U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
Commission file number 000-30426
LARGO VISTA GROUP, LTD.
(Name of Small Business Issuer in its charter)
Nevada 76-0434540
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4570 Campus Drive
Newport Beach, California 92660
---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (949) 252-2180
--------------
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 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 [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained in this form, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [___]
The revenues for the year ended December 31, 2002 were $554,914
The market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of April 14, 2003 was approximately
$3,182,440.
The number of shares of Common Stock outstanding as of April 14, 2003 was
256,921,534.
LARGO VISTA GROUP, LTD.
FORM 10-KSB
INDEX
Page
----
Part I
Item 1. Description of Business.....................................................................3
Item 2. Properties..................................................................................7
Item 3. Legal Proceedings...........................................................................8
Item 4. Submission of Matters of a Vote of Security Holders.........................................8
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................8
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operation..........................................................12
Item 7. Financial Statements and Supplementary Data.................................................18
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................................................19
Part III
Item 9. Directors and Executive Officers of the Registrant..........................................19
Item 10. Executive Compensation......................................................................19
Item 11. Security Ownership of Certain Beneficial Owners and Management..............................21
Item 12. Certain Relationships and Related Transactions..............................................21
Part IV
Item 13. Exhibits, Financial Statement Schedule and Reports on Form 8-K..............................21
Item 14. Controls and Procedures.....................................................................23
Signatures ............................................................................................24
PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development
--------------------
Largo Vista Group, Ltd., a Nevada corporation ("Company"), was formed under the
laws of the State of Nevada on January 16, 1987.
Unless the context otherwise requires, all references to the Company include its
wholly-owned subsidiaries, Largo Vista, Inc., an inactive California
corporation, Largo Vista Construction, Inc., an inactive Nevada corporation and
Largo Vista International, Corp., a Panama corporation (LVI).
Business of the Issuer
----------------------
Largo Vista Group, Ltd, a Nevada corporation ("Largo Vista"), has operations
through a contract agreement with Jiahong Gas Co., Ltd (registered under the
Chinese laws in the Peoples Republic of China, Guizhou Province). Though this
agreement, Largo Vista 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 in China. Largo Vista operates a storage
depot and has an office headquarters in the City of Zunyi. In addition, Largo
Vista operates a pipeline providing LPG in the City of Zunyi, Guizhou Province
through a service agreement with City of Zunyi.
Largo Vista, through its subsidiary Largo Vista International Ltd., has and
continues to engage in the petroleum supply business in Far East countries, more
specifically Vietnam.
On June 29, 2001, Largo Vista sold, under a stock purchase agreement, its 100
percent interest in Everlasting International Ltd., a Nevada corporation, which
owned a 66.67 percent ownership interest in Kunming Xinmao Petrochemical
Industry Co., Ltd. Largo Vista elected to withdraw from the Kunming market due
to competitive pressures from non-profit oriented government owned suppliers
In addition, Largo Vista has two representative offices in the Far East area,
one in Wuhan, China and another in Ho Chi Minh City, Vietnam, to supervise LPG
and gasoil trading operations in China and Vietnam, respectively, in addition to
potentially acquiring other possible business opportunities in the Far East.
Largo Vista was originally incorporated on January 16, 1987 in Nevada under the
name, "The George Group". On January 9, 1989, The George Group acquired Waste
Service Technologies, Inc. ("WST"), an Oregon corporation, and filed a name
change in Nevada and changed its name to WST, listed its stock, and began
trading on OTC bulletin Board.
On April 15, 1994, WST acquired Largo Vista, Inc., a California corporation, and
filed a name change in Nevada to change WST's name to Largo Vista Group, Ltd.,
OTC bulletin Board symbol "LGOV". Largo Vista originally planned to develop
housing in China, but after shipping two factory built homes to China, never
fully implemented plans due to unanticipated financing, environmental and
regulatory complications.
2
Organizational Chart
--------------------
LVG
Largo Vista Group, Ltd.
Owns 100% of Largo Vista Inc.
No current operations
Owns 100% of Largo Vista International Corp.
No current operations
Owns 100% of Largo Vista Construction Inc.
No current operations
Owns 100% of Zunyi Shilin Xinmao Petrochemical Industries Co., Ltd.
BUSINESS
--------
Terms of the Jiahong Gas Co., Ltd Agreement.
The agreement between Largo Vista and Jiahong Gas Co. Ltd ("Jiahong") is a DBA
(Doing business as) agreement formed under the laws of the People's Republic of
China.
Term: Five years from August 27, 2002 to August 26, 2007
General Provisions: Agreement allows Largo Vista to operate the LPG depot,
tanks, fueling workshop, bottle testing center, office building along with other
facilities as provided with the property along with allowing Largo Vista to
utilize Jiahong's existing licensing to conduct business
Terms of Zunyi Pipeline Service contract Agreement.
General Provisions: Agreement allows Largo Vista to operate and supply LPG to a
pipeline located in the City of Zunyi, Peoples Republic of China for a period of
40 years beginning December, 2002 at no leasing cost. Largo Vista was rewarded
the service contract as a direct result of their organization and participation
in the construction of the pipeline.
Principal Products and Their Markets
------------------------------------
The Product
-----------
LPG is used by about 500 million people worldwide. As a form of energy, it is
considered a very efficient fuel. Its liquid state provides a significant supply
of energy in a comparatively small volume. LPG is recognized for its
transportability and ease-of-use. It is a clean and environmentally friendly
source of energy that has a variety of residential, commercial, industrial and
transportation uses. It can be used at home for cooking and heating and can
therefore replace wood, kerosene, coal and other environmentally unfriendly
sources of energy. In fact, environmental concerns have caused the outlaw of the
use of coal in most larger cities in China. Since LPG is one of the only viable
sources of energy for cooking and heating in Southern China, management believes
the China LPG market is ripe for growth and expansion.
3
Most Chinese consumers have used wood and coal all their lives primarily for
cooking. They are, however, beginning to realize the ease and convenience of
using LPG for cooking and heating water. Most consumers obtain LPG in 15kg.
cylinders, very similar to those used for gas barbecues in the U.S. As LPG
delivery systems, such as pipelines, make use more convenient and simple, LPG
consumption per capita should increase significantly. In addition, management
believes there will be future opportunities for increased LPG use in the tobacco
business, operating factory machinery and vehicles.
MARKETS: The China market is broken down into three segments for purposes of
analysis:
1. Distribution
2. Method of delivery to the consumer, and
3. Black Market dealers
The primary market segment is through the distribution method, that is, either
retail-direct or wholesale-indirect. Retail distribution is accomplished by the
three major LPG companies that deal directly with the end user. Zunyi
distributes to both retail and wholesale customers, and to both residential and
commercial users. Retail customers, however, are far more profitable for the
Company than wholesale because sales prices are higher and there are no
middleman costs. The Company is implementing strategies to develop and expand
the retail customer base.
The second market segment is through vehicle delivery used by the user, such as
bottle or cylinder, pipeline, or tank truck.
The bottle users may be either retail, purchasing directly from a major LPG
company, or wholesale, purchasing indirectly from a distributor of a major LPG
company. Bottle customers purchase LPG in 15 kg. cylinders or bottles that must,
by law, be filled to a minimum of 13.5 kg, which is considered full. Bottle
users include residential and commercial customers. Residential consumption is
by far the largest, with commercial restaurants and caterers following second.
There has been little industrial use of LPG to date.
Pipeline users are considered retail-direct users. LPG flows directly into
household via pipes from a central storage tank that is replenished when
necessary by a major LPG company. Pipeline users are billed according to usage
based on a meter in their living unit. Management is pursuing a policy of
expanding into this arena due to the fact that once the retail customer is
captured via a pipeline connection, they will remain a profit center for the
Company. Also, the usage of a pipeline customer is expected to be greater than a
bottle retail customer because of the expanding uses of LPG, such as heating of
the residence.
Tank truck or bulk sales are made to wholesale distributors who operate small
bottle filling stations. These distributors represent lower profit margins, but
sheer volume of distribution makes-up some of the difference. Bulk sales are
encouraged to cultivate the small wholesale distributors because of the
potential of acquiring their customer base in the future.
A third market segment, although temporary, must be considered because of the
negative impact it has on the LPG market. This segment is comprised of the many
small independent distributors and individuals who operate illegally in what is
referred to as the "black market" - most operating without a license, violating
safety laws, and unfairly profiting by "short filling" LPG bottles. These
abusers create problems of unfair competition for the Company.
4
LPG consumption has been growing at a remarkable rate since the beginning of
1990's. In 1990, LPG consumption was slightly over 2 million tons, while in
1996, nearly 7.4 million tons. The average annual growth rate in this period was
more than 20% and growth from 1994 to 1995 reached almost 33%. Even though LPG
consumption has been developing very fast in the past decade, LPG consumption
per capita is small in comparison to its Asian neighbors consumption, such as
Japan and South Korea, for example. LPG development in China also shows
geographical variance. South China has led the nation in terms of per capita
consumption, at nearly 35kg. East China follows with a per capita consumption of
about 10kg. North China is far less, only half of that in East China and still
in many places inland, the LPG consumption per capita is negligible.
The majority of dollars invested in the China LPG market have been invested in
large "mega" depots by the major oil companies. Little to no focus has been
placed on the retail end-user market. Put simply, the LPG "storage"
infrastructure is in place, but it is overbuilt because the retail market has
not been cultivated at the same pace. Management's primary objective is the
development of this retail consumer base.
From the mega-depots on the east and southeast coast of China, LPG is shipped to
smaller inland storage depots via railroad tank car. LPG is then pumped into
large storage tanks until it is distributed in bottles, pipelines or tank trucks
to end users and distributors.
Inland infrastructure development has not kept pace with coastal development.
Inland depot storage capacity must be expanded to serve the customers waiting
for LPG service. More efficient distribution methods are also needed. The bottle
exchange system is labor intensive, a factor that does not significantly affect
overhead yet, but will have greater future impact as salaries increase.
Distribution of LPG via pipelines directly to end-users is very efficient, but
one drawback is the cost to install pipeline service to each household, which is
approximately $185.00 US per household. Some more affluent customers can afford
to pay the installation fee up front, but most of these have already purchased
pipeline service. Some new construction projects permit the cost of installation
to be incorporated into the cost of the home. Most customers, however, cannot
afford the up-front fee, but are willing and able to pay extra each month based
on usage. Zunyi has a number of pipeline projects in various planning or
construction phases and it is management's belief that this area is one of the
most profitable in the long term. In December, 2002 Largo Vista completed its
first pipeline project and signed a long term service contract to maintain and
supply LPG to it's customers along the pipeline.
Distribution of LPG
-------------------
There are four basic levels of LPG distribution:
Major LPG Companies
Major LPG Distributors
Medium LPG Distributors
Small Independent LPG Distributors
5
The Major LPG companies are characterized by the following: they purchase LPG
directly from refineries or major oil companies, they must be licensed, have
railroad tank cars and storage depots, and typically serve over 10,000 retail
customers. These companies depend on distribution networks to get LPG to the
consumers.
Major distributors are licensed and generally serve more than 4,000 but less
than 10,000 customers directly, but do not typically have any railroad tank
cars, and have little or no storage capacity.
Medium distributors are licensed and generally serve more than 1,500 but less
than 4,000 customers directly and do not have any storage capacity.
Small independent distributors are those who may or may not be licensed, do not
have any relationship or loyalty to any major oil company or distributor and
usually serve less than 1,500 customers.
Since all of these distributors serve a customer base, Zunyi is actively
recruiting them on an ongoing basis.
The majority of Zunyi's customer base is serviced with the help of agents and
entity users. Zunyi has a number of agents that are independent dealers who
exclusively represent the Company in an outlying county area that is difficult
for the Company to access on a regular basis. The consumers serviced by the
agent pay retail prices. The Company pays the agent a fee for his services and
the agent carries his own overhead expenses. As the LPG market was developing in
the early 1990's, the Company was seeking to develop a customer base in the most
efficient and effective manner possible, and, as a result, began to cultivate
the "entity" user. Entity users were companies in other industries, already
providing housing for their employees who also desired to provide a convenience
to their workers by distributing LPG as an additional service. These entity
users developed into distribution service to consumers who paid retail prices.
As the market further developed, the entity user also began to be a distribution
outlet to other consumers in the local area that were not affiliated with the
entity company. Today, the Company is actively seeking to cultivate and develop
additional entity users to expand the consumer base.
Raw Materials
-------------
The Chinese market is unique compared to other Asian countries. Japan and Korea
seek security of supply through regular term contracts supported by long-term
relationships, but in China, low price and bargaining is the driving force for
LPG purchases.
When purchasing LPG, Zunyi must weigh various factors including quality of LPG,
price, and transportation costs. It generally purchases from domestic sources
inside China where prices are very low, but transportation costs are higher. On
occasion, the Company also purchases LPG from foreign companies such as Mobil
Oil Hong Kong and Caltex.
Cost of goods can fluctuate widely and rapidly and can cause cash flow problems.
The Company is researching the feasibility of obtaining a much larger storage
facility that would permit it to purchase large quantities of LPG when prices
are favorable, and sell it when prices are higher.
Competition
-----------
The LPG industry in the city of Zunyi, Guizhou Province, consists of three major
LPG companies with storage facilities and sells LPG in both the retail and
wholesale markets. All three companies depend on a network of distributors to
help reach and service the needs of their customers. Competition is based
principally on price and service, with some based on relationship and
reputation. All are privately owned and operated.
6
LPG retail market prices have been relatively unstable during the past three
years, characterized by over supply and cutthroat competition.
Black Market. In the residential wholesale market, many independent "black
market" dealers have been operating without a license, and have ignored safety
regulations that require inspection and pressure testing of each bottle every
five years. Another flagrant violation of consumer fairness is the practice of
short-filling bottles. The "black market" dealer typically will fill a bottle
with 10kg of LPG, and sell it representing it has 13.5kg of LPG. Short filling
has permitted the Company's competition to charge lower prices and unfairly
compete with Zunyi. This practice of cheating the consumer has been prevalent
over the past several years. Zunyi challenges customers to be aware of what they
are paying for by implementing of a "weight comparison program". The program
permits the consumer to actually weigh the bottles to expose the "short-fill"
problem.
Zunyi competes with others on both reputation and service. To differentiate
itself from its competition, Zunyi stresses a long-term relationship both with
the residential user and with the distributor to help them bring in and keep new
customers. Its reputation is excellent and is backed up by a record of good
service, with the understanding that Zunyi can be relied upon to deliver honest
weights and measures.
Governmental Regulation
-----------------------
The LPG industry is regulated on a day-to-day basis by the Zunyi municipal
government, which oversees all companies licensed to do business and enforces
rules and regulations in the market place. The Zunyi government faces many
problems in this rapidly emerging chaotic market including the existence of many
unlicensed small distributors, violations of safety regulations and short filled
bottles. Local government is working to correct some of these more flagrant
violations.
Patents, Trademarks & Licenses
------------------------------
The Company does not currently own any patents or trademarks.
Employees
---------
Largo Vista has one full-time employee in the United States and relies on
outside consultants for legal, accounting and other services as needed.
Operations in Zunyi, Wuhan and Ho Chi Minh City have a total of 35 employees,
including management.
Item 2. DESCRIPTION OF PROPERTY
Largo Vista
-----------
Largo Vista has corporate offices in Newport Beach, California. The cost is
approximately $1,000 per month.
7
Wuhan Representative Office
---------------------------
Largo Vista maintains a representative office in Wuhan, Hubei Province, China,
which include three offices and access to common areas. The facilities are
leased from Proton Enterprises. The terms of the Lease are for three years
beginning January 2001, for approximately $480 per month.
Ho Chi Minh City Representative Office
--------------------------------------
Largo Vista maintains a representative office in Ho Chi Minh City, Vietnam,
which includes an open office type environment. The terms of this Lease is for
month to month at approximately $1,500 per month.
Zunyi
-----
Largo Vista, through a contract agreement with Jiahong Gas Co., Ltd., operates
its primary service from its depot located in the City of Zunyi, Guizhou
Province. The depot includes 500 cubic meter storage facilities, fueling
workshops, bottle testing center and office buildings. The facility is under
lease for five years, beginning in August 2002, at approximately $18,116 per
year payable in monthly installments.
In addition, Largo Vista, through a contract agreement with the City of Zunyi
operates a pipeline supplying LPG to approximately 1,000 customers. The service
contract is for 40 years beginning in December, 2002. Largo Vista enjoys the
service contract at no lease cost throughout the period due to Largo Vista's
investment in (and subsequent recovery of) the cost of the related pipeline
installation.
Item 3. LEGAL PROCEEDINGS
At present, there are no outstanding lawsuits or claims known against our
Company and its subsidiaries.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 18, 2002, the Company held an annual shareholders' meeting at which
the following matters were approved:
(a) Deng Shan, Albert N. Figueroa and Edward H. Deese were elected
Directors;
(b) The adoption of the 2002 stock option plan providing for the issuance
of up to 25 million shares of the Company's common stock;
(c) The creation of Preferred Stock - 25 million Series A shares.
The Company filed a report on Form DEF 14 C on December 19, 2002, detailing all
the information summarized above.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the OTC Bulletin Board under the symbol
LGOV.
The following table sets forth the range of high and low bid information for the
Company's common stock for each quarterly period in 2002 and 2001. These
quotations are believed to be representative inter-dealer prices, without retail
mark-up, markdown or commission, and may not represent actual transactions.
8
Bid
-----------------------------------
High Low
--------------- ---------------
4th Quarter 2002 $ 0.06 $ 0.02
3rd Quarter 2002 $ 0.08 $ 0.04
2nd Quarter 2002 $ 0.27 $ 0.06
1st Quarter 2002 $ 0.19 $ 0.04
4th Quarter 2001 $ 0.14 $ 0.06
3rd Quarter 2001 $ 0.23 $ 0.05
2nd Quarter 2001 $ 0.17 $ 0.08
1st Quarter 2001 $ 0.31 $ 0.13
As of April 14, 2003, the Company had approximately 657 shareholders of record.
We have never paid a cash dividend and do not anticipate doing so in the
foreseeable future.
Recent sales of unregistered securities:
The company issued unregistered shares of its common stock from January 1, 2001
to December 31, 2002 as follows:
Fiscal 2001, a total of 13,370,985 shares of common stock valued at $1,147,602
and in fiscal 2002, a total of 14,352,131 shares of common stock and options
valued at $707,975 as follows:
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued Whom Issued Consideration
------- ------ ----------- -------------
Issued to officers as compensation:
2001
2nd Quarter 297,093 Deng Shan 41,666
356,512 Daniel Mendez 50,000
178,256 Albert Figueroa 25,000
3rd Quarter 195,167 Deng Shan 25,000
234,201 Daniel Mendez 30,000
117,100 Albert Figueroa 15,000
4th Quarter 317,857 Deng Shan 25,000
381,430 Daniel Mendez 30,000
342,858 (S8 Option) Daniel Mendez 9,965
190,715 Albert Figueroa 15,000
342,858 (S8 Option) Albert Figueroa 10,633
9
Number of
Common Shares Name of Persons Amount of
Quarter Issued Whom Issued Consideration
------- ------ ----------- -------------
2002:
1st Quarter 408,263 Deng Shan 25,000
1,200,000 (S8 Option) Daniel Mendez 33,104
2nd Quarter 338,158 Deng Shan 33,334
925,000 (S8 Option) Daniel Mendez 43,557
277,572 (S8 Option) Albert Figueroa 14,731
3rd Quarter 333,334 Deng Shan 16,983
785,000 (S8 Option) Daniel Mendez 20,526
550,000 (S8 Option) Albert Figueroa 14,757
4th Quarter 175,057 Deng Shan 8,016
Issued to consultants for services:
2001:
2nd Quarter 356,512 Steve Chaussy 50,000
267,385 Li Chuming 37,500
267,385 Harold Mclenden 37,500
3rd Quarter 234,201 Steve Chaussy 30,000
175,650 Li Chuming 22,500
175,650 Harold Mclenden 22,500
4th Quarter 381,430 Steve Chaussy 30,000
286,072 Li Chuming 22,500
286,072 Harold Mclenden 22,500
342,858(S8 Option) Steve Chaussy 10,769
2002:
1st Quarter 369,753 Harold Mclenden 22,500
290,589 Li Chuming 17,500
214,286 Danny Nguyen 15,000
1,200,000 Steve Chaussy 35,507
2nd Quarter 340,963 Harold Mclenden 30,000
356,796 Li Chuming 31,000
304,341 Danny Nguyen 30,000
925,000(S8 Option) Steve Chaussy 46,524
3rd Quarter 188,726 Harold Mclenden 10,000
272,059 Li Chuming 15,000
356,426 Danny Nguyen 17,821
664,000(S8 Option) Steve Chaussy 17,785
4th Quarter 163,043 Harold Mclenden 7,500
163,043 Li Chuming 7,500
189,726 Danny Nguyen 9,486
10
Issued to service providers for past services:
Number of
Common Shares Name of Persons Amount of
Quarter Issued Whom Issued Consideration
------- ------ ----------- -------------
2001:
2nd Quarter 222,222 Danilo Cacciamatta 20,000
55,555 Marcia Hein 5,000
222,042 Danny Nguyen 21,094
3rd Quarter 196,712 Danny Nguyen 15,737
136,475 Gymar 10,918
200,000 Ted Connolly 10,000
4th Quarter 138,889 James DeOlden 10,000
899,083 Danny Nguyen 71,927
37,500 Michael Rubino 2,812
182,100 Joe Chen 14,568
2002:
1st Quarter 253,396 James DeOlden 15,000
426,098 Hoa Thi Nguyen 21,305
2nd Quarter 200,795 James DeOlden 20,000
23,810 Michael Rubino 4,937
3rd Quarter 176,923 James DeOlden 10,000
Issued as loans to officers:
2002:
1st Quarter 1,200,000(S8 Option) Albert Figueroa 35,635
2nd Quarter 647,458(S8 Option) Albert Figueroa 34,365
Issued to officers and shareholders for reimbursement of cash advances:
2001:
1st Quarter 79,240 Deng Shan 7,528
210,029 Daniel Mendez 19,953
278,783 Albert Figueroa 26,484
5,644 Steve Chaussy 536
2nd Quarter 78,523 Deng Shan 7,810
180,983 Daniel Mendez 13,720
529,089 Albert Figueroa 41,515
444,185 Steve Chaussy 24,658
4th Quarter 73,387 Deng Shan 3,669
10,220 Daniel Mendez 511
143,400 Albert Figueroa 7,170
58,100 Steve Chaussy 2,905
3,261,562 Proton Tech 164,127
2002:
2nd Quarter 856 Daniel Mendez 77
101,459 Albert Figueroa 9,131
124,622 Steve Chaussy 11,216
62,752 Danny Nguyen 13,178
3rd Quarter 142,857 Danny Nguyen 10,000
11
All stock issuances were conducted pursuant to section 4(2) under the 1933 Act
without the involvement of underwriters. Stock issuances other than for cash
were valued at market, generally determined by the low bid quotation.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Regarding Forward-Looking Information:
-----------------------------------------------------------
This Form 10-KSB 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
Corporation'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
Corporation's business strategies and development plans and changes in
government regulation could adversely affect the Company. Although the
Corporation 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
Corporation that the objectives and expectations of the Corporation would be
achieved
The following is a discussion of the financial condition and results of
operations of the Company as of the date of this Annual Report. This discussion
and analysis should be read in conjunction with the accompanying audited
Consolidated Financial Statements of the Company including the Notes thereto
which are included elsewhere in this Form 10-KSB.
Results of Operations
---------------------
The following selected financial information has been derived from the Company's
consolidated financial statements. The information set forth below is not
necessarily indicative of results of future operations and cash flows and should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this Form 10-KSB.
12
Discontinued Operations
-----------------------
In the year ended December 31, 2001, the Company discontinued the operations of
its Kunming Xinmao business segment. Kunming Xinmao was engaged in the
distribution of liquid petroleum gas in the retail and wholesale markets in the
Province of Yunnan in the People's Republic of China.
The following table sets forth the results of operations and loss on disposal
from this discontinued business segment for
the year ended December 31, 2001.
2001
----
Revenues $ 351,506
Expenses (634,721)
-----------
Net (loss) $ (283,215)
===========
Continuing Operations
---------------------
Revenues
--------
The Company's 2002 revenues from continuing operations of $554,914 are
attributable to liquid petroleum gas sales at its Zunyi facility located in
South China.
Costs of sales
--------------
The Company incurred costs of sales of $518,775, or 93.5% of sales in connection
with the LPG revenues from continuing operations during 2002.
Selling and administrative expenses
-----------------------------------
Selling and administrative expenses increased $103,558, or 8.2% to $1,365,755
during 2002 from $1,262,197 during 2001.
Interest expense
----------------
Interest expense decreased $56,799 or 81.8 % to $12,668 during 2002 from $69,497
during 2001 as a result of conversions of debt.
Currency Consideration
----------------------
The Company's LPG operations are conducted in the People's Republic of China
whose currency, the Renminbi (RMB), is pegged to the US Dollar. The exchange
rate as of December 31, 2002 and the average rate during each of the periods
presented in the accompanying consolidated financial statements was 8.28 RMBs to
one US Dollar. No representation is made that any RMB amount could have been, or
could be, converted into US dollars at these rates or any other rates of
exchange.
13
Liquidity and Capital Resources
-------------------------------
As of December 31, 2002, the Company had a working capital deficit of $752,677.
As a result of our operating losses, we generated a cash flow deficit of
$255,784 from operating activities during 2002. We met our cash requirements
during the year primarily through advances, loans and contributions of $169,158
from the Company's Chairman and principal shareholder and other officers.
The Company has experienced significant operating losses from inception and has
financed its activities to date through cash advances from affiliates and sales
of its common stock. Availability, source, amount and terms of any additional
financing are uncertain at this time, and by no means assured.
The Company has relied heavily on the financial resources that its Chairman and
largest shareholder has been able to make available. In particular, the first
oil shipment could not have taken place without the Chairman's posting of a
performance bond on behalf of the Company and facilitating the procurement of
the required letters of credit. The cost of these credit facilities has been
charged to the Company at the same amount incurred by the Chairman.
The Company believes it will require at least an additional $1,000,000 of new
capital in order to fund its plan of operations over the next 12 months.
Affiliates of the Company have advised the Company that they will not demand
payment of the amounts owed them for at least 12 months. The Company expects to
fund its working capital requirements over the next 12 months from additional
advances from its affiliates and the sale of its common stock.
While the Company has raised the capital necessary to meet its working capital
and financing needs in the past, additional financing is required in order to
meet the Company's current and projected cash flow deficits from operations and
development. The Company is seeking financing in the form of equity in order to
provide the necessary working capital. The Company currently has no commitments
for financing. There are no assurances the Company will be successful in raising
the funds required.
The Company believes that its existing capital resources will be sufficient to
fund its current level of operating activities, capital expenditures, debt and
other obligations through the next 12 months. However, if during that period or
thereafter, the Company is not successful in generating sufficient liquidity
from operations or in raising sufficient capital resources, on terms acceptable
to the Company, this could have a material adverse effect on the Company's
business, results of operations liquidity and financial condition.
The Company's independent certified public accountants have stated in their
report included in the Company's December 31, 2002 Form 10-KSB, that the Company
has incurred operating losses and that the Company is dependent upon
management's ability to develop profitable operations. These factors among
others may raise substantial doubt about the Company's ability to continue as a
going concern.
Recent Accounting Pronouncements
--------------------------------
In December 2002, the FASB issued 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 charge to the fair value based
method of accounting for stock-based compensation. In addition, this statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosure in both annual and interim financial statements about the method of
14
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, 2002 and will
adopt the interim disclosure provisions for its financial reports for the
quarter ended March 31, 2003. The Company has no awards of stock-based employee
compensation outstanding at December 31, 2002.
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141), and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS No. 142). The FASB also issued Statement of
Financial Accounting Standards No. 143, "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets" (SFAS No. 143), and Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144) in August and October 2001,
respectfully.
SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements.
Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible assets
with indefinite lives, but such assets will be subject to periodic testing for
impairment. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs to be included in results from operations may be
necessary. SFAS No. 142 also requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption.
Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No.143 effective January
1, 2003.
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.
15
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, FASB
Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of
Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations
In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain
Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", which removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with Statements No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition,
this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term customer-relationship
intangible assets of financial institutions such as depositor- and
borrower-relationship intangible assets and credit cardholder intangible assets.
The requirements relating to acquisitions of financial institutions is effective
for acquisitions for which the date of acquisition is on or after October 1,
2002. The provisions related to accounting for the impairment or disposal of
certain long-term customer-relationship intangible assets are effective on
October 1, 2002. The adoption of this Statement did not have a material impact
to the Company's financial position or results of operations as the Company has
not engaged in either of these activities.
In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which amends FASB Statement 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 Statement 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 transition guidance and annual disclosure provisions of Statement
148 are effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The adoption of this
statement did not have a material impact on the Company's financial position or
results of operations as the Company has not elected to change to the fair value
based method of accounting for stock-based employee compensation.
16
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.
Inflation
---------
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
Trends, Risks and Uncertainties
-------------------------------
Largo Vista has sought to identify what it believes to be the most significant
risks to its business as discussed in "Risk Factors" below, but cannot predict
whether or to what extent any of such risks may be realized nor can there be any
assurances that Largo Vista has identified all possible risks that might arise.
Investors should carefully consider all of such risk factors before making an
investment decision with respect to Largo Vista's stock.
Limited operating history; anticipated losses; uncertainly of future results
----------------------------------------------------------------------------
Largo Vista has only a limited operating history upon which an evaluation of
Largo Vista and its prospects can be based. Largo Vista's prospects must be
evaluated with a view to the risks encountered by a company in an early stage of
development, particularly in light of the uncertainties relating to the
litigation funding which Largo Vista intends to market and the acceptance of
Largo Vista's business model. Largo Vista will be incurring costs to develop,
introduce and enhance its petroleum products, to establish marketing
relationships, to acquire and develop products that will complement each other,
and to build an administrative organization. To the extent that such expenses
are not subsequently followed by commensurate revenues, Largo Vista's business,
results of operations and financial condition will be materially adversely
affected. There can be no assurance that Largo Vista will be able to generate
sufficient revenues from the sale of its products and other product candidates.
Largo Vista expects negative cash flow from operations to continue for the next
12 months as it continues to develop and market its petroleum products. If cash
generated by operations is insufficient to satisfy Largo Vista's liquidity
requirements, Largo Vista may be required to sell additional equity or debt
securities. The sale of additional equity or convertible debt securities would
result in additional dilution to Largo Vista's shareholders.
Largo Vista's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside Largo
Vista's control, including: the demand for Largo Vista's products; seasonal
trends in demand and pricing of petroleum products; the amount and timing of
capital expenditures and other costs relating to the expansion of Largo Vista's
operations; the introduction of new services and products by Largo Vista or its
17
competitors; price competition or pricing changes in the industry; political
risks and uncertainties involving the world's petroleum and markets; technical
difficulties; general economic conditions, and economic conditions specific to
the liquid petroleum gas markets. Largo Vista's quarterly results may also be
significantly affected by the impact of the accounting treatment of
acquisitions, financing transactions or other matters. Particularly at Largo
Vista's early stage of development, such accounting treatment can have a
material impact on the results for any quarter. Due to the foregoing factors,
among others, it is likely that Largo Vista's operating results will fall below
the expectations of Largo Vista or investors in some future quarter.
Management of Growth
--------------------
Largo Vista expects to experience significant growth in the number of employees
relative to its current levels of employment and the scope of its operations. In
particular, Largo Vista intends to hire sales, marketing and administrative
personnel. Additionally, acquisitions could result in an increase in employee
headcount and business activity. Such activities could result in increased
responsibilities for management. Largo Vista believes that its ability to
increase its customer support capability and to attract, train, and retain
qualified technical, sales, marketing, and management personnel, will be a
critical factor to its future success. In particular, the availability of
qualified sales, trading and management personnel is quite limited, and
competition among companies to attract and retain such personnel is intense.
During strong business cycles, Largo Vista may experience difficulty in filling
its needs for qualified sales, and other personnel.
Largo Vista's future success will be highly dependent upon its ability to
successfully manage the expansion of its operations. Largo Vista's ability to
manage and support its growth effectively will be substantially dependent on its
ability to implement adequate financial and management controls, reporting
systems, and other procedures and hire sufficient numbers of financial,
accounting, administrative, and management personnel. Largo Vista is in the
process of establishing and upgrading its financial accounting and procedures.
There can be no assurance that Largo Vista will be able to identify, attract,
and retain experienced accounting and financial personnel. Largo Vista's future
operating results will depend on the ability of its management and other key
employees to implement and improve its systems for operations, financial
control, and information management, and to recruit, train, and manage its
employee base. There can be no assurance that Largo Vista will be able to
achieve or manage any such growth successfully or to implement and maintain
adequate financial and management controls and procedures, and any inability to
do so would have a material adverse effect on Largo Vista's business, results of
operations, and financial condition.
Largo Vista's future success depends upon its ability to address potential
market opportunities while managing its expenses to match its ability to finance
its operations. This need to manage its expenses will place a significant strain
on Largo Vista's management and operational resources. If Largo Vista is unable
to manage its expenses effectively, Largo Vista's business, results of
operations, and financial condition will be materially adversely affected.
Risks associated with acquisitions
----------------------------------
Although Largo Vista does not presently intend to do so, as part of its business
strategy in the future, Largo Vista could acquire assets and businesses relating
to or complementary to its operations. Any acquisitions by Largo Vista would
involve risks commonly encountered in acquisitions of companies. These risks
would include, among other things, the following: Largo Vista could be exposed
to unknown liabilities of the acquired companies; Largo Vista could incur
acquisition costs and expenses higher than it anticipated; fluctuations in Largo
18
Vista's quarterly and annual operating results could occur due to the costs and
expenses of acquiring and integrating new businesses or technologies; Largo
Vista could experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; Largo Vista's ongoing business could
be disrupted and its management's time and attention diverted; Largo Vista could
be unable to integrate successfully.
ITEM 7. FINANCIAL STATEMENTS
LARGO VISTA GROUP, LTD.
INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Page
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at December 31, 2002 and 2001 F-3
Consolidated Statements of Operations for the two years
ended December 31, 2002 and 2001 F-4
Consolidated Statements of Deficiency in Stockholders' Equity for
the two years ended December 31, 2002 and 2001 F-5
Consolidated Statements of Cash Flows for the two
years ended December 31, 2002 and 2001 F-6
Notes to Consolidated Financial Statements F-7-18
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Largo Vista Group, Ltd.
Newport Beach, California
We have audited the accompanying consolidated balance sheets of Largo
Vista Group, Ltd. and its wholly-owned subsidiaries (the "Company") as of
December 31, 2002 and 2001 and the related consolidated statements of
operations, deficiency in stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
L, the Company has an accumulated deficit of $15,623,773 at December 31, 2002,
which raises substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/S/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
--------------------------------------------
Russell Bedford Stefanou Mirchandani LLP
McLean, Virginia
April 8, 2003
F-2
LARGO VISTA GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalent $ 11,174 $ 99,343
Accounts receivable, net of allowance for doubtful accounts
of $0 at December 31, 2002 and 2001 154,438 2,790
Inventories, at cost (Note C) 2,630 59,954
Prepaid expenses and other 48,810 52,022
------------- -------------
Total Current Assets 217,052 214,109
Property, plant and equipment, at cost (Note D) 15,972 14,427
Less: accumulated depreciation (3,132) (211)
------------- -------------
12,840 14,216
$ 229,892 $ 228,325
============= =============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 421,280 $ 275,858
Notes payable to related parties (Note E) 473,938 408,081
Due to related parties (Note F) 74,511 31,209
------------- -------------
Total Current Liabilities 969,729 715,148
Commitment and contingencies (Note K) -- --
Preferred Stock, $0.001 par value; 25,000,000 shares authorized,
none issued and outstanding at December 31, 2002 and 2001 (Note G) -- --
Common stock, $0.001 par value; 400,000,000 shares authorized,
246,527,861 and 232,175,730 shares issued and outstanding at
December 31, 2002 and 2001, respectively (Note G) 246,528 232,176
Additional paid-in capital 14,633,708 13,555,870
Accumulated deficit (15,623,773) (14,278,569)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700 3,700
------------- -------------
Deficiency in stockholders' equity (739,837) (486,823)
$ 229,892 $ 228,325
============= =============
See the accompanying notes to consolidated financial statements
F-3
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
-------------- --------------
Revenue $ 554,914 $ 1,946,041
Cost of sales 518,775 1,953,925
-------------- --------------
Gross profit (loss) 36,139 (7,884)
Operating expenses:
Selling, general and administrative 1,365,755 1,262,197
Depreciation 2,920 211
-------------- --------------
1,368,675 1,262,408
Loss from operations (1,332,536) (1,270,292)
Interest expense (12,668) (69,467)
-------------- --------------
Loss from continuing operations, before income taxes and
discontinued operations (1,345,204) (1,339,759)
Income taxes -- --
-------------- --------------
Loss from continuing operations, before discontinued
operations (1,345,204) (1,339,759)
Loss from discontinued operations (Note B) -- (283,215)
Gain on disposal of discontinued operations (Note B) -- 3,572,563
-------------- --------------
Net income (loss) $ (1,345,204) $ 1,949,589
Basic and diluted net income (loss) per common share (Note J) $ (0.01) $ 0.01
Continuing operations $ (0.01) $ (0.01)
Discontinued operations $ -- $ 0.02
Weighted average shares outstanding 241,841,014 222,491,883
See accompanying notes to consolidated financial statements
F-4
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
Foreign
Preferred Common Additional Currency
Preferred Stock Common Stock Paid-In Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
--------- --------- ------------ ----------- ------------ ------------- ---------- -------------
Balance at December 31, 2000 -- $ -- 218,804,745 $ 218,805 $ 12,467,623 $(16,228,158) $ 3,700 $ (3,538,030)
Shares issued in
exchange for services -- -- 8,023,484 8,023 773,544 -- -- 781,567
Shares issued in exchange
for debt -- -- 5,347,501 5,348 314,703 -- -- 320,051
Net income -- -- -- -- -- 1,949,589 -- 1,949,589
--------- --------- ------------ ----------- ------------ ------------- ---------- -------------
Balance at December 31, 2001 -- $ -- 232,175,730 $ 232,176 $ 13,555,870 $(14,278,569) $ 3,700 $ (486,823)
Shares issued in
exchange for services -- -- 13,919,585 13,920 974,668 -- -- 988,588
Shares issued in exchange
for debt -- -- 432,546 432 43,170 -- -- 43,602
Capital contributed by
related parties (Note F) -- -- -- -- 60,000 -- -- 60,000
Net loss -- -- -- -- -- (1,345,204) -- (1,345,204)
--------- --------- ------------ ----------- ------------ ------------- ---------- -------------
Balance at December 31, 2002 -- $ -- 246,527,861 $ 246,528 $ 14,633,708 $(15,623,773) $ 3,700 $ (739,837)
========= ========= ============ =========== ============ ============= ========== =============
See accompanying notes to consolidated financial statements
F-5
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from continuing operations $(1,345,204) $(1,339,759)
Net (loss) from discontinued operations -- (283,215)
Gain on business divestiture -- 3,572,563
Adjustments to reconcile net (loss) to net cash
used by operating activities
Depreciation and amortization 2,920 211
Loss on disposal of assets -- 821,060
Common stock issued for services 988,588 781,567
Common stock issued in exchange for debt 43,602 --
Changes in assets and liabilities:
Accounts receivable (151,648) (2,790)
Inventories 57,324 256,772
Prepaid expenses and other 3,212 228,399
Accounts payable and other liabilities 145,422 (4,180,655)
Deferred revenue -- (188,230)
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES (255,784) (334,077)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (1,545) (14,427)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,545) (14,427)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from related parties 60,000 --
Proceeds from (repayments of) notes payable 65,856 408,081
Proceeds from (repayments to) related parties 43,302 --
------------ ------------
NET CASH PROVIDED BY IN) FINANCING ACTIVITIES 169,158 408,081
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS $ (88,171) $ 59,577
Cash and cash equivalents at the beginning of the year $ 99,345 $ 39,766
------------ ------------
Cash and cash equivalents at the end of the year $ 11,174 $ 99,343
============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $ 1,740 $ 25,947
Income taxes paid $ -- $ --
Common stock issued for services $ 988,588 $ 781,567
Common stock issued in exchange for debt $ 43,602 $ 320,051
See accompanying notes to consolidated financial statements
F-6
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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., Largo Vista International Corp., Everlasting International Ltd.
("Everlasting"), Kunming Xinmao Petrochemical Industrial Co., Ltd. ("Kunming
Xinmao") and Zunyi Shilin Xinmao Petrochemical Industries Co., Ltd.
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. Everlasting was formed under the laws of Nevada
and was liquidated in 2001. Kunming Xinmao was registered under the laws of the
Peoples Republic of China and was sold to a Russian entity in 2001 (see Note B).
Zunyi Shilin Xinmao Petrochemical Industries Co., Ltd. ("Zunyi") is registered
under the laws of the Peoples Republic of China. Zunyi was formed and began
operations in 2001.
In April 27, 2001, Everlasting disposed its 66.67 % interest in Kunming Xinmao
to UNIKO-LINE, an entity organized under the laws of the Russian Federation.
Kunming Xinmao was engaged in the distribution of liquid petroleum gas in the
retail and wholesale markets in the Province of Yunnan in the Peoples Republic
of China. Subsequent to the sale, the Company liquidated in its entirety,
Everlasting, whose sole asset was the Company's equity interest in Kunming
Xinmao.
The Kunming Xinmao business segment is accounted for as a discontinued
operation, and accordingly, amounts in the financial statements, and related
notes for all periods shown have been restated to reflect discontinued
operations accounting. Summarized results of the discontinued business are
further described in Note B. 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.
Foreign Currency Translation
----------------------------
The financial statements and results of operations of the Company's Chinese
subsidiary are measured using local currency as the functional currency. The
reporting currency of the Company is the US dollar; accordingly, all amounts
included in the consolidated financial statements have been translated into US
dollars. The accumulated currency translation adjustment is reflected as a
separate component of stockholders' equity on the consolidated balance sheet.
Foreign currency translation gains and losses are included in the consolidated
results of operations for the period presented. The national currency of the
People's Republic of China, the Renminbi (RMB), is pegged to the U.S. dollar.
The average rate of exchange for fiscal 2002 and 2001 was 8.28 RMB to the
dollar.
F-7
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
-------------------------
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Property and Equipment
----------------------
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets. (See Note
D).
Long-Lived Assets
-----------------
The Company has adopted Statement of Financial Accounting Standards No. 144
("SFAS 144"). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undercounted cash flows. Should an impairment in value be indicated,
the carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. SFAS No. 144 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.
Inventories
-----------
Inventories consist primarily of LPG. Cost is determined by the first-in,
first-out method for retail operations and specific identification method for
wholesale operations. (See Note C).
Income Taxes
------------
The Company has implemented the provisions on Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
that income tax accounts be computed using the liability method. Deferred taxes
are determined based upon the estimated future tax effects of differences
between the financial reporting and tax reporting bases of assets and
liabilities given the provisions of currently enacted tax laws.
Net Earnings (Losses) Per Common Share
--------------------------------------
The Company computes earnings per share under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). Net earnings (losses) per
common share is computed by dividing net income (loss) by the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding during the year. Dilutive common stock equivalents consist of shares
issuable upon conversion of convertible preferred shares and the exercise of the
Company's stock options and warrants (calculated using the treasury stock
method).
F-8
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
----------------
The preparation of 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.
Revenue Recognition
-------------------
The Company generally recognizes revenue upon delivery of LPG to the customer.
Revenue associated with shipments of petroleum products is recognized when title
passes to the customer. There are no significant credit transactions.
In February 2002, the Company entered into an agreement with Zunyi Municipal
Government ("Government") to design and install LPG pipeline systems in
residential areas in the city of Zunyi, China on behalf of the Government.
Pursuant to the Agreement, the Government will reimburse the Company for certain
direct and indirect design and installation costs incurred by the Company up to
$308,000. In exchange for installing the pipeline, the Agreement provides for
the Company to be the sole LPG supplier for those households.
Advertising
-----------
The Company follows the policy of charging the costs of advertising to expenses
as incurred. The Company incurred no advertising costs during the years ended
December 31, 2002 and 2001.
Research and Development
------------------------
The Company accounts for research and development costs in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs".
Under SFAS 2, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company incurred no
expenditures on research and product development for 2002 and 2001.
Liquidity
---------
As shown in the accompanying financial statements, the Company incurred a net
loss from continuing operations of $1,345,204 and $1,339,759 during the year
ended December 31, 2002 and 2001, respectively. The Company's current
liabilities exceeded its current assets by $752,677 as of December 31, 2002.
F-9
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk
-----------------------------
Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments may be
in excess of the FDIC insurance limit. The Company periodically reviews its
trade receivables in determining its allowance for doubtful accounts. The
allowance for doubtful accounts was $0 at December 31, 2002 and 2001.
Comprehensive Income (Loss)
---------------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes standards for the
reporting and displaying of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. SFAS No. 130
requires other comprehensive income (loss) to include foreign currency
translation adjustments and unrealized gains and losses on available-for-sale
securities.
Reclassifications
-----------------
Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.
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 charge 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, 2002 and will adopt the
interim disclosure provisions for its financial reports for the quarter ended
March 31, 2003. The Company has no awards of stock-based employee compensation
outstanding at December 31, 2002.
F-10
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Segment Information
-------------------
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision-making group, in making decisions
how to allocate resources and assess performance. The information disclosed
herein materially represents all of the financial information related to the
Company's principal operating segment.
New Accounting Pronouncements
-----------------------------
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141), and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS No. 142). The FASB also issued Statement of
Financial Accounting Standards No. 143, "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets" (SFAS No. 143), and Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144) in August and October 2001,
respectively.
SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements.
Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible assets
with indefinite lives, but such assets will be subject to periodic testing for
impairment. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs to be included in results from operations may be
necessary. SFAS No. 142 also requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption.
Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
January 1, 2003.
F-11
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
-----------------------------------------
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, FASB
Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of
Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations.
In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain
Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", which removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with Statements No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition,
this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term customer-relationship
intangible assets of financial institutions such as depositor- and
borrower-relationship intangible assets and credit cardholder intangible assets.
The requirements relating to acquisitions of financial institutions is effective
for acquisitions for which the date of acquisition is on or after October 1,
2002. The provisions related to accounting for the impairment or disposal of
certain long-term customer-relationship intangible assets are effective on
October 1, 2002. The adoption of this Statement did not have a material impact
to the Company's financial position or results of operations as the Company has
not engaged in either of these activities.
F-12
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
-----------------------------------------
In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which amends FASB Statement 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 Statement 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 transition guidance and annual disclosure provisions of Statement
148 are effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The adoption of this
statement did not have a material impact on the Company's financial position or
results of operations as the Company has not elected to change to the fair value
based method of accounting for stock-based employee compensation.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.
NOTE B - DISCONTINUED OPERATIONS
In connection with the disposition of Kunming Xinmao in 2001, UNIKO-LINE
acquired all Kunming Xinmao assets, assumed all Kunming Xinmao liabilities and
paid $100 to the Company. As a result of the sale of the Kunming Xinmao business
segment, the Company accounted for the segment as a discontinued operation, and
accordingly, the amounts in the financial statements and related notes for all
periods shown have been restated to reflect discontinued operations accounting.
The financial statements reflect the operating results and balance sheet items
of the discontinued operations separately from continuing operations. Operating
results for the discontinued operations for the years ended December 31, 2002
and 2001 were:
2002 2001
------- ----------
Revenues $ -- $ 351,506
Expenses -- (634,721)
------- ----------
Net (loss) $ -- $(283,215)
======= ==========
Subsequent to the sale of Kunming Xinmao, the Company has had no involvement in
the operations of the business. Neither the Company nor any of its directors,
officers or significant shareholders are directors or officers of Kunming
Xinmao, or in any position to affect financial or operating policies of that
business. The new owners of Kunming Xinmao are not officers, directors or
significant shareholders of the Company.
F-13
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE B - DISCONTINUED OPERATIONS (Continued)
The following summarizes the gain on the disposition of the Kunming Xinmao
business segment for the year ended December 31, 2001:
Cash received $ 100
Debts assumed 5,026,262
Net assets disposed of (1,453,799)
------------
Net gain on disposal $ 3,572,563
============
NOTE C - 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 December 31, 2002 and 2001 are as follows:
2002 2001
-------- --------
Liquid petroleum gas $ 1,463 $50,874
Packaging bottles 938 7,665
Supplies 229 1,415
-------- --------
$ 2,630 $59,954
======== ========
NOTE D - PROPERTY, PLANT AND EQUIPMENT
The Company's property and equipment at December 31, 2002 and 2001 consists of
the following:
2002 2001
--------- ---------
Office Equipment $ 3,293 $ 3,014
Transportation Equipment 12,679 11,413
--------- ---------
Total 15,972 14,427
Accumulated Depreciation (3,132) (211)
--------- ---------
$ 12,840 $ 14,216
========= =========
Depreciation expense included as a charge to income amounted to $2,920 and $ 211
for the year ended December 31, 2002 and 2001, respectively.
NOTE E - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31, 2002 and 2001 consists of the
following:
2002 2001
---------- ----------
Note payable on demand to Company President; interest
payable monthly at 7% per annum; unsecured $ 15,000 $ 30,000
Note payable on demand to Company's Chairman; interest
payable monthly at 7% per annum; unsecured 458,938 378,081
---------- ----------
Total 473,938 408,081
Less: current portion (473,938) (408,081)
---------- ----------
$ -- $ --
========== ==========
F-14
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE F - RELATED PARTY TRANSACTIONS
In addition to notes payable to related parties described in Note E, two
officers of the Company have advanced funds to the Company for working capital
purposes. No formal repayment terms or arrangements exist. The net amount of
advances due the officers at December 31, 2002 and 2001 was $1,225 and $3,144,
respectively. In October 2002, one officer of the Company contributed $10,000 to
the Company as working capital.
A consultant of the Company has advanced funds to the Company for working
capital purposes. No formal repayment terms or arrangements exist. The net
amount of advances due the consultant at December 31, 2002 and 2001 was $9,386
and $28,065, respectively.
The Company's Chairman has advanced funds to the Company for working capital
purposes. No formal repayment terms or arrangements exist. The net amount of
advances due the chairman at December 31, 2002 was $63,900. In November 2002,
the Company Chairman contributed $50,000 to the Company as working capital.
NOTE G - CAPITAL STOCK
The Company has authorized 25,000,000 shares of Series A Preferred Stock, with a
par value of $.001 per share. As of December 31, 2002, the Company has no Series
A 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 December 31,
2002, the Company has 246,527,861 shares of common stock issued and outstanding.
For the year ended December 31, 2001, the Company issued an aggregate of
8,023,484 shares of common stock to consultants and employees for services in
the amount of $781,567. 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. In addition, the Company issued an aggregate of 5,347,501 shares
of common stock in exchange for previously incurred debt of $320,051.
For the year ended December 31, 2002, the Company issued an aggregate of
5,545,585 shares of common stock to consultants for services in the amount of
$368,312. The Company also issued 8,374,000 shares of common stock to employees
in exchange for options exercised for employee compensation in the amount of
$620,276. 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. In addition, the Company issued an aggregate of 432,546 shares of
common stock in exchange for previously incurred debt of $43,602.
NOTE H - STOCK OPTION PLANS
In November 2001, the Board of Directors of the Company implemented a
Non-Qualified Stock Option Plan for Consultants in an amount equal to 5,000,000
shares of common stock and a Qualified Stock Option Plan for Employees in an
amount equal to 10,000,000 shares. In October 2002, the Company's Board of
Directors approved to increase the issuance of Non-Qualified Stock Options to an
amount equal to 25,000,000 shares of common stock.
The stock option plan provides for the issuance of both qualified and
nonqualified incentive stock options at an exercise price approximating 50% of
the fair market value of the Company's common stock on the date of exercise (or
110% of the fair market value of the common stock on the date of the grant of
the option, in the case of significant stockholders). The maximum life of the
options is ten years for both the qualified incentive stock options and
non-qualified incentive stock options. An aggregate of 8,374,000 and 1,028,574
options were granted and all options were exercised on the grant date during the
year ended December 31, 2002 and 2001, respectively. There are no stock options
outstanding as of December 31, 2002.
F-15
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE I - INCOME TAXES
The Company has adopted Financial Accounting Standards No. 109 which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
At December 31, 2002, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $15,600,000, expiring in the
year 2022, that may be used to offset future taxable income. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company, it is more likely than not that the benefits will not be realized.
Due to significant changes in the Company's ownership, the Company's future use
of its existing net operating losses may be limited.
Components of deferred tax assets as of December 31, 2002 are as follows:
Non Current:
Net operating loss carryforward $ 5,378,000
Valuation allowance (5,378,000)
------------
Net deferred tax asset --
NOTE J -EARNINGS (LOSS) PER SHARE
Basic and fully diluted earnings (loss) per share are calculated by dividing net
income (loss) available to common shareholders by the weighted average of common
shares outstanding during the year. The Company has no potentially dilutive
securities, options, warrants or other rights outstanding. The following table
sets forth the computation of basic and diluted earnings (loss) per share:
2002 2001
--------------- ---------------
Net income (loss) available to
common stockholders $ (1,345,204) $ 1,949,589
=============== ===============
Basic and diluted earning (loss) per share $ (0.01) $ 0.01
=============== ===============
Continuing Operations (0.01) (0.01)
Discontinued Operations -- 0.02
Basic and diluted weighted average
number of common shares outstanding 241,841,014 222,491,883
NOTE K - COMMITMENTS AND CONTINGENCIES
Lease Commitments
-----------------
The Company leases office space on a month-to-month basis in Newport Beach,
California for its corporate offices. The Company also leases office space on a
month to month basis in Ho Chi Minh City, Vietnam for an administrative and
sales representation.
F-16
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE K - COMMITMENTS AND CONTINGENCIES
Lease Commitments (Continued)
-----------------------------
The Company maintains a representative office in Wuhan, Hubei Province, China.
The lease is for three years beginning January 2001, for approximately $480 per
months.
The Company leases distribution and office facilities in Zunyi City, Province of
Guizhou, China. Commitments for minimum rentals under non-cancelable leases at
the end of 2002 are as follows.
2003 $ 23,876
2004 18,116
2005 18,116
2006 18,116
2007 10,568
--------
$ 88,792
========
Rental expense charged to operations was $52,972 and $136,192 for 2002 and 2001,
respectively.
Employment and Consulting Agreements
-----------------------------------
The Company has several agreements with employees to provide organizational
services and various consulting agreements with outside contractors to provide
business development in China, international petroleum and other products
trading consultation services.
Litigation
----------
On March 1, 2001, UPAC/UAS, a former joint venture partner with the Company,
filed a complaint against the Company in Orange County Superior Court of the
State of California. The complaint alleges a breach of contract. The Company
filed a counter claim against the plaintiff for damages and received a judgment
in the Company's favor in February 2002 in the amount of $196,638. The Company
believes that the chance of collection is unlikely and The Company believes that
the chance of collection is unlikely, and therefore, has not recorded a
receivable for this amount.
The Company is subject to other legal proceedings and claims which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity.
NOTE L - GOING CONCERN MATTERS
The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the consolidated financial statements
during the years ended December 31, 2002 and 2001, the Company incurred losses
from continuing operations of $1,345,204 and 1,339,759, respectively. These
factors among others may indicate that the Company will be unable to continue as
a going concern for a reasonable period of time.
..
F-17
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE L - GOING CONCERN MATTERS (CONTINUED)
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve it's liquidity problems. Management
anticipates the Company will attain profitable status and improve its liquidity
through the continued developing, marketing and selling of its products and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
In order to improve the Company's liquidity, the Company is actively pursuing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.
F-18
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position
---- --- --------
Albert N. Figueroa 36 Principal Accounting Officer
Deng Shan 51 Interim Chief Executive officer and
Chairman of the Board of Directors
Directors serve until the next annual meeting of shareholders, or until their
successors are elected.
Albert N. Figueroa, Secretary and Treasurer, is in charge of day-to-day business
operations of Largo Vista in the United States, as well as being a liaison with
all outside service providers, and generally maintains the consistency of
information within the Company. Mr. Figueroa joined the Company in July 1991.
Deng Shan, Chairman of the Board of Directors, is well versed in the business
practices of China. Early in his career Mr. Deng was a lecturer in Wuhan
Chemical Engineering School. Later he advanced to associate professor at
Huazhong University of Science and Technology. In 1989, Mr. Deng became the
Director, Science and Technology Commission, Nanshan District Government, China.
In 1994, Mr. Deng was appointed Chief Executive Officer/Chairman of the Board of
four commercial companies. Mr. Deng joined the Company in April 1997.
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder require the Company's officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies. Based solely on its review of
the copies of the Section 16(a) forms received by it, or written representations
from certain reporting persons, the Company believes that, during the last
fiscal year, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the Company
during the last three years to its executive officers.
19
Name Other Securities All other
and Annual Restricted Underlying LTIP Compen-
Principal Salary Bonus Compen- Stock Options/ Payouts sation
Position Year ($) ($) sation ($) Awards ($) SARs (#) ($) ($)
----------------------------------------------------------------------------------------------
Deng Shan, 2002 0 0 0 100,000 0 0 0
Interim CEO 2001 0 0 0 100,000 0 0 0
2000 0 0 0 100,000 0 0 0
Albert 2002 30,512 0 0 0 29,488 0 0
Figueroa, 2001 0 0 0 55,000 10,633 0 0
Secretary 2000 0 0 0 60,000 0 0 0
Daniel 2002 3,814 0 0 0 104,685 0 0
Mendez, 2001 0 0 0 110,000 9,965 0 0
President 2000 0 0 0 120,000 0 0 0
Edward 2002 30,000 0 0 0 0 0 0
Deese, 2001 0 0 0 0 0 0 0
Interim COO 2000 0 0 0 0 0 0 0
James 2002 0 0 0 0 64,612 0 0
DeOlden, 2001 0 0 0 0 10,000 0 0
Director 2000 0 0 0 0 0 0 0
Notes:
(1) The officers listed above were paid their salary in a combination of
registered stock options, unregistered stock and/or cash. Any issuance of
unregistered common stock was valued at market, generally determined by the low
bid quotation.
(2) Albert N. Figueroa, Secretary/Treasurer, serves under a semi- annual
employment contract renewed effective January 1, 2003 at annualized compensation
of $30,000 that may be terminated upon 30 days written notice of either party.
(3) Deng Shan, Interim CEO, serves under a semi- annual Agreement for Services
renewed effective January 1, 2003 at annualized compensation of $84,000, that
may be terminated upon 30 days written notice of either party.
(4) Daniel Mendez, President, served under an annual Agreement for Services for
an annual compensation of $120,000. He resigned his position as president August
1,2002. Effective August 2,2002, Mr. Mendez agreed to provide consulting
services as the Company required. Mendez also served as a member of the Board of
Directors until his resignation October 17, 2002
(5) Edward Deese, Interim Chief Operating Officer, served under a semi-annual
Agreement for Services for an annualized compensation of $72,000. His agreement
terminated as of January 31, 2003. Deese also served as a member of the Board of
Directors from August 1, 2002 to January 17, 2003
(6) James DeOlden, Director served on the Board of Directors from September 12,
2002 to October 17, 2002
20
(7) The members of the Company's Board of Directors receive no additional
compensation for serving as directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership as of
April 14, 2003 of the Company's common stock by any person who is known to the
Company to be the beneficial owner of more than 5% of the Company's voting
securities and by each director and officer of the Company.
Beneficial Percentage
Name and Address (1) Ownership of Class
----------------- --------- --------
Albert Figueroa 5,085,079 1.98%
Deng Shan (2) 84,339,621 32.83%
All directors/officers as a group (2 persons) 89,424,700 34.81%
(1) The address for all persons listed is 4570 Campus Drive, Newport Beach,
CA 92660
(2) Mr. Deng Shan owns 3,500,079 (1.36%) shares personally, and
80,839,542 (31.46%) shares through his majority owned corporation,
Proton Technology Corporation Limited.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of February 28, 2003, other than issuances of common shares to executive
officers as compensation or in satisfaction of cash advances, there have been no
transactions to which the Company was a party involving $100,000 or more and in
which any director, executive officer, or holder of more than five percent of
our common stock had a material interest.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.(i) Articles of Incorporation of Largo Vista Group, Limited (filed Form
10SB, 11/2/99)
3.(ii) Bylaws of Largo Vista Group, Limited (filed Form 10SB, 11/2/99)
3.(iii) Articles of Incorporation of Largo Vista Inc.
(filed Form 10SB, 11/2/99)
3.(iv) Bylaws of Largo Vista Inc. (filed Form 10SB, 11/2/99)
3.(v) Articles of Incorporation of Everlasting International Limited (filed
Form 10SB, 11/2/99)
3.(vi) Bylaws of Everlasting International Limited
(filed Form 10SB, 11/2/99)
3.(vii) Articles of Incorporation of Kunming Xinmao Petrochemical Industry
Co., Ltd. (filed Form 10SB, 11/2/99)
21
10 Material Contracts
10.(a) Contract. Largo Vista Group, Ltd. and Sentio Corporation, December 28,
1998, (filed Form 10SB, 11/2/99)
10.(b) Contract. Hong Kong De Xiang Tuo Yi Industrial Company, August 28,
1992 (filed Form 10SB, 11/2/99)
10.(c) Plan and Agreement of Reorganization between Largo Vista Group, Ltd.,
Proton Technology Corporation, Ltd. and Everlasting International,
December 21, 1996 (filed Form 10SB, 11/2/99)
10.(d) Joint Venture Agreement of Kunming Xinmao Petrochemical Industry Co.,
Ltd., August 8, 1992 (filed Form 10SB, 11/2/99)
10.(e) Approval Certificate of Enterprise with Foreign Investment in the
People's Republic of China (filed Form 10SB, 11/2/99)
10.(f) Business License of Enterprise in the Peoples Republic of China (filed
Form 10SB, 11/2/99)
10.(g) Business Permit to Engage in LPG Business in Yunnan Province (filed
Form 10SB, 11/2/99)
10.(h) Notice of Subsidiaries of the Agriculture Bank of China, Yunnan
Provincial Branch, Acting as Agents for Collection and Receipt of
Payment for Kunming Xinmao Petrochemical Industry Co., Ltd. (filed
Form 10SB, 11/2/99)
10.(i) Agreement of Supply of Liquefied Petroleum Gas, March 18, 1996 (filed
Form 10SB, 11/2/99)
10.(j) Method of Insurance for LPG Credit, August 26, 1997 (filed Form 10SB,
11/2/99)
10.(k) Memorandum of Understanding Kunming Xinmao Petrochemical Industry Co.,
Ltd. and Wuhan Minyi Fuel Gas Petrochemical Company Limited, March 14,
1999 (filed Form 10SB, 11/2/99)
10.(l) Memorandum of Understanding Kunming Xinmao Petrochemical Industry Co.,
Ltd. and Guilin Municipal Garden Fuel Gas Pipelines Limited, March 29,
1999 (filed Form 10SB, 11/2/99)
10.(m) Approval Certificate of Enterprises with Foreign Investment in the
Peoples Republic of China, August 21, 1992
(filed Form 10SB, 11/2/99)
10.(n) Contract. Enterprise Ownership Transfer Agreement "Ten Year Leasing
Contract", Seller Chen Mao Tak, Purchaser Everlasting International,
Ltd., third party Kunming Fuel General Company, November 8, 1995
(filed Form 10SB-A1, 1/14/2000 as EX-10.D)
10.(o) Joint Venture Agreement. , Largo Vista with the United Arab Petroleum
Corporation ("UAPC"), known as Largo Vista/UAPC Partners (filed Form
10SB-A1, 1/14/2000 as EX-10.F)
10.(p) Memorandum of Association Limited Liability Company. Largo Vista
Group, Ltd., LLC, Dubai, UAE, October 12, 1999, Largo Vista Group,
Ltd., UAPC, and Sheik Al Shabani, named Largo Vista Group Limited,
Limited Liability Company of the UAE (filed Form 10SB-A1, 1/14/2000 as
EX-10.G)
10.(q) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG)
Buyer, and United Arab Petroleum Corporation Seller, November 25, 1999
(filed Form 10SB-A1, 1/14/2000 as EX-10.H)
10.(r) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG),
Buyer, and United Arab Petroleum Corporation Seller, December 18, 1999
(filed Form 10SB-A1, 1/14/2000 as EX-10.H)
10.(s) Employment Agreement Daniel J. Mendez 1999 (filed Form 10SB-A1 as
Ex-3.iv, 1/14/2000)
22
10.(t) Consultant Agreement Deng Shan 1999 (filed Form 10SB-A1, as Ex-3.v
1/14/2000)
10.(u) Contract. "Enterprise Ownership Transfer Agreement", November 8, 1995,
new translation (filed Form 10SB-A2, 3/20/2000 as EX-10.E.1)
10.(v) Contract. "Agreement on Payment", November 8, 1995 (filed Form
10SB-A2, 3/20/2000 as EX-10.E.2)
10.(w) Contract. "Agreement on Supply of Liquified Petroleum Gas", March 18,
1996 (filed Form 10SB-A2, 3/20/2000 as EX-10.E.3)
10.(x) Employment Agreement Albert N. Figueroa 1999 (filed as Ex-3.vi
3/21/2000)
All of the exhibits listed above have been filed previously with the forms and
on the dates indicated.
The new exhibits for this filing are as follows:.
10.(y) Agreement on Zunyi Pipeline Project No.1
Largo Vista Group, Ltd - Proton Enterprise (Wuhan) LTD., China (Agent
Agreement)
10.(z) Zunyi Pipeline #1 Contract
Proton Enterprise (Wuhan) LTD. & Construction Headquarters of Zunyi
Municipal Government, Dated February 2, 2002
10.(aa) Gas Supply Contract Between Proton Enterprise (Wuhan) LTD. and Zunyi
Government Administration Construction Team, Dated October 15, 2002
40 Years Exclusive Right
10.(ab) Zunyi Jiahong Gas Co., Ltd. & Largo Vista Group, Ltd. Lease Agreement
No.JHLGOV0802 Dated August 27, 2002
(b) Reports on Form 8-K
None
ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, Largo Vista Group, Ltd
carried out an evaluation, under the supervision and with the participation of
Largo Vista's management, including Largo Vista's Interim Chief Executive
Officer and Principal Accounting Officer, of the effectiveness of the design and
operation of Largo Vista's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Interim Chief
Executive Officer and Principal Accounting Officer concluded that Largo Vista's
disclosure controls and procedures are effective in timely alerting them to
material information relating to Largo Vista required to be included in Largo
Vista's periodic Securities and Exchange Commission filings. There has been no
significant changes in Largo Vista's internal controls or in other factors that
could significantly affect these controls subsequent to the evaluation date.
23
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LARGO VISTA GROUP, LTD.
Signature Title Date
--------------------- ------------------- --------------
/s/Albert N. Figueroa Secretary/Treasurer April 15, 2003
Albert N. Figueroa
/s/Deng Shan Interim CEO April 15, 2003
Deng Shan
24
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Deng Shan, certify that:
1. I have reviewed this annual report on Form 10-KSB of Largo Vista Group, Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/Deng Shan
---------------------------------------
Deng Shan, Principal Executive Officer
25
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Albert Figueroa, certify that:
1. I have reviewed this annual report on Form 10-KSB of Largo Vista Group, Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/Albert Figueroa
-------------------------------
Albert Figueroa
Principal Accounting Officer
26
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Largo Vista Group, Ltd (the
"Company") on Form 10-KSB for the period ending December 31, 2002, as filed with
the Securities and Exchange Commission (the "Report"), the undersigned, Deng
Shan, Interim Chief Executive Officer of the Company, certifies to the best of
his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Date: April 15, 2003 /s/ Deng Shan
-----------------------------------------
Deng Shan, Principal Executive Officer
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Largo Vista Group, Ltd (the
"Company") on Form 10-KSB for the period ending December 31, 2002, as filed with
the Securities and Exchange Commission (the "Report"), the undersigned, Albert
Figueroa, Secretary/Treasurer of the Company, certifies to the best of his
knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Date: April 15, 2003 /s/ Albert Figueroa
---------------------------------------------
Albert Figueroa, Principal Accounting Officer
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
27