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 September 30, 2003
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: 264,615,280 shares of Common Stock
($.001 par value) as of November 6, 2003.
LARGO VISTA GROUP, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet
September 30, 2003
Condensed Consolidated Statements of Losses
Three and Nine Months Ended September 30, 2003 and 2002
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003 and 2002
Notes to Condensed Consolidated Financial Information
September 30, 2003
Item 2. Management's Discussion and Analysis
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
Item 1. Financial Statements (Unaudited)
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS September 30, 2003
------------------
CURRENT ASSETS:
Cash and cash equivalents $ 69,803
Accounts receivable, net 37,765
Inventories, at cost 6,951
Prepaid expenses and other 41,329
-------------
Total current assets 155,848
Property, plant and equipment, net 10,736
Other assets 755
-------------
$ 167,339
=============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 334,106
Notes payable to related parties 473,937
Due to related parties 151,177
-------------
Total current liabilities 959,220
Commitment and contingencies --
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 25,000,000 shares authorized,
none issued --
Common stock, $0.001 par value; 400,000,000
shares authorized, 264,615,280 shares issued and outstanding at
September 30, 2003 264,615
Additional paid-in capital 15,006,545
Accumulated deficit (16,066,741)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
-------------
Deficiency in stockholders' equity (791,881)
-------------
$ 167,339
=============
See accompanying notes to the unaudited condensed consolidated financial information
3
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Sales $ 287,843 $ 185,835 $ 571,964 $ 561,303
Cost of sales 257,283 9,045 549,751 346,246
-------------- -------------- -------------- --------------
Gross profit 30,560 176,790 22,213 215,057
Expenses
Selling and administrative 113,058 304,203 431,374 1,150,597
Depreciation 792 1,866 8,925 3,236
-------------- -------------- -------------- --------------
113,850 306,069 440,299 1,153,833
Loss from operations (83,290) (129,279) (418,086) (938,776)
Interest (expense) (8,294) (9,189) (24,882) (4,274)
-------------- -------------- -------------- --------------
Income (taxes) benefit -- -- -- --
Net (loss) $ (91,584) $ (138,468) $ (442,968) $ (943,050)
============== ============== ============== ==============
Basic and diluted net loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Weighted average common shares
outstanding 260,500,000 244,500,000 255,500,000 240,000,000
See accompanying notes to the unaudited condensed consolidated financial information
4
LARGO VISTA GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Nine Months Ended
September 30
2003 2002
---- ----
Cash flows from operating activities:
Net loss: $(442,968) $(943,050)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 8,925 3,236
Common stock issued for services 298,067 955,656
Common stock issued in exchange for debts -- 43,602
Changes in assets and liabilities:
Accounts receivable 116,673 (166,293)
Inventories (4,321) 54,317
Prepaid expenses and others 6,726 (150,255)
Accounts payable and accrued liabilities (87,173) 55,221
---------- ----------
Net cash used in operating activities (104,071) (147,566)
Cash flows from investing activities:
Capital expenditure (6,823) (1,543)
---------- ----------
Net cash issued in investing activities (6,823) (1,543)
Cash flows from financing activities:
Proceeds from notes payable to related parties, net 92,857 66,287
Advances from affiliates, net 76,666 23,597
---------- ----------
Net cash provided by financing activities 169,523 89,884
Net increase in cash and cash equivalents 58,629 (59,225)
Cash and cash equivalents at beginning of period 11,174 99,343
---------- ----------
Cash and cash equivalents at end of period $ 69,803 $ 40,118
========== ==========
Supplemental Disclosure:
Interest paid for the period $ -- $ 1,740
Income taxes paid for the period $ -- $ --
Common stock issued in exchange for services rendered $ 298,067 $ 955,656
Common stock issued in exchange for debt $ -- $ 43,602
See accompanying notes to the unaudited condensed consolidated financial statements
5
LARGO VISTA GROUP, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2003
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
---------------------------------------
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the nine-month period ended
September 30, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated December 31, 2002 financial statements and footnotes thereto
included in the Company's SEC Form 10-KSB.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
Business and Basis of Presentation
----------------------------------
Largo Vista Group, Ltd. (the "Company") was incorporated under the laws of the
State of Nevada. The Company is principally engaged in the distribution of
liquid petroleum gas (LPG) in the retail and wholesale markets in South China
and in the purchase of petroleum products for delivery to the Far East.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Largo Vista, Inc., Largo Vista Construction,
Inc., Largo Vista International Corp., and Zunyi Shilin Xinmao Petrochemical
Industries Co., Ltd. ("Zunyi"). Largo Vista, Inc. was formed under the laws of
the State of California and is inactive. Largo Vista Construction, Inc. was
formed under the laws of the State of Nevada and is inactive. Largo Vista
International Corp. was formed under the laws of Panama and is inactive. Zunyi
was registered under the laws of the Peoples Republic of China.
All significant intercompany balances and transactions have been eliminated in
consolidation. All amounts in these consolidated financial statements and notes
thereto are stated in United States dollars unless otherwise indicated.
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, 2002 and subsequent periods.
The Company has no awards of stock-based employee compensation outstanding at
September 30, 2003.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and Notes thereto, included
elsewhere within this Report.
Description of the Company
--------------------------
The Company is principally engaged in the resale and distribution of liquid
petroleum gas (LPG) in the retail and wholesale markets in South China and in
the purchase of petroleum products for delivery to the Far East.
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, 2003 the Company realized $287,843 of
revenue compared to $185,835, a 54.9% increase compared to the same period in
the prior year.
During the nine months of 2003, the Company realized $571,964 of revenue
compared to $561,303, a 1.9% increase compared to the same period in the prior
year.
Costs and expenses
------------------
During the quarter ended September 30, 2003 the Company incurred $113,850 of
operating expenses compared to $306,069 a 62.8% decrease compared to the same
period in the prior year.
During the nine months of 2003, the Company incurred $440,299 of operating
expenses compared to $1,153,833, a 61.8% decrease compared to the same period in
the prior year, due to better operating efficiencies.
Liquidity and Capital Resources
-------------------------------
As of September 30, 2003, the Company had a deficiency in working capital of
$803,372. During the first nine months of 2003, the Company used cash flow of
$104,071 in operating activities.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. We currently have no commitments for financing. There is no guarantee
that we will be successful in raising the funds required.
7
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, 2002 Form 10-KSB, that the Company has
incurred operating losses in the last two years, and that the Company is
dependent upon management's ability to develop profitable operations. These
factors among others raise substantial doubt about the Company's ability to
continue as a going concern.
TRENDS, RISKS AND UNCERTAINTIES
-------------------------------
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our Common Stock.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
-------------------------------------------------
Our annual report on December 31, 2002 Form 10-KSB includes a detailed list of
cautionary factors that may affect future results. Management believes that
there have been no material changes to those factors listed, however other
factors besides those listed could adversely affect us. That annual report can
be accessed on EDGAR.
ITEM 3. CONTROLS AND PROCEDURES
The Company's management including the Chief Executive Officer, President and
Chief Financial Officer, have evaluated, within 90 days prior to the filing of
this quarterly report, the effectiveness of the design, maintenance and
operation of the Company's disclosure controls and procedures. Management
determined that the Company's disclosure controls and procedures were effective
in ensuring that the information required to be disclosed by the Company in the
reports that it files under the Exchange Act is accurate and is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and regulations.
Disclosure controls and procedures, no matter how well designed and implemented,
can provide only reasonable assurance of achieving an entity's disclosure
objectives. The likelihood of achieving such objectives is affected by
limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be fully faulty and that
breakdowns in internal control can occur because of human failures such as
errors or mistakes or intentional circumvention of the established process.
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation thereof, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company issued 7,693,746 unregistered shares in Q3 2003
valued at $146,267 to officers and consultants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Chief Executive Officer.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Chief Financial Officer
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K filed during the quarter ended September
30, 2003
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 12, 2003. Largo Vista Group, Ltd.
/s/Deng Shan
------------
Deng Shan
Principal Executive Officer
9