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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission file number : 0-30426
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LARGO VISTA GROUP, LTD.
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(Exact name of registrant as specified in its charter)
Nevada 76-0434540
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4570 Campus Drive, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 252-2180
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Securities registered pursuant to Section 12 (b) of the Act: None
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Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
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(Title of Class)
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 [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as latest practicable date:
Number of Shares Outstanding
Class
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Common Stock
DOCUMENTS INCORPORATED BY REFERENCES
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424 (b) or (c) under the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for the fiscal year ended
December 24, 1990).
None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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Item 1. DESCRIPTION OF BUSINESS
A. INTRODUCTION
1. Largo Vista Group, Ltd., a Nevada corporation ("Largo Vista,"), operates
through its wholly owned subsidiary, Everlasting International Ltd.
("Everlasting"), a Nevada corporation. Everlasting operates and owns a 66.67%
interest in a joint venture company in China, operated under the name
"Kunming Xinmao Petrochemical Industry Co. Ltd." ("Xinmao or the Company").
Xinmao is principally engaged in the business of purchasing and reselling
liquid petroleum gas ("LPG") in the retail and wholesale markets to both
residential and commercial consumers in Yunnan Province of South China.
Xinmao operates a storage depot and has office headquarters in the City of
Kunming. All of the Company's property and equipment is located in China.
Largo Vista was originally incorporated on January 16, 1987 in Nevada under
the name, "The George Group". On January 9, 1989, The George Group acquired
Waste Service Technologies, Inc. ("WST"), an Oregon corporation. On the same
day The George Group filed a name change in Nevada and changed its name to
WST. WST's plan of business was to become an environmental service company.
It listed its stock and began trading on OTC Bulletin Board.
On April 15, 1994, WST acquired Largo Vista, Inc., a California corporation,
and on the same day filed a name change in Nevada to change WST's name to
Largo Vista Group, Ltd. At the time of acquisition Largo Vista filed a
change of name with the OTC Bulletin Board and received a new CUSIP number
and symbol ("LGOV"). Largo Vista originally planned to develop housing in
China, but, after shipping two factory built homes to China, never fully
implemented the plans due to unanticipated financing, environmental and
regulatory complications.
On December 26, 1996, Largo Vista acquired 100% of Everlasting International
Ltd. ("Everlasting"), a Nevada Corporation, which owns a 66.67% interest in
Kunming Xinmao Petrochemical Industry Co., Ltd. ("Xinmao"), mentioned above.
Everlasting acquired this asset from Proton Technology Corporation Limited, a
Bahamas Corporation ("Proton"), in which Mr. Deng Shan, a director and
principal shareholder of Largo Vista, is the principal shareholder.
Since Largo Vista had no substantive operations as of the date it acquired
Everlasting, the transaction between Everlasting and Largo Vista represents a
re-capitalization/reverse merger that resulted in no change in the basis of
Everlasting's accounts. The book value of Xinmao's net assets did not differ
materially from their fair market value in November 1995, in that there were
no material transactions during that period, other than those occurring in
the normal course of business. Since there was no significant difference
between the book value and fair market value of the net assets acquired, no
goodwill has been recorded. Minority interest is not shown on the balance
sheet or statement of operations since the minority interest has no
obligation to make good on any losses Xinmao incurs.
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The historical chain-of-ownership of the asset is as follows: The Hong Kong
Company, formed under the laws of Hong Kong, was initially owned by one
individual, Chan Mau Tak. On November 8, 1995, Deng Shan, an individual,
purchased the Hong Kong Company from Chan Mau Tak. On December 20, 1996, the
Hong Kong Co. was acquired from Deng Shan by Proton with majority shareholder
being Deng Shan. On December 21, 1996, Proton transferred 100% of its interest
in the Hong Kong Company to Everlasting International Ltd., a Nevada
Corporation. On April 29,1997, Largo Vista shareholders consented to an
acquisition and plan of reorganization executed on December 26, 1996, wherein
Largo Vista purchased 100% of the stock of Everlasting from Proton Technology in
a stock exchange transaction.
2. Organization of the Company and Subsidiary
Xinmao, in operation and providing uninterrupted service to consumers since
1992, is in its third year of operation as a subsidiary of Largo Vista.
Xinmao is the only company that has private majority ownership, and a private
majority Board of Directors; and, is one of the largest LPG distribution
companies in the Yunnan Province in terms of end users.
On October 12, 1999, Largo Vista entered into a joint venture agreement with
the United Arab Petroleum Corporation ("UAPC"), named Largo Vista/UAPC
Partners, wherein Largo Vista shall hold 51% of the assets and liabilities,
and shall share 51% of the income and expenses of the JV; and, UAPC 49%. The
purpose of the JV is to combine the resources and talents of each party to
develop a market for the sale of petrochemical products to be supplied by
middle-east sources, and principally Dubai. The JV plans to sell petroleum
products to customers in China, Vietnam and other countries throughout the
Pacific Rim.
On December 12, 1999, Largo Vista/UAPC Partners entered into a joint venture
agreement with Mr. Ahmed Hasan Abdul Qahir Al Shaibani, Dubai, United Arab
Emirates (UAE), named Largo Vista Group, Ltd. (LLC of Dubai, UAE). Largo
Vista/UAPC Partners will hold 49% (Largo Vista 25% and UAPC 24%) of the
assets and liabilities, and shall share 49% of the income and expenses of the
JV; and, Al Shaibani 51%. The objective of the JV is to carry-on the trade
of crude oil and refined oil products. The JV will have headquarters in
Dubai, and plans to focus sales of petroleum products in China, Indochina and
other Pacific Rim customers.
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LVG
Largo Vista Group, Ltd.
Owns 100 % EIL
Owns 100 % LVI
Subsidiaries Joint Ventures
EIL LVI Joint Venture
Everlasting Largo Vista "Largo Vista/UAPC Partners"
International Inc.
Ltd. No Operations LVG owns 51%
Owns 66.67 % Presently UAPC owns 49%
Of "Xinmao"
To to
"Xinmao" Joint Venture
Kunming Xinmao Petrochemical "Largo Vista Group, Ltd."
Industru Co. Ltd., a (Limited Liability Company)
Chinese Joint Venture Dubai
JV Partners: Al Shaibani owns 51%
"Everlasting" - 66.67 %
Government Partner - 33.33 % LV/UAPC Partners = 49 %
Lvg owns 25 %
UAPC owns 24 %
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LARGO VISTA GROUP, LTD.
EVERLASTING INTERNATIONAL, LTD.
(100% Owned Subsidiary of Largo Vista holding a)
66.67% Interest in the
Joint Venture
KUNMING XINMAO PETROCHEMICAL INDUSTRY CO., LTD.
(in which a)
33.33% Interest
is held by KUNMING FUEL GENERAL CO.
(Chinese Government Joint Venture Partner)
B. BUSINESS
The Company operates in one industry segment, the purchasing and reselling of
LPG in Yunnan Province of South China.
1. Terms of Xinmao Joint Venture
The Kunming Xinmao Petrochemical Co., Ltd. ("Xinmao") is a Joint Venture
formed under the laws of the People's Republic of China. The Xinmao Joint
Venture commenced business in August of 1992, but has yet to achieve
profitable operations.
Term: Twenty years, commencing on August 28, 1992.
Parties: Party A is the Kunming Fuel General Co. ("Government Partner ") as
to a 33.33% interest with a "registered capital" investment of US $641,000.
Party B is Everlasting International, Ltd as to a 66.67% interest, with a
"registered capital" investment of US $1,283,400.
General Provisions: Government Partner has a general responsibility to
support Everlasting in its duties.
The Joint Venture is an independent entity with an independent accounting
system. An audit of the Joint Venture's financial records is conducted
annually by an auditor registered in China. Fiscal year of Joint Venture is
January 1 to December 31.
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Everlasting is, subject to the terms and conditions of an operating agreement
set forth below, responsible for the general management of Xinmao including:
Procurement of equipment and raw materials, equipment installation, testing
and technical training, hiring a management staff, production and technical
processes and other duties entrusted to it.
This Operating Agreement was made between the Government Partner and the Hong
Kong Company on August 28, 1992, for a term of ten years, ending on August
28, 2002. Everlasting, as purchasor of the Hong Kong Company, is responsible
to manage the day-to-day operations of Xinmao and assume sole responsibility
for its profits and losses.
Each party under Chinese law would normally participate in the profits and
losses of the Joint Venture according to its proportionate share of
contribution. However, this provision was changed by the Operating
Agreement, which provides that Xinmao is to pay the Government Partner 9
million Yuan (RMB) during the term of the Agreement as follows:
3.5 million Yuan (RMB) for the first 3 years;
1.5 million Yuan (RMB) per year for the 4th and 5th years;
500,000 Yuan (RMB) per year from the 6th through the 10th years
The Company negotiated this agreement to provide flexibility and encourage
future investment and expansion by precluding the payment of large a sum of
money to the Government Partner. To date, the Government Partner has been
paid 4.1mm RMB, and the balance due is 3.4mm RMB. No payment has been made
since January 24, 1998 due to several factors. Since the government partner
has recovered more than its initial capital contribution, it has not urged
Xinmao to make up past due payments due to the difficulties Xinmao has faced
during 1997 and 1998 including record high LPG prices and a chaotic and
unstable developing market. This liability has been accrued on the books of
Xinmao.
The Government Partner has indicated a willingness to sell to Largo Vista an
additional 28.33% which would result in Largo Vista owning 95% and the
Chinese partner owning 5% of the joint venture. Largo Vista had negotiated
in July and August of 1998, an agreement with the Chinese Partner in the
Xinmao Joint Venture, to acquire an additional 28.33% interest in the Joint
Venture for a cash purchase of 5mm RMB. Unfortunately, Largo Vista was
unable to raise sufficient funds to complete this acquisition at that time.
As a result, as of this date, Largo Vista continues to own 66.67% interest in
Xinmao. There is currently no binding contract or option in place to acquire
a further interest in Xinmao.
2. Government License Held
The Xinmao Company holds a unique license issued by Chinese Central
Government (National Industrial and Commercial Registration Administration of
China). This license is most valuable because it permits the Company to
operate across provincial borders; whereas, competitors of the Company are
restricted to the geographic area in which they are located. In addition,
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the license permits the Company to process domestic crude oil and sell its by-
products; to process and sell LPG to retail domestic and industrial
customers; to manufacture cylinders, stoves, water heaters, and cigarette
lighters and their accessories; and to provide services in inspection and
maintenance of stoves and cylinders for safety and quality.
Xinmao is a Sino-Foreign Joint Venture registered with the government as
having foreign ownership. This registration permits foreign investment to
legally flow into China, and allows funds to legally flow out of China
including loan repayments, interest payments and dividends. Xinmao is one of
the few known Sino-Foreign Joint Ventures licensed to sell petroleum products
in the retail market.
Xinmao also holds a general contractors license intended for construction of
pipeline projects. As a part of its overall strategy to expand its LPG
market in China, management intends to expand its business in the future
beyond its current core business of purchasing and reselling LPG, utilizing
its various licensing authorities.
3. The Product
As of December 30, 1998, according to information published by the Yunnan Gas
Association, in Yunnan Province there are approximately 1,000,000 households
using some form of gas utility (town gas, natural gas and LPG). About 65% or
650,000 households use LPG, and the number is increasing. Approximately
160,000 household users reside in Kunming; and, there are 30,000 pipeline
household users, 60% of which are within Kunming City, with the balance
residing in smaller cities within the Province. The metropolitan population
in Yunnan is 5.9 million with 3.2 million using gas (1 household equates to
3.2 people) as a utility - a city gasification rate of 54.2%. This rate
increased by 7% over 1997, but still lags the national average by 20%. LPG
use accounts for about 65% of this total.
LPG consumption in Yunnan was approximately 68,000 metric tons, a net
increase over 1997 of 13,000 metric tons.
As a form of energy it is considered a very efficient fuel because in a
liquid state it provides a significant supply of energy in a comparatively
small volume. LPG is recognized for its transportability and ease-of-use.
It is a clean and environmentally friendly source of energy that has a
variety of residential, commercial, industrial and transportation uses. It
can be used at home for cooking and heating, replacing wood, kerosene, coal
and other environmentally unfriendly sources of energy. In fact,
environmental concerns have caused the outlaw of the use of coal in most
larger cities in China. Although LPG has some drawbacks such as high
combustibility, it requires great care in handling, and is subject to fire
and safety regulations, LPG remains one of the only viable sources of energy
for cooking and heating in Southern China. Management believes the China LPG
market is ripe for growth and expansion.
Most Chinese consumers have used of wood and coal all of their life primarily
for cooking only; however, they are slowly beginning to realize the ease and
convenience of also using LPG for heating and heating water. Most consumers
obtain LPG in 15 kg. cylinders, very similar to those used for gas barbecues
<PAGE>
in the U.S. As LPG delivery systems, such as pipelines, make use more
convenient and simple, LPG consumption per capita should increase
significantly. In addition, management believes there will be future
opportunities in drying tobacco and operating factory machinery and vehicles.
4. Markets
The China LPG market is broken down into three segments for purposes of
analysis:
1.Distribution method from the major LPG companies,
2.Method of delivery to the consumer, and
3.Black Market dealers
The Primary market segment is according to distribution method - that is
either retail-direct or wholesale-indirect. Retail distribution is
accomplished by the ten major LPG companies that deal directly with the end
user. Xinmao qualifies as one of the ten major LPG companies by its
ownership of rail tank cars; it is one of only five companies having depot
storage facilities of 1,000M3; and it has distribution of LPG to retail and
wholesale, and residential and commercial users.
The second market segment is according to the delivery vehicle used by the
user, such as bottle or cylinder, pipeline, or tank truck.
The bottle users may be either retail, purchasing directly from a major LPG
company, or wholesale, purchasing indirectly from a distributor of a major
LPG company. Bottle customers purchase LPG in 15 kg. cylinders or bottles
that must, by law, be filled to a minimum of 13.5 kg which is considered
full. Bottle users include residential, and commercial customers.
Residential consumption is by far the largest, with commercial restaurants
and caterers following second. There has been little industrial use of LPG
to date.
Pipeline users are considered retail-direct users. LPG flows directly into a
household via pipes from a central storage tank that is replenished as
necessary by a major LPG company. Pipeline users are billed according to
usage based on a meter in their living unit.
Tank truck or bulk sales are made to wholesale distributors who operate small
bottle filling stations. These distributors represent lower profit margins
but volume makes-up some of the difference. Bulk sales are encouraged to
cultivate the small wholesale distributors because of the potential of
acquiring their customer base in the future.
A third market segment, although temporary, must be considered because of the
negative impact it has on the LPG market. This segment is comprised of the
many small independent distributors and individuals who operate illegally in
what is referred to as the "black market" - most operating without a license,
violating safety laws, and unfairly profiting by short-filling LPG bottles.
These abusers create problems of unfair competition for the Company. The
Kunming LPG Administration is aware of these abuses, but, unless a blatant
case is presented to it, it is ignoring the problems until the market
consolidates to a greater degree.
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LPG consumption has been increasing in the past decade, but LPG consumption
per capita is still low, partly due to the large population in China. At
present it is around only 6 kg nationwide which is small in comparison to
100kg in its Asian neighbors such as Japan and South Korea, for example. LPG
development in China also shows geographical variance. South China has led
the nation in terms of per capita consumption at nearly 35 kg. East China
follows with per capita consumption of about 10kg. North China is far less,
only half of that in East China. And still in many places inland, the LPG
consumption per capita is negligible. Since the Company operates in
Southwest China, management perceives a great opportunity to grow with the
projected expansion.
The majority of dollars invested in the China LPG market have been invested
in large "mega" depots by the major oil companies. Little to no focus has
been placed on the retail end-user market. Put simply, the LPG "storage"
infrastructure is in place, but it is overbuilt because the retail market has
not been cultivated at the same pace. Management's primary objective is the
development of this retail consumer base.
From the mega-depots on the east and southeast coast of China, LPG is shipped
to smaller inland storage depots via railroad tank car. LPG is then pumped
into large storage tanks until it is distributed in bottles, pipelines or
tank trucks to end users and distributors.
Inland infrastructure development has not kept pace with coastal development.
Inland depot storage capacity must be expanded to serve the customers in
waiting for LPG service. More efficient distribution methods are also
needed. The bottle exchange system is labor intensive - a factor that does
not significantly affect overhead yet, but will have greater future impact as
salaries increase.
Distribution of LPG via pipelines directly to end-users is very efficient,
but one drawback is the cost to install pipeline service to each household,
which is approximately $185 US. Some more affluent customers can afford to
pay the installation fee up front, but most of these have already purchased
pipeline service. Some new construction projects permit the cost of
installation to be incorporated into the cost of the home. However, most
customers can not afford the up-front fee, but are willing and able to pay
extra each month based on usage. Xinmao has seven pipeline projects either
completed or under construction.
5. Distribution of LPG
There are four basic levels of LPG distribution:
Major LPG companies
Major LPG Distributors
Medium LPG Distributors
Small Independent LPG Distributors
The Major LPG companies are characterized by the following: they purchase LPG
directly from refineries or major oil companies, they must be licensed, have
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railroad tank cars and storage depots, and typically serve over 10,000 retail
customers. These companies depend on distribution networks to get LPG to the
consumers.
Major distributors are licensed and generally serve more that 4,000 but less
than 10,000 customers directly, but do not typically have any railroad tank
cars, and have little or no storage capacity.
Medium Distributors are licensed and generally serve more than 1,500 but less
than 4,000 customers directly, have no storage capacity.
Small Independent Distributors are those who may or may not be licensed, and
have no relationship or loyalty to any major company or distributor, and
usually serve less than 1,500 customers.
Since all of these distributors serve a customer base, Xinmao is actively
recruiting them on an ongoing basis.
The majority of Xinmao's customer base is serviced with the help of agents
and entity users. Xinmao has eight agents that are independent dealers who
exclusively represent the Company in an outlying county area that is
difficult for the Company to access on a regular basis. The consumers
serviced by the agent pay retail prices. The Company pays the agent a fee
for his services and the agent carries his own overhead expenses.
As the LPG market was developing in the early 1990's, the Company was seeking
to develop a customer base in the most efficient and effective manner
possible; and, as a result, began to cultivate the "entity user". Entity
users were companies in other industries, already providing housing for their
employees, which desired to provide a convenience to their workers by
distributing LPG as an additional service. These entity users developed into
distribution outlets that benefited the Company by providing free receiving,
storage and LPG distribution service to consumers who paid retail prices. As
the market further developed, the entity user also began to be a distribution
outlet to other consumers in the local area that were not affiliated with the
entity company. Today, the Company is actively seeking to cultivate and
develop additional entity users to expand the consumer base. Today Xinmao
has 125 entity users.
In 1997, under the leadership of Largo Vista management, several innovations
were added to the distribution process. First, there was a time delay
between the sale of the LPG and receipt of the cash from the sale. The
Company responded with the "coupon program" whereby the consumer, first
purchased a special coupon from the bank and presented it as payment as he
exchanged an empty bottle of LPG for a full one. The bank then remitted to
the Company. The Bank of Agriculture, one of the largest in China with over
1,000 branches in the province, has successfully worked with the Company for
over two years in this program and the bank is pleased with exposure to a new
customer base.
Second, also in 1997, the Company implemented the first consumer insurance
program. This insurance, written by the largest insurance company in China,
guaranteed the consumer who either made a non-refundable prepayment for LPG
by purchasing a coupon that the LPG would be at a fixed price, immediately
available, and a guaranteed quality and quantity.
<PAGE>
These two innovations, the coupon program and the consumer insurance
protection program, were the first of their kind in China. In the future the
Company intends to implement a third innovation for the pipeline distribution
system which will be a prepaid "smart card", that will be inserted into a
meter in the consumer's home. This precludes cash flow and collection
problems. Distribution of the prepaid smart card will be similar to the
coupon program in concert with the Bank of Agriculture.
The bulk of Xinmao's retail customers are located in the Yunnan Province
central cities of Kunming, Lunan, Chengong, Yiliang, Jinnin, Annin, and
Eshan. As the population thins out in the suburbs, distribution networks
take-over and service most customers. The rural areas are exclusively
serviced by smaller distributors.
Finally, there are a number of other minor distributors who purchase from
Xinmao and other major companies, who have solicited their own customer base
over a period of time and have generated customer loyalty through
relationship.
6. Raw Materials
The Chinese market is unique compared to other Asian countries. Japan and
Korea seek security of supply through regular term contracts supported by
long-term relationships, but, in China, low price and bargaining is the
driving force for LPG purchases.
Xinmao has been able to consistently purchase LPG at low prices due to high
volume of orders. When purchasing LPG, Xinmao must weigh various factors
including quality of LPG, price, and transportation costs. It generally
purchases from domestic sources inside China where prices are very low, but
transportation costs are higher. On occasion Xinmao also purchases LPG from
foreign companies such as Mobil Oil Hong Kong and Caltex.
Since Xinmao is presently dependent upon both domestic and foreign sources to
supply its LPG and since domestic supply cannot be relied upon for all of its
needs, Largo Vista decided that the best interests of the Company would be
served by Largo Vista establishing a strategic relationship with a supplier
of petroleum products outside of the domestic China market both to provide a
greater guarantee of LPG in the future, and to expand its sale of petroleum
products both in and outside of China. Pursuant thereto, On October 12,
1999, Largo Vista entered into a joint venture agreement with the United Arab
Petroleum Corporation ("UAPC"), named Largo Vista/UAPC Partners, wherein LVG
shall hold 51% of the assets and liabilities, and shall share 51% of the
income and expenses of the JV; and, UAPC 49%. The purpose of the JV is to
combine the resources and talents of each party to develop a market for the
sale of petrochemical products to be supplied by middle-east sources, and
principally Dubai. The JV plans to sell petroleum products to customers in
China, Vietnam and other countries throughout the Pacific Rim.
<PAGE>
To date, Largo Vista/UAPC Partners has accomplished the following:
Contract: November 25, 1999, Largo Vista/UAPC Partners seller; Mekong
Petroleum Joint Venture Co., Ltd. (PETROMEKONG) buyer; 20,000 metric tons of
diesel oil during the months of December 1999 and January 2000; total
contract price approximately $3,300,000 USD.
Contract: December 18, 1999, Largo Vista/UAPC Partners seller; Mekong
Petroleum Joint Venture Co., Ltd. (PETROMEKONG) buyer; 2,600 metric tons of
gasoil 1% sulphur and 3,000 metric tons of unleaded mogas 92 during the month
of December 1999; contract price approximately $430,000 USD for gasoil, and
approximately $560,000 USD for mogas 92.
On December 12, 1999, Largo Vista/UAPC Partners entered into a joint venture
agreement with Mr. Ahmed Hasan Abdul Qahir Al Shaibani, Dubai, United Arab
Emirates (UAE), named Largo Vista Group, Ltd. (LLC of Dubai, UAE). Largo
Vista/UAPC Partners will hold 49% (Largo Vista 25% and UAPC 24%) of the
assets and liabilities, and shall share 49% of the income and expenses of the
JV; and, Al Shaibani 51%. The objective of the JV is to carry-on the trade
of crude oil and refined oil products. The JV will have headquarters in
Dubai, and plans to focus sales of petroleum products in China, Indochina and
other Pacific Rim customers.
Cost of goods can fluctuate widely and rapidly and can cause cash flow
problems. The Company is researching the feasibility of obtaining a much
larger storage facility that would permit it to purchase large quantities of
LPG when prices are favorable, and sell it when prices are higher.
7. Pricing and Competition
The LPG industry in Yunnan Province consists of ten major LPG companies that
have railroad tank cars, depot storage facilities, and sell LPG in both the
retail and wholesale markets. All ten companies depend on a network of
distributors to help reach and serve the needs of their customers.
Competition is based principally on price and service, with some based on
relationship and reputation. Nine of these companies are majority owned by
the government, and are wholly operated by management that is responsible to
a government majority Board of Directors. These companies are designated in
China as "government owned and operated". Xinmao is the only company that
has private majority ownership, a private majority on the Board of Directors
which controls the Company. Only five of the nine companies are in the same
category as Xinmao in terms of storage capacity of 1,000 cubic meters.
LPG retail market prices have been relatively unstable during the past two
years, characterized by over supply and cut-throat competition. This was
precipitated by environmental concerns that prompted the passing new
regulations by the Kunming City Government that outlaw the use of coal.
Other larger cities are following suit with similar clean air regulations,
leaving LPG as the major viable energy alternative for cooking, heating, and
hot water.
No companies were prepared to supply a sufficient amount of LPG to this new
consumer market, but all companies reacted to the huge new demand.
The difference between Xinmao and the other nine government companies is that
the primary objective of Xinmao is to make a profit while profit is secondary
<PAGE>
to the government companies primary objective is to ensure supply LPG. The
nine government companies, whose primary objective was to supply LPG to
consumers, are characterized by a lack of management and financial expertise,
and by large work staffs that operate very inefficiently. These entities
ordered an excess supply of LPG and had to cut prices to deplete the excess.
This began the spiraling downward price market in which Xinmao was forced to
compete. These pressures have eased, and Xinmao is negotiating with the
government agencies and some companies in an effort to bring stability back
to the market along with higher prices and profitable margins.
Black Market. In the residential wholesale market, many independent, "black
market" dealers sprung-up and have been operating without a license, and have
ignored safety regulations that require inspection and pressure testing of
each bottle every five years. Another flagrant violation of consumer
fairness is the practice of short-filling bottles. The "black market" dealer
fills the bottle with 10 kg. of LPG, and sells it representing it has 13.5
kg. of LPG. Short-filling has permitted the Company's competition to charge
lower prices and unfairly compete with Xinmao. This practice of cheating the
consumer has been prevalent over the past several years. Xinmao is now
challenging customers to be aware of what they are paying for by
implementation of a "weight comparison program". The program permits the
consumer to actually weigh the bottles to expose the "short-fill" problem.
As of April 15, 1999, the Kunming LPG Administration established "minimum
pricing" regulations which set a base price for both wholesale bulk sales,
and wholesale and retail bottle sales. This regulation will help stop the
uncontrolled cut-throat pricing competition that occurred over the past 24
months. It will be incumbent upon the nine participating major LPG companies
to form task forces to assist the LPG Administrator in enforcing these
regulations. The "short-fill" practice is now illegal under new "minimum
price" regulations, which require all wholesalers to sell a 13.5 kg. bottle
for no less than 36 RMB, and retail distributors for no less than 42 RMB.
Xinmao competes with others on both reputation and service. To differentiate
itself from its competition, Xinmao stresses a long-term relationship both
with the residential user, and with the distributor, to help them bring-in
and keep new customers. The Company wants its distributors and their
customers to be a part of the "Xinmao Family". The Company offers more than
claims about its service. Its reputation is excellent and is backed-up by a
record of uninterrupted service since 1992. Consumers and distributors know
that they can rely on Xinmao to deliver and that they will receive honest
weights and measures.
8. Insurance
Xinmao sells a solid image of reliability, service, safety, and seven years
of uninterrupted service to its customers - and backs it up with insurance.
The Company provides consumer insurance, written by the Peoples Insurance
Company of China (PICC) which is owned by the government. The insurance
guarantees that a customer who paid in advance that the LPG would be at a
fixed price, immediately available, and a guaranteed quality and quantity.
This innovation has given the customer new confidence, since in the past many
companies collected in advance, and then went out of business, leaving the
customer empty handed.
<PAGE>
9. Government Regulation
The LPG industry is regulated on a day-to-day basis by the Kunming LPG
Administration, which oversees all companies licensed to do business, and
enforces rules and regulations in the market place. The LPG Administration
faces many problems in this rapidly emerging, chaotic market, including the
existence of many unlicensed small distributors, violations of safety
regulations, and bottles of LPG short-filled by as much as 25%. In April
1999, the local LPG Administration met with Xinmao and eight of the other
largest licensed companies in the area, and together set minimum price
policies intended to provide positive margins over cost. The LPG
Administration has also begun to correct some of the more flagrant
violations. The philosophy of the Chinese LPG Administration is to first
ensure LPG is available to all people requiring it, then to enforce
regulations so long as they don't interfere with the first priority.
10. Patents, Trademarks & Licenses
The Company maintains no patents or trademarks.
11. Seasonal Factors
Northern China is subject to a wide range of seasonality ranging from snow in
the winter to hot, humid summers. However, moving south, the seasons and
temperatures do not fluctuate as much as in the north. The Xinmao Company
operates in Yunnan Province which, being at an elevation of approximately
5,500 feet, is known for its moderate and even climate year around - being
slightly cooler in the winter, requiring some heating, while the summer
weather is warm and pleasant. As a result, seasonal factors do not play a
significant role in the Company's business.
12. Inventory
Inventory, valued at cost, on the first-in, first-out basis, consists
primarily of liquid petroleum gas.
13. Firm Backlog
None.
14. Government Contracts
The Company has government approval for the exclusive development of pipeline
projects in the counties of Lunan, Fuming, Yiliang, Yuxi, and a part of
Kunming.
<PAGE>
15. Environmental Factors
Between 1996 and 1998, environmental concerns over clean air and streets,
have prompted a general movement within the Chinese Government from the
Central Government to the provinces and the major cities to phase-out the use
of coal as an energy source for cooking and heating. As coal is phased-out a
void is left which is being filled by liquid petroleum gas (LPG) because it
is a clean burning, efficient and transportable energy substitute. It is
expected that continued efforts will be made to replace other unclean burning
fuels with LPG, especially in automobiles and industrial applications, since
it is the only viable alternative fuel resource available to Southern China.
16. Financial Information Relating to Foreign & Domestic Sales
All of the Company's sales are foreign, through Xinmao, its China subsidiary.
The Company has had no significant foreign currency transaction gains or
losses in connection with its activities.
17. Employees
Largo Vista is fully staffed with 2 employees, and relies on five other
outside service providers for legal, accounting and other services as needed.
The Chinese subsidiary, Xinmao, is fully staffed with 84 employees, including
a full management staff, which is considered highly competent and well
qualified.
<PAGE>
Item 2. FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The following table contains selected financial data for the periods
presented for the Company. The data should be read in conjunction with the
more detailed audited statements for such years presented elsewhere herein.
1999 1998 - RESTATED
Revenues $1,765,124 $1,618,200
Cost of Sales $1,153,910 $1,353,537
Margin $ 611,214 $ 264,663
S,G&A $2,661,416 $ 760,491
Operating (Loss) ($2,050,202) ($ 495,828)
NET (LOSS) ($2,198,488) ($ 694,480)
1. Revenues and expenses are generated from the Company' s Chinese subsidiary,
Kunming Xinmao Petrochemical Industrial Co., Ltd. ("Xinmao"). The United States
entities produce no revenues, and experience expenses in conjunction with
management oversight of the Chinese entity, legal, accounting and other
professional services.
Revenues for 1999 increased $147,000, (9.1%) over 1998. This increase
reflects the Company's curtailment of sales activity in high volume, low to
negative margin market segments, and focus on higher margin retail business.
Price pressures continue to negatively affect sales volume and profitability
in the retail residential market segment. The market is still developing and
reflects rapidly increasing consumer demand, low cost of goods and some over
supply of product placing downward pressure on prices, and one that requires
capital investment to improve delivery systems to consumers. The Company
anticipates increases in revenue from expanded marketing efforts, price
increases, expansion into other lines of business, and mergers and
acquisitions.
Cost of sales for 1999 decreased $200,000 (14.7%) from 1998. Improvements are
due to cost containment procedures, and the Company anticipates greater
improvements going forward by further implementing cost containment procedures
and obtaining LPG at lower prices.
Margins for 1999 of 34.6% increased from 16.4% in 1998. The increase reflects
focus of sales activity on more profitable market segments, implementation of
cost reduction efforts, and improved management techniques. The Company
anticipates improving the margin going forward by continuing to focus sales
efforts on more profitable market segments, and implementing additional measures
to reduce cost of goods.
Selling, general and administrative expenses for 1999 increased $1,901,000 or
250% over 1998. The Company issued a substantial amount of stock to its officers
for compensation, including salaries and bonuses.
Net losses for 1999 increased $1,504,000 over 1998 primarily due to the increase
in SG&A expenses.
<PAGE>
2. Liquidity and Capital Resources
Historically, the Company has been able to obtain funds as necessary to
pursue operations. However, neither Largo Vista nor Xinmao have written
letters of commitment from either commercial or private sources of credit.
The Company has continually experienced significant operating losses and
there is no internal source of liquidity. The primary source of external
liquidity has been loans from Chinese state-owned banks. However, since
Chinese banking authorities are tightening credit, it is uncertain whether
Xinmao will continue to receive such loans. The availability, source, amount
and terms of any additional financing is uncertain at this date, and by no
means assured.
3. Trends, events or uncertainties that have or are reasonably likely to
have a material impact on the Company's liquidity.
The economic growth of China with its huge population, emerging middle class,
and growing consumer sector are trends that management anticipates will
increase the Company's revenues from Xinmao as well as other anticipated
projects. China's young, developing LPG market presents challenges of
improving sales strategies, seeking lowest-cost sources of goods,
implementing efficient management techniques, and developing the efficiency
and effectiveness of human resources.
World geopolitical uncertainties, such as the United States bombing of the
Chinese consulate in Belgrade, Yugoslavia resulted in a short period (4-5
days) of unrest and negative reactions toward Americans in China; however, no
long term difficulties have been experienced and management does not
anticipate any serious detriment to prospects for the Company's success in
China because of the nature of the service a utility company provides that is
in continual demand, and the fact that foreign ownership is not readily
ascertainable by consumers.
In addition, even though Chinese management is optimistic of its ability to
obtain credit from private sources, the trend in China is for the banks to
tighten loan eligibility for businesses such as Xinmao that are experiencing
cash flow difficulties.
Additionally, the Company is searching for joint venture partners in various
potential LPG projects in the Yunnan Province and in other provinces.
Investment by joint venture partners will be perceived as financial strength
by the local LPG Administration, and management anticipates stronger
enforcement of licensing and safety regulations, which should reduce unfair
competition currently experienced by the Company.
Year 2000 Issue
Many computer Systems in use today may be unable to correctly process data or
may not operate at all after December 31, l999 because those systems
recognize the year within a date only by the last two digits. Some computer
programs may interpret the year "00" as 1900, instead of as 2000, causing
errors in calculations or the value "00" may be considered invalid by the
computer program, causing the system to fail.
<PAGE>
In the U.S., the Company maintains its financial data on a PC system utilizing
generic accounting software, both of which have been guaranteed by the
manufacturer as Y2K compliant. In China, due to government regulations, the
Company maintains a manual record system. During first quarter 2000, in China,
management expects to begin maintaining financial and other information on both
a manual and PC system, totally shifting to a PC system as government
regulations permit. The Company has not experienced any problems related to
computer software dating issues and does not believe it will either experience
future, or that it has significant exposure in the future, to Year 2000
problems, and neither does it expect that the Year 2000 issue will have a future
material cost or impact on Company operations. The Company's primary contingency
plan depends upon the use of manual back-up systems, and alternative supply
sources such as major oil companies.
These contingency plans are intended to mitigate the impact of third party
Year 2000 noncompliance. Outside of manual backup, the Company does not plan
to implement further contingency plans. The Company has not inquired into
the readiness of any of its key third party suppliers; however, as of March
1, 2000, none of its key third party suppliers has reported any Y2K problems.
However, there can be no assurance that the systems of key suppliers and
other companies on which the Company relies will not have an adverse effect
on the Company including, (1) the inability to obtain products or services
used in business operations, (2) the inability to deliver goods or services
sold to customers.
Forward - Looking Statements
Investors are cautioned that certain statements contained in this document,
including but not limited to those under the caption Management's Discussion and
Analysis as well as some statements by the Company in periodic press releases
and some oral statements of Company officials during presentations about the
Company, are "forward-looking" statements. Forward-looking statements include
words such as "expects", "anticipates", "intends", "plans", "believes",
"estimates", or similar expressions. In addition, any statements concerning
future financial performance (including future revenues, earnings or growth
rates), ongoing business strategies or prospects, and possible future company
actions, which may be provided by management are also forward-looking
statements. Forward-looking statements are based on current expectations and
projections about future events and are subject to risks, uncertainties, and
assumptions about the Company, economic and market factors and the industries in
which the Company does business, among other things. These statements are not
guaranties of future performance and the company has no specific intention to
update these statements. Actual events and results may differ materially and
detrimentally from those expressed or forecasted in forward-looking statements.
Certain of the important factors that could cause actual results to differ
materially and negatively from the Company's expectations, among others,
include continued instability in pricing and unprofitable competition in
China, a slow down in the trend in sales of LPG during the remainder of the
year, an inability to obtain sufficient working capital, and new Government
regulations adverse to the Company's operations.
<PAGE>
Item 3. PROPERTIES
A. Largo Vista
Currently Largo Vista has corporate offices in Newport Beach, California,
which include two office suites. The terms of this Lease provide for month
to month tenancy at $2,500 per month.
B. Xinmao
Xinmao provides its primary service from its depot, which is adjacent to a
railroad terminal. The depot has a capacity of storing 1,000 cubic meters
(approximately 500 metric tons) of LPG. Assuming the depot is operating at full
capacity and turns-over twice per month, the depot is sufficient to supply
83,000 users assuming consumption of 12 kg. of LPG per household per month. In
addition, Xinmao, formed in 1998, a new joint venture in Yuxi, a city near
Kunming. The purpose of the joint venture is to give Xinmao the option for
additional LPG storage in the future as distribution expands. The joint venture,
being recently organized, is in the development stage, and as of this date, has
no assets or liabilities or operations. This joint venture will have access to
LPG storage facilities that management believes may be capable of supplying LPG
storage for up to 30,000 customers per month should demand increase to these
levels.
The depot also has ten service stations from which the 2, 15, and 50 kilogram
bottles are filled, and loaded onto trucks for distribution. For its retail-
direct customers, Xinmao transports the full bottles to an exchange shop
where either the customer comes in personally, or Xinmao will provide a
delivery man to take the bottle to the customer who pays a delivery fee.
In the case of a pipeline, 50 kg. bottles are used in cluster to service
residents in the housing complex. The advantage the pipeline customer has
over the bottle customer is convenience and service. There is no need to
spend valuable time exchanging bottles. The meter is read by the serviceman
each month who also collects the amount due. Xinmao is planning to use
"smart meters" in future pipeline developments that require the customer to
go to the Bank of Agriculture and purchase a prepaid card, similar to a
prepaid phone card commonly in use in the U.S. This will improve cash flow
and reduce "slow-pays" and "bad debts".
Xinmao leases a two story, 4,000 square foot facility in Kunming City, where it
operates a customer service and sales center, bottle exchange shop, storage
facility, and administrative offices, at an annual rental of $1000 US per year,
under a three year lease, with one year of the term remaining. It also leases
and operates a number of small bottle exchange stores throughout key locations
in the city.
<PAGE>
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership as
of March 31, 2000, of the Company's Common Stock, by any person who is known
to the Company to be the beneficial owner of more than 5% of the Company's
voting securities and by each director and by officers and directors of the
Company as a group.
Beneficial Percentage
Name and Address Ownership of Class
Daniel Mendez 21,742,462 10.21%
4570 Campus Drive
Newport Beach, CA 92660*
Albert Figueroa 6,023,654 2.83%
Deng Shan (1) 86,973,559 40.83%
All current directors and
officers as a group (3 persons) 114,739,675 53.86%
- (1) Mr. Deng Shan owns 1,095,896 (.51%) shares personally, and 85,877,663
(40.31%) shares through his majority owned corporation, Proton Technology
Corporation Limited.
*This address applies to all persons listed.
<PAGE>
Item 5. DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and positions of the directors and executive
officers of the Company as of March 31, 2000, are as follows:
Name Age Position Since
Daniel J. Mendez 47 President and a Director 4/94
Albert N. Figueroa 33 Secretary/Treasurer, and 5/95
" " a Director
Deng Shan 49 Director 1/99
" " Chairman of the Board of Directors 4/99
The Directors serve until the next annual meeting of shareholders, or until
their successors are elected.
Daniel J. Mendez, President, is responsible for investor relations,
coordination of information with market makers and brokers and potential
partners, coordination of all agreements, corporate financing, and liaison
with Chinese operations. Mr. Mendez joined the Company in October of 1991 as
a marketing coordinator. In April 1994 he became President and a Director.
Albert N. Figueroa, Secretary and Treasurer, is the gatekeeper of all
corporate documents and information, maintains the minute book and all
corporate records and agreements, keeps the books, liaisons with all outside
service providers, and generally coordinates the flow of information within
the company and with the Chinese operations. Mr. Figueroa was formerly
involved in the construction industry as an estimator.
Deng Shan, Chairman of the Board of Directors, is well versed in the business
practices of China. Early in his career Mr. Deng was a lecturer in Wuhan
Chemical Engineering School. Later he advanced to associate professor at
Huazhong University of Science and Technology. In 1989, Mr. Deng became the
Director, Science and Technology Commission, Nanshan District Government,
China. Since 1994, Mr. Deng has been appointed as Chief Executive
Officer/Chairman of the Board of four commercial companies. In 1996, Mr.
Deng acquired Kunming Xinmao Petrochemical Industrial Co., Ltd. Mr. Deng has
established strategic networks in both business and government arenas.
<PAGE>
Item 6. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the
Company during the last three years to its three executive officers.
<TABLE>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Other Secur
Name Annual Restricted ities All Other
And Compen- Stock Underlying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ payouts sation
Position Year ($) ($) ($) ($) (SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel 1997 220,000 0 0 0 0 0 0
Mendez 1998 220,000 0 0 0 0 0 0
President 1999 150,000 661,618 0 0 0 0 0
Albert 1997 100,000 0 0 0 0 0 0
Figueroa 1998 100,000 0 0 0 0 0 0
Secretary/1999 100,000 275,034 0 0 0 0 0
Treasurer
Deng Shan 1997 100,000 0 0 0 0 0 0
Chairman 1998 100,000 0 0 0 0 0 0
1999 100,000 261,827 0 0 0 0 0
</TABLE>
- -(1) The officers listed above were paid all their salary and bonus
compensation by the issuance of unregistered common stock valued at market,
generally determined by the low bid quotation. See Item 10.
- -(2) Daniel J. Mendez, President, serves under annual employment contract
renewed effective January 1, 2000 at annual compensation of $120,000 per year
payable $10,000 per month. It may be terminated upon 30 days written notice
of either party, and has a provision for change in ownership or control of 30
days severance at the monthly salary set forth above.
- -(3) Albert N. Figueroa, Secretary/Treasurer, serves under annual employment
contract renewed effective January 1, 2000 at annual compensation of $60,000
per year payable $5,000 per month. It may be terminated upon 30 days written
notice of either party, and has a provision for change in ownership or
control of 30 days severance at the monthly salary set forth above.
- -(4) Deng Shan, Consultant, serves under annual Agreement for Services
renewed effective January 1, 2000 at annual compensation of $100,000 per year
payable $8,333 per month. It may be terminated upon 30 days written notice
of either party, and has no protective provision for change in ownership or
control except for 30 days severance at the monthly compensation set forth
above.
- -(5) The above officers, comprising the Company's Board of Directors, receive
no additional compensation for serving as directors.
<PAGE>
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The common shares issued by the Company for compensation, services and
repayment of cash advances during 1999 and 1998 were issued primarily to the
Company's directors and shareholders.
Other than discussed above, the Company has no knowledge of any transaction
or series of transactions, or any currently proposed transaction, or series
of transactions, to which the Company was or is to be party, in which the
amount involved exceeds $60,000, involving management, any person owning 10%
or more of the common stock, or any member of the immediate family of any of
the foregoing persons.
<PAGE>
Item 8. LEGAL PROCEEDINGS
Various lawsuits, claims and proceedings of a nature considered normal to its
business are pending against the Company and its subsidiaries. The most
significant of these are described below.
Everlasting, Plaintiff vs. CHAN MAU TAK ("CMD"), Defendant
This lawsuit was brought by Everlasting against CMD for breach of the purchase
agreement wherein Everlasting acquired the assets of Xinmao from CMD. The basis
of the case is that CMD made fraudulent representations concerning the assets of
Xinmao at the time of purchase. The court ordered an Interlocutory Judgment on
October 14, 1998 in favor of Everlasting for 1 million HK$ (approximately
US$127,000) plus damages incurred plus interest @ 13.08% per annum. CMD has
filed an appeal, based on failure of service of process.
The Company anticipates that the ultimate resolution of this matter will have no
material adverse effect on the accompanying consolidated financial statements
Claimant, Panzhihua vs. Xinmao
In late 1997 the Claimant, an equipment supplier, and Xinmao began experiencing
disagreement on several matters concerning specifications, terms and delivery
times of various equipment orders. In January 1998 Panzhihua filed a breach of
contract action against Xinmao and in March 1998 obtained a $452,000 judgment.
Subsequently, the Claimant agreed to repossess various equipment with an
aggregate book value of $279,719 in full satisfaction of both the judgment and
$167,169, representing all unpaid and accrued balances owed to Panzhihua for
transactions in the ordinary course of business that occurred prior to December
31, 1997 and that were not related to the judgment against the company or its
settlement. Accordingly, the balance of $112,550 was charged to operations in
fiscal 1998, and included in SG&A expense.
<PAGE>
Item 9. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON STOCK
EQUITY AND RELATED STOCKHOLDER MATTERS
From 1994 to January 20, 2000 the Company's common stock traded on the OTC BB
and since January 21, 2000, it trades on the OTC Market under the symbol
"LGOV".
The closing quotations on March 31, 2000 were $1.03125 bid and $1.0625 ask.
Set forth below is the high and low bid information for the Company's Common
Stock for each full quarterly period within the two most recent fiscal years.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions, and may not represent actual transactions.
High Low
4th Quarter 1999 $3.875 $.085
3rd Quarter 1999 $0.14 $.08
2nd Quarter 1999 $0.11 $.09
1st Quarter 1999 $0.17 $.09
4th Quarter 1998 $0.29 $.08
3rd Quarter 1998 $0.34 $.15
2nd Quarter 1998 $0.74 $.13
1st Quarter 1998 $0.19 $.07
At March 31, 2000, the Company had approximately 559 Shareholders of record.
The Company has not paid a dividend since its incorporation and does not
anticipate paying dividends in the near future.
<PAGE>
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
The Company issued unregistered shares of its common stock from January 1,
1997 to December 31, 1999 as follows.
Fiscal 1997, a total of 2,995,194 shares of common stock valued at $273,312,
as follows.
Issued to officers as compensation:
Number of Amount
1997 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Oct. 21 1,861,027 Daniel Mendez $157,258
Oct. 21 687,379 Albert Figueroa 58,054
2,548,406 $215,312
Issued to shareholders for repayment of cash advances:
Number of Amount
1997 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Oct. 21 391,788 John Prentice $51,000
Oct. 21 55,000 William Vauthrin 7,000
446,788 $58,000
Fiscal 1998, a total of 3,939,058 shares of common stock valued at $322,911,
as follows.
Issued to officers as compensation:
Number of Amount
1998 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Feb5/Oct26 2,593,489 Daniel Mendez $201,993
Feb5/Oct26 795,569 Albert Figueroa $65,918
3,389,058 $267,911
Issued to service providers in settlement of claims:
Number of Amount
1998 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Oct. 26 350,000 Danilo Cacciamatta $35,000
Oct. 26 200,000 Equitrade $20,000
550,000 $55,000
<PAGE>
Fiscal 1999, a total of 28,519,534 shares of common stock valued at
$2,562,120, as follows.
Issued to officers as compensation:
Number of Amount
1999 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Jun21/Sep16/Nov16 9,860,482 Daniel Mendez $ 892,367
Jun21/Sep16/Nov16 4,974,736 Albert Figueroa 451,062
Jun21/Sep16/Nov16 4,252,477 Deng Shan 385,665
Jun21/Sep16/Nov16 1,957,356 Proton Technology
Corp. (1) 176,162
21,045,051 $1,905,256
(1) A corporation controlled by Deng Shan
Issued to key service providers for past services:
Number of Amount
1999 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Jun21/Sep16/Nov16 2,188,472 Bernard Kruer $ 198,660
Jun21/Sep16/Nov16 1,233,788 Gymar, Inc. 112,173
July 20 100,000 Craig Saunar 8,531
July 20/Nov16 110,000 Fred Smith 11,500
Nov. 16 20,000 Todd Ream 2,000
3,652,260 $ 332,864
Issued for cash:
Number of Amount
1999 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Sept.23 700,000 Seifer, D & C $ 35,000
Issued to officers and shareholders for repayment of cash advances:
Number of Amount
1999 Common Shares Name of Persons to of
Dates Issued Whom Issued Consideration
Sept. 16 1,277,778 Daniel Mendez $ 115,000
Sept. 16 166,667 Albert Figueroa 15,000
Sept. 16 777,778 Deng Shan 70,000
Sept. 16 100,000 John Prentice 9,000
Nov. 16 800,000 Wan Lin 80,000
3,122,223 $289,000
All stock issuances were conducted pursuant to section 4(2) under the 1933
Act without the involvement of underwriters. Stock issuances, other than for
cash, were valued at market, generally determined by the low bid quotation.
<PAGE>
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company has only one type of security, Common Stock with par value equal
to $0.001. Prior to September 27, 1999, there were 200,000,000 authorized
shares of Common Stock of which 186,013,021 shares were issued/outstanding.
However, on September 27, 1999, the Board of Directors passed a resolution to
increase the authorized shares to 400,000,000 with a par value of $0.001. On
October 4, 1999, shareholders representing a majority of outstanding shares
approved the resolution. A certificate of amendment was filed in the public
records of the State of Nevada on October 7, 1999. Management has no current
plans to use additional authorized common stock for the purpose of purchases
or acquisitions.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the holders of Capital Stock.
Holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference
of any preferred stock that might be issued in the future. Holders of Common
Stock have no preemptive or subscription rights, and there are no redemption
or conversion rights with respect to such shares. All outstanding shares of
Common Stock are fully paid and nonassessable.
<PAGE>
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law, (NRS 78.7502) under which the Company is
incorporated, gives a corporation the power to indemnify any of its
directors, officers, employees, or agents who are sued by reason of their
service in such capacity to the corporation provided that the director,
officer, employee, or agent acted in good faith and in a manner he believed
to be in or not opposed to the best interests of the corporation. With
respect to any criminal action, he must have had no reasonable cause to
believe his conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS OF
THE REGISTRANT PURSUANT TO THE FOREGOING PROVISIONS OR OTHERWISE, THE
REGISTRANT HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS
EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE, IN THE EVENT THAT A
CLAIM FOR INDEMNIFICATION AGAINST SUCH LIABILITIES (OTHER THAN THE PAYMENT BY
THE REGISTRANT OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER OR
CONTROLLING PERSON OF THE REGISTRANT IN THE SUCCESSFUL DEFENSE OF ANY ACTION,
SUIT OR PROCEEDING) IS ASSERTED BY SUCH DIRECTOR, OFFICER OR CONTROLLING
PERSON IN CONNECTION WITH THE SECURITIES BEING REGISTERED, THE REGISTRANT
WILL, UNLESS IN THE OPINION OF ITS COUNSEL THE MATTER HAS BEEN SETTLED BY
CONTROLLING PRECEDENT, SUBMIT TO A COURT OF APPROPRIATE JURISDICTION THE
QUESTION WHETHER SUCH INDEMNIFICATION BY IT IS AGAINST PUBLIC POLICY AS
EXPRESSED IN THE ACT AND WILL BE GOVERNED BY THE FINAL ADJUDICATION OF SUCH
ISSUE.
<PAGE>
Item 13. FINANCIAL STATEMENTS
Index to Financial Statements
Report of Independent Certified Public Accountant
Consolidated Balance Sheet at December 31, 1999
Consolidated Statements of Operations for the years ended December 31, 1999
and 1998
Consolidated Statements of Stockholders' Deficit for the years ended December
31, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998
Notes to Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
Largo Vista Group, Ltd.
I have audited the accompanying consolidated balance sheet of Largo Vista Group,
Ltd. as of December 31, 1999, and the related consolidated statements of
operations and comprehensive loss, changes in stockholders' deficit and cash
flows for each of the two years in the period ended December 31, 1999. These
consolidated financial statements are the responsibility of Company's
management. My responsibility is to express an opinion on these consolidated
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a
reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Largo Vista Group, Ltd. as of December 31, 1999, and results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company has significant
operating recurring losses from operations that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
As discussed in Note 11, the Company restated the consolidated financial
statements referred to above.
/s/ Jaak (Jack) Olesk, CPA
Beverly Hills, California
June 26, 2000
<PAGE>
Largo Vista Group, Ltd.
Consolidated Balance Sheet
December 31, 1999
ASSETS
RESTATED
Current assets
Cash $16,379
Inventories 163,782
Prepaid expenses and
advances to suppliers 80,562
Total current assets 260,723
Property and equipment, at cost 1,262,669
Less accumulated depreciation (323,106)
Net property and equipment 939,563
Other assets 73,070
$1,273,356
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable to banks $ 1,750,148
Accrued interest 250,116
Accounts payable 707,960
Accrued expenses 227,466
Deferred revenue 1,061,359
Due to affiliates 449,971
Total current liabilities 4,447,020
Commitments and contingencies -
Shareholders' Deficit
and outstanding 212,383
Additional paid-in capital 10,671,845
Accumulated deficit (14,061,592)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
Total shareholders' deficit (3,173,664)
$ 1,273,356
See accompanying notes to consolidated financial statements.
<PAGE>
Largo Vista Group, Ltd.
Consolidated Statements of Operations and Comprehensive Loss
Year ended December 31,
1999 1998
RESTATED
Net sales $1,765,124 $1,618,200
Cost of sales 1,353,537
1,153,910
Gross profit 264,663
611,214
Selling, general and administrative
expenses 2,661,416 760,491
Loss from operations (495,828)
(2,050,202)
Interest expense (198,652)
(148,286)
Net loss (2,198,488) (694,480)
Other comprehensive gain / loss:
Foreign currency -
translation adjustment -
Comprehensive loss $(2,198,488) $(694,480)
Basic and diluted net loss per share $(0.01) $(0.00)
Basic and diluted weighted average
common shares 192,652,800 181,565,237
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Changes in Stockholders'Deficit - RESTATED
For the Years Ended December 31, 1999 and 1998
Common stock Additional Accumulated Foreign Total
Shares Amount Paid-in Deficit Currency Shareholders
Capital Translati Deficit
on
Adjustmen
<S> <C> <C> <C> <C> <C> <C>
Balance
at
Decembe 179,923,963 $179,924 $7,819,273 $(11,168,624) $3,700 $(3,165,727)
r 31,
1997
Common
shares
issued
for 3,389,058 3,389 264,522 - - 267,911
compens
ation
Common
shares
issued
for 550,000 550 54,450 - - 55,000
claims
Foreign
currenc
y
transla - - - - - -
tion
adjustm
ent
Net - - - (694,480) - (694,480)
loss
Balance
at
Decembe 183,863,021 183,863 8,138,245 (11,863,104) 3,700 (3,537,296)
r 31,
1998
Common
shares
issued
for:
Compens 21,045,051 21,045 1,884,211 - - 1,905,256
ation
Service 3,652,260 3,653 329,211 - - 332,864
s
Cash 700,000 700 34,300 - - 35,000
Repayme
nt of
cash 3,122,223 3,122 285,878 - - 289,000
advance
s
Foreign
currenc
y
transla - - - - - -
tion
adjustm
ent
Net - - - (2,198,488) - (2,198,488)
loss
Balance
at
Decembe 212,382,555 $212,383 $10,671,845 $(14,061,592) $3,700 $(3,173,664)
r 31,
1999
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Cash Flows
Year ended December 31,
1999 1998
RESTATED
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,198,488) $(694,480)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 45,319 67,926
Loss on disposal of assets 62,567 -
Equipment conveyed in satisfaction
of judgment - 112,550
Common stock issued for services 332,864 -
Common stock issued for compensation 1,905,256 267,911
Changes in assets and liabilities:
Inventories 62,603 491,902
Prepaid and other assets (27,423) 83,190
Accounts payable (184,224) (380,603)
Accrued expenses 5,754 446,453
Accrued interest 148,286 101,830
Deferred revenue (329,008) (77,444)
Net cash from operating activities (176,494) 419,235
Cash flows from investing activities:
Purchases of equipment - (209,200)
Cash flows from financing activities:
Increase in notes payable 105,002 5,426
Issuance of common stock 35,000 -
Advances from affiliates 39,343 (301,642)
Net cash from financing activities 179,345 (296,216)
Increase (decrease) in cash 2,851 (86,181)
Cash at beginning of year 13,528 99,709
Cash at end of year $16,379 $13,528
Supplemental cash flow information:
Interest paid $- $
96,822
Non-cash investing and financing activities:
Common stock issued for claims $- $55,000
Common stock issued for cash advances $289,000 $-
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 1 - Summary of Significant Accounting Policies
Basis of Consolidation and Nature of Operations
The consolidated financial statements include the accounts of Largo Vista
Group, Ltd. ("Largo Vista"or the "Company"), incorporated in Nevada on
January 16, 1987, and its wholly-owned subsidiaries, Largo Vista, Inc., with
no assets, liabilities or operations, incorporated in California on October
12, 1988, and Everlasting International, Ltd. ("Everlasting"), incorporated
in Nevada on January 25, 1995, and Kunming Xinmao Petrochemical Industrial
Co., Ltd. ("Xinmao"), a Chinese joint venture 66.67% owned by Everlasting.
The minority partner is a Chinese Government Entity that has contractually
agreed to place all power and day-to-day decisions in the hands of the
majority. The Chinese minority partner is not responsible for Xinmao's
losses; accordingly, no portion of those losses is allocated to the minority
interest. All amounts are in U.S. dollars unless otherwise indicated. All
significant intercompany balances and transactions have been eliminated in
consolidation. Xinmao operates a liquefied petroleum gas (LPG) distribution
business in Yunnan Province, South China.
Foreign Currency Translation
The financial statements and results of operations of the Company's Chinese
subsidiary are measured using local currency as the functional currency.
Assets and liabilities of the subsidiary are translated at the exchange rates
in effect at each year-end. Statements of operations are translated at the
average rate of exchange prevailing during the year. Translation adjustments
arising from differences in exchange rates from period to period are included
in the foreign currency translation adjustment account in stockholders'
deficit.
The national currency of the People's Republic of China, the Renminbi (RMB),
is pegged to the U.S. dollar. As of December 1997, 1998 and 1999, the
exchange rate was 8.28 RMBs to US$1.00 and the average rate of exchange for
fiscal 1998 and 1999 was also 8.28. However, no representation is made that
any Renminbi amounts could have been, or could be, converted into U.S.
dollars at these rates or any other rates.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents include all highly liquid investments with an original
maturity of three months or less.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Inventory
Inventory is valued at lower of cost of market on the first-in, first-out
basis and consists primarily of liquid natural gas.
Impairment of Long Lived Assets
Long-lived assets are assessed for impairment annually or whenever changes in
facts and circumstances indicate a possible significant deterioration in the
future cash flows expected to be generated by an asset group. If, upon
review, the sum of the undiscounted pretax cash flows is less than the
carrying value of the asset group, the carrying value is written down to
estimated fair value. Individual assets are grouped for impairment purposes
at the lowest level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups of assets.
The fair value of impaired assets is determined based on quoted market prices
in active markets, if available, or upon the present values of expected
future cash flows using discount rates commensurate with the risks involved
in the asset group. Long-lived assets committed by management for disposal
are accounted for at the lower of amortized cost or fair value, less cost to
sell.
Revenue Recognition
The Company generally recognizes revenue upon delivery of LPG. In addition,
the Company contracts with certain customers for the delivery of LPG bottles
over a 1 to 5 year period. The customer is required to pay a non-refundable
amount at the time the contract is purchased. This entitles the customer to
receive one bottle of gas each month during the contract life at a reduced
fixed price. The prepayment is recorded as deferred revenue at the beginning
of the contract and the appropriate prorated amount is realized as revenue
when an empty bottle is exchanged for a full bottle. If customers do not
exchange their allotted number of bottles by the end of the contract term,
the excess deferred revenue is recognized as income.
There is no significant amount of credit transactions.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under the asset and liability method of SFAS 109, deferred income
taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory rates applicable to future years to the difference
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Stock Compensation
SFAS No. 123, "Accounting of Stock-Based Compensation," defines a fair value
based method of accounting for stock-based compensation but allows an entity
to continue to measure compensation cost related to stock and stock options
issued to employees using the intrinsic method of accounting prescribed by
APB 25, "Accounting for Stock Issued To Employees." Entities electing to
remain with the accounting method of APB 25 must make pro forma disclosures
of net income and earnings per share, as if the fair value method of
accounting defined in SFAS No. 123 had been applied. The Company has elected
to account for its stock-based compensation to employees under APB 25.
Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires that certain items of comprehensive income other than net earnings
or loss be reported in the financial statements. For the two years ended
December 31, 1999, the adoption of this pronouncement had no material impact
on the Company's consolidated financial statements.
Segment Disclosure
In Fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". This Statement establishes
standards for the way companies report information regarding operating
segments in annual financial statements. The adoption of SFAS No. 131
required no additional disclosure for the Company as the Company operated in
one business segment.
Reclassifications
Certain items in prior period financial statements have been reclassified to
conform to 1999 classifications.
Note 2 - Basis of presentation and considerations related to continued
existence (going concern)
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
incurred significant net losses for the two years ended December 31, 1999.
Additionally, its liabilities exceed its assets at December 31, 1999. These
factors raise substantial doubt as to the Company's ability to continue as a
going concern.
The Company intends to raise additional operating funds through equity and
debt offerings. However, there can be no assurance it will be successful in
this endeavor.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 3 - Fair Value of Financial Instruments
The carrying amount of the Company's cash and bank balances approximates
their fair value because of the short maturity of those instruments.
The fair value of the notes payable to banks based on the interest rates
currently available for borrowings with similar terms and maturities
approximates the carrying amount of those borrowings. The fair value of the
amounts due to affiliates can not be determined due to the related party
nature of the obligations.
Note 4 - Property and Equipment
<TABLE>
Years of
December 31, Useful
1999 Life
<S> <C> <C>
Storage tanks $472,328 20
Building and leasehold 25
improvements 291,865
Railroad cars and trucks 8
268,286
LPG Bottles 156,491 5
Equipment 73,699 5
1,262,669
Accumulated depreciation
(323,106)
$939,563
</TABLE>
Note 5 - Notes Payable to Banks
The balance at December 31, 1999 represents the aggregate borrowings from
various PRC banks at average interest rates of approximately 7 percent. In
the past, Xinmao has been allowed by the PRC bankers to roll over the loans
due for repayment. Accordingly, consistent with previous years, management
believes that the existing bank loans will again be renewed when they became
due.
Note 6 - Related Party Transactions
Amounts due to affiliates at December 31, 1999 include $410,627 due to
Xinmao's minority partner and $39,344 due to executive officers for cash
advances. All amounts are non-interest bearing.
All shares of common stock issued in 1999 and 1998 for compensation and
repayment of cash advances involved executive officers and shareholders.
These issuances were valued at market, generally determined by low bid
quotations.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 7 - Income taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting and tax bases of its assets and
liabilities. Deferred tax assets are reduced by a 100% valuation allowance.
At December 31, 1999, the Company has a net operating loss carryforward for
federal tax purposes of approximately $6,765,000 which, if unused to offset
future taxable income, will expire beginning in 2011.
Note 8 - Loss per Common Share
The following table illustrates the reconciliation of the numerators and
denominators of the basic and diluted loss per share computations.
Year ended December 31,
1999 1998
Basic and diluted loss per
share:
Numerator
Net loss $(2,198,488) $(694,480)
Denominator
Basic and diluted weighted
average
number of common shares 181,565,237
outstanding 192,652,800
Basic and diluted loss per $(0.01) $(0.00)
share
The Company has no potentially dilutive securities, options, warrants or
other rights outstanding.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 9 - Chinese Subsidiary
Xinmao accounted for the following share of consolidated assets, liabilities
and results of operations.
<TABLE>
Xinmao's Xinmao's share of the
share of the
consolidated consolidated
balance operations
sheet at
December 31, 1999 1998
1999
<S> <C> <C> <C> <C>
Assets 99% Gross profit 100% 100%
Liabilities 95% S, G & As 20% 59%
Interest expense 100% 100%
Net loss 4% 63%
</TABLE>
Note 10 -Commitments and Contingencies
Various lawsuits, claims and proceedings of a nature considered normal to its
business are pending against the Company and its subsidiaries. The most
significant of these are described below.
Everlasting, Plaintiff vs. CHAN MAU TAK ("CMD"), Defendant
Everlasting brought this lawsuit against CMD for breach of the purchase
agreement wherein Everlasting acquired the assets of Xinmao from CMD. The
basis of the case is that CMD made fraudulent representations concerning the
assets of Xinmao at the time of purchase. The court ordered an Interlocutory
Judgment on October 14, 1998 in favor of Everlasting for approximately
US$127,000 plus damages incurred plus interest @ 13.08% per annum. CMD has
filed an appeal, based on failure of service of process.
The Company anticipates that the ultimate resolution of this matter will have
no material adverse effect on the accompanying consolidated financial
statements
Claimant, Panzhihua vs. Xinmao
In late 1997 the Claimant, an equipment supplier, and Xinmao began experiencing
disagreement on several matters concerning specifications, terms and delivery
times of various equipment orders. In January 1998 Panzhihua filed a breach of
contract action against Xinmao and in March 1998 obtained a $452,000 judgment.
Subsequently, the Claimant agreed to repossess various equipment with an
aggregate book value of $279,719 in full satisfaction of both the judgment and
$167,169, representing all unpaid and accrued balances owed to Panzhihua for
transactions in the ordinary course of business that occurred prior to December
31, 1997 and that were not related to the judgment against the Company or its
settlement. Accordingly, the balance of $112,550 was charged to operations in
fiscal 1998, and included in SG&A expense.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
Note 11 - Restatement
The Company has restated its consolidated financial statements for the year
ended December 31, 1999 and 1998 to correct an error in the financial statements
previously filed with Amendment No. 2 to its Form 10-SB. The error was caused by
a computer malfunction compounded by inadequate data back-up procedures. As
Company personnel attempted to restore lost information, data from a corrupted
file was inadvertently included in the financial statements previously filed.
This error increased 1998 selling, general and administrative expenses by
$325,146 and increased accumulated deficit and additional paid in capital at
December 31, 1999 by the same amount. The effect of the correction of this error
was to reduce 1998 selling, general and administrative expenses by $325,146 and
decrease accumulated deficit and additional paid in capital at December 31, 1999
by the same amount. Loss per share, originally reported at $(0.01) is now
reduced to $(0.00) due to the error correction.
<PAGE>
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company's consolidated financial statements included in this Registration
Statement have been audited by Jaak (Jack) Olesk, CPA, whose report, included
elsewhere herein, is modified to reflect substantial doubt about the
Company's ability to continue as a going concern. Jaak (Jack) Olesk, CPA,
has resigned as our Company's auditor on March 16, 2000. In his letter of
resignation, Mr. Olesk, who is both a CPA and an attorney, informed the
Company that he intends to pursue the practice of law exclusively. At no
time was there any disagreement between the Company and Jaak (Jack) Olesk,
CPA, on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
Item 15. EXHIBITS
3.(i) Articles of Incorporation of Largo Vista Group, Limited
(filed Form 10SB, 11/2/99)
3.(ii) Bylaws of Largo Vista Group, Limited (filed Form 10SB, 11/2/99)
3.(iii) Articles of Incorporation of Largo Vista Inc.
(filed Form 10SB, 11/2/99)
3.(iv) Bylaws of Largo Vista Inc. (filed Form 10SB, 11/2/99)
3.(v) Articles of Incorporation of Everlasting International
Limited (filed Form 10SB, 11/2/99)
3.(vi) Bylaws of Everlasting International Limited
(filed Form 10SB, 11/2/99)
3.(vii) Articles of Incorporation of Kunming Xinmao Petrochemical
Industry Co., Ltd. (filed Form 10SB, 11/2/99)
10 Material Contracts
.(a) Contract. Largo Vista Group, Ltd. and Sentio Corporation,
December 28, 1998, (filed Form 10SB, 11/2/99)
.(b) Contract. Hong Kong De Xiang Tuo Yi Industrial Company,
August 28, 1992 (filed Form 10SB, 11/2/99)
.(c) Plan and Agreement of Reorganization between Largo Vista Group,
Ltd., Proton Technology Corporation, Ltd. and Everlasting
International, December 21, 1996 (filed Form 10SB, 11/2/99)
.(d) Joint Venture Agreement of Kunming Xinmao Petrochemical Industry
Co., Ltd., August 8, 1992 (filed Form 10SB, 11/2/99)
.(e) Approval Certificate of Enterprise with Foreign Investment in the
Peoples Republic of China (filed Form 10SB, 11/2/99)
.(f) Business License of Enterprise in the Peoples Republic of China
(filed Form 10SB, 11/2/99)
.(g) Business Permit to Engage in LPG Business in Yunnan Province
(filed Form 10SB, 11/2/99)
.(h) Notice of Subsidiaries of the Agriculture Bank of China, Yunnan
Provincial Branch, Acting as Agents for Collection and Receipt
of Payment for Kunming Xinmao Petrochemical Industry Co., Ltd.
(filed Form 10SB, 11/2/99)
.(i) Agreement of Supply of Liquified Petroleum Gas, March 18, 1996
(filed Form 10SB, 11/2/99)
<PAGE>
.(j) Method of Insurance for LPG Credit, August 26, 1997
(filed Form 10SB, 11/2/99)
.(k) Memorandum of Understanding Kunming Xinmao Petrochemical Industry
Co., Ltd. and Wuhan Minyi Fuel Gas Petrochemical Company
Limited, March 14, 1999 (filed Form 10SB, 11/2/99)
.(l) Memorandum of Understanding Kunming Xinmao Petrochemical Industry
Co., Ltd. and Guilin Municipal Garden Fuel Gas Pipelines
Limited, March 29, 1999 (filed Form 10SB, 11/2/99)
.(m) Approval Certificate of Enterprisees with Foreign Investment in
the Peoples Republic of China, August 21, 1992
(filed Form 10SB, 11/2/99)
.(n) Contract. Enterprise Ownership Transfer Agreement "Ten Year
Leasing Contract", Seller Chen Mao Tak, Purchaser Everlasting
International, Ltd., third party Kunming Fuel General Company,
November 8, 1995 (filed Form 10SB-A1, 1/14/2000 as EX-10.D)
.(o) Joint Venture Agreement. , Largo Vista with the United Arab
Petroleum Corporation ("UAPC"), known as Largo Vista/UAPC
Partners (filed Form 10SB-A1, 1/14/2000 as EX-10.F)
.(p) Memorandum of Association Limited Liability Company. Largo Vista
Group, Ltd., LLC, Dubai, UAE, October 12, 1999, Largo Vista
Group, Ltd., UAPC, and Sheik Al Shabani, named Largo Vista
Group Limited, Limited Liability Company of the UAE (filed
Form 10SB-A1, 1/14/2000 as EX-10.G)
.(q) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG)
Buyer, and United Arab Petroleum Corporation Seller,
November 25, 1999 (filed Form 10SB-A1, 1/14/2000 as EX-10.H)
.(r) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG),
Buyer, and United Arab Petroleum Corporation Seller,
December 18, 1999 (filed Form 10SB-A1, 1/14/2000 as EX-10.H)
.(s) Employment Agreement Daniel J. Mendez 1999
(filed Form 10SB-A1 as Ex-3.iv, 1/14/2000)
.(t) Consultant Agreement Deng Shan 1999
(filed Form 10SB-A1, as Ex-3.v 1/14/2000)
.(u) Contract. "Enterprise Ownership Transfer Agreement",
November 8, 1995, new translation (filed Form 10SB-A2,
3/20/2000 as EX-10.E.1)
.(v) Contract. "Agreement on Payment", November 8, 1995
(filed Form 10SB-A2, 3/20/2000 as EX-10.E.2)
.(w) Contract. "Agreement on Supply of Liquified Petroleum Gas",
March 18, 1996 (filed Form 10SB-A2, 3/20/2000 as EX-10.E.3)
.(x) Employment Agreement Albert N. Figueroa 1999
(filed as Ex-3.vi 3/21/2000)
All of the exhibits listed above have been filed previously with the forms
and on the dates indicated.
There are no new exhibits for this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
President /s/ Daniel J. Mendez June 27, 2000
Daniel J. Mendez
Secretary/Treasurer /s/ Albert N. Figueroa June 27, 2000
Albert N. Figueroa
Director /s/ Deng Shan June 27, 2000
Deng Shan
