SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LARGO VISTA GROUP, LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed: Notes:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 18, 2002
To Our Shareholders:
The Annual Meeting of Shareholders of Largo Vista Group, Ltd. (the
"Company") will be held at the Sutton Place Hotel, 4500 MacArthur
Blvd., Newport Beach, California, 92660, on Friday, October 18, 2002
at 10:30 a.m., local time, for the following purposes:
1. To elect four directors to hold office until the next Annual
Meeting of Shareholders or until their successors are duly elected
and qualified;
2. To ratify the adoption of the 2002 Stock Option Plan which
authorizes the issuance of non-qualified stock options to purchase up
to 25,000,000 shares of Common Stock;
3. To approve an amendment to the Articles of Incorporation thereby
creating 25,000,000 shares of Preferred Series A Stock of the Company;
4. To ratify the appointment of Stefanou & Company LLP as independent
auditors for fiscal year 2002; and
5. The transaction of such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on September 18,
2002, (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. A list of shareholders as of the Record Date will
be available during normal business hours for examination by any
shareholder for any purpose germane to the Annual Meeting for a
period of ten days prior to October 18, 2002, at the principal
executive offices of the Company, 4570 Campus Drive, Newport Beach,
CA 92660.
All shareholders are urged to attend the meeting in person or by proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
SIGN AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES
CAN BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH YOUR
INSTRUCTIONS. For specific instructions on voting, please refer to
the instructions on your enclosed proxy card. The proxy is revocable
and will not affect your right to vote in person in the event you
attend the Annual Meeting. You may revoke your proxy at any time
before it is voted. If you receive more than one proxy card because
your shares are registered in different names or at different
addresses, please sign and return each proxy card so all your shares
will be represented at the Annual Meeting. In addition, if you plan
to attend the Annual Meeting in person, please check the appropriate
box so that we can ensure we have proper accommodations.
By the Order of the Board of Directors
September 24, 2002
/s/Albert Figueroa, Director and Corporate Secretary
LARGO VISTA GROUP, LTD.
4570 Campus Drive
Newport Beach, California 92660
PROXY STATEMENT
This Proxy Statement contains information related to the solicitation
of proxies by and on behalf of the Board of Directors of Largo Vista
Group, Ltd. ("Largo" or the "Company") for use in connection with the
Annual Meeting of Shareholders to be held on Friday, October 18,
2002, beginning at 10:30 a.m., local time, at the Sutton Place Hotel,
4500 MacArthur Boulevard, Newport Beach, California, 92660, and at
any and all adjournments or postponements thereof. This Proxy
Statement and the accompanying proxy are being mailed to shareholders
on or about October 7, 2002.
ABOUT THE MEETING
What is the purpose of the Annual Meeting?
At our Annual Meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this Proxy
Statement, including the election of directors, ratification of the
Company's 2002 Stock Option Plan, approval of the creation of
25,000,000 shares of Preferred Series A Stock of the Company and
ratification of the Company's independent auditors. In addition,
management will report on the performance of the Company during
fiscal 2001 and respond to questions from shareholders.
Why am I receiving these materials?
Largo's Board of Directors is providing these proxy materials for you
in connection with our Annual Meeting of Shareholders, which will
take place on October 18, 2002. Shareholders are invited to attend
the annual meeting and are requested to vote on the proposals
described in this Proxy Statement.
What information is contained in these materials?
The information included in this Proxy Statement relates to the
proposals to be voted on at the Annual Meeting, the voting process,
the compensation of directors and our most highly paid executive
officers, and certain other required information. Largo's 2001 Annual
Report and audited consolidated financial statements, proxy card and
return envelope are also enclosed.
What proposals will be voted on at the Annual Meeting?
There are four proposals scheduled to be voted on at the Annual Meeting:
- the election of four directors until the next Annual Meeting of
Shareholders;
- approval of the creation of 25,000,000 shares of Preferred Series A
Stock of the Company;
- ratification of the adoption of the 2002 Stock Option Plan; and
- the ratification of the appointment of Stefanou & Company, LLP as
Largo's independent auditors for fiscal year 2002.
Who is entitled to vote at the meeting?
The shares of Common Stock of Largo constitutes the only class of
securities entitled to notice of, to attend and to vote at the Annual
Meeting of Shareholders. Only shareholders of record at the close of
business on September 18, 2002, the record date for the meeting, are
entitled to receive notice of and to participate in the Annual
Meeting. As of September 18, 2002 there were 245,836,992 shares of
Common Stock issued and outstanding. If you were a shareholder of
record on that date, you will be entitled to vote all of the shares
that you held on that date at the meeting, or any postponements or
adjournments of the meeting. Each outstanding share of Largo common
stock will be entitled to one vote on each matter.
What is the difference between holding shares as a shareholder of
record and as a beneficial owner?
Most shareholders of Largo hold their shares through a stockbroker,
bank or other nominee rather than directly in their own name. As
summarized below, there are some distinctions between shares held of
record and those owned beneficially.
Shareholder of Record
If your shares are registered directly in your name with Largo's
transfer agent, OTR Transfer Agent and Registrar, you are considered,
with respect to those shares, the shareholder of record, and these
proxy materials are being sent directly to you by Largo. As the
shareholder of record, you have the right to grant your voting proxy
directly to Largo or to vote in person at the Annual Meeting. Largo
has enclosed a proxy card for you to use.
Beneficial Owner
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of shares held
in street name, and these proxy materials are being forwarded to you
by your broker or nominee who is considered, with respect to those
shares, the shareholder of record. Brokers, dealers, banks, voting
trusts and/or their nominees are requested to forward soliciting
materials to the beneficial owners of shares and will be reimbursed
for their reasonable expenses.
How can I vote my shares in person at the Annual Meeting?
Shares held directly in your name as the shareholder of record may be
voted in person at the Annual Meeting. If you choose to do so, please
bring the enclosed proxy card and proof of identification. Even if
you plan to attend the Annual Meeting, Largo recommends that you also
submit your proxy as described below so that your vote will be
counted if you later decide not to attend the Annual Meeting. Shares
held in street name may be voted in person by you only if you obtain
a signed proxy from the record holder giving you the right to vote
the shares in person.
How can I vote my shares without attending the Annual Meeting?
Whether you hold shares directly as the shareholder of record or
beneficially in street name, you may direct your vote without
attending the Annual Meeting. You may vote your directly held shares
by granting a proxy or, for shares held in street name, by submitting
voting instructions to your broker or nominee.
Can I change my vote?
You may change your proxy instructions at any time prior to the vote
at the Annual Meeting. For shares held directly in your name, you may
accomplish this by granting a new proxy bearing a later date (which
automatically revokes the earlier proxy) or by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting will
not cause your previously granted proxy to be revoked unless you
specifically request to do so. For shares held beneficially by you,
you may accomplish this by submitting new voting instructions to your
broker or nominee.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed
proxies, may attend the meeting. Cameras, recording devices and other
electronic devices will not be permitted at the meeting. All
shareholders are urged to attend the meeting in person or by proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
SIGN AND SUBMIT YOUR PROXY CARD AS SOON AS POSSIBLE SO THAT YOUR
SHARES CAN BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH YOUR
INSTRUCTIONS. For specific instructions on voting, please refer to
the instructions on your proxy card or the voting instruction card.
What are the Board's voting recommendations?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with
the recommendations of the Board of Directors. The Board's
recommendations are set forth together with the description of each
item in this Proxy Statement. In summary, the Board recommends a vote:
- FOR election of the nominated slate of directors (see Proposal 1);
- FOR ratification of the 2002 Stock Option Plan (see Proposal 2);
- FOR approval of the creation of 25,000,000 shares of Preferred
Series A stock of the Company through the amendment of the Articles
of Incorporation (see Proposal 3); and
- FOR ratification of the appointment of Stefanou & Company, LLP as
the Company's independent auditors for fiscal 2002 (see Proposal 4).
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of
Directors or, if no recommendation is given, in their own discretion.
How are votes counted?
In the election of directors, you may vote "FOR" all of the nominees
or you may vote "WITHHOLD AUTHORITY" with respect to one or more of
the nominees. For the ratification of the 2002 Stock Option Plan, the
approval of the creation of 25,000,000 shares of Preferred Series A
Stock of the Company through the amendment of the Articles of
Incorporation and the ratification of the appointment of Stefanou &
Company, LLP, you may vote "FOR", "AGAINST" or "ABSTAIN." If you
"ABSTAIN," it has the same effect as a vote "AGAINST." If you sign
your proxy card or broker voting instruction card with no further
instructions, your shares will be voted in accordance with the
recommendations of the Board described above.
What vote is required to approve each item?
Election of Directors - The affirmative vote of a majority of the
voting power present at the meeting is required for the election of
directors. A properly executed proxy marked "WITHHOLD AUTHORITY" with
respect to the election of one or more directors will not be voted
with respect to the director or directors indicated, although it will
be counted for purposes of determining whether there is a quorum.
Accordingly, a withheld vote will essentially have the effect of a
negative vote.
Other Items - For the ratification of the 2002 Stock Option Plan, the
approval of the creation of 25,000,000 shares of Preferred Series A
Stock of the Company through the amendment of the Articles of
Incorporation and the ratification of the appointment of Stefanou &
Company, LLP, the affirmative vote of the holders of a majority of
the shares represented in person or by proxy and entitled to vote on
the item will be required for approval. A properly executed proxy
marked "ABSTAIN" with respect to any such matter will not be voted,
although it will be counted for purposes of determining whether there
is a quorum. Accordingly, an abstention will have the effect of a
negative vote. If you hold your shares in street name through a
broker or other nominee, your broker or nominee may not be permitted
to exercise voting discretion with respect to some of the matters to
be acted upon. Thus, if you do not give your broker or nominee
specific instructions, your shares may not be voted on those matters
and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will,
however, be counted in determining whether there is a quorum.
What does it mean if I receive more than one proxy or voting
instruction card?
It means your shares are registered differently or are in more than
one account. Please provide voting instructions for all proxy and
voting instruction cards you receive.
Where can I find the voting results of the Annual Meeting?
Largo will publish the final results in Largo's quarterly report on
Form 10-Q for the third quarter of fiscal 2002.
STOCK OWNERSHIP
Who are the largest owners of Largo's stock?
The following table sets forth information regarding beneficial
ownership as of September 24, 2002, of the Company's common stock, by
any person who is known to the Company to be the beneficial owner of
more than 5% of the Company's voting securities and by each director
and by officers and directors of the Company as a group.
Beneficial Percentage
Name and Address (1) Ownership of Class
Daniel Mendez(3) 17,702,390 7.20%
Albert Figueroa 5,564,620 2.26%
Deng Shan (2) 86,874,065 35.34%
James DeOlden 0 0.00%
Edward H. Deese 0 0.00%
All directors/officers as a group
(4 persons) 110,141,075 44.80%
(1) The address for all persons listed is 4570 Campus Drive, Newport
Beach, CA 92660
(2) Mr. Deng Shan owns 3,569,245 (1.45%) shares personally, and
83,304,820 (33.89%) shares through his majority owned
corporation, Proton Technology Corporation Limited.
(3) Mr. Mendez is a beneficial owner of more than five percent, but
is not an officer or a director of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file reports of ownership with the Securities and
Exchange Commission ("SEC") and Nasdaq. Directors, executive officers
and greater than ten-percent beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based upon a review of filings with the Securities and Exchange
Commission, we believe that all of our directors and executive
officers are in compliance with the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934 since the Companies most
recent 10KSB.
PROPOSAL 1 - ELECTION OF DIRECTORS
The current term of office of all of the Company's directors expires
at the 2002 Annual Meeting of Shareholders. The Board of Directors
proposes that the following nominees, all of whom are currently
serving as directors, be re-elected until the next Annual Meeting of
Shareholders or until their successors are duly elected and
qualified. The bylaws of the Company allow between three and twenty-
five Directors, however, the Company has identified, and is only
nominating four directors. Each of the nominees has consented to
serve if elected. If any of them becomes unavailable to serve as a
director, the Board may designate a substitute nominee. In that case,
the persons named as proxies will vote for the substitute nominee
designated by the Board.
The directors standing for election are:
Albert N. Figueroa, 36, Director, 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, 50, Chairman of the Board of Directors, Interim Chief
Executive Officer, is well versed in the business practices of China.
Mr. Deng has the experience as a locomotive driver and a
college/university teacher for many years before he was recruited by
Chinese district government in 1989. He served as the director of
Science and Technology Commission and at the same time was entitled
as Chairman of the Board of 4 state-owned companies until 1994 when
he was appointed as the Director of the Representative Office (of the
Government) in European Countries. Mr. Deng joined the Company in
December 1996.
James DeOlden, Esq., 33, Director, has a B.A. in History from
Virginia Commonwealth University, a J.D. from Whittier Law School and
is an attorney admitted to the California Bar. Mr. DeOlden
practices transactional and securities law in Irvine, California. Mr.
DeOlden currently represents a number of both public and private
companies, with an emphasis on emerging growth companies in various
stages of corporate growth and development. Mr. DeOlden joined the
Board of Directors in September 2002.
Edward H. Deese, 39, Interim Chief Operating Officer and Director,
with a BS in Economics from University of California, Irvine, has
been involved in the public arena for over fifteen years and was an
Officer and general manager of two companies that went public through
IPO. Recently, Mr. Deese was a founder of a private bio-technology
company with a private market capitalization exceeding $100 million.
Mr. Deese was responsible for establishing the administrative team of
the company and managing the day-to-day operations, from start-up
through 65 employees. Mr. Deese joined the Board of Directors in
September 2002.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED ABOVE.
How are director's compensated?
Base Compensation. Members of the Board of Directors of the Company
receive no additional compensation for their services as a director.
Options. The 2002 Stock Option Plan will provide for issuances of
Options to Directors at the discretion of the Board of Directors or
through a committee approved by the Board of Directors. There are
not currently any agreements to issue options to members of the Board
of Directors that have been approved either by the Board of Directors
or a committee approved by the Board of Directors.
Meetings of the Board of Directors
During the fiscal year ended December 30, 2001, the Board of
Directors of the Company held twelve meetings. Each director attended
at least 75% of all meetings of the Board of Directors.
What committees has the Board established?
The Board of Directors has not established an Audit, Compensation or
Corporate Governance Committee.
Certain Relationships and Transactions with Management and Others
A company officer has advanced funds to the Company for working
capital purposes. No formal repayment terms or arrangements exist.
The net amount of advances due the officer at December 31, 2001 was
$3,144.
A consultant to 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,
2001 was $28,065.
Audit and Non Audit Fees
For providing audit services to the Company in relation to the
preparation of the Company's fiscal year ended audit for December 31,
2001, Stefanou & Company, LLP billed the Company $85, 125.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by
the Company during the last three years to the executive officers of
the Company during the same period.
Summary Compensation Table
Annual compensation Long-term Compensation
Awards Payouts
Name and Other Restricted Securities
principal annual stock underlying LTIP All other
position Year Salary Bonus compensation award(s) options/SARs payouts compensation
($) ($) ($) ($) (#) ($) ($)
Daniel Mendez 2001 110,000 0 0 0 0 0 0
President 2000 120,000 0 0 0 0 0 0
1999 150,000 661,618 0 0 0 0 0
Albert 2001 55,000 0 0 0 0 0 0
Figueroa 2000 60,000 0 0 0 0 0 0
Secretary 1999 100,000 275,034 0 0 0 0 0
Deng Shan 2001 100,000 0 0 0 0 0 0
Chairman 2000 100,000 0 0 0 0 0 0
1999 100,000 261,827 0 0 0 0 0
Notes:
(1) The officers listed above were paid any salary and/or bonuses 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 low bid quotation.
(2) Daniel J. Mendez, former President, served under an annual
employment contract that was not renewed by the Board of Directors
and is therefore no longer under an employment contract.
(3) Albert N. Figueroa, Secretary/Treasurer, serves under an annual
employment contract renewed effective January 1, 2001 at annual
compensation of $60,000 that may be terminated upon 30 days written
notice of either party.
(4) Deng Shan, Consultant, serves under an annual Agreement for
Services renewed effective January 1, 2001 at annual compensation of
$100,000, that may be terminated upon 30 days written notice of
either party.
PROPOSAL 2 - RATIFICATION OF 2002 STOCK OPTION PLAN
RATIFICATION OF THE ADOPTION OF THE 2002 STOCK OPTION PLAN AND THE
AUTHORIZATION
OF THE ISSUANCE OF 25,000,000 SHARES OF COMMON STOCK THEREUNDER
General
The Company's shareholders are being asked to ratify the 2002 Stock
Option Plan (the "2002 Plan"). The 2002 Plan authorizes the issuance
of up to 25,000,000 shares of the Company's Common with the Board of
Directors or a committee appointed by the Board of Directors having
the discretion to issue options thereunder. The purposes of the 2002
Plan are to attract and retain personnel for positions of substantial
responsibility with the Company and to provide participants with
additional incentives in the form of options to purchase the
Company's Common Stock which will encourage them to acquire a
proprietary interest in, and to align their financial interests with
those of the Company and its shareholders.
The 2002 Plan was adopted by the Board of Directors on September 23,
2002. As of September 24, 2002, no options have been granted under
the 2002 Plan. The Board has agreed that the exercise price of the
options will be either the price on the date of issuance of the
options, or the price on the date that the individual to whom the
options are issued was employed or appointed by the Company,
whichever is lower.
Eligibility, participation, administration, amendment, termination
and other incidentals to the administration of the 2002 Plan will be
at the discretion of the Board of Directors or a committee appointed
by the Board of Directors.
If the shareholders do not ratify the 2002 Plan, the Board will
reconsider its adoption thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE ADOPTION OF THE 2002 STOCK OPTION PLAN AND AUTHORIZATION OF THE
ISSUANCE OF 25,000,000 SHARES OF COMMON STOCK THEREUNDER.
PROPOSAL 3 - APPROVAL OF THE CREATION OF 25,000,000 SHARES OF SERIES
A PREFERRED STOCK OF THE COMPANY THROUGH THE AMENDMENT OF THE
ARTICLES OF INCORPORATION
The Board of Directors has approved, and is seeking the approval of
the shareholders to amend the Articles of Incorporation to create,
25,000,000 shares of Series A Preferred Stock of the Company.
The Board of Directors has determined that the Company should
aggressively seek to acquire companies that 1) are profitable, 2) are
revenue producing and/or 3) have assets that might prove beneficial
to the Company. It is the intent of the Board of Directors to use
the newly created Series A Preferred Stock to purchase those
companies and thereby seek to build the Company through acquisition
without immediately diluting the shareholders of common stock of the
Company. The Board of Directors believes that its current common
share price is undervalued, and at the current undervalued price, any
acquisition would cost the Company more than an acquisition would if
the Company's share price was more appropriately valued. By being
able to set the rights and preferences of the Series A Preferred
Stock, the Board of Directors intends to be able to make acquisitions
in the present by using a potential future stock price through the
use of the newly created Series A Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE CREATION OF 25,000,000 SHARES OF SERIES A PREFERRED STOCK OF THE
COMPANY THROUGH THE AMENDMENT OF THE ARTICLES OF INCORPORATION
PROPOSAL 4 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the independent accounting firm
of Stefanou and Company LLP, certified public accountants, to audit
the accounts of the Company and its subsidiaries for the 2002 fiscal
year. Stefanou & Company, LLP has audited the accounts and records of
the Company and its subsidiaries since 2001. If the shareholders do
not ratify the appointment of Stefanou & Company, LLP, the Board will
reconsider the appointment of independent public auditors.
Representatives of Stefanou & Company, LLP are not expected to be
present at the Annual Meeting and therefore will not have the
opportunity to make a statement or be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY
THE APPOINTMENT OF STEFANOU & COMPANY, LLP AS INDEPENDENT AUDITORS OF
THE COMPANY FOR THE 2002 FISCAL YEAR.
ADDITIONAL INFORMATION REGARDING THE ANNUAL MEETING
What happens if additional proposals are presented at the Annual Meeting?
Other than the four proposals described in this Proxy Statement,
Largo does not expect any other matters to be presented for a vote at
the Annual Meeting.
What is the quorum requirement for the Annual Meeting?
The quorum requirement for holding the Annual Meeting and transacting
business is a majority of the outstanding shares entitled to be
voted. Based on the number of shares outstanding on the September 18,
2002 record date, 122, 918,496 shares will constitute a quorum for
purposes of this Annual Meeting. The shares may be present in person
or represented by proxy at the Annual Meeting. Both abstentions and
broker non-votes are counted as present for the purpose of
determining the presence of a quorum. Broker non-votes, however, are
not counted as shares present and entitled to be voted with respect
to the matter on which the broker has expressly not voted. Thus,
broker non-votes will not affect the outcome of any of the matters
being voted on at the Annual Meeting. Generally, broker non-votes
occur when shares held by a broker for a beneficial owner are not
voted with respect to a particular proposal because the broker has
not received voting instructions from the beneficial owner and the
broker lacks discretionary voting power to vote such shares.
Abstentions are treated as shares present and entitled to vote for
purposes of any matter for which a majority of shares present are
required for passage and, accordingly will not have the affect of
votes against such matters.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify
individual shareholders are handled in a manner that protects your
voting privacy. Your vote will not be disclosed either within Largo
or to third parties except (1) as necessary to meet applicable legal
requirements, (2) to allow for the tabulation of votes and
certification of the vote, or (3) to facilitate a successful proxy
solicitation by the Board. Occasionally, shareholders provide written
comments on their proxy card, which are then forwarded to Largo's
management.
Who will bear the cost of soliciting votes for the Annual Meeting?
Largo will pay the entire cost of preparing, assembling, printing,
mailing and distributing these proxy materials. In addition to the
mailing of these proxy materials, the solicitation of proxies or
votes may be made in person, by telephone or by electronic
communication by Largo's directors, officers, and employees, who will
not receive any additional compensation for such solicitation
activities. In addition, Largo will also reimburse brokerage firms
and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners.
May I propose actions for consideration at next year's Annual Meeting
of Shareholders or nominate individuals to serve as directors?
Any shareholders desiring to submit a proposal for action at the
Company's Annual Meeting of Shareholders to be held in 2003 and for
presentation in the Company's Proxy Statement with respect to such
meeting should arrange for such proposal to be delivered to the
Secretary of the Company at its principal place of business no later
than May 18, 2003 in order to be considered for inclusion in the
Company's Proxy Statement relating to that meeting. Matters
pertaining to such proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals
included and other aspects are regulated by the Securities and
Exchange Act of 1934, Rules and Regulations of the SEC and other laws
and regulations to which interested persons should refer. The Company
anticipates that its next annual meeting will be held in September 2003.
Under Rule 14a-4 as promulgated under the Securities and Exchange Act
of 1934, as amended the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the Proxy Statement,
in two situations: (i) if a proponent of a proposal fails to notify
the Company at least 45 days prior to the current year's anniversary
of the date of the mailing of the prior year's Proxy Statement, or
(ii) if the date of the Company's annual meeting has changed by more
than thirty (30) days from the prior year, if notice is not received
a reasonable time before the Company mails the Proxy Statement for
the current year.
ANNUAL REPORT
The Company's Annual Report, including Form 10-K (without exhibits),
for the fiscal year ended December 31, 2001 is being forwarded to
each shareholder with this Proxy Statement. The Annual Report is not
to be regarded as proxy soliciting material or as a communication by
means of which any solicitation is to be made.
Submitted by:
Albert Figueroa
Director and Secretary
Dated: September 24, 2002
REVOCABLE PROXY
LARGO TECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS - OCTOBER 18, 2002
The undersigned shareholder(s) of Largo Vista Group, Ltd., (the
"Company") hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated September 24,
2002 and nominates, constitutes and appoints Shan Deng and Albert
Figueroa, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of
the Company which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the Sutton Place
Hotel, 4500 MacArthur Boulevard, Newport Beach, California, 92660 on
Friday, October 18, 2002 at 10:30 a.m., and any and all adjournments
thereof, as fully with the same force and effect as the undersigned
might or could do if personally present thereat, as follows:
1. Election of Directors. Authority to elect the four (4) persons
named in the Notice of Annual Meeting dated September 24, 2002, to
the Board of Directors to serve until the next Annual Meeting of
Shareholders or until their successors are duly elected and qualified.
[ ] FOR all Nominees listed below (except as indicated to the [ ] WITHHOLD
AUTHORITY to vote for all Nominees listed below)
Shan Deng, Albert Figueroa, James DeOlden and Edward H. Deese
Instruction: To withhold authority to vote for any individual
Nominee, write that Nominee's name in the space provided below.
2. 2002 Stock Option Plan. To ratify the Company's 2002 Stock Option
Plan which authorizes the issuance of non-qualified stock options to
purchase up to 25,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Series A Preferred Shares. To approve the creation of 25,000,000
shares of Preferred Series A stock of the Company through the
amendment of the Articles of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of Appointment of Independent Auditors. To ratify the
appointment of Stefanou & Company, LLP as independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to transact such
other business as may properly come before the meeting or any
adjournment or postponement thereof, including procedural and other
matters relating to the conduct of the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE BELOW, AND RETURN THIS CARD IN THE ENVELOPE
PROVIDED.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1, 2,
3 AND 4. THE PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED "FOR" THE
ELECTION OF THE FOUR NOMINEES LISTED ON THE REVERSE SIDE AND "FOR"
PROPOSALS 2, 3 AND 4 UNLESS OTHERWISE INDICATED, IN WHICH CASE THE
PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS.
(Number of Shares)
Dated
(Please Print Name)
(Signature of Shareholder)
(Please date this Proxy and sign your name as it appears on your
stock certificates. Executors, administrators, trustees, etc.
should give their full titles.
All joint owners should sign.)
I/We do [ ] do not [ ] expect to attend the Annual Meeting. Number of Persons
Exhibit A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-30426
LARGO VISTA GROUP, LTD.
(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
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act of 1934 during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No.
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-K contained in this form, and will not 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, 2001 were $1,946,041.
The market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of March 28, 2002 was
approximately $23,750,595.
The number of shares of Common Stock outstanding as of March 28, 2002
was 238,338,115.
PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development
Largo Vista Group, Ltd., a Nevada corporation ("Company"), was formed
under the laws of the State of Nevada on January 16, 1987.
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 (LVI).
Business of the Issuer
Largo Vista Group, Ltd, a Nevada corporation ("Largo Vista"), has
operations through a contract agreement with Shilin Xinmao
Petrochemical Industry Co., Ltd (registered under the Chinese laws in
the Peoples Republic of China, Yunan Province). Though this
agreement, 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 in the Guizhou
Province of China. Largo Vista operates a storage depot and has an
office headquarters in the City of Zunyi.
Largo Vista, through its subsidiary Largo Vista International Corp.
has and continues to engage in the petroleum supply business in Far
East countries, more specifically Vietnam.
On June 29, 2001, Largo Vista sold, under a stock purchase agreement,
its 100 percent interest in Everlasting International Ltd., a Nevada
corporation, which owned a 66.67 percent ownership interest in
Kunming Xinmao Petrochemical Industry Co., Ltd. Largo Vista elected
to withdraw from the Kunming market due to competitive pressures from
non-profit oriented government owned suppliers.
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 gas oil trading operations in China and
Vietnam, respectively, in addition to potentially acquiring other
possible business opportunities in the Far East.
Largo Vista was originally incorporated on January 16,1987 in Nevada
under the name, "The George Group". On January 9, 1989, The George
Group acquired Waste Service Technologies, Inc. ("WST"), an Oregon
corporation, 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.
Organizational Chart
LVG
Largo Vista Group, Ltd.
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
BUSINESS
Terms of the Shilin Xinmao Petrochemical Industry Co., Ltd Agreement.
The agreement between Largo Vista and Shilin Xinmao Petrochemical
Industry Co. Ltd ("Shilin Xinmao") is a DBA (Doing business as)
agreement formed under the laws of the People's Republic of China.
Term: Five years, commencing on November 20, 2000
General Provisions: Agreement allows Largo Vista to do LPG business
by using the name of Shilin Xinmao, including using agents to run the
day-to-day business operations for Largo Vista, although all
management control is under Largo Vista or its appointed agent, in
the City of Zunyi, Province of Guizhou, People's Republic of China.
Pursuant to agreement post execution of the contract, Largo Vista
enjoys profits and bears losses exclusively.
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. In fact, environmental concerns have
caused the outlaw of the use of coal in most 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 life
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. In addition, management
believes there will be future opportunities for increased LPG use in
the tobacco business, operating factory machinery and vehicles.
Markets: The China market is broken down into three segments for
purposes of analysis:
1. Distribution
2. Method of delivery to the consumer, and
3. Black Market dealers
The primary market segment 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. Zunyi 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 market segment is through vehicle delivery used by the
user, such as bottle or cylinder, pipeline, or tank truck.
The bottle users may be either retail, purchasing directly from a
major LPG company, or wholesale, purchasing indirectly from a
distributor of a major LPG company. Bottle customers purchase LPG in
15 kg. cylinders or bottles that must, by law, be filled to a minimum
of 13.5 kg, which is considered full. Bottle users include
residential and commercial customers. Residential consumption is by
far the largest, with commercial restaurants and caterers following
second. There has been little industrial use of LPG to date.
Pipeline users are considered retail-direct users. LPG flows directly
into household Svia 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 of 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.
A third market segment, although temporary, must be considered
because of the negative impact it has on the LPG market. This segment
is comprised of the many small independent distributors and
individuals who operate illegally in what is referred to as the
"black market" - most operating without a license, violating safety
laws, and unfairly profiting by "short filling" LPG bottles. These
abusers create problems of unfair competition for the Company.
LPG consumption 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 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 and still 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 does not significantly affect overhead yet,
but will have greater future impact as salaries increase.
Distribution of LPG via pipelines directly to end-users is very
efficient, but one drawback is the cost to install pipeline service
to each household, which is approximately $185.00 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. Zunyi 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.
Distribution of LPG
There are four basic levels of LPG distribution:
Major LPG Companies
Major LPG Distributors
Medium LPG Distributors
Small Independent LPG Distributors
The Major LPG companies are characterized by the following: they
purchase LPG directly from refineries or major oil companies, they
must be licensed, have railroad tank cars and storage depots, and
typically serve over 10,000 retail customers. These companies depend
on distribution networks to get LPG to the consumers.
Major distributors are licensed and generally serve more than 4,000
but less than 10,000 customers directly, but do not typically have
any railroad tank cars, and have little or no storage capacity.
Medium distributors are licensed and generally serve more than 1,500
but less than 4,000 customers directly 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 Zunyi's customer base is serviced with the help of
agents and entity users. Zunyi 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, Zunyi must weigh various factors including
quality of LPG, price, and transportation costs. It generally
purchases from domestic sources inside China where prices are very
low, but transportation costs are higher. On occasion, the Company
also purchases LPG from foreign companies such as Mobil Oil Hong Kong
and Caltex.
Cost of goods can fluctuate widely and rapidly and can cause cash
flow problems. The Company is researching the feasibility of
obtaining a much larger storage facility that would permit it to
purchase large quantities of LPG when prices are favorable, and sell
it when prices are higher.
Competition
The LPG industry in the city of Zunyi, Guizhou Province, consists of
three major LPG companies with storage facilities and sells 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. Competition is based principally on price and
service, with some based on relationship and reputation. All are
privately owned and operated.
LPG retail market prices have been relatively unstable during the
past three years, characterized by over supply and cutthroat competition.
Black Market. In the residential wholesale market, many independent
"black market" dealers have been operating without a license, and
have ignored safety regulations that require inspection and pressure
testing of each bottle every five years. Another flagrant violation
of consumer fairness is the practice of short-filling bottles. The
"black market" dealer typically will fill a bottle with 10kg of LPG,
and sell it representing it has 13.5kg of LPG. Short filling has
permitted the Company's competition to charge lower prices and
unfairly compete with Zunyi. This practice of cheating the consumer
has been prevalent over the past several years. Zunyi challenges
customers to be aware of what they are paying for by implementing of
a "weight comparison program". The program permits the consumer to
actually weigh the bottles to expose the "short-fill" problem.
Zunyi competes with others on both reputation and service. To
differentiate itself from its competition, Zunyi 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 Zunyi can be relied upon to deliver honest weights
and measures.
Dependence on Key Customers
The Company is currently not dependent on any single customer for a
significant portion of its annual sales. The Company believes its
customers base will change on a continuous basis as new customers are
added or old customers removed.
Major Suppliers
The Company is currently not dependent on any major suppliers.
Governmental Regulation
The LPG industry is 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
Company makes every effort to fully comply with all laws and
regulations, however, the constraints of international restrictions
could impact the success of the Company. 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.
Cost of Compliance with Environmental Regulations
The Company currently has no costs associated with compliance with
local environmental regulations. However, there can be no assurances
that the Peoples Republic of China develops environmental laws and
regulations, that the Company will not incur such costs in the future.
Patents, Trademarks & Licenses
The Company does not currently own any patents or trademarks.
Employees
Largo Vista has three full-time employees in the United States and
relies on outside consultants for legal, accounting and other
services as needed. Operations in Zunyi, Wuhan and Ho Chi Minh City
have a total of 35 employees, including management.
Item 2. DESCRIPTION OF PROPERTY
Largo Vista
Currently, Largo Vista has corporate offices in Newport Beach,
California. The Company believes that this is sufficient for its
operations. The cost is approximately $2,500 per month.
Wuhan Representative Office
Largo Vista maintains a representative office in Wuhan, Hubei
Province, China, which includes three offices and access to common
areas. The facilities are leased from Proton Enterprises. The terms
of the Lease are for three years beginning January 2001, 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 is for month to month at approximately $1,500 per month.
Zunyi
Largo Vista, through a contract agreement with Shilin Xinmao
Petroleum Co., Ltd., operates its primary service from its depot
located in the City of Zunyi, Guizhou Province. The depot includes
520 cubic meter storage facilities and has access to railroad tank
cars. The facility is under lease for five years, beginning in
December 2000, at approximately $6,800 per month payable semi-
annually. The lease charges are fixed for the first three years and
are subject to negotiations for the remaining two years.
Largo Vista, through a contract agreement with Shilin Xinmao
Petroluem Co., Ltd., operates its service from its depot located in
the City of Zunyi, Guizhou Province. The depot includes 400 cubic
meter storage facilities. The facility is under lease on a yearly
basis beginning in August 2001, at approximately $18,100 per year
payable semi-annually.
The Company also leases offices in Zunyi City, Guizhou Province. The
terms of the lease are for three years beginning July 2001, at
approximately $1,200 per year.
Item 3. LEGAL PROCEEDINGS
On March 1, 2001, UPAC/UAS, a former joint venture partner with the
Company, filed a complaint against the Company in Orange County
Superior Court of the State of California. The complaint alleges a
breach of contract. The Company filed a counter claim against the
Plaintiff for damages and received a judgment in the Company's favor
in February 2002 in the amount of $196,638.
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 an adverse effect
on its financial position, results of operations or liquidity.
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 2001 and 2000. These quotations are believed to be representative
inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions.
Bid
High Low
4th Quarter 2001 $0.14 $0.06
3rd Quarter 2001 $0.23 $0.05
2nd Quarter 2001 $0.17 $0.08
1st Quarter 2001 $0.31 $0.13
4th Quarter 2000 $0.70 $0.14
3rd Quarter 2000 $1.10 $0.25
2nd Quarter 2000 $1.12 $0.09
1st Quarter 2000 $3.12 $0.01
As of March 28, 2002, the Company had approximately 632 shareholders
of record.
The Company has never paid a cash dividend and does not anticipate
doing so in the foreseeable future.
Recent sales of unregistered securities:
In fiscal year 2001, the Company issued 13,012,496 unregistered
shares of its common stock as follows:
(a) In the second fiscal quarter the Company issued 2,796,658 shares
of unregistered common stock of the Company for a combination of
services and capital.
(b) In the third fiscal quarter the Company issued 2,897,936 shares
of unregistered common stock of the Company for a combination of
services and capital.
(c) In the fourth fiscal quarter the Company issued 7,317,902 shares
of unregistered common stock of the Company for a combination of
services and capital.
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.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Description of Company
The Company operates a liquefied petroleum gas (LPG) distribution
business in South China and other Asian markets.
Cautionary Statement Regarding Forward-Looking Information:
This Form 10-KSB contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
All statements included herein that address activities, events or
developments that the Corporation expects, believes, estimates,
plans, intends, projects or anticipates will or may occur in the
future, are forward-looking statements. Actual events may differ
materially from those anticipated in the forward-looking statements.
Important risks that may cause such a difference include: general
domestic and international economic business conditions, increased
competition in the Corporation's markets and products. Other factors
may include, availability and terms of capital, and/or increases in
operating and supply costs. Market acceptance of existing and new
products, rapid technological changes, availability of qualified
personnel also could be factors. Changes in the Corporation's
business strategies and development plans and changes in government
regulation could adversely affect the Company. Although the
Corporation believes that the assumptions underlying the forward-
looking statements contained herein are reasonable, any of the
assumptions could be inaccurate. There can be no assurance that the
forward-looking statements included in this filing will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Corporation that the objectives and expectations of the Corporation
would be achieved
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.
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.
Discontinued Operations
In the year ended December 31, 2001, the Company discontinued the
operations of its Kunming Xinmao business segment. Kunming Xinmao was
engaged in the distribution of liquid petroleum gas in the retail and
wholesale markets in the Province of Yunnan in the People's Republic
of China.
The following table sets forth the results of operations and loss on
disposal from this discontinued business segment for the years ended
December 31, 2001 and 2000.
2001 2000
Revenues $ 351,506 $ 3,431,525
Expenses (634,721) (3,818,143)
Net (loss) $ (283,215) $ (386,618)
Continuing Operations
Revenues
The Company's revenues from continuing operations are $1,946,041
during the year ended December 31, 2001 and are attributable to
liquid petroleum gas sales at its Zunyi Shilin Xinmao Petrochemical
facility located in South China. The Company initiated operations of
this facility in 2001.
Costs of sales
The Company incurred costs of sales of $1,806,133 in connection with
the LPG revenues from continuing operations during the year ended
December 31, 2001.
Selling and administrative expenses
Selling and administrative expenses decreased $232,649, or 14.2% to
$1,410,200 during the year ended December 31, 2001 from $1,642,849
during the year ended December 31, 2000. The decrease was a result of
the Company discontinuing operating the Kunming Xinmao business
segment and the reduced need for related support functions and a
general reduction in corporate overhead costs.
Interest expense
Interest expense increased $36,827, or 112 % to $69,467 during the
year ended December 31, 2001 from $32,640 during the year ended
December 31, 2000. The increase is a result of the additional
interest bearing loans advanced to the Company by its Officers and
principal shareholders to meet its working capital requirements.
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, 2000 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, 2001, the Company had a working capital deficit of
$501,039. As a result of its operating losses, the Company generated
a cash flow deficit of $334,076 from operating activities during the
year ended December 31, 2001. The Company met the cash requirements
during this period through $408,081 advances from the Company's
Chairman and principal shareholder.
The Company has experienced significant operating losses from
inception and has financed its activities to date through cash
advances from affiliates, loans from Chinese banks and sales of its
common stock. Availability, source, amount and terms of any
additional financing are uncertain at this time, and by no means assured.
The Company has relied heavily on the financial resources that its
Chairman and largest shareholder has been able to make available. In
particular, the first oil shipment could not have taken place without
the Chairman's posting of a performance bond on behalf of the Company
and facilitating the procurement of the required letters of credit.
The cost of these credit facilities has been charged to the Company
at the same amount incurred by the Chairman.
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. Affiliates of the Company have advised the
Company that they will not demand payment of the amounts owed them
for at least 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.
While the Company has raised the capital necessary to meet its
working capital and financing needs in the past, additional financing
is required in order to meet the Company's current and projected cash
flow deficits from operations and development. The Company is seeking
financing in the form of equity in order to provide the necessary
working capital. The Company currently has no commitments for
financing. There are no assurances the Company will be successful in
raising the funds required.
The Company believes that its existing capital resources will be
sufficient to fund its current level of operating activities, capital
expenditures, debt and other obligations through the next 12 months.
However, if during that period or thereafter, the Company is not
successful in generating sufficient liquidity from operations or in
raising sufficient capital resources, on terms acceptable to the
Company, this could have a material adverse effect on the Company's
business, results of operations liquidity and financial condition.
The Company's independent certified public accountants have stated in
their report included in the Company's December 31, 2001 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 March 2000, the Financial Accounting Standards Board issued
interpretation No. 44 (FIN 44), "Accounting for Certain Transactions
Involving Stock Compensation, and Interpretation of APB Opinion No.
25". FIN 44 clarifies the application of APB No. 25 for (a) the
definition of employee for purposes of applying APB 25, (b) the
criteria for determining whether a plan qualifies as a non
compensatory plan, (c) the accounting consequences of various
modifications to previously fixed stock options or awards, and (d)
the accounting for an exchange of stock compensation awards in a
business combination. FIN 44 is effective July 2, 2000 but certain
conclusions cover specific events that occur after December 15, 1998
or January 12, 2000. The adoption of FIN 44 did not have an affect on
the Company's financial statements but may impact the accounting for
grants or awards in a future period.
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
Combinations (FAS 141), and FAS 142, Goodwill and Other Intangible
Assets (FAS 142). FAS 141 addresses the initial recognition and
measurement of goodwill and other intangible assets acquired in a
business combination. FAS 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business
combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other
intangibles subsequent to their acquisition. These standards require
all future business combinations to be accounted for using the
purchase method of accounting. Goodwill will no longer be amortized
but instead will be subject to impairment tests at least annually.
The Company is required to adopt FAS 141 and FAS 142 on a prospective
basis as of January 1, 2002; however, certain provisions of these new
standards may also apply to any acquisitions concluded subsequent to
June 30, 2001. As a result of implementing these new standards, the
Company will discontinue the amortization of goodwill as of December
31, 2001. The Company does not believe that the adoption of FAS 141
or 142 will have a material impact on is consolidated financial statements.
In October 2001, the Financial Accounting Standards Board issued FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
(FAS 144). FAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement
supersedes FAS 121, "Accounting for the Impairment of Long Lived
Assets for Long-Lived Assets to be Disposed of" (FAS 121) and related
literature establishes a single accounting model, based on the
framework established in FAS 121, for long-lived assets to be
disposed of by sale. The Company is required to adopt FAS 144 no
later than January 1, 2002. The Company does not believe that the
adoption of FAS 144 will have a material impact on its consolidated
financial statements.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Trends, Risks and Uncertainties
Largo Vista has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that Largo Vista has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to Largo Vista's stock.
Limited operating history; anticipated losses; uncertainly of future results
Largo Vista has only a limited operating history upon which an
evaluation of Largo Vista and its prospects can be based. Largo
Vista's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the litigation
funding which Largo Vista intends to market and the acceptance of
Largo Vista's business model. Largo Vista will be incurring costs to
develop, introduce and enhance its petroleum products, to establish
marketing relationships, to acquire and develop products that will
complement each other, and to build an administrative organization.
To the extent that such expenses are not subsequently followed by
commensurate revenues, Largo Vista's business, results of operations
and financial condition will be materially adversely affected. There
can be no assurance that Largo Vista will be able to generate
sufficient revenues from the sale of its products and other product
candidates. Largo Vista expects negative cash flow from operations to
continue for the next 12 months as it continues to develop and market
its petroleum products. If cash generated by operations is
insufficient to satisfy Largo Vista's liquidity requirements, Largo
Vista may be required to sell additional equity or debt securities.
The sale of additional equity or convertible debt securities would
result in additional dilution to Largo Vista's shareholders.
Potential fluctuations in quarterly operating results
Largo Vista's quarterly operating results may fluctuate significantly
in the future as a result of a variety of factors, most of which are
outside Largo Vista's control, including: the demand for Largo
Vista's products; seasonal trends in demand and pricing of petroleum
products; the amount and timing of capital expenditures and other
costs relating to the expansion of Largo Vista's operations; the
introduction of new services and products by Largo Vista or its
competitors; price competition or pricing changes in the industry;
political risks and uncertainties involving the world's petroleum and
markets; technical difficulties; general economic conditions, and
economic conditions specific to the liquid petroleum gas markets.
Largo Vista's quarterly results may also be significantly affected by
the impact of the accounting treatment of acquisitions, financing
transactions or other matters. Particularly at Largo Vista's early
stage of development, such accounting treatment can have a material
impact on the results for any quarter. Due to the foregoing factors,
among others, it is likely that Largo Vista's operating results will
fall below the expectations of Largo Vista or investors in some
future quarter.
Management of Growth
Largo Vista expects to experience significant growth in the number of
employees relative to its current levels of employment and the scope
of its operations. In particular, Largo Vista intends to hire sales,
marketing and administrative personnel. Additionally, acquisitions
could result in an increase in employee headcount and business
activity. Such activities could result in increased responsibilities
for management. Largo Vista believes that its ability to increase its
customer support capability and to attract, train, and retain
qualified technical, sales, marketing, and management personnel, will
be a critical factor to its future success. In particular, the
availability of qualified sales, trading and management personnel is
quite limited, and competition among companies to attract and retain
such personnel is intense. During strong business cycles, Largo Vista
may experience difficulty in filling its needs for qualified sales,
and other personnel.
Largo Vista's future success will be highly dependent upon its
ability to successfully manage the expansion of its operations. Largo
Vista's ability to manage and support its growth effectively will be
substantially dependent on its ability to implement adequate
financial and management controls, reporting systems, and other
procedures and hire sufficient numbers of financial, accounting,
administrative, and management personnel. Largo Vista is in the
process of establishing and upgrading its financial accounting and
procedures. There can be no assurance that Largo Vista will be able
to identify, attract, and retain experienced accounting and financial
personnel. Largo Vista's future operating results will depend on the
ability of its management and other key employees to implement and
improve its systems for operations, financial control, and
information management, and to recruit, train, and manage its
employee base. There can be no assurance that Largo Vista will be
able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on Largo Vista's business, results of operations, and
financial condition.
Largo Vista's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations. This need to manage its
expenses will place a significant strain on Largo Vista's management
and operational resources. If Largo Vista is unable to manage its
expenses effectively, Largo Vista's business, results of operations,
and financial condition will be materially adversely affected.
Risks associated with acquisitions
Although Largo Vista does not presently intend to do so, as part of
its 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 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 7. FINANCIAL STATEMENTS
The consolidated financial statements for Largo Vista Group, Ltd. as
of and for the fiscal years ended December 31, 2001 and 2000 are
included herein in response to Item 7 of this Form 10-KSB.
LARGO VISTA GROUP, LTD.
Index to Financial Statements
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheet at December 31, 2001 F-4
Consolidated Statements of Losses for the two years
ended December 31, 2001 and 2000 F-5
Consolidated Statements of Deficiency in
Stockholders' Equity for the two years
ended December 31, 2001 and 2000 F-6
Consolidated Statements of Cash Flows for
the two years ended December 31, 2001 and 2000 F-7
Notes to Consolidated Financial Statements F-8 - 17
STEFANOU & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
Philadelphia, PA
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 sheet of Largo
Vista Group, Ltd. (the "Company") as of December 31, 2001 and the
related consolidated statements of operations and comprehensive
income, stockholders' equity, and cash flows for the year 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. The accompanying
financial statements of the Company as of December 31, 2000 were
audited by another auditor whose report, dated April 9, 2001, on
those statements included an explanatory paragraph that described the
uncertainty regarding the Company's ability to continue as a going concern.
We conducted our audit 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 audit
provides 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 Largo Vista Group, Ltd. as of December 31, 2001, and the
results of its operations and its cash flows for the year ended in
conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note M, the Company has an accumulated deficit of $14,278,569 as of
December 31, 2001, 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/ STEFANOU & COMPANY, LLP
Stefanou & Company, LLP
Certified Public Accountants
McLean, Virginia
February 11, 2001
F-3
LARGO VISTA GROUP, LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
ASSETS
CURRENT ASSETS:
Cash and cash equivalent $ 99,343
Accounts receivable, net 2,790
Inventories, at cost (Note C) 59,954
Prepaid expenses and other 52,022
Total current assets 214,109
Property, plant and equipment, at cost (Note E) 14,427
Less: accumulated depreciation (211)
14,216
$ 228,325
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities 275,858
Notes payable to related parties (Note F) 408,081
Due to related parties (Note G) 31,209
Total current liabilities 715,148
Commitments and contingencies (Note K) -
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 400,000,000 shares
authorized, 232,175,730 shares issued and outstanding at
December 31, 2001 232,176
Additional paid-in capital 13,555,870
Accumulated deficit (14,278,569)
Accumulated other comprehensive income:
Foreign currency translation adjustment 3,700
Deficiency in stockholders' equity (486,823)
$ 228,325
See accompanying notes to consolidated financial statements.
F-4
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
Revenue:
Liquid petroleum gas sales $ 1,946,041 $ -
Petroleum sales - 6,706,498
1,946,041 6,706,498
Operating expenses:
Liquid petroleum gas 1,806,133 -
Petroleum - 6,810,957
Selling, general and administrative 1,410,200 1,642,849
Operating expenses 3,216,333 8,453,806
Loss from operations (1,270,292) (1,747,308)
Interest expense 69,467 32,640
Loss from continuing operations, before
income taxes and discontinued operations (1,339,759) (1,779,948)
Income (taxes) benefit - -
Loss from continuing operations, before
discontinued operations (1,339,759) (1,779,948)
Loss from discontinued operations (Note B) (283,215) (386,618)
Gain on disposal of discontinued operations (Note B) 3,572,563 -
Net income (Loss) 1,949,589 (2,166,566)
Other comprehensive gain (loss) - -
Comprehensive income (loss) $ 1,949,589 $(2,166,566)
Income (loss) per common share (basic and
assuming diluted) (Note I) $ 0.01 $ (0.01)
Continuing Operations (0.01) (0.01)
Discontinued Operations 0.02 (0.00)
Shares used to compute basic and diluted
net loss per common share 222,491,883 214,487,586
See accompanying notes to consolidated financial statements.
F-5
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Foreign Total
Common Common Additional Currency Deficiency
Stock Stock Paid-In Accumulated Translation In
Shares Amount Capital Deficit Adjustment Stockholders
Equity
Balance at December 31
1999 212,382,555 $ 212,383 $ 10,671,845 $(14,061,592) $ 3,700 $(3,173,664)
Shares issued in
exchange for services 3,114,550 3,115 914,578 - - 917,693
Shares issued in exchange
for cash, net of costs 587,272 587 281,913 - - 282,500
Shares issued in
exchange for debt 2,720,368 2,720 599,287 - - 602,007
Net loss - - - (2,166,566) - (2,166,566)
Balance at December 31
2000 218,804,745 218,805 12,467,623 (16,228,158) 3,700 (3,538,030)
Shares issued in
exchange for services 8,023,484 8,023 773,544 - - 781,567
Shares issued in
exchange for debt 5,347,501 5,348 314,703 - - 320,051
Net income - - - 1,949,589 - 1,949,589
Balance at December 31
2001 232,175,730 232,176 13,555,870 (14,278,569) 3,700 (486,823)
See accompanying notes to consolidated financial statements.
F-6
LARGO VISTA GROUP, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Cash flows from operating activities:
Net income (loss) from continuing operations $ (1,339,759) $(1,779,948)
Net income (loss) from discontinued operations (283,215) (386,618)
Gain on business divestiture 3,572,563 -
Adjustment to reconcile net income
(loss) to net cash used by
Operating activities:
Depreciation 211 40,488
Loss on disposal of assets, net 821,060 78,015
Common stock issued in exchange for services 781,567 917,693
Changes in assets and liabilities:
Accounts receivable (2,790) -
Inventories 256,772 (152,944)
Prepaid and other 228,399 (116,787)
Accounts payable and other liabilities, net (4,180,654) 986,358
Deferred revenue (188,230) (873,129)
Net cash used in operating activities (334,076) (1,286,872)
Cash flows used investing activities:
Purchase of fixed assets (14,427) -
Net cash used in investing activities (14,427) -
Cash flows provided by financing activities:
Proceeds from (repayments of) notes payable 408,081 (105,221)
Issuance of common stock, net - 282,500
Advances from (repayments to) related parties - 1,132,980
Net cash provided by financing activities 408,081 1,310,259
Net increase in cash 59,579 23,387
Cash at beginning of year 39,766 16,379
Cash at end of year 99,345 39,766
Supplemental cash flow information:
Interest paid 25,947 78,909
Income taxes paid - -
Non-cash investing and financing activities:
Common stock issued in exchange for debt 320,051 602,007
Common stock issued in exchange for services 781,567 917,693
See accompanying notes to consolidated financial statements
F-7
LARGO VISTA GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 and 2000
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., Largo Vista International Corp., and Zunyi
Shilin Xinmao Petrochemical Industries Co., Ltd. ("Zunyi"). Largo
Vista, Inc. was formed under the laws of the State of California and
is inactive. Largo Vista Construction, Inc. was formed under the laws
of the State of Nevada and is inactive. Largo Vista International
Corp. was formed under the laws of Panama and is inactive. Zunyi was
registered under the laws of the Peoples Republic of China. Zunyi was
formed and began operations in 2001.
In June 29, 2001, the Company's wholly owned subsidiary, Everlasting
International, Ltd. disposed of its 66.67% interest in Xinmao
Petrochemical Industrial Co., Ltd. ("Kunming Xinmao"), a Chinese
joint venture to UNIKO-LINE, an entity organized under the laws of
the Russian Federation. Kunming Xinmao was engaged in the
distribution of liquid petroleum gas in the retail and wholesale
markets in the Province of Yunnan in the Peoples Republic of China.
Subsequent to the sale, the Company liquidated in its entirety,
Everlasting, whose sole asset was the Company's equity interest in
Kunming Xinmao.
The Kunming Xinmao business segment is accounted for as a
discontinued operation, and accordingly, amounts in the financial
statements, and related notes for all periods shown have been
restated to reflect discontinued operations accounting. Summarized
results of the discontinued business are further described in Note B.
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 transaction 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 2000 and 2001 was
8.28 RMB to the dollar.
F-8
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers
all highly liquid investments purchased with a maturity date of three
months or less to be cash equivalents.
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 C).
Property and Equipment
Property and equipment are recorded on the basis of cost. For
financial statement purposes, property and equipment will be
depreciated using the straight-line method over their estimated
useful lives of not more than five years. The straight-line method of
depreciation is also used for tax purposes. (See Note E).
Impairment of Long Lived Assets
The Company has adopted Statement of Financial Accounting Standards
No. 121 (SFAS No. 121). 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.
SFAS No. 121 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.
Revenue Recognition
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.
Reclassifications
Certain reclassifications have been made to conform the prior
periods' data to the current presentation. These reclassifications
had no effect on reported losses.
F-9
Income Taxes
Income taxes are provided based on the liability method for financial
reporting purposes in accordance with the provisions of Statements of
Financial Standards No. 109, "Accounting for Income Taxes". Under
this method deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be removed or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the
statement of operations in the period that includes the enactment date.
Stock Based Compensation
The Company accounts for stock transactions in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees." In accordance
with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation," the Company has adopted the proforma
disclosure requirements.
Concentration 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 trade receivables. The Company places its
cash and temporary cash investments with high credit quality
institutions. At times, such investments may be in excess of the FDIC
insurance limit.
Liquidity
As shown in the accompanying financial statements, the Company
incurred a net loss from continuing operations of 1,339,759 and
$1,779,948 during the year ended December 31, 2001 and 2000,
respectively. The Company recognized an after tax gain of $ 3,572,563
on the disposition of Kunming Xinmao operations and the liquidation
of Everlasting in June 2001. The Company's current liabilities
exceeded its current assets by $501,039 as of December 31, 2001.
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-10
Segment Information
The Company adopted Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"). SFAS 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 on 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
segments. (See Note J).
Earnings (Loss) Per Share
The Company has adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share," specifying the computation,
presentation and disclosure requirements of earnings per share
information. Basic earnings (loss) per share have been calculated
based upon the weighted average number of common shares outstanding.
Stock options and warrants will be excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material. The weighted average
number of common shares outstanding used in the computation of
earnings (loss) per share was 222,491,883 and 214,487,586 for each of
the periods ended December 31, 2001 and 2000 respectively.
New Accounting Pronouncements
In March 2000, the FASB issued interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
Interpretation of APB Opinion No. 25". FIN 44 clarifies the
application of APB No. 25 for (a) the definition of employee for
purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequences of various modifications to previously fixed
stock option or award, and (d) the accounting for an exchange of
stock compensation awards in a business combination. FIN 44 is
effective July 2, 2000 but certain conclusions cover specific events
that occur after either December 15, 1998 or January 12, 2000. The
adoption of FIN 44 did not have an affect on the Company's financial
statements but may impact the accounting for grants or awards in
future periods.
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. ("FAS") 141,
"Business Combinations" ("FAS 141") and FAS 142, "Goodwill and Other
Intangible Assets" ("FAS 142"). FAS 141 addresses the initial
recognition and measurement of goodwill and other intangible assets
acquired in a business combination. FAS 142 addresses the initial
recognition and measurement of intangible assets acquired outside of
a business combination, whether acquired individually or with a group
of other assets, and the accounting and reporting for goodwill and
other intangibles subsequent to their acquisition. These standards
require all future business combinations to be accounted for using
the purchase method of accounting. Goodwill will no longer be
amortized but instead will be subject to impairment tests at least
annually. The Company is required to adopt FAS 141 and FAS 142 on a
prospective basis as of January 1, 2002; however, certain provisions
of these new standards may also apply to any acquisitions concluded
subsequent to June 30, 2001. As a result of implementing these new
standards, the Company will discontinue the amortization of goodwill
as of December 31, 2001. The Company does not believe that the
adoption of FAS 141 and 142 has a material impact on its consolidated
financial statements.
F-11
In October 2001, the Financial Accounting Standards Board issued FAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("FAS 144"). FAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement
supersedes FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121") and
related literature and establishes a single accounting model, based
on the framework established in FAS 121, for long-lived assets to be
disposed of by sale. The Company is required to adopt FAS 144 no
later than January 1, 2002. The Company does not believe that the
adoption of FAS 144 will have a material impact on its consolidated
financial statements.
NOTE B - DISCONTINUED OPERATIONS
In connection with the disposition of Kunming Xinmao, UNIKO-LINE
acquired all Kunming Xinmao assets, assumed all Kunming Xinmao
liabilities and paid $100 to the Company. As a result of the sale of
the Kunming Xinmao business segment, the Company accounted for the
segment as a discontinued operation, and accordingly, the amounts in
the financial statements and related notes for all periods shown have
been restated to reflect discontinued operations accounting.
The financial statements reflect the operating results and balance
sheet items of the discontinued operations separately from continuing
operations. Prior years have been restated. Operating results for the
discontinued operations for the years ended December 31, 2001 and
2000 were:
2001 2000
Revenues $ 351,506 $ 3,431,525
Expenses (634,721) (3,818,143)
Net (loss) $ (283,215) $ (386,618)
The following summarizes the gain on the disposition of the Kunming
Xinmao business segment:
Cash received $ 100
Debts assumed 5,026,463
Net assets disposed of 1,453,799
Net gain on disposal $3,572,563
NOTE C - INVENTORIES
Inventories are stated at the lower of cost or market determined by
the first-in, first-out (FIFO) method. Inventories consist of liquid
petroleum gas available for sale to contract clients and the public.
F-12
Components of inventories as of December 31, 2001 are as follows:
Liquid petroleum gas $ 50,874
Packaging bottles 7,665
Supplies 1,415
$ 59,954
NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS 107"), defines the
fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between
willing parties. The Company includes fair value information in the
notes to consolidated financial statements when the fair value of its
financial instruments is materially different from the book value.
The carrying value of the Company's cash and cash equivalents, short-
term debt securities held to maturity, time deposits, receivables,
other current assets, accounts payable, and accrued liabilities,
included in the accompanying balance sheets, approximate the
estimated fair value of those instruments because of their short-term
nature. The fair value of the notes payable to banks based on the
interest rates currently available for borrowings with similar terms
and maturities approximates the carrying amount of those borrowings.
The fair value of the amounts due to and from related party cannot be
determined due to the uncertainty as to the timing of repayment.
NOTE E - PROPERTY, PLANT AND EQUIPMENT
The Company's property and equipment at December 31, 2001 consists of
the following:
ffice Equipment $ 3,014
Transportation Equipment 11,413
Total 14,427
Accumulated Depreciation (211)
$ 14,216
Depreciation expense included as a charge to income amounted to $ 211
for the year ended December 31, 2001.
NOTE F - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31, 2001 consists of the
following:
Note payable on demand to Company
President; interest payable monthly at
7% per annum; unsecured $ 30,000
Note payable on demand to Company's
Chairman; interest payable monthly at 7%
per annum; unsecured 378,081
Total notes payable to related parties 408,081
Less: current portion 408,081
$ -
F-13
NOTE G - RELATED PARTY TRANSACTIONS
A company officer has advanced funds to the Company for working
capital purposes. No formal repayment terms or arrangements exist.
The net amount of advances due the officer at December 31, 2001 was $3,144.
A consultant to 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,
2001 was $28,065.
NOTE H - INCOME TAXES
The Company has adopted Financial Accounting Standard No. 109 that
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, 2001, the Company has available for federal income
tax purposes a net operating loss carryforward of approximately $
14,000,000, expiring in the year 2021, 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. Due to significant changes in the Company's ownership, the
Company's future use of its existing net operating losses may be limited.
Components of deferred tax assets as of December 31, 2001 are as follows:
Non Current:
Net operating loss carryforward $ 4,800,000
Valuation allowance (4,800,000)
Net deferred tax asset -
NOTE I - EARNINGS (LOSS) 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 (loss) per share:
2001 2000
Net income (loss) available to
Common stockholders $ 1,949,591 $ (2,166,566)
Basic and diluted earning (loss) per share 0.01 (0.01)
Continuing Operations (0.01) (0.01)
Discontinued Operations 0.01 (0.00)
Basic and diluted weighted average
Number of common shares outstanding 222,491,883 214,487,586
F-14
NOTE J - SEGMENT INFORMATION
The Company's current operations are classified into two reportable
segments that provide different products: Liquid Petroleum Gas and
Petroleum. The Company's reportable segments are managed separately
based on fundamental differences in their operations.
The Company's wholly-owned subsidiary Zunyi Shilin Xinmao
Petrochemical Industries Co., Ltd. is engaged in the distribution of
liquid petroleum gas in the wholesale markets in South China. The
Company is also engaged in the purchase of petroleum products for
delivery to the Far East through a representative office in Vietnam.
Segment operating income is total segment revenue reduced by
operating expenses identifiable with that business segment. Corporate
includes general corporate administrative costs. The Company
evaluates performance and allocates resources based upon operating
income. The accounting policies of the reportable segments are the
same as those described in the summary of accounting policies. There
are no inter- segment sales.
As a result of the sale of the Kunming Xinmao business segment, the
Company accounted for the segment as a discontinued operation, and
accordingly, the amounts in the financial statements for all periods
shown have been restated to reflect discontinued operations
accounting. The financial statements reflect the operating results
and balance sheet items of the discontinued operations separately
from continuing operations.
2001 2000
Revenues Received from External Customers:
Liquid Petroleum Gas $ 1,946,041 -
Petroleum - 6,706,498
Total Revenue 1,946,041 6,706,498
Operating (Losses):
Liquid Petroleum Gas (62,776) -
Petroleum - (957,000)
Corporate (1,207,516) (822,948)
Total Segment Operating Losses (1,270,292) (1,779,948)
Segment Assets:
Liquid Petroleum Gas 217,667
Petroleum -
Corporate 10,658
Total Segment Assets 228,325
Capital Expenditures:
Liquid Petroleum Gas 14,427
Petroleum -
Corporate -
Total Capital Expenditures 14,427
F-15
Depreciation and Amortization:
Liquid Petroleum Gas 211
Petroleum -
Corporate -
Total Depreciation and Amortization 211
NOTE K - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space on a month-to-month basis 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
for an administrative and sales representation.
The Company maintains a representative office in Wuhan, Hubei
Province, China. The leases are 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 2001 are as follows:
2002 $ 94,625
2003 93,325
2004 82,275
2005 82,125
2006 82,125
Rental expense charged to operations was $136,192 for the year ended
December 31, 2001.
Employment and Consulting Agreement
The Company has several agreements with employees to provide
organizational services and various consulting agreements with
outside contractors to provide business development in China,
international petroleum and other products trading consultation services.
Litigation and Contingencies
On March 1, 2001, UPAC/UAS, a former joint venture partner with the
Company, filed a complaint against the Company in Orange County
Superior Court of the State of California. The complaint alleges a
breach of contract. The Company filed a counter claim against the
Plaintiff for damages and received a default judgment in the
Company's favor in February 2002 in the amount of $196,638.
The Company is subject to other legal proceedings and claims that
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 material adverse
effect on its financial position, results of operations or liquidity.
F-16
NOTE L - STOCK OPTION PLAN
On November 14, 2001, the Board of Directors of the Company
implemented a Non-Qualified Stock Plan for Consultants in an amount
equal to 5,000,000 shares of common stock and a Qualified Stock Plan
for Employees in an amount equal to 10,000,000 shares.
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 substantial stockholders). The maximum life of the options is ten
years for both the qualified incentive stock options and non-
qualified incentive stock options. As of December 31, 2001, 1,028,574
options were granted and excerised inside the Plan.
NOTE M - 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,
2001 and 2000, the Company incurred losses from continuing operations
of $1,339,759 and $1,779,948 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 it's 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 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-17
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Largo Vista Group, Ltd.
I have audited the accompanying consolidated balance sheet of Largo
Vista Group, Ltd. as of December 31, 2000, and the related
consolidated statements of operations, changes in shareholders'
deficit and cash flows for each of the years in the two-year period
ended December 31, 2000. These consolidated financial statements are
the responsibility of Company's management. My responsibility is to
express an opinion on these consolidated financial statements based
on my audits.
I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require
that I plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audits
provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Largo Vista Group, Ltd. as of December 31,
2000, and results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2000, 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 2 to the consolidated financial statements, the
Company's recurring losses from operations raise substantial doubt
about its ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
As discussed in Note 11, the Company restated its 1999 consolidated
statement of shareholders' deficit.
/s/ Jaak (Jack) Olesk, CPA
Beverly Hills, California
April 9, 2001
Note 1 - Summary of Significant Accounting Policies
Basis of Consolidation and Nature of Operations
The consolidated financial statements include the accounts of Largo
Vista Group, Ltd. ("Largo Vista"or the "Company"), incorporated in
Nevada on January 16, 1987, and its wholly-owned subsidiaries,
Everlasting International, Ltd. ("Everlasting"), incorporated in
Nevada on January 25, 1995, and Kunming Xinmao Petrochemical
Industrial Co., Ltd. ("Xinmao"), a Chinese joint venture 66.67% owned
by Everlasting. The minority partner is a Chinese Government Entity
that has contractually agreed to place all power and day-to-day
decisions in the hands of the majority. The Chinese minority partner
is not responsible for Xinmao's losses; accordingly, no portion of
those losses is allocated to the minority interest. All amounts are
in U.S. dollars unless otherwise indicated. All significant
intercompany balances and transactions have been eliminated in
consolidation. Largo Vista operates a liquefied petroleum gas (LPG)
distribution business in South China, and, beginning the second
quarter of 2000, ships petroleum products to Southeast Asia.
Foreign Currency Translation
The financial statements and results of operations of the Company's
Chinese subsidiary are measured using local currency as the
functional currency. Assets and liabilities of the subsidiary are
translated at the exchange rates in effect at each year-end.
Statements of operations are translated at the average rate of
exchange prevailing during the year. Translation adjustments arising
from differences in exchange rates from period to period are included
in the foreign currency translation adjustment account in
stockholders' deficit.
The national currency of the People's Republic of China, the Renminbi
(RMB), is pegged to the U.S. dollar. As of December 1998, 1999 and
2000, the exchange rate was 8.28 RMBs to US$1.00 and the average rate
of exchange for fiscal 1999 and 2000 was also 8.28. However, no
representation is made that any Renminbi amounts could have been, or
could be, converted into U.S. dollars at these rates or any other rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in financial
statements and accompanying notes. Actual results could differ from
those estimates.
Cash Equivalents
Cash equivalents include all highly liquid investments with an
original maturity of three months or less.
Inventories
Inventories are valued at lower of cost or market on the first-in,
first-out basis and consist primarily of LPG.
Impairment of Long Lived Assets
Long-lived assets are assessed for impairment annually or whenever
changes in facts and circumstances indicate a possible significant
deterioration in the future cash flows expected to be generated by an
asset group. If, upon review, the sum of the undiscounted pretax cash
flows is less than the carrying value of the asset group, the
carrying value is written down to estimated fair value. Individual
assets are grouped for impairment purposes at the lowest level for
which there are identifiable cash flows that are largely independent
of the cash flows of other groups of assets.
The fair value of impaired assets is determined based on quoted
market prices in active markets, if available, or upon the present
values of expected future cash flows using discount rates
commensurate with the risks involved in the asset group. Long-lived
assets committed by management for disposal are accounted for at the
lower of amortized cost or fair value, less cost to sell.
Revenue Recognition
The Company generally recognizes revenue upon delivery of LPG to the
customer. In addition, the Company contracts with certain customers
for the delivery of LPG bottles over a 1 to 5 year period. The
customer is required to pay a non-refundable amount at the time the
contract is purchased. This entitles the customer to receive one
bottle of gas each month during the contract life at a reduced fixed
price. The prepayment is recorded as deferred revenue at the
beginning of the contract and the appropriate prorated amount is
realized as revenue when an empty bottle is exchanged for a full
bottle. If customers do not exchange their allotted number of bottles
by the end of the contract term, the excess deferred revenue is
recognized as income.
Revenue associated with shipments of petroleum products is recognized
when title passes to the customer.
There are no significant credit transactions.
Income Taxes
The Company accounts for income taxes using the asset and liability
method. Deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory rates
applicable to future years to the difference between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
Stock Based Compensation
The Company has adopted the disclosure provisions only of SFAS 123
and continues to measure compensation costs related to stock and
stock options issued to employees using the intrinsic value method of
accounting prescribed by APB 25, Accounting for Stock Issued to
Employees, and related interpretations.
Reclassifications
Certain items in the 1999 financial statements have been reclassified
to conform to 2000 classifications.
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred significant operating losses and
its liabilities exceed its assets by over $3,500,000 at December 31,
2000. These factors, among others, raise substantial doubt as to the
Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
The Company intends to raise additional operating funds from its
affiliates and through equity and debt offerings. However, there can
be no assurance it will be successful in this endeavor.
Note 3 - Fair Value of Financial Instruments
The carrying amount of the Company's cash and bank balances
approximates their fair value because of the short maturity of those
instruments.
The fair value of the notes payable to banks based on the interest
rates currently available for borrowings with similar terms and
maturities approximates the carrying amount of those borrowings. The
fair value of the amounts due to affiliates cannot be determined due
to the related party nature of the obligations.
Note 4 - Property and Equipment
Years of
December 31, 2000 Useful Life
Storage tanks $ 465,337 20
Building and leasehold improvements 291,865 25
Railroad cars and trucks 242,224 8
LPG Bottles 111,529 5
Equipment 73,699 5
1,184,654
Accumulated depreciation (363,594)
821,060
Note 5 - Notes Payable to Banks
The balance at December 31, 2000 represents the aggregate borrowings
from various PRC banks at average interest rates of approximately 7
percent. In the past, Xinmao has been allowed by the PRC bankers to
roll over the loans due for repayment. Accordingly, consistent with
previous years, management believes that the existing bank loans will
again be renewed when they become due. However, there can be no
assurance that the PRC banks will continue to renew or not call these loans.
Note 6 - Related Party Transactions
Amounts due to affiliates at December 31, 2000 include $471,000 due
to Xinmao's minority partner and $1,111,951 due to executive officers
for cash advances. All amounts are non-interest bearing.
All shares of common stock issued in 1999 and 2000 for compensation
and repayment of cash advances involved executive officers and
shareholders. These issuances were valued at market, generally
determined by the low bid quotation.
Note 7 - Income taxes
The Company recognizes deferred tax assets and liabilities for
temporary differences between the financial reporting and tax bases
of its assets and liabilities. Deferred tax assets are reduced by a
100% valuation allowance, as the utilization of the loss carryforwards cannot
reasonably be assured.
At December 31, 2000, the Company has a net operating loss
carryforward for federal tax purposes of approximately $7,600,000,
which, if unused to offset any future taxable income, will expire
beginning in 2010 through 2020.
Under Section 382 of the Internal Revenue Code, the utilization of
net operating loss carryforwards is limited after a change in the
ownership of the Company, as defined.
Note 8 - Loss per Common Share
The following table illustrates the reconciliation of the numerators
and denominators of the basic and diluted loss per share computations.
Year Ended December 31
2000 1999
Basic and diluted loss per share
Numerator
Net loss $(2,166,566) $1,298,488)
Demoninator
Basic and diluted weighted average number of
Common shares outstanding 214,487,586 192,652,800
Basic and diluted loss per share (0.01) (0.01)
The Company has no potentially dilutive securities, options, warrants
or other rights outstanding.
Note 9 - Segment Information
Beginning in 2000, the Company's operations are classified into two
principal reportable segments that provide different products.
Reconciling items consist of corporate items that are not allocated
to the two segments. The chief decision maker does not consider these
items when making segment operating decisions.
Note 10 -Commitments and Contingencies
Various lawsuits, claims and proceedings of a nature considered
normal to its business are pending against the Company and its
subsidiaries. The most significant of these are described below.
Everlasting, Plaintiff vs. CHAN MAU TAK ("CMD"), Defendant
Everlasting brought this lawsuit against CMD for breach of the
purchase agreement wherein Everlasting acquired the assets of Xinmao
from CMD. The basis of the case is that CMD made fraudulent
representations concerning the assets of Xinmao at the time of
purchase. The court ordered an Interlocutory Judgment in October 1998
in favor of Everlasting for approximately $127,000 plus damages
incurred plus interest @ 13.08% per annum. CMD filed an appeal, based
on failure of service of process.
The appeal process culminated in November 2000 with the complete
reversal of the lower court's finding. On December 2, 2000, in order
to put an end to this lengthy dispute, the parties reached a
settlement whereby the Company would pay CMD a total of RMB 2,000,000
($241,500), due $145,000 on May 1, 2001, and $96,500 on December 31,
2001. The Company has accrued $250,000 at December 31, 2000, for the
total amount of the settlement and related expenses.
Largo Vista/UAPC Partners (LV/UAPC) Joint Venture Dispute
During the second quarter of 2000, the Company withdrew from LV/UAPC
due to UAPC's inability to provide reliable suppliers of petroleum
products at reasonable terms. Since that time, the Company's efforts
to reach a settlement with UAPC, including UAPC's reimbursement of
its fair share of the joint venture costs, have been unsuccessful. On
March 1, 2001, UAPC filed a suit against the Company for various
contractual breaches, seeking unspecified damages. No estimate as to
the ultimate liability from this dispute, if any, can be made at this time.
Note 11 - Restatement
The Company has restated its consolidated financial statements for
the years ended December 31, 1999 and 1998 to correct an error in the
financial statements previously filed. The error was caused by a
computer malfunction compounded by inadequate data back-up
procedures. As Company personnel attempted to restore lost
information, data from a corrupted file was inadvertently included in
the financial statements previously filed. This error increased 1998
selling, general and administrative expenses by $ 325,146 and
increased accumulated deficit and additional paid in capital at
December 31, 1999 by the same amount. The effect of the correction of
this error was to reduce 1998 selling, general and administrative
expenses by $325,146 and decrease accumulated deficit and additional
paid in capital at December 31, 1999 by the same amount.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On April 24, 2001, the Company dismissed its certifying accountant,
Jaack (Jack) Olesk, CPA ("Olesk"). Olesk's reports on the financial
statements for the years ended December 31, 2000 and 1999 did not
contain an adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting
principles, except that his report for the years ended December 31,
2000 and 1999 contained an explanatory paragraph regarding the
substantial doubt about the Company's ability to continue as a going
concern The decision to dismiss Olesk was approved by the Company's
Board of Directors. During the years ended December 31, 2000 and
1999, and the subsequent interim period through April 24, 2001, the
Company has not had any disagreements with Olesk on any matter of
accounting principles or practices, financial statement disclosure or
auditing scope or procedure. The Company engaged Stefanou & Company
LLP ("Stefanou") as its certifying accountant as of April 24, 2001
for the Company's fiscal year ending December 31, 2001.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages and positions of the directors and executive officers
of the Company as of March 31, 2002, are as follows:
Name Age Position
Daniel J. Mendez 49 President and Director
Albert N. Figueroa 35 Secretary/Treasurer and Director
Deng Shan 50 Chairman of the Board of Directors
Directors serve until the next annual meeting of shareholders, or
until their successors are elected.
Daniel J. Mendez, President, is responsible for investor relations,
coordination of information with market makers and brokers and
potential partners, coordination of all agreements, corporate
financing, and liaison with Chinese operations. Mr. Mendez joined the
Company in October 1991.
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.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by
the Company during the last three years to its three executive officers.
Summary Compensation Table
Annual compensation Long-term Compensation
Awards Payouts
Name and Other Restricted Securities
principal annual stock underlying LTIP All other
position Year Salary Bonus compensation award(s) options/SARs payouts compensation
($) ($) ($) ($) (#) ($) ($)
Daniel Mendez 2001 119,965 0 0 0 0 0 0
President 2000 120,000 0 0 0 0 0 0
1999 150,000 661,618 0 0 0 0 0
Albert 2001 65,634 0 0 0 0 0 0
Figueroa 2000 60,000 0 0 0 0 0 0
Secretary 1999 100,000 275,034 0 0 0 0 0
Deng Shan 2001 100,000 0 0 0 0 0 0
Chairman 2000 100,000 0 0 0 0 0 0
1999 100,000 261,827 0 0 0 0 0
Notes:
(1) The officers listed above were paid any salary and/or bonuses 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 low bid quotation.
(2) Daniel J. Mendez, President, serves under an annual employment
contract renewed effective January 1, 2001 at annual compensation of
$120,000, that may be terminated upon 30 days written notice of
either party.
(3) Albert N. Figueroa, Secretary/Treasurer, serves under an annual
employment contract renewed effective January 1, 2001 at annual
compensation of $60,000 that may be terminated upon 30 days written
notice of either party.
(4) Deng Shan, Consultant, serves under an annual Agreement for
Services renewed effective January 1, 2001 at annual compensation of
$100,000, that may be terminated upon 30 days written notice of
either party.
(5) The above officers, comprising the Company's Board of Directors,
receive no additional compensation for serving as directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership as of March 28, 2002, of the Company's common stock, by any
person who is known to the Company to be the beneficial owner of more
than 5% of the Company's voting securities and by each director and
by officers and directors of the Company as a group.
Beneficial Percentage
Name and Address (1) Ownership of
Class
Daniel Mendez 16,615,621 6.97%
Albert Figueroa 5,564,620 2.33%
Deng Shan (2) 86,202,573 36.17%
All directors/officers as a group (3 persons) 109,956,534 46.13%
(1) The address for all persons listed is 4570 Campus Drive, Newport
Beach, CA 92660
(2) Mr. Deng Shan owns 2,897,753 (1.21%) shares personally, and
83,304,820 (34.95%) shares through his majority owned corporation,
Proton Technology Corporation Limited.
(3) The Company is currently conducting an internal audit to ensure
that the Company's Officers and/or Directors, as well as persons
holding more than 10% of the Company's outstanding common stock, are
in Compliance with Section 16(a) of the Securities and Exchange Act
of 1934. It is the Company's intention to ensure, from the date of
this filing forward, complete compliance according to this Section.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of February 28, 2001, other than issuances of common shares to
executive officers as compensation or in satisfaction of cash
advances, there have been no transactions to which the Company was a
party involving $60,000 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)
10 Material Contracts
(a) Contract. Largo Vista Group, Ltd. and Sentio Corporation,
December 28, 1998, (filed Form 10SB, 11/2/99)
(b) Contract. Hong Kong De Xiang Tuo Yi Industrial Company, August
28, 1992 (filed Form 10SB, 11/2/99)
(c) Plan and Agreement of Reorganization between Largo Vista Group,
Ltd., Proton Technology Corporation, Ltd. and Everlasting
International, December 21, 1996 (filed Form 10SB, 11/2/99)
(d) Joint Venture Agreement of Kunming Xinmao Petrochemical Industry
Co., Ltd., August 8, 1992 (filed Form 10SB, 11/2/99)
(e) Approval Certificate of Enterprise with Foreign Investment in the
People's Republic of China (filed Form 10SB, 11/2/99)
(f) Business License of Enterprise in the Peoples Republic of China
(filed Form 10SB, 11/2/99)
(g) Business Permit to Engage in LPG Business in Yunnan Province
(filed Form 10SB, 11/2/99)
(h) Notice of Subsidiaries of the Agriculture Bank of China, Yunnan
Provincial Branch, Acting as Agents for Collection and Receipt of
Payment for Kunming Xinmao Petrochemical Industry Co., Ltd.
(filed Form 10SB, 11/2/99)
(i) Agreement of Supply of Liquefied Petroleum Gas, March 18, 1996
(filed Form 10SB, 11/2/99)
(j) Method of Insurance for LPG Credit, August 26, 1997
(filed Form 10SB, 11/2/99)
(k) Memorandum of Understanding Kunming Xinmao Petrochemical Industry
Co., Ltd. and Wuhan Minyi Fuel Gas Petrochemical Company Limited,
March 14, 1999 (filed Form 10SB, 11/2/99)
(l) Memorandum of Understanding Kunming Xinmao Petrochemical Industry
Co., Ltd. and Guilin Municipal Garden Fuel Gas Pipelines Limited,
March 29, 1999 (filed Form 10SB, 11/2/99)
(m) Approval Certificate of Enterprisees with Foreign Investment in
the Peoples Republic of China, August 21, 1992 (filed Form 10SB, 11/2/99)
(n) Contract. Enterprise Ownership Transfer Agreement "Ten Year
Leasing Contract", Seller Chen Mao Tak, Purchaser Everlasting
International, Ltd., third party Kunming Fuel General Company,
November 8, 1995 (filed Form 10SB-A1, 1/14/2000 as EX-10.D)
(o) Joint Venture Agreement. , Largo Vista with the United Arab
Petroleum Corporation ("UAPC"), known as Largo Vista/UAPC Partners
(filed Form 10SB-A1, 1/14/2000 as EX-10.F)
(p) Memorandum of Association Limited Liability Company. Largo Vista
Group, Ltd., LLC, Dubai, UAE, October 12, 1999, Largo Vista Group,
Ltd., UAPC, and Sheik Al Shabani, named Largo Vista Group Limited,
Limited Liability Company of the UAE (filed Form 10SB-A1, 1/14/2000
as EX-10.G)
(q) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG)
Buyer, and United Arab Petroleum Corporation Seller, November 25,
1999 (filed Form 10SB-A1, 1/14/2000 as EX-10.H)
(r) Contract: Mekong Petroleum Joint Venture Co., Ltd. (PETROMEKONG),
Buyer, and United Arab Petroleum Corporation Seller, December 18,
1999 (filed Form 10SB-A1, 1/14/2000 as EX-10.H)
(s) Employment Agreement Daniel J. Mendez 1999
(filed Form 10SB-A1 as Ex-3.iv, 1/14/2000)
(t) Consultant Agreement Deng Shan 1999
(filed Form 10SB-A1, as Ex-3.v 1/14/2000)
(u) Contract. "Enterprise Ownership Transfer Agreement", November 8,
1995, new translation (filed Form 10SB-A2, 3/20/2000 as EX-10.E.1)
(v) Contract. "Agreement on Payment", November 8, 1995
(filed Form 10SB-A2, 3/20/2000 as EX-10.E.2)
(w) Contract. "Agreement on Supply of Liquified Petroleum Gas", March
18, 1996 (filed Form 10SB-A2, 3/20/2000 as EX-10.E.3)
(x) Employment Agreement Albert N. Figueroa 1999 (filed as Ex-3.vi
3/21/2000)
All of the exhibits listed above have been filed previously with the
forms and on the dates indicated.
There are no new exhibits for this filing.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
/s/Daniel J. Mendez President April 1, 2002
Daniel J. Mendez
/s/Albert N. Figueroa Secretary/Treasurer April 1, 2002
Albert N. Figueroa
/s/ Deng Shan Chairman April 1, 2002
Deng Shan