U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2004
COMMISSION FILE NUMBER 000-30426
LARGO VISTA GROUP, LTD
(Name of Small Business Issuer in Its Charter)
Nevada 76-0434540
(State of Incorporation) (IRS Employer Identification No.)
4570 Campus Drive Newport Beach, CA 92660
(Address of Principal Executive Offices)
(949) 252-2180
ISSUER'S TELEPHONE NUMBER
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: 269,963,856 shares of Common Stock
($.001 par value) as of May 26, 2004.
LARGO VISTA GROUP, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets 3
March 31, 2004 and December 31, 2003
Condensed Consolidated Statements of Losses 4
Three Months Ended March 31, 2004 and 2003
Condensed Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 2004 and 2003
Notes to Unaudited Condensed Consolidated Financial Information 6
March 31, 2004
Item 2. Management's Discussion and Analysis 7
Item 3. Controls and Procedures 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security holders 8
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
(Unaudited) (Audited)
March 31, December 31,
2004 2003
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalent $ 46,463 $ 7,874
Accounts receivable, net 42,129 53,291
Employee advances 57,439 49,091
Inventories, at cost (Note B) 5,531 11,990
Prepaid expenses and other 24,556 33,304
------------- -------------
Total Current Assets 176,118 155,550
Property, plant and equipment, at cost 16,221 16,221
Less: accumulated depreciation 6,988 6,226
------------- -------------
9,233 9,995
Deposits 755 755
$ 186,106 $ 166,300
============= =============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 366,269 $ 392,694
Deferred revenue 21,262 5,888
Notes payable to related parties 449,782 449,782
Due to related parties 114,657 120,794
------------- -------------
Total Current Liabilities 951,970 969,158
Commitment and contingencies -- --
Preferred stock, $0.001 par value; 25,000,000
shares authorized, none issued and outstanding
at March 31, 2004 and December 31, 2003 (Note C) -- --
Common stock, $0.001 par value; 400,000,000
shares authorized, 269,963,856 and 264,615,280
shares issued and outstanding at March 31, 2004
and December 31, 2003, respectively (Note C) 269,964 264,615
Additional paid-in capital 15,150,837 15,049,352
Accumulated deficit (16,190,365) (16,120,525)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700 3,700
------------- -------------
Deficiency in stockholders' equity (765,864) (802,858)
$ 186,106 $ 166,300
============== ==============
See accompanying notes to the unaudited condensed consolidated financial information
3
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
For the three months ended March 31,
2004 2003
---- ----
Revenue $ 124,692 $ 12,387
Cost of sales 103,231 15,577
-------------- --------------
Gross profit (loss) 21,461 (3,190)
Operating expenses:
Selling general and administrative 89,230 147,716
Depreciation 762 780
-------------- --------------
89,992 148,496
Loss from operations (68,531) (151,686)
Other income (expenses):
Other income, net 6,562 --
Interest income (expense) (7,871) (9,985)
-------------- --------------
Total other income (expenses) (1,309) (9,985)
Loss from operations before income taxes (69,840) (161,671)
Income taxes -- --
-------------- --------------
Net loss $ (69,840) $ (161,671)
============== ==============
Loss per common share (basic and assuming diluted) $ (0.00) $ (0.00)
============== ==============
Weighted average shares outstanding 266,378,547 249,137,000
See accompanying notes to the unaudited condensed consolidated financial information
4
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended March 31,
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from operations $ (69,840) $ (161,671)
Adjustments to reconcile net (loss) to net cash provided by
operating activities:
Depreciation 762 780
Common stock issued for services -- 113,500
Changes in assets and liabilities:
Accounts receivable 11,162 154,438
Inventories 6,459 (4,090)
Employee advances (8,348) --
Prepaid expenses and other 8,748 9,918
Accounts payable and other liabilities 55,975 (48,998)
Deferred revenue 15,374 --
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,292 63,877
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- --
-------------- --------------
NET CASH (USED IN) INVESTING ACTIVITIES -- --
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from related parties (Note C) 9,356 55,188
Proceeds from related parties, net of repayments 8,941 14,925
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,297 70,113
NET INCREASE IN CASH AND CASH EQUIVALENTS 38,589 133,990
Cash and cash equivalents at the beginning of the period 7,874 11,174
-------------- --------------
Cash and cash equivalents at the end of the period $ 46,463 $ 145,164
============== ==============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $ -- $ --
Income taxes paid -- --
Common stock issued for services -- 113,500
Common stock issued for accrued service fees (Note C) 82,400 --
Common stock issued in exchange for expenses paid by related
parties (Note C) 15,078 --
See accompanying notes to the unaudited condensed consolidated financial statements
5
LARGO VISTA GROUP, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
---------------------------------------
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the three-month period ended March
31, 2004 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2004. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2003
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
Business and Basis of Presentation
----------------------------------
Largo Vista Group, Ltd. (the "Company") was incorporated under the laws of the
State of Nevada. The Company is principally engaged in the distribution of
liquid petroleum gas (LPG) in the retail and wholesale markets in South China
and in the purchase of petroleum products for delivery to the Far East.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Largo Vista, Inc., Largo Vista Construction,
Inc., and Largo Vista International Corp. Largo Vista, Inc. is formed under the
laws of the State of California and is inactive. Largo Vista Construction, Inc.
is formed under the laws of the State of Nevada and is inactive. Largo Vista
International Corp. is formed under the laws of Panama and is inactive. The
Company also has operations through DBA (Doing Business As) agreements with
Zunyi Shilin Xinmao Petrochemical Industries Co., Ltd. ("Zunyi") and Jiahong Gas
Co., Ltd. ("Jiahong"). Zunyi and Jiahong are both registered under the Chinese
laws in the Peoples Republic of China.
All significant intercompany balances and transactions have been eliminated in
consolidation. All amounts in these consolidated financial statements and notes
thereto are stated in United States dollars unless otherwise indicated.
Stock Based Compensation
------------------------
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 ("SFAS No. 148"), "Accounting for Stock-Based Compensation-Transition
and Disclosure-an amendment of SFAS 123." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB Opinion No. 25
and related interpretations. Accordingly, compensation expense for stock options
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of the grant over the exercise price of the related option.
The Company has adopted the annual disclosure provisions of SFAS No. 148 in its
financial reports for the year ended December 31, 2003 and will adopt the
interim disclosure provisions for its financial reports for the subsequent
periods. The Company has no awards of stock-based employee compensation
outstanding at March 31, 2004.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
NOTE B - INVENTORIES
--------------------
Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Inventories consist primarily of liquid
petroleum gas available for sale to contract clients and the public. Components
of inventories as of March 31, 2004 and December 31, 2003 are as follows:
March 31, 2004 December 31, 2003
-------------- -----------------
Liquid petroleum gas $ 1,449 $ 10,418
Packaging bottles 3,665 1,204
Supplies 417 368
------------ ------------
$ 5,531 $ 11,990
============ ============
6
NOTE C - CAPITAL STOCK
----------------------
The Company has authorized 25,000,000 shares of Preferred Stock, with a par
value of $.001 per share. As of March 31, 2004 and December 31, 2003, the
Company has no Preferred Stock issued and outstanding. The company has
authorized 400,000,000 shares of common stock, with a par value of $.001 per
share. As of March 31, 2004 and December 31, 2003, the Company has 269,963,856
and 264,615,280 shares of common stock issued and outstanding, respectively.
For the three-month period ended March 31, 2004, the Company issued an aggregate
of 4,343,582 shares of common stock to consultants in exchange for accrued
service fees of $82,400. All valuations of common stock issued for services were
based upon the value of the services rendered, which did not differ materially
from the fair value of the Company's common stock during the period the services
were rendered. The Company issued an aggregate of 1,004,994 shares of common
stock to a consultant and former employee in exchange for $15,078 of expenses
paid on behalf of the Company. In addition, during the three-month ended March
31, 2004, the Company Chairman and significant shareholders contributed cash of
$9,356 to the Company as working capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and Notes thereto, included
elsewhere within this Report.
DESCRIPTION OF THE COMPANY
--------------------------
The Company is principally engaged in the resale and distribution of liquid
petroleum gas (LPG) in the retail and wholesale markets in South China and in
the purchase of petroleum products for delivery to the Far East.
Through DBA agreements with Zunyi and Jiahong, the Company is engaged in the
business of purchasing and reselling liquid petroleum gas ("LPG") in the retail
and wholesale markets to both residential and commercial consumers. The Company
operated a storage depot and has an office headquarters in the City of Zunyi.
However, the Company has found the storage depot operations to be unprofitable;
and therefore has terminated those operations in order to concentrate its
resources on supplying LPG in bottles and through pipelines.
In February 2002 and May 2003, the Company entered into agreements
("Agreements") with Zunyi Municipal Government ("Government") to design and
install LPG pipeline systems in residential areas in the city of Zunyi, China on
behalf of Government. In exchange for installing the pipeline, the Agreements
provide for the Company to be the sole LPG supplier for those households.
FORWARD LOOKING STATEMENTS
--------------------------
This Form 10-QSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
Herein that address activities, events or developments that the Corporation
expects, believes, estimates, plans, intends, projects or anticipates will or
may occur in the future, are forward-looking statements. Actual events may
differ materially from those anticipated in the forward-looking statements.
Important risks that may cause such a difference include: general domestic and
international economic business conditions, increased competition in the
Company's markets and products. Other factors may include, availability and
terms of capital, and/or increases in operating and supply costs. Market
acceptance of existing and new products, rapid technological changes,
availability of qualified personnel also could be factors. Changes in the
Company's business strategies and development plans and changes in government
regulation could adversely affect the Company. Although the Company believes
that the assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate. There can be no
assurance that the forward-looking statements included in this filing will prove
to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company that the objectives
and expectations of the Company would be achieved.
RESULTS OF OPERATIONS
---------------------
REVENUE
-------
During the quarter ended March 31, 2004 the Company realized $124,692 of revenue
compared to $12,387 for the same period in the prior year, a 906.6% increase.
This was largely due to increased sales at the depot operated by the Company.
However, as noted above, due to their unprofitability, the Company has decided
to terminate the depot operations.
COSTS AND EXPENSES
------------------
During the quarter ended March 31, 2004 the Company incurred $89,230 of
operating expenses compared to $147,716 for the same period in the prior year, a
39.6% decrease. This was due to the continuation of operations with greatly
reduced overhead costs.
7
LOSS FROM OPERATIONS
--------------------
The increase in revenues, accompanied by the decrease in operating expenses
resulted in the reduction in the loss from operations to a loss of $68,531 from
a loss of $151,686 for the same period in the prior year, a 54.8% decrease.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of March 31, 2004, the Company had a deficiency in working capital of
$775,852. During the first three months of 2004, the operating activities of the
Company provided a cash flow of $20,292.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. We currently have no commitments for financing. There is no guarantee
that we will be successful in raising the funds required.
The effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are located in mainland China and there
are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations.
The Company's independent certified public accountant has stated in his report
included in the Company's December 31, 2003 Form 10-KSB, that the Company has
incurred operating losses in the last two years, and that the Company is
dependent upon management's ability to develop profitable operations. These
factors among others raise substantial doubt about the Company's ability to
continue as a going concern.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
-------------------------------------------------
Our annual report on Form 10-KSB for the year ended December 31, 2003 includes a
detailed list of cautionary factors that may affect future results. Management
believes that there have been no material changes to the factors so listed,
however other factors besides those listed could adversely affect us. That
annual report can be accessed on EDGAR.
ITEM 3. CONTROLS AND PROCEDURES
The Company's management including the Chief Executive Officer, President and
Chief Financial Officer, have evaluated, within 90 days prior to the filing of
this quarterly report, the effectiveness of the design, maintenance and
operation of the Company's disclosure controls and procedures. Management
determined that the Company's disclosure controls and procedures were effective
in ensuring that the information required to be disclosed by the Company in the
reports that it files under the Exchange Act is accurate and is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and regulations.
Disclosure controls and procedures, no matter how well designed and implemented,
can provide only reasonable assurance of achieving an entity's disclosure
objectives. The likelihood of achieving such objectives is affected by
limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be fully faulty and that
breakdowns in internal control can occur because of human failures such as
errors or mistakes or intentional circumvention of the established process.
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation thereof, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company issued 5,348,576 unregistered shares in the first quarter of 2004
valued at $97,478 to officers and consultants in exchange for accrued services
fees and expenses paid by consultants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
8
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 - Chief Executive Officer.
31.2 Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 - Chief Financial Officer
32.1 Certification of Deng Shan Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Albert Figueroa Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K filed during the quarter ended March 31,
2004
None
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.
DATE: MAY 26, 2004 LARGO VISTA GROUP, LTD.
/S/ DENG SHAN
-----------------------
DENG SHAN
CHIEF EXECUTIVE OFFICER
9