NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
1.
|
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 a durian plantation, leasing and development of the operation of
oil palm and durian plantation, commercial and residential real estate properties in Malaysia.
Corporate history
On December 6, 2010, the Company acquired
Union Hub Technology Sdn. Bhd. (“UHT”), a company incorporated under the laws of Malaysia, through a share exchange
transaction, or the Share Exchange. Pursuant to the Share Exchange, the Company acquired from the UHT shareholders all of the issued
and outstanding shares of UHT in exchange for the issuance of 16,500,000 shares of its common stock. As a result of the Share Exchange,
UHT became a wholly owned subsidiary of the Company.
Concurrently, on December 6, 2010, the
Company entered into and executed an agreement to sell its wholly-owned subsidiary, Home Touch Limited (a corporation organized
under the laws of the Hong Kong Special Administrative Region), to the former founders and directors for $20,000. Upon the completion
of this sale, Mr. Ng and Ms. Yau, the former founders and executive officers, resigned from their positions on the board of directors.
The share exchange transaction has been
accounted for as a reverse acquisition and recapitalization of the Company whereby UHT is deemed to be the accounting acquirer
(legal acquiree) and the Company to be the accounting acquiree (legal acquirer).
On January 25, 2011, the Company changed
its fiscal year from March 31 to October 31 and increased its authorized capital to 1,000,000,000 shares of common stock and 100,000,000
shares of preferred stock.
On January 20, 2014, the Company through
PGCG Assets sold and issued to an unaffiliated third party 200,000 shares of its Common Stock at a price of RM 100 per share, for
aggregate consideration of RM 20,000,000, or approximately US$ 6,084,760. PGCG Assets received net proceeds of approximately
RM 20,000,000, or approximately US$ 6,084,760 from the sale of its securities and used the net proceeds for general corporate purposes,
including repayment of the loan made by UHT. Upon the consummation of the foregoing transactions, 90% of the issued and outstanding
securities of PGCG Assets will be owned by UHT and 10% by such unaffiliated third party. Each sale and issuance was
made pursuant to the terms of a subscription agreement containing terms and conditions that are normal and customary for a transaction
of this type. In October 2014, PGCG Assets issued 48,000,000 shares of its common stock by capitalization of its share premium
account.
On October 31, 2014, the Company through
Virtual Setup Sdn. Bhd., its affiliate, sold and issued to Denvoursuisse Sdn. Bhd. 200,000 shares of its Common Stock at a price
of RM 10 per share, for aggregate consideration of RM 2,000,000, or approximately US$ 611,731. PGCG Assets received net proceeds
of approximately RM 2,000,000, from the sale of its securities and used the net proceeds for general corporate purposes, including
repayment of the loan made by UHT. Upon the consummation of the foregoing transactions, 95% of the issued and outstanding securities
of VSSB will be owned by PGCG Plantation and 5% by Denvoursuisse Sdn. Bhd., which also owns 10% of the issued and outstanding securities
of PGCG Assets. The sale and issuance was made pursuant to the terms of a subscription agreement containing terms and conditions
that are normal and customary for a transaction of this type.
In December 2014, the Company discontinued
the software business and concentrated its resource to develop the real estate business.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
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 corporate service to group companies
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Power Green Investments Limited (“PGIL”)
|
|
British Virgin Islands
|
|
January 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$1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Virtual Setup Sdn. Bhd. (“VSSB”)
|
|
Malaysia
|
|
July 19, 2010
|
|
4,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Operation of oil palm and durian plantation
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
PGCG Assets Holdings Sdn. Bhd. (“PGCG Assets”)
|
|
Malaysia
|
|
March 21, 2012
|
|
50,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Investment in land & buildings
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
PGCG Development Sdn. Bhd. (“PGCG Development”)
|
|
Malaysia
|
|
March 21, 2012
|
|
250,000 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
PGCG Plantations Sdn. Bhd. (“PGCG Plantation”)
|
|
Malaysia
|
|
October 4, 2011
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Holding company of VSSB
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Max Trend International Limited (“Max Trend”)
|
|
Hong Kong
|
|
August 19, 2010
|
|
2 issued shares of ordinary shares of HK$ 1 each
|
|
Holding company of SMTG
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Shenzhen Max Trend Green Energy Company Limited (Max Trend WOFE) (“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”).
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
2.
|
GOING CONCERN UNCERTAINTY
|
The accompanying 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 year ended October 31, 2016, the
Company reported a net loss of $911,522 and working capital deficit of $5,111,507
as of October 31, 2016. The Company had accumulated deficit of $2,846,486
as of October 31, 2016 from recurring losses and significant short-term debt obligations maturing in less than one year (notes
7 and 8). 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 consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities
that may result in the Company not being able to continue as a going concern.
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
These accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US
GAAP”).
In preparing these 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 years reported. Actual results may differ from these estimates.
The 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 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.
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Bank balances held by financial institutions located in:
|
|
|
|
|
|
|
|
|
Malaysia
|
|
$
|
684,974
|
|
|
$
|
760,787
|
|
The PRC
|
|
|
–
|
|
|
|
74,595
|
|
|
|
|
684,974
|
|
|
|
835,382
|
|
Cash on hand in Malaysia
|
|
|
902
|
|
|
|
1,412
|
|
|
|
$
|
685,876
|
|
|
$
|
836,794
|
|
As of October 31, 2016 and 2015, the restricted
amount of cash held by our PRC subsidiary in China was $nil and $74,595, respectively.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
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 considers 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 for the years ended October 31, 2016
and 2015, respectively.
|
·
|
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. Any unrealized losses that are
deemed other-than-temporary are included in current period earnings and removed from accumulated other comprehensive income (loss).
Realized gains and losses on marketable
securities are included in current period earnings. For purposes of computing realized gains and losses, the cost basis of each
investment sold is generally based on the weighted average cost method.
The Company regularly evaluates whether
the decline in fair value of available-for-sale securities is other-than-temporary and objective evidence of impairment could include:
|
·
|
The severity and duration of the fair value decline;
|
|
·
|
Deterioration in the financial condition of the issuer; and
|
|
·
|
Evaluation of the factors that could cause individual securities to have an other-than-temporary impairment.
|
During the year ended October 31,
2016, $135,597 of losses previously classified in other comprehensive losses were
reclassified into earnings to recognize an other-than-temporary decline in fair value. No such other-than-temporary decline in
fair value was recognized during the year ended October 31, 2015.
During the years ended October
31, 2016 and 2015, the Company invested in equity securities listed on Bursa Malaysia with a total cost of $265,606 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. The unrealized
loss representing the change in fair value of $60,590 and $106,783 was charged against accumulated other comprehensive
income (loss) for the years ended October 31, 2016 and 2015, respectively.
|
·
|
Deferred development costs
|
Deferred development costs consist of replanting
costs of durian such as soil amendments, cultivation, fertilization and purchase costs of sapling. Costs related to durian development
projects on the Company's plantation land, are capitalized during the sapling, developing and planting durian fruit bunches and
when the harvests are substantially available for commercial sale. Deferred development costs will then commence to be amortized
as components of plantation costs and expenses.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
·
|
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
|
|
Oil palm 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 story building “Menara CMY” in Kuala Lumpur, Malaysia
|
|
Indefinite, as per property titles
|
Building structure and improvements
|
|
Building structure of commercial buildings in Kuala Lumpur, Malaysia, including: 12 story building “Megan Avenue” and 15 story building “Menara CMY”
|
|
33 years
|
Office furniture 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
fiscal 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 lowest level 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 years presented.
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 October 31,
2016 and 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 the Company capitalizes only those costs associated with the portion
under construction.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
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) title and
risk of loss are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the
customer; and (4) the collection of related accounts receivable is reasonably assured. The Company’s sale arrangements do
not contain general rights of return.
(a) Plantation
sales
Revenue from the sale of palm oilseed 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 collectibility is reasonably assured. For the years ended October 31, 2016 and 2015, sale of palm oil seed was $14,986
and $137,854.
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, BJ Bentong Trading Company (“BJ”) 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 $93,530
and $18,788 was recognized for the year ended October 31, 2016 and 2015, respectively, and was included in revenue from plantation
business.
On September 29, 2016, the Company and
BJ entered into a letter agreement pursuant to which the parties mutually agreed to terminate the Tenancy Agreement upon the following
conditions:
|
1.
|
BJ’s deposit of RM70,000 shall be forfeited by the Company;
|
|
2.
|
All staff, laborers, machinery and tools shall be removed from the premises and the premises returned
to the Company no later than September 30, 2016; and
|
|
3.
|
BJ shall indemnify the Company for a period of six (6) months after the termination of the Tenancy
Agreement against all and any damages, loss, expenses or other cost on the property and or the oil palm trees regardless of whether
such damage arose as a result of the act, omission or negligence of BJ or its agents and representatives.
|
During the year ended October 31, 2016,
the Company recognized other income of $16,983 from forfeiture of BJ’s deposit.
The Company is currently directly managing
its oil palm and durian plantation.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
(b) Rental
income
The Company generally leases the units
under operating leases with terms of two years or less. For the years ended October 31, 2016 and 2015, we have recorded $1,538,211
and $1,763,101, respectively, 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 October 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
|
67%
|
Menara CMY
|
15
|
91,848
|
0%
|
The Company expects to record approximately
$1.2 million in annual lease revenue under the operating lease arrangements in the next twelve months, through October 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. Six-months’ rent-free period under the operating lease agreement is treated as long-term rent 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.
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Rental concession:
|
|
|
|
|
|
|
Current portion
|
|
$
|
26,231
|
|
|
$
|
25,605
|
|
Non-current portion
|
|
|
710,425
|
|
|
|
719,080
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
736,656
|
|
|
$
|
744,685
|
|
The estimated amortization on long-term
rent concession in the next five years and thereafter is as follows:
Period ending October 31:
|
|
|
|
|
|
2017
|
|
|
$
|
26,231
|
|
|
2018
|
|
|
|
26,231
|
|
|
2019
|
|
|
|
26,231
|
|
|
2020
|
|
|
|
26,231
|
|
|
2021
|
|
|
|
26,231
|
|
|
Thereafter
|
|
|
|
605,501
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
736,656
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
As of October 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 October 31:
|
|
|
|
|
|
2017
|
|
|
$
|
1,128,532
|
|
|
2018
|
|
|
|
1,118,398
|
|
|
2019
|
|
|
|
1,118,398
|
|
|
2020
|
|
|
|
1,118,398
|
|
|
2021
|
|
|
|
1,118,398
|
|
|
Thereafter
|
|
|
|
24,697,944
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
30,300,068
|
|
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 oil palm
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 real estate business shown
on the accompanying statements of operations include costs associated with 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 stockholders’ equity 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. This comprehensive income is not included in the computation of income tax expense or benefit.
|
·
|
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 years 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 is 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 CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
·
|
Foreign currencies translation
|
Transactions denominated in currencies
other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of
the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into
the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are
recorded in the statement of operations.
The functional currency of the
Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in
US$, which is the reporting currency. In addition, the Company maintains its books and record in a local currency, Malaysian
Ringgit (“MYR” or “RM”), Hong Kong Dollars (“HK$”) 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.
Translation of amounts from the local currency
of the Company into US$1 has been made at the following exchange rates for the respective years:
|
|
As of and for the year ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Year-end RMB : US$1 exchange rate
|
|
|
6.7732
|
|
|
|
6.3185
|
|
Yearly average RMB : US$1 exchange rate
|
|
|
6.5628
|
|
|
|
6.1721
|
|
Year-end HK$ : US$1 exchange rate
|
|
|
7.7548
|
|
|
|
7.7502
|
|
Yearly average HK$ : US$1 exchange rate
|
|
|
7.7606
|
|
|
|
7.7528
|
|
Year-end MYR : US$1 exchange rate
|
|
|
4.1935
|
|
|
|
4.2960
|
|
Yearly average MYR : US$1 exchange rate
|
|
|
4.1217
|
|
|
|
3.7524
|
|
Contributions to retirement schemes (which
are defined contribution plans) are charged to general and administrative expenses in the statements of operation and comprehensive
loss as and when the related employee service is provided.
Parties, which can be a corporation or
individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Companies are also considered
to be related if they are subject to common control or common significant influence.
ASC Topic 280, “
Segment Reporting
”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business segments and major customers in financial statements.
During the years ended October 31, 2016 and 2015, the Company operates in two reportable operating segments in Malaysia.
|
·
|
Fair value of financial instruments
|
The carrying value of the
Company’s financial instruments (excluding obligation under finance lease, long-term bank loans
and available-for-sale marketable securities): cash and cash equivalents, time deposits, accounts receivable,
deposits and other receivables, short-term bank borrowings, amount due to a related party and other payables
approximate at their fair values because of the short-term nature of these financial instruments.
Management believes based on the
current market prices or interest rates for similar debt instruments, the fair value of its obligation under finance lease
and long-term bank loans approximates the carrying amount.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
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
|
The following table summarizes information
on the fair value measurement of the Company’s financial assets as of October 31, 2016 and 2015, measured at fair value,
grouped by the categories described above:
|
|
Quoted prices in active markets
(Level 1)
|
|
|
Significant other observable inputs
(Level 2)
|
|
|
Significant unobservable inputs
(Level 3)
|
|
As of October 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, available-for-sale
|
|
$
|
279,042
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, available-for-sale
|
|
$
|
334,452
|
|
|
$
|
–
|
|
|
$
|
–
|
|
As of October 31, 2016 and 2015, the Company
did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements,
at least annually, on a recurring basis, nor did the Company have any assets or liabilities measured at fair value on a non-recurring
basis.
|
·
|
Recent accounting pronouncements
|
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance
in U.S. GAAP when it becomes effective. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue
recognition standard. The amendments in ASU 2014-09 are effective for public companies for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. The standard permits the use of either the retrospective or cumulative
effect transition method. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal
versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts
with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue
from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09
and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients.
These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606.
The Company is evaluating the effect the ASUs will have on its consolidated financial statements and related disclosures. The Company
has not yet selected a transition method nor has it determined the effect of these standards on its ongoing financial reporting.
In June 2014, the FASB issued ASU 2014-15,
"Presentation of Financial Statements-Going concern (Subtopic 205-40) which provides guidance to an organization’s management,
with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly
provided by organizations today in the financial statement footnotes. This guidance in ASU 2014-15 is effective for annual periods
ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application
is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company
does not expect that the adoption will have a material impact on its consolidated financial statements.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
In November 2014, FASB issued
Accounting Standards Update No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a
Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging
Issues Task Force). The amendments permit the use of the Fed Funds Effective Swap Rate (also referred to as the Overnight
Index Swap Rate, or OIS) as a benchmark interest rate for hedge accounting purposes. Public business entities are required to
implement the new requirements in fiscal years (and interim periods within those fiscal years) beginning after December 15,
2015. The Company does not expect the adoption of ASU 2014-16 to have a material impact on its consolidated financial
statements.
In February 2015, the FASB issued ASU 2015-02
“Consolidation (Topic 810): Amendments to the Consolidation Analysis.” ASU 2015-02 changes the analysis that a reporting
entity must perform to determine whether it should consolidate certain types of legal entities. It is effective for annual reporting
periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption
in an interim period. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-02 on its consolidated
financial statements.
In April 2015, the FASB issued ASU 2015-03
“Simplifying the Presentation of Debt Issuance Costs”, which changes the presentation of debt issuance costs in the
financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the
related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The
guidance is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The guidance
will be applied retrospectively to each period presented. The adoption of this standard update is not expected to have any impact
on the Company's financial statements.
In July 2015, the FASB issued ASU 2015-11,
Inventory, which requires an entity to measure inventory within the scope at the lower of cost and net realizable value. Net realizable
value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal,
and transportation. The effective date for the standard is for fiscal years beginning after December 15, 2016. Early adoption is
permitted. The Company does not expect the adoption of ASU 2015-11 to have a material impact on its consolidated financial statements.
In September 2015, the FASB issued ASU
No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the
accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement
to retrospectively account for those adjustments. For public business entities, the amendments are effective for fiscal years beginning
after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to
adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements
that have not been issued. The Company does not expect the adoption of ASU 2015-16 to have a material impact on its consolidated
financial statements.
In November 2015, the FASB issued ASU 2015-17,
“Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. To simplify the presentation of deferred
income taxes, the amendments in this update require that deferred income tax liabilities and assets be classified as noncurrent
in a classified statement of financial position. The amendments in ASU 2015-17 are effective for public business entities for financial
statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendments
may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The
Company does not expect that the adoption will have a material impact on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01,
“Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.”
The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized
through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the
investee). The amendments in this update also require an entity to present separately in other comprehensive income the portion
of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity
has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The amendments
in ASU 2016-01 are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods
within those fiscal years. The Company does not expect that the adoption will have a material impact on its consolidated financial
statements.
In February 2016, the FASB issued ASU No.
2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record
a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified
as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new
standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients
available. The Company does not expect that the adoption will have a material impact on its consolidated financial statements.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
In March 2016, the FASB issued ASU No.
2016-07, Simplifying the Transition to the Equity Method of Accounting, which eliminates the requirement to apply the equity method
of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The amendments
in ASU 2016-07 are effective for public companies for fiscal years beginning after December 15, 2016 including interim periods
therein. Early adoption is permitted. The new standard should be applied prospectively for investments that qualify for the equity
method of accounting after the effective date. The Company does not expect that the adoption will have a material impact on its
consolidated financial statements.
In March 2016, the FASB issued ASU No.
2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement,
forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for
fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted but
requires all elements of the amendments to be adopted at once rather than individually. The Company is evaluating the effect that
ASU No. 2016-09 will have on the Company’s consolidated financial statements and related disclosures.
In June 2016, the FASB issued Accounting
Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure
all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of
credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact
that the standard will have on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU No.
2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of
certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for
fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company
is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.
In October 2016, the FASB issued ASU No.
2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting
for the income tax consequences of intra-entity transfers of assets other than inventory. This ASU is effective for fiscal years
and interim periods within those years beginning after December 15, 2017. Early adoption is permitted. The Company does not anticipate
that the adoption of this ASU to have a significant impact on its consolidated financial statements.
In October 2016, the FASB issued ASU No.
2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are Under Common Control. The amendments in this
ASU change how a reporting entity that is the single decision maker of a variable interest entity should treat indirect interests
in the entity held through related parties that are under common control with the reporting entity when determining whether it
is the primary beneficiary of that variable interest entity. The ASU is effective for fiscal years and interim periods within those
years beginning after December 15, 2016. The Company does not expect the adoption of this ASU to have a material impact on its
consolidated financial statements.
In November 2016, the FASB issued Accounting
Standards Update 2016-18 (ASU 2016-18), Statement of Cash Flows: Restricted Cash. This ASU provides guidance on the classification
of restricted cash in the statement of cash flows. The amendments in this ASU are effective for interim and annual periods beginning
after December 15, 2017. Early adoption is permitted. The amendments in the ASU should be adopted on a retrospective basis. The
Company does not expect that adoption of this ASU to have a material effect on its consolidated financial statements.
Other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the Company’s consolidated financial statements upon adoption.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
4.
|
PROPERTY, PLANT AND EQUIPMENT
|
Property, plant and equipment consisted
of the following:
|
|
As of October 31,
|
|
|
|
2016
|
|
|
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
|
|
|
125,959
|
|
|
|
125,631
|
|
Motor vehicles
|
|
|
173,811
|
|
|
|
166,047
|
|
Foreign translation difference
|
|
|
(16,009,829
|
)
|
|
|
(17,096,349
|
)
|
|
|
|
45,552,216
|
|
|
|
44,457,604
|
|
Less: accumulated depreciation
|
|
|
(2,457,773
|
)
|
|
|
(1,928,852
|
)
|
Less: foreign translation difference
|
|
|
490,329
|
|
|
|
515,809
|
|
Property, plant and equipment, net
|
|
$
|
43,584,772
|
|
|
$
|
43,044,561
|
|
Depreciation expense for the years ended
October 31, 2016 and 2015 amounted to $528,921 and $590,757, respectively.
As of October 31, 2016 and 2015, the Company
has one motor vehicle under finance lease with a carrying value of $3,378 and $5,625, respectively.
Both commercial buildings in Kuala Lumpur,
Malaysia are pledged against the bank loans (notes 7 and 8).
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 entered into a memorandum of understanding (“MOU”) 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.
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 RM510 million, or approximately $122 million. This estimate
may be revised accordingly during the negotiation of the terms of the definitive agreement.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
The participation of the parties in the
Proposed JV is conditional upon the following conditions precedent being fulfilled on or before 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 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.
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.
During the course of the Company’s
strategic review of its operations, the Company assessed the recoverability of the carrying value of its property, plant and equipment.
The impairment charge, if any, represented the excess of carrying amounts of the Company’s property, plant and equipment
over the fair values of the assets. The Company believes that there was no impairment of its property, plant and equipment for
the years ended October 31, 2016 and 2015.
|
5.
|
AMOUNT DUE TO RELATED PARTIES
|
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Current portion:
|
|
|
|
|
|
|
|
|
Amount due to a related party, unsecured, interest-free and repayable on demand,
|
|
|
|
|
|
|
|
|
Mr. Pua Wooi Khang, a former director of UHT
|
|
$
|
108,149
|
|
|
$
|
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
|
|
$
|
1,279,196
|
|
|
$
|
2,071,183
|
|
|
6.
|
ACCRUED LIABILITIES AND OTHER PAYABLES
|
Accrued liabilities and other payables
consist of the following:
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Accrued operating expenses
|
|
$
|
118,670
|
|
|
$
|
115,883
|
|
Accrued interest expense
|
|
|
54,775
|
|
|
|
57,957
|
|
Potential tax penalty liability (Note 12)
|
|
|
135,000
|
|
|
|
135,000
|
|
Other payable
|
|
|
25,161
|
|
|
|
60,320
|
|
|
|
$
|
333,606
|
|
|
$
|
369,160
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Bank loans from financial institutions in Malaysia,
|
|
|
|
|
|
|
|
|
Bank of China (Malaysia) Berhad
|
|
$
|
8,213,970
|
|
|
$
|
8,692,957
|
|
RHB Bank Berhad
|
|
|
2,180,786
|
|
|
|
2,186,990
|
|
|
|
|
10,394,756
|
|
|
|
10,879,947
|
|
Less: current portion
|
|
|
(844,436
|
)
|
|
|
(768,529
|
)
|
Bank loans, net of current portion
|
|
$
|
9,550,320
|
|
|
$
|
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% per annum for the
years ended October 31, 2016 and 2015.
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 of RM57,045 each (including interests) 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 4.95% per annum for the year ended October 31, 2016 (2015: 4.95% per annum).
As of October 31, 2016, the minimum future
payments of the aggregate bank loans in the next five years and thereafter are as follows:
Year ending October 31:
|
|
|
|
|
|
2017
|
|
|
$
|
844,436
|
|
|
2018
|
|
|
|
904,907
|
|
|
2019
|
|
|
|
970,598
|
|
|
2020
|
|
|
|
1,041,267
|
|
|
2021
|
|
|
|
1,118,697
|
|
|
Thereafter
|
|
|
|
5,514,851
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
$
|
10,394,756
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
8.
|
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 7) by Bank of China (Malaysia) Berhad to
the Company, which provided for up to RM15,000,000 (equal to $3,576,964) 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 5.11%
and 5.18% per annum for the year ended October 31, 2016 and 2015, respectively.
|
9.
|
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:
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Finance lease
|
|
$
|
3,808
|
|
|
$
|
6,193
|
|
Less: interest expense
|
|
|
(594
|
)
|
|
|
(960
|
)
|
|
|
|
|
|
|
|
|
|
Net present value of finance lease
|
|
$
|
3,214
|
|
|
$
|
5,233
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
2,147
|
|
|
$
|
2,096
|
|
Non-current portion
|
|
|
1,067
|
|
|
|
3,137
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,214
|
|
|
$
|
5,233
|
|
As of October 31, 2016, the maturities
of the finance lease for each of the three years are as follows:
Years ending October 31:
|
|
|
|
|
|
2017
|
|
|
$
|
2,147
|
|
|
2018
|
|
|
|
1,067
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
3,214
|
|
As of October 31, 2016 and 2015, the number
of shares of the Company’s common stock issued and outstanding was 512,682,393 shares. There are no shares of preferred stock
issued and outstanding.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
Basic net loss per share is computed using
the weighted average number of common stock outstanding during the year. Diluted net loss per share is computed using the weighted
average number of common stock outstanding and common stock equivalents during the year.
The following table sets forth the computation
of basic and diluted net loss per share attributable to Prime Global Capital Group Incorporated stockholders:
|
|
Years ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Basic and diluted net loss attributable to Prime Global Capital Group Incorporated stockholders:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
- Net loss attributable to Prime Global Capital Group Incorporated stockholders
|
|
$
|
(866,351
|
)
|
|
$
|
(1,554,500
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding attributable to Prime Global Capital Group Incorporated stockholders – Basic and diluted
|
|
|
512,682,393
|
|
|
|
512,682,393
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Prime Global Capital Group Incorporated stockholders – Basic and diluted
|
|
|
(0.00
|
)*
|
|
$
|
(0.00
|
)*
|
* Denotes
less than $0.01 per share
The local (United States) and foreign components
of loss before income taxes were comprised of the following:
|
|
Years ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
(150,884
|
)
|
|
$
|
(180,793
|
)
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
BVI
|
|
|
–
|
|
|
|
–
|
|
Malaysia
|
|
|
(507,100
|
)
|
|
|
(762,746
|
)
|
Hong Kong
|
|
|
–
|
|
|
|
(1,093
|
)
|
The PRC
|
|
|
–
|
|
|
|
(11,861
|
)
|
Loss before income taxes
|
|
$
|
(657,984
|
)
|
|
$
|
(956,493
|
)
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
Provision for income taxes consisted of
the following:
|
|
Years ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Current:
|
|
|
|
|
|
|
– Local
|
|
$
|
–
|
|
|
$
|
–
|
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
BVI
|
|
|
–
|
|
|
|
–
|
|
Malaysia
|
|
|
274,142
|
|
|
|
426,357
|
|
Hong Kong
|
|
|
–
|
|
|
|
–
|
|
The PRC
|
|
|
–
|
|
|
|
(2,557
|
)
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
– Local
|
|
|
–
|
|
|
|
–
|
|
– Foreign
|
|
|
(20,604
|
)
|
|
|
213,141
|
|
Income tax expense
|
|
$
|
253,538
|
|
|
$
|
636,941
|
|
The effective tax rate in the years 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
years presented, the Company has a number of subsidiaries that operates in different countries and is subject to tax in the jurisdictions
in which it 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 October 31, 2016 and 2015, the operations in the United States of America
incurred $646,189 and $467,838, respectively of cumulative net operating
losses which can be carried forward to offset future taxable income. The net operating loss carry forwards begin to expire in 2031,
if unutilized. As of October 31, 2016, the Company has provided for a full valuation allowance
of $226,166 (2015: $163,743) against the deferred tax assets on the expected future
tax benefits from the net operating loss carry forwards as the management believes it is not likely 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 at October 31, 2016 and 2015 in respect of potential tax penalty of the late filing of IRS return and,
if recognized, will affect the Company’s effective tax rate.
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. As of October 31, 2016, the Company has provided for a full valuation allowance against the deferred
tax assets of $1,065 (2015:$1,065) on the expected future tax benefits from the net
operating loss carry forwards as the management believes it is not likely that these assets will be realized in the future.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
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 due to operating loss incurred during the years ended October 31, 2016 and 2015. A reconciliation
of loss before income taxes to the effective tax rate as follows:
|
|
Years ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
–
|
|
|
$
|
(11,861
|
)
|
Statutory income tax rate
|
|
|
25%
|
|
|
|
25%
|
|
Income tax at statutory tax rate
|
|
|
–
|
|
|
|
(2,965
|
)
|
|
|
|
|
|
|
|
|
|
Tax effect of non-deductible expenses
|
|
|
–
|
|
|
|
–
|
|
Over-provision in prior years
|
|
|
–
|
|
|
|
(2,557
|
)
|
Net operating loss
|
|
|
–
|
|
|
|
2,965
|
|
Income tax credit
|
|
$
|
–
|
|
|
$
|
(2,557
|
)
|
Malaysia
All of the
Company’s subsidiaries operating in Malaysia are subject to the Malaysia Corporate Tax Laws at a progressive income tax
rate of 19% (2015: 20%) (for Company with paid up capital not more than RM2.5 million and on the first RM 500,000 income)
and 24% (2015: 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. Any unutilized losses can be carried forward indefinitely to be utilized against income
from any business source. As of October 31, 2016, the Company has provided for a full valuation allowance against the
deferred tax assets of $227,729 (2015: $183,405) on the expected future tax benefits from the net operating loss carry
forwards as the management believes it is not likely that these assets will be realized in the future.
The general statute of
limitations for an assessment or additional assessment is five years from the end of the relevant year of assessment. If the
Inland Revenue Board is of the view that a transaction is not at a arm’s length price, the statute of limitations is
extended by another two years to seven years. However, if there is fraud, willful default or negligence on the part of the
taxpayer, an assessment can be made at any time. There is no statute of limitations for the collection of unpaid tax.
A reconciliation of loss before income
taxes to the effective tax rate as follows:
|
|
Years ended October 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(507,100
|
)
|
|
$
|
(762,746
|
)
|
Statutory income tax rate
|
|
|
24%
|
|
|
|
25%
|
|
Income tax at statutory tax rate
|
|
|
(121,704
|
)
|
|
|
(190,687
|
)
|
|
|
|
|
|
|
|
|
|
Tax effect of non-deductible expenses
|
|
|
58,675
|
|
|
|
166,428
|
|
Tax effect of different tax rate
|
|
|
3,092
|
|
|
|
8,593
|
|
Tax effect of non-business source rental income
|
|
|
|
|
|
|
|
|
- under-provision in prior years
|
|
|
84,759
|
|
|
|
213,141
|
|
- current year
|
|
|
155,303
|
|
|
|
154,789
|
|
Under-provision in prior years
|
|
|
9,692
|
|
|
|
271,568
|
|
Net operating loss
|
|
|
63,721
|
|
|
|
15,666
|
|
Income tax expense
|
|
$
|
253,538
|
|
|
$
|
639,498
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
In fiscal 2014, for Malaysian Tax purposes,
rental income at “Megan Avenue” and “Menara CMY” was deemed as a business source and income tax provision
was calculated as such. During fiscals 2015 and 2016, the Company revisited the facts and circumstances and determined that rental
income should be more appropriately taxed as a non-business source under Section 4(d) of the Income Tax Act.
The following table sets forth the significant
components of the aggregate deferred tax assets of the Company as of October 31, 2016 and 2015:
|
|
As of October 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Capital loss
|
|
$
|
10,055
|
|
|
$
|
6,359
|
|
Accrued interest expenses
|
|
|
13,694
|
|
|
|
–
|
|
Net operating loss carry forwards
|
|
|
|
|
|
|
|
|
- United States of America
|
|
|
226,166
|
|
|
|
163,743
|
|
- Malaysia
|
|
|
221,223
|
|
|
|
183,405
|
|
- Hong Kong
|
|
|
1,065
|
|
|
|
1,065
|
|
Total deferred tax assets
|
|
|
472,203
|
|
|
|
354,572
|
|
Less: valuation allowance
|
|
|
(458,509
|
)
|
|
|
(354,572
|
)
|
Deferred tax assets
|
|
$
|
13,694
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
Rental concession
|
|
$
|
6,558
|
|
|
$
|
6,401
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities – non-current
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
2,757
|
|
|
|
2,691
|
|
Rental concession
|
|
|
177,606
|
|
|
|
179,770
|
|
|
|
$
|
180,363
|
|
|
$
|
182,461
|
|
The Company is required to make contribution
on behalf of its employees under a government-mandated defined contribution pension scheme for its eligible full-times employees
in Malaysia and the PRC. The Company is required to contribute a specified percentage of the participants’ relevant income
based on their ages and wages level. The total contributions made by the Company were $29,303
and $41,928 for the years ended October 31, 2016 and 2015, respectively.
|
(a)
|
Business segment reporting
|
During the years ended October 31, 2016
and 2015, the Company operated two reportable business segments, as defined by ASC Topic 280:
|
·
|
Plantation business – oil palm and durian plantation in Malaysia
|
|
·
|
Real estate business – acquisition and development of commercial and residential real estate properties in Malaysia
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
The accounting policies of the segments
are the same as those described in the summary of significant accounting policies (see Note 3). The Company had no inter-segment
sales for the years presented. Summarized financial information concerning the Company’s reportable segments is shown as
below:
|
|
Year ended October 31, 2016
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
108,516
|
|
|
$
|
1,564,239
|
|
|
$
|
–
|
|
|
$
|
1,672,755
|
|
Less: inter-company revenues
|
|
|
–
|
|
|
|
(26,028
|
)
|
|
|
–
|
|
|
|
(26,028
|
)
|
Revenues from external customers
|
|
|
108,516
|
|
|
|
1,538,211
|
|
|
|
–
|
|
|
|
1,646,727
|
|
Cost of revenues
|
|
|
(35,585
|
)
|
|
|
(594,833
|
)
|
|
|
–
|
|
|
|
(630,418
|
)
|
Gross profit
|
|
|
72,931
|
|
|
|
943,378
|
|
|
|
–
|
|
|
|
1,016,309
|
|
Depreciation
|
|
|
13,801
|
|
|
|
500,793
|
|
|
|
14,327
|
|
|
|
528,921
|
|
Net income (loss)
|
|
|
2,290
|
|
|
|
(525,696
|
)
|
|
|
(388,116
|
)
|
|
|
(911,522
|
)
|
Total assets
|
|
|
5,957,293
|
|
|
|
39,523,026
|
|
|
|
331,533
|
|
|
|
45,811,852
|
|
Expenditure for long-lived assets
|
|
$
|
7,764
|
|
|
$
|
1,373
|
|
|
$
|
–
|
|
|
$
|
9,137
|
|
|
|
Year ended October 31, 2015
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
156,642
|
|
|
$
|
1,791,691
|
|
|
$
|
–
|
|
|
$
|
1,948,333
|
|
Less: inter-company revenues
|
|
|
–
|
|
|
|
(28,590
|
)
|
|
|
–
|
|
|
|
(28,590
|
)
|
Revenues from external customers
|
|
|
156,642
|
|
|
|
1,763,101
|
|
|
|
–
|
|
|
|
1,919,743
|
|
Cost of revenues
|
|
|
(83,728
|
)
|
|
|
(656,139
|
)
|
|
|
–
|
|
|
|
(739,867
|
)
|
Gross profit
|
|
|
72,914
|
|
|
|
1,106,962
|
|
|
|
–
|
|
|
|
1,179,876
|
|
Depreciation
|
|
|
19,033
|
|
|
|
550,051
|
|
|
|
21,673
|
|
|
|
590,757
|
|
Net income (loss)
|
|
|
33,901
|
|
|
|
(809,267
|
)
|
|
|
(818,068
|
)
|
|
|
(1,593,434
|
)
|
Total assets
|
|
|
5,850,588
|
|
|
|
40,772,138
|
|
|
|
463,857
|
|
|
|
47,086,583
|
|
Expenditure for long-lived assets
|
|
$
|
16,110
|
|
|
$
|
301,354
|
|
|
$
|
1,181
|
|
|
$
|
318,645
|
|
All long-lived assets are located in Malaysia.
|
(b)
|
Geographic segment reporting
|
The business of the Company is engaged
entirely in Malaysia. The Chief Executive Officer and executive directors regularly review the Company’s business as one
geographical segment.
As of October 31, 2016, the amount of net
assets held by a PRC subsidiary was $0 (2015: $74,595), all of which is restricted.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
|
15.
|
CONCENTRATIONS OF RISK
|
The Company is exposed to the following
concentrations of risk:
(a) Major
customers
For the years ended October 31, 2016 and
2015, the customer who accounted for 10% or more of the Company’s revenues is presented as follows:
|
|
|
|
Year ended October 31, 2016
|
|
|
October 31, 2016
|
|
|
|
Business
segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
Customer A
|
|
Real estate
|
|
$
|
1,501,818
|
|
|
|
91%
|
|
|
$
|
104,924
|
|
|
|
|
|
Year ended October 31, 2015
|
|
|
October 31, 2015
|
|
|
|
Business
segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
Customer A
|
|
Real estate
|
|
$
|
1,729,560
|
|
|
|
90%
|
|
|
$
|
102,421
|
|
(b) Major
vendors
For the years ended October 31, 2016 and
2015, the vendor who accounted for 10% or more of the Company’s purchases is presented as follows:
|
|
Year ended October 31, 2016
|
|
|
October 31, 2016
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Trade accounts
payable
|
|
Vendor B
|
|
|
4,715
|
|
|
|
13%
|
|
|
|
–
|
|
|
|
Year ended October 31, 2015
|
|
|
October 31, 2015
|
|
|
|
Purchase
|
|
|
Percentage
of purchase
|
|
|
Trade accounts
payable
|
|
Vendor C
|
|
$
|
45,794
|
|
|
|
55%
|
|
|
$
|
–
|
|
Vendor D
|
|
|
17,995
|
|
|
|
21%
|
|
|
|
–
|
|
All of the 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.
(d) Interest
rate risk
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.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amount expressed in United States Dollars
(“US$”), except for number of shares or stated otherwise)
(e) Exchange
rate risk
The reporting currency of the Company is
US$. 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. 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$ and MYR. If MYR depreciates against US$, the value of MYR revenues
and assets as expressed in US$ 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. 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.
|
16.
|
COMMITMENTS AND CONTINGENCIES
|
(a) Operating lease commitments
As of October 31, 2016, the Company occupied
its own building premises and has no significant future minimum rental payments due under various operating leases in the next
twelve months.
(b) Capital
commitment
As of October 31, 2016, the Company does
not have any significant capital commitments.
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
October 31, 2016 up through February 10, 2017 of these consolidated financial statements.
During the period, the Company did not have any material recognizable subsequent events.