U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2003
Commission file number 000-30426
LARGO VISTA GROUP, LTD.
(Name of Small Business Issuer in its charter)
Nevada 76-0434540
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4570 Campus Drive
Newport Beach, California 92660
---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (949) 252-2180
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The revenues for the year ended December 31, 2003 were $548,304.
The market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of April 14, 2004 was approximately
$3,182,440.
The number of shares of Common Stock outstanding as of April 14, 2004 was
269,963,856.
LARGO VISTA GROUP, LTD.
FORM 10-KSB
INDEX
Part I
Item 1. Description of Business.............................................3
Item 2. Description of Property............................................11
Item 3. Legal Proceedings..................................................12
Item 4. Submission of Matters of a Vote of Security Holders................12
Part II
Item 5. Market for Common Equity and Related Stockholder Matters...........12
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................17
Item 7. Financial Statements and Supplementary Data........................22
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................39
Item 8A Controls and Procedures............................................39
Part III
Item 9. Directors and Executive Officers of the Registrant;
Compliance with Section 16(a) fo the Exchange Act.................39
Item 10. Executive Compensation.............................................40
Item 11. Security Ownership of Certain Beneficial Owners and Management
And Related Stockholder Matters....................................41
Item 12. Certain Relationships and Related Transactions.....................42
Part IV
Item 13. Exhibits and Reports on Form 8-K...................................42
Item 14. Principal Accountant Fees and Services.............................44
Signatures ...................................................................46
2
PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development
--------------------
Largo Vista Group, Ltd. ("Largo Vista" or the "Company") was formed under the
laws of the State of Nevada on January 16, 1987 under the name, "The George
Group". On January 9, 1989, The George Group acquired Waste Service
Technologies, Inc. ("WST"), an Oregon corporation, and filed a name change in
Nevada and changed its name to WST, listed its stock, and began trading on OTC
bulletin Board.
On April 15, 1994, WST acquired Largo Vista, Inc., a California corporation, and
filed a name change in Nevada to change WST's name to Largo Vista Group, Ltd.,
OTC bulletin Board symbol "LGOV". Largo Vista originally planned to develop
housing in China, but after shipping two factory built homes to China, never
fully implemented plans due to unanticipated financing, environmental and
regulatory complications.
Unless the context otherwise requires, all references to the Company include its
wholly-owned subsidiaries, Largo Vista, Inc., an inactive California
corporation, Largo Vista Construction, Inc., an inactive Nevada corporation, and
Largo Vista International, Corp., an inactive Panama corporation. Largo Vista
also has operations through Doing Business As ("DBA") agreements with Zunyi
Shilin Xinmao Petrochemical Industries Co. Ltd, ("Zunyi") and Jiahong Gas Co.,
Ltd. ("Jiahong"), both registered under the Chinese laws in the Peoples Republic
of China, Guizhou Province.
Business of the Issuer
----------------------
Through DBA agreements with Zunyi and Jiahong, Largo Vista is engaged in the
business of purchasing and reselling liquid petroleum gas ("LPG") in the retail
and wholesale markets to both residential and commercial consumers. Largo Vista
operated a storage depot and has an office headquarters in the City of Zunyi.
Largo Vista has found the storage depot operations to be unprofitable; and
therefore has terminated those operations in order to concentrate its resources
on supplying LPG in bottles and through pipelines.
In February 2002, Largo Vista's China operations entered into an agreement with
the Zunyi Municipal Government to design and install LPG pipeline systems in
residential areas in the city of Zunyi. In exchange for installing the pipeline,
the agreement provides for the Largo Vista to be the sole LPG supplier for those
households for 40 years. Largo Vista substantially completed the installation of
the LPG pipeline in 2002 and continues to operate the pipeline.
3
In May 2003, Largo Vista's China operations entered into its second agreement
with Zunyi Municipal Government to design and install more LPG pipeline systems
in residential areas in the city of Zunyi, China. The pipeline project has not
been completed and was delayed due to lack of funding from the Government.
Largo Vista continues to engage in the petroleum supply business in Vietnam.
In addition, Largo Vista has two representative offices in the Far East area,
one in Wuhan, China and another in Ho Chi Minh City, Vietnam, to supervise LPG
and gasoil trading operations in China and Vietnam, respectively. Largo Vista
continues to evaluate the acquisition of other possible business opportunities
in the Far East.
Organizational Chart
--------------------
Largo Vista Group, Ltd. (LVG)
Owns 100% of Largo Vista Inc.
No current operations
Owns 100% of Largo Vista International Corp.
No current operations
Owns 100% of Largo Vista Construction Inc.
No current operations
Principal Products and Their Markets
------------------------------------
The Product
-----------
LPG is used by about 500 million people worldwide. As a form of energy, it is
considered a very efficient fuel. Its liquid state 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 and can
therefore replace wood, kerosene, coal and other environmentally unfriendly
sources of energy. Environmental concerns have caused the outlaw of the use of
coal in most of the larger cities in China. Since LPG is 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 wood and coal all their lives, primarily for
cooking. They are, however, beginning to realize the ease and convenience of
using LPG for cooking and heating water. Most consumers obtain LPG in 15kg.
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.
4
MARKETS:
The China market is broken down in two ways for purposes of analysis:
1. Distribution
2. Method of delivery to the consumer, and
The first way to view the market is through the distribution method; that is,
either retail-direct or wholesale-indirect. Retail distribution is accomplished
by the three major LPG companies that deal directly with the end user. In Zunyi,
Largo Vista distributes to both retail and wholesale customers, and to both
residential and commercial users. Retail customers, however, are far more
profitable for the Company than wholesale because sales prices are higher and
there are no middleman costs. The Company is implementing strategies to develop
and expand the retail customer base.
The second way to view the market is through the method of delivery to the user;
such as by bottle or cylinder, by pipeline, or by tank truck.
The bottle users may be either retail, purchasing directly from a major LPG
company, or wholesale, purchasing from a distributor of a major LPG company.
Bottle customers purchase LPG in 15 kg. cylinders or bottles that must, by law,
be filled to a minimum of 13.5 kg, which is considered full. Bottle users
include residential and commercial customers. Residential consumption is by far
the largest, with commercial restaurants and caterers following second. There
has been little industrial use of LPG to date.
Pipeline users are considered retail-direct users. LPG flows directly into
household via pipes from a central storage tank that is replenished when
necessary by a major LPG company. Pipeline users are billed according to usage
based on a meter in their living unit. Management is pursuing a policy of
expanding into this arena due to the fact that once the retail customer is
captured via a pipeline connection, they will remain a profit center for the
Company. Also, the usage by a pipeline customer is expected to be greater than a
bottle retail customer because of the expanding uses of LPG, such as heating of
the residence.
Tank truck or bulk sales are made to wholesale distributors who operate small
bottle filling stations. These distributors represent lower profit margins, but
sheer volume of distribution 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.
LPG consumption in China has been growing at a remarkable rate since the
beginning of 1990's. In 1990, LPG consumption was slightly over 2 million tons,
while in 1996, nearly 7.4 million tons. The average annual growth rate in this
period was more than 20% and growth from 1994 to 1995 reached almost 33%. Even
though LPG consumption has been developing very fast in the past decade, LPG
consumption per capita is small in comparison to its Asian neighbors
5
consumption, 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 35kg. East China follows with a per capita
consumption of about 10kg. North China is far less, only half of that in East
China. In many places inland, the LPG consumption per capita is negligible.
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 waiting
for LPG service. More efficient distribution methods are also needed. The bottle
exchange system is labor intensive, a factor that currently does not
significantly affect overhead; but will have greater future impact as salaries
increase.
Distribution of LPG via pipelines directly to end-users is very efficient; but
one drawback is the cost to install pipeline service to each household, which is
approximately $185.00 US per household. 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. Most customers, however, cannot
afford the up-front fee; but are willing and able to pay extra each month based
on usage. Largo Vista has a number of pipeline projects in various planning or
construction phases and it is management's belief that this area is one of the
most profitable in the long term. In December, 2002 Largo Vista completed its
first pipeline project and signed a long term service contract to maintain and
supply LPG to its customers along the pipeline.
Distribution of LPG
-------------------
There are four primary 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. They
have railroad tank cars and storage depots. They typically serve over 10,000
retail customers. These companies depend on distribution networks to get LPG to
the consumers.
6
Major distributors are licensed by major LPG companies and generally serve more
than 4,000 but less than 10,000 customers directly. They do not typically have
any railroad tank cars, and have little or no storage capacity.
Medium distributors are also licensed by major LPG companies, generally serve
more than 1,500 but less than 4,000 customers directly and do not have any
storage capacity.
Small independent distributors are those who may or may not be licensed, do not
have any relationship or loyalty to any major oil company or distributor and
usually serve less than 1,500 customers.
Since all of these distributors serve a customer base, Zunyi is actively
recruiting them on an ongoing basis.
The majority of Largo Vista's customer base is serviced with the help of agents
and entity users. Largo Vista has a number of 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 who also desired to
provide a convenience to their workers by distributing LPG as an additional
service. These entity users developed into 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.
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.
When purchasing LPG, Largo Vista 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.
Cost of goods can fluctuate widely and rapidly and can cause cash flow problems.
7
Competition
-----------
The LPG industry in the city of Zunyi, Guizhou Province, consists of three major
LPG companies with storage facilities that sell LPG in both the retail and
wholesale markets. All three companies depend on a network of distributors to
help reach and service the needs of their customers. Two are privately owned and
operated and the other is state owned. Competition is based principally on price
and service; however relationship and reputation are also important to consumers
of LPG.
LPG retail market prices have been relatively unstable during recent years,
characterized by oversupply and cutthroat competition.
In the residential wholesale market, many independent "black market" dealers
have been operating without a license, and have ignored safety regulations.
Another flagrant violation of consumer fairness is the practice of short-filling
bottles. The "black market" dealer typically will fill a bottle with 10kg of
LPG, representing that it has 13.5kg of LPG. Short filling has permitted the
Company's competition to charge lower prices and unfairly compete with Largo
Vista. This practice of cheating the consumer has been prevalent over the past
several years. Largo Vista challenges customers to be aware of what they are
paying for by implementing of a "weight comparison program." The program permits
the consumer to weigh their bottles to expose the "short-fill" problem.
Largo Vista competes with others on both reputation and service. To
differentiate itself from its competition, Largo Vista stresses a long-term
relationship both with the residential user and with the distributor to help
them bring in and keep new customers. Its reputation is excellent and is backed
up by a record of good service, with the understanding that Largo Vista can be
relied upon to deliver honest weights and measures.
Governmental Regulation
-----------------------
Largo Vista's operations in China are regulated on a day-to-day basis by the
Zunyi municipal government, which oversees all companies licensed to do business
and enforces rules and regulations in the market place. The Zunyi government
faces many problems in this rapidly emerging chaotic market including the
existence of many unlicensed small distributors, violations of safety
regulations and short filled bottles. Local government is working to correct
some of these more flagrant violations.
Patents, Trademarks & Licenses
------------------------------
The Company does not currently own any patents or trademarks.
8
Employees
---------
Largo Vista has no employees in the United States and relies on outside
consultants for legal, accounting and organizational services as needed.
Operations in Zunyi, Wuhan and Ho Chi Minh City have a total of 35 employees,
including management, all of whom are full-time employees.
ITEM 1A. CAUTIONARY STATEMENTS REGARDING FUTURE RESULTS, FORWARD-LOOKING
INFORMATION AND CERTAIN IMPORTANT FACTORS
Largo Vista makes written and oral statements from time to time regarding its
business and prospects, such as projections of future performance, statements of
management's plans and objectives, forecasts of market trends, and other matters
that are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements containing the words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimates," "projects," "believes,"
"expects," "anticipates," "intends," "target," "goal," "plans," "objective,"
"should" or similar expressions identify forward-looking statements, which may
appear in documents, reports, filings with the Securities and Exchange
Commission, news releases, written or oral presentations made by officers or
other representatives made by Largo Vista to analysts, stockholders, investors,
news organizations and others, and discussions with management and other
representatives of Largo Vista. For such statements, Largo Vista claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Largo Vista's future results, including results related to forward-looking
statements, involve a number of risks and uncertainties. No assurance can be
given that the results reflected in any forward-looking statements will be
achieved. Any forward-looking statement made by or on behalf of Largo Vista
speaks only as of the date on which such statement is made. Largo Vista's
forward-looking statements are based upon assumptions that are sometimes based
upon estimates, data, communications and other information from suppliers,
government agencies and other sources that may be subject to revision. Except as
required by law, Largo Vista does not undertake any obligation to update or keep
current either (i) any forward-looking statement to reflect events or
circumstances arising after the date of such statement, or (ii) the important
factors that could cause Largo Vista's future results to differ materially from
historical results or trends, results anticipated or planned by Largo Vista, or
which are reflected from time to time in any forward-looking statement which may
be made by or on behalf of Largo Vista.
In addition to other matters identified or described by Largo Vista from time to
time in filings with the SEC, there are several important factors that could
cause Largo Vista's future results to differ materially from historical results
or trends, results anticipated or planned by Largo Vista, or results that are
reflected from time to time in any forward-looking statement that may be made by
or on behalf of Largo Vista. Some of these important factors, but not
necessarily all important factors, include the following:
9
Largo vista has a history of losses, expects to incur additional losses and may
never achieve profitability. During Largo Vista's fiscal year ended December 31,
2003, the Company generated only $548,304 of revenue and realized a net loss
$496,752. Largo Vista has yet to generate profits from operations and
consequently is unable to predict with any certainty whether its operations will
become a commercially viable business. In order for Largo Vista to become
profitable, it will need to generate and sustain a significant amount of revenue
while maintaining reasonable cost and expense levels.
Largo vista may require additional capital in order to meet its projected
operatinig costs and, if necessary, to finance future losses from operations as
it endeavors to build revenue, but largo vista does not have any commitments to
obtain such capital and cannot assure you that it will be able to obtain
adequate capital as and when required. Should Largo Vista be required to sell
additional equity securities or additional debt securities convertible into
equity, there will be additional dilution to Largo Vista's shareholders.
Largo vista is dependant on the stability of economic relations with the
people's republic of china for its current revenues. Nearly all of Largo Vista's
current revenues are generated in China. Largo Vista cannot predict or guarantee
the stability of economic relations with China; and, therefore the operations of
Largo Vista are subject to disruption from a number of political and economic
causes.
Largo vista is owed a substantial portion of its accounts receivable from the
single source of the government of the city of zunyi, china. Pursuant to the its
agreement with Largo Vista in February 2002, the government of Zunyi is
obligated to pay to Largo Vista 50% of the total contracted installation price,
or $154,438, based on the completion of the pipeline project in 2002. Largo
Vista recognized the $154,438 as revenue and charged to expense the direct and
indirect design and installation costs incurred by the Company for the pipeline
project. The Zunyi government also has an obligation to collect the remaining
50% of contract price from the households obtaining LPG from the pipeline on
behalf of the Company. Management determined that the collectibility and length
of time to collect the amount due can not be reasonably assured. Accordingly,
revenues are recognized as collected for the project. During the year ended
December 31, 2003, the Company received and recognized additional $44,807 of
revenue in connection with the project. In May 2003, the Company entered into
its Second Agreement ("Second Agreement") with Government to design and install
more LPG pipeline systems in residential areas in the city of Zunyi, China.
Pursuant to the Second Agreement, Government is obligated to pay to the Company
50% of the total contract price, or $87,258, within seven days the Second
Agreement was entered into. As of December 31, 2003, the Company has not
received any payments from Government and has decided to delay the installation
of pipelines until full or partial payments are received.
Should largo vista choose to grow through acquisitions, it will experience the
uncertainties associated with such a strategy. As part of Largo Vista's business
strategy in the future, Largo Vista could acquire assets and businesses relating
to or complementary to its operations. Any acquisitions by Largo Vista would
involve risks commonly encountered in acquisitions of companies. These risks
would include, among other things, the following: Largo Vista could be exposed
10
to unknown liabilities of the acquired companies; Largo Vista could incur
acquisition costs and expenses higher than it anticipated; fluctuations in Largo
Vista's quarterly and annual operating results could occur due to the costs and
expenses of acquiring and integrating new businesses or technologies; Largo
Vista could experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; Largo Vista's ongoing business could
be disrupted and its management's time and attention diverted; Largo Vista could
be unable to integrate successfully.
Item 2. DESCRIPTION OF PROPERTY
Largo Vista
-----------
Largo Vista has corporate offices in Newport Beach, California. The base rent is
$550 per month on a month-to-month lease.
Wuhan Representative Office
---------------------------
Largo Vista maintains a representative office in Wuhan, Hubei Province, China,
which include three offices and access to common areas. The facilities are
leased from Proton Enterprises. The lease has been renewed for three years
beginning January 2004, for approximately $480 per month.
Ho Chi Minh City Representative Office
--------------------------------------
Largo Vista maintains a representative office in Ho Chi Minh City, Vietnam,
which includes an open office type environment. The terms of this Lease are for
month to month at approximately $500 per month.
Zunyi
-----
Largo Vista, through a contract agreement with Jiahong Gas Co., Ltd., operated
its primary service from its depot located in the City of Zunyi, Guizhou
Province. The depot includes 500 cubic meter storage facilities, fueling
workshops, bottle testing center and office buildings. The facility was under
lease for five years, beginning in August 2002, at approximately $18,116 per
year payable in monthly installments. Largo Vista has found the storage depot
operations to be unprofitable; and therefore has terminated those operations in
order to concentrate its resources on supplying LPG in bottles and through
pipelines. This will reduce the annual facilities cost by approximately $18,000.
In addition, Largo Vista, through a contract agreement with the City of Zunyi
operates a pipeline supplying LPG to approximately 1,000 customers. The service
contract is for 40 years beginning in December, 2002. Largo Vista enjoys the
service contract at no lease cost throughout the period due to Largo Vista's
investment in (and subsequent recovery of) the cost of the related pipeline
installation.
11
Item 3. LEGAL PROCEEDINGS
At present, there are no outstanding lawsuits or claims known against our
Company and its subsidiaries.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the OTC Bulletin Board under the symbol
LGOV.
The following table sets forth the range of high and low bid information for the
Company's common stock for each quarterly period in 2003 and 2002. These
quotations are believed to be representative inter-dealer prices, without retail
mark-up, markdown or commission, and may not represent actual transactions.
Bid
High Low
---- ---
4th Quarter 2003 $ 0.03 $ 0.01
3rd Quarter 2003 $ 0.04 $ 0.02
2nd Quarter 2003 $ 0.05 $ 0.01
1st Quarter 2003 $ 0.03 $ 0.01
4th Quarter 2002 $ 0.06 $ 0.02
3rd Quarter 2002 $ 0.08 $ 0.04
2nd Quarter 2002 $ 0.27 $ 0.06
1st Quarter 2002 $ 0.19 $ 0.04
As of April 14, 2004, the Company had approximately 687 shareholders of record.
We have never paid a cash dividend and do not anticipate doing so in the
foreseeable future.
Recent sales of unregistered securities:
The company issued unregistered shares of its common stock from January 1, 2002
to December 31, 2003 as follows:
12
Fiscal 2002, a total of 5,545,585 shares of common stock valued at $368,312 and
in fiscal 2003, a total of 17,634,669 shares of common stock valued at $314,767
as follows:
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued To Whom Issued Consideration
------- ------ -------------- -------------
Issued to officers as
compensation:
2002:
1st Quarter 408,263 Deng Shan 25,000
1,200,000 (S8 Option) Daniel Mendez 33,104
2nd Quarter 338,158 Deng Shan 33,334
925,000 (S8 Option) Daniel Mendez 43,557
277,572 (S8 Option) Albert Figueroa 14,731
3rd Quarter 333,334 Deng Shan 16,983
785,000 (S8 Option) Daniel Mendez 20,526
550,000 (S8 Option) Albert Figueroa 14,757
4th Quarter 175,057 Deng Shan 8,016
2003:
1st Quarter 902,771* Deng Shan 25,000*
2nd Quarter None Issued
3rd Quarter 916,666 Albert Figueroa 17,500
4th Quarter None Issued
*Accrual from 4th quarter of 2002
13
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued To Whom Issued Consideration
------- ------ -------------- -------------
Issued to consultants for
services:
2002:
1st Quarter 369,753 Harold Mclenden 22,500
290,589 Li Chuming 17,500
214,286 Danny Nguyen 15,000
1,200,000 Steve Chaussy 35,507
2nd Quarter 356,796 Li Chuming 31,000
304,341 Danny Nguyen 30,000
925,000(S8 Option) Steve Chaussy 46,524
3rd Quarter 188,726 Harold Mclenden 10,000
272,059 Li Chuming 15,000
356,426 Danny Nguyen 17,821
664,000(S8 Option) Steve Chaussy 17,785
4th Quarter 163,043 Harold Mclenden 7,500
163,043 Li Chuming 7,500
189,726 Danny Nguyen 9,486
2003:
1st Quarter 662,823 Harold Mclenden 22,500
662,823 Li Chuming 22,500
812,500 Danny Nguyen 22,500
1,400,000 Steve Chaussy 21,000
2nd Quarter None Issued
3rd Quarter 1,650,000 Harold Mclenden 31,500
1,045,000 Li Chuming 19,500
2,566,666 Danny Nguyen 49,000
584,746 Steve Chaussy 10,500
916,666 Daniel Mendez 17,500
4th Quarter None Issued
14
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued To Whom Issued Consideration
------- ------ -------------- -------------
Issued to service
providers for past
services:
2002:
1st Quarter 253,396 James DeOlden 15,000
426,098 Hoa Thi Nguyen 21,305
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued To Whom Issued Consideration
2nd Quarter 200,795 James DeOlden 20,000
23,810 Michael Rubino 4,937
3rd Quarter 176,923 James DeOlden 10,000
2003:
1st Quarter None Issued
2nd Quarter 4,500,000 Danilo Cacciamatta 45,000
1,000,000 Marcia Hein 10,000
171,875(S8 Option) James DeOlden 2,750
280,875(S8 Option) Edward Deese 4,494
3rd Quarter None issued
4th Quarter None issued
Issued as loans to officers:
2002:
1st Quarter 1,200,000(S8 Option) Albert Figueroa 35,635
2nd Quarter 647,458(S8 Option) Albert Figueroa 34,365
3rd Quarter None issued
4th Quarter None issued
15
Number of Dollar
Common Shares Name of Persons Amount of
Quarter Issued To Whom Issued Consideration
------- ------ -------------- -------------
2003: None issued
Issued to officers and
shareholders for
reimbursement of
cash advances:
2002:
2nd Quarter 856 Daniel Mendez 77
101,459 Albert Figueroa 9,131
124,622 Steve Chaussy 11,216
162,752 Danny Nguyen 13,178
3rd Quarter 142,857 Danny Nguyen 10,000
2003:
1st Quarter None issued
2nd Quarter None issued
3rd Quarter 14,002 Steve Chaussy 316
4th Quarter None issued
All stock issuances were conducted pursuant to section 4(2) under the 1933 Act
without the involvement of underwriters. Stock issuances other than for cash
were valued at market, generally determined by the low bid quotation.
16
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Regarding Forward-Looking Information:
-----------------------------------------------------------
The following is a discussion of the financial condition and results of
operations of the Company as of the date of this Annual Report. This discussion
and analysis should be read in conjunction with the accompanying audited
Consolidated Financial Statements of the Company including the Notes thereto
which are included elsewhere in this Form 10-KSB.
Overview
--------
Largo Vista is in the business of supplying liquid petroleum gas (LPG) through
pipelines and in bottles to consumers in the People's Republic of China. Largo
Vista constructed and operates a LPG pipeline in the City on Zunyi, China. In
addition, Largo Vista continues to pursue the supply of petroleum products in
Viet Nam through a representative office located there.
Basis of Presentation
---------------------
The accompanying consolidated financial statements, included elsewhere in this
Annual Report on Form 10-KSB, have been prepared in conformity with accounting
principles generally accepted in the United States of America, which contemplate
continuation as a going concern. Largo Vista has incurred a net loss of $496,752
for the year ended December 31, 2003 and as of December 31, 2003, had a working
capital deficiency of $813,608. In addition, as of December 31, 2003, Largo
Vista had not developed a substantial source of revenue.
These conditions raise substantial doubt as to Largo Vista's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty. These financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should Largo Vista be unable to continue as
a going concern.
Critical Accounting Policies and Estimates
------------------------------------------
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and judgments that affect our reported assets, liabilities, revenues, and
expenses, and the disclosure of contingent assets and liabilities. We base our
estimates and judgments on historical experience and on various other
assumptions we believe to be reasonable under the circumstances. Future events,
however, may differ markedly from our current expectations and assumptions.
While there are a number of significant accounting policies affecting our
consolidated financial statements; we believe the following critical accounting
policies involve the most complex, difficult and subjective estimates and
judgments:
o Stock-based compensation.
o Revenue recognition
17
Stock-Based Compensation
------------------------
In December 2002, the FASB issued SFAS No. 148 - ACCOUNTING FOR STOCK-BASED
COMPENSATION - TRANSITION AND DISCLOSURE. This statement amends SFAS No. 123 -
Accounting for Stock-Based Compensation, providing alternative methods of
voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.
The Company elected to continue to account for stock-based compensation plans
using the intrinsic value-based method of accounting prescribed by APB No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.
Revenue Recognition
-------------------
For revenue from product sales, the Company recognizes revenue in accordance
with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
The Company generally recognizes revenue upon delivery of LPG to the customer.
Revenue associated with shipments of petroleum products is recognized when title
passes to the customer. There are no significant credit transactions.
For the year ended December 31, 2003 and 2002, the Company entered into
Agreements ("Agreements") with Zunyi Municipal Government ("Government") to
design and install LPG pipeline systems in residential areas in the city of
Zunyi, China on behalf of Government. In exchange for installing the pipeline,
the Agreements provide for the Company to be the sole LPG supplier for those
households. The Company's management however, has determined that the
collectibility and length of time to collect the amounts due can not be
reasonably assured. Accordingly, revenues are recognized as collected in
connection with the Agreement.
18
Results of Operations
---------------------
The following selected financial information has been derived from the Company's
consolidated financial statements. The information set forth below is not
necessarily indicative of results of future operations and cash flows and should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this Form 10-KSB.
The Company's 2003 revenues of $548,304 are attributable to liquid petroleum gas
sales at its Zunyi facility located in South China. This is a 1% decrease from
the revenues of $554,914 from substantially the same operations in 2002.
Management believes that the revenues from these operations will remain stable
or increase in 2004, and that revenues from other sources will be added to it.
The Company incurred costs of sales of $483,059, or 88.1% of sales in connection
with the LPG revenues during 2003, compared to $518,775, or 93.5% in 2002. This
slight decrease can be attributed to fluctuation in the cost of LPG supplies.
This resulted in an increase in gross profit from 6.5% in 2002 to 11.9% in 2003.
Selling and administrative expenses decreased from $1,365,755 during 2002 to
$647,538 during 2003, a decrease of 52.6%. This substantial decrease was due
primarily to the reduction in overhead positions. Largo Vista continues to
operate in that mode and plans to continue to do so until it becomes profitable.
Interest expense increased to $31,224 in 2003 from $12,668 during 2002 as a
result of incurring debt to sustain operations.
As the result of Largo' Vista's substantial cost cutting, its net loss from
operations decreased to $496,752, or 91%, in 2003 from $1,345,204, or 242% in
2002.
Currency Consideration
----------------------
The Company's LPG operations are conducted in the People's Republic of China
whose currency, the Renminbi (RMB), is pegged to the US Dollar. The exchange
rate as of December 31, 2003 and 2002 and the average rate during each of the
periods presented in the accompanying consolidated financial statements was 8.28
RMBs to one US Dollar. No representation is made that any RMB amount could have
been, or could be, converted into US dollars at these rates or any other rates
of exchange.
Liquidity and Capital Resources
-------------------------------
As of December 31, 2003, the Company had a working capital deficit of $813,608.
As a result of our operating losses, we generated a cash flow deficit of
$136,898 from operating activities during 2003. We met our cash requirements
during the year primarily through advances, loans and contributions of $133,847
from the Company's Chairman and principal shareholder and officers.
19
The Company has experienced significant operating losses from inception and has
financed its activities to date through cash advances from affiliates and sales
of its common stock. Availability, source, amount and terms of any additional
financing are uncertain at this time, and by no means assured.
The Company believes it will require at least an additional $1,000,000 of new
capital in order to fund its plan of operations over the next 12 months. The
Company expects to fund its working capital requirements over the next 12 months
from additional advances from its affiliates and the sale of its common stock.
The Company's independent certified public accountants have stated in their
report included in the Company's December 31, 2003 Form 10-KSB, that the Company
has incurred operating losses and that the Company is dependent upon
management's ability to develop profitable operations. These factors among
others may raise substantial doubt about the Company's ability to continue as a
going concern.
Recent accounting pronouncements
--------------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Company's results of operations or financial
position.
20
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 will not have a material impact on the Company's
results of operations or financial position.
In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88, AND 106. This statement retains the disclosure
requirements contained in FASB statement no. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures to those in the original statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The required
information should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first fiscal or
annual interim period ending after December 15, 2003 for domestic pension plans
and June 15, 2004 for foreign pension plans and requires certain new disclosures
related to such plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.
Off-Balance Sheet Arrangements
------------------------------
Largo Vista currently has no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on its financial condition,
revenue or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.
21
ITEM 7. FINANCIAL STATEMENTS
LARGO VISTA GROUP, LTD.
INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets at December 31, 2003 and 2002 F-4
Consolidated Statements of Operations for the years
ended December 31, 2003 and 2002 F-5
Consolidated Statements of Deficiency in Stockholders' Equity for
the years ended December 31, 2003 and 2002 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 2003 and 2002 F-7
Notes to Consolidated Financial Statements F-8~F-18
22
RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors
Largo Vista Group, Ltd.
Newport Beach, California
We have audited the accompanying consolidated balance sheets of Largo
Vista Group, Ltd. and its wholly-owned subsidiaries (the "Company") as of
December 31, 2003 and 2002 and the related consolidated statements of
operations, deficiency in stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2003 and 2002, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
L, the Company has incurred losses from operations during the years ended
December 31, 2003 and 2002 of $496,752 and $1,345,204, respectively and has an
accumulated deficit of $16,120,525 as of December 31, 2003, which raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
--------------------------------------------
Russell Bedford Stefanou Mirchandani LLP
Certified Public Accountants
McLean, Virginia
April 29, 2004
F-3
LARGO VISTA GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
ASSETS
Current Assets:
Cash and cash equivalent $ 7,874 $ 11,174
Accounts receivable, net 53,291 154,438
Employee advances 49,091 -
Inventories, at cost (Note B) 11,990 2,630
Prepaid expenses and other 33,304 48,810
------------- -------------
Total Current Assets 155,550 217,052
Property, plant and equipment, at cost (Note C) 16,221 15,972
Less: accumulated depreciation (6,226) (3,132)
------------- -------------
9,995 12,840
Other assets:
Deposits 755 -
$ 166,300 $ 229,892
============= =============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities (Note D) $ 392,694 $ 421,280
Deferred revenue (Note A) 5,888 -
Notes payable to related parties (Note E) 449,782 473,938
Due to related parties (Note F) 120,794 74,511
------------- -------------
Total Current Liabilities 969,158 969,729
Commitment and contingencies (Note K) - -
Preferred stock, $0.001 par value; 25,000,000 shares authorized, none
issued and outstanding at December 31, 2003 and 2002 (Note G) - -
Common stock, $0.001 par value; 400,000,000 shares authorized,
264,615,280 and 246,527,861 shares issued and outstanding at
December 31, 2003 and 2002, respectively (Note G) 264,615 246,528
Additional paid-in capital 15,049,352 14,633,708
Accumulated deficit (16,120,525) (15,623,773)
Foreign currency translation adjustment 3,700 3,700
------------- -------------
Deficiency in stockholders' equity (802,858) (739,837)
$ 166,300 $ 229,892
============= =============
See accompanying notes to consolidated financial statements
F-4
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
Revenue, net $ 548,304 $ 554,914
Cost of sales 483,059 518,775
-------------- --------------
Gross profit 65,245 36,139
Operating expenses:
Selling, general and administrative 647,538 1,365,755
Depreciation (Note C) 3,094 2,920
-------------- --------------
650,632 1,368,675
Loss from operations (585,387) (1,332,536)
Other income, net (Note K) 11,859 -
Debt forgiveness (Note D) 108,000 -
Interest expense, net (31,224) (12,668)
-------------- --------------
Loss from operations before income taxes (496,752) (1,345,204)
Income taxes - -
-------------- --------------
Net loss $ (496,752) $ (1,345,204)
============== ==============
Loss per common share (basic and assuming diluted) (Note J) $ (0.00) $ (0.01)
============== ==============
Weighted average shares outstanding 257,506,361 241,841,014
See accompanying notes to consolidated financial statements
F-5
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
Foreign
Preferred Additional Currency
Preferred Stock Common Common Stock Paid-In Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
------ ------ ------ ------ ------- ------- ---------- -----
BALANCE AT DECEMBER 31, 2001 -- $ -- 232,175,730 $ 32,176 $ 13,555,870 $(14,278,569) $ 3,700 $ (486,823)
======== ======== ============= ========= ============= ============= ========= =============
Shares issued in exchange for services -- -- 5,545,585 5,546 362,766 -- -- 368,312
Shares issued in exchange for employee
stock options exercised -- -- 8,374,000 8,374 611,902 -- -- 620,276
Shares issued in exchange for debt -- -- 432,546 432 43,170 -- -- 43,602
Capital contributed by related parties
(Note F) -- -- -- -- 60,000 -- -- 60,000
Net loss -- -- -- -- -- (1,345,204) -- (1,345,204)
-------- -------- ------------- --------- ------------- ------------- --------- -------------
BALANCE AT DECEMBER 31, 2002 -- $ -- 246,527,861 $ 46,528 $ 14,633,708 $(15,623,773) $ 3,700 $ (739,837)
======== ======== ============= ========= ============= ============= ========= =============
Shares issued in exchange for services -- -- 18,051,730 18,052 303,296 -- -- 321,348
Shares issued in exchange for debt -- -- 17,635 17 306 -- -- 323
Shares issued in exchange for expenses
paid by shareholders -- -- 18,054 18 322 -- -- 340
Capital contributed by related parties
(Note F) -- -- -- -- 111,720 -- -- 111,720
Net loss -- -- -- -- -- (496,752) -- (496,752)
-------- -------- ------------- --------- ------------- ------------- --------- -------------
BALANCE AT DECEMBER 31, 2003 -- $ -- 264,615,280 $ 64,615 $ 15,049,352 $(16,120,525) $ 3,700 $ (802,858)
======== ======== ============= ========= ============= ============= ========= =============
See accompanying notes to consolidated financial statements
F-6
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from operations $ (496,752) $(1,345,204)
Adjustments to reconcile net (loss) to net cash used by operating
activities
Depreciation (Note C) 3,094 2,920
Common stock issued for services rendered (Note G) 321,348 693,097
Common stock issued in exchange for debt and expenses paid by
shareholders (Note G) 663 43,602
Changes in assets and liabilities:
Accounts receivable 101,147 (151,648)
Inventories (9,360) 57,324
Employee advances (49,091) --
Prepaid expenses and other 14,751 3,212
Accounts payable and other liabilities (28,586) 145,422
Deferred revenue (Note A) 5,888 --
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES (136,898) (551,275)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (249) (1,545)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (249) (1,545)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock options exercised (Note G) -- 295,491
Capital contributions from related parties (Note F) 111,720 60,000
Proceeds from (repayments of) notes payable (24,156) 65,856
Proceeds from (repayments to) related parties advances 46,283 43,302
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 133,847 464,649
NET (DECREASE) IN CASH AND EQUIVALENTS (3,300) (88,171)
Cash and cash equivalents at the beginning of the year 11,174 99,345
------------ ------------
Cash and cash equivalents at the end of the year $ 7,874 $ 11,174
============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $ -- $ 1,740
Income taxes paid -- --
Common stock issued for services rendered (Note G) 321,348 693,097
Common stock issued in exchange for debt and expenses paid by
shareholders (Note G) 663 43,602
See accompanying notes to consolidated financial statements
F-7
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Business and Basis of Presentation
----------------------------------
Largo Vista Group, Ltd. (the "Company") was incorporated under the laws of the
State of Nevada. The Company is principally engaged in the distribution of
liquid petroleum gas (LPG) in the retail and wholesale markets in South China
and in the purchase of petroleum products for delivery to the Far East.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Largo Vista, Inc., Largo Vista Construction,
Inc., and Largo Vista International Corp. Largo Vista, Inc. is formed under the
laws of the State of California and is inactive. Largo Vista Construction, Inc.
is formed under the laws of the State of Nevada and is inactive. Largo Vista
International Corp. is formed under the laws of Panama and is inactive. The
Company also has operations through DBA (Doing Business As) agreements with
Zunyi Shilin Xinmao Petrochemical Industries Co., Ltd. ("Zunyi") and Jiahong Gas
Co., Ltd. ("Jiahong"). Zunyi and Jiahong are both registered under the Chinese
laws in the Peoples Republic of China.
All significant intercompany balances and transactions have been eliminated in
consolidation. All amounts in these consolidated financial statements and notes
thereto are stated in United States dollars unless otherwise indicated.
Foreign Currency Translation
----------------------------
The financial statements and results of operations of the Company's Chinese
subsidiary are measured using local currency as the functional currency. The
reporting currency of the Company is the US dollar; accordingly, all amounts
included in the consolidated financial statements have been translated into US
dollars. The accumulated currency translation adjustment is reflected as a
separate component of stockholders' equity on the consolidated balance sheet.
Foreign currency translation gains and losses are included in the consolidated
results of operations for the period presented. The national currency of the
People's Republic of China, the Renminbi (RMB), is pegged to the U.S. dollar.
The average rate of exchange for fiscal 2003 and 2002 was 8.28 RMB to the
dollar.
Cash and Cash Equivalents
-------------------------
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Property and Equipment
----------------------
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets. (See Note
C).
F-8
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
-----------------
The Company has adopted Statement of Financial Accounting Standards No. 144
("SFAS 144"). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undercounted cash flows. Should an impairment in value be indicated,
the carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. SFAS No. 144 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.
Inventories
-----------
Inventories consist primarily of LPG. Cost is determined by the first-in,
first-out method for retail operations and specific identification method for
wholesale operations. (See Note B).
Income Taxes
------------
The Company has implemented the provisions on Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
that income tax accounts be computed using the liability method. Deferred taxes
are determined based upon the estimated future tax effects of differences
between the financial reporting and tax reporting bases of assets and
liabilities given the provisions of currently enacted tax laws.
Net Earnings (Losses) Per Common Share
--------------------------------------
The Company computes earnings per share under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). Net earnings (losses) per
common share is computed by dividing net income (loss) by the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding during the year. Dilutive common stock equivalents consist of shares
issuable upon conversion of convertible preferred shares and the exercise of the
Company's stock options and warrants (calculated using the treasury stock
method).
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
F-9
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
-------------------
For revenue from product sales, the Company recognizes revenue in accordance
with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
The Company generally recognizes revenue upon delivery of LPG to the customer.
Revenue associated with shipments of petroleum products is recognized when title
passes to the customer. There are no significant credit transactions.
In February 2002, the Company entered into an agreement ("Agreement") with Zunyi
Municipal Government ("Government") to design and install LPG pipeline systems
in residential areas in the city of Zunyi, China on behalf of Government. In
exchange for installing the pipeline, the Agreement provides for the Company to
be the sole LPG supplier for those households. The Company substantially
completed the installation of the LPG pipeline in 2002. Pursuant to the
Agreement, Government is obligated to pay to the Company 50% of the total
contracted installation price, or $154,438. The Company recognized the $154,438
as revenue and charged to expense the direct and indirect design and
installation costs of $165,772 incurred by the Company for the pipeline project.
Under the Agreement, the Government also has an obligation to collect the
remaining 50% of contract price from the households on behalf of the Company.
The Company's management however, has determined that the collectibility and
length of time to collect the amounts due can not be reasonably assured.
Accordingly, revenues are recognized as collected in connection with the
Agreement. During the year ended December 31, 2003, the Company received and
recognized $44,807 of installation fees from customers as revenue in connection
with this contract.
In May 2003, the Company entered into its Second Agreement ("Second Agreement")
with Government to design and install more LPG pipeline systems in residential
areas in the city of Zunyi, China on behalf of Government. In exchange for
installing the pipeline, the Second Agreement provides for the Company to be the
sole LPG supplier for those households. Pursuant to the Second Agreement,
Government is obligated to pay to the Company 50% of the total contract price,
or $87,258, within seven days the Second Agreement was entered into. As of
December 31, 2003, the Company has not received any payments from Government and
has decided to delay the installation of pipelines until full or partial
payments are received. Additionally, the Company management determined that the
collectibility and length of time to collect the amounts due can not be
reasonably assured. During the year ended December 31, 2003, the Company did not
recognize revenue in connection with Second Agreement, and the direct and
indirect design and installation costs incurred of $5,484 have been capitalized
until the completion of the installation. The Company received installation fees
of $5,888 from households in connection with the Second Agreement in 2003 and
are accounted for as deferred revenue as of December 31, 2003.
F-10
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
-----------
The Company follows the policy of charging the costs of advertising to expenses
as incurred. The Company incurred no advertising costs during the years ended
December 31, 2003 and 2002.
Research and Development
------------------------
The Company accounts for research and development costs in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs."
Under SFAS 2, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company incurred no
expenditures on research and product development for 2003 and 2002.
Liquidity
---------
As shown in the accompanying financial statements, the Company incurred a net
loss from operations of $496,752 and $1,345,204 during the year ended December
31, 2003 and 2002, respectively. The Company's current liabilities exceeded its
current assets by $813,608 as of December 31, 2003.
Concentrations of Credit Risk
-----------------------------
Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments may be
in excess of the FDIC insurance limit. The Company periodically reviews its
trade receivables in determining its allowance for doubtful accounts. The
allowance for doubtful accounts was $0 at December 31, 2003 and 2002.
Comprehensive Income (Loss)
---------------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes standards for the
reporting and displaying of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. SFAS No. 130
requires other comprehensive income (loss) to include foreign currency
translation adjustments and unrealized gains and losses on available-for-sale
securities.
F-11
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
------------------------
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 ("SFAS No. 148"), "Accounting for Stock-Based Compensation-Transition
and Disclosure-an amendment of SFAS 123." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB Opinion No. 25
and related interpretations. Accordingly, compensation expense for stock options
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of the grant over the exercise price of the related option.
The Company has adopted the annual disclosure provisions of SFAS No. 148 in its
financial reports for the year ended December 31, 2003 and 2002 and will adopt
the interim disclosure provisions for its financial reports for the subsequent
periods. The Company has no awards of stock-based employee compensation
outstanding at December 31, 2003.
Segment Information
-------------------
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision-making group, in making decisions
how to allocate resources and assess performance. The information disclosed
herein materially represents all of the financial information related to the
Company's principal operating segment.
New Accounting Pronouncements
-----------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.
F-12
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
-----------------------------------------
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Company's results of operations or financial
position.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 will not have a material impact on the Company's
results of operations or financial position.
In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88, AND 106. This statement retains the disclosure
requirements contained in FASB statement no. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures to those in the original statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The required
information should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first fiscal or
annual interim period ending after December 15, 2003 for domestic pension plans
and June 15, 2004 for foreign pension plans and requires certain new disclosures
related to such plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.
Reclassifications
-----------------
Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Inventories consist primarily of liquid
petroleum gas available for sale to contract clients and the public. Components
of inventories as of December 31, 2003 and 2002 are as follows:
F-13
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE B - INVENTORIES (CONTINUED)
2003 2002
---- ----
Liquid petroleum gas $10,418 $ 1,463
Packaging bottles 1,204 938
Supplies 368 229
-------- --------
$11,990 $ 2,630
======== ========
NOTE C - PROPERTY, PLANT AND EQUIPMENT
The Company's property and equipment at December 31, 2003 and 2002 consists of
the following:
2003 2002
---- ----
Office furniture and equipment $ 3,542 $ 3,293
Transportation equipment 12,679 12,679
--------- ---------
Total 16,221 15,972
Accumulated depreciation (6,226) (3,132)
--------- ---------
$ 9,995 $ 12,840
========= =========
Depreciation expense included as a charge to income amounted to $3,094 and
$2,920 for the year ended December 31, 2003 and 2002, respectively.
NOTE D - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 2003 and 2002 are as
follows:
2003 2002
---- ----
Accounts payable $297,166 $219,787
Accrued interest 95,528 62,493
Accrued payroll and payroll taxes -- 139,000
--------- ---------
Total $392,694 $421,280
========= =========
During the year ended December 31, 2003, the Company's Chairman and one of its
consultants legally released the Company's obligation for a total of $108,000 of
unpaid service fees. The Company recognized $108,000 of other income in
connection with the extinguishment of the liabilities.
NOTE E - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31, 2003 and 2002 consists of the
following:
2003 2002
---- ----
Note payable on demand to Company consultant; interest payable
Monthly at 7% per annum; unsecured $ 15,000 $ 15,000
Note payable on demand to Company's Chairman; interest payable
Monthly at 7% per annum; unsecured 434,782 458,938
---------- ----------
Total 449,782 473,938
Less: current portion (449,782) (473,938)
---------- ----------
$ -- $ --
========== ==========
F-14
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE F - RELATED PARTY TRANSACTIONS
In addition to notes payable to related parties described in Note E, two
consultants (former officers) of the Company have advanced funds to the Company
for working capital purposes. No formal repayment terms or arrangements exist.
The net amount of advances due the consultants (former officers) at December 31,
2002 was $1,225. During the year ended December 31, 2003, the Company repaid to
the consultants $1,019 in cash and also issued 10,323 shares of its common stock
in exchange for $206 of the advances (Note G).
During the year ended December 31, 2002, a consultant of the Company has
advanced funds to the Company for working capital purposes. No formal repayment
terms or arrangements exist. The net amount of advances due the consultant at
December 31, 2002 was $117. During the year ended December 31, 2003, the Company
issued 7,312 shares of its common stock in exchange for settlement of the
advance (Note G).
A consultant (former employee) of the Company has advanced funds to the Company
as working capital of its Vietnam representative office. No formal repayment
terms or arrangements exist. The net amount of advances due the consultant at
December 31, 2003 and 2002 was $15,078 and $9,269, respectively.
The Company's Chairman has advanced funds to the Company for working capital
purposes. No formal repayment terms or arrangements exist. The net amount of
advances due the chairman at December 31, 2003 and 2002 was $105,716 and
$63,900, respectively.
During the year ended December 31, 2003 and 2002, the Company Chairman and
significant shareholders contributed cash of $111,720 and $60,000, respectively
to the Company as working capital.
NOTE G - CAPITAL STOCK
The Company has authorized 25,000,000 shares of Series A Preferred Stock, with a
par value of $.001 per share. As of December 31, 2003 and 2002, the Company has
no Series A Preferred Stock issued and outstanding. The company has authorized
400,000,000 shares of common stock, with a par value of $.001 per share. As of
December 31, 2003 and 2002, the Company has 264,615,280 and 246,527,861 shares
of common stock issued and outstanding, respectively.
For the year ended December 31, 2002, the Company issued an aggregate of
5,545,585 shares of common stock to consultants for services rendered in the
amount of $368,312. The Company also issued 8,374,000 shares of common stock to
employees in exchange for options exercised for employee compensation of
$295,491 and proceeds of $324,785, net of costs and fees (see Note H). All
valuations of common stock issued for services were based upon the value of the
services rendered, which did not differ materially from the fair value of the
Company's common stock during the period the services were rendered. In
addition, the Company issued an aggregate of 432,546 shares of common stock in
exchange for previously incurred debt of $43,602.
For the year ended December 31, 2003, the Company issued an aggregate of
18,051,730 shares of common stock to consultants for services rendered in the
amount of $321,348. All valuations of common stock issued for services were
based upon the value of the services rendered, which did not differ materially
from the fair value of the Company's common stock during the period the services
were rendered.
F-15
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE G - CAPITAL STOCK (CONTINUED)
In addition, the Company issued an aggregate of 17,635 shares of common stock to
related parties in exchange for previously incurred debt of $323 (see Note F)
and an aggregate of 18,054 shares of common stock in exchange for $340 of office
expenses paid by shareholders.
NOTE H - STOCK OPTIONS
In November 2001, the Board of Directors of the Company implemented a
Non-Qualified Stock Option Plan for Consultants in an amount equal to 5,000,000
shares of common stock and a Qualified Stock Option Plan for Employees in an
amount equal to 10,000,000 shares. In October 2002, the Company's Board of
Directors approved to increase the issuance of Non-Qualified Stock Options to an
amount egual to 25,000,000 shares of common stock.
The stock option plan provides for the issuance of both qualified and
nonqualified incentive stock options at an exercise price approximating 50% of
the fair market value of the Company's common stock on the date of exercise (or
110% of the fair market value of the common stock on the date of the grant of
the option, in the case of significant stockholders). The maximum life of the
options is ten years for both the qualified incentive stock options and
non-qualified incentive stock options. An agrregate of 8,374,000 options were
granted and all options were excerised on the grant date (Note G) during the
year ended December 31, 2002. There are no stock options granted and outstanding
during the year ended December 31, 2003.
NOTE I - INCOME TAXES
The Company has adopted Financial Accounting Standards No. 109, which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
At December 31, 2003, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $16,000,000, expiring in the
year 2023, that may be used to offset future taxable income. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company, it is more likely than not that the benefits will not be realized.
Components of deferred tax assets as of December 31, 2003 are as follows:
Non Current:
Net operating loss carryforward $ 5,500,000
Valuation allowance (5,500,000)
------------
Net deferred tax asset --
F-16
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE J - EARNINGS (LOSSES) PER SHARE
Basic and fully diluted losses per share are calculated by dividing net income
(loss) available to common shareholders by the weighted average of common shares
outstanding during the year. The Company has no potentially dilutive securities,
options, warrants or other rights outstanding. The following table sets forth
the computation of basic and diluted earnings (losses) per share:
2003 2002
---- ----
Net income (loss) available to
common stockholders $ (496,752) $ (1,345,204)
============== ==============
Basic and diluted earning (loss) per share $ (0.00) $ (0.01)
============== ==============
Basic and diluted weighted average
number of common shares outstanding 257,506,361 241,841,014
NOTE K - COMMITMENTS AND CONTINGENCIES
Lease Commitments
-----------------
The Company leases office space on a month-to-month basis at base rent of $550
per month in Newport Beach, California for its corporate offices. The Company
also leases office space on a month to month basis in Ho Chi Minh City, Vietnam
at base rent of $500 per month for an administrative and sales representative.
The Company maintains a representative office in Wuhan, Hubei Province, China.
The lease is for three years beginning January 2001, for approximately $480 per
month.
The Company leases distribution and office facilities in Zunyi City, Province of
Guizhou, China. Commitments for minimum rentals under non-cancelable leases at
the end of 2003 are as follows.
Year Amount
---- ------
2004 18,116
2005 18,116
2006 18,116
2007 10,568
Rental expense charged to operations was $47,995 and $52,972 for the year ended
December 31, 2003 and 2002, respectively.
Sublease Agreement
------------------
The Company leases an office suite on a month-to-month basis at base rent of
$590 per month in Newport Beach, California and subleases the office to a third
party for $2,000 per month starting May 2003. During the year ended December 31,
2003, the Company recorded $11,859 of rentals received as other income, net of
costs and expenses.
F-17
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE K - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Consulting Agreements
---------------------
The Company has several agreements with outside contractors to provide
organizational services, business development in China and Vietnam,
international petroleum, and other products trading consultation services. The
agreements are generally for a term of 12 months from inception and renewable
from year to year unless either the Company or Consultant terminates such
engagement with written notice
Litigation and Contingencies
----------------------------
The Company is subject to other legal proceedings and claims, which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have a material adverse effect on its financial position,
results of operations, or liquidity.
NOTE L - GOING CONCERN MATTERS
The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements during the
years ended December 31, 2003 and 2002, the Company incurred losses from
operations of $496,752 and $1,345,204, respectively. These factors among others
may indicate that the Company will be unable to continue as a going concern for
a reasonable period of time.
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. Management anticipates
the Company will attain profitable status and improve its liquidity through the
continued developing, marketing and selling of its products and additional
equity investment in the Company. The accompanying consolidated financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
In order to improve the Company's liquidity, the Company is actively pursuing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.
F-18
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 8A. Controls and Procedures
Within the 90 days prior to the date of this report, Largo Vista Group, Ltd
carried out an evaluation, under the supervision and with the participation of
Largo Vista's management, including Largo Vista's Interim Chief Executive
Officer and Principal Accounting Officer, of the effectiveness of the design and
operation of Largo Vista's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon that evaluation, the Interim Chief
Executive Officer and Principal Accounting Officer concluded that Largo Vista's
disclosure controls and procedures are effective in timely alerting them to
material information relating to Largo Vista required to be included in Largo
Vista's periodic Securities and Exchange Commission filings. There has been no
significant changes in Largo Vista's internal controls or in other factors that
could significantly affect these controls subsequent to the evaluation date.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position
------- ----- ------------------------------------------
Albert N. Figueroa 37 Director; Principal Accounting Officer
Deng Shan 52 Interim Chief Executive officer and
Chairman of the Board of Directors
Directors serve until the next annual meeting of shareholders, or until their
successors are elected.
Albert N. Figueroa, Secretary and Treasurer, is in charge of day-to-day business
operations of Largo Vista in the United States, as well as being a liaison with
all outside service providers, and generally maintains the consistency of
information within the Company. Mr. Figueroa joined the Company in July 1991.
Deng Shan, Chairman of the Board of Directors, is well versed in the business
practices of China. Early in his career Mr. Deng was a lecturer in Wuhan
Chemical Engineering School. Later he advanced to associate professor at
Huazhong University of Science and Technology. In 1989, Mr. Deng became the
Director, Science and Technology Commission, Nanshan District Government, China.
In 1994, Mr. Deng was appointed Chief Executive Officer/Chairman of the Board of
four commercial companies. Mr. Deng joined the Company in April 1997.
The Company does not have an audit committee and consequently the entire Board
of Directors serves in that capacity. The Board's pre-approval policy regarding
professional services provided by the Company's principal accountant is to
pre-approve the engagement of the principal accountant for the performance of
39
all professional services. The policy does provide a waiver of pre-approval in
the event that such services, in the aggregate, will be less than 5% of the
audit fee, such services are not recognized as non-audit fees at the time of the
engagement, and pre-approval is obtained from a designated member of the Board
prior to the engagement. Until such time as an audit committee is appointed, the
designated individual is the Principal Executive Officer, currently the
President of the Company. 100% of the 2003 non-audit fees were pre-approved by
the designated Board member and subsequently approved by the Board.
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder require the Company's officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies. Based solely on its review of
the copies of the Section 16(a) forms received by it, or written representations
from certain reporting persons, the Company believes that, during the last
fiscal year, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.
The Company has adopted a Policy Statement on Business Ethics and Conflicts of
Interest, which was approved by the Board of Directors, applicable to all
employees, which is attached as an exhibit to this report.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the Company
during the last three years to its executive officers.
Name Other Securities All other
And Annual Restricted Underlying LTIP Compen-
Principal Salary Bonus Compen- Stock Options/ Payouts sation
Position Year ($) ($) sation($) Awards($) SARs (#) ($) ($)
Deng Shan, 2003 0 0 0 0 0 0 0
Interim CEO 2002 0 0 0 100,000 0 0 0
2001 0 0 0 100,000 0 0 0
Albert 2003 33,500 0 0 0 0 0 0
Figueroa, 2002 30,512 0 0 0 29,488 0 0
Secretary 2001 0 0 0 55,000 10,633 0 0
Daniel 2003 0 0 0 0 0 0 0
Mendez, 2002 3,814 0 0 0 104,685 0 0
Ex-President 2001 0 0 0 110,000 9,965 0 0
Edward 2003 6,000 0 0 0 0 0 0
Deese, 2002 30,000 0 0 0 0 0 0
Ex-Interim 2001 0 0 0 0 0 0 0
COO
40
Notes:
(1) The officers listed above were paid their salary in a combination of
registered stock options, unregistered stock and/or cash. Any issuance of
unregistered common stock was valued at market, generally determined by the
closing price on the first day of trading of the following month.
(2) Albert N. Figueroa, Secretary/Treasurer, serves under a semi- annual
consulting contract renewed effective January 1, 2004 at annualized compensation
of $54,000 that may be terminated upon 30 days written notice of either party.
(3) Deng Shan, Interim CEO, serves under a semi- annual Agreement for Services
renewed effective January 1, 2004 at annualized compensation of $84,000 that may
be terminated upon 30 days written notice of either party.
(4) Daniel Mendez, President, served under an annual Agreement for Services for
an annual compensation of $120,000. He resigned his position as president August
1,2002. Effective August 2,2002, Mr. Mendez agreed to provide consulting
services as the Company required. Mendez also served as a member of the Board of
Directors until his resignation October 17, 2002
(5) Edward Deese, Interim Chief Operating Officer, served under a semi-annual
Agreement for Services for an annualized compensation of $72,000. His agreement
terminated as of January 31, 2003. Deese also served as a member of the Board of
Directors from August 1, 2002 to January 17, 2003
(6) James DeOlden, Director served on the Board of Directors from September 12,
2002 to October 17, 2002
(7) The members of the Company's Board of Directors receive no additional
compensation for serving as directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership as of
April 14, 2004 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 officer of the Company.
Beneficial Percentage
Name and Address (1) Ownership of Class
---------------------------------------------------------- ----------------- ---------------
Albert Figueroa 4,078,402 1.51%
Deng Shan (2) 82,272,438 30.46%
All directors/officers as a group (2 persons) 86,350,840 31.97%
(1) The address for all persons listed is 4570 Campus Drive, Newport Beach, CA
92660
(2) Mr. Deng Shan owns 3,287,396 (1.21%) shares personally, and 78,985,042
(29.25%) shares through his majority owned corporation, Proton Technology
Corporation Limited.
41
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company issued notes payable on demand to its Chairman at interest rate 7%
per annum, as of December 31, 2003, the amount due to the Company's Chairman was
$434,782.
The Company issued notes payable on demand to a consultant at interest rate 7%
per annum, as of December 31, 2003, the amount due to the consultant was
$15,000.
Two consultants (former officers) of the Company have advanced funds to the
Company for working capital purposes. No formal repayment terms or arrangements
exist. The net amount of advances due the consultants (former officers) at
December 31, 2002 was $1,225. During the year ended December 31, 2003, the
Company repaid to the consultants $1,019 in cash and also issued 10,323 shares
of its common stock in exchange for $206 of the advances.
During the year ended December 31, 2002, a consultant of the Company has
advanced funds to the Company for working capital purposes. No formal repayment
terms or arrangements exist. The net amount of advances due the consultant at
December 31, 2002 was $117. During the year ended December 31, 2003, the Company
issued 7,312 shares of its common stock in exchange for settlement of the
advance.
A consultant (former employee) of the Company has advanced funds to the Company
as working capital of its Vietnam representative office. No formal repayment
terms or arrangements exist. The net amount of advances due the consultant at
December 31, 2003 and 2002 was $15,078 and $9,269, respectively.
The Company's Chairman has advanced funds to the Company for working capital
purposes. No formal repayment terms or arrangements exist. The net amount of
advances due the chairman at December 31, 2003 and 2002 was $105,716 and
$63,900, respectively.
During the year ended December 31, 2003 and 2002, the Company Chairman and
significant shareholders contributed cash of $111,720 and $60,000, respectively
to the Company as working capital.
As of April 14, 2004, other than issuances of common shares to executive
officers as compensation or in satisfaction of cash advances and transactions
described above, there have been no transactions to which the Company was a
party involving $100,000 or more and in which any director, executive officer,
or holder of more than five percent of our common stock had a material interest.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.(i) Articles of Incorporation of Largo Vista Group, Limited (filed Form
10SB, 11/2/99)
3.(ii) Bylaws of Largo Vista Group, Limited (filed Form 10SB, 11/2/99)
3.(iii) Articles of Incorporation of Largo Vista Inc. (filed Form 10SB,
11/2/99)
3.(iv) Bylaws of Largo Vista Inc. (filed Form 10SB, 11/2/99)
3.(v) Articles of Incorporation of Everlasting International Limited (filed
Form 10SB, 11/2/99)
3.(vi) Bylaws of Everlasting International Limited (filed Form 10SB, 11/2/99)
3.(vii) Articles of Incorporation of Kunming Xinmao Petrochemical Industry Co.,
Ltd. (filed Form 10SB, 11/2/99)
42
10 Material Contracts
10.(a) Contract. Largo Vista Group, Ltd. and Sentio Corporation, December 28,
1998, (filed Form 10SB, 11/2/99)
10.(b) Contract. Hong Kong De Xiang Tuo Yi Industrial Company, August 28, 1992
(filed Form 10SB, 11/2/99)
10.(c) Plan and Agreement of Reorganization between Largo Vista Group, Ltd.,
Proton Technology Corporation, Ltd. and Everlasting International,
December 21, 1996 (filed Form 10SB, 11/2/99)
10.(d) Joint Venture Agreement of Kunming Xinmao Petrochemical Industry Co.,
Ltd., August 8, 1992 (filed Form 10SB, 11/2/99)
10.(e) Approval Certificate of Enterprise with Foreign Investment in the
People's Republic of China (filed Form 10SB, 11/2/99)
10.(f) Business License of Enterprise in the Peoples Republic of China (filed
Form 10SB, 11/2/99)
10.(g) Business Permit to Engage in LPG Business in Yunnan Province (filed
Form 10SB, 11/2/99)
10.(h) Notice of Subsidiaries of the Agriculture Bank of China, Yunnan
Provincial Branch, Acting as Agents for Collection and Receipt of
Payment for Kunming Xinmao Petrochemical Industry Co., Ltd. (filed Form
10SB, 11/2/99)
10.(i) Agreement of Supply of Liquefied Petroleum Gas, March 18, 1996 (filed
Form 10SB, 11/2/99)
10.(j) Method of Insurance for LPG Credit, August 26, 1997 (filed Form 10SB,
11/2/99)
10.(k) Memorandum of Understanding Kunming Xinmao Petrochemical Industry Co.,
Ltd. and Wuhan Minyi Fuel Gas Petrochemical Company Limited, March 14,
1999 (filed Form 10SB, 11/2/99)
10.(l) Memorandum of Understanding Kunming Xinmao Petrochemical Industry Co.,
Ltd. and Guilin Municipal Garden Fuel Gas Pipelines Limited, March 29,
1999 (filed Form 10SB, 11/2/99)
10.(m) Approval Certificate of Enterprisees with Foreign Investment in the
Peoples Republic of China, August 21, 1992 (filed Form 10SB, 11/2/99)
10.(n) Contract. Enterprise Ownership Transfer Agreement "Ten Year Leasing
Contract", Seller Chen Mao Tak, Purchaser Everlasting International,
Ltd., third party Kunming Fuel General Company, November 8, 1995 (filed
Form 10SB-A1, 1/14/2000 as EX-10.D)
10.(o) Joint Venture Agreement. , Largo Vista with the United Arab Petroleum
Corporation ("UAPC"), known as Largo Vista/UAPC Partners (filed Form
10SB-A1, 1/14/2000 as EX-10.F)
10.(p) Memorandum of Association Limited Liability Company. Largo Vista Group,
Ltd., LLC, Dubai, UAE, October 12, 1999, Largo Vista Group, Ltd., UAPC,
and Sheik Al Shabani, named Largo Vista Group Limited, Limited
Liability Company of the UAE (filed Form 10SB-A1, 1/14/2000 as EX-10.G)
10.(q) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG) Buyer,
and United Arab Petroleum Corporation Seller, November 25, 1999 (filed
Form 10SB-A1, 1/14/2000 as EX-10.H)
10.(r) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG),
Buyer, and United Arab Petroleum Corporation Seller, December 18, 1999
(filed Form 10SB-A1, 1/14/2000 as EX-10.H)
10.(s) Employment Agreement Daniel J. Mendez 1999 (filed Form 10SB-A1 as
Ex-3.iv, 1/14/2000)
10.(t) Consultant Agreement Deng Shan 1999 (filed Form 10SB-A1, as Ex-3.v
1/14/2000)
10.(u) Contract. "Enterprise Ownership Transfer Agreement", November 8, 1995,
new translation (filed Form 10SB-A2, 3/20/2000 as EX-10.E.1)
10.(v) Contract. "Agreement on Payment", November 8, 1995 (filed Form 10SB-A2,
3/20/2000 as EX-10.E.2)
10.(w) Contract. "Agreement on Supply of Liquified Petroleum Gas", March 18,
1996 (filed Form 10SB-A2, 3/20/2000 as EX-10.E.3)
10.(x) Employment Agreement Albert N. Figueroa 1999 (filed as Ex-3.vi
3/21/2000)
10.(y) Agreement on Zunyi Pipeline Project No.1 Largo Vista Group, Ltd -
Proton Enterprise (Wuhan) LTD., China (Agent Agreement)
10.(z) Zunyi Pipeline #1 Contract Proton Enterprise (Wuhan) LTD. &
Construction Headquarters of Zunyi Municipal Government, Dated February
2, 2002
43
10.(aa) Gas Supply Contract Between Proton Enterprise (Wuhan) LTD. and Zunyi
Government Administration Construction Team, Dated October 15, 2002 40
Years Exclusive Right
10.(ab) Zunyi Jiahong Gas Co., Ltd. & Largo Vista Group, Ltd. Lease Agreement
No.JHLGOV0802 Dated August 27, 2002
All of the exhibits listed above have been filed previously with the forms and
on the dates indicated.
The new exhibits for this filing are as follows:
10.(ac) Policy Statement on Business Ethics and Conflicts of Interest
(b) Reports on Form 8-K
None
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth fees billed to the Company by our auditors during
the fiscal years ended December 31, 2003 and 2002 for: (i) services rendered for
the audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditor that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------- -----------------
1. Audit Fees $ 36,289 $ 40,400
2. Audit Related Fees -- --
3. Tax Fees -- --
4. All Other Fees -- --
----------------- -----------------
Total Fees $ 36,289 $ 40,400
Audit fees consist of fees billed for professional services rendered for the
audit of the Company's consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided by Russell Bedford Stefanou Mirchandani LLP
in connection with statutory and regulatory filings or engagements.
Audit-related fees consists of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's consolidated financial statements, which are not reported under "Audit
Fees." There were no Audit-Related services provided in fiscal 2003 or 2002.
44
Tax fees consists of fees billed for professional services for tax compliance,
tax advice and tax planning.
All other fees consist of fees for products and services other than the services
reported above. There were no management consulting services provided in fiscal
2003 or 2002.
Audit Committee's Pre-Approval Policies and Procedures
------------------------------------------------------
The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The independent auditors
and management are required to periodically report to the Company's Board of
Directors regarding the extent of services provided by the independent auditors
in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a
case-by-case basis.
45
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LARGO VISTA GROUP, LTD.
Signature Title Date
--------------------- ------------------- --------------
/s/Albert N. Figueroa Secretary/Treasurer May 11, 2004
---------------------
Albert N. Figueroa
/s/Deng Shan Interim CEO May 11, 2004
---------------------
Deng Shan
46
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Deng Shan, certify that:
1. I have reviewed this annual report on Form 10-KSB of Largo Vista Group, Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 11, 2004
/s/Deng Shan
---------------------------------------
Deng Shan, Principal Executive Officer
47
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Albert Figueroa, certify that:
1. I have reviewed this annual report on Form 10-KSB of Largo Vista Group, Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 11, 2004
/s/Albert Figueroa
-------------------------------
Albert Figueroa
Principal Accounting Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Largo Vista Group, Ltd (the
"Company") on Form 10-KSB for the period ending December 31, 2003, as filed with
the Securities and Exchange Commission (the "Report"), the undersigned, Deng
Shan, Interim Chief Executive Officer of the Company, certifies to the best of
his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: May 11, 2004
/s/ Deng Shan
-----------------------------------------
Deng Shan, Principal Executive Officer
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Largo Vista Group, Ltd (the
"Company") on Form 10-KSB for the period ending December 31, 2003, as filed with
the Securities and Exchange Commission (the "Report"), the undersigned, Albert
Figueroa, Secretary/Treasurer of the Company, certifies to the best of his
knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: May 11, 2004
/s/ Albert Figueroa
---------------------------------------------
Albert Figueroa, Principal Accounting Officer
This certification accompanies this Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.