LARGO VISTA GROUP LTD
Form: 10KSB/A Filing Date: 6/27/2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission file number : 0-30426
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LARGO VISTA GROUP, LTD.
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(Exact name of registrant as specified in its charter)
Nevada 76-0434540
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4570 Campus Drive, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 252-2180
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Securities registered pursuant to Section 12 (b) of the Act: None
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Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as latest practicable date:
Number of Shares Outstanding
Class
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Common Stock
DOCUMENTS INCORPORATED BY REFERENCES
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424 (b) or (c) under the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for the fiscal year ended
December 24, 1990).
None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
Item 1. DESCRIPTION OF BUSINESS
A. INTRODUCTION
1. Largo Vista Group, Ltd., a Nevada corporation ("Largo Vista,"), operates
through its wholly owned subsidiary, Everlasting International Ltd.
("Everlasting"), a Nevada corporation. Everlasting operates and owns a 66.67%
interest in a joint venture company in China, operated under the name
"Kunming Xinmao Petrochemical Industry Co. Ltd." ("Xinmao or the Company").
Xinmao is principally engaged in the business of purchasing and reselling
liquid petroleum gas ("LPG") in the retail and wholesale markets to both
residential and commercial consumers in Yunnan Province of South China.
Xinmao operates a storage depot and has office headquarters in the City of
Kunming. All of the Company's property and equipment is located in China.
Largo Vista was originally incorporated on January 16, 1987 in Nevada under
the name, "The George Group". On January 9, 1989, The George Group acquired
Waste Service Technologies, Inc. ("WST"), an Oregon corporation. On the same
day The George Group filed a name change in Nevada and changed its name to
WST. WST's plan of business was to become an environmental service company.
It listed its stock and began trading on OTC Bulletin Board.
On April 15, 1994, WST acquired Largo Vista, Inc., a California corporation,
and on the same day filed a name change in Nevada to change WST's name to
Largo Vista Group, Ltd. At the time of acquisition Largo Vista filed a
change of name with the OTC Bulletin Board and received a new CUSIP number
and symbol ("LGOV"). Largo Vista originally planned to develop housing in
China, but, after shipping two factory built homes to China, never fully
implemented the plans due to unanticipated financing, environmental and
regulatory complications.
On December 26, 1996, Largo Vista acquired 100% of Everlasting International
Ltd. ("Everlasting"), a Nevada Corporation, which owns a 66.67% interest in
Kunming Xinmao Petrochemical Industry Co., Ltd. ("Xinmao"), mentioned above.
Everlasting acquired this asset from Proton Technology Corporation Limited, a
Bahamas Corporation ("Proton"), in which Mr. Deng Shan, a director and
principal shareholder of Largo Vista, is the principal shareholder.
Since Largo Vista had no substantive operations as of the date it acquired
Everlasting, the transaction between Everlasting and Largo Vista represents a
re-capitalization/reverse merger that resulted in no change in the basis of
Everlasting's accounts. The book value of Xinmao's net assets did not differ
materially from their fair market value in November 1995, in that there were
no material transactions during that period, other than those occurring in
the normal course of business. Since there was no significant difference
between the book value and fair market value of the net assets acquired, no
goodwill has been recorded. Minority interest is not shown on the balance
sheet or statement of operations since the minority interest has no
obligation to make good on any losses Xinmao incurs.
<PAGE>
The historical chain-of-ownership of the asset is as follows: The Hong Kong
Company, formed under the laws of Hong Kong, was initially owned by one
individual, Chan Mau Tak. On November 8, 1995, Deng Shan, an individual,
purchased the Hong Kong Company from Chan Mau Tak. On December 20, 1996, the
Hong Kong Co. was acquired from Deng Shan by Proton with majority shareholder
being Deng Shan. On December 21, 1996, Proton transferred 100% of its interest
in the Hong Kong Company to Everlasting International Ltd., a Nevada
Corporation. On April 29,1997, Largo Vista shareholders consented to an
acquisition and plan of reorganization executed on December 26, 1996, wherein
Largo Vista purchased 100% of the stock of Everlasting from Proton Technology in
a stock exchange transaction.
2. Organization of the Company and Subsidiary
Xinmao, in operation and providing uninterrupted service to consumers since
1992, is in its third year of operation as a subsidiary of Largo Vista.
Xinmao is the only company that has private majority ownership, and a private
majority Board of Directors; and, is one of the largest LPG distribution
companies in the Yunnan Province in terms of end users.
On October 12, 1999, Largo Vista entered into a joint venture agreement with
the United Arab Petroleum Corporation ("UAPC"), named Largo Vista/UAPC
Partners, wherein Largo Vista shall hold 51% of the assets and liabilities,
and shall share 51% of the income and expenses of the JV; and, UAPC 49%. The
purpose of the JV is to combine the resources and talents of each party to
develop a market for the sale of petrochemical products to be supplied by
middle-east sources, and principally Dubai. The JV plans to sell petroleum
products to customers in China, Vietnam and other countries throughout the
Pacific Rim.
On December 12, 1999, Largo Vista/UAPC Partners entered into a joint venture
agreement with Mr. Ahmed Hasan Abdul Qahir Al Shaibani, Dubai, United Arab
Emirates (UAE), named Largo Vista Group, Ltd. (LLC of Dubai, UAE). Largo
Vista/UAPC Partners will hold 49% (Largo Vista 25% and UAPC 24%) of the
assets and liabilities, and shall share 49% of the income and expenses of the
JV; and, Al Shaibani 51%. The objective of the JV is to carry-on the trade
of crude oil and refined oil products. The JV will have headquarters in
Dubai, and plans to focus sales of petroleum products in China, Indochina and
other Pacific Rim customers.
<PAGE>
LVG
Largo Vista Group, Ltd.
Owns 100 % EIL
Owns 100 % LVI
Subsidiaries Joint Ventures
EIL LVI Joint Venture
Everlasting Largo Vista "Largo Vista/UAPC Partners"
International Inc.
Ltd. No Operations LVG owns 51%
Owns 66.67 % Presently UAPC owns 49%
Of "Xinmao"
To to
"Xinmao" Joint Venture
Kunming Xinmao Petrochemical "Largo Vista Group, Ltd."
Industru Co. Ltd., a (Limited Liability Company)
Chinese Joint Venture Dubai
JV Partners: Al Shaibani owns 51%
"Everlasting" - 66.67 %
Government Partner - 33.33 % LV/UAPC Partners = 49 %
Lvg owns 25 %
UAPC owns 24 %
<PAGE>
LARGO VISTA GROUP, LTD.
EVERLASTING INTERNATIONAL, LTD.
(100% Owned Subsidiary of Largo Vista holding a)
66.67% Interest in the
Joint Venture
KUNMING XINMAO PETROCHEMICAL INDUSTRY CO., LTD.
(in which a)
33.33% Interest
is held by KUNMING FUEL GENERAL CO.
(Chinese Government Joint Venture Partner)
B. BUSINESS
The Company operates in one industry segment, the purchasing and reselling of
LPG in Yunnan Province of South China.
1. Terms of Xinmao Joint Venture
The Kunming Xinmao Petrochemical Co., Ltd. ("Xinmao") is a Joint Venture
formed under the laws of the People's Republic of China. The Xinmao Joint
Venture commenced business in August of 1992, but has yet to achieve
profitable operations.
Term: Twenty years, commencing on August 28, 1992.
Parties: Party A is the Kunming Fuel General Co. ("Government Partner ") as
to a 33.33% interest with a "registered capital" investment of US $641,000.
Party B is Everlasting International, Ltd as to a 66.67% interest, with a
"registered capital" investment of US $1,283,400.
General Provisions: Government Partner has a general responsibility to
support Everlasting in its duties.
The Joint Venture is an independent entity with an independent accounting
system. An audit of the Joint Venture's financial records is conducted
annually by an auditor registered in China. Fiscal year of Joint Venture is
January 1 to December 31.
<PAGE>
Everlasting is, subject to the terms and conditions of an operating agreement
set forth below, responsible for the general management of Xinmao including:
Procurement of equipment and raw materials, equipment installation, testing
and technical training, hiring a management staff, production and technical
processes and other duties entrusted to it.
This Operating Agreement was made between the Government Partner and the Hong
Kong Company on August 28, 1992, for a term of ten years, ending on August
28, 2002. Everlasting, as purchasor of the Hong Kong Company, is responsible
to manage the day-to-day operations of Xinmao and assume sole responsibility
for its profits and losses.
Each party under Chinese law would normally participate in the profits and
losses of the Joint Venture according to its proportionate share of
contribution. However, this provision was changed by the Operating
Agreement, which provides that Xinmao is to pay the Government Partner 9
million Yuan (RMB) during the term of the Agreement as follows:
3.5 million Yuan (RMB) for the first 3 years;
1.5 million Yuan (RMB) per year for the 4th and 5th years;
500,000 Yuan (RMB) per year from the 6th through the 10th years
The Company negotiated this agreement to provide flexibility and encourage
future investment and expansion by precluding the payment of large a sum of
money to the Government Partner. To date, the Government Partner has been
paid 4.1mm RMB, and the balance due is 3.4mm RMB. No payment has been made
since January 24, 1998 due to several factors. Since the government partner
has recovered more than its initial capital contribution, it has not urged
Xinmao to make up past due payments due to the difficulties Xinmao has faced
during 1997 and 1998 including record high LPG prices and a chaotic and
unstable developing market. This liability has been accrued on the books of
Xinmao.
The Government Partner has indicated a willingness to sell to Largo Vista an
additional 28.33% which would result in Largo Vista owning 95% and the
Chinese partner owning 5% of the joint venture. Largo Vista had negotiated
in July and August of 1998, an agreement with the Chinese Partner in the
Xinmao Joint Venture, to acquire an additional 28.33% interest in the Joint
Venture for a cash purchase of 5mm RMB. Unfortunately, Largo Vista was
unable to raise sufficient funds to complete this acquisition at that time.
As a result, as of this date, Largo Vista continues to own 66.67% interest in
Xinmao. There is currently no binding contract or option in place to acquire
a further interest in Xinmao.
2. Government License Held
The Xinmao Company holds a unique license issued by Chinese Central
Government (National Industrial and Commercial Registration Administration of
China). This license is most valuable because it permits the Company to
operate across provincial borders; whereas, competitors of the Company are
restricted to the geographic area in which they are located. In addition,
<PAGE>
the license permits the Company to process domestic crude oil and sell its by-
products; to process and sell LPG to retail domestic and industrial
customers; to manufacture cylinders, stoves, water heaters, and cigarette
lighters and their accessories; and to provide services in inspection and
maintenance of stoves and cylinders for safety and quality.
Xinmao is a Sino-Foreign Joint Venture registered with the government as
having foreign ownership. This registration permits foreign investment to
legally flow into China, and allows funds to legally flow out of China
including loan repayments, interest payments and dividends. Xinmao is one of
the few known Sino-Foreign Joint Ventures licensed to sell petroleum products
in the retail market.
Xinmao also holds a general contractors license intended for construction of
pipeline projects. As a part of its overall strategy to expand its LPG
market in China, management intends to expand its business in the future
beyond its current core business of purchasing and reselling LPG, utilizing
its various licensing authorities.
3. The Product
As of December 30, 1998, according to information published by the Yunnan Gas
Association, in Yunnan Province there are approximately 1,000,000 households
using some form of gas utility (town gas, natural gas and LPG). About 65% or
650,000 households use LPG, and the number is increasing. Approximately
160,000 household users reside in Kunming; and, there are 30,000 pipeline
household users, 60% of which are within Kunming City, with the balance
residing in smaller cities within the Province. The metropolitan population
in Yunnan is 5.9 million with 3.2 million using gas (1 household equates to
3.2 people) as a utility - a city gasification rate of 54.2%. This rate
increased by 7% over 1997, but still lags the national average by 20%. LPG
use accounts for about 65% of this total.
LPG consumption in Yunnan was approximately 68,000 metric tons, a net
increase over 1997 of 13,000 metric tons.
As a form of energy it is considered a very efficient fuel because in a
liquid state it provides a significant supply of energy in a comparatively
small volume. LPG is recognized for its transportability and ease-of-use.
It is a clean and environmentally friendly source of energy that has a
variety of residential, commercial, industrial and transportation uses. It
can be used at home for cooking and heating, replacing wood, kerosene, coal
and other environmentally unfriendly sources of energy. In fact,
environmental concerns have caused the outlaw of the use of coal in most
larger cities in China. Although LPG has some drawbacks such as high
combustibility, it requires great care in handling, and is subject to fire
and safety regulations, LPG remains one of the only viable sources of energy
for cooking and heating in Southern China. Management believes the China LPG
market is ripe for growth and expansion.
Most Chinese consumers have used of wood and coal all of their life primarily
for cooking only; however, they are slowly beginning to realize the ease and
convenience of also using LPG for heating and heating water. Most consumers
obtain LPG in 15 kg. cylinders, very similar to those used for gas barbecues
<PAGE>
in the U.S. As LPG delivery systems, such as pipelines, make use more
convenient and simple, LPG consumption per capita should increase
significantly. In addition, management believes there will be future
opportunities in drying tobacco and operating factory machinery and vehicles.
4. Markets
The China LPG market is broken down into three segments for purposes of
analysis:
1.Distribution method from the major LPG companies,
2.Method of delivery to the consumer, and
3.Black Market dealers
The Primary market segment is according to distribution method - that is
either retail-direct or wholesale-indirect. Retail distribution is
accomplished by the ten major LPG companies that deal directly with the end
user. Xinmao qualifies as one of the ten major LPG companies by its
ownership of rail tank cars; it is one of only five companies having depot
storage facilities of 1,000M3; and it has distribution of LPG to retail and
wholesale, and residential and commercial users.
The second market segment is according to the delivery vehicle used by the
user, such as bottle or cylinder, pipeline, or tank truck.
The bottle users may be either retail, purchasing directly from a major LPG
company, or wholesale, purchasing indirectly from a distributor of a major
LPG company. Bottle customers purchase LPG in 15 kg. cylinders or bottles
that must, by law, be filled to a minimum of 13.5 kg which is considered
full. Bottle users include residential, and commercial customers.
Residential consumption is by far the largest, with commercial restaurants
and caterers following second. There has been little industrial use of LPG
to date.
Pipeline users are considered retail-direct users. LPG flows directly into a
household via pipes from a central storage tank that is replenished as
necessary by a major LPG company. Pipeline users are billed according to
usage based on a meter in their living unit.
Tank truck or bulk sales are made to wholesale distributors who operate small
bottle filling stations. These distributors represent lower profit margins
but volume makes-up some of the difference. Bulk sales are encouraged to
cultivate the small wholesale distributors because of the potential of
acquiring their customer base in the future.
A third market segment, although temporary, must be considered because of the
negative impact it has on the LPG market. This segment is comprised of the
many small independent distributors and individuals who operate illegally in
what is referred to as the "black market" - most operating without a license,
violating safety laws, and unfairly profiting by short-filling LPG bottles.
These abusers create problems of unfair competition for the Company. The
Kunming LPG Administration is aware of these abuses, but, unless a blatant
case is presented to it, it is ignoring the problems until the market
consolidates to a greater degree.
<PAGE>
LPG consumption has been increasing in the past decade, but LPG consumption
per capita is still low, partly due to the large population in China. At
present it is around only 6 kg nationwide which is small in comparison to
100kg in its Asian neighbors such as Japan and South Korea, for example. LPG
development in China also shows geographical variance. South China has led
the nation in terms of per capita consumption at nearly 35 kg. East China
follows with per capita consumption of about 10kg. North China is far less,
only half of that in East China. And still in many places inland, the LPG
consumption per capita is negligible. Since the Company operates in
Southwest China, management perceives a great opportunity to grow with the
projected expansion.
The majority of dollars invested in the China LPG market have been invested
in large "mega" depots by the major oil companies. Little to no focus has
been placed on the retail end-user market. Put simply, the LPG "storage"
infrastructure is in place, but it is overbuilt because the retail market has
not been cultivated at the same pace. Management's primary objective is the
development of this retail consumer base.
From the mega-depots on the east and southeast coast of China, LPG is shipped
to smaller inland storage depots via railroad tank car. LPG is then pumped
into large storage tanks until it is distributed in bottles, pipelines or
tank trucks to end users and distributors.
Inland infrastructure development has not kept pace with coastal development.
Inland depot storage capacity must be expanded to serve the customers in
waiting for LPG service. More efficient distribution methods are also
needed. The bottle exchange system is labor intensive - a factor that does
not significantly affect overhead yet, but will have greater future impact as
salaries increase.
Distribution of LPG via pipelines directly to end-users is very efficient,
but one drawback is the cost to install pipeline service to each household,
which is approximately $185 US. Some more affluent customers can afford to
pay the installation fee up front, but most of these have already purchased
pipeline service. Some new construction projects permit the cost of
installation to be incorporated into the cost of the home. However, most
customers can not afford the up-front fee, but are willing and able to pay
extra each month based on usage. Xinmao has seven pipeline projects either
completed or under construction.
5. Distribution of LPG
There are four basic levels of LPG distribution:
Major LPG companies
Major LPG Distributors
Medium LPG Distributors
Small Independent LPG Distributors
The Major LPG companies are characterized by the following: they purchase LPG
directly from refineries or major oil companies, they must be licensed, have
<PAGE>
railroad tank cars and storage depots, and typically serve over 10,000 retail
customers. These companies depend on distribution networks to get LPG to the
consumers.
Major distributors are licensed and generally serve more that 4,000 but less
than 10,000 customers directly, but do not typically have any railroad tank
cars, and have little or no storage capacity.
Medium Distributors are licensed and generally serve more than 1,500 but less
than 4,000 customers directly, have no storage capacity.
Small Independent Distributors are those who may or may not be licensed, and
have no relationship or loyalty to any major company or distributor, and
usually serve less than 1,500 customers.
Since all of these distributors serve a customer base, Xinmao is actively
recruiting them on an ongoing basis.
The majority of Xinmao's customer base is serviced with the help of agents
and entity users. Xinmao has eight agents that are independent dealers who
exclusively represent the Company in an outlying county area that is
difficult for the Company to access on a regular basis. The consumers
serviced by the agent pay retail prices. The Company pays the agent a fee
for his services and the agent carries his own overhead expenses.
As the LPG market was developing in the early 1990's, the Company was seeking
to develop a customer base in the most efficient and effective manner
possible; and, as a result, began to cultivate the "entity user". Entity
users were companies in other industries, already providing housing for their
employees, which desired to provide a convenience to their workers by
distributing LPG as an additional service. These entity users developed into
distribution outlets that benefited the Company by providing free receiving,
storage and LPG distribution service to consumers who paid retail prices. As
the market further developed, the entity user also began to be a distribution
outlet to other consumers in the local area that were not affiliated with the
entity company. Today, the Company is actively seeking to cultivate and
develop additional entity users to expand the consumer base. Today Xinmao
has 125 entity users.
In 1997, under the leadership of Largo Vista management, several innovations
were added to the distribution process. First, there was a time delay
between the sale of the LPG and receipt of the cash from the sale. The
Company responded with the "coupon program" whereby the consumer, first
purchased a special coupon from the bank and presented it as payment as he
exchanged an empty bottle of LPG for a full one. The bank then remitted to
the Company. The Bank of Agriculture, one of the largest in China with over
1,000 branches in the province, has successfully worked with the Company for
over two years in this program and the bank is pleased with exposure to a new
customer base.
Second, also in 1997, the Company implemented the first consumer insurance
program. This insurance, written by the largest insurance company in China,
guaranteed the consumer who either made a non-refundable prepayment for LPG
by purchasing a coupon that the LPG would be at a fixed price, immediately
available, and a guaranteed quality and quantity.
<PAGE>
These two innovations, the coupon program and the consumer insurance
protection program, were the first of their kind in China. In the future the
Company intends to implement a third innovation for the pipeline distribution
system which will be a prepaid "smart card", that will be inserted into a
meter in the consumer's home. This precludes cash flow and collection
problems. Distribution of the prepaid smart card will be similar to the
coupon program in concert with the Bank of Agriculture.
The bulk of Xinmao's retail customers are located in the Yunnan Province
central cities of Kunming, Lunan, Chengong, Yiliang, Jinnin, Annin, and
Eshan. As the population thins out in the suburbs, distribution networks
take-over and service most customers. The rural areas are exclusively
serviced by smaller distributors.
Finally, there are a number of other minor distributors who purchase from
Xinmao and other major companies, who have solicited their own customer base
over a period of time and have generated customer loyalty through
relationship.
6. Raw Materials
The Chinese market is unique compared to other Asian countries. Japan and
Korea seek security of supply through regular term contracts supported by
long-term relationships, but, in China, low price and bargaining is the
driving force for LPG purchases.
Xinmao has been able to consistently purchase LPG at low prices due to high
volume of orders. When purchasing LPG, Xinmao must weigh various factors
including quality of LPG, price, and transportation costs. It generally
purchases from domestic sources inside China where prices are very low, but
transportation costs are higher. On occasion Xinmao also purchases LPG from
foreign companies such as Mobil Oil Hong Kong and Caltex.
Since Xinmao is presently dependent upon both domestic and foreign sources to
supply its LPG and since domestic supply cannot be relied upon for all of its
needs, Largo Vista decided that the best interests of the Company would be
served by Largo Vista establishing a strategic relationship with a supplier
of petroleum products outside of the domestic China market both to provide a
greater guarantee of LPG in the future, and to expand its sale of petroleum
products both in and outside of China. Pursuant thereto, On October 12,
1999, Largo Vista entered into a joint venture agreement with the United Arab
Petroleum Corporation ("UAPC"), named Largo Vista/UAPC Partners, wherein LVG
shall hold 51% of the assets and liabilities, and shall share 51% of the
income and expenses of the JV; and, UAPC 49%. The purpose of the JV is to
combine the resources and talents of each party to develop a market for the
sale of petrochemical products to be supplied by middle-east sources, and
principally Dubai. The JV plans to sell petroleum products to customers in
China, Vietnam and other countries throughout the Pacific Rim.
<PAGE>
To date, Largo Vista/UAPC Partners has accomplished the following:
Contract: November 25, 1999, Largo Vista/UAPC Partners seller; Mekong
Petroleum Joint Venture Co., Ltd. (PETROMEKONG) buyer; 20,000 metric tons of
diesel oil during the months of December 1999 and January 2000; total
contract price approximately $3,300,000 USD.
Contract: December 18, 1999, Largo Vista/UAPC Partners seller; Mekong
Petroleum Joint Venture Co., Ltd. (PETROMEKONG) buyer; 2,600 metric tons of
gasoil 1% sulphur and 3,000 metric tons of unleaded mogas 92 during the month
of December 1999; contract price approximately $430,000 USD for gasoil, and
approximately $560,000 USD for mogas 92.
On December 12, 1999, Largo Vista/UAPC Partners entered into a joint venture
agreement with Mr. Ahmed Hasan Abdul Qahir Al Shaibani, Dubai, United Arab
Emirates (UAE), named Largo Vista Group, Ltd. (LLC of Dubai, UAE). Largo
Vista/UAPC Partners will hold 49% (Largo Vista 25% and UAPC 24%) of the
assets and liabilities, and shall share 49% of the income and expenses of the
JV; and, Al Shaibani 51%. The objective of the JV is to carry-on the trade
of crude oil and refined oil products. The JV will have headquarters in
Dubai, and plans to focus sales of petroleum products in China, Indochina and
other Pacific Rim customers.
Cost of goods can fluctuate widely and rapidly and can cause cash flow
problems. The Company is researching the feasibility of obtaining a much
larger storage facility that would permit it to purchase large quantities of
LPG when prices are favorable, and sell it when prices are higher.
7. Pricing and Competition
The LPG industry in Yunnan Province consists of ten major LPG companies that
have railroad tank cars, depot storage facilities, and sell LPG in both the
retail and wholesale markets. All ten companies depend on a network of
distributors to help reach and serve the needs of their customers.
Competition is based principally on price and service, with some based on
relationship and reputation. Nine of these companies are majority owned by
the government, and are wholly operated by management that is responsible to
a government majority Board of D |
