Largo Vista 10-QSB 9-30-05 body
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the period ended September 30, 2005
COMMISSION
FILE NUMBER 000-30426
LARGO
VISTA GROUP, LTD
(Name
of
Small Business Issuer in Its Charter)
Nevada
|
76-0434540
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
4570
Campus Drive
|
Newport
Beach, CA 92660
|
(Address
of Principal Executive Offices)
(949)
252-2180
ISSUER'S
TELEPHONE NUMBER
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 277,635,403 shares of Common Stock ($.001
par
value) as of November 8, 2005.
LARGO
VISTA GROUP, LTD.
Table
of
Contents
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
3
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
3
|
|
September
30, 2005 and December 31, 2004
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations and Statements of Comprehensive
Operations
|
4
|
|
Three
and Nine Months Ended September 30, 2005 and 2004
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
5
|
|
Nine
Months Ended September 30, 2005 and 2004
|
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Information
|
6-10
|
|
September
30, 2005
|
|
|
|
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis
|
11-13
|
|
|
|
Item
3.
|
Controls
and Procedures
|
13
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
14
|
|
|
|
Item
2.
|
Changes
in Securities and Use of Proceeds
|
14
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
14
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security holders
|
15
|
|
|
|
Item
5.
|
Other
Information
|
15
|
|
|
|
Item
6.
|
Exhibits
|
15
|
2
PART
I.
FINANCIAL INFORMATION
Item
1.
Financial Statements (Unaudited)
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
SEPTEMBER
30, 2005 AND DECEMBER 31, 2004
|
|
|
|
|
(Unaudited)
|
|
|
September
30, 2005
|
December
31, 2004
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalent
|
$
82,364
|
$
94,565
|
Accounts
receivable, net
|
11,705
|
6,865
|
Employee
advances
|
11,504
|
13,532
|
Inventories,
at cost
|
12,260
|
8,834
|
Prepaid
expenses and other
|
111,453
|
12,541
|
Total
current assets
|
229,286
|
136,337
|
|
|
|
Property
and equipment, at cost
|
16,560
|
16,221
|
Less:
accumulated depreciation
|
11,800
|
9,273
|
|
4,760
|
6,948
|
|
|
|
Deposits
|
755
|
755
|
|
|
|
Total
assets
|
$
234,801
|
$
144,040
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
Current
Liabilities:
|
|
|
Accounts
payable and accrued liabilities
|
$
550,599
|
$
467,632
|
Customer
deposits
|
-
|
4,831
|
Notes
payable to related parties
|
537,400
|
434,782
|
Due
to related parties
|
233,080
|
157,393
|
Total
Current Liabilities
|
1,321,079
|
1,064,638
|
|
|
|
Commitment
and contingencies
|
-
|
-
|
|
|
|
Preferred
stock, $0.001 par value; 25,000,000 shares authorized, none issued
and
outstanding at September 30, 2005 and December 31, 2004
|
-
|
-
|
Common
stock, $0.001 par value; 400,000,000 shares authorized, 277,635,403
and
269,963,856 shares issued and outstanding at September 30, 2005 and
December 31, 2004, respectively
|
277,635
|
269,964
|
Additional
paid-in capital
|
15,344,343
|
15,184,356
|
Subscription
payable
|
-
|
18,458
|
Accumulated
deficit
|
(16,707,636)
|
(16,397,076)
|
Accumulated
other comprehensive income:
|
|
|
Foreign
currency translation adjustment
|
(620)
|
3,700
|
Deficiency
in stockholders' equity
|
(1,086,278)
|
(920,598)
|
|
|
|
Total
liabilities and deficiency in stockholders' equity
|
$
234,801
|
$
144,040
|
See
accompanying notes to the unaudited condensed consolidated financial
information
3
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF COMPREHENSIVE
OPERATIONS
|
(Unaudited)
|
|
|
|
|
|
|
For
the three months ended September 30,
|
For
the nine months ended September 30,
|
|
2005
|
2004
|
2005
|
2004
|
Revenue
|
$
98,000
|
$
69,180
|
$
259,773
|
$
295,226
|
Cost
of sales
|
88,475
|
62,151
|
245,325
|
261,037
|
Gross
profit (loss)
|
9,525
|
7,029
|
14,448
|
34,189
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Selling
general and administrative
|
107,934
|
95,009
|
295,328
|
261,645
|
Depreciation
|
772
|
762
|
2,296
|
2,285
|
|
108,706
|
95,771
|
297,624
|
263,930
|
|
|
|
|
|
Loss
from operations
|
(99,181)
|
(88,742)
|
(283,176)
|
(229,741)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
Other
income, net
|
-
|
7,380
|
-
|
18,333
|
Interest
income (expense)
|
(12,403)
|
(7,872)
|
(27,384)
|
(23,614)
|
Total
other income (expenses)
|
(12,403)
|
(492)
|
(27,384)
|
(5,281)
|
|
|
|
|
|
Loss
from operations before income taxes
|
(111,584)
|
(89,234)
|
(310,560)
|
(235,022)
|
Provision
for income taxes
|
-
|
-
|
-
|
-
|
Net
loss
|
(111,584)
|
(89,234)
|
(310,560)
|
(235,022)
|
|
|
|
|
|
Other
comprehensive income: foreign currency translation loss
|
(4,320)
|
-
|
(4,320)
|
-
|
|
|
|
|
|
Comprehensive
(loss)
|
$
(115,904)
|
$
(89,234)
|
$
(314,880)
|
$
(235,022)
|
|
|
|
|
|
Loss
per common share (basic and assuming diluted)
|
$
(0.00)
|
$
(0.00)
|
$
(0.00)
|
$
(0.00)
|
Weighted
average shares outstanding
|
277,635,403
|
268,773,115
|
277,270,091
|
269,963,856
|
See
accompanying notes to the unaudited condensed consolidated financial
information
4
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
For
the nine months ended September 30,
|
|
2005
|
2004
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
(loss) from operations
|
$
(310,560)
|
$
(235,022)
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
Depreciation
|
2,296
|
2,285
|
Changes
in assets and liabilities:
|
|
|
Accounts
receivable
|
(4,599)
|
53,291
|
Inventories
|
(3,174)
|
2,397
|
Employee
advances
|
2,264
|
49,091
|
Prepaid
expenses and other
|
(96,626)
|
(102,881)
|
Accounts
payable and other liabilities
|
166,218
|
150,835
|
Customer
Deposits
|
|
(4,741)
|
-
|
Deferred
revenue
|
-
|
89,372
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
(248,922)
|
9,368
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Capital
contributions from related parties
|
40,979
|
41,159
|
Proceeds
from related parties, net of repayments
|
194,097
|
41,521
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
235,076
|
82,680
|
Effect
of exchange rates on cash
|
|
1,645
|
-
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(12,201)
|
92,048
|
Cash
and cash equivalents at the beginning of the period
|
94,565
|
7,874
|
Cash
and cash equivalents at the end of the period
|
$
82,364
|
$
99,922
|
|
|
|
Supplemental
Disclosures of Cash Flow Information
|
|
|
Cash
paid during the period for interest
|
$
-
|
$
-
|
Income
taxes paid
|
-
|
-
|
Common
stock issued for accrued service fees
|
84,000
|
82,400
|
Common
stock issued in exchange for due to related parties
|
24,222
|
15,078
|
See
accompanying notes to the unaudited condensed consolidated financial
information
5
LARGO
VISTA GROUP, LTD.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER
30, 2005
(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 and nine-month period ended September
30, 2005 are not necessarily indicative of the results that may be expected
for
the year ended December 31, 2005. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31,
2004
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
Business
and Basis of Presentation
Largo
Vista Group, Ltd. (the "Company") was incorporated under the laws of the State
of Nevada. The Company is principally engaged in the distribution of liquid
petroleum gas (LPG) in the retail and wholesale markets in South China and
in
the purchase of petroleum products for delivery to the Far East.
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Largo Vista, Inc., Largo Vista Construction, Inc.,
and Largo Vista International Corp. Largo Vista, Inc. is formed under the laws
of the State of California and is inactive. Largo Vista Construction, Inc.
is
formed under the laws of the State of Nevada and is inactive. Largo Vista
International Corp. is formed under the laws of Panama and is inactive. The
Company also has operations through DBA (Doing Business As) agreements with
Zunyi Jiahong Gas Co., Ltd. ("Jiahong"). Jiahong is registered under the Chinese
laws in the Peoples Republic of China.
All
significant intercompany balances and transactions have been eliminated in
consolidation. All amounts in these consolidated financial statements and notes
thereto are stated in United States dollars unless otherwise
indicated.
Stock
Based Compensation
In
December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 (“SFAS No. 148”), "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This
statement amends SFAS No. 123, "Accounting for Stock-Based Compensation,"
to provide alternative methods of transition for a voluntary change to the
fair
value based method of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of SFAS No. 123
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in APB Opinion No. 25 and related interpretations.
Accordingly, compensation expense for stock options is measured as the excess,
if any, of the fair market value of the Company's stock at the date of the
grant
over the exercise price of the related option. The Company has adopted the
annual disclosure provisions of SFAS No. 148 in its financial reports
for
the year ended December 31, 2004 and has adopted the interim disclosure
provisions for its financial reports for the subsequent periods. The Company
has
no awards of stock-based employee compensation outstanding at September 30,
2005.
6
LARGO
VISTA GROUP, LTD.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER
30, 2005
(UNAUDITED)
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Stock
Based Compensation (Continued)
On
December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123R (revised 2004), "Share-Based Payment" which is a revision
of
FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
approach in Statement 123R is similar to the approach described in Statement
123. However, Statement 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro-forma disclosure is no longer an
alternative. On April 14, 2005, the SEC amended the effective date of the
provisions of this statement. The effect of this amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value
based
method of accounting no later than the first quarter of 2006. Management has
not
determined the impact that this statement will have on Company's consolidated
financial statements.
Revenue
Recognition
For
revenue from product sales, the Company recognizes revenue in accordance with
Staff Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which
superseded Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS ("SAB101"). SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectibility
of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time
that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
SAB
104
incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting
for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21
on
the Company's consolidated financial position and results of operations was
not
significant.
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 (“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 Government. In
exchange for installing the pipeline, the Agreement provides for the Company
to
be the sole LPG supplier for those households. Pursuant to the Agreement,
Government had paid to the Company 50% of the total contracted installation
fees, and the Company has to collect the remaining 50% of contract price
directly from the customers. The Company substantially completed the
installation of the LPG pipeline as of December 31, 2002 and recognized revenues
in the amount of fees collected from Government. The Company’s management has
determined that the collectibility and length of time to collect the amount
due
from customers can not be reasonably assured. Accordingly, revenues are
recognized as collected in connection with the portion of the contracted price
to be collected from customers.
7
LARGO
VISTA GROUP, LTD.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER
30, 2005
(UNAUDITED)
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Revenue
Recognition (Continued)
------------------------
In
May
2003, the Company entered into its Second Agreement (“Second Agreement”) with
Government to design and install more LPG pipeline systems in residential areas
in the city of Zunyi, China on behalf of Government. In exchange for installing
the pipeline, the Second Agreement provides for the Company to be the sole
LPG
supplier for those households. Pursuant to the Second Agreement, Government
is
obligated to pay to the Company 50% of the total contracted installation price,
and the Company has to collect the remaining 50% of contracted price directly
from the customers. During the year ended December 31, 2003, the Company did
not
receive any payments from Government and thus delayed the installation of
pipelines. During the year ended December 31, 2004, the Company received 50%
of
the total contracted price from Government and substantially completed the
installation project. The Company recognized revenues in the amount of fees
collected from Government during the year ended December 31, 2004. The Company
management has determined that the collectibility and length of time to collect
the remaining contracted price due from customers can not be reasonably assured.
Accordingly, revenues will be recognized as collected in connection with the
portion of contracted price to be collected from customers.
Foreign
Currency Translation
----------------------------
The
Company translates the foreign currency financial statements of its Chinese
subsidiary in accordance with the requirements of Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." Assets and
liabilities are translated at the rates of exchange at the balance sheet date,
and related revenue and expenses are translated at average monthly exchange
rates in effect during the period. Resulting translation adjustments are
recorded as a separate component in stockholders' equity. Foreign currency
transaction gains and losses are included in the statement of
income.
Reclassifications
------------------
Certain
reclassifications have been made in prior year’s financial statements to conform
to classifications used in the current year.
NOTE
B - INVENTORIES
Inventories
are stated at the lower of cost or market determined by the first-in, first-out
(FIFO) method. Inventories consist primarily of liquid petroleum gas available
for sale to contract clients and the public. Components of inventories as of
September 30, 2005 and December 31, 2004 are as follows:
|
September
30, 2005
|
December
31, 2004
|
Liquid
petroleum gas
|
$
2,125
|
$
2,860
|
Packaging
bottles
|
9,536
|
4,428
|
Supplies
|
599
|
1,546
|
|
----------
|
----------
|
Total
|
$
12,260
|
$
8,834
|
8
LARGO
VISTA GROUP, LTD.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER
30, 2005
(UNAUDITED)
NOTE
C - 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 September 30, 2005 and December 31, 2004, 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 September 30, 2005 and December 31, 2004, the Company has
277,635,403 and 269,963,856 shares of common stock issued and outstanding,
respectively.
In
December 2004, one of the Company’s significant shareholders agreed to subscribe
1,230,546 shares of common stock in exchange for $15,000 of notes payable and
$3,458 of accrued interest due to the shareholder. The Company accounted for
the
common shares to be issued as stock subscription payable at December 31, 2004.
In January 2005, the 1,230,546 shares of common stock were issued.
During
the nine months ended September 30, 2005, the Company issued an aggregate of
4,923,963 shares of common stock to consultants for in exchange for accrued
services fees in the amount of $84,000. 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. Additionally, the Company issued an aggregate
of 1,517,038 shares of common stock to related parties in exchange for $24,222
of expenses previously paid by the related parties on behalf of the Company.
During
the nine months ended September 30, 2005, the Company Chairman and significant
shareholders contributed cash of $40,979 to the Company as working
capital.
NOTE
D - AGREEMENT TO SELL STOCK TO SHANGHAI OFFSHORE OIL GROUP
On
March
18, 2005, The Company signed an Agreement and Assignment of Certain Contractual
Rights and Benefits (the “Agreement”), with Shanghai Offshore Oil Group (HK)
Co., Ltd. (“Shanghai Oil”). Under the Agreement, Shanghai Oil assigned to
The Company all of its rights to receive payments under a prior contract with
Asiacorp Investment Holding Ltd. (“Asiacorp”), under which Shanghai Oil would
purchase from Asiacorp fuel oil produced in Russia and deliver it to entities
in
The People’s Republic of China at a rate of thirty thousand (30,000) metric tons
per month for three (3) months and continue for the following thirty-three
(33)
months at a rate of two hundred thousand (200,000) metric tons per month, for
a
total of six million, six hundred ninety thousand (6,690,000) metric tons (the
“Asiacorp Contract”). The Agreement states that deliveries under the
Asiacorp Contract were to begin no later than May 18, 2005.
The
Agreement provides that The Company will receive all of the profit realized
by
Shanghai Oil from the sale of fuel oil it acquires under the Asiacorp Contract,
after the deduction of costs associated with the purchase, transportation and
sale of the fuel oil, with a minimum payment of two dollars ($2.00) per metric
ton. In exchange for the assignment of the Asiacorp contract and subject to
the
receipt of payment(s) from Shanghai Oil, The Company agreed to issue to Shanghai
Oil one hundred million (100,000,000) shares of The Company’s common stock,
deliverable in three equal increments over the term of the Agreement, which
amounts may be reduced based upon the amount, if any, of Shanghai Oil’s actual
payments from its sale of the fuel oil. However, The Company has not received
any payments from Shanghai Oil under the Agreement, and cannot give absolute
assurances that any fuel oil will be delivered under the Asiacorp
Contract.
Payments
received by The Company based upon Shanghai Oil’s sale of the fuel oil, if any,
will be accounted for as a capital transaction as The Company’s transaction with
Shanghai Oil represents, in substance, a stock subscription under which The
Company would receive approximately $0.13 per share if the total projected
amount of fuel oil is sold and the minimum guaranteed profit margin is paid
to
The Company.
9
LARGO
VISTA GROUP, LTD.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER
30, 2005
(UNAUDITED)
NOTE
D - AGREEMENT TO SELL STOCK TO SHANGHAI OFFSHORE OIL GROUP
(Continued)
During
June of 2005, Shanghai Oil notified The Company that it had not received any
fuel oil under the Asiacorp Contract. As The Company had not received
any
payments from Shanghai Oil, it did not release any of its shares of common
stock
to Shanghai Oil. On approximately July 1, 2005, The Company sent Shanghai
Oil a written “Demand to Cure Delayed-Performance” giving Shanghai Oil until
July 18, 2005, later extended to August 31, 2005, to make its first payment
to
The Company under the Agreement. Although Shanghai Oil has indicated
to
The Company that it intends to deliver payment pursuant to the Agreement, either
through performance under the Asiacorp Contract or through another contract
in
its place, investors should understand that delivery is far from certain. As
of
September 30, 2005, the Company has not received any payments from Shanghai
Oil
nor has it released any of the shares deliverable to Shanghai Oil.
The
Company will continue to pursue amicable remedies with Shanghai Oil. Although
any resolution with Shanghai Oil is highly uncertain, The Company believes
that
continuing to pursue a business relationship with Shanghai Oil is in the best
interest of the Company. Should Shanghai Oil deliver any payments to The
Company, pursuant to the terms of the Agreement, the management of The Company
will determine the number of shares of its common stock, if any, to deliver
to
Shanghai Oil.
NOTE
E - NOTES PAYABLE TO RELATED PARTIES
Notes
payable to related parties at September 30, 2005 and December 31, 2004 consists
of the following:
|
September
30, 2005
|
December
31, 2004
|
Note
payable on demand to Company’s Chairman; interest payable
monthly
at 7% per annum; unsecured.
|
$
537,400
|
$
434,782
|
Total
|
537,400
|
434,782
|
Less:
current portion
|
(537,400)
|
(434,782)
|
|
$
-
|
$
-
|
NOTE
F - RELATED PARTY TRANSACTIONS
In
addition to notes payable to related parties described in Note E, a consultant
(shareholder and former employee) of the Company has advanced funds to the
Company as working capital of its Vietnam representative office. No formal
repayment terms or arrangements exist. The net amount of advances due the
consultant at September 30, 2005 and December 31, 2004 was $61,326 and $14,708,
respectively.
The
Company’s Chief Financial Officer has advanced funds to the Company for working
capital purpose. No formal repayment terms or arrangements exist. The net amount
of advances due the Chief Financial Officer at September 30, 2005 and December
31, 2004 was $6,193 and $11,326, 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 Company’s Chairman at September 30, 2005 and December 31, 2004
was $155,561 and $131,359, respectively.
The
Company’s shareholders and former employees advanced the Company funds to meet
working capital needs. Interest is accrued at a rate of 7% per annum. The net
amount of advances due as of September 30, 2005 and December 31, 2004 was
$10,000 and $-0-, respectively.
During
the nine months ended September 30, 2005, the Company Chairman and significant
shareholders contributed cash of $40,979 to the Company as working
capital.
10
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The
following discussion should be read in conjunction with the Company's Condensed
Consolidated Financial Statements and Notes thereto, included elsewhere within
this Report.
DESCRIPTION
OF THE COMPANY
Largo
Vista Group, Ltd. (“Largo Vista” or the "Company") was formed under the laws of
the State of Nevada on January 16, 1987 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.
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., an inactive Panama corporation. Largo Vista
also has operations through Doing Business As (“DBA”) agreement with Jiahong Gas
Co., Ltd. (“Jiahong”), registered under the Chinese laws in the Peoples Republic
of China, Guizhou Province.
Through
DBA agreements with Jiahong, 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. Largo Vista
operated a storage depot and has an office headquarters in the City of Zunyi.
Largo Vista has found the storage depot operations to be unprofitable; and
therefore has terminated those operations in order to concentrate its resources
on supplying LPG in bottles and through pipelines.
In
February 2002, Largo Vista’s China operations entered into an agreement with the
Zunyi Municipal Government to design and install LPG pipeline systems in
residential areas in the city of Zunyi. In exchange for installing the pipeline,
the agreement provides for the Largo Vista to be the sole LPG supplier for
those
households for 40 years. Largo Vista substantially completed the installation
of
the LPG pipeline in 2002 and continues to operate the pipeline.
In
May
2003, Largo Vista’s China operations entered into its second agreement with
Zunyi Municipal Government to design and install more LPG pipeline systems
in
residential areas in the city of Zunyi, China. The pipeline project was
substantially completed in December of 2004. These two pipelines currently
serve
approximately 620 customers. Additionally, in July of 2005 we completed our
pipeline Number 3 which will provide service to 42 condominiums. When natural
gas becomes available to the area, these pipelines will be in place to deliver
that commodity to the same customers.
In
addition, Largo Vista has contracted with a private developer to construct
four
additional pipelines in the same area. Number 4 will serve 60 condominiums.
Construction schedules are being developed. Pipeline Number 5 will serve 1,067
condominiums with completion expected by December of 2005. Pipeline Number
6
will serve 5,000 condominiums and is currently in the architectural development
stage. All of these pipelines will be operated by Largo Vista under exclusive
40-year supply contracts.
The
contracts that Largo Vista has with the Zunyi Municipal Government grant to
the
Company the exclusive right to supply liquid petroleum gas (LPG) to certain
building projects and to construct or have constructed pipeline systems to
deliver the LPG. These building projects are similar to large apartment or
condominium complexes in the United States. The Company contracts with
independent third parties for all of the design and construction of the
pipelines. Generally, a central supply station will be built close to the
building project to be served. LPG will be stored in this facility and gasified
before entering the pipeline system. The Company operates these central supply
stations and manages the relationships with the individual customers in the
building projects.
11
The
Zunyi
Municipal Government (“Zunyi”) agreed in its contracts with the Company to
reimburse the Company for the costs of constructing the LPG pipelines, fifty
percent (50%) after the signing of each contract and the remaining fifty percent
(50%) upon completion of each pipeline project. Zunyi did pay the Company the
first fifty percent (50%); but failed to pay the Company the remaining fifty
percent (50%) upon completion of the first two (2) pipeline projects. Zunyi
took
the position that the Company should collect the balance from the customers
as
they subscribe for LPG delivery. The Company has been collecting that amount
as
a connection or subscription fee and accounting for that revenue as it is
received.
Largo
Vista continues to engage in the petroleum supply business in
Vietnam.
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
gas oil trading operations in China and Vietnam, respectively. Largo Vista
continues to evaluate the acquisition of other possible business opportunities
in the Far East.
Agreement
To Sell Stock To Shanghai Offshore Oil Group
On
March
18, 2005, Largo Vista signed an Agreement and Assignment of Certain Contractual
Rights and Benefits (the “Agreement”), with Shanghai Offshore Oil Group (HK)
Co., Ltd. (“Shanghai Oil”). Under the Agreement, Shanghai Oil assigned to
Largo Vista all of its rights to receive payments under a prior contract with
Asiacorp Investment Holding Ltd. (“Asiacorp”), under which Shanghai Oil would
purchase from Asiacorp fuel oil produced in Russia and deliver it to entities
in
The People’s Republic of China at a rate of thirty thousand (30,000) metric tons
per month for three (3) months and continue for the following thirty-three
(33)
months at a rate of two hundred thousand (200,000) metric tons per month, for
a
total of six million, six hundred ninety thousand (6,690,000) metric tons (the
“Asiacorp Contract”). The Agreement states that deliveries under the
Asiacorp Contract were to begin no later than May 18, 2005.
The
Agreement provides that Largo Vista will receive all of the profit realized
by
Shanghai Oil from the sale of fuel oil it acquires under the Asiacorp Contract,
after the deduction of costs associated with the purchase, transportation and
sale of the fuel oil, with a minimum payment of two dollars ($2.00) per metric
ton. In exchange for the assignment of the Asiacorp contract and subject to
the
receipt of payment(s) from Shanghai Oil, Largo Vista agreed to issue to Shanghai
Oil one hundred million (100,000,000) shares of Largo Vista’s common stock,
deliverable in three equal increments over the term of the Agreement, which
amounts may be reduced based upon the amount, if any, of Shanghai Oil’s actual
payments from its sale of the fuel oil. However, Largo Vista has not received
any payments from Shanghai Oil under the Agreement, and cannot give absolute
assurances that any fuel oil will be delivered under the Asiacorp
Contract.
Payments
received by Largo Vista based upon Shanghai Oil’s sale of the fuel oil, if any,
will be accounted for as a capital transaction as Largo Vista’s transaction with
Shanghai Oil represents, in substance, a stock subscription under which Largo
Vista would receive approximately $0.13 per share if the total projected amount
of fuel oil is sold and the minimum guaranteed profit margin is paid to Largo
Vista.
During
June of 2005, Shanghai Oil notified Largo Vista that it had not received any
fuel oil under the Asiacorp Contract. As Largo Vista had not received
any
payments from Shanghai Oil, it did not release any of its shares of common
stock
to Shanghai Oil. On approximately July 1, 2005, Largo Vista sent Shanghai
Oil a written “Demand to Cure Delayed-Performance” giving Shanghai Oil until
July 18, 2005, later extended to August 31, 2005, to make its first payment
to
Largo Vista under the Agreement. Although Shanghai Oil has indicated
to
Largo Vista that it intends to deliver payment pursuant to the Agreement, either
through performance under the Asiacorp Contract or through another contract
in
its place, investors should understand that delivery is far from certain. As
of
the date of filing of this Amendment, Largo Vista has not received any payments
from Shanghai Oil nor has it released any of the shares deliverable to Shanghai
Oil.
Largo
Vista will continue to pursue amicable remedies with Shanghai Oil. Although
any
resolution with Shanghai Oil is highly uncertain, Largo Vista believes that
continuing to pursue a business relationship with Shanghai Oil is in the best
interest of the Largo Vista. Should Shanghai Oil deliver any payments to Largo
Vista, pursuant to the terms of the Agreement, the management of Largo Vista
will determine the number of shares of Largo Vista common stock, if any, to
deliver to Shanghai Oil.
12
FORWARD
LOOKING STATEMENTS
This
Form
10-QSB contains certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements included Herein
that address activities, events or developments that the Corporation expects,
believes, estimates, plans, intends, projects or anticipates will or may occur
in the future, are forward-looking statements. Actual events may differ
materially from those anticipated in the forward-looking statements. Important
risks that may cause such a difference include: general domestic and
international economic business conditions, increased competition in the
Company's markets and products. Other factors may include, availability and
terms of capital, and/or increases in operating and supply costs. Market
acceptance of existing and new products, rapid technological changes,
availability of qualified personnel also could be factors. Changes in the
Company's business strategies and development plans and changes in government
regulation could adversely affect the Company. Although the Company believes
that the assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate. There can be no
assurance that the forward-looking statements included in this filing will
prove
to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company that the objectives
and expectations of the Company would be achieved.
RESULTS
OF OPERATIONS
REVENUE
During
the quarter ended September 30, 2005 the Company realized $98,000 of revenue
compared to $69,180 for the same period in the prior year, a 42% increase.
During the nine months ended September 30, 2005 revenues from operations were
$259,773 as compared with $295,226 for the same period last year. The increase
of 42% in revenue in the quarter ended September 30, 2005 compared with the
same
period last year is due to added customers with the pipeline operations. The
decrease in the nine month period ended September 30, 2005 of 12% compared
with
the nine month ended September 30, 2004 is primarily attributable to the
decrease in revenues from the unprofitable depot operations closed in the second
quarter 2004.
COSTS
AND EXPENSES
The
Company incurred costs of sales of $88,475 in connection with the LPG revenues
during three months ended September 30, 2005, compared to $62,151 for the three
months ended September 30, 2004; an increase of $26,324 or 42.4%. Cost of sales
for the nine month period ended September 30, 2005 is $245,325; a decrease
of
$15,712 or 6% as compared with the same period last year ($261,037). The
increase in cost of sales during the quarter ended September 30, 2005 is the
result of improved sales coupled with a 1% margin drop with our LPG sales.
The
nine month decrease in cost of sales of $15,712 from September 30, 2005 as
compared with the same last year is primarily attributable to the decrease
in
related revenues from the unprofitable depot operations closed in
2004.
During
the quarter ended September 30, 2005 the Company incurred $108,706 of total
operating expenses compared to $95,771 for the same period in the prior year.;
a
$12,935 or 13.5% increase. For the nine month period ended September 30, 2005
total operating expenses were $297,624 compared with $263,930 for the same
period last year; an increase of $33,694 or 12.8%. The increase is due primarily
to increases in professional, consulting and other related administrative
services.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
September 30, 2005, we had a working capital deficit of $1,091,793. As a result
of our operating losses for the nine month period ended September 30, 2005,
we
generated a cash flow deficit of $248,922 from operating activities. . We met
our cash requirements during this period through loans, net of repayments,
from
related parties totaling $194,097 and $40,979 from capital contributions from
the Company's officers, principal shareholders and third parties.
13
While
we
have raised capital to meet our working capital and financing needs in the
past,
additional financing is required in order to meet our current and projected
cash
flow deficits from operations. We currently have no commitments for financing
and there is no guarantee that we will be successful in raising the funds
required. Certain shareholders and related parties have advanced funds and
contributed capital to the Company in the past. There is no guarantee advances
or contributions will continue into the future.
If
we are
not successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations liquidity and
financial condition.
The
Company's independent certified public accountant has stated in his report
included in the Company's December 31, 2004 Form 10-KSB, that the Company has
incurred operating losses in the last two years, and that the Company is
dependent upon management's ability to develop profitable operations.
The
effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are located in mainland China and there
are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations.
CAUTIONARY
FACTORS THAT MAY AFFECT FUTURE RESULTS
Our
annual report on Form 10-KSB for the year ended December 31, 2004 includes
a
detailed list of cautionary factors that may affect future results. Management
believes that there have been material changes to the factors so listed, and
as
such should reflect positively on future results. That annual report can be
accessed in the EDGAR section of the SEC website.
ITEM
3. CONTROLS AND PROCEDURES
a) |
Evaluation
of Disclosure Controls and Procedures.
As of September 30, 2005, our management carried out an evaluation,
under
the supervision of our Chief Executive Officer and Chief Financial
Officer
of the effectiveness of the design and operation of our system of
disclosure controls and procedures pursuant to the Securities and Exchange
Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act).
Based on
that evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective
to
provide reasonable assurance that information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in
Securities and Exchange Commission rules and forms, and that such
information is accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate,
to allow timely decisions regarding required
disclosure.
|
b) |
Changes
in internal controls.
There were no changes in internal controls over financial reporting
that
occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially effect, our internal
control over financial reporting.
|
PART
II OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None
ITEM
2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
14
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
31.1
|
Certification
pursuant to Section 302 of the
|
|
Sarbanes-Oxley
Act of 2002 - Chief Executive Officer.
|
|
|
31.2
|
Certification
pursuant to Section 302 of the
|
|
Sarbanes-Oxley
Act of 2002 - Chief Financial Officer
|
|
|
32.1
|
Certification
of Deng Shan Pursuant to Section 906 of
|
|
the
Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
Certification
of Albert Figueroa Pursuant to Section
|
|
906
of the Sarbanes-Oxley Act of 2002.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATE:
November 21, 2005
|
LARGO
VISTA GROUP, LTD.
|
|
|
|
/S/
DENG SHAN
|
|
-----------------------
|
|
DENG
SHAN
|
|
CHIEF
EXECUTIVE OFFICER
|
15