UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
Commission file number 000-30426
LARGO VISTA GROUP, LTD
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 76-0434540
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
4570 Campus Drive
Newport Beach, CA 92660
--------------------------------------------------------------------------------
(Address of principal executive offices)
(949) 252-2180
--------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act during the past 12 months
(or for such shorter period as 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 ___
Indicate the number of shares outstanding of each of the issuer's class of
common stock. The Registrant had 256,921,534 shares of its common stock
outstanding as of May 19, 2003.
LARGO VISTA GROUP, LTD
QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2003
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet:
March 31, 2003 3
Condensed Consolidated Statements of Operations:
Three Months Ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2003 and 2002 5
Notes to Unaudited Condensed Consolidated Financial
Information: March 31, 2003 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
Item 3. Controls and Procedures 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Certifications 12
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2003
--------------
ASSETS
Current Assets:
Cash and cash equivalents $ 145,164
Inventories, at cost 6,720
Prepaid expenses and other 38,892
-------------
Total Current Assets 190,776
Equipment, at cost 15,972
Accumulated depreciation (3,912)
-------------
12,060
$ 202,836
=============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 372,282
Notes payable to related parties 473,938
Due to related parties 89,436
-------------
Total Current Liabilities 935,656
Commitments and Contingencies --
Preferred stock, $0.001 par value; 25,000,000 shares authorized;
none issued and outstanding --
Common stock, $0.001 par value; 400,000,000 shares authorized;
250,968,784 shares issued and outstanding 250,969
Additional paid-in capital 14,797,956
Accumulated deficit (15,785,445)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
-------------
Deficiency in stockholders' equity (732,820)
$ 202,836
=============
See accompanying notes to the unaudited condensed
consolidated financial information
3
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
Three months ended March 31,
2003 2002
-------------- --------------
Revenue $ 12,387 $ 117,962
Cost of revenue 15,577 114,699
-------------- --------------
Gross profit (loss) (3,190) 3,263
Operating expenses:
Selling and administrative 147,716 450,027
Depreciation 780 604
-------------- --------------
148,496 450,631
Loss from Operation (151,686) (447,368)
-------------- --------------
Interest (expense) income (9,985) 15,546
-------------- --------------
Net Loss $ (161,671) $ (431,822)
============== ==============
Loss per common share (basic and diluted) $ (0.00) $ (0.00)
============== ==============
Weighted average shares outstanding 249,137,000 235,466,000
============== ==============
See accompanying notes to the unaudited condensed
consolidated financial information.
4
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months
ended March 31,
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(161,671) $(431,822)
Adjustments to reconcile net (loss) to net cash used
by operating activities
Depreciation 780 604
Common stock issued for services -- 36,305
Common stock issued for compensation 113,500 303,471
Changes in assets and liabilities:
Accounts receivable 154,438 1,525
Inventories (4,090) 14,314
Prepaid expenses and other 9,918 (118,753)
Accounts payable and other liabilities (48,998) 22,925
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 63,877 (171,431)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures -- (1,266)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES -- (1,266)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from related parties 55,188 --
Proceeds from notes payable -- 177,474
Proceeds from related parties 14,925 40,099
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 70,113 217,573
NET INCREASE IN CASH AND EQUIVALENTS $ 133,990 $ 44,876
Cash and cash equivalents at the beginning of the period $ 11,174 $ 99,343
---------- ----------
Cash and cash equivalents at the end of the period $ 145,164 $ 144,219
========== ==========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $ -- $ 1,740
Income taxes paid $ -- $ --
Common stock issued for services $ -- $ 36,305
Common stock issued in exchange for compensation $ 113,500 $ 303,471
See accompanying notes to the unaudited condensed
consolidated financial information.
5
LARGO VISTA GROUP, LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2003
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the three-month period ended March
31, 2003 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2003. The unaudited consolidated financial
statements should be read in conjunction with the consolidated December 31, 2002
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
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, 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. Zunyi Shilin Xinmao Petrochemical Industries
Co., Ltd. ("Zunyi") is registered under the laws of the Peoples Republic of
China.
All significant intercompany balances and transactions have been eliminated in
consolidation. All amounts in these consolidated financial statements and notes
thereto are stated in United States dollars unless otherwise indicated.
6
LARGO VISTA GROUP, LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2003
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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 has adopted 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 March 31, 2003.
New Accounting Pronouncements
-----------------------------
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.
7
Item 2. Management's Discussion and Analysis or Plan of Operations
Cautionary Statement Regarding Forward-Looking Information
----------------------------------------------------------
This Form 10-QSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
herein that address activities, events or developments that the Corporation
expects, believes, estimates, plans, intends, projects or anticipates will or
may occur in the future, are forward-looking statements. Actual events may
differ materially from those anticipated in the forward-looking statements.
Important risks that may cause such a difference include: general domestic and
international economic business conditions, increased competition in the
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 Quarterly Report. This
discussion and analysis should be read in conjunction with the audited
Consolidated Financial Statements of the Company including the Notes thereto in
the Form 10-KSB.
Results of Operations
---------------------
Revenue
Our revenue is primarily attributable to liquid petroleum gas sales at our Zunyi
facility located in South China. In 2003 we concentrated primarily on the retail
side of the business because the wholesale business was negatively affected by
sharp price fluctuations.
Costs of revenue
Our cost of revenue was higher than expected due to the sharp decline in sales
activities and our decision not to participate in the wholesale business.
Selling and administrative expenses
Selling and administrative expenses decreased $302,311 to $147,716 as a result
of Improved cost saving measures and decreased volume of operations.
8
Currency Consideration
----------------------
Our 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 March 31, 2003 and the average rate during the periods presented in the
accompanying 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.
Liquidity and Capital Resources
-------------------------------
As of March 31, 2003, we had a working capital deficit of approximately
$745,000. Despite our operating loss for the quarter, we generated cash flow of
approximately $64,000 from operating activities. We also obtained additional
advances and contributions from related parties of $70,000.
We have experienced significant operating losses from inception and have
financed our activities to date through cash advances from affiliates and sales
of our common stock. Availability, source, amount and terms of any additional
financing are uncertain at this time, and by no means assured.
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.
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.
9
Item 3. 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 have 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.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Recent sales of unregistered securities:
The company issued unregistered shares of its common stock from January
1, 2003 to March 31, 2003 a total of 4,440,923 shares valued at
$113,500 as follows:
Number of
Common Shares Name of Persons Amount of
Date Issued Whom Issued Consideration
---- ------ ----------- -------------
Issued to officers as compensation:
February 24, 2003 902,777 Deng Shan 25,000
Issued to consultants for services:
January 8, 2003 1,400,000 Steve Chaussy 21,000
February 24, 2003 662,823 Harold McLendon 22,500
February 24, 2003 662,823 Li Chuming 22,500
February 24, 2003 812,500 Danny Nguyen 22,500
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
10
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 May 20, 2003
----------------------
Albert N. Figueroa
/s/ Deng Shan Interim CEO May 20, 2003
----------------------
Deng Shan
11
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-QSB 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: May 20, 2003 /s/ Deng Shan
------------------------------------------
Deng Shan, Principal Executive Officer
12
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-QSB 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: May 20, 2003 /s/ Albert Figueroa
----------------------------
Albert Figueroa
Principal Accounting Officer
13
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-QSB for the period ending March 31, 2003, 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: May 20, 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.
14
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-QSB for the period ending March 31, 2003, 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: May 20, 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.
15