U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to____________
Commission File Number 000-30426
LARGO VISTA GROUP, LTD.
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(Exact name of small business issuer as specified in its charter)
Nevada 76-0434540
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4570 Campus Drive, Newport Beach, CA 92660
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(Address of principal executive offices)
949-252-2180
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(Issuer's telephone number)
Not Applicable
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(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
As of September 30,2000, the Company had 217,072,366 shares of its $.001 par
value common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (UNAUDITED)
Condensed Consolidated Balance Sheet at September 30,2000
Condensed Consolidated Statements of Operations for the three
and nine month periods ended September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
<PAGE>
LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
September 30, 2000
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ASSETS
Current assets:
Cash $ 62,141
Inventories 194,151
Other 57,939
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Total current assets 314,231
Property and equipment 855,809
Other 25,661
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$ 1,195,701
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Notes payable to banks $ 1,644,927
Accrued interest 299,222
Accounts payable 489,064
Accrued expenses 263,244
Deferred revenue 608,335
Due to affiliates 1,194,633
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Total current liabilities 4,499,425
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Commitments and contingencies -
Shareholders' deficit:
Common stock 217,072
Additional paid-in capital 12,168,642
Accumulated deficit (15,693,138)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
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Total shareholders' deficit (3,303,724)
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$ 1,195,701
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See accompanying notes to financial statements.
<PAGE>
LARGO VISTA GROUP, LTD and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended September 30,
2000 1999
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Sales $ 513,205 $ 418,686
Cost of sales 488,881 270,581
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Gross profit 24,324 148,105
Selling, general and administrative expenses 781,230 1,750,090
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Loss from operations (756,906) (1,601,985)
Interest expense (32,777) (31,099)
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Net loss $ (789,683) $ (1,633,084)
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Basic and diluted net loss per share $ - $ (0.01)
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Basic and diluted weighted average
common shares 215,571,035 191,694,166
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See accompanying notes to financial statements.
<PAGE>
LARGO VISTA GROUP, LTD and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Nine months ended September 30,
2000 1999
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Sales $ 9,007,648 $ 1,195,289
Cost of sales 8,852,735 765,280
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Gross profit 154,913 430,009
Selling, general and administrative expenses 1,659,881 2,366,706
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Loss from operations (1,504,968) (1,936,697)
Interest expense (126,578) (115,489)
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Net loss $ (1,631,546) $ (2,052,186)
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Basic and diluted net loss per share $ (0.01) $ (0.01)
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Basic and diluted weighted average
common shares 213,372,626 185,223,456
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See accompanying notes to financial statements.
<PAGE>
LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
2000 1999
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Cash flows from operating activities:
Net loss $ (1,631,546) $( 2,052,186)
Adjustments to reconcile net loss to net
cash (used) provided by operating
activities:
Depreciation and amortization 83,754 88,460
Common stock issued for services 716,360 2,009,819
Changes in assets and liabilities:
Inventories (30,369) (189)
Other 70,032 (67,773)
Accounts payable (218,896) (161,318)
Accrued expenses 35,778 (169,818)
Accrued interest 49,106 115,489
Deferred revenue (453,024) (124,392)
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Net cash used by operating activities (1,378,805) (361,908)
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Cash flows from investing activities: - -
Cash flows from financing activities:
(Decrease) increase in notes payable (105,221) 24,380
Increase in due to affiliates 1,247,288 -
Common stock issued for cash 282,500 324,000
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Net cash provided by financing activities 1,424,567 348,380
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Net increase (decrease) in cash 45,762 (13,528)
Cash, beginning of period 16,379 13,528
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Cash, end of period $ 62,141 $ -
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Cash paid during the period for:
Interest $ 77,472 $ -
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Non-cash investing and financing activities:
Common stock issued for cash advances $ 502,626 $ 209,000
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See accompanying notes to financial statements.
<PAGE>
LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2000
(Unaudited)
(1) These condensed consolidated financial statements of Largo Vista Group,
Ltd.(the "Company") do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB. In the opinion of management, the financial
information set forth in the accompanying condensed consolidated
financial statements reflects all adjustments necessary for a fair
statement of the periods reported, and all such adjustments were of a
normal and recurring nature. Interim results are not necessarily
indicative of results for a full year.
(2) Revenue for the nine month period ended September 30,2000 were as
follows:
LPG OIL TOTAL
Sales $ 2,301,150 6,706,498 9,007,648
Cost of Sales 2,041,778 6,810,957 8,852,735
Gross Profit/Loss 259,372 (104,459) 154,913
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Background
The Company operates a liquefied petroleum gas (LPG) distribution
business in South China through its affiliate, Kunming Xinmao Petrochemical
Industrial Co., Ltd. ("Xinmao") and, beginning in the second quarter of 2000,
delivers petroleum from the Arabian Gulf Region to South East Asia.
Results of Operations
LPG
Revenue for the third quarter of 2000 increased 23% over the third
quarter of 1999 and gross profit decreased from 35% to 5%. For the first nine
months of 2000, revenue increased 93% over the first nine months of 1999 and
gross profit decreased from 36% to 11%. The increase in 2000 revenue is due to
the expansion of our wholesale business. Increased LPG availability has reduced
the practice of long-term contracts for the delivery of LPG at fixed prices to
retail customers. That practice produced higher margins in the past but also
exposed us to the risk of sudden increases in the cost of LPG. We welcome the
growing demand for LPG at the wholesale level because although it comes at lower
margins, it also comes with the practice of prompt payment and no price risk. We
are well positioned to take advantage of the increased volume of business from
the wholesale sector.
Our deferred revenue represents the prepaid and unearned portion of our
retail long-term contracts. These contracts ranged from one to five years, with
the most popular term being three years. As of September 30, 2000, most of our
contracts in place will expire within one year. There are no built-in losses in
our contracts in place and we do not anticipate significant losses in the
future. We expect deferred revenue to be reduced rapidly in the next two to
three quarters.
OIL
Our first shipment of oil took place in the second quarter of 2000 when
we delivered 30,000 metric tons of diesel oil valued at $6.7 million from the
Arabian Gulf Region to Vinapco, a state-owned Vietnamese company. This shipment
was not profitable primarily due to 1) the inability of our joint venture
partners to perform 2) a sudden increase in the price of crude and 3) generally
higher costs than anticipated. On the positive side, we 1) demonstrated our
ability to perform on a significant contract 2) assembled the necessary network
of agents and contacts, and 3) are no longer a newcomer to this field.
This quarter, we were not able to find a desirable bid environment due
to excessive market volatility. We are prepared to resume our oil delivery
activities as soon as market conditions stabilize.
<PAGE>
General and Administrative Expenses
Selling, general and administrative expenses for the third quarter of
2000 were 69% lower than the comparable 1999 quarter, primarily due to the
payment of bonuses to officers in 1999.
Currency Consideration
The Company's LPG operations are located in the People's Republic of
China whose currency, the Renminbi(RMB), is pegged to the US Dollar. The
exchange rate as of September 30, 2000 and the average rate during each of the
periods presented in the accompanying condensed consolidated financial
statements was 8.28 RMBs to 1 US$. No representation is made that any RMB amount
could have been, or could be, converted into US dollars at these rates or any
other rates of exchange.
Liquidity and Capital Resources
The Company has experienced significant operating losses from inception
and has financed its activities to date through cash advances from affiliates,
loans from Chinese banks and sales of its common stock. Availability, source,
amount and terms of any additional financing are uncertain at this time, and by
no means assured.
The Company has relied heavily on the financial resources that its
Chairman and largest shareholder has been able to make available. In particular,
the first oil shipment could not have taken place without the Chairman's posting
of a performance bond on behalf of the Company and facilitating the procurement
of the required letters of credit. The cost of these credit facilities has been
charged to the Company at the same amount incurred by the Chairman but the
Company will not be able to reimburse the Chairman for these charges in the
foreseeable future.
The Company believes it will require at least an additional $1,000,000
of new capital in order to fund its plan of operations over the next 12 months.
This estimate presumes that the PRC banks will continue to allow Xinmao to roll
over the loans aggregating $1,645,000 owed to such banks and the Affiliates will
not demand payment of the aggregate $1,195,000 owed to them. The Affiliates have
advised the Company that they will not demand payment of the amounts owed them
for at least 12 months; however there is no assurance that the PRC banks will
continue to allow Xinmao to roll over the loans due for repayment. The Company
expects to fund its working capital requirements over the next 12 months from
additional advances from its affiliates and the sale of its common stock.
There can be no assurance, however, that the Company will be able to
obtain additional capital sufficient to fund its working capital requirements in
a timely manner. The report of the Company's independent accountants for the
fiscal year ended December 31, 1999 states that due to the Company's recurring
operating losses, there is substantial doubt about the Company's ability to
continue as a going concern.
Forward-Looking Statements
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe",
"expect", "anticipate", "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties including, but not limited to, the Company's ability to
obtain additional operating capital, as required, the Company's present
financial condition, unexpected changes in government regulations, in the Far
East and the Middle East especially, and increased competition. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may very materially from those
anticipated, estimated, or projected. The Company cautions potential investors
not to place undue reliance on any such forward-looking statements, all of which
speak only as of the date made.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable.
Item 2. Changes in Securities
<TABLE>
During the nine month period ended September 30, 2000, the Company
issued unregistered shares of its common stock as follows.
<CAPTION>
Dates Number of Name of Person Amount of
Shares to Whom Issued Consideration
<S> <C> <C> <C> <C>
For cash:
Jan 07 200,000 John Prentice $ 100,000
Mar. 1 100,000 Donald Geralds 50,000
Mar.13 165,000 Leonard Davis 82,500
Apr. 4 65,934 Michael Mercer 30,000
May.19 56,338 Michael Mercer 20,000
587,272 282,500
For services:
Feb. 29 8,000 Linda Collin 8,000
Aug. 4 15,427 Bernard Kruer 16,666
Aug. 4 10,285 Gymar, Inc. 8,333
Aug. 4 270,403 Steven Chaussy 74,500
Aug. 4 25,459 Kelly Chen 18,028
Aug. 4 1,000,000 Danny Nguyen 250,000
Aug. 4 500,000 Wang Changhong 125,000
1,829,574 500,527
For officers' compensation:
Aug. 4 58,365 Albert Figueroa 48,333
Aug. 4 112,485 Daniel Mendez 92,500
Aug. 4 91,615 Deng Shan 75,000
262,465 215,833
For repayment of officers' and shareholders' cash advances:
Aug. 4 218,102 Albert Figueroa 54,526
Aug. 4 280,861 Daniel Mendez 70,215
Aug. 4 1,334,734 Deng Shan 333,684
Aug. 4 145,871 Wan Lin 36,468
Aug. 4 30,932 Steven Chaussy 7,733
2,010,500 502,626
</TABLE>
All stock issuances were conducted pursuant to section 4(2) under the
1933 Act without the involvement of underwriters. Stock issuances for
services and repayment of cash advances were valued at market,
generally determined by the low bid quotation. Stock issuances for
compensation were valued at the daily average low quotation for the
related compensation periods.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
Item 5. Other Information
Inapplicable.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Inapplicable
<PAGE>
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.
LARGO VISTA GROUP, LTD. AND SUBSIDIARIES
By: /s/ Daniel Mendez
Daniel Mendez,
Chief Executive Officer
and Chief Accounting Officer
Dated: November 17, 2000
