SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-KSB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
LARGO VISTA GROUP, LTD.
(Exact name of Registrant as specified in its Charter)
Nevada 76-0434-540
(State of Incorporation) (IRS Employer ID No.)
4570 Campus Drive, Newport Beach, California 92660
(Address of principal executive offices)
(949) 252-2180
(Registrant's telephone number)
Securities to be registered pursuant to Section 12(g) of the Act:
212,382,555 Common shares
Securities registered pursuant to Section 12(b) of the Act: None
Title of Each Class Name of Each Exchange
to be Registered on which registered
Common Stock, $0.001 par value - Pink Sheets
<PAGE>
Item 1. DESCRIPTION OF BUSINESS
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 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. The
acquisition of the 66.67% interest in the Xinmao Joint Venture by Everlasting
was accounted for as an asset purchase transaction. Everlasting compared the
estimated fair market value of the assets acquired to the depreciated book
value of the assets on the Joint Venture's books and records in China, and
found no significant difference. As a result, 66.67% of the depreciated book
value of the China Joint Venture assets were taken on to Everlasting's books
as the fair value for the stock issued. Subsequently, Largo Vista acquired
100% of Everlasting from Proton in a stock for stock exchange. In connection
with this transaction, the assets on the books of Everlasting were not
adjusted, and these values are now consolidated with Largo Vista's.
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.
<PAGE>
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 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.
See exhibits.
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. See exhibits.
<PAGE>
3. Organization Chart
LVG
Largo Vista Group,
Ltd.
Owns 100% EIL
Owns 100% LVI
Subsidiaries
Joint Ventures
EIL LVI
Everlasting Largo Vista, Inc.
International, Ltd.
No Operations Presently
Owns 66.67% of "Xinmao"
"Xinmao"
Kunming Xinmao
Petrochemical Industry
Co., Ltd., a
Chinese Joint Venture
JV Partners:
"Everlasting" - 66.67%
Government Partner
33.33%
Note: Government Partner is "Kunming Fuel General Co."
<PAGE>
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. FINANCIAL INFORMATION BY
INDUSTRY SEGMENT AND CLASSES OF PRODUCTS
Registrant is in the purchasing and reselling segment of the liquid petroleum
gas ("LPG") market in China.
<TABLE>
Year
1999 1998
<S> <C> <C>
Sales to $1,616,961 $1,476,971
Unaffiliated Customers:
Operating Loss ($2,126,309) (1) ($ 962,203) (1)
Net <LOSS> ($2,198,488) ($1,019,626)(1)
Identifiable Assets, Net $ 776,174 $ 831,882
</TABLE>
- -(1) Operating losses for the twelve month period ending December 31, 1999
were [$2,126,309], increased from [$962,203] in the twelve month period
ending December 31, 1998; an increase of $1,503,770 (121.0%). This increase
reflects abnormal G&A expenses resulting from a substantial issuance of stock
by the Company in 1999 to satisfy indebtedness to officers and outside
service providers as reflected in the Financial Statement Consolidated
Statement of Cash Flows. These costs should even-out in the future as
expenses are paid as incurred.
C. BUSINESS
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.
<PAGE>
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.
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 for the first 3 years;
1.5 million Yuan per year for the 4th and 5th years;
500,000 Yuan 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 1/24/98 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.
<PAGE>
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 66-2/3% 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,
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 acounts for about 65% of this total.
<PAGE>
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
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.
<PAGE>
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.
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.
<PAGE>
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
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.
<PAGE>
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.
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.
<PAGE>
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.
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 491% 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
<PAGE>
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
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.
<PAGE>
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.
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
<PAGE>
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.
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 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>
LARGO VISTA GROUP, LTD.
Item 2. A. FINANCIAL INFORMATION
The following table summarizes certain selected financial data for the
periods presented for the Company. The data for the year ended December 31
1998 and 1997 should be read in conjunction with the more detailed audited
statements for such years presented elsewhere herein.
<TABLE>
12/31/99 12/31/98
<S> <C> <C>
Revenues $ $
LP Gas Sales $1,616,961 $1,476,971
Other Income $ 148,092 $ 141,229
Total Revenue $1,765,053 $1,618,200
Cost of Sales $1,153,863 $1,353,537
Margin $ 611,190 $ 264,663
G&A & Other Exp. $2,589,407 (1) $1,085,637 (1)
Operating <Loss> <$2,126,309> <$ 962,203>
NET <LOSS> <$2,198,488> <$1,019,626>
</TABLE>
See Consolidated Statement of Operations - (12/31/99)
- -(1) The calculations of $2,589,407 and $1,085,637 G&A and Other Expenses for
the years 1999 and 1998, respectively, include amounts for provisions for bad
debt of approximately $54,000 in 1998. Higher U.S. costs in 1999 are
discussed below in Management's Discussion and Analysis.
B. Management's Discussion and Analysis of Financial Condition and Results
of Operation
1. Management's Discussion and Analysis of Financial Condition
And Results of Operations
Twelve months ended December 31, 1999 and December 31, 1998
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. The result of consolidated operations are reported.
Revenues for the twelve month period ending December 31, 1999 were
$1,765,053, increased from $1,618,200 in the twelve month period ending
December 31, 1998; an increase of $146,853 (9.1%). 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.
<PAGE>
Cost of sales for the twelve month period ending December 31, 1999 were
$1,153,863, decreased from $1,353,537 in the twelve month period ending
December 31, 1998; a decrease of $199,674 (-14.8%). Cost of sales on a
percentage basis, has remained fairly consistent over the last two years.
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 the twelve month period ending December 31, 1999 were $611,190,
increased from $264,663 in the twelve month period ending December 31, 1998;
an improvement of $346,527 (130.9%). 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.
General and administrative expenses for the twelve month period ending
December 31, 1999 were $2,589,407, increased from $1,085,637 in the twelve
month period ending December 31, 1998; an increase of $1,503,770 (138.5%).
In 1999 the Company issued a substantial amount of stock to satisfy
indebtedness to officers and outside service providers as reflected in the
Financial Statement Consolidated Statement of Cash Flows. These costs should
even-out in the future as expenses are paid as incurred.
Operating losses for the twelve month period ending December 31, 1999 were
[$2,126,309], increased from [$962,203] in the twelve month period ending
December 31, 1998; an increase of $1,503,770 (121.0%). This increase
reflects abnormal G&A expenses discussed above.
2. Liquidity and Capital Resources
Historically, the Company has been able to borrow 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 or
not Xinmao will continue to receive loans from them. Currently the Company
has sufficient liquid capital to operate for approximately 6 to 8 months.
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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding beneficial ownership as
of March 1, 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.
<TABLE>
Beneficial Percentage
Name and Address Ownership of Class
<S> <C> <C>
Daniel Mendez 22,616,154 10.61%
4570 Campus Drive
Newport Beach, CA 92660*
Albert Figueroa 6,094,936 2.86%
Deng Shan 96,197,274 48.78% (1)
All current directors and
officers as a group (3 persons) 124,908,364 62.25%
</TABLE>
- -(1) Mr. Deng Shan owns 1,437,255 shares (.674%) personally, and 88,861,246
shares (41.70%) through his wholly owned corporation, Proton Technology
Corporation Limited for a total of 90,298,501 shares (42.374%).
*This address also 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 September30, 1999, are as follows:
<TABLE>
Name Age Position Since
<S> <C> <C> <C>
Daniel J. Mendez 47 Acting President and a Director 4/94
Albert N. Figueroa 33 Acting Secretary/Treasurer, and 5/95
" " a Director
Deng Shan 48 Director 1/99
" " Chairman of the Board 4/99
</TABLE>
The Directors serve until the next annual meeting of shareholders, or until
their successors are elected.
Daniel J. Mendez, Acting 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,
and is responsible for investor relations, coordination of corporate
agreements, corporate financing, and liaison with Chinese operations. Prior
to 1991
Albert N. Figueroa, Acting 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 and Director, 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 the annual compensation paid and accrued by
the Company during its last three fiscal years to the executive officers to
whom it paid in excess of $100,000, including cash and issuance of
securities.
<TABLE>
Summary Compensation
Annual Compensation Awards Payouts
Other Secur
Name Annual Restricted ities All Other
And Compen- Stock UnderlyingLTIP Compen-
Principal Salary Bonus sation Award(s) Options/Payouts sation
Position Year ($) ($) ($) ($) (SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel
Mendez 1997 220,000 0 9,503 0 0 0 0
Daniel
Mendez 1998 220,000 0 45,951 0 0 0
0
Daniel
Mendez 1999 150,000 0 68,422 0 0 0 0
Albert
Figueroa 1997 100,000 0 4,320 0 0 0 0
Albert
Figueroa 1998 100,000 0 46,225 0 0 0 0
Albert
Figueroa 1999 100,000 0 45,899 0 0 0 0
Deng
Shan 1997 100,000 0 4,320 0 0 0 0
Deng
Shan 1998 100,000 0 46,225 0 0 0 0
Deng
Shan 1999 100,000 0 48,474 0 0 0 0
</TABLE>
- -(1) Of the above compensation paid to Daniel J. Mendez, a portion of said
compensation was paid by the issuance of private placement stock in lieu of
cash in the following amounts and the agreed values in the respective years
indicated:
1997: 2,850,970 shares valued at $229,503
1998: 3,304,737 shares valued at $265,951
1999: 2,528,816 shares valued at $218,422
- -(2) Of the above compensation paid to Albert N. Figueroa, a portion of said
compensation was paid by the issuance of private placement stock in lieu of
cash in the following amounts and the agreed values in the respective years
indicated:
1997: 1,295,896 shares valued at $104,320
1998: 1,817,449 shares valued at $146,225
1999: 1,689,420 shares valued at $145,899
<PAGE>
- -(3) Of the above compensation paid to Deng Shan, a portion of said
compensation was paid by the issuance of private placement stock in lieu of
cash in the following amounts and the agreed values in the respective years
indicated:
1997: 1,295,896 shares valued at $104,320
1998: 1,817,449 shares valued at $146,225
1999: 1,721,403 shares valued at $148,474
- -(4) No directors are paid compensation as directors. The persons serving as
directors also serve as officers or key consultants and the full compensation
for each has been set forth in Item 6 above.
Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements
- -(5) Daniel J. Mendez, President, has an employment contract for a term of
one year commencing on January 1, 1999 with annual compensation of $150,000
per year payable $12,500 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.
- -(6) Albert N. Figueroa, Secretary/Treasurer, has an employment contract for
a term of one year commencing on January 1, 1999 with annual compensation of
$100,000 per year payable $8,335 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.
- -(7) Deng Shan, Consultant, has an Agreement for Services for a term of one
year commencing on January 1, 1999 with annual compensation of $100,000 per
year payable $8,335 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.
Options/SAR Grants in Last Fiscal Year
No options or SAR Grants have been made by the Company during its
last fiscal year.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. In late December, 1996, the company entered into a Plan and Agreement of
Reorganization with Everlasting International, Ltd. ("Everlasting"), a Nevada
corporation, and Proton Technology Corporation Limited ("Proton"), a Bahamas
corporation, whereby the Company acquired 100% of the shares of Everlasting,
owned by Proton, in exchange for 123,850,139 shares of the voting common
stock of the Company. At the time of this transaction, Everlasting owned two-
thirds of Kunming Xinmao Petrochemical Industrial Co., Ltd. ("Kunming
Xinmao"), a Chinese entity, with the other third of Kunming Xinmao owned by a
Chinese Government corporation (this interest had been transferred to
Everlasting from Proton).
<PAGE>
Mr. Deng Shan is currently a Director of Largo Vista and a majority
shareholder of Proton Technology Corporation, Ltd. A loan of $30,000.00 is
owed by the company to Proton Technology.
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.
Item 8. LEGAL PROCEEDINGS
The Company has unpaid judgments totaling approximately $95,000, as a result
of disputes arising in the normal course of business.
In March, 1998, the Sichuan Peoples Court, P.R. China rendered a judgment
against Xinmao in the approximate amount of U.S. $452,000 that negatively
impacted the 12/31/98 Financial Statement by approximately $112,550. The
judgment is completely satisfied.
Action filed on May 14, 1998 in the High Court of Hong Kong Special
Administration Region, Case HCA14528/98 by Plaintiff Everlasting
International, Ltd. vs. Defendant Chan Mau Tak. This lawsuit was brought by
Everlasting International, Ltd. ("EIL") against Chan Mao Tak ("CMD") for
breach of the purchase agreement wherein EIL acquired the assets of the
Xinmao Company from CMD. EIL is a wholly owned subsidiary of Largo Vista
Group, Ltd. This lawsuit is brought on the basis that CMD made fraudulent
representations concerning the assets of the Kunming Xinmao Petrochemical
Co., Ltd. The court ordered an Interlocutory Judgment on 10/14/98 in favor of
EIL for 1 million HK$ plus damages incurred plus interest @ 13.08% per annum.
One million HK$ is the penalty provided in the Transfer Agreement. CMD has
filed an appeal, based on failure of service of process. It is not likely
that Xinmao has any liability in the matter since no complaint has been filed
against it, however this is not certain. If EIL prevails, management
anticipates recovery of the 1 million HK$ plus the value of the assets
misrepresented in the Transfer Agreement. CMD owns and operates Panzhihur
Petrochemical Industry Co., Ltd., a company with assets including an LPG
depot. The resolution of this matter is uncertain.
Aside from the above, there is no litigation outstanding, and management is
not aware of any potential claims which might be asserted.
Item 9. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON STOCK
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the NASD Bulletin Board,
under the symbol "LGOV". The closing sales price on December 31, 1999 was
$1.06 bid and $0.94 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
and the four quarters of 1999.
<PAGE>
<TABLE>
High Low
Period Bid Bid
<S> <C> <C>
4th Quarter 1999 $1.06 $.94
3rd Quarter 1999 $0.11 $.10
2nd Quarter 1999 $0.125 $.125
1st Quarter 1999 $0.12 $.10
4th Quarter 1998 $0.13 $.11
3rd Quarter 1998 $0.20 $.17
2nd Quarter 1998 $0.18 $.17
1st Quarter 1998 $0.20 $.18
4th Quarter 1997 $0.125 $.09
3rd Quarter 1997 $0.13 $.12
2nd Quarter 1997 $0.19 $.18
1st Quarter 1997 $0.20 $.18
</TABLE>
At December 31, 1999, the Company had approximately 519 Shareholders of
record.
The Company has not paid a dividend since its incorporation, and management
does not anticipate the Company will pay dividends in the near future.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
During its last three fiscal years, up through and including this date, the
Registrant has issued the following unregistered securities.
From January 1, 1997 through December 31, 1997, the Company issued 2,995,194
shares of its common stock that was valued at $273,312 as follows:
<TABLE>
Date Amount Name or Class of Nature Amount Exempti
Shares Persons of Of on
issued to Whom Sold Consider- Consider-Claimed
ation ation
($)
<S> <C> <C> <C> <C> <C>
10/27/97 1,861,027 Daniel Mendez Conversion (1) 157,176 4(2)
of Loan
10/27/97 687,379 Albert Figueroa Conversion (1) 58,054 4(2)
of Loan
10/27/97 391,788 John Prentice Conversion (2) 50,932 4(2)
of Loan
10/27/97 55,000 William Vauthrin Conversion (2) 7,150 4(2)
of Loan
------------ ----------
Total 2,995,194 273,312
</TABLE>
From January 1, 1998 through December 31, 1998, the Company issued 3,939,058
shares of its common stock that was valued at $559,022 as follows:
<PAGE>
<TABLE>
Date Amount Name or Class of Nature Amount Exempti
Shares Persons of Of on
issued to Whom Sold Consider- Consider-Claimed
ation ation
($)
<S> <C> <C> <C> <C> <C> <C>
2/4/98 373,224 Albert Figueroa Conversion (1) 27,759 4(2)
of Loan
2/4/98 1,553,921 Daniel Mendez Conversion (1) 115,573 4(2)
of Loan
7/21/98 422,345 Albert Figueroa Conversion (1) 55,292 4(2)
of Loan
7/21/98 1,039,568 Daniel Mendez Conversion (1) 136,097 4(2)
of Loan
9/24/98 350,000 Danilo Cacciamatta Settlement (2) 78,256 4(2)
of Claim
9/24/98 200,000 Equitrade Settlement (2) 146,045 4(2)
of Claim
------------- -----------
Total 3,939,058 $559,022
</TABLE>
<TABLE>
From January 1, 1999 through December 31, 1999, the Company issued 28,519,534
shares of its common stock that was valued at $2,387,980 as follows:
Date Amount Name or Class of Nature Amount Exempti
Shares Persons of Of on
issued to Whom Sold Consider- Consider-Claimed
ation ation
($)
<S> <C> <C> <C> <C> <C> <C>
6/21/99 1,000,000 Daniel Mendez Services (3) 80,420 4(2)
6/21/99 1,000,000 Albert Figueroa Services (3) 80,420 4(2)
6/21/99 1,000,000 Deng Shan Services (3) 80,420 4(2)
6/21/99 700,000 Bernard Kruer Services (2) 56,294 4(2)
6/21/99 300,000 Gymar, Inc. Services (2) 24,126 4(2)
7/20/99 100,000 Craig Saunar Settlement (2) 85,000 4(2)
of Claim
7/20/99 50,000 Fred Smith Services (2) 5,000 4(2)
9/23/99 700,000 Dan/Colette Seifer Cash Sale (2) 35,000 4(2)
9/23/99 100,000 John Prentice Conversion (2) 4,000 4(2)
of LoanS
9/27/99 2,104,473 Daniel Mendez Services (4)(8) 169,410 4(2)
9/27/99 2,304,737 Daniel Mendez Services (4)(8) 185,531 4(2)
9/27/99 2,850,970 Daniel Mendez Services (4)(8) 229,503 4(2)
<PAGE>
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
9/27/99 1,406,536 Albert Figueroa Services (4)(8) 113,226 4(2)
9/27/99 817,449 Albert Figueroa Services (4)(8) 65,805 4(2)
9/27/99 1,295,896 Albert Figueroa Services (4)(8) 104,320 4(2)
9/27/99 1,438,519 Deng Shan Services (4)(8) 115,801 4(2)
9/27/99 817,449 Deng Shan Services (4)(8) 65,805 4(2)
9/27/99 1,295,896 Deng Shan Services (4)(8) 104,320 4(2)
9/27/99 746,522 Bernard Kruer Services (2)(8) 60,095 4(2)
9/27/99 572,213 Bernard Kruer Services (2)(8) 46,063 4(2)
9/27/99 575,407 Gymar, Inc. Services (2)(8) 46,320 4(2)
9/27/99 245,234 Gymar, Inc. Services (2)(8) 19,741 4(2)
9/27/99 287,989 Albert Figueroa Conversion (5) 23,160 4(2)
of Loan
9/27/99 2,385,714 Daniel Mendez Conversion (5) 191,860 4(2)
of Loan
9/27/99 184,164 Deng Shan Conversion (5) 14,811 4(2)
of Loan
9/27/99 1,957,356 Proton Technology Conversion (5) 157,441 4(2)
Corporation, Ltd of Loan
11/24/99 424,343 Daniel Mendez Services (6) 49,012 4(2)
11/24/99 282,884 Albert Figueroa Services (6) 32,673 4(2)
11/24/99 282,884 Deng Shan Services (6) 32,673 4(2)
11/24/99 169,737 Bernard Kruer Services (2) 19,605 4(2)
11/24/99 113,147 Gymar, Inc. Services (2) 13,608 4(2)
11/24/99 68,023 Daniel Mendez Conversion (7) 7,857 4(2)
of Loan
11/24/99 50,649 Albert Figueroa Conversion (7) 5,850 4(2)
of Loan
11/24/99 11,343 Deng Shan Conversion (7) 1,310 4(2)
of Loan
11/24/99 20,000 Todd Ream Services (2) 3,000 4(2)
11/24/99 60,000 Fred N. Smith Services (2) 8,500 4(2)
12/ 8/99 800,000 Wan Lin Conversion
Of Loan (2) 50,000 4(2)
------------- ----------
28,519,534 S2,387,980
</TABLE>
The issued securities were valued as follows:
- -(1) Stock issuances signified by Footnote (1) to Daniel J. Mendez and Albert
N. Figueroa on 10/27/97, 2/4/98 and 7/21/98 were valued at the average
closing market price for the month during which the stock was issued,
discounted by 30%.
<PAGE>
- -(2) The stock issuances signified by Footnote (2) were negotiated at arms-
length to individuals not officers, directors or affiliates, and not tied to
any specific price per share value.
- -(3) Stock issuances signified by Footnote (3) on 6/21/99 were issued
pursuant to a contractual obligation requiring issuance of said shares on
1/30/98. The shares were valued at the average closing market price for June
1999 which was $0.1148, discounted by 30% ($.0804).
- -(4) Stock issuances signified by Footnote (4) on 9/27/99 were issued
pursuant to a settlement agreement for past services performed over the
period 1/1/97 through 9/30/99. The shares were valued at the average closing
market price for September 1999 which was $0.1150, discounted by 30%
($0.0805).
- -(5) Stock issuances signified by Footnote (5) on 9/27/99 for "conversion of
loan" were valued at the average closing market price for September 1999
which was $0.1150, discounted by 30% ($0.0805).
- -(6) Stock issuances signified by Footnote (6) on 11/24/99 were issued
pursuant to a settlement agreement for past services performed over the
period 10/1/99 through 11/30/99. The shares were valued at the average
closing market price for November 1999 which was $0.1650, discounted by 30%
($0.1155).
- -(7) Stock issuances signified by Footnote (7) on 11/24/99 for "conversion of
loan" were for loans made prior to 9/30/99 and were valued at the average
closing market price for November 1999 which was $0.1650, discounted by 30%
($0.1155).
- -(8) The individual employees or key service providers receiving these shares
for "Services" signified by Footnote (8), each performed substantial and
necessary services for the Company during fiscal 1997, 1998 and 11 months
1999, for which they had not been compensated; and, with respect to which
they had continuing claims for compensation. The individuals on September
27, 1999, entered into an agreement with the Company, wherein each claimant
agreed to accept, and the Company agreed to issue, the specified number of
shares of the Company's restricted common stock in full and complete
satisfaction of the claim.
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.
<PAGE>
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.
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
AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT (US $)
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, changes in stockholders' equity <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 in the United States of America. 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 suffered
significant recurring losses from operations that raises 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. Significant litigation
uncertainties also exist as described in Note 5. The consolidated financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
Beverly Hills, California
February 29,2000
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Balance Sheet
December 31, 1999
ASSETS
<S> <C>
Current Assets
Cash $ 16,379
Inventories 163,782
Prepaid expenses and
advances to suppliers 80,562
Total current assets 260,723
Fixed assets
Property and equipment 1,099,280
<Less> accumulated depreciation <323,106>
Total fixed assets 776,174
Other Assets
Other receivable 40,976
Deferred expenses 32,094
Other 163,389
Total other assets 236,459
$ 1,273,356
------------
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY <DEFICIT>
<S> <C>
Current Liabilities
Accounts payable $ 707,960
Accrued expenses 356,779
Taxes Payable 120,803
Notes Payable 1,750,148
Advances and Other 1,511,330
Total current liabilities 4,447,020
Litigation contingencies (Note 5)
Shareholders' Equity <Deficit>
Common Stock, 400,000,000 shares
authorized; .001 par value;
212,382,555 shares issued and
outstanding 212,383
Additional Paid-in Capital 10,996,991
Retained earnings <deficit> <14,383,038>
Total shareholders' equity <deficit> <3,173,664>
$ 1,273,356
------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Operations
Year December 31,
1999 1998
<S> <C> <C>
Revenue $ 1,616,961 $1,476,971
Cost of sales 1,153,863 1,353,537
Gross profit <loss> 463,098 123,434
Expenses:
General and administrative
and Other 2,589,407 1,085,637
<Loss> From operations <2,126,309> <962,203>
Other income <expense>:
Interest <expense> <220,271> <198,652>
Other income 148,092 141,229
<Loss> before
income taxes <2,198,488> <1,019,626>
Income taxes - -
NET <LOSS> $<2,198,488> $<1,019,626>
Basic <LOSS> per share of
common stock $ <.01> $ <.01>
Diluted <LOSS> per share of
common stock $ <.01> $ <.01>
Weighted average
shares outstanding 201,733,334 181,565,237
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Cash Flows
Year December 31,
1999 1998
<S> <C> <C>
Cash flows from <for>
Operating activities:
Net <loss> $<2,198,488> $<1,019,626>
Adjustments to reconcile
net<loss> to cash flows
<for> operating activities:
Depreciation 45,319 67,926
Stock for services and debt 2,562,120 648,057
Changes in assets and
liabilities:
Inventories 62,603 491,902
Accounts payable <184,224> <380,603>
Accrued expenses 159,764 452,284
Notes and taxes
payable and other <444,243> <346,121>
Net cash flows <for>from
operating activities: 2,851 <86,181>
Cash flows from
investing activities: - -
Cash flows from
financing activities:
- -
Increase <decrease> in cash 2,851 <86,181>
Cash at beginning of period 13,528 99,709
Cash at end of period $ 16,379 $ 13,528
----------- -----------
Supplemental cash
flows information:
Cash paid for interest $ - $ -
---------- -----------
Cash paid for taxes $ - $ -
---------- -----------
Non-cash financing
transactions:
Shares for services
and debt $2,562,120 $ 648,057
---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Changes in Stockholders' Equity <Deficit>
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital <Deficit> Total
<S> <C> <C> <C> <C> <C>
Balance at
Dec. 31, 1997 179,923,963 $179,924 $ 7,819,273 $<11,164,924> $<3,165,727>
Common shares
issued for
services and
debt
extinguishment
during the
year ended
Dec. 31, 1998 3,939,058 3,939 644,118 - 648,057
Net <loss>
for the year
ended
Dec. 31, 1998 - - - <1,019,626> <1,019,626>
Balance at
Dec. 31, 1998 183,863,021 183,863 8,463,391 <12,184,550> <3,537,296>
Common shares
issued for
services and
debt
extinguishment
during the
year ended
Dec. 31, 1999 28,519,534 28,520 2,533,600 - 2,562,120
Net <loss>
for the year
ended Dec.
31, 1999 - - - <2,198,488> <2,198,488>
Balance at
Dec. 31, 1999 212,382,555 $212,383 $10,996,991 $<14,383,038> $<3,173,664>
----------- -------- ----------- ------------ -----------
</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
Nature of Operations and basis of consolidation
The consolidated financial statements include the accounts of Largo
Vista Group, Ltd. (the "Company"), a Nevada corporation, (date of
incorporation was January 16, 1987) its wholly-owned subsidiary, Largo Vista,
Inc., a California corporation, (date of incorporation was October 12, 1988)
its wholly-owned subsidiary Everlasting International, Ltd., a Nevada
Corporation, (date of incorporation was January 25, 1995) and Kunming Xinmao
Petrochemical Industrial Co., Ltd., a Chinese entity (see Note 4). The
Chinese entity operates a natural gas distribution business. The United
States entities have no operations. Intercompany accounts and transactions
have been eliminated. All amounts in these financial statements and
footnotes are in United States dollars.
Cash and Cash Equivalents
Cash equivalents consist of funds invested in money market accounts and
in investments with a maturity of three months or less when purchased. During
the periods presented, and at December 31, 1999, the Company had no cash
equivalents.
Provision for Bad Debt
The financial statements are prepared using an allowance for bad debts
in conformity with generally accepted accounting principles. At December 31,
1999 the Company had no significant provision for bad debts.
Loss per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the periods presented.
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.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Valuation of shares for services
Shares issued for services were valued based upon estimated fair market
value of services. The policy for "valuation of shares" applies to
transactions with both employees and non-employees. The policy is one of
negotiation between the parties. In the case of non-employees, final value
is approved by a majority of the Board of Directors; and, in the case of
employees, final value is approved by a majority of the Board of Directors
with the interested director abstaining. During the periods presented,
United States management's compensation has primarily been in the form of
issuance of shares by the company.
Inventory
Inventory, valued at lower of cost of market, on the first-in, first-out
basis consists primarily of liquid natural gas.
Property and equipment and depreciation
Property and equipment consists of a building, storage tanks, railroad
cars and miscellaneous equipment. All property and equipment is located in
China. Depreciation is primarily by the straight line method over estimated
useful lives, generally of approximately five to thirty years.
Impairment of Assets
Long-lived assets used in operations are accessed for impairment
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 are
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.
Deferred Expenses
Deferred expenses consist primarily of deposits including on telephone,
utilities and office facilities.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Other Assets
Other assets consist primarily of slower moving inventory items, which
have the appropriate fair market value, but to be conservative have been
classified as non-current.
Notes payable
Notes payable consists primarily of unsecured short-term loans,
primarily non-interest bearing demand notes. A loan of $30,000 is payable to
an entity controlled by the Company's majority shareholder.
Advances and other
Advances and other consists primarily of advances to suppliers and
miscellaneous payables, primarily non-interest bearing.
Income Taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". (See Note 3).
Foreign currency translation
During the periods presented, the Company had no significant foreign
currency transaction gains or losses.
Revenue recognition
The Company recognizes revenue upon delivery or pick up of natural gas.
There is not a significant amount of credit transactions.
Fair Value of Financial Instruments
Pursuant to SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, the Company is required to estimate the fair value of all
financial instruments included on its balance sheet at December 31, 1999.
The Company considers the carrying value of such amounts in the consolidated
financial statements to approximate their expected realization and interest
rates, which approximate current market rates. During the periods presented
and at December 31, 1999 the Company had no financial instruments.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Comprehensive Income <Loss>
In fiscal 1999, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement establishes standards for the reporting
of comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. The
adoption of SFAS No. 130 required no additional disclosure for the Company
and did not have any effect on the Company's financial position, as there was
no difference between comprehensive loss and the net loss as reported.
Segment Disclosures
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 principal business segment.
Reclassifications
Certain items in prior period financial statements have been
reclassified to conform with 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 net losses of $2,198,488 and $1,019,626 for the years ended
December 31, 1999, and 1998, respectively. Additionally, current liabilities
exceed current assets by $4,186,297 at December 31, 1999. These factors,
among others, raise substantial doubt as to the Company's ability to continue
as a going concern.
The Company's management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no assurance
management will be successful in this endeavor.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 3 - Income taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for
deferred income taxes.
As the Company has not generated taxable income since inception no
provision for income taxes has been provided. At December 31, 1999, the
Company did not have any significant tax net operating loss carryforwards
(tax benefits resulting from losses for tax purposes have been fully
reserved due to the uncertainty of a going concern). At December 31, 1999,
the Company did not have any significant deferred tax liabilities or deferred
tax assets.
<PAGE>
<TABLE>
Note 4 - Chinese subsidiary
Kunming Xinmao Petrochemical
Industrial Co., Ltd. ("Xinmao")
(Stated in United States Dollars)
Condensed Balance Sheet-December 31, 1999
(Separate Financial Statements)
ASSETS
<S> <C>
Current Assets
Cash $ 15,234
Inventories 163,782
Prepaid expenses;
advances to suppliers; other 82,085
Total current assets 261,101
Fixed assets
Property and equipment 1,099,280
<Less> accumulated depreciation <323,106>
Total fixed assets 776,174
Other Assets
Other receivable 39,453
Deferred expense 32,094
Other 163,389
Total other assets 234,936
$ 1,272,211
-----------
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY <DEFICIT>
<S> <C>
Current Liabilities
Accounts payable $ 617,538
Accrued expenses 319,279
Taxes payable 68,355
Notes payable 1,750,148
Advances and other 1,471,987
Total current liabilities 4,227,307
Shareholders' Equity <Deficit> <2,955,096>
$ 1,272,211
-----------
</TABLE>
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 4 - Chinese subsidiary (continued)
Kunming Xinmao Petrochemical
Industrial Co., Ltd.
(Stated in United States Dollars)
Condensed Statement of Operations
(Separate Financial Statements)
Year Ended December 31,
1999 1998
<S> <C> <C>
Revenue $ 1,616,961 $ 1,476,971
Cost of sales 1,153,863 1,353,537
Gross profit 463,098 123,434
Expenses
Writedown of receivables - 53,849
Selling, general and
administrative expenses 471,644 451,922
<Loss> from operations <8,546> <382,337>
Interest <expense> <220,271> <198,652>
Other income 148,092 141,229
NET <LOSS> $ <80,725> $ <439,760>
----------- -----------
</TABLE>
The financial information in Note 4 has been prepared in Renminbi, the
national currency of the People's Republic of China. Solely for the
convenience of the reader, the financial statements have been translated into
United States dollars at the rate of U.S. $1.00=RMB 8.28 quoted as of
December 31, 1999. No representation is made that the Renminbi could have
been, or could be, converted into United States dollars at that rate or at
any other certain rate on December 31, 1999, or any other date.
From inception (January 16, 1987) to date (February 29, 2000) the United
States entities of the Company have had no significant assets, no revenues
and no operations. During this period however, the United States entities
have incurred significant losses.
As of December 31, 1999 the Company owns 66.67% of Kunming Xinmao
Petrochemical Industrial Co. Ltd.
Beginning Retained Earnings (at December 31, 1997) of Kunming Xinmao
Petrochemical Industrial Co. Ltd. included a loss carry-forward of
approximately $2 million already on the books at the time the Company
acquired Xinmao. This item was a carry over from the acquisition by Largo
Vista Group, Ltd., and not a result of operations under the control of Largo
Vista Group Ltd..
<PAGE>
Note 5 - Litigation Contingencies
YONGHENG (Everlasting) NEVADA INTERNATIONAL CO., LTD., Plaintiff
vs. CHAN MAU TAK, Defendant
Case HCA 14528/98
The above matter was filed IN THE HIGH COURT OF THE HONG KONG SPECIAL
ADMINISTRATION REGION, and is the Court of First Instance.
This lawsuit was brought by Everlasting International, Ltd. ("EIL")
against Chan Mao Tak ("CMD") for breach of the purchase agreement wherein EIL
acquired the assets of the Xinmao Company from CMD.
EIL is a wholly owned subsidiary of Largo Vista Group, Ltd.
This lawsuit is brought on the basis that CMD made fraudulent
representations concerning the assets of the Kunming Xinmao Petrochemical
Co., Ltd. The court ordered an Interlocutory Judgment on 10/14/98 in favor of
EIL for 1 million HK$ plus damages incurred plus interest @ 13.08% per annum.
One million HK$ is the penalty provided in the Transfer Agreement. CMD
has filed an appeal, based on failure of service of process. It is not
likely that Xinmao has any liability in the matter since no complaint has
been filed against it, however this is not certain.
If EIL prevails, management anticipates recovery of the 1 million HK$
plus the value of the assets misrepresented in the Transfer Agreement. CMD
owns and operates Panzhihur Petrochemical Industry Co., Ltd., a company with
assets including an LPG depot. The resolution of this matter is uncertain.
Note 6 - Related Party Transactions
The common shares issued by the Company for services, and related debt
extinguishment, during 1999 and 1998 were issued primarily to the Company's
directors, officers and shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT (Chinese Renminbi)
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, changes in stockholders' equity <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 in the United States of America. 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 suffered
significant recurring losses from operations that raises 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. Significant litigation
uncertainties also exist as described in Note 5. The consolidated financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
Beverly Hills, California
February 29,2000
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Balance Sheet
December 31, 1999
United States Dollars and Chinese Renminbi
ASSETS
(US$) (Chinese
Renminbi)
<S> <C> <C>
Current Assets
Cash $ 16,379 135,618
Inventories 163,782 1,356,115
Prepaid expenses and
advances to suppliers 80,562 667,053
Total current assets 260,723 2,158,786
Fixed assets
Property and equipment 1,099,280 9,102,038
<Less> accumulated depreciation <323,106> < 2,675,318>
Total fixed assets 776,174 6,426,720
Other Assets
Other receivable 40,976 339,281
Deferred expenses 32,094 265,738
Other 163,389 1,352,861
Total other assets 236,459 1,957,880
$ 1,273,356 10,543,386
------------ -----------
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY <DEFICIT>
<S> <C> <C>
Current Liabilities
Accounts payable $ 707,960 5,861,909
Accrued expenses 356,779 2,954,130
Taxes Payable 120,803 1,000,249
Notes Payable 1,750,148 14,491,225
Advances and Other 1,511,330 12,513,812
Total current liabilities 4,447,020 36,821,325
Litigation contingencies (Note 6)
Shareholders' Equity <Deficit>
Common Stock, 400,000,000 shares
authorized; .001 par value;
212,382,555 shares issued and
outstanding 212,383 1,758,531
Additional Paid-in Capital 10,996,991 91,055,085
Retained earnings <deficit> <14,383,038> <119,091,555>
Total shareholders' equity <deficit> <3,173,664> <26,277,939>
$ 1,273,356 10,543,386
------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Operations
(Chinese Renminbi)
Year December 31,
1999 1998
<S> <C> <C>
Revenue 13,388,437 12,229,320
Cost of sales 9,553,986 11,207,286
Gross profit <loss> 3,834,451 1,022,034
Expenses:
General and administrative
and Other 21,440,290 8,989,074
<Loss> From operations <17,605,839> <7,967,040>
Other income <expense>:
Interest <expense> <1,823,844> <1,644,839>
Other income 1,226,202 1,169,376
<Loss> before
income taxes <18,203,481> <8,442,503>
Income taxes - -
NET <LOSS> <18,203,481> <8,442,503>
Basic <LOSS> per share of
common stock $ <.09> $ <.09>
Diluted <LOSS> per share of
common stock $ <.09> $ <.09>
Weighted average
shares outstanding 201,733,334 181,565,237
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Cash Flows
(Chinese Renminbi)
Year December 31,
1999 1998
<S> <C> <C>
Cash flows from <for>
Operating activities:
Net <loss> <18,203,481> <8,442,503>
Adjustments to reconcile
net<loss> to cash flows
<for> operating activities:
Depreciation 375,241 562,427
Stock for services and debt 21,214,354 5,365,912
Changes in assets and
liabilities:
Inventories 518,353 4,072,949
Accounts payable <1,525,375> <3,151,393>
Accrued expenses 1,322,846 3,744,912
Notes and taxes
payable and other <3,678,332> <2,865,883>
Net cash flows <for>
operating activities: 23,606 <713,579>
Cash flows from
investing activities: - -
Cash flows from
financing activities:
Increase <decrease> in cash 23,606 <713,579>
Cash at beginning of period 112,012 825,591
Cash at end of period 135,618 112,012
------------ -----------
Supplemental cash
flows information:
Cash paid for interest - -
------------ -----------
Cash paid for taxes - -
------------ -----------
Non-cash financing
transactions:
Shares for services
and debt 21,214,354 5,365,912
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Consolidated Statements of Changes in Stockholders' Equity <Deficit>
Chinese Renminbi
(in thousands)
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital <Deficit> Total
<S> <C> <C> <C> <C> <C>
Balance at
Dec. 31, 1997 179,923,963 1,489 64,744 <92,446> <26,213>
Common shares
issued for
services and
debt
extinguishment
during the
year ended
Dec. 31, 1998 3,939,058 33 5,333 - 5,366
Net <loss>
for the year
ended
Dec. 31, 1998 - - - <8,443> <8,443>
Balance at
Dec. 31, 1998 183,863,021 1,522 70,077 <100,889> <29,290>
Common shares
issued for
services and
debt
extinguishment
during the
year ended
Dec. 31, 1999 28,519,534 236 20,978 - 21,214
Net <loss>
for the year
ended Dec.
31, 1999 - - - <18,203> <18,203>
Balance at
Dec. 31, 1999 212,382,555 1,758 91,055 <119,092> <26,279>
----------- ------ ------ ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements
December 31, 1999
(Chinese Renminbi)
Note 1 - Summary of Significant Accounting Policies
Nature of Operations and basis of consolidation
The consolidated financial statements include the accounts of Largo
Vista Group, Ltd. (the "Company"), a Nevada corporation, (date of
incorporation was January 16, 1987) its wholly-owned subsidiary, Largo Vista,
Inc., a California corporation, (date of incorporation was October 12, 1988)
its wholly-owned subsidiary Everlasting International, Ltd., a Nevada
Corporation, and Kunming Xinmao Petrochemical Industrial Co., Ltd., a Chinese
entity (see Note 4). The Chinese entity operates a natural gas distribution
business. The United States entities have no operations. Intercompany
accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash equivalents consist of funds invested in money market accounts and
in investments with a maturity of three months or less when purchased. During
the periods presented, and at December 31, 1999, the Company had no cash
equivalents.
Provision for Bad Debt
The financial statements are prepared using an allowance for bad debts
in conformity with generally accepted accounting principles. At December 31,
1999 the Company had no significant provision for bad debts.
Loss per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the periods presented.
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.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
(Chinese Renminbi)
Note 1 - Summary of Significant Accounting Policies (continued)
Valuation of shares for services
Shares issued for services were valued based upon estimated fair market
value of services. The policy for "valuation of shares" applies to
transactions with both employees and non-employees. The policy is one of
negotiation between the parties. In the case of non-employees, final value
is approved by a majority of the Board of Directors; and, in the case of
employees, final value is approved by a majority of the Board of Directors
with the interested director abstaining. During the periods presented,
United States management's compensation has primarily been in the form of
issuance of shares by the company.
Inventory
Inventory, valued at lower of cost of market, on the first-in, first-out
basis consists primarily of liquid natural gas.
Property and equipment and depreciation
Property and equipment consists of a building, storage tanks, railroad
cars and miscellaneous equipment. All property and equipment is located in
China. Depreciation is primarily by the straight line method over estimated
useful lives, generally of approximately five to thirty years.
Impairment of Assets
Long-lived assets used in operations are accessed for impairment
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 are
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.
Deferred Expenses
Deferred expenses consist primarily of deposits including on telephone,
utilities and office facilities.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
(Chinese Renminbi)
Note 1 - Summary of Significant Accounting Policies (continued)
Other Assets
Other assets consist primarily of slower moving inventory items, which
have the appropriate fair market value, but to be conservative have been
classified as non-current.
Notes payable
Notes payable consists primarily of unsecured short-term loans,
primarily non-interest bearing demand notes. A loan of $248,400 is payable
to an entity controlled by the Company's majority shareholder.
Advances and other
Advances and other consists primarily of advances to suppliers and
miscellaneous payables, primarily non-interest bearing.
Income Taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". (See Note 3).
Foreign currency translation
During the periods presented, the Company had no significant foreign
currency transaction gains or losses.
Revenue recognition
The Company recognizes revenue upon delivery or pick up of natural gas.
There is not a significant amount of credit transactions.
Fair Value of Financial Instruments
Pursuant to SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, the Company is required to estimate the fair value of all
financial instruments included on its balance sheet at December 31, 1999.
The Company considers the carrying value of such amounts in the consolidated
financial statements to approximate their expected realization and interest
rates, which approximate current market rates. During the periods presented
and at December 31, 1999 the Company had no financial instruments.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
(Chinese Renminbi)
Note 1 - Summary of Significant Accounting Policies (continued)
Comprehensive Income <Loss>
In fiscal 1999, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement establishes standards for the reporting
of comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. The
adoption of SFAS No. 130 required no additional disclosure for the Company
and did not have any effect on the Company's financial position, as there was
no difference between comprehensive loss and the net loss as reported.
Segment Disclosures
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 principal business segment.
Reclassifications
Certain items in prior period financial statements have been
reclassified to conform with 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 net losses of 18,203,481 and 8,442,503 for the years ended
December 31, 1999, and 1998, respectively. Additionally, current liabilities
exceed current assets by 34,662,539 at December 31, 1999. These factors,
among others, raise substantial doubt as to the Company's ability to continue
as a going concern.
Note 2 - Basis of presentation and considerations related to continued
existence (going concern)
The Company's management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no assurance
management will be successful in this endeavor.
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
(Chinese Renminbi)
Note 3 - Income taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for
deferred income taxes.
As the Company has not generated taxable income since inception no
provision for income taxes has been provided. At December 31, 1999, the
Company did not have any significant tax net operating loss carryforwards
(tax benefits resulting from losses for tax purposes have been fully
reserved due to the uncertainty of a going concern). At December 31, 1999,
the Company did not have any significant deferred tax liabilities or deferred
tax assets.
<PAGE>
<TABLE>
Note 4 - Chinese subsidiary
Kunming Xinmao Petrochemical
Industrial Co., Ltd. ("Xinmao")
Condensed Balance Sheet-December 31, 1999
(Separate Financial Statements)
ASSETS
<S> <C>
Current Assets
Cash 126,138
Inventories 1,356,115
Prepaid expenses;
advances to suppliers; other 679,664
Total current assets 2,161,917
Fixed assets
Property and equipment 9,102,038
<Less> accumulated depreciation <2,675,318>
Total fixed assets 6,426,720
Other Assets
Other receivable 326,671
Deferred expense 265,738
Other 1,352,861
Total other assets 1,945,270
10,533,907
------------
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY <DEFICIT>
<S> <C>
Current Liabilities
Accounts payable 5,113,215
Accrued expenses 2,643,630
Taxes payable 565,979
Notes payable 14,491,225
Advances and other 12,188,052
Total current liabilities 35,002,101
Shareholders' Equity <Deficit> <24,468,194>
10,533,907
------------
</TABLE>
<PAGE>
<TABLE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
Note 4 - Chinese subsidiary (continued)
Kunming Xinmao Petrochemical
Industrial Co., Ltd.
(Stated in Chinese Renminbi)
Condensed Statement of Operations
(Separate Financial Statements)
Year Ended December 31,
1999 1998
<S> <C> <C>
Revenue 13,388,437 12,229,320
Cost of sales 9,553,986 11,207,286
Gross profit 3,834,451 1,022,034
Expenses
Writedown of receivables - 445,870
Selling, general and
administrative expenses 3,905,212 3,741,914
<Loss> from operations <70,761> <3,165,750>
Interest <expense> <1,823,844> <1,644,839>
Other income 1,226,202 1,169,376
NET <LOSS> <668,403> <3,641,213>
----------- -----------
</TABLE>
The financial information in Note 4 has been prepared in Renminbi, the
national currency of the People's Republic of China. The conversion rate was
U.S. $1.00=RMB 8.28 quoted as of December 31, 1999. No representation is
made that the Renminbi could have been, or could be, converted into United
States dollars at that rate or at any other certain rate on December 31,
1999, or any other date.
>From inception (January 16, 1987) to date (February 29, 2000) the
United States entities of the Company have had no significant assets, no
revenues and no operations. During this period however, the United States
entities have incurred significant losses.
As of December 31, 1999 the Company owns 66.67% of Kunming Xinmao
Petrochemical Industrial Co. Ltd.
Beginning Retained Earnings (at December 31, 1997) of Kunming Xinmao
Petrochemical Industrial Co. Ltd. included a loss carry-forward of
approximately $2 million already on the books at the time the Company
acquired Xinmao. This item was a carry over from the acquisition by Largo
Vista Group, Ltd., and not a result of operations under the control of Largo
Vista Group Ltd..
<PAGE>
Largo Vista Group, Ltd.
Notes to Consolidated Financial Statements (continued)
December 31, 1999
(Chinese Renminbi)
Note 5- Litigation Contingencies
YONGHENG (Everlasting) NEVADA INTERNATIONAL CO., LTD., Plaintiff
vs. CHAN MAU TAK, Defendant
Case HCA 14528/98
The above matter was filed IN THE HIGH COURT OF THE HONG KONG SPECIAL
ADMINISTRATION REGION, and is the Court of First Instance.
This lawsuit was brought by Everlasting International, Ltd. ("EIL")
against Chan Mao Tak ("CMD") for breach of the purchase agreement wherein EIL
acquired the assets of the Xinmao Company from CMD.
EIL is a wholly owned subsidiary of Largo Vista Group, Ltd.
This lawsuit is brought on the basis that CMD made fraudulent
representations concerning the assets of the Kunming Xinmao Petrochemical
Co., Ltd. The court ordered an Interlocutory Judgment on 10/14/98 in favor of
EIL for 1 million HK$ plus damages incurred plus interest @ 13.08% per annum.
One million HK$ is the penalty provided in the Transfer Agreement. CMD
has filed an appeal, based on failure of service of process. It is not
likely that Xinmao has any liability in the matter since no complaint has
been filed against it, however this is not certain.
If EIL prevails, management anticipates recovery of the 1 million HK$
plus the value of the assets misrepresented in the Transfer Agreement. CMD
owns and operates Panzhihur Petrochemical Industry Co., Ltd., a company with
assets including an LPG depot. The resolution of this matter is uncertain.
Note 6 - Related Party Transactions
The common shares issued by the Company for services, and related debt
extinguishment, during 1999 and 1998 were issued primarily to the Company's
directors, officers and shareholders.
<PAGE>
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No Change in accounting or in accountants in the last 3 years.
Item 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Report of Independent Certified Public Accountants 12/31/98
Consolidated Financial Statements 12/31/98, U.S. Dollars.
Consolidated Financial Statements 12/31/98, Renminbi.
Notes to Consolidated Financial Statements 12/31/98
Consolidated Financial Statements 9/30/99, U.S. Dollars.
Consolidated Financial Statements 9/30/99, Renminbi.
Notes to Consolidated Financial Statements 9/30/99
(b) Exhibits Required by Item 601 of Regulation SK
3(i) Articles of Incorporation of Largo Vista Group, Limited
3(ii) Bylaws of Largo Vista Group, Limited
3 (iii) Articles of Incorporation of Largo Vista Inc.
3 (iv) Bylaws of Largo Vista Inc.
3. (v) Articles of Incorporation of Everlasting International Limited
3 (vi) Bylaws of Everlasting International Limited
4. Instruments defining rights of security holders, including
indentures.
None.
9. Voting Trust Agreement
None
10 Material Contracts
No material contracts since the last 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
Acting President/ CEO /s/Daniel J. Mendez January 13, 2000
Daniel J. Mendez
Acting Secretary/Treasurer/s/Albert N. Figueroa January 13, 2000
Albert N. Figueroa
Director /s/ Deng Shan January 13, 2000
Deng Shan
<PAGE>
The following are added to Form 10-KSB
None
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 16,379
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 163,782
<CURRENT-ASSETS> 260,723
<PP&E> 1,099,280
<DEPRECIATION> (323,106)
<TOTAL-ASSETS> 1,273,356
<CURRENT-LIABILITIES> 4,447,020
<BONDS> 0
0
0
<COMMON> 212,383
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,273,356
<SALES> 0
<TOTAL-REVENUES> 1,616,961
<CGS> 1,153,863
<TOTAL-COSTS> 463,098
<OTHER-EXPENSES> (220,271)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,198,488)
<INCOME-TAX> (2,198,488)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,198,488)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
