NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 1 BASIS
OF PRESENTATION
The accompanying unaudited condensed consolidated
financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United
States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate
to make the information not misleading.
These consolidated condensed financial statements
should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual
Report on Form 10-K for the year ended October 31, 2015. All significant intercompany balances and transactions have been eliminated
in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered
necessary for a fair presentation of the operating results for the periods presented have been included in the interim period.
Operating result for the three and nine months ended July 31, 2016 is not necessarily indicative of the results that may be expected
for other interim periods or the year ending October 31, 2016. The consolidated condensed financial data at October 31, 2015 is
derived from audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2015, filed
on January 29, 2016.
NOTE 2 ORGANIZATION
AND BUSINESS BACKGROUND
Prime Global Capital Group Incorporated (formerly
Home Touch Holding Company) (“PGCG” or “the Company”) was incorporated in the State of Nevada on January
26, 2009. On January 25, 2011, the Company changed its name to Prime Global Capital Group Incorporated.
Currently, the Company, through its subsidiaries,
is principally engaged in the operation of durian plantation, leasing and development of commercial and residential real estate
properties in Malaysia.
Summary of the Company’s subsidiaries
|
|
Name of entities
|
|
Place of
incorporation
|
|
Date of
incorporation
|
|
Issued capital
|
|
Nature of business
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Union Hub Technology Sdn. Bhd. (“UHT”)
|
|
Malaysia
|
|
February 22, 2008
|
|
100,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Provision of corporate service to group companies
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Power Green Investments Limited (“PGIL”)
|
|
British Virgin Islands
|
|
July 13, 2011
|
|
1 issued share of US$ 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
PGCG Properties Investment Limited (“PPIL”)
|
|
British Virgin Islands
|
|
September 1, 2011
|
|
1 issued share of US$ 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Virtual Setup Sdn. Bhd. (“VSSB”)
|
|
Malaysia
|
|
July 19, 2010
|
|
4,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Operation of oil palm and durian plantation
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
PGCG Assets Holdings Sdn. Bhd. (“PGCG Assets”)
|
|
Malaysia
|
|
March 21, 2012
|
|
50,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Investment in land & buildings
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
PGCG Development Sdn. Bhd. (“PGCG Development”)
|
|
Malaysia
|
|
March 21, 2012
|
|
250,000 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
PGCG Plantations Sdn. Bhd. (“PGCG Plantation”)
|
|
Malaysia
|
|
October 4, 2011
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Holding company of VSSB
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Max Trend International Limited (“Max Trend”)
|
|
Hong Kong
|
|
August 19, 2010
|
|
2 issued shares of ordinary shares of HK$ 1 each
|
|
Holding company of SMTG
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Shenzhen Max Trend Green Energy Company Limited (“SMTG”)
|
|
The People’s Republic of China (“PRC”), Shenzhen
|
|
July 7, 2011
|
|
RMB 1,000,000
|
|
De-registered in August 2015
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
Dunford Corporation Sdn. Bhd.
|
|
Malaysia
|
|
October 4, 1990
|
|
242,000 issued shares of ordinary shares of MYR 1 each
|
|
Property holding land
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
|
Impiana Maksima Sdn. Bhd.
|
|
Malaysia
|
|
March 15, 2013
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Property development
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
|
PGCG Constructions Sdn. Bhd.
|
|
Malaysia
|
|
April 16, 2013
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Construction of properties
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
|
Fiesta Senada Sdn. Bhd.
|
|
Malaysia
|
|
November 28, 2012
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
|
Havana Avenue Sdn. Bhd.
|
|
Malaysia
|
|
April 4, 2014
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
PGCG and its subsidiaries are hereinafter referred
to as (the “Company”).
NOTE 3 GOING
CONCERN UNCERTAINTIES
The accompanying condensed consolidated financial
statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
For the nine months ended July 31, 2016, the
Company reported a loss of $485,415 and working capital deficit of $4,715,860 as of July 31, 2016. The Company had accumulated
deficit of $2,439,458 as of July 31, 2016 from recurring losses and significant short-term debt obligations maturing in less than
one year (notes 8 and 9). These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The continuation of the Company as a going
concern is dependent upon improving the profitability and the continuing financial support from its stockholders or other capital
sources. Management believes that the continuing financial support from the existing shareholders or external debt financing will
provide the additional cash to meet the Company’s obligations as they become due.
These condensed consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities
should the Company be unable to continue as a going concern.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 4 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial
statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying
condensed consolidated financial statements and notes.
In preparing these condensed consolidated financial
statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance
sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.
Depreciation of $127,715 and $395,151 included
in general and administrative expenses for the three and nine months ended July 31, 2015 in prior period financial statements have
been reclassified to cost of revenues.
The change in time deposits was classified into cash flows from financing activities in the Company's condensed consolidated statements
of cash flows for the nine months ended July 31, 2015. The Company has reclassified these amounts as components of cash flows from
investing activities. As a result of such reclassification, net cash flows from investing activities for the nine months ended
July 31, 2015 has changed from net cash used in investing activities of $316,194 to $2,258,804, and net cash provided by financing
activities has changed from $1,268,943 to $3,211,553.
The condensed consolidated financial statements
include the accounts of PGCG and its subsidiaries. All significant inter-company balances and transactions between the Company
and its subsidiaries have been eliminated upon consolidation.
|
·
|
Cash and cash equivalents
|
Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments.
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Bank balances held by financial institutions located in:
|
|
|
|
|
|
|
|
|
Malaysia
|
|
$
|
256,969
|
|
|
$
|
760,787
|
|
The PRC
|
|
|
73,478
|
|
|
|
74,595
|
|
|
|
|
330,447
|
|
|
|
835,382
|
|
Cash on hand in Malaysia
|
|
|
1,140
|
|
|
|
1,412
|
|
|
|
$
|
331,587
|
|
|
$
|
836,794
|
|
Time deposits represent certificates of deposits
placed with a reputable financial institution with an original maturity beyond three months, expiring in October 2016.
Accounts receivable are recorded at the invoiced
amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates
the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known requirements, aging of receivables, payment history,
the customer’s current credit worthiness and the economic environment. The Company will consider the allowance for doubtful
accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables
that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection,
including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet
credit exposure related to its customers. Based upon the aforementioned criteria, the Company wrote off $nil and $25,850 accounts
receivable on uncollectible rental receivable at July 31, 2016 and October 31, 2015, respectively, and recorded $23,951 and $22,579
as allowance for doubtful accounts as of July 31, 2016 and October 31, 2015, respectively.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
·
|
Available-for-sale marketable securities
|
Available-for-sale marketable securities are
reported at fair value using the market approach based on the quoted prices in active markets at the reporting date. The Company
classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. During the three and nine months
ended July 31, 2016, the Company invested in equity securities listed on Bursa Malaysia with a total cost of $246,145 and escrow
funds (which invested in equity securities listed in the U.S.) with a total cost of $200,000. The Company entered into an escrow
agreement with Peijin Wu Hoppe (“Hoppe”), the Company’s former director, to set up an escrow fund up to $500,000
as a reserve to indemnify Hoppe from any claim of liability until July 29, 2022, the seventh year anniversary of the termination
of Director Retainer Agreement, or any mutual agreement with the Company and Hoppe. For the three and nine months ended July 31,
2016, the unrealized loss representing the change in fair value of $18,536 and $67,930 respectively, was recorded as a charge to
accumulated other comprehensive income in the Company’s condensed consolidated balance sheets.
|
·
|
Deferred development costs
|
Deferred development costs consist of replanting
costs of durian such as soil amendments, cultivation, fertilization and purchase costs of sapling. Costs related to durian development
projects at the Company’s plantation land are capitalized during the sapling, developing and planting durian fruit bunches
and until the harvests are substantially available for commercial sale, deferred development costs will then commence to be amortized
as components of plantation costs and expenses.
|
·
|
Property, plant and equipment
|
Property, plant and equipment are stated at
cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become fully operational:
Categories
|
|
Location of properties
|
|
Expected useful life
|
Freehold plantation land
|
|
Palm oil and durian plantation in Malaysia
|
|
Indefinite, as per land titles
|
Leasehold land under development
|
|
Leasehold land in Puncak Alam, Malaysia
|
|
Remaining lease life of 88 years, as per land titles
|
Freehold land under development
|
|
Freehold land in Sungai Long, Cheras, Selangor, Malaysia
|
|
Indefinite, as per land titles
|
Freehold land and land improvement for rental purpose
|
|
Land portion of 15 storey buildings “Menara CMY” in Kuala Lumpar, Malaysia
|
|
Indefinite, as per land titles
|
Building structure and improvements
|
|
Building structure of commercial buildings in Kuala Lumpar, Malaysia, including: 12 story building “Megan Avenue” and 15 story building “Menara CMY”
|
|
33 years
|
Office furniture, fixture and equipment
|
|
|
|
3-10 years
|
Motor vehicles
|
|
|
|
5 years
|
Expenditure for maintenance and repairs is
expensed as incurred. The gain or loss on the disposal of property, plant and equipment is the difference between the net sales
proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.
Long-lived assets primarily include freehold
plantation land, leasehold land held for development, freehold land and land improvement for rental purpose and building structure
and improvements. In accordance with the provision of ASC Topic 360, “
Impairment or Disposal of Long-Lived Assets
”,
the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each
year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The
recoverability of long-lived assets is measured at the asset group. If the total of the expected undiscounted future net cash flows
is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount
of the asset. There has been no impairment charge for the periods presented.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
The Company has separately identified the portion
of freehold land and building structure, in which freehold land is not subject to amortization and buildings are to be amortized
over 33 years on a straight-line method.
Policy for Capitalizing Development Cost
The cost of buildings and improvements includes
the purchase price of property, legal fees and other acquisition costs. Costs directly related to planning, developing, initial
leasing and constructing a property are capitalized and classified as Real Estate in the consolidated balance sheets. Capitalized
development costs include interest, and other direct project costs incurred during the period of development. As of July 31, 2016
and October 31, 2015, there was no such capitalized interest.
A variety of costs are incurred in the acquisition,
development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component
of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease
involves a degree of judgment. The Company adopts the capitalization policy on development properties, which is guided by ASC Topic
835-20 “
Interest – Capitalization of Interest
” and ASC Topic 970 “
Real Estate - General
”.
The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction
costs essential to the development of the property, development costs, construction costs, interest costs, salaries and related
costs and other costs incurred during the period of development. The Company considers a construction project as substantially
completed and held available for occupancy upon the receipt of certificates of occupancy, but no later than one year from cessation
of major construction activity. The Company ceases capitalization on the portion (1) substantially completed and (2) occupied or
held available for occupancy, and capitalizes only those costs associated with the portion under construction.
The Company capitalizes leasing costs which
include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal
costs that may be applicable. The Company allocates these costs to individual tenant leases and amortizes them over the related
lease term.
Leases that transfer substantially all the
rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of
the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of
ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term
exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding
90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an
amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term
or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with
the Company’s depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made
during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method
in accordance with the provisions of ASC Topic 835-30,
“Imputation of Interest”
.
The Company recognizes its revenue in accordance with ASC Topic
605, “
Revenue Recognition
”, upon the delivery of its plantation products when: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred, (3) the sales price is fixed or determinable and (4) collection is probable.. The
Company’s sale arrangements do not contain general rights of return.
(a) Plantation
revenue
Revenue from the sale of palm oil is recognized
upon confirmation of the weight of fresh fruit bunches and shipment to the customer, when there is persuasive evidence of an arrangement,
delivery has occurred and risk of loss has passed, the sales price is fixed or determinable at the date of sale, and collectability
is reasonably assured.
Pursuant to a 8-K filing on September 23, 2015,
in order to concentrate on durian plantation, the Company suspended the direct operation of oil palm plantation and leased out
the oil palm land to a third party under an operating lease for 30 months from September 21, 2015 to March 20, 2018. Pursuant to
this tenancy agreement, the tenant is entitled to manage the plantation, harvest and sell palm oil fresh fruit bunches and receive
all proceeds thereto. Rental income of $25,974 and $76,420 was recognized for the three and nine months ended July 31, 2016, respectively
and included in revenue from plantation business. No rental income was recognized for the three and nine months ended July 31,
2015.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
As of July 31, 2016, the minimum future rental
receivables on the oil palm land to be collectible are as follows:
Period ending July 31:
|
|
|
|
2017
|
|
$
|
103,704
|
|
2018
|
|
|
60,494
|
|
|
|
|
|
|
Total
|
|
$
|
164,198
|
|
(b) Rental
income
The Company generally leases the units under
operating leases with terms of two years or less. For the nine months ended July 31, 2016 and 2015, the Company has recorded $1,208,230
and $1,405,883 in lease revenue, based upon its annual rental over the life of the lease under operating lease, using the straight-line
method in accordance with ASC Topic 970-605, “
Real Estate – General – Revenue Recognition
” (“ASC
Topic 970-605”).
As of July 31, 2016, the commercial buildings
for lease are as follows:
Name of commercial building
|
Number of units
(by floor)
|
Footage area
(square feet)
|
Vacancy percentage
|
Megan Avenue
|
12
|
19,987
|
42%
|
Menara CMY
|
15
|
91,848
|
0%
|
The Company expects to record approximately
$1.6 million in annual lease revenue under the operating lease arrangements in the next twelve months through July 31, 2017.
The Company leases store location and office
spaces to the tenants under operating lease arrangements. The Company receives rental income from the real estates it owns for
a stated period of times. Rental income is recognized over the life of the operating lease agreement as it is earned in the period
under ASC Topic 970-605. The typical leases contain initial terms of one to two years with renewal options and do not contain escalating
rent amounts. Under the lease agreement of Menara CMY, the initial term of lease is one year. Provided that there are no existing
breaches by the tenant, an irrecoverable annual renewal option is granted for up to twenty-nine years, with a maximum aggregate
term of thirty years. Nine-months’ rent-free period under the operating lease agreement is treated as long-term rental concession,
which is being amortized as an offset to revenues collected over the term of the underlying lease of 30 years on a straight-line
basis.
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Rental concession:
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
27,160
|
|
|
$
|
25,605
|
|
Non-current portion
|
|
|
715,226
|
|
|
|
719,080
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
742,386
|
|
|
$
|
744,685
|
|
The estimated amortization on long-term rental
concession in the next five years and thereafter is as follows:
Period ending July 31:
|
|
|
|
2017
|
|
$
|
27,160
|
|
2018
|
|
|
27,160
|
|
2019
|
|
|
27,160
|
|
2020
|
|
|
27,160
|
|
2021
|
|
|
27,160
|
|
Thereafter
|
|
|
606,586
|
|
|
|
|
|
|
Total
|
|
$
|
742,386
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
As of July 31, 2016, the minimum future rental
receivables on the commercial properties to be collectible in the next five years and thereafter are as follows:
Period ending July 31:
|
|
|
|
2017
|
|
$
|
1,646,419
|
|
2018
|
|
|
1,629,630
|
|
2019
|
|
|
1,629,630
|
|
2020
|
|
|
1,629,630
|
|
2021
|
|
|
1,629,630
|
|
Thereafter
|
|
|
36,395,061
|
|
|
|
|
|
|
Total
|
|
$
|
44,560,000
|
|
|
|
|
|
|
The Company also records operating costs directly
attributable to the leasing properties, such as real estate taxes, depreciation of the leased properties and maintenance fees,
which are charged to expense when incurred.
Cost of revenue on plantation sales includes
material supplies, subcontracting costs and transportation costs incurred for planting, fertilizing and harvesting the palm oil
tree. Shipping and handling costs associated with the distribution of fresh fruit bunches to the customers are also included in
cost of revenues.
Cost related to the real estate business include
costs associated with depreciation, land tax, on-site and property management personnel, repairs and maintenance, property insurance,
marketing, landscaping and other on-site and related administrative costs. Utility expenses are paid directly by tenants.
ASC Topic 220, “
Comprehensive Income
”
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive
income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income,
as presented in the accompanying statements of operations and comprehensive income (loss) consists of changes in unrealized gains
and losses on foreign currency translation and cumulative net change in the fair value of available-for-sale investments held at
the balance sheet date.
|
·
|
Non-controlling interests
|
Non-controlling interests represent the equity
interest in the capital contributions, income and loss of less than wholly-owned and consolidated entities that is not attributable
to the Company.
Income taxes are determined in accordance with
the provisions of ASC Topic 740, “
Income Taxes
” (“ASC Topic 740”). 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 and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected
to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for
how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected
to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more
likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently
be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement
with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in Malaysia
and are subject to tax in its own jurisdiction. As a result of its business activities, the Company will file separate tax returns
that are subject to examination by the local and foreign tax authorities.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
·
|
Foreign currencies translation
|
Transactions denominated in currencies other
than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the
statement of operations.
The functional currency of the Company is the
United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the
Company maintains its books and record in a local currency, Malaysian Ringgit (“MYR” or “RM”), Hong Kong
Dollars (“HK$”) and Renminbi Yuan (“RMB”), which is functional currency as being the primary currency of
the economic environment in which the entity operates.
In general, for consolidation purposes, assets
and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic
830-30, “
Translation of Financial Statement”
, using the exchange rate on the balance sheet date. Revenues and
expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial
statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income. The gains and
losses are recorded as a separate component of accumulated other comprehensive income.
Translation of amounts from the local currency
of the Company into US$1 has been made at the following exchange rates for the respective periods:
|
|
As of and for the period ended July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Period-end RMB : US$1 exchange rate
|
|
|
6.6430
|
|
|
|
6.1997
|
|
Period-average RMB : US$1 exchange rate
|
|
|
6.5223
|
|
|
|
6.1151
|
|
Period-end HK$ : US$1 exchange rate
|
|
|
7.7566
|
|
|
|
7.7515
|
|
Period-average HK$ : US$1 exchange rate
|
|
|
7.7621
|
|
|
|
7.7534
|
|
Period-end MYR : US$1 exchange rate
|
|
|
4.0500
|
|
|
|
3.8200
|
|
Period-average MYR : US$1 exchange rate
|
|
|
4.1285
|
|
|
|
3.6034
|
|
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
ASC Topic 280, “
Segment Reporting
”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business segments and major customers in financial statements.
During the period ended July 31, 2016 and 2015, the Company operates in two reportable operating segments in Malaysia.
|
·
|
Fair value of financial instruments
|
The carrying value of the Company’s financial
instruments (excluding obligation under finance lease): cash and cash equivalents, time deposits, accounts receivable, deposits
and other receivables, short-term bank borrowings, long-term bank loans and available-for-sale marketable securities, amount due
to a director, accrued liabilities and other payables approximate at their fair values because of the short-term nature of these
financial instruments.
Management believes, based on the current market
prices or interest rates for similar debt instruments, the fair value of its obligation under finance lease approximates the carrying
amount.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
The Company also follows the guidance of the
ASC Topic 820-10, “
Fair Value Measurements and Disclosures
” ("ASC 820-10"), with respect to financial
assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes
the inputs used in measuring fair value as follows:
|
☐☐
|
Level 1
: Observable inputs such as quoted prices in active markets;
|
|
☐☐
|
Level 2
: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
and
|
|
☐☐
|
Level 3
: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions
|
|
·
|
Recent accounting pronouncements
|
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected
to cause a material impact on its financial condition or the results of its operations.
NOTE 5 PROPERTY,
PLANT AND EQUIPMENT
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Freehold plantation land
|
|
$
|
7,845,805
|
|
|
$
|
7,845,805
|
|
Leasehold land under development
|
|
|
4,276,764
|
|
|
|
4,276,764
|
|
Freehold land under development
|
|
|
18,091,173
|
|
|
|
18,091,173
|
|
Freehold land and land improvement for rental purpose commercial building
|
|
|
15,191,123
|
|
|
|
15,191,123
|
|
Building structure and improvements
|
|
|
15,857,410
|
|
|
|
15,857,410
|
|
Office furniture, fixture and equipment
|
|
|
126,443
|
|
|
|
125,631
|
|
Motor vehicles
|
|
|
166,047
|
|
|
|
166,047
|
|
Foreign translation difference
|
|
|
(14,395,948
|
)
|
|
|
(17,096,349
|
)
|
|
|
|
47,158,817
|
|
|
|
44,457,604
|
|
Less: accumulated depreciation
|
|
|
(2,317,584
|
)
|
|
|
(1,928,852
|
)
|
Less: foreign translation difference
|
|
|
422,445
|
|
|
|
515,809
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,263,678
|
|
|
$
|
43,044,561
|
|
Depreciation expense for the three months ended
July 31, 2016 and 2015 was $132,579 and $149,178, respectively.
Depreciation expense for the nine months ended
July 31, 2016 and 2015 was $388,733 and $461,556, respectively.
Both commercial buildings in Kuala Lumpur,
Malaysia are pledged against the bank loans (note 8 and 9).
In April 2015, the Company’s development
order regarding the development of 21.8921 hectares (54.10 acres) leasehold land located in Puncak Alam, Malaysia was approved
by the Kuala Selangor District Council. The approved order allows the Company to proceed with its plans to construct its Shah Alam
2 Eco Residential Development project. In November 2015, the Company submitted a request to convert some of its planned semi-detached
and bungalow home parcels into cluster semi-detached homes to improve the marketability of the Company’s proposed development.
On March 4, 2016, the Company received notification from the Kuala Selangor District Council that its revised Development Order
relating to the Puncak Alam land was approved on February 24, 2016.
Pursuant to an 8-K filed on July 1, 2016, PGCG
Assets Holdings Sdn Bhd, the Company’s wholly owned subsidiary (“PGCG Assets”), entered into a memorandum of
understanding (“MOU”) (filed as Exhibit 10.10 to this Quarterly Report and incorporated herein by reference) with Yong
Tai Berhad, a public listed corporation in the main market of Bursa Malaysia Berhad (“YTB”) engaged in the business
of commercial and residential property development, to jointly develop our land (the “Land”) located at Puncak Alam
(the “Proposed JV”). Under the MOU, the parties agreed to use their best efforts to negotiate exclusively with each
other regarding the terms and conditions of the definitive agreement to jointly develop the Land.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Pursuant to the MOU, the parties agreed that
PGCG Assets and YTB shall be entitled to 20% and 80%, respectively, of the estimated Gross Development Value of the Proposed JV,
or at such percentage of estimated gross development value as may be mutually agreed upon at a later date between the parties.
The gross development value of the Proposed JV is estimated to be Ringgit Malaysia Five Hundred Ten Million [RM510,000,000.00]
or approximately United States Dollars One Hundred Twenty Five Million [USD125,000,000.00] based on the exchange rate of USD1 :
RM4.08 as at 9.00am, 14.06.2016. This estimated Gross Development Value is an estimate and may be revised accordingly during the
negotiation of the terms of the definitive agreement.
The participation of the parties in the Proposed
JV is conditional upon the following conditions precedent being fulfilled on or before 5.00pm, Malaysian time on the expiry of
4 months from the date of this MOU with an automatic extension of 2 months from the expiry therefrom or such later date as agreed
between the parties (“Termination Date”):
|
(i)
|
finalization of the negotiations between the parties and the terms and conditions and execution and delivery of the definitive agreement, in the form and substance that is satisfactory to the parties;
|
|
(ii)
|
completion of all viability studies, assessments and due diligences as required by YTB including but not limited to financial, legal, tax, technical and business due diligences and due diligence on the Proposed JV, and the parties being satisfied with the results of such viability studies, assessments and due diligences;
|
|
(iii)
|
The parties shall use reasonable efforts to negotiate and enter into the definitive agreement which will reflect the terms of this MOU and contain such other provisions as are usual and customary in transactions of this nature including customary representations and warranties, customary conditions to closing, indemnifications and covenants and the parties are satisfied on the warranties as agreed between the parties.
|
If the definitive agreement concerning the
Proposed JV is not executed by 5.00pm, Malaysian time on the Termination Date (or such later date as agreed between the parties)
for whatever reason, then the parties are released from all further obligations and liabilities under the MOU. The MOU is governed
by the laws of Malaysia.
YTB is currently conducting its feasibility
studies and business and market due diligence. The Company suspended its plans for obtaining further approvals pending YTB’s
determination of whether it elects to proceed with the Proposed JV. In the event YTB elects not to proceed with the Proposed JV,
the Company may also suspend its development efforts until market conditions improve. As of the approval date of these financial
statements, no definitive agreement has been concluded.
NOTE 6 AMOUNTS
DUE TO RELATED PARTIES
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Current portion:
|
|
|
|
|
|
|
Amount due to a related party, unsecured, interest-free and repayable on demand,
|
|
|
|
|
|
|
Mr. Pua Wooi Khang, a subsidiary’s former director
|
|
$
|
180,177
|
|
|
$
|
180,316
|
|
|
|
|
|
|
|
|
|
|
Non-current portion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to a related party, unsecured, interest-free and not expected to be repaid in the next twelve months
|
|
|
|
|
|
|
|
|
Mr. Weng Kung Wong, the Company’s director
|
|
$
|
1,479,989
|
|
|
$
|
2,071,183
|
|
NOTE 7 ACCRUED
LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consist
of the following:
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Accrued operating expenses
|
|
$
|
55,647
|
|
|
$
|
115,883
|
|
Accrued interest expense
|
|
|
61,477
|
|
|
|
57,957
|
|
Potential tax penalty liability (Note 11)
|
|
|
135,000
|
|
|
|
135,000
|
|
Other payable
|
|
|
33,848
|
|
|
|
60,320
|
|
|
|
$
|
285,972
|
|
|
$
|
369,160
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 8 BANK
LOANS
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Bank loans from financial institutions in Malaysia,
|
|
|
|
|
|
|
|
|
Bank of China (Malaysia) Berhad
|
|
$
|
8,692,386
|
|
|
$
|
8,692,957
|
|
RHB Bank Berhad
|
|
|
2,274,613
|
|
|
|
2,186,990
|
|
|
|
|
10,966,999
|
|
|
|
10,879,947
|
|
Less: current portion
|
|
|
(859,538
|
)
|
|
|
(768,529
|
)
|
Bank loans, net of current portion
|
|
$
|
10,107,461
|
|
|
$
|
10,111,418
|
|
15 Story Bank Loan
In December 2012, the Company, through PGCG
Assets obtained a loan in the principal amount of RM41,000,000 from Hong Leong Bank Berhad, a financial institution in Malaysia
to finance the acquisition of a fifteen story office building property, which bears interest at a rate of 1.75% per annum over
the lending rate, variable rate quoted by the bank, with 180 monthly installments over a period of 15 years and will mature on
January 31, 2028. The outstanding amount was fully repaid by a new loan of RM40,000,000 refinanced by Bank of China (Malaysia)
Berhad in December 2014, which bears interest at a rate of 1% per annum over the lending rate, currently 6.85% per annum, with
120 monthly installments of RM476,898 each (including interests) over a period of 10 years or until full settlement and will mature
in December 2024.
The loan from Bank of China (Malaysia) Berhad
is secured by the first party charge over 15-story commercial office building “Menara CMY” in Kuala Lumpur, Malaysia,
deed of assignment of rental proceeds over the rights and interest to the rental of the 15-story commercial office building and
is personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and a subsidiary of the
Company, UHT. The loan is also secured by a debenture incorporating fixed and floating charge for RM55 million plus interest thereon
over the assets of PGCG Assets. The cost of funds was 7.85% and 7.60% per annum for the periods ended July 31, 2016 and 2015, respectively.
12 Story Bank Loan
In May 2013, the Company, through PGCG Assets
obtained a loan in the aggregate amount of RM9,840,000 from RHB Bank Berhad, a financial institution in Malaysia to finance the
acquisition of a twelve story office building property, which bears interest at a rate of 1.90% per annum below the lending rate,
variable rate quoted by the bank, with 288 monthly installments over a period of 24 years and will mature in 2037.
The loan is secured by the 12-story commercial
office building “Megan Avenue” in Kuala Lumpur, Malaysia and is personally guaranteed by the director and chief executive
officer of the Company, Mr. Weng Kung Wong and a director of the Company’s subsidiary, Mr. Kok Wai Chai and a subsidiary
of the Company, UHT. The cost of funds was 4.70%-4.95% per annum for the periods ended July 31, 2016 and 2015.
As of July 31, 2016, the minimum future payments
of the aggregate bank loans in the next five years and thereafter are as follows:
Period ending July 31:
|
|
|
|
|
2017
|
|
$
|
859,538
|
|
2018
|
|
|
920,278
|
|
2019
|
|
|
986,937
|
|
2020
|
|
|
1,058,371
|
|
2021
|
|
|
1,137,498
|
|
Thereafter
|
|
|
6,004,377
|
|
|
|
|
|
|
Total:
|
|
$
|
10,966,999
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 9 SHORT-TERM
BANK BORROWINGS
The revolving line of credit was granted concurrent
with the term loans and pursuant to the same facility letter (see Note 8) by Bank of China (Malaysia) Berhad to the Company, which
provided for up to RM15,000,000 (equal to $3,703,704) for its working capital purpose. The line bears interest at an annual rate
of 1.5% above the bank’s cost of funds on a daily basis. The line is repayable on demand or at rollover options of 1, 3,
6 & 12 months. The effective interest rate was 4.93% per annum for the quarter ended July 31, 2016.
The aggregate amount outstanding under the
revolving line of credit was $3,703,704 at July 31, 2016.
NOTE 10 OBLIGATION
UNDER FINANCE LEASE
The Company purchased a motor vehicle under
a finance lease agreement with the effective interest rate of 3.70% per annum, due through April 8, 2018, with principal and interest
payable monthly. The obligation under the finance lease is as follows:
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Finance lease
|
|
$
|
4,598
|
|
|
$
|
6,193
|
|
Less: interest expense
|
|
|
(714
|
)
|
|
|
(960
|
)
|
|
|
|
|
|
|
|
|
|
Net present value of finance lease
|
|
$
|
3,884
|
|
|
$
|
5,233
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
2,223
|
|
|
$
|
2,096
|
|
Non-current portion
|
|
|
1,661
|
|
|
|
3,137
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,884
|
|
|
$
|
5,233
|
|
As of July 31, 2016, the maturities of the
finance lease for the remaining term is as follows:
Period ending July 31:
|
|
|
|
|
2017
|
|
$
|
2,223
|
|
2018
|
|
|
1,661
|
|
|
|
|
|
|
Total
|
|
$
|
3,884
|
|
NOTE 11 INCOME
TAXES
The local (United States) and foreign components
of loss before income taxes were comprised of the following:
|
|
Nine months ended July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
(105,349
|
)
|
|
$
|
(140,869
|
)
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
Malaysia
|
|
|
(129,198
|
)
|
|
|
(924,613
|
)
|
Hong Kong
|
|
|
–
|
|
|
|
–
|
|
The PRC
|
|
|
–
|
|
|
|
(5,084
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(234,547
|
)
|
|
$
|
(1,070,566
|
)
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Provision for income taxes consisted of the
following:
|
|
Nine months ended July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Current:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
–
|
|
|
$
|
–
|
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
BVI
|
|
|
–
|
|
|
|
–
|
|
Malaysia
|
|
|
277,601
|
|
|
|
–
|
|
Hong Kong
|
|
|
|
|
|
|
–
|
|
The PRC
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
– Local
|
|
|
–
|
|
|
|
–
|
|
– Foreign
|
|
|
(26,733
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
250,868
|
|
|
$
|
–
|
|
The effective tax rate in the periods presented
is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the
periods presented, the Company has a number of subsidiaries that operates in different countries and are subject to tax in the
jurisdictions in which the subsidiaries operate, as follows:
United States of America
PGCG is registered in the State of Nevada and
is subject to United States of America tax law. As of July 31, 2016 and October 31, 2015, the operations in the United States of
America incurred $545,150 and $467,838, respectively of cumulative net operating losses which can be carried forward to offset
future taxable income. The net operating loss carryforwards begin to expire in 2031, if unutilized. The Company has provided for
a full valuation allowance of $190,803 (October 31, 2015: $163,743) against the deferred tax assets on the expected future tax
benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will
not be realized in the future.
The Company
has adopted ASC 740-10 “
Accounting for Income Taxes
” and recorded a liability for an uncertain income tax position,
tax penalties and any imputed interest thereon. The amount, recorded as an obligation in accrued liabilities and other payables,
is $135,000 (Note 7) at July 31, 2016 and October 31, 2015 in respect of potential tax penalty of the late filing of IRS return.
British Virgin Islands
Under the current BVI law, the Company’s
subsidiaries are not subject to tax on income. No provision for income tax is required due to operating loss incurred.
Hong Kong
Max Trend is subject to Hong Kong Profits Tax,
which is charged at the statutory income rate of 16.5% on its assessable income. No provision for income tax is required due to
operating loss incurred. The Company has provided for a full valuation allowance against the deferred tax assets of $1,065
at
July 31, 2016 and October 31, 2015,
on the expected future tax benefits from the net operating loss carryforwards as the
management believes it is more likely than not that these assets will not be realized in the future.
The PRC
SMTG is subject to the Corporate Income Tax
governed by the Income Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%. No provision
for income tax is required since SMTG deregistered in August 2015.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Malaysia
All of the Company’s subsidiaries operating
in Malaysia are subject to the Malaysia Corporate Tax Laws at a progressive income tax rate starting from 20% (for company with
paid up capital not more than RM2.5 million and on the first RM 500,000 income) and 25% (on all income for company with paid up
capital more than RM2.5 million and on the remaining balance of income after the first RM500,000 income charged at 20% for company
with paid up capital not more than RM2.5 million) on the assessable income for its tax year. A reconciliation of loss before income
taxes to the effective tax rate as follows:
|
|
Nine months ended July 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(129,198
|
)
|
|
$
|
(924,613
|
)
|
Statutory income tax rate
|
|
|
25%
|
|
|
|
20%
|
|
Income tax at statutory tax rate
|
|
|
(32,299
|
)
|
|
|
(184,923
|
)
|
Tax effect of non-deductible expenses
|
|
|
10,823
|
|
|
|
92,311
|
|
Tax effect of different tax rate
|
|
|
3,019
|
|
|
|
–
|
|
Tax effect of non-business source rental income
|
|
|
243,738
|
|
|
|
–
|
|
Net operating loss
|
|
|
25,587
|
|
|
|
92,612
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
250,868
|
|
|
|
–
|
|
The following table sets forth the significant
components of the aggregate deferred tax assets of the Company as of July 31, 2016 and October 31, 2015:
|
|
July 31, 2016
|
|
|
October 31, 2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Capital loss
|
|
$
|
9,869
|
|
|
$
|
6,359
|
|
Accrued interest expenses
|
|
|
15,369
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards:
|
|
|
|
|
|
|
|
|
- United States of America
|
|
|
190,803
|
|
|
|
163,743
|
|
- Malaysia
|
|
|
235,436
|
|
|
|
183,405
|
|
- Hong Kong
|
|
|
1,065
|
|
|
|
1,065
|
|
- PRC
|
|
|
–
|
|
|
|
–
|
|
Total deferred tax assets
|
|
|
452,542
|
|
|
|
354,572
|
|
Less: valuation allowance
|
|
|
(437,173
|
)
|
|
|
(354,572
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
15,369
|
|
|
$
|
–
|
|
Deferred tax liabilities, current
|
|
|
|
|
|
|
|
|
Rental concession
|
|
$
|
6,790
|
|
|
$
|
6,401
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities, non-current
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
2,855
|
|
|
|
2,691
|
|
Rental concession
|
|
|
178,806
|
|
|
|
179,770
|
|
|
|
$
|
181,661
|
|
|
$
|
182,461
|
|
NOTE 12 STOCKHOLDERS’
EQUITY
As of July 31, 2016, the number of shares of
the Company’s common stock issued and outstanding is 512,682,393 shares. There are no shares of preferred stock issued and
outstanding.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 13 SEGMENT
INFORMATION
|
(a)
|
Business segment reporting
|
The Company currently operates two reportable
business segments, as defined by ASC Topic 280:
|
·
|
Plantation business – oil palm and durian plantation in Malaysia
|
|
·
|
Real estate business – acquisition, development and leasing of commercial and residential
real estate properties in Malaysia
|
The accounting policies of the segments are
the same as those described in the summary of significant accounting policies (see Note 4). Summarized financial information concerning
the Company’s reportable segments is shown as below:
|
|
Three months ended July 31, 2016
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
25,974
|
|
|
$
|
417,122
|
|
|
$
|
–
|
|
|
$
|
443,096
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(6,634
|
)
|
|
|
–
|
|
|
|
(6,634
|
)
|
Revenues, net
|
|
|
25,974
|
|
|
|
410,488
|
|
|
|
–
|
|
|
|
436,462
|
|
Cost of revenues
|
|
|
–
|
|
|
|
(126,155
|
)
|
|
|
–
|
|
|
|
(126,155
|
)
|
Gross profit
|
|
|
25,974
|
|
|
|
284,333
|
|
|
|
–
|
|
|
|
310,307
|
|
Depreciation
|
|
|
1,970
|
|
|
|
127,645
|
|
|
|
2,964
|
|
|
|
132,579
|
|
Net income (loss)
|
|
|
7,251
|
|
|
|
(132,109
|
)
|
|
|
(95,132
|
)
|
|
|
(219,990
|
)
|
Total assets
|
|
|
6,186,616
|
|
|
|
41,587,087
|
|
|
|
403,215
|
|
|
|
48,176,918
|
|
Expenditure for long-lived assets
|
|
$
|
5
|
|
|
$
|
14
|
|
|
$
|
–
|
|
|
$
|
19
|
|
|
|
Three months ended July 31, 2015
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
47,199
|
|
|
$
|
464,775
|
|
|
$
|
–
|
|
|
$
|
511,974
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(7,217
|
)
|
|
|
–
|
|
|
|
(7,217
|
)
|
Revenues, net
|
|
|
47,199
|
|
|
|
457,558
|
|
|
|
–
|
|
|
|
504,757
|
|
Cost of revenues
|
|
|
(15,518
|
)
|
|
|
(191,354
|
)
|
|
|
–
|
|
|
|
(206,872
|
)
|
Gross profit
|
|
|
31,681
|
|
|
|
266,204
|
|
|
|
–
|
|
|
|
297,885
|
|
Depreciation
|
|
|
4,867
|
|
|
|
138,850
|
|
|
|
5,461
|
|
|
|
149,178
|
|
Net income (loss)
|
|
|
75,128
|
|
|
|
(74,110
|
)
|
|
|
(108,977
|
)
|
|
|
(107,959
|
)
|
Total assets
|
|
|
6,653,629
|
|
|
|
46,240,621
|
|
|
|
339,813
|
|
|
|
53,234,063
|
|
Expenditure for long-lived assets
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
Nine months ended July 31, 2016
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
76,420
|
|
|
$
|
1,227,719
|
|
|
$
|
–
|
|
|
$
|
1,304,139
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(19,489
|
)
|
|
|
–
|
|
|
|
(19,489
|
)
|
Revenues, net
|
|
|
76,420
|
|
|
|
1,208,230
|
|
|
|
–
|
|
|
|
1,284,650
|
|
Cost of revenues
|
|
|
–
|
|
|
|
(420,796
|
)
|
|
|
–
|
|
|
|
(420,796
|
)
|
Gross profit
|
|
|
76,420
|
|
|
|
787,434
|
|
|
|
–
|
|
|
|
863,854
|
|
Depreciation
|
|
|
2,946
|
|
|
|
374,968
|
|
|
|
10,819
|
|
|
|
388,733
|
|
Net income (loss)
|
|
|
10,563
|
|
|
|
(230,649
|
)
|
|
|
(265,329
|
)
|
|
|
(485,415
|
)
|
Total assets
|
|
|
6,186,616
|
|
|
|
41,587,087
|
|
|
|
403,215
|
|
|
|
48,176,918
|
|
Expenditure for long-lived assets
|
|
$
|
484
|
|
|
$
|
1,370
|
|
|
$
|
–
|
|
|
$
|
1,854
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
|
Nine months ended July 31, 2015
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
132,807
|
|
|
$
|
1,428,212
|
|
|
$
|
–
|
|
|
$
|
1,561,019
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(22,329
|
)
|
|
|
–
|
|
|
|
(22,329
|
)
|
Revenues, net
|
|
|
132,807
|
|
|
|
1,405,883
|
|
|
|
–
|
|
|
|
1,538,690
|
|
Cost of revenues
|
|
|
(77,788
|
)
|
|
|
(542,711
|
)
|
|
|
–
|
|
|
|
(620,499
|
)
|
Gross profit
|
|
|
55,019
|
|
|
|
863,172
|
|
|
|
–
|
|
|
|
918,191
|
|
Depreciation
|
|
|
15,064
|
|
|
|
429,596
|
|
|
|
16,896
|
|
|
|
461,556
|
|
Net income (loss)
|
|
|
46,655
|
|
|
|
(660,250
|
)
|
|
|
(456,971
|
)
|
|
|
(1,070,566
|
)
|
Total assets
|
|
|
6,653,629
|
|
|
|
46,240,621
|
|
|
|
339,813
|
|
|
|
53,234,063
|
|
Expenditure for long-lived assets
|
|
$
|
16,498
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
16,498
|
|
All long-lived assets are located in Malaysia.
NOTE 14 CONCENTRATIONS
OF RISK
The Company is exposed to the following concentrations
of risk:
(a) Major
customers
For the three and nine months ended July 31,
2016 and 2015, the customer who accounted for 10% or more of the Company’s revenues is presented as follows:
|
|
|
|
Three months ended July 31, 2016
|
|
|
July 31, 2016
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer H
|
|
Real estate
|
|
$
|
401,335
|
|
|
|
92%
|
|
|
$
|
135,802
|
|
|
|
|
|
Three months ended July 31, 2015
|
|
|
July 31, 2015
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer H
|
|
Real estate
|
|
$
|
444,226
|
|
|
|
88%
|
|
|
$
|
143,979
|
|
|
|
|
|
Nine months ended July 31, 2016
|
|
|
July 31, 2016
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer H
|
|
Real estate
|
|
$
|
1,178,994
|
|
|
|
92%
|
|
|
$
|
135,802
|
|
|
|
|
|
Nine months ended July 31, 2015
|
|
|
July 31, 2015
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer H
|
|
Real estate
|
|
$
|
1,358,439
|
|
|
|
88%
|
|
|
$
|
143,979
|
|
All customers are located in Malaysia.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
(b) Major
vendors
For the three and nine months ended July 31,
2016, no vendor accounted for 10% or more of the Company’s purchases.
For the three and nine months ended July 31,
2015, the vendor who accounted for 10% or more of the Company’s purchases is presented as follows:
|
|
Three months ended July 31, 2015
|
|
|
July 31, 2015
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Trade accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
Vendor E
|
|
$
|
1,624
|
|
|
|
11%
|
|
|
|
–
|
|
Vendor F
|
|
|
4,140
|
|
|
|
27%
|
|
|
|
–
|
|
|
|
Nine months ended July 31, 2015
|
|
|
July 31, 2015
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Trade accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
Vendor E
|
|
$
|
13,233
|
|
|
|
17%
|
|
|
|
–
|
|
Vendor F
|
|
|
26,836
|
|
|
|
35%
|
|
|
|
–
|
|
All vendors are located in Malaysia.
Financial instruments that are potentially
subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade
receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company
does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical trends and other information.
The Company’s exposure to interest rate
risk primarily relates to the interest income generated from excess cash invested in time deposits, and interest expense incurred
on bank borrowings. The Company has not used derivative financial instruments in its investment portfolio in order to reduce this
risk. The Company has not been exposed nor does it anticipate being exposed to material risks due to changes in interest rates.
The reporting currency of the Company is US$.
To date the majority of the revenues and costs are denominated in MYR, and a significant portion of the assets and liabilities
are denominated in MYR and RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations
may be affected by fluctuations in the exchange rate between US$, MYR and RMB. If MYR and RMB depreciates against US$, the value
of MYR and RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative
or other financial instruments that expose to substantial market risk.
|
(f)
|
Economic and political risks
|
Substantially all of the Company’s services
are conducted in Malaysia and Asian region. The Company’s operations are subject to various political, economic, and other
risks and uncertainties inherent in Malaysia. Among other risks, the Company’s operations are subject to the risks of restrictions
on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies;
foreign exchange restrictions; and political conditions and governmental regulations in Malaysia.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2016
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE 15 COMMITMENTS
AND CONTINGENCIES
(a) Operating lease commitment
As of July 31, 2016, the Company occupied its
own building premises and has no future minimum rental payments due under various operating leases in the next twelve months.
(b) Capital
commitment
As of July 31, 2016, the Company does not have
any significant capital commitments.
(c) Indemnification agreements
The Company entered into an indemnification
agreement with each of its independent directors, pursuant to which the Company agreed to indemnify the independent directors against
expenses, judgments, fines, penalties or other amount actually and reasonably incurred by the independent directors in connection
with any proceeding if the independent directors acted in good faith and in the best interests of the Company.
NOTE 16 SUBSEQUENT
EVENTS
In accordance with ASC Topic 855, “
Subsequent
Events
”, which establishes general standards of accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after
July 31, 2016 up through the filing date of these condensed consolidated financial statements. During the period, the Company did
not have any material recognizable subsequent events.