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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 June 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 June 30,2000, the Company had 212,977,827 shares of its $.001 par value
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (UNAUDITED) Page
Condensed Consolidated Balance Sheet at June 30,2000 3
Condensed Consolidated Statements of Operations for the three
and six month periods ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the
six month periods ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
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LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
June 30, 2000
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ASSETS
Current assets:
Cash $ 64,256
Inventories 188,715
Other 51,558
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Total current assets 304,529
Property and equipment 884,413
Other 27,799
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$ 1,216,741
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Notes payable to banks $ 1,644,927
Accrued interest 268,133
Accounts payable 602,514
Accrued expenses 420,097
Deferred revenue 800,858
Due to affiliates 1,205,239
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Total current liabilities 4,941,768
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Commitments and contingencies -
Shareholders' deficit:
Common stock 212,978
Additional paid-in capital 10,961,750
Accumulated deficit (14,903,455)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
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Total shareholders' deficit (3,725,027)
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$ 1,216,741
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See accompanying notes to financial statements.
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LARGO VISTA GROUP, LTD and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended June 30,
2000 1999
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Sales $ 7,759,603 $ 461,482
Cost of sales 7,717,360 296,843
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Gross profit 42,243 164,639
Selling, general and administrative expenses 439,380 299,759
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Loss from operations (397,137) (135,120)
Interest expense (59,045) (44,900)
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Net loss $ (456,182) $ (180,020)
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Basic and diluted net loss per share $ (0.00) $ (0.00)
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Basic and diluted weighted average
common shares 212,916,691 185,938,010
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See accompanying notes to financial statements.
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LARGO VISTA GROUP, LTD and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Six months ended June 30,
2000 1999
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Sales $ 8,494,443 $ 776,603
Cost of sales 8,363,854 494,699
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Gross profit 130,589 281,904
Selling, general and administrative expenses 878,651 616,616
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Loss from operations (748,062) (334,712)
Interest expense (93,801) (84,390)
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Net loss $ (841,863) $ (419,102)
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Basic and diluted net loss per share $ (0.00) $ (0.00)
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Basic and diluted weighted average
common shares 212,680,191 184,900,515
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See accompanying notes to financial statements.
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LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
2000 1999
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Cash flows from operating activities:
Net loss $ (841,863) $ (419,102)
Adjustments to reconcile net loss to net
cash (used) provided by operating
activities:
Depreciation and amortization 55,150 56,923
Common stock issued for services 8,000 374,032
Changes in assets and liabilities:
Inventories (24,933) 23,576
Other 74,275 (10,223)
Accounts payable (105,446) (19,043)
Accrued expenses 192,631 28,367
Accrued interest 18,017 84,390
Deferred revenue (260,501) (117,015)
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Net cash (used) provided by operating activities (884,670) 1,905
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Cash flows from investing activities: - -
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Cash flows from financing activities:
Decrease in notes payable (105,221) -
Increase (decrease) in due to affiliates 755,268 -
Common stock issued for cash 282,500 -
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Net cash provided by financing activities 932,547 -
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Net increase in cash 47,877 1,905
Cash, beginning of period 16,379 13,528
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Cash, end of period $ 64,256 $ 15,433
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Cash paid during the period for:
Interest $ 75,784 $ -
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See accompanying notes to financial statements.
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LARGO VISTA GROUP, LTD. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 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) Revenues for the three month period ended June 30, 2000 were as
follows:
LPG OIL TOTAL
Sales $1,053,105 6,706,498 7,759,603
Cost of Sales 906,403 6,810,957 7,717,360
Gross Profit/Loss 146,702 (104,459) 42,243
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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 this second quarter of 2000,
delivers petroleum from the Arabian Gulf Region to South East Asia.
Results of Operations
LPG
Revenue for the second quarter of 2000 increased 128% over the second
quarter of 1999 and gross profit decreased from 36% to 14%. For the first six
months of 2000, revenue increased 130% over the first half of 1999 and gross
profit decreased from 36% to 13%. 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 June 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 three to
four quarters.
OIL
Our first shipment of oil took place this quarter when we delivered
30,000 metric tons of diesel oil valued at $6.7 million from the Arabian Gulf
Region to Vinapco, a state-owned Vietnamese company. This shipment was not
profitable primarily due to 1) the inability of our joint venture partners to
perform 2) a sudden increase in the price of crude and 3) generally higher costs
than anticipated.
On the positive side, we 1) have demonstrated our ability to perform on
a significant contract 2) have assembled the necessary network of agents and
contacts and 3) are no longer a newcomer to this field.
We now expect to be better positioned to compete for oil delivery
contracts with much more favorable terms.
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General and Administrative Expenses
Selling, general and administrative expenses for the second quarter of
2000 were 47% higher than the comparable 1999 quarter, reflecting primarily
additional expenditures related to the joint ventures entered into in late 1999,
including office set-up and additional personnel, both employed and retained on
a consulting basis.
Currency Consideration
The Company's LPG operations are located in the People's Republic of
China whose currency, the Renminbi(RMB), is pegged to the US Dollar. The
exchange rate as of June 30, 2000 and the average rate during each of the
periods presented in the accompanying condensed consolidated financial
statements was 8.28 RMBs to 1 US$. 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 $1,205,000 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.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable.
Item 2. Changes in Securities
During the six month period ended June 30, 2000, the Company issued
unregistered shares of its common stock as follows.
Issued for cash:
Dates Number of Common Name of Person to Amount of
Shares Whom Issued Consideration
Jan 07 200,000 John Prentice $ 100,000
Mar. 1 100,000 Donald Geralds 50,000
Mar.13 165,000 Leonard Davis 82,500
465,000 232,500
Apr. 4 65,934 Michael Mercer 30,000
May.19 56,338 Michael Mercer 20,000
122,272 50,000
Issued for services:
The Company issued 8,000 shares to a service provider valued at $8,000
on Feb.29, 2000 in satisfaction of an existing obligation.
All stock issuances were conducted pursuant to section 4(2) under the
1933 Act without the involvement of underwriters. Stock issuances for
services were valued at market, generally determined by the low bid
quotation.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
Item 5. Other Information
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Inapplicable
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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: August 8, 2000
