Largo V ista 10-QSB 6-30-06
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10QSB
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the period ended June 30, 2006
COMMISSION
FILE NUMBER 000-30426
LARGO
VISTA GROUP, LTD
(Name
of
Small Business Issuer in Its Charter)
Nevada
|
76-0434540
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
4570
Campus Drive
|
Newport
Beach, CA 92660
|
(Address
of Principal Executive Offices)
(949)
252-2180
ISSUER'S
TELEPHONE NUMBER
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 286,947,989 shares of Common Stock ($.001
par
value) as of August 11, 2006.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]
LARGO
VISTA GROUP, LTD.
Table
of
Contents
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
3
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
3
|
|
June
30, 2006 and December 31, 2005
|
|
|
|
|
|
Condensed
Consolidated Statements of Losses
|
4
|
|
Three
and Six Months Ended June 30, 2006 and 2005
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
5
|
|
Six
Months Ended June 30, 2006 and 2005
|
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Information
|
6
|
|
June
30, 2006
|
|
|
|
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Results of Operation and Financial
Condition
|
13
|
|
|
|
Item
3.
|
Controls
and Procedures
|
17
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
17
|
|
|
|
Item
2.
|
Unregistered
Sale of Equity Securities and Use of Proceeds
|
17
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
17
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security holders
|
17
|
|
|
|
Item
5.
|
Other
Information
|
17
|
|
|
|
Item
6.
|
Exhibits
|
18
|
2
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(unaudited)
|
|
|
June
30, 2006
|
December
31, 2005
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalent
|
$
35,593
|
$
75,642
|
Accounts
receivable, net
|
522
|
287
|
Employee
advances
|
30,493
|
11,064
|
Inventories,
at cost (Note B)
|
21,153
|
17,689
|
Prepaid
expenses and other
|
156,528
|
129,764
|
Total
current assets
|
244,289
|
234,446
|
|
|
|
Property
and equipment, at cost
|
17,147
|
16,636
|
Less:
accumulated depreciation
|
14,322
|
12,635
|
|
2,825
|
4,001
|
|
|
|
Deposits
|
755
|
755
|
|
|
|
Total
assets
|
$
247,869
|
$
239,202
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
Current
Liabilities:
|
|
|
Accounts
payable and accrued liabilities
|
$
465,057
|
$
546,565
|
Customer
deposits
|
78,261
|
-
|
Notes
payable to related parties (Note E)
|
533,082
|
595,546
|
Due
to related parties (Note F)
|
189,177
|
194,432
|
Total
Current Liabilities
|
1,265,577
|
1,336,543
|
|
|
|
Commitment
and contingencies
|
-
|
-
|
|
|
|
Deficiency
in stockholders' equity
|
|
|
Preferred
stock, $0.001 par value; 25,000,000 shares authorized, none issued
and
outstanding at June 30, 2006 and December 31, 2005 (Note
C)
|
-
|
-
|
Common
stock, $0.001 par value; 400,000,000 shares authorized, 286,691,908
and
277,635,403 shares issued and outstanding at June 30, 2006 and December
31, 2005, respectively. (Note C)
|
286,692
|
277,635
|
Additional
paid-in capital
|
15,574,531
|
15,344,344
|
Subscription
payable
|
-
|
25,000
|
Accumulated
deficit
|
(16,877,506)
|
(16,742,284)
|
Accumulated
other comprehensive income:
|
|
|
Foreign
currency translation adjustment
|
(1,425)
|
(2,036)
|
Deficiency
in stockholders' equity
|
(1,017,708)
|
(1,097,341)
|
|
|
|
Total
liabilities and deficiency in stockholders' equity
|
$
247,869
|
$
239,202
|
(see
accompanying notes to the unaudited condensed consolidated financial
information)
3
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF LOSSES
|
(unaudited)
|
|
|
|
|
|
|
For
the three months ended June 30,
|
For
the six months ended June 30,
|
|
2006
|
2005
|
2006
|
2005
|
Revenue
|
$
103,779
|
$
107,162
|
$
210,625
|
$
161,773
|
Cost
of sales
|
95,751
|
90,784
|
196,276
|
156,850
|
Gross
profit
|
8,028
|
16,378
|
14,349
|
4,923
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Selling
general and administrative
|
53,392
|
118,840
|
128,052
|
187,394
|
Depreciation
|
792
|
762
|
1,575
|
1,524
|
|
54,184
|
119,602
|
129,627
|
188,918
|
|
|
|
|
|
Loss
from operations
|
(46,156)
|
(103,224)
|
(115,278)
|
(183,995)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
Interest
(expense), net
|
(11,196)
|
(7,372)
|
(19,944)
|
(14,981)
|
Total
other (expenses)
|
(11,196)
|
(7,372)
|
(19,944)
|
(14,981)
|
|
|
|
|
|
Loss
from operations before income taxes
|
(57,352)
|
(110,596)
|
(135,222)
|
(198,976)
|
Provision
for income taxes
|
-
|
-
|
-
|
-
|
Net
loss
|
(57,352)
|
(110,596)
|
(135,222)
|
(198,976)
|
|
|
|
|
|
Other
comprehensive income: foreign currency translation gain
|
1,320
|
-
|
611
|
-
|
|
|
|
|
|
Comprehensive
(loss)
|
$
(56,032)
|
$
(110,596)
|
$
(134,611)
|
$
(198,976)
|
|
|
|
|
|
Loss
per common share (basic and assuming diluted)
|
$
(0.00)
|
$
(0.00)
|
$
(0.00)
|
$
(0.00)
|
Weighted
average shares outstanding
|
285,415,264
|
277,635,403
|
281,546,825
|
277,084,408
|
(see
accompanying notes to the unaudited condensed consolidated financial
information)
4
LARGO
VISTA GROUP, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
|
|
|
|
For
the six months ended June 30,
|
|
2006
|
2005
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
(loss) from operations
|
$
(135,222)
|
$
(198,976)
|
Adjustments
to reconcile net (loss) to net cash provided by operating
activities:
|
|
|
Depreciation
|
1,575
|
1,524
|
Common
stock issued in exchange for services rendered
|
9,000
|
-
|
Changes
in assets and liabilities:
|
|
|
Accounts
receivable
|
(231)
|
2,777
|
Inventories
|
(3,289)
|
(1,257)
|
Employee
advances
|
(19,176)
|
(632)
|
Prepaid
expenses and other
|
(25,466)
|
(86,967)
|
Accounts
payable and other liabilities
|
(2,329)
|
71,990
|
Customer
Deposits
|
78,261
|
(4,831)
|
NET
CASH (USED IN) OPERATING ACTIVITIES
|
(96,877)
|
(216,372)
|
|
|
|
NET
CASH FROM INVESTING ACTIVITIES:
|
|
|
Purchase
of property and equipment
|
(399)
|
-
|
NET
CASH USED IN INVESTING ACTIVITIES:
|
(399)
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from sale of commons stock
|
122,440
|
-
|
Proceeds
from capital contributions from related parties
|
-
|
40,979
|
Proceeds
from notes payable to related parties and related party advances,
net of
repayments
|
(65,245)
|
171,338
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
57,195
|
212,317
|
Effect
of exchange rates on cash
|
32
|
-
|
|
|
|
NET
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(40,049)
|
(4,055)
|
Cash
and cash equivalents at the beginning of the period
|
75,642
|
94,565
|
Cash
and cash equivalents at the end of the period
|
$
35,593
|
$
90,510
|
|
|
|
Supplemental
Disclosures of Cash Flow Information
|
|
|
Cash
paid during the period for interest
|
$
-
|
$
-
|
Income
taxes paid
|
-
|
-
|
Non
cash Investing and Financing Activities:
|
|
|
Common
stock issued in exchange for services rendered
|
9,000
|
-
|
Common
stock issued for accrued service fees
|
78,000
|
84,000
|
Common
stock issued in exchange for due to related parties
|
4,084
|
24,222
|
Common
stock issued in exchange for common stock subscription
|
25,000
|
18,458
|
(see
accompanying notes to the unaudited condensed consolidated financial
information)
5
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(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 six month period ended June 30,
2006 are not necessarily indicative of the results that may be expected for
the
year ended December 31, 2006. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31,
2005
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
Prior
to
the January 1, 2006 adoption of the Financial Accounting Standards Board
(“FASB”) Statement No. 123(R), “Share-Based Payment” (“SFAS 123R”), the
Company accounted for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related interpretations.
Accordingly, because the stock option grant price equaled the market price
on
the date of grant, and any purchase discounts under the Company’s stock purchase
plans were within statutory limits, no compensation expense was recognized
by
the Company for stock-based compensation. As permitted by SFAS No. 123,
“Accounting for Stock-Based Compensation” (“SFAS 123”), stock-based compensation
was included as a pro forma disclosure in the notes to the consolidated
financial statements.
6
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30,, 2006
(UNAUDITED)
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Stock
Based Compensation (Continued)
Effective
January 1, 2006, the beginning of the Company’s first fiscal quarter of 2006,
the Company adopted the fair value recognition provisions of SFAS 123R, using
the modified-prospective transition method. Under this transition method,
stock-based compensation expense was recognized in the consolidated financial
statements for granted, modified, or settled stock options. Compensation expense
recognized included the estimated expense for stock options granted on and
subsequent to January 1, 2006, based on the grant date fair value estimated
in
accordance with the provisions of SFAS 123R, and the estimated expense for
the
portion vesting in the period for options granted prior to, but not vested
as of
January 1, 2006, based on the grant date fair value estimated in accordance
with
the original provisions of SFAS 123. Results for prior periods have not been
restated, as provided for under the modified-prospective method.
SFAS
123(R) requires forfeitures to be estimated at the time of grant and revised,
if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. In the Company’s pro forma information required under SFAS 123 for
the periods prior to fiscal 2006, the Company accounted for forfeitures as
they
occurred.
Upon
adoption of SFAS 123(R), the Company is using the Black-Scholes option-pricing
model as its method of valuation for share-based awards granted beginning in
fiscal 2006, which was also previously used for the Company’s pro forma
information required under SFAS 123. The Company’s determination of fair value
of share-based payment awards on the date of grant using an option-pricing
model
is affected by the Company’s stock price as well as assumptions regarding a
number of highly complex and subjective variables. These variables include,
but
are not limited to the Company’s expected stock price volatility over the term
of the awards, and certain other market variables such as the risk free interest
rate.
The
following table shows the effect on net earnings and earnings per share had
compensation cost been recognized based upon the estimated fair value on the
grant date of stock options for the six months ended June 30, 2005, in
accordance with SFAS 123, as amended by SFAS No. 148 “Accounting for Stock-Based
Compensation - Transition and Disclosure:
|
June
30,
|
Six
month Ended
|
2005
|
Net
loss
|
$
|
(198,976)
|
Deduct:
stock-based compensation expense, net of tax
|
|
-
|
|
|
Pro
forma net loss
|
$
|
(198,976)
|
|
|
|
|
|
Net
loss per common share — basic (and assuming dilution):
|
|
|
As
reported
|
$
|
(0.00)
|
Deduct:
stock-based compensation expense, net of tax
|
|
-
|
|
|
Pro
forma
|
$
|
(0.00)
|
|
|
The
Company had no employee stock options issued and outstanding at June 30, 2006.
All prior awards of stock options were vested at the time of issuance in prior
years.
7
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(UNAUDITED)
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (Continued)
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.
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.
8
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(UNAUDITED)
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (Continued)
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
June 30, 2006 and December 31, 2005 are as follows:
|
June
30, 2006
|
December
31, 2005
|
Liquid
petroleum gas
|
$
10,141
|
$
6,670
|
Packaging
bottles
|
10,262
|
10,417
|
Supplies
|
750
|
602
|
|
----------
|
----------
|
Total
|
$
21,153
|
$
17,689
|
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 June 30, 2006 and December 31, 2005, 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 June 30, 2006 and December 31, 2005, the Company has 286,691,908
and 277,635,403 shares of common stock issued and outstanding,
respectively.
9
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(UNAUDITED)
NOTE
C - CAPITAL STOCK (continued)
During
the six months ended June 30, 2006, the Company issued an aggregate of 1,166,666
shares of its common stock for $25,000 of common stock subscribed during the
year ended December 31, 2005. The Company issued an aggregate of 1,532,145
shares of its common stock in exchange for accrued services fees of $78,000
and
service fees of $9,000. 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. The Company issued 68,634 shares of its common stock as repayment
of advances from an officer in the amount of $4,804. Additionally, the Company
issued an aggregate of 6,289,060 shares of common stock in exchange for proceeds
of $122,440, net of costs and fees.
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.
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 or about 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
June 30, 2006, the Company has not received any payments from Shanghai Oil
nor
has it released any of the shares deliverable to Shanghai Oil.
10
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(UNAUDITED)
NOTE
D - AGREEMENT
TO SELL STOCK TO SHANGHAI OFFSHORE OIL GROUP (continued)
Resolution
with Shanghai Oil remains highly uncertain, and the Company does not foresee
any
economic benefit materializing from the Agreement. While the Company has
reserved its rights to pursue all available remedies it may have against
Shanghai Oil, pursuing these remedies may be prohibitively expensive. On
December 22, 2005, the Company's board of directors unanimously adopted a
resolution to cancel the 97,364,597 shares that the Company agreed to issue
to
Shanghai Oil under the Agreement, none of these shares were released to Shanghai
Oil prior the cancellation of shares on December 22, 2005.
NOTE
E -
NOTES PAYABLE TO RELATED PARTIES
Notes
payable to related parties at June 30, 2006 and December 31, 2005 consists
of
the following:
|
June
30, 2006
|
December
31, 2005
|
Notes
payable on demand to Company’s Chairman; interest payable monthly at 7%
per annum; unsecured
|
$464,937
|
$537,401
|
|
|
|
Notes
payable on demand to Company’s Chief Financial Officer; interest payable
monthly at 7% per annum; unsecured
|
9,400
|
9,400
|
|
|
|
Notes
payable on demand to Company shareholders; interest payable monthly
at 10%
per annum; unsecured
|
12,000
|
12,000
|
|
|
|
Notes
payable on demand to Company shareholders; interest payable monthly
at 7%
per annum; unsecured
|
46,745
|
36,745
|
|
|
|
Total:
|
533,082
|
595,546
|
Less:
|
|
|
Current
portion
|
(533,082)
|
(595,546)
|
Long
term portion
|
$
-
|
$
-
|
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 June 30, 2006 and December 31, 2005 was $29,082.
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 June 30, 2006 and December 31,
2005 was $1,148 and $4,803, 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 June 30, 2006 and December 31, 2005 was
$158,947 and $160,547, respectively.
11
LARGO
VISTA GROUP, LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE
30, 2006
(UNAUDITED)
NOTE
G - 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 six months ended June 30, 2006 and 2005, the Company
incurred net losses of $135,222 and $198,976, respectively. The Company had
accumulated deficit of $16,877,506 as of June 30, 2006. The Company's current
liabilities exceeded its current assets by $1,021,288 as of June 30, 2006.
These
factors among others may indicate that the Company will be unable to continue
as
a going concern for a reasonable period of time.
The
Company’s existence is dependent upon management’s ability to develop profitable
operations and resolve its 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 consolidated 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.
12
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The
following discussion should be read in conjunction with the Company's Unaudited
Condensed Consolidated Financial Statements and Notes thereto, included
elsewhere within this Report.
Management’s
discussion and analysis of results of operations and financial condition are
based on our financial statements. These statements have been prepared in
accordance with accounting principles generally accepted in the United States
of
America. These principles require management to make certain estimates,
judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates based on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. References to “we”, “our”,
“us” or the “Company” are to Largo Vista Group, Ltd. and its
subsidiaries.
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 660 customers. When natural gas becomes available to the area,
these pipelines will be in place to deliver that commodity to the same
customers.
13
In
addition, Largo Vista has contracted with a private developer to construct
six
additional pipelines in the same area. Pipeline Number 3 will serve 42
condominiums and was completed July, 2005. Pipeline Number 4 will serve 60
condominiums. Construction schedules are still pending. Pipeline Number 5 will
serve 1,067 condominiums and the original plan was to build 16 buildings,
housing 1,067 residences. 15 buildings containing 994 residences were completed
in December, 2005. The developer is awaiting government approval to proceed
with
the 16th
building
of 73 residences. Pipeline Number 6 will serve 5,000 condominiums but the
developer is slow in civil engineering. Pipeline Number 7 will serve 70
condominiums. Pipeline Number 8 will serve 242 condominiums. All of these
pipelines will be operated by Largo Vista under long term supply
contracts.
The
contracts that Largo Vista Group, Ltd. (the “Company”) has with the Zunyi
Municipal Government granted to the Company the exclusive right to supply liquid
petroleum gas (LPG) to project buildings through pipeline systems. These project
buildings 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 buildings 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 buildings.
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 still seeks for the opportunities to supply petroleum products into
Vietnam.
In
addition, Largo Vista has a representative office in the Far East area, in
Wuhan, China to supervise LPG and gas oil trading operations in China,
respectively. Largo Vista closed its rep office in Vietnam at the end of
December, 2005. 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.
14
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 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 or about 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
December 31, 2005, the Company has not received any payments from Shanghai
Oil
nor has it released any of the shares deliverable to Shanghai Oil.
Resolution
with Shanghai Oil remains highly uncertain, and the Company does not foresee
any
economic benefit materializing from the Agreement. While the Company has
reserved its rights to pursue all available remedies it may have against
Shanghai Oil, pursuing these remedies may be prohibitively expensive. On
December 22, 2005, the Company’s board of directors unanimously adopted a
resolution to cancel the 97,364,597 shares that the Company agreed to issue
to
Shanghai Oil under the Agreement, none of these shares were released to Shanghai
Oil prior the cancellation of shares on December 22, 2005.
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 June 30, 2006 the Company realized $103,779 of revenue
compared to $107,162 for the same period in the prior year, a 3.16%% decrease.
During the six months ended June 30, 2006 revenues from operations were $210,625
as compared with $161,773 for the same period last year. The decrease of 3.16%
in revenue in the quarter ended June 30, 2006 compared with the same period
last
year is due to a decrease of bottled customers and partially offset by an
increase of pipeline operations. The increase in the six month period ended
June
30, 2006 of 30.20% compared with the six month ended June 30, 2005 is primarily
attributable to the additional pipeline revenues created with added lines coming
into service in 2006.
15
COSTS
AND EXPENSES
The
Company incurred costs of sales of $95,751 in connection with the LPG revenues
during three months ended June 30, 2006, compared to $90,784 for the three
months ended June 30, 2005; an increase of $4,967 or 5.47%. Cost of sales for
the six month period ended June 30, 2006 is $196,276; an increase of $39,426
or
25.14% as compared with the same period last year $156,850. The increase in
cost
of sales during the quarter ended June 30, 2006 is the result of additional
customers on line. The six month increase in cost of sales of $39,426 from
June
30, 2006 as compared with the same last year is primarily attributable to the
increase in related revenues from an additional customer base.
During
the quarter ended June 30, 2006 the Company incurred $54,184 of total operating
expenses compared to $119,602 for the same period in the prior year; a $65,418
or 55.07% decrease for the six month period ended June 30, 2006 operating
expenses is $129,627 compared with $188,918 for the same period last year;
a
decrease of $59,291 or 31.38%. The decrease is due primarily to decreases in
professional, consulting and other related administrative services.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
June 30, 2006, we had a deficiency in working capital of $1,021,288. As a result
of our operating losses of $135,222 for the six month period ended June 30,
2006, adjusted by depreciation of $1,575, common stock issued in exchange for
services in the amount of $9,000, increase in receivables and other assets
of
$48,162, decrease in accounts payable of $2,329, and increase in customer
deposit of $78,261, we generated a cash flow deficit of $96,877 from operating
activities. We met our cash requirements during this period through loans,
net
of repayments, from related parties totaling $65,245 and $122,440 from capital
contributions from the company’s officers, principal shareholders and third
parties.
In
the
past we have raised capital to meet our working capital requirements. Additional
financing may be required if the contract agreement stated previously does
not
materialize.
The
effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are located in mainland China and there
are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations.
The
Company's independent certified public accountant has stated in his report
included in the Company's December 31, 2005 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.
Off-Balance
Sheet Arrangements
We
have
not had, and at June 30, 2006 do not have, any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources
that
is material to investors.
CAUTIONARY
FACTORS THAT MAY AFFECT FUTURE RESULTS
Our
annual report on Form 10-KSB for the year ended December 31, 2005 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.
16
ITEM
3. CONTROLS AND PROCEDURES
a) Evaluation
of Disclosure Controls and Procedures.
As of
June 30, 2006, 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. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During
the quarter ended June 30, 2006, we issued an aggregate of 1,166,666 shares
of
common stock for $25,000 of common stock subscribed during the year ended
December 31, 2005. We issued an aggregate of 1,532,145 shares of common stock
to
three consultants in exchange for accrued services fees of $78,000 and service
fees of $9,000. We issued 68,634 shares of common stock as repayment of advances
from an officer in the amount of $4,804. Additionally, we issued an aggregate
of
6,289,060 shares of common stock in exchange for proceeds of $122,440, net
of
costs and fees. These
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
In
August
2005, the staff of the Los Angeles office of the Securities and Exchange
Commission advised Largo Vista that it had initiated a formal, non-public
inquiry. Largo Vista and its officers have received document
subpoenas seeking documents related to the previously announced contract between
Largo Vista and Shanghai Oil and trading in the securities of Largo Vista,
among
other things.
17
While
the
Company is confident in its practices, there is a risk that an enforcement
proceeding will be recommended by the staff of the Commission as a result of
this formal investigation. An enforcement proceeding could include allegations
by the SEC that the Company and/or its officers violated, among
others, the anti-fraud and books and records provisions of
federal securities laws, and the rules thereunder. It cannot be predicted
with certainty what the nature of such enforcement proceeding would be, the
type
of sanctions that might be sought, or what the likelihood would be of reaching
settlement. The Company has been and expects to continue to cooperate with
the
ongoing SEC investigation.
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:
August 8, 2006
|
LARGO
VISTA GROUP, LTD.
|
|
|
|
/S/
DENG SHAN
|
|
-----------------------
|
|
DENG
SHAN
|
|
CHIEF
EXECUTIVE OFFICER
|
18