Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    
    SECURITIES EXCHANGE ACT OF 1934    
         
    For the fiscal year ended October 31, 2019    
         
    OR    
         
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    
    SECURITIES EXCHANGE ACT OF 1934    

 

For the transition period from ____________ to ____________

 

Commission file number: 000-54288

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

(Exact name of registrant as specified in its charter)

 

NEVADA   26-4309660
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     

E-5-2, Megan Avenue 1, Block E

Jalan Tun Razak

50400 Kuala Lumpur, Malaysia

  N/A
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: +603 2162 0773

 

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   No 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.     Yes  No 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

Approximate aggregate market value of the voting stock held by non-affiliates of the registrant as of April 30, 2018, based upon the closing sale price reported by the Over-the-Counter Bulletin Board on that date: $45,787,131.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Common Stock   Outstanding at January 28, 2020
Common Stock, $.001 par value per share   512,682,393 shares

 

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 

     
 

 

TABLE OF CONTENTS

 

    Page
Part I    
Item 1 Business 1
Item 1A Risk Factors 17
Item 1B Unresolved Staff Comments 17
Item 2 Properties 17
Item 3 Legal Proceedings 18
Item 4 Mine Safety Disclosures 18
Part II    
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19
Item 6 Selected Financial Data 20
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation 20
Item 7A Quantitative and Qualitative Disclosures about Market Risk 37
Item 8 Financial Statements and Supplementary Data 38
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 39
Item 9A Controls and Procedures 39
Item 9B Other Information 40
Part III    
Item 10 Directors and Executive Officers and Corporate Governance 41
Item 11 Executive Compensation 43
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 48
Item 13 Certain Relationships and Related Transactions, and Director Independence 48
Item 14 Principal Accounting Fees and Services 50
Part IV    
Item 15 Exhibits, Financial Statement Schedules 51
Signatures   53

 

 

 

 

 

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PART I

 

Forward Looking Statements

 

This Form 10-K contains “forward-looking” statements including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control.

 

These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth, our ability to successfully make and integrate acquisitions, new product development and introduction, existing government regulations and changes in, or the failure to comply with, government regulations, adverse publicity, competition, the loss of significant customers or suppliers, fluctuations and difficulty in forecasting operating results, change in business strategy or development plans, business disruptions, the ability to attract and retain qualified personnel, the ability to protect technology, and the risk of foreign currency exchange rate. Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to announce publicly revisions we make to these forward-looking statements to reflect the effect of events or circumstances that may arise after the date of this report. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.

 

ITEM 1. DESCRIPTION OF BUSINESS.

 

History

 

We were incorporated in the state of Nevada on January 26, 2009, to serve as a holding company for our former smart home business, which was conducted through our former subsidiary, Home Touch Limited, a Hong Kong Special Administrative Region of China corporation, or HTL. On January 26, 2009, we acquired HTL through a share exchange transaction in which we exchanged 40,000,000 shares of our Common Stock for 10,000 shares of HTL common stock. HTL was originally organized under the name Lexing Group Limited in July 2004 and was renamed Home Touch Limited in 2005.

 

On July 15, 2010, we effectuated a 1-for-20 reverse stock split, or the Reverse Split, of all issued and outstanding shares of the Company's Common Stock in connection with our plans to attract additional financing and potential business opportunities. As a result of the Reverse Split, our issued and outstanding shares decreased from 40,000,000 to 2,000,000.

 

On September 27, 2010, we filed a report on Form 8-K disclosing the sale to certain accredited investors on September 21, 2010, of an aggregate of 1,500,000 shares of our Common Stock at a per share price of $0.10, or $150,000 in the aggregate, in accordance with the terms and conditions of certain subscription agreements made with such investors. The Company received net proceeds of approximately $145,000 from the sale of the shares which were used for general corporate purposes. The shares were sold pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. Weng Kung Wong, who was appointed our Chief Executive Officer and director on November 15, 2010, purchased 375,000 shares of our Common Stock in this transaction.

   

 

 

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Change in Control, Disposition of Smart Home Business, Acquisition of UHT and Name Change

 

On November 15, 2010, we consummated the sale to certain accredited investors of an aggregate of 80,000,000 shares of our Common Stock at a per share price of $0.01, or $800,000 in the aggregate, in accordance with the terms and conditions of certain subscription agreements made with such investors. The Company received net proceeds of approximately $795,000 from the sale of the shares which were used for general corporate purposes. The shares were sold pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D promulgated thereunder. Weng Kung Wong, our Chief Executive Officer and director, purchased an additional 12,750,000 shares of our Common Stock in this transaction.

 

A change of control occurred in connection with the sale of such shares. David Ng and Stella Wai Yau resigned from their positions as President and Chief Executive Officer of the Company, and as Chief Financial Officer, Chief Operating Officer and Secretary of the Company effective November 15, 2010. The following individuals were appointed to serve as executive officers and directors of the Company:

 

Name   Office
Weng Kung Wong   Chief Executive Officer, Director
Liong Tat Teh   Chief Financial Officer,
Sek Fong Wong   Secretary,

 

On December 6, 2010, we consummated a share exchange, or the Share Exchange, pursuant to which Wooi Khang Pua and Kok Wai Chai, or the UHT Shareholders, transferred to us all of the issued and outstanding shares of Union Hub Technology Sdn. Bhd., or UHT, a company organized under the laws of Malaysia and engaged in the design, development and operation of technologies to enable a community of users to engage in social networking, research and e-commerce on a mobile platform, in exchange for the issuance of 16,500,000 shares of our common stock, par value $0.001 per share, or the Common Stock. As a result of our acquisition of UHT, we became involved in the m-commerce business. The Share Exchange was made pursuant to the terms of a Share Exchange Agreement, or the Exchange Agreement, by and among the Company, the UHT Shareholders and UHT. As result of the Share Exchange, UHT became our wholly owned subsidiary. We relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under, the Securities Act of 1933, as amended, or the Securities Act, in issuing the UHT Shares. Mr. Chai is a director of UHT and beneficially owns 4.85% of our issued and outstanding common stock.

 

Concurrently with the Share Exchange, we sold to Up Pride Investments Limited, a British Virgin Islands limited liability company owned by David Gunawan Ng, and Magicsuccess Investments Limited, a British Virgin Islands limited liability company owned by Stella Wai Yau, all of the issued and outstanding securities of HTL for cash consideration of $20,000. In connection with the sale, Mr. Ng and Ms. Yau, our former founders and executive officers, resigned from their positions on our board of directors. Our smart home business was conducted through HTL, and as result of the sale, we ceased our smart home business operations. The sale of HTL securities was made pursuant to the terms of a Common Stock Purchased Agreement, or the Common Stock Purchase Agreement, by and among the Company, HTL, Up Pride Investments Limited and Magicsuccess Investments Limited. We relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under, the Securities Act of 1933, as amended, or the Securities Act, in selling the HTL securities.

 

On January 25, 2011, we changed our name to Prime Global Capital Group Incorporated and increased our authorized capital to 1 billion shares of common stock and 100 million shares of preferred stock. 

 

On February 8, 2011, we consummated the sale to 19 of our of existing accredited stockholders of an aggregate of 400,000,000 shares of its common stock, par value $0.001, at a per share price of $0.01, or $4,000,000 in the aggregate, in accordance with the terms and conditions of certain subscription agreements made with such stockholders. Weng Kung Wong, our Chief Executive Officer and director, participated in the transaction and purchased 32,300,000 shares of our common stock on the same terms and conditions as the other stockholders.

  

 

 

 

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The per share closing prices of our common stock and the per share purchase prices paid by our investors on each placement date are described below:

 

  Subscription Purchase Price Closing Price
February 8, 2011 $0.01 $0.41
November 15, 2010 $0.01 $0.55
September 21, 2010 $0.10 $0.40

 

The discount on price provided to our investors at the time were attributable to a variety of factors including the significant risks involved in investing in a Company in its early stages of business development, the low revenues and earnings generated by the Company, concerns regarding the Company’s ability to continue as a going concern which was ultimately expressed in the Company’s financial statements as of October 31, 2011, the size of the investment and the illiquidity of the Company’s securities on the open market.

  

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 RM20,000,000, or approximately $6,084,760.72.  PGCG Assets received net proceeds of approximately RM20,000,000, or approximately $6,084,760.72 from the sale of its securities and used the net proceeds for general corporate purposes. As a result of the foregoing transactions, 90% of the issued and outstanding securities of PGCG Assets is owned by UHT and 10% by such unaffiliated third party. 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.

 

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 RM2,000,000, or approximately $ 611,731. Virtual Setup received net proceeds of approximately RM2,000,000, from the sale of its securities and used the net proceeds for general corporate purposes. As a result of the foregoing transactions, 95% of the issued and outstanding securities of VSSB is owned by PGCG Plantation and 5% by such 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.

 

 

 

 

 

 

 

 

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Current Business Operations

 

Current Corporate Structure

 

A chart of our current corporate structure is set forth below:

  

 

 

* Denvoursuisse Sdn. Bhd., an unaffiliated third party, owns 10% of PGCG Assets and 5% of VSSB.

 

 

 

 

 

 

 

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During fiscal year 2019, we operated two business segments: (i) our oil palm and durian plantation business; and (ii) our real estate business. Our oil palm and durian plantation business is operated through Virtual Setup Sdn. Bhd., or VSSB, and our real estate business is primarily operated through PGCG Assets Holdings Sdn. Bhd., or PGCG Assets, and Dunford Corporation Sdn. Bhd.

 

During the last two fiscal years, each of our business segments accounted for the amount and percentage of net revenue set forth below:

 

  October 31, 2019 October 31, 2018
  Net Revenue % of Net Revenue Net Revenue % of Net Revenue
Plantation 286,084 14.91% 164,947 10.8%
Real Estate 1,632,055 85.09% 1,364,639 89.2%

 

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.

 

Our initial business plan launched in July 2010 broadly contemplated the development, distribution and operation of mobile and online social networking, ecommerce and search products and services. However, as a result of the challenges we experienced in implementing our m-commerce business plan, we entered the oil palm plantation and real estate businesses in 2012 and in 2014 discontinued our software business. Since the commencement of our new business segments, we (through our subsidiaries):

 

  · Acquired an oil palm plantation in Malaysia which is operated through VSSB;

 

  · Acquired 21.8921 hectares (54.10 acres) of vacant development land located in Selangor, Malaysia, which is subject to a 99-year leasehold, expiring July 30, 2100;

 

  · Acquired Dunford Corporation Sdn. Bhd., or Dunford, whose primary assets consist of two parcels of undeveloped land located in Selangor, Malaysia aggregating approximately 31 acres;

 

  · Acquired a 15 story commercial building located at Geran 10010, Lot 238 Section 43, Town and District of Kuala Lumpur, Wilayah Persekutuan, Kuala Lumpur, Malaysia; and

 

  · Acquired a 12 story commercial building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.

  

Description of Our Plantation Business

 

Oil Palm Cultivation

 

Oil palm is an edible vegetable oil obtained by crushing the fruit of the oil palm tree, commonly referred to as fresh fruit bunches. Palm oil is one of seventeen major oils traded in the global edible oils and fats market and has broad commercial and industrial uses. According to World Palm Oil, the United States Department of Agriculture (USDA) estimates that the World Palm Oil Production in 2018 will be approximately 73.3 million metric tons with Malaysia contributing 20.5 million metric tons. The estimation of 73.3 million tons production for 2018 represents a decrease of 0.06 million tons in palm oil production around the globe, with Malaysia contributing an increase of 0.637 million metric tons. According to a study by Grand View Research, Inc., global palm oil market demand was 74.01 million tons in 2014 and is expected to reach 128.2 million tons by 2022.

 

Crude palm oil (CPO) is extracted through a process of sterilizing and pressing of the oil palm tree’s fresh fruit bunches (FFB). Each FFB can contain over a thousand individual fruits. During the extraction process, seeds are separated from the fruit, and upon cracking the seed’s shell, the kernel inside is separated for further processing to yield palm kernel oil (PKO). Derivatives of CPO and PKO are used throughout the world for many food and non-food applications including cooking oil, margarine, ice cream, non dairy creamer, soaps, detergents, animal feed, cosmetics and industrial lubricants.

 

 

 

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Oil palm is one of the few perennial crops that is harvested all year round. Oil palm trees require constant rain throughout the year and are limited to tropical environments located in the ten-degree belt around the equator such as South East Asia, West Africa and South America. The largest producers of palm oil are Malaysia and Indonesia, which account for approximately 85 percent of annual global palm oil production.

 

The commercial life span of an oil palm tree is estimated to be up to 25 years. Palm oil is recognized as being significantly more productive due to its high oil yield per hectare compared to other edible oil sources, such as soybeans and rapeseed. Oil palm, due to its high edible oil productivity per hectare, is one of the world’s most efficient crops for the production of edible oils, which is an important component of the human food supply. Oil palm can yield up to ten to fifteen times more edible oil per hectare than the leading alternatives such as soya, rapeseed, canola or corn.

 

We believe the palm oil industry is well positioned in the years ahead for the following reasons:

 

  · Demand for CPO, in common with other vegetable oils, has remained relatively robust, even through the current global economic turbulence. We believe that this is being driven by growing demand from the food industry which is anticipated to increase in line with expectations of higher GDP growth from the three key consuming/buying markets: China, India and the EU. We believe that demand for vegetable oils is accelerating, due largely to income growth in populous regions and the influence of biodiesel programs.

 

  · We believe that per capita vegetable oil consumption in developing Asian countries remains low relative to other more developed nations. As per capita income increases in these developing nations, we expect that the demand for palm oil will increase, as the population is able to consume more foods that use palm oil (especially packaged foods such as chocolates, creamers and fast food).

 

  · Environmental concerns and the increasing price of crude mineral oils have resulted in a worldwide trend to utilize vegetable oils such as rapeseed oil, soybean oil and palm oil for the production of biofuels and electricity. We believe that the growth in the production of biodiesel will be particularly pronounced in Asia. In addition, biofuel initiatives in Europe, such as the edible oil requirement for food, are causing an increase in demand for vegetable oils, primarily rapeseed, by biofuel producers. In turn, we anticipate that Europe’s demand for palm oil will increase in food processing, as locally produced oil crops are diverted for biofuel usage.

 

Management and Operation of Oil Palm Plantation 

 

We cultivate FFBs on our 300 acres oil palm plantation and sell them to third party oil mill processors located within Malaysia. These oil mill processors extract, refine and resell the palm oil. These byproducts of the refinery process are thereafter sold to other manufacturers further downstream to produce various derivative products.

 

We directly manage our oil palm plantation. The Board expects to monitor its plantation operations in the near future to determine whether the Company will continue with direct operations, enter into another contracting arrangement or sell the oil palm plantation.

 

Currently, oil palm cultivation comprises 79% of our plantation business. If our cultivation operations expand, we may consider building or acquiring one or more oil mills to extract and sell CPO and PKO from FFB cultivated on our own plantation and on smaller local plantations.

 

Management believes that the value of its oil palm plantation has increased since its acquisition, and while it has not pursued any discussions or received any formal offers regarding the sale of its plantation, it may also consider selling in the future if a sale would maximize return to its investors.

 

 

 

 

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Oil Palm Pricing

 

CPO and PKO are commodities traded in a worldwide competitive market with high pricing volatility. Factors affecting pricing of these commodities (which in turn affect the prices for FFBs) include:

 

  · Estimated output based on the acreage, weather conditions and pest infestation etc.;

 

  · Shifting cropping patterns in producing countries;

 

  · Leftover stocks from the previous years’ production after meeting the demand;

 

  · Consumption and export pattern;

 

  · Energy prices; and

 

  · Government policies and intervention.

 

We believe that prices of our oil palms are linked to prices in the fuel sector. As fuel prices increase, we would expect the prices of our oil palm to also increase. Similarly, we would expect falling crude prices to exercise a downward pressure on oil palm prices. We further believe that the current financial condition and the growing nexus between crude oil prices and vegetable oil prices brought on by the increased reliance on oils for biofuels will exacerbate the pricing volatility and uncertainty already inherent in our industry.

 

Because we do not exert significant pricing power over our products, we expect margin expansion to occur through more cost effective manufacturing processes or by way of value addition, branding and retail packaging. We do not, however, have any current plans to brand our products or to seek retail customers.

 

Our Durian Orchard

 

We commenced planting premium durian, of the “Musang King” variety, in the first quarter of calendar year 2014. The first phase consists of 60 acres, the second and third phase consist of approximately 130 acres and the fourth phase consist of 170 acres. With over 200 varieties, durian is regarded by many people in Southeast Asia as the "king of fruits" with the “Musang King” variety being one of the best. Durian fruit can grow as large as 30 centimeters (12 in) long and 15 centimeters (6 in) in diameter, and it typically weighs one to three kilograms (2 to 7 lbs.). Its shape ranges from oblong to round, the colour of its husk green to brown, and its flesh pale yellow to red, depending on the species. Durian trees have one or two fruiting periods per year, although the timing may vary depending on the species, cultivars, and localities. A typical durian tree can bear fruit after four or five years. The durian fruit can hang from any branch and matures roughly three months after pollination. As of the date of this report, we have replanted approximately 180 acres of our oil palm plantation land with premium durian trees of the “Musang King” variety. We planted approximately 30 trees per acre and anticipate an average production of 35-50 grade A fruits per tree for each of the two harvesting seasons per year. Our premium durian constitutes approximately 21% of our plantation business.

 

In 2016, we began using our internally developed planting technology, our cutting edge technological bio fertilizers that has reduced the maturity time of the durian tree from 5 years to 3 years. The durian trees planted during the first phase has begun to bear fruits, with our first major harvest occurring in July 2019. We expect the second and third phase plantings to begin bearing fruit by 2021 and the fourth phase planting by 2023, at the latest.

 

Premium Durian Pricing

 

Prices of durians are relatively high as compared with other fruits. In Singapore, the strong demand for high quality cultivars such as the D24(Sultan), and Musang King (Mao Shan Wang) has resulted in typical retail prices of between $6 to $12 per kilogram and wholesale prices between $6 to $12 per kilogram of whole fruit. With an average weight of about 1.5 kilograms (3.3 lbs.), a durian fruit would therefore cost about $9 to $18. The edible portion of the fruit, known as the aril and usually referred to as the "flesh" or "pulp", only accounts for about 15–30% of the mass of the entire fruit.

 

 

 

 

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Description of Our Real Estate Business

 

Our real estate business operations consist of the acquisition, development, management, operation and sale of commercial and residential real estate properties located in Malaysia, primarily in Kuala Lumpur and Selangor. We anticipate generating revenues through sales of developed properties and from rental income from our commercial properties. Developed property sales may include sale of condominium units, individual villas and bungalows at our future Shah Alam 2 Eco Residential Development project located in Selangor, Malaysia. We may also sell properties under development, undeveloped properties or commercial properties, if opportunities arise that we believe will maximize overall asset values.

 

Real Estate Market Conditions in Malaysia

 

We believe that Malaysia’s property market has been subdued in 2018 and 2019, and based on industry experts from Malaysia, the same is expected in 2020. However, these industry experts also believe that the recent development of the LRT/MRT train lines which enhances connectivity to Greater Klang Valley including Seremban, Rawang and Klang will bode well for the residential and commercial property markets. We believe that Malaysia has a young demographic, with 80% of Malaysians below the age of 50. We believe that demand for housing will increase as more young adults enter the workforce and begin family formation.

 

Because our real estate holdings will be concentrated in Selangor and Kuala Lumpur, Malaysia, we expect that the financial condition and results of operations of our real estate segment will be highly dependent upon market conditions for real estate activity in those regions. We expect that our future operating cash flows and, ultimately, our ability to develop our properties and expand our real estate business will be largely dependent on the level of our real estate sales and leasing activities. These activities in turn will be significantly affected by future real estate market conditions in Selangor and Kuala Lumpur, Malaysia, including development costs, interest rate levels, the availability of credit to finance real estate transactions, demand for residential and commercial real estate, and regulatory factors including our use and development entitlements. These market conditions historically move in periodic cycles, and can be volatile in specific regions.

 

Our Commercial Real Estate Holdings

 

We generate rental income from our 12 story and 15 story commercial properties and anticipate generating income from the sale of developed properties. As of October 31 2019, we occupy 2 floors of our 12 story commercial building as our corporate headquarters and 6 floors have been leased to tenants at market rates. The remaining 4 floors are currently vacant and we are actively attempting to lease these 4 floors.

 

In October 18, 2014, PGCG Assets entered into a rental agreement (the “Rental Agreement”) with Le Apple Boutique Hotel (KLCC) Sdn. Bhd. formerly known as Esquire Bayview Sdn. Bhd. (“Le Apple”), pursuant to which Le Apple agreed to lease the entirety of our 15 story commercial building located at No. 160, Jalan Ampang, 50450 Kuala Lumpur, Malaysia to operate a boutique hotel. The Rental Agreement is retroactively effective as of December 1, 2013, and supersedes the prior lease agreement between us and Esquire Bayview Sdn. Bhd. (now Le Apple) dated December 18, 2013, with respect to the same premises.

 

The Rental Agreement operates on thirty sequential renewable one-year terms, with the current term expiring November 30, 2019. Provided that there are no existing breaches by Le Apple, we will be required to renew the lease for additional one-year terms, for a maximum aggregate term of thirty years. The monthly rental rate shall be increased every three years at an increment rate of 5% to 10% of the current monthly rental rate, or shall be based on the prevailing market rate, whichever is lower. Our current rental rate has increased from RM400,000 to RM550,000 (approximately $131,520) from April 1, 2018.

 

In the event we elect to sell the premises, we are required to offer Le Apple a right of first refusal to purchase the premises at a mutually agreed upon price in accordance with the terms of the Rental Agreement. If the premises are sold to a third party other than Le Apple, the Rental Agreement shall be assumed by such purchaser.

 

The foregoing description of the Rental Agreement is qualified in its entirety by reference to the Rental Agreement, which is filed as Exhibit 10.1 to this Annual Report and incorporated herein by reference.

 

Keen Solution Sdn. Bhd. owns 45% of the shares in Le Apple Boutique Hotel (KLCC) Sdn Bhd. Chai Sook Tieng is a director and owns 55% of the shares of Keen Solution Sdn. Bhd. Chai Sook Tieng is the spouse of Wong Weng Kung, our Chief Executive Officer, Interim Chief Financial Officer, Interim Secretary and Director.

 

 

 

 

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If the business of our tenant is adversely affected, we will be required to seek replacement tenants. There can be no assurance that the business of our tenant will continue for the term of the lease or that we will be able to find a replacement tenant if our tenant is no longer able to meet its lease obligations. If we are unable to lease out the premise, our operating results may be materially and adversely affected. We expect demand for commercial property to remain steady and positive for 2020. As a result, we do not anticipate significant challenges in leasing out our 12 story and 15 story commercial buildings.

 

Development Activities

 

We hold a 99-year leasehold interest to 21.8921 hectares (54.10 acres) of vacant development land, or the Land, and two parcels of vacant land aggregating approximately 31 acres, or the Dunford Parcels, all located in Selangor, Malaysia. We intend to develop the Land into the Shah Alam 2 Eco Residential Development project and hope to develop the Dunford Parcels into the Bandar Sungai Long High Grade Villas Community project. For better cash flow planning, we have strategized that the development of our Bandar Sungai Long High Grade Villas Community project will commence once we have successfully sold Phase 1 and Phase 2 of the Shah Alam 2 Eco Residential Development project. If we are not able to successfully develop, market and sell our Shah Alam 2 Eco Residential Development project, our ability to complete all or any portion of our Bandar Sungai Long High Grade Villas Community Project may be affected. As at the date of this report, due to market forces, we plan to begin construction by the end of calendar 2023 to maximize profits.

 

Shah Alam 2 Eco Residential Development

 

Shah Alam 2 is an existing third party development sprawled over 1,163 acres of prime land within Bandar Puncak Alam. It is located in Selangor in the burgeoning Klang Valley area in which Malaysia’s capital is also situated. Upon completion, it is anticipated to be an integrated and self-contained township approximately 10 times the size of Subang Jaya, one of Malaysia’s most celebrated suburbs, with a population of approximately 500,000. We believe that Shah Alam 2 may rival even Shah Alam, the Selangor state capital, in terms of size and dynamism.

 

Our project, the Shah Alam 2 Eco Residential Development, will be located within the Shah Alam 2 development. Encompassing 54.1 acres, the project will feature superlink homes, semi-detached homes, bungalows, high-end condominiums and commercial shop-offices with an environment-friendly theme emphasizing the importance of a sustainable lifestyle. All the residential parcels will be gated and guarded for increased security. 

 

On June 10, 2015, we received approval to develop our leasehold land located in Puncak Alam. Due to challenges in the current Malaysian real property market, in November 2015, we submitted a request to convert some our planned semi-detached and bungalow home parcels into cluster semi-detached homes to improve the marketability of the development. We received approval of our revised development plan on March 4, 2016.

 

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. On February 15, 2017, PGCG Assets and YTB entered into a Mutual Termination of Memorandum of Understanding (the “Termination MOU”) pursuant to which the parties mutually agreed to terminate the MOU as the parties were unable to agree and finalize the terms of the Proposed JV. In light of the termination of the Proposed JV with YTB, we plan to develop, market, promote and complete the construction on our own. As at the date of this report, due to market forces, we plan to begin construction by the end of calendar 2023 to maximize profits. We believe that we will require approximately RM5 to RM10 million in the aggregate to market, promote and complete construction of each phase of our Shah Alam 2 Eco Residential Development Project.

 

 

 

 

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If completed, we expect our Shah Alam 2 Eco Residential Development project to comprise of the following:

 

Types of property Total Block(s)

Floor(s)/

Units per floor /

Land size

Total Unit(s) Planned Built-up area (sq. ft.)
2-Story Boulevard Shop offices   22ft x 75ft / 22ft x 78ft / 20ft x 70ft 74 2,500 to 2,900
3-Story Boulevard Shop offices   30ft x 75ft / 30ft x 77ft 12 6,000 to 6,700
Stratified Affordable Shops   20ft x 35ft 18 700
         
High Rise Apartments 2 11 floor X 12 units     
  Type A     21 1,200
  Type B     21 1,100
  Type C     125 1,000
  Type D     83 800
         
Affordable Apartments (Type B) 1   172 750
Affordable Apartments (Type C) 1   173 900
         
Landed Homes :-        
   3 - Story Superlink Homes - 22ft x 75ft 122 2,500
   2 - Story Link Homes - 20ft x 70ft 33 1,600
   2 - Story Cluster Semi-Detached Homes - 30ft x 60ft 128 1,800
   2 - Story Cluster Semi-Detached Homes - 30ft x 55ft 16 1,650
   2 - Story Semi-Detached Homes - 40ft x 65ft 24 1,900
   3 - Story Bungalow Homes - 80ft – 90ft x 60ft 7 3,500 to 5,000
   2 - Story Semi-Detached Homes - 42ft x 60ft 2 1,920
   2 - Story Semi-Detached Homes - 47ft x 60ft 2 2,220
   2 - Story Semi-Detached Homes - 40ft x 60ft 2 1,800

 

Bandar Sungai Long High Grade Villas Community

 

We do not intend to commence development of our Bandar Sungai Long High Grade Villas Community project until we have successfully sold Phase 1 and Phase 2 of the Shah Alam 2 Eco Residential Development project. If we are able to successfully develop the Bandar Sungai Long High Grade Villas Community project, we anticipate that the project will consist of a high-end gated and guarded community encompassing approximately 31 acres of landscaped areas with the following types of properties:

 

Types of property Total Block(s)

Floor(s)/

Units per floor /

Land size

Total Unit(s) Planned Built-up area (sq. ft.)
2 ½ - Story Superlink Homes   30ft x 80ft 77 3,500 sq.ft.
Condominiums 4 508

1,000 sq.ft.

1,100 sq.ft.

1,200 sq.ft.

1,300 sq.ft.

Low-Cost Apartments 1 234 700 sq.ft.
Low-Medium Cost Apartments 1 130

750 sq.ft.

900 sq.ft.

Medium-Cost Apartments 1 226 1,000 sq.ft.

 

 

 

 

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Near-Term Requirements For Additional Capital And Business Strategy

 

We intend to focus on our near-term goal of developing the Land and the Dunford Parcels through prudent use of available resources and our long-term goal of maximizing the value of our development projects. We believe that Malaysia is a desirable market and we intend to continue exploring acquisitions in Kuala Lumpur and the Selangor region. We believe that our developments will have inherent value given their unique nature and location and that this value should be sustainable in the future.  

 

For the immediate future, we intend to continue financing future real estate acquisitions and development through sales of our securities to existing shareholders and loans from financial institutions. We periodically conduct internal discussions to obtain the necessary financing, however, there can be no assurance that we will be able to obtain sufficient funds on acceptable terms to timely meet our obligations.

 

As of October 31, 2019, we had cash and cash equivalents of $198,113. We believe that we will need approximately RM5 to RM10 million (equivalent to $1.2 to $2.4 million) in the aggregate to market, promote and complete construction of our Shah Alam 2 Eco Residential Development Project. We hope to finance such costs through the combination of loans, funds from ongoing building sales and operating capital.

 

Moneylenders License

 

On September 8, 2016, the Urban Wellbeing, Housing and Local Government Ministry of Malaysia announced the introduction of an initiative that will enable property developers to provide loans to buyers at an annual interest rate between 12 and 18 percent. Developers will be able to begin applying to the ministry on September 8, 2016, for a money lending license. It is our understanding that loans made pursuant to such license will not be restricted to first time homebuyers.

 

Depending upon the guidelines, we may apply for such moneylender’s license to enable us to provide financing to prospective buyers of our future properties. If we apply and are successful in obtaining such license, we hope that we will be able to boost sales of our properties that we have earmarked for development.

 

We continue to maintain a cautious but positive outlook for the residential market based upon Malaysia’s stable employment outlook, growth in household income, formation of new households, and increased demand for affordable residential property from first time home buyers. Developers such as us are facing challenges of inconsistent supply and high cost of labour, increased costs of building materials (such as cement and steel bars) and general increased costs of doing business. Our market is also sensitive to changes in lending rates and lending requirements as many homebuyers rely on financing to make purchases. As a result, government or bank policies that result in increased interest rates and or stricter lending requirements may adversely affect the sales of our developed properties.

 

Distribution

  

Customers of our oil palm plantation business principally consist of oil palm processors, refineries and oil palm product manufacturers. Our products are distributed in bulk from our plantations directly to our customers’ facilities. We transport our products through third party transportation systems.

 

As at the date of this report, our durian fruits are primarily sold to and distributed by local wholesalers within Pahang.

 

Marketing, Sales and Support

 

Our sales and support staff focus on identifying land for the cultivation of our oil palm, durian and preparation for the marketing activities of our real estate development projects.

 

We do not and have no immediate plans to engage in marketing activities with respect to our oil palm plantation business as our FFBs are sold in bulk to extractors and processors.

 

We also do not at the present moment, have any immediate plans to engage in marketing activities with respect to our durian plantation business as our durians fruits are primarily sold to and distributed by local wholesalers in Malaysia.

 

Once we commence construction of our Shah Alam 2 Eco Residential Development or Bandar Sungai Long High Grade Villas Community projects, we expect to initiate marketing activities directed toward prospective purchasers for the sale of our property units that we are developing.

 

 

 

 

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Major Customers

 

We generated net revenues of $1,918,139 during the fiscal year ended October 31, 2019. Our real estate business accounted for approximately 85% of our net revenue in Malaysia. We are not a party to any long-term agreements with our customers.

 

During the fiscal years ended October 31, 2019, and 2018, the following customer accounted for 10% or more of our total net revenues:

 

        Year ended October 31, 2019     October 31, 2019  
    Business
segment
  Revenues     Percentage
of revenues
    Trade accounts
receivable
 
Le Apple Boutique Hotel (KLCC) Sdn. Bhd.   Real estate   $ 1,558,111       83%     $ 4,104  
Lim Joo Soon Enterprise   Plantation     286,084       15%       8,852  
          1,844,195       98%       12,956  

 

        Year ended October 31, 2018     October 31, 2018  
    Business
segment
  Revenues     Percentage
of revenues
    Trade accounts
receivable
 
Le Apple Boutique Hotel (KLCC) Sdn. Bhd.   Real estate   $ 1,289,505       89%     $ 2,398  

 

All of our customers are located in Malaysia.

 

Key Vendors

 

All of our key vendors are located in Malaysia. We are not a party to any long-term agreements with our major vendors. In light of the discontinuation of our software and consumer goods business segments, we do not expect to engage the services of software vendors in the future. We do not anticipate difficulties in locating alternative developers and other vendors as needed.

 

During the fiscal year ended October 31, 2019, and 2018, no vendor accounted for 10% or more of our purchase.

  

Competition and Market Position

 

Oil Palm Plantation

 

Our oil palm plantation is characterized by intense competition, pricing volatility and foreign currency risks. Our competitors range from small-scale operators to fully integrated multinational enterprises with significant financial, technical, sales, marketing and other resources. In addition to palm oil producers, our competitors for the oil palm plantation business also include producers of alternative vegetable oils such as soybean, rapeseed, cottonseed, peanut, sunflower seed and corn oils.

 

 

 

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Market fundamentals that affect supply and demand of our products include land shortages, water constraints, climate change, global warming, low operating margin, inadequate quality control and quality assurance mechanisms leading to adulteration, food laws and poor implementation and low depth liquidity in futures markets. Non-fundamental factors include politics, inflation, investor interest, government policies and liquidity.

  

Multinational corporations are able to take advantage of economies of scale that allow them to command high quality with lower costs, access cheaper credit, minimize losses and decrease input costs. Multinational corporations also tend to have a greater ability to absorb volatility in production and pricing and respond to uncertainty. We believe that the current financial crisis, global volatility in commodity prices and the growing nexus between crude oil prices and vegetable oil prices brought on by the increased reliance on oils for biofuels have only served to exacerbate the volatility and uncertainty already inherent in our industry.

 

We believe that our competitive position will depend on our ability to mitigate volatility and uncertainty in our industry. We hope to achieve this by obtaining economies of scale, developing vendor relationships, obtaining and maintaining protection of our intellectual property, recruiting and retaining qualified personnel and securing adequate capital resources. While we expect to compete primarily on the basis of pricing and vendor relationships, we believe that the diversion of palm oil for use as biofuels will offer us an opportunity to achieve and sustain an acceptable margin of return for the foreseeable future.

 

Durian Orchard Business

 

Our orchard business is mainly challenged by market fundamentals that affects the supply of durian fruits such as climate change, pests and viruses.

 

We believe that we will be able to mitigate these challenges through the use of our cutting edge technological bio fertilizers. Furthermore, with the increasing demand for durian fruit in China, south east nations and western countries, over the recent years and with the announcement in May 2019 by the Chinese customs department and the Malaysia’s Deputy Minister of Agriculture and Agro-based Industry that Malaysian companies will be allowed to export frozen whole durians to China, we expect the demand for durian fruits from Malaysia to increase in the coming years.

 

Real Estate

 

The real estate development business in Malaysia is highly competitive and fragmented. We compete against numerous public and private developers of varying sizes, ranging from local to national in scope. As a result, we may be competing for investment opportunities, financing, and potential buyers with entities that may possess greater financial, marketing, or other resources than we have. Competition for potential buyers has been intensified by an increase in the number of available properties resulting from the recent boom in the Malaysian real estate market. Our prospective customers generally have a variety of choices of new and existing homes and home sites when considering a purchase. We attempt to differentiate our properties primarily on the basis of community design, quality, uniqueness, amenities, location and developer reputation.

 

The real estate investment industry in Malaysia is highly fragmented among individuals, partnerships and public and private entities, with no dominant single entity or person. Although we may compete against large sophisticated owners and operators, owners and operators of any size can provide effective competition for prospective tenants. We compete for tenants primarily on the basis of property location, rent charged, and the design and condition of improvements.

 

 

 

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Intellectual Property

 

We intend to protect our investment in the research and development of our products and technologies. We intend to seek the widest possible protection for significant product and process developments in our major markets through a combination of trade secrets, trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level of protection afforded by the particular jurisdiction. Currently, our revenue is derived principally from our operations in Malaysia where intellectual property protection may be limited and difficult to enforce. In such instances, we may seek protection of our intellectual property through measures taken to increase the confidentiality of our findings.

 

We intend to register trademarks as a means of protecting the brand names of our companies and products. We intend protect our trademarks against infringement and also seek to register design protection where appropriate.

 

We rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require some of our employees to execute confidentiality agreements upon the commencement of employment with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific limited circumstances. The agreements also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.

 

Government Regulation

 

Malaysia

 

All of our business segments are subject to the general laws in Malaysia governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws.

 

Plantation Lands

 

Our plantation lands are subject to many additional laws addressing land, environmental, labor, wildlife and crop cultivation matters. By way of example, we are subject to the Land Acquisition Act of 1960, which specifies the conditions under which the Malaysian government may acquire by eminent domain private land (including our plantation lands) to pursue its social policies. We are also subject to various environmental laws including the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987 which governs land clearing, air emissions, waste water discharges and other similar matters, the Workers’ Minimum Standard of Housing & Amenities Act 1990 which requires us to provide our plantation workers with reasonable housing and amenities, water, electricity and addresses other sanitation related matters, other labor laws governing minimum wages, wage increases and occupational health and safety, the Pesticides Act 1974 (Pesticides Registration) Rules 1988, Pesticides (Licensing for sale and storage) Rules 1988 and Pesticides (Labeling) Regulations 1984 which govern the registration, use, labeling and storage of pesticides and the Protection of Wildlife Act 1972 which governs the capture and destruction of certain protected wildlife.

 

We are also subject to taxes, tariffs, duties, subsidies and incentives and import and export restrictions on palm oil products, foreign and domestic policies regarding genetically modified organisms, renewable fuel, and low carbon fuel mandates which can influence the planting of species of crops, the location and size of crop production, and the volume and types of imports and exports. These factors all affect the viability and volume of production of our products, and industry profitability.

 

International trade disputes can adversely affect the trade flow of our goods by limiting or disrupting trade between countries or regions. Future government policies may adversely affect the supply of, demand for, and prices of our products, restrict our ability to do business in its existing and target markets, and can negatively impact our revenues and operating results.

 

 

 

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Real Estate

 

Our real estate investments are subject to extensive local, city, county and state rules and regulations regarding permitting, zoning, subdivision, utilities and water quality as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats. Such regulation may delay development of our properties and result in higher than anticipated developmental and administrative costs.

 

One of the distinguishing features of our Shah Alam 2 Eco Residential Development and Bandar Sungai Long High Grade Villas Community projects is their emphasis on developing a sustainable green lifestyle to reduce their impact on the environment. Accordingly, we expect to make additional environmental related expenditures in developing these projects as well as other projects with an environmental theme. Based on an analysis of our operations in relation to current and presently anticipated environmental requirements, we currently do not anticipate that these costs will have a material adverse effect on our future operations or financial condition.

 

Seasonality

 

Our real estate business is not subject to seasonality.

 

Our oil palm plantation and durian orchard business is subject to seasonality in the growing cycles, procurement, and transportation. Price variations and availability of raw agricultural commodities may cause fluctuations in our working capital levels. In addition, these seasonal trends will likely cause fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

 

Insurance

 

We maintain property, business interruption and casualty insurance which we believe is in accordance with customary industry practices in Malaysia, but we cannot predict whether this insurance will be adequate to fully cover all potential hazards incidental to our business.

 

Employees

 

As of October 31, 2019, we had 9 employees in Malaysia, all of which are full-time. Our employees are in the following principal areas:

 

Administrative / Finance – 3

Management– 3

Plantation operations – 3

 

All of our employees are located in Malaysia and are primarily focused on our real estate businesses. None of our employees are members of a trade union. We believe that we maintain good relationships with our employees, and have not experienced any strikes or shutdowns and have not been involved in any labor disputes.

 

We are required to make contributions under a defined contribution pension plan for all of our eligible employees in Malaysia. We are required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. The total contributions made were $21,823 and $23,602, for the years ended October 31, 2019, and 2018, respectively.

 

Corporation Information

 

Our principal executive offices are located at E-5-2, Megan Avenue 1, Block E, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, telephone at +603 2162 0773, facsimile at +603 2161 0770. Our website is located at www. http://www.pgcg.cc. Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q and amendments to those reports filed or furnished pursuant to the Exchange Act are available on our website. You may request copies of such filings free of charge by writing to our corporate offices.

 

 

 

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ITEM 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 1B. Unresolved Staff Comments.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. Properties.

 

We own the following properties:

 

Property Location Business Segment
Vacant land (54.1 acres) for development (1) Selangor, Malaysia Real Estate
Vacant land (31 acres) for development Selangor, Malaysia Real Estate
15 Story Commercial Building Kuala Lumpur, Malaysia Real Estate
12 Story Commercial Building Kuala Lumpur, Malaysia Real Estate
Oil palm and Durian Plantation (643 acres) Pahang, Malaysia Plantation

 

  (1) The land is subject to a 99-year leasehold, expiring July 30, 2100.

 

Our principal executive offices are located at E-5-2, Megan Avenue 1, Block E, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, which is the above referenced 12 story commercial building. We believe that our current facilities are adequate for our current needs. We believe that suitable additional space will be available on commercially reasonable terms as needed to accommodate our operations.

 

 15 Story Bank Loan

 

Effective July 10, 2018, PGCG Assets accepted the Letter of Offer from the Public Islamic Bank Berhad for a Term Equity Financing-i (the “Loan”) in the amount of RM50,000,000 (approximately $11,956,288). The Loan was used to pay off our existing loan with Bank of China (Malaysia) Berhad on our 15 story commercial building located at No. 160, Jalan Ampang, 50450 Kuala Lumpur, Malaysia and working capital for the Group. The Loan is secured by a charge on the 15-story commercial office building 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 Weng Kung Wong, our Chief Executive Officer and Director, and also guaranteed by Union Hub Technology Sdn. Bhd., our wholly owned subsidiary (“UHT”). The loan is also secured by a debenture incorporating fixed and floating charge for RM50 million plus interest thereon over the assets of PGCG Assets.

 

Outstanding principal amounts due under the Loan accrue interest at a rate of 1.50% per annum below the Base Financing Rate, which is currently at 6.97% per annum. The Loan is repayable in monthly installments of RM407,750.00 (approximately $97,503), including interest, over a period of 180 months and will mature in 2033. As of October 31, 2019, $12 million was outstanding under the Loan.

 

12 Story Bank Loan

 

In May 2013, PGCG Assets obtained a loan in the aggregate amount of RM9,840,000 (approximately $2,346,488) 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, with an monthly instalment of RM58,317 (approximately $13,659), including interest, 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 our director and Chief Executive Officer, Weng Kung Wong, the director of UHT, our subsidiary, Kok Wai Chai and UHT.

 

 

 

 

  17  
 

 

The foregoing descriptions of the loan agreements with each of Public Islamic Bank Berhad and RHB Bank Berhad are qualified in their entirety by reference to the loan agreements, which are filed as Exhibits 10.2 through and including 10.5 to this Annual Report and incorporated herein by reference.

 

Financing Loan

 

In April 2019, the Company, through Virtual Setup Sdn Bhd (“VSSB”) obtained a loan in the aggregate amount of RM5,000,000 from Public Islamic Bank Berhad, a financial institution in Malaysia for working capital purpose, which bears interest at a rate of 1.00% per annum above base financing rate, variable rate quoted by the bank, with 120 monthly instalments of RM60,590 each (including interests) over a period of 10 years and will mature in 2029.

 

The loan is secured by the first party charge over agricultural lands under Lot 3695, Lot 3696 and Lot 1552 situated at Pahang, Malaysia, and a third-party charge over the 15-story commercial office building registered under PGCG Assets. The loan is also secured by a specific debenture on the oil palm and durian plantation is to be obtained, and personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and subsidiaries of the Company, UHT and PGCG Assets. The cost of funds was 7.97% per annum for the period ended July 31, 2019.

 

ITEM 3. Legal Proceedings.

 

There are no material pending legal proceedings to which we are a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

 

 

 

  18  
 

 

PART II

 

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

(a) Market Information

 

The following table sets forth the high and low closing sale prices for the periods presented as reported on the Over the Counter Bulletin Board. There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained.

 

    Price Range  
    High     Low  
Fiscal 2019                
First quarter   $ 0.03     $ 0.02  
Second quarter     0.87       0.02  
Third quarter     0.39       0.15  
Fourth quarter     0.15       0.12  
Fiscal 2018                
First quarter   $ 0.10     $ 0.10  
Second quarter     0.10       0.02  
Third quarter     0.10       0.03  
Fourth quarter     0.03       0.03  

 

Our common stock is quoted on the Over the Counter Bulletin Board under the symbol PGCG. As of January 13, 2020, the closing price of our securities was $0.07.

 

(b)  Approximate Number of Holders of Common Stock

  

As of January 13, 2020, there were approximately 2285 shareholders of record of our common stock. Such number does not include any shareholders holding shares in nominee or “street name”.

 

(c)  Dividends

 

Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. We paid no dividends during the periods reported herein, nor do we anticipate paying any dividends in the foreseeable future.

 

(d)  Equity Compensation Plan Information

 

There are no options, warrants or convertible securities outstanding.

 

(e)  Recent Sales of Unregistered Securities

 

The information set forth below describes our issuance of securities without registration under the Securities Act of 1933, as amended, during the year ended October 31, 2019, that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K: None.

 

 

 

  19  
 

 

ITEM 6.  Selected Financial Data.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiaries for the fiscal years ended October 31, 2019 and 2018. The discussion and analysis that follow should be read together with the section entitled “Forward Looking Statements” and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K.

 

Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.

 

Currency and exchange rate

 

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. References to “MYR” or “RM” are to the Malaysian Ringgit, the legal currency of Malaysia. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

Overview

 

During the fiscal year 2019, we operated in two business segments: (i) our oil palm and durian plantation business; and (ii) our real estate business. Our oil palm and durian plantation business is operated through Virtual Setup Sdn. Bhd., or VSSB, and our real estate business is primarily operated through PGCG Assets Holdings Sdn. Bhd., or PGCG Assets, and Dunford Corporation Sdn Bhd. Oil palm and durian comprise approximately 79% and 21% of our plantation business.

 

Summarized financial information regarding each revenue generating segment for the year ended October 31, 2019 is as follows:

 

    Year ended October 31, 2019  
    Plantation Business     Real Estate Business     Corporate     Total  
                         
Revenues, net   $ 286,084     $ 1,657,811     $     $ 1,943,895  
Less: inter-company revenues           (25,756 )           (25,756 )
Revenues from external customers     286,084       1,632,055             1,918,139  
Cost of revenues     (82,983 )     (566,513 )           (649,496 )
Gross profit     203,101       1,065,542             1,268,643  
Depreciation     12,434       463,140       6,062       481,636  
Net income (loss)     30,933       47,123       (345,377 )     (267,321 )
Total assets     6,308,836       37,943,770       220,675       44,473,281  
Expenditure for long-lived assets   $ 33,515     $     $     $ 33,515  

  

 

 

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Our initial business plan launched in July 2010 broadly contemplated the development, distribution and operation of mobile and online social networking, ecommerce and search products and services. However, as a result of the challenges we experienced in implementing our m-commerce business plan, we entered the oil palm plantation and real estate businesses in 2012 and in 2014 discontinued our software business. Since the commencement of our business segments, we (through our subsidiaries):

 

  · Acquired an oil palm plantation in Malaysia which is operated through VSSB;

 

  · Acquired 21.8921 hectares (54.10 acres) of vacant development land located in Selangor, Malaysia, which is subject to a 99-year leasehold, expiring July 30, 2100;

 

  · Acquired Dunford Corporation Sdn. Bhd., or Dunford, whose primary assets consist of two parcels of undeveloped land located in Selangor, Malaysia aggregating approximately 31 acres;

 

  · Acquired a 15 story commercial building located at Geran 10010, Lot 238 Section 43, Town and District of Kuala Lumpur, Wilayah Persekutuan, Kuala Lumpur, Malaysia; and

 

  · Acquired a 12 story commercial building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.

 

As we continue to develop, we may continue to experience significant fluctuations in revenue which may cause our gross profit to fluctuate.

 

Challenges From Our Oil Palm Planting Operations

 

The oil palm business is a highly regulated industry with prices subject to wide fluctuations due to factors beyond our control such as weather conditions, competition, global demand and government policies. Management has limited experience operating in this industry and may not be able to successfully navigate all industry specific factors in addition to any geopolitical factors in Malaysia. If we are not able to successfully respond to any of these or other factors, our business operations and financial results may be adversely affected.

 

We are focused on the maintenance and operation of our oil palm plantation in Malaysia. We believe that the value of our oil palm plantation has increased since its acquisition, and while we have not pursued any discussions or received any formal offers regarding the sale of our plantation, we may consider sales offers in the future if a sale would maximize return to our investors.

 

Challenges From Our Durian Planting Operations

 

We commenced planting premium durian, of the “Musang King” variety, in the first quarter of calendar year 2014. As of the date of this report, we have replanted approximately 180 acres of our oil palm with premium durian trees. We planted an average of 30 trees per acre and anticipate an average production of 35-50 grade A fruits per tree for each of the two harvesting seasons per year.

 

We used the latest planting technology in 2016, which we hope will reduce the maturity time of the durian tree from 5 years to 3 years. The durian trees planted during the first phase has begun to bear fruits, and our first major harvest occurred in July 2019. We expect the second and third phase to begin bearing fruit by 2021 and the fourth phase by 2023, at the latest.  

 

 

 

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Challenges From Our Real Estate Operations 

 

Commercial Buildings

 

We generate rental income from our 12 story and 15 story commercial properties and anticipate generating income from the sale of developed properties. As of Oct 31, 2019, we occupy 2 floors of our 12 story commercial building as our corporate headquarters, 6 floors have been leased to tenants at market rate. The remaining 4 floors are currently vacant and we are actively attempting to lease these 4 floors.

 

Our 15 story building is fully leased to Le Apple Boutique Hotel (KLCC) Sdn Bhd (“Le Apple”) which operates a boutique hotel on the premises. The Rental Agreement has an initial term of one (1) year commencing December 1, 2018 and expiring November 30, 2019. Provided that there are no existing breaches by Le Apple, we will be required to renew the lease for additional one-year terms for a maximum aggregate term of thirty years. The monthly rental rate shall be increased every three years at an increment rate of 5% to 10% of the current monthly rental rate, or shall be based on the prevailing market rate, whichever is lower. Our current rental rate has increased from RM400,000 to RM550,000 (approximately $131,520) from April 1, 2018.

 

Residential Property Development

 

On June 10, 2015, we received approval to develop our leasehold land located in Puncak Alam. Due to challenges in the current Malaysian real property market, in November 2015, we submitted a request to convert some of our planned semi-detached and bungalow home parcels into cluster semi-detached homes to improve the marketability of the development. We received approval of our revised development plan on March 4, 2016.

 

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”). The MOU was terminated on February 15, 2017, pursuant to the terms of a Mutual Termination of Memorandum of Understanding (the “Termination MOU”). In light of the termination of the Proposed JV with YTB, we intend to develop, market, promote and complete the construction on our own. Due to market forces, we plan to begin construction by the end of calendar 2023, to maximize profits.

 

We believe that we will require approximately RM5 to RM10 million in the aggregate to market, promote and complete construction of each phase of our Shah Alam 2 Eco Residential Development Project.

 

On September 8, 2016, the Urban Wellbeing, Housing and Local Government Ministry of Malaysia announced the introduction of an initiative that will enable property developers to provide loans to buyers at an annual interest rate between 12 and 18 percent. Developers will be able to begin applying to the ministry on September 8, 2016, for a moneylending license. It is our understanding that loans made pursuant to such license will not be restricted to first time homebuyers.

 

We are considering applying for such money lender’s license to enable us to provide financing to prospective buyers of our future properties. If we apply and are successful in obtaining such license, we hope that we will be able to boost sales of our properties that we have earmarked for development.

 

We continue to maintain a cautious but positive outlook for the residential market based upon Malaysia’s stable employment outlook, growth in household income, formation of new households, and increased demand for affordable residential property for first time home buyers. Developers such as us are facing challenges of inconsistent supply and high cost of labour, increased costs of building materials (such as cement and steel bars) and general increased costs of doing business. Our market is also sensitive to changes in lending rates and lending requirements as many homebuyers rely on financing to make purchases. As a result, government or bank policies that result in increased interest rates and or stricter lending requirements may adversely affect the sales of our developed properties.

 

Results of Operations

 

As of October 31, 2019, we suffered from continuous operating loss from prior years and working capital deficit of $1,467,703. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders or other capital sources. Management believes that the continuing financial support from the existing shareholders and external financing will provide the additional cash to meet our obligations as they become due.

 

 

 

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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.

 

The following table sets forth certain operational data for the years indicated:

 

    Fiscal Years Ended October 31,  
    2019     2018  
Total net revenues   $ 1,918,139     $ 1,529,586  
Plantation business     286,084       164,947  
Real estate     1,632,055       1,364,639  
Total cost of revenue     (649,496 )     (695,040 )
Plantation business     (82,983 )     (79,679 )
Real estate     (566,513 )     (615,361 )
Gross profit     1,268,643       834,546  
Plantation business     203,101       85,268  
Real estate     1,065,542       749,278  
General and administrative expenses     (667,932 )     (352,006 )
Other income, net (expense)     (690,825 )     (823,079 )
Income tax expense     (177,207 )     (213,423 )
Net loss     (267,321 )     (553,962 )

 

Comparison of the fiscal years ended October 31, 2019 and October 31, 2018

 

Net Revenue. We generated net revenue of $1,918,139 and $1,529,586 for the fiscal years ended October 31, 2019 and 2018, respectively, with our oil palm and durian plantation and real estate businesses accounting for 15% and 85% of the net revenue, respectively, for the fiscal year ended October 31, 2019. For the fiscal year ended October 31, 2018, our oil palm and durian plantation and real estate businesses accounted for approximately 11% and 89% of net revenue, respectively.

 

Our plantation business experienced a 73% increase with net revenue increasing from $164,947 for the year ended October 31, 2018, to $286,084 for the same period ended October 31, 2019. The increase is attributable to oil palm and durian plantation.

 

Our real estate business experienced a 20% increase in revenue from $1,364,639 for the year ended October 31, 2018, to $1,632,055 for the same period ended October 31, 2019. The increase in our real estate revenue is attributable to the increase in rental income from our fifteen story buildings and the decreased vacancies in our twelve story building. The primary increase in real estate revenue is attributable to the recovery of monthly rental rate from RM400,000 to RM550,000 (approximately $131,520) from our tenant of fifteen story building, Le Apple, effective from April 1, 2018. The monthly rental rate on Le Apple was previously decreased from our initial rental rate of RM550,000 to RM400,000 due to unfavourable market conditions.  

 

Cost of Revenue. Cost of revenue as a percentage of net revenue was approximately 34%, or $649,496, for the fiscal year ended October 31, 2019, with real estate and plantation sales accounting for approximately 35% and 29%, respectively, of the respective net revenue. Cost of revenue for the year ended October 31, 2018 was $695,040. Cost of revenue as a percentage of net revenue for the year ended October 31, 2018 was approximately 45%, with real estate and plantation sales accounting for approximately 45% and 48%, respectively, of the respective net revenue. The decrease in cost of revenue as a percentage of net revenue is attributable to real estate sales accounting.

 

Gross Profit. We achieved a gross profit of $1,268,643 for the fiscal year ended October 31, 2019, as compared to $834,546 for the fiscal year ended October 31, 2018, with real estate rental income and plantation sales accounting for approximately 84% and 16%, respectively of total gross profit. The increase in gross profit is primarily attributable to the increased rental income derived from our real estate business segment and plantation business segment.

 

Once we begin real estate development, we expect gross profit derived from our real estate business to gradually increase as we commence sales activities with respect to our developed properties. We also expect our plantation revenue to continue to increase as our premium durian orchard matures and is able to increase production of grade A fruits for distribution. 

 

 

 

 

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General and Administrative Expenses (“G&A”). We incurred G&A expenses of $667,932 for the fiscal year ended October 31, 2019, representing a increase of 90%, as compared to $352,006 for the fiscal year ended October 31, 2018. The increase in G&A is primarily attributable to increase in accommodation, air ticket, processing fees, filing fees, salaries and wages and incentives and allowances of $287,325.

 

G&A as a percentage of net revenue was approximately 35% and 23% for the fiscal years ended October 31, 2019 and 2018, respectively. As a general matter, we expect our G&A to increase in the foreseeable future as we acquire real estate or other businesses and assets.

 

Other Expense, net. We incurred net other expenses of $690,825 for the fiscal year ended October 31, 2019, as compared to $823,079 for the fiscal year ended October 31, 2018. The decrease is attributable primarily to a decrease in interest rate charged on our bank loans. Our net other expenses for the years ended October 31, 2019 and 2018 consisted primarily of interest expense on our bank loans.

 

Income Tax Expense. We recorded income tax expenses of $177,207 and $213,423 for the fiscal years ended October 31, 2019 and 2018, respectively. In fiscals 2019 and 2018, we recorded under-accrual of estimated Malaysian income tax of $243 and $505, respectively, for previous years. The Malaysian income tax in fiscals 2019 and 2018 was mainly related to the rental income being taxed as a non-business source pursuant to the Malaysian income tax rules. The increase in fiscal 2019 is primarily attributable to the increase in rental income.

 

Liquidity and Capital Resources

 

As of October 31, 2019, we had cash and cash equivalents of $198,113, accounts receivable of $12,956 and incurred a net loss of $267,321 for fiscal 2019.

 

As of October 31, 2018, we had cash and cash equivalents of $503,197, accounts receivable of $15,990 and incurred a net loss of $553,962 for fiscal 2018.

 

Our ratio of current assets to current liabilities was 0.28:1 and 0.36:1 as of October 31, 2019 and 2018, respectively.

 

We expect to incur significantly greater expenses in the near future, including the contractual obligations that we have assumed discussed below, to begin development activities. We also expect our general and administrative expenses to increase as we expand our finance and administrative staff, and add infrastructure.

 

We have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.

 

Going Concern Uncertainties

 

Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months.

 

    Fiscal Year Ended October 31,  
    2019     2018  
Net cash used in operating activities   $ (1,174 )   $ (200,185 )
Net cash used in investing activities     (106,549 )     (292,639 )
Net cash provided by financing activities     (198,933 )     724,461  

 

 

 

 

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Net Cash Used In Operating Activities.

 

For the fiscal year ended October 31, 2019, net cash used in operating activities was $1,174, which consisted primarily of a net loss (excluding non-cash depreciation and impairment on fair value) of $214,315 increase in account receivable of $3,069, and decrease in accrued liabilities and other payables of $34,661 and income tax payable of $87,483.

 

For the fiscal year ended October 31, 2018, net cash used in operating activities was $200,185, which consisted primarily of a net loss (excluding non-cash depreciation and impairment on fair value) of $202,421, an increase in account receivable of $145,861, offset by a decrease in accrued liabilities and other payables of $61,925, and a decrease in income tax payable of $123,872.

 

We expect rental income from our real estate operations to increase as we increase the occupancy rates of our commercial buildings, which will be offset by the increased expenses associated with developing our residential projects. We expect to continue to rely on cash generated through private placements of our securities, however, to finance our operations and future acquisitions.

 

Net Cash (Used In)/Provided By Investing Activities.

 

For the fiscal year ended October 31, 2019, net cash used in investing activities was $106,549 which is primarily attributable to a decrease in payments of plantation development costs of $66,793 and decrease in construction in progress of $6,241 and the purchase of property, plant and equipment of $33,515.

 

For the fiscal year ended October 31, 2018, net cash used in investing activities was $292,639, which is primarily attributable to decrease in payments of plantation development costs of $151,463 and decrease in construction in progress of $113,251 and the purchase of property, plant and equipment of $27,925.

 

We expect investing cash outflows to increase as the durian orchard further matures. The first phase of the orchard has already begun commercial harvesting. We also expect investing cash outflows to increase due to expenditures associated with developing our residential projects.

 

Net Cash Provided By/(Used In) Financing Activities.

 

For the fiscal year ended October 31, 2019, net cash provided by financing activities was $198,933 consisting primarily proceeds from new loan of $1,174,094, offset by repayment of $760,331 to Weng Kung Wong, our Chief Executive Officer, Interim Chief Financial Officer and Interim Secretary and director and repayments of $612,696 on outstanding bank loans.

 

For the fiscal year ended October 31, 2018, net cash provided by financing activities was $724,461 consisting primarily proceeds from new bank borrowings of $13,151,916, offset by repayment of advances from Weng Kung Wong, our Chief Executive Officer and director, of $190,385 and repayments on bank loans of $12,237,070.

 

Off-Balance Sheet Arrangements 

 

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

 

Contractual Obligations and Commercial Commitments

 

We had the following contractual obligations and commercial commitments as of October 31, 2019:  

 

Contractual Obligations   Total     Less than 1 Year     1-3 Years     3-5 Years     More than 5 Years  
    $     $     $     $     $  
Amount due to related parties     1,601,573       86,420       1,515,153              
Commercial Commitments                                        
Bank borrowing repayment     14,644,497       717,475       1,563,053       1,750,851       10,613,118  
Total obligations     16,246,070       803,895       3,078,206       1,750,851       10,613,118  

 

 

 

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Critical Accounting Policies and Estimates 

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.

 

· Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest. We extend unsecured credit to our 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. We will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of our 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. We do not have any off-balance-sheet credit exposure related to our customers. Based upon the aforementioned criteria, we did not write off accounts receivable on uncollectible rental receivable at October 31, 2019 and 2018.

 

Based upon the aforementioned criteria, the Company did not record any allowance for doubtful accounts for the years ended October 31, 2019 and 2018.

 

· Marketable securities at fair value

 

Marketable securities at fair value are reported at fair value using the market approach based on the quoted prices in active markets at the reporting date. We classify 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.

 

We regularly evaluate whether the decline in fair value of fair-value-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.

 

 

 

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During the years ended October 31, 2019, and 2018, we 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”), our 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 Hoppe and us. The unrealized gain representing the change in fair value of $14,294 and the unrealized loss of $50,830 was charged against accumulated other comprehensive income for the years ended October 31, 2019 and 2018, respectively.

 

·

Biological assets

 

Biological assets are measured at their fair value less costs to sell at each reporting date. The fair value is determined as the net present value of cash flows expected to be generated by these crops (including a risk adjustment factor). Where fair value cannot be measured reliably, biological assets are measured at cost.

 

The valuation takes into account expected sales prices, yields, picked fruit quality and expected direct costs related to the production and sale of the assets and management must make a judgment as to the trend in these factors.

 

· 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 the assets become fully operational:

 

Categories   Location of properties   Expected useful life
Freehold plantation land and orchard   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  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   33 years
Office furniture and equipment       3-10 years
Motor vehicle       5 years  
Bearer plants   Oil palm and durian plantation in Malaysia   50 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.

 

Bearer plants consist of replanting costs of durian such as soil amendments, cultivation, fertilization and purchase costs of sapling. Costs related to durian development projects on our plantation land, are capitalized during the sapling, developing and planting durian fruit bunches and when the harvests are substantially available for commercial sale. The bearer plants will then commence to be depreciated as components of plantation costs and expenses.

 

 

 

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Deferred development costs for oil palms that had been capitalized as part of freehold plantation land were not amortized over the useful life of the oil palms since these costs were not separately identifiable from the cost of freehold plantation land and buildings when the whole oil palm plantation was purchased in July 2011.

 

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”, we generally conduct our 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 reporting unit level. 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.

 

We have 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, based on applicable local laws and practice.

 

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, 2019 and 2018, 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. We adopt 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. We consider 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. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction.

 

We capitalize 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. We allocate these costs to individual tenant leases and amortize them over the related lease term.

 

· Revenue recognition

 

Revenue recognition applicable from 1 November 2018

We recognize revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. Revenue is measured based on a consideration specified in a contract with a customer. We recognize revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, usually upon delivery of palm oil fruit bunches and durian fruits. There are no significant payment terms, no significant financing components or any variable consideration. All of the company’s revenue from contracts with customers in the scope of ASC 606 is recognized in one geographical market in Malaysia, and one major product line, and plantation sales are transferred at a point in time.

 

 

 

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Revenue recognition applicable until 31 October 2019

We recognize our revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of our 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 probable. Our sale arrangements do not contain general rights of return.

 

(a)       Plantation sales

 

Revenue from plantation sales include the sale of palm oil fruit bunches and sale of durian fruits. The sale is recognized upon confirmation of the weight of the produce and transport 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. For the year ended October 31, 2019, sales of palm oil and durian was $286,084. For the year ended October 31, 2018, sales of palm oil was $164,947.

 

(b)       Rental income

 

We generally lease the units under operating leases with terms of two years or less. For the year ended October 31, 2019 and 2018, we have recorded $1,632,055 and $1,364,639, respectively, in lease revenue, based upon our 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, 2019, 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 33%

Le Apple Boutique Hotel KLCC

(fka “Menara CMY”)

15 91,848 0%

 

We expect to record approximately $1.62 million in annual lease revenue under the operating lease arrangements in the next twelve months through October 31, 2020.

 

· Rental concession

 

We lease retail and office spaces to the tenants under operating lease arrangements. The Company receives rental income over a stated period of time from the real estate properties it leased out. 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 Le Apple Boutique Hotel KLCC, 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.

 

· Cost of revenues

 

Costs of revenue on plantation sales includes material supplies, subcontracting costs and transportation costs incurred for planting, fertilizing and harvesting the oil palm and durian trees. Transportation and handling costs associated with the distribution of fresh oil palm fruit bunches and durian fruits to the customers are also included in cost of revenues.

 

Costs related to our 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.

 

 

 

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· Comprehensive income

 

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

 

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.

 

We conduct major businesses in Malaysia are subject to tax in its own jurisdiction. As a result of our business activities, we will file separate tax returns that are subject to examination by the local and foreign tax authorities.

 

· 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 reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, we maintain our books and record in a local currency, Malaysian Ringgit (“MYR” or “RM”), 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 Statements”, 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 within the statement of stockholders’ equity. The gains and losses are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

 

 

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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,  
    2019     2018  
Year-end MYR : $1 exchange rate     4.1745       4.1819  
Yearly average MYR : $1 exchange rate     4.1653       4.0248  

 

· Related parties

 

Parties, which can be a corporation or individual, are considered to be related if we have 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.

 

· Segment reporting

 

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with our internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. During the years ended October 31, 2019 and 2018, we operate in two reportable operating segments in Malaysia.

 

· Fair value of financial instruments

 

The carrying value of our financial instruments (excluding obligation under finance lease, long-term bank loans and marketable securities at fair value): cash and cash equivalents, accounts receivable, deposits and other receivables, 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.

 

We also follow 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 our financial assets as of October 31, 2019, 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, 2019                        
Marketable securities at fair value   $ 186,835     $     $  
                         
As of October 31, 2018                        
Marketable securities at fair value   $ 172,532     $     $  

  

As of October 31, 2019, we did not have any non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis, nor did we have any assets or liabilities measured at fair value on a non-recurring basis.

 

 

 

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· Recent accounting pronouncements

 

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. We do not anticipate that the adoption of this ASU to have a significant impact on our consolidated financial statements.

 

In February 2017, FASB issued Accounting Standards Update 2017-06; Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force). The amendments in this ASU requires an employee benefit plan within the scope of Topic 960,1 962,2 or 9653 to present its interest in a master trust and the change in its interest in that master trust as single line items in the statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively. In addition, the amendments update and align the disclosure requirements for an interest in a master trust across Topics 960, 962, and 965. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The amendments in the ASU should be adopted on a retrospective basis. We do not expect that adoption of this ASU to have a material effect on our consolidated financial statements.

 

In March 2017, FASB issued Accounting Standards Update 2017-08; Receivables—Non refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shortens the amortization period for certain purchased callable debt securities held at a premium. Specifically, it requires the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In July 2017, FASB issued Accounting Standards Update 2017-11; Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480): Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non public Entities and Certain Mandatorily Redeemable Non controlling Interests with a Scope Exception. The guidance is intended to reduce the complexity associated with issuers’ accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2017, FASB issued Accounting Standards Update 2017-12; Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance in this ASU will result in the simplification of certain accounting requirements for hedging activities, resolve hedge accounting practice issues that have arisen under the current guidance, and better align hedge accounting with an organization’s risk management activities. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early application is permitted in any interim period after issuance of the amendments for existing hedging relationships on the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

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In December 2017, FASB issued Accounting Standards Update 2017-15; Codification Improvements to Topic 995, U.S. Steamship Entities: Elimination of Topic 995. The amendments in this ASU affect all entities that have unrecognized deferred taxes related to statutory reserve deposits that were made on or before December 15, 1992. Entities are required to recognize the unrecognized income taxes in accordance with Topic 740. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We do not anticipate that the adoption of this ASU to have a significant impact on our consolidated financial statements. 

 

In February 2018, FASB issued Accounting Standards Update 2018-02; Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in the ASU addresses the accounting issue pertaining to the deferred tax amounts that are “stranded” in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the Act). We do not expect that the adoption will have a material impact on our consolidated financial statements. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We do not expect that the adoption will have a material impact on our consolidated financial statements.

 

In May 2018, FASB issued Accounting standards Update 2018-06; Codification Improvements to Topic 942 Financial Services – Depository and Lending which supersedes outdated guidance related to the office of the Comptroller of the Currency’s Baking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202). The amendments in this update remove outdated guidance related to Circular 202 and is effective upon issuance of this update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In July 2018, the FASB issued ASU 2018-08—Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made which clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations and business enterprises. The amendment is effective for fiscal years beginning after June 15, 2018 (serving as resource recipient) and December 15, 2018 (serving as resource provider), including interim periods within that fiscal year. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In July 2018, the FASB issued ASU 2018-09—Codification Improvements which clarifies, corrects errors in, and makes improvements to several Codification Topics, including to:

 

- Clarify when excess tax benefits should be recognized for share-based compensation awards
- Remove inconsistent guidance in income tax accounting for business combinations
- Clarify the circumstances when derivatives may be offset
- Clarify the measurement of liability or equity-classified financial instruments when an identical asset is held as an asset
- Allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives to use the portfolio exception to valuation

 

The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this Update do not require transition guidance and will be effective upon issuance of this Update. However, many of the amendments in this Update do have transition guidance with effective dates for annual periods beginning after December 15, 2018. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

  33  
 

 

In July 2018, the FASB issued ASU 2018-10—Codification Improvements to Topic 842, Leases which clarifies and corrects unintended application of narrow aspects of the lease accounting guidance. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-11—Leases (Topic 842): Targeted Improvements which simplifies transition requirements and, for lessors, provides a practical expedient for the non separation of non-lease components from lease components if certain conditions are met. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. The practical expedient may be applied either retrospectively or prospectively. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-12—Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts which improves financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application of the amendments is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which improves the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending after December 15, 2020, for public business entities. Early adoption is permitted for all entities. An entity should apply the amendments in this Update on a retrospective basis to all periods presented. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-15—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) which aligns the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract or incurred to develop or obtain internal-use software (and hosing arrangements that include an internal –use software license). This standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

  34  
 

 

In October 2018, FASB issued Accounting Standards Update 2018-16, Derivatives and Hedging (Topic 805): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU amends ASC 815 to add the OIS rate based on the SOFR as a fifth US benchmark interest rate. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In October 2018, FASB issued Accounting Standards Update 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard expands the application of a specific private company accounting alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2018, FASB issued Accounting Standards Update 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The ASU amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2018, FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The ASU changes the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Thus, the effective date for such entities’ annual financial statements is now aligned with that for these interim financial statements. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.

 

In December 2018, FASB issued Accounting Standards Update 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. The amendments are designed to make lessors adoption of the new leases standard easier such as accounting policy election on sales tax, exclude variable payments for all lessor costs, and clarification on lessor costs. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.

 

In March 2019, FASB Issued Accounting Standards Update 2019-01, Leases (Topic 842): Codification Improvements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In March 2019, FASB Issued Accounting Standards Update 2019-02, Leases (Topic 842): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In March 2019, FASB Issued Accounting Standards Update 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections (Topic 958). We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements as the ASU is applicable to not-for-profit entities.

 

In April 2019, FASB Issued Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU 2019-04 clarifies and improves guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments: The effective dates for amendments related to ASUs 2016-13 and 2017-12 align with the effective dates of those standards, unless an entity has already adopted one or both. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In May 2019, FASB Issued Accounting Standards Update 2019-05, Targeted Transition Relief. ASU 2019-05 provides transition relief for ASU 2016-13 (“credit losses standard”) by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the new credit losses standard. For entities that have not yet adopted ASU 2016-13, the effective dates are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

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In May 2019, FASB Issued Accounting Standards Update 2019-06, Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities. The amendments are affective upon issuance of the ASU. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2019, the ASB issued Accounting Standards Update 2019-08-Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer. This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in the supplier. For entities that have not yet adopted the amendments in Update 2018-07, the amendments in this update are effective in fiscal years beginning after December 15, 2019. We do not expect the adoption of this ASU to have a material affect on our consolidate financial statements.

 

In November 2019, the FASB issued Accounting Standards Update 2019-09-Financial Services-Insurance (Topic 944). This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in the supplier. The amendments in this Update are effective in fiscal years beginning after December 15, 2021. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2019, the FASB issued Accounting Standards Update 2019-10-Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This ASU discusses the FASB’s proposed ASU Codification Improvements to Hedge Accounting, which would clarify certain amendments made by ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to the guidance in ASC 815 on hedging activities. The FASB issued the proposal in response to feedback and questions received from stakeholders related to their implementation of ASU 2017-12. The ASU also discusses the recent issuance of FASB ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The ASU provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for ASU 2017-12 on hedging, ASU 2016-02 on leasing, ASU 2016-13 on current expected credit losses, and ASU 2017-04 on simplifying the goodwill impairment test. The amendments in this Update amend the mandatory effective dates Credit Losses for all entities as follows or fiscal years beginning after December 15, 2019. The effective dates for Hedging after applying this update are as follows: for fiscal years beginning after December 15, 2018. The effective dates for Leases after applying this Update are as follows for fiscal years beginning after December 15, 2018. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In December 2019, the FASB issued Accounting Standards Update 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU summarizes the FASB’s recently issued Accounting Standards Update (ASU) No. 2019-12, simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In January 2020, the FASB issued Accounting Standards Update 2020-01-Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This ASU clarifies the interaction between accounting standards related to equity securities (ASC 321), equity method investments (ASC 323), and certain derivatives (ASC815). The amendments in this Update are effective for fiscal years beginning after December 15, 2020. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

The Company has reviewed all other 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.

 

 

 

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ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk.

 

Interest rate risk

 

Our exposure to interest rate risk primarily relates to the interest expense incurred on bank borrowings. We have not used derivative financial instruments in our investment portfolio in order to reduce this risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.

 

Foreign exchange risk

 

The reporting currency of the Company is US$. To date, the majority of the revenues and costs are denominated in MYR, and a significant portion of the assets and liabilities are denominated in MYR. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and MYR. If MYR depreciates against US$, the value of our MYR revenues, earnings and assets as expressed in our US$ financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

 

Commodity price

 

Our primary market risk exposure results from the price we receive for our palm oil fruit bunches. We do not currently engage in any commodity hedging activities, although we may do so in the future. Realized commodity pricing for our operation is primarily driven by the prevailing worldwide price for palm oil fruit bunches. Pricing for palm oil fruit bunches has been volatile and unpredictable in recent years, and we expect this volatility to continue in the foreseeable future. The prices we receive for operation depend on many factors outside of our control, including volatility in the differences between product prices at sales points and the applicable commodity index price.

 

Malaysian real estate market risk

 

Our real estate business may be affected by market conditions and economic challenges experienced by the economy as a whole in Malaysia, conditions in the credit markets or by local economic conditions in the markets in which our properties are located. Such conditions may impact our results of operations, financial condition or ability to expand our operations.

 

Market risk related to marketable securities

 

We are also exposed to the risk of changes in the value of financial instruments, caused by fluctuations in equity prices related to marketable securities. Changes in these factors could cause fluctuations in earnings and cash flows.

 

 

 

 

 

 

 

  37  
 

 

ITEM 8.   Financial Statements and Supplementary Data.

 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  Page
   
Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets F-2
   
Consolidated Statements of Operations and Comprehensive Loss F-3
   
Consolidated Statements of Cash Flows F-4
   
Consolidated Statements of Stockholders’ Equity F-5
   
Notes to Consolidated Financial Statements F-6 - F-32

 

 

 

 

 

 

 

 

 

  38  
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of Prime Global Capital Group Incorporated

 

We have audited the accompanying consolidated balance sheet of Prime Global Capital Group Incorporated (the “Company”) as of October 31, 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for the year ended October 31, 2019. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of October 31, 2019, and the consolidated results of their operations and their cash flows for the year ended October 31, 2019, in conformity with the accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a working capital deficiency, and accumulated deficit from recurring net losses maturing in less than one year as of October 31, 2019. All these factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

/s/ ShineWing Australia

 

ShineWing Australia

Chartered Accountants

 

Melbourne, Australia

January 28, 2020

 

 

 

 

 

  F- 1  
 

  

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

(Amount expressed in United States Dollars (“$”), except for number of shares)

 

 

    As of October 31,  
    2019     2018  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 198,113     $ 503,197  
Marketable securities at fair value     186,835       172,532  
Rental concession     26,350       26,304  
Accounts receivable, net     12,956       15,990  
Deposits and other receivables     110,816       26,804  
Biological Assets     32,504        
Total current assets     567,574       744,827  
                 
Rental concession, non-current     608,257       633,484  
Construction in progress     424,376       417,409  
Property, plant and equipment, net     42,873,074       43,177,024  
TOTAL ASSETS   $ 44,473,281     $ 44,972,744  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $     $ 30,797  
Amount due to a related party     86,420       86,420  
Rental deposits from tenants     417,501       416,762  
Income tax payable     486,550       572,825  
Short-term bank borrowings            
Current portion of long-term bank loans     717,475       598,795  
Deferred tax liabilities, current            
Accrued liabilities and other payables     327,331       330,827  
Total current liabilities     2,035,277       2,036,426  
                 
Long-term liabilities:                
Long-term bank loans     13,927,022       13,460,618  
Amount due to a director     1,515,153       2,270,089  
Deferred tax liabilities     154,253       160,050  
Obligation under finance lease            
Total liabilities     17,631,705       17,927,183  
                 
Commitments and contingencies                
                 
Total equity:                
Stockholders’ equity:                
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding            
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 512,682,393 shares issued and outstanding     512,683       512,683  
Additional paid-in capital     41,934,476       41,934,476  
Accumulated other comprehensive loss     (10,812,852 )     (10,876,629 )
Accumulated deficit     (4,545,195 )     (4,277,137 )
Total stockholders’ equity     27,089,112       27,293,393  
Non-controlling interests     (247,536 )     (247,832 )
Total equity     26,841,576       27,045,561  
TOTAL LIABILITIES AND EQUITY   $ 44,473,281     $ 44,972,744  

 

See accompanying notes to consolidated financial statements.

 

 

 

  

  F- 2  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Amount expressed in United States Dollars (“$”), except for number of shares)

 

 

    Years ended October 31,  
    2019     2018  
Revenues, net:                
Plantation business   $ 286,084     $ 164,947  
Rental income     1,632,055       1,364,639  
Total revenues, net     1,918,139       1,529,586  
                 
Cost of revenues     (649,496 )     (695,040 )
                 
Gross profit     1,268,643       834,546  
                 
Operating expenses:                
General and administrative     (667,932 )     (352,006 )
                 
Income from operations     600,711       482,540  
                 
Other income (expense):                
Gain on disposal of property, plant and equipment            
Forgiveness of debts            
Interest expense     (723,401 )     (787,285 )
Other income     32,576       7,736  
Impairment loss on fair value-sale securities           (43,530 )
                 
Loss before income taxes     (90,114 )     (340,539 )
                 
Income tax expense     (177,207 )     (213,423 )
                 
NET LOSS   $ (267,321 )   $ (553,962 )
                 
Net loss attributable to non-controlling interests     (737 )     21,630  
                 
Net loss attributable to the Company   $ (268,058 )   $ (532,332 )
                 
Other comprehensive income (loss):                
- Unrealized holding loss on fair value-sale securities     14,294       (50,830 )
- Impairment loss on fair value-sale securities           43,530  
- Foreign exchange adjustment     49,483       318,583  
                 
COMPREHENSIVE LOSS   $ (204,281 )   $ (221,049 )
                 
Net loss per share – Basic and diluted:   $ *0.00     $ *0.00  
                 
Weighted average common stock outstanding – Basic and diluted     512,682,393       512,682,393  

 

* Less than $0.01 per share

 

See accompanying notes to consolidated financial statements.

 

 

  F- 3  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amount expressed in United States Dollars (“$”))

 

 

    Years ended October 31,  
    2019     2018  
Cash flows from operating activities:                
Net loss   $ (267,321 )   $ (553,962 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Impairment loss on fair value-sale securities           43,530  
Forgiveness of debts            
Depreciation     481,636       308,011  
Gain on disposal of plant and equipment            
Changes in operating assets and liabilities:                
Accounts receivable     3,069       145,861  
Rental concession     26,409       54,661  
Deposits and other receivables     (84,151 )     (1,851 )
Biological Assets     (32,577 )      
Accounts payable     (30,920 )     31,662  
Rental deposits from tenants           2,236  
Income tax payable     (87,483 )     (123,872 )
Accrued liabilities and other payables     (3,741 )     (93,587 )
Deferred tax assets            
Deferred tax liabilities     (6,095 )     (12,874 )
Net cash used in operating activities     (1,174 )     (200,185 )
                 
Cash flows from investing activities:                
Bearer Plants     (66,793 )     (151,463 )
Payment on construction in progress     (6,241 )     (113,251 )
Purchase of property, plant and equipment     (33,515 )     (27,925 )
Proceeds from disposal of plant and equipment            
Net cash used in investing activities     (106,549 )     (292,639 )
                 
Cash flows from financing activities:                
(Repayment to) / Advances from a director     (760,331 )     (190,385 )
Proceeds from long-term bank loans     1,174,094       13,151,916  
Repayments on long-term bank loans     (612,696 )     (8,557,345 )
Payments on finance lease            
Repayment on revolving line of credit           (3,679,725 )
Net cash provided by financing activities     (198,933 )     724,461  
                 
Foreign currency translation adjustment     1,572       (22,701 )
                 
NET CHANGE IN CASH AND CASH EQUIVALENTS     (305,084 )     208,936  
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     503,197       294,261  
                 
CASH AND CASH EQUIVALENTS, END OF YEAR   $ 198,113     $ 503,197  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
Cash paid for income tax   $ 365,608     $ 349,664  
Cash paid for interest   $ 723,401     $ 787,285  

 

See accompanying notes to consolidated financial statements.

 

 

 

  F- 4  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amount expressed in United States Dollars (“$”), except for number of shares)

 

 

    Common stock     Additional     Accumulated other           Total PGCG     Non-     Total  
    No. of           paid-in     income/     Accumulated     stockholders’     controlling     stockholders’  
    Shares     Amount     capital     (loss)     deficit     equity     interests     equity  
          $     $     $     $     $     $     $  
Balance as of October 31, 2017     512,682,393       512,683       41,934,476       (11,187,912 )     (3,744,805 )     27,514,442       (224,470 )     27,289,972  
Net loss for the year                             (532,332 )     (532,332 )     (21,630 )     (553,962 )
Unrealized loss on available-for-sale securities                       (50,830 )           (50,830 )           (50,830 )
Impairment loss on available-for-sale securities                       43,530             43,530             43,530  
Foreign currency translation adjustment                       318,583             318,583       (1,732 )     316,851  
                                                                 
Balance as of October 31, 2018     512,682,393       512,683       41,934,476       (10,876,629 )     (4,277,137 )     27,293,393       (247,832 )     27,045,561  
Net loss for the year                             (268,058 )     (268,058 )     737       (267,321 )
Unrealized loss on available-for-sale securities                       14,294             14,294             14,294  
Impairment loss on available-for-sale securities                                                
Foreign currency translation adjustment                       49,483             49,483       (441 )     49,042  
                                                                 
Balance as of October 31, 2019     512,682,393       512,683       41,934,476       (10,812,852 )     (4,545,195 )     27,089,112       (247,536 )     26,841,576  

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

  F- 5  
 

  

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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 RM20,000,000, or approximately $6,084,760.  PGCG Assets received net proceeds of approximately RM20,000,000, or approximately $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 $611,731. PGCG Assets received net proceeds of approximately RM2,000,000, 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.

  

 

 

 

 

  F- 6  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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.   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
                     
3.   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
                     
4.   PGCG Development Sdn. Bhd. (“PGCG Development”)   Malaysia   March 21, 2012   250,000 issued shares of ordinary shares of MYR 1 each   Inactive operation
                     
5.   PGCG Plantations Sdn. Bhd. (“PGCG Plantation”)   Malaysia   October 4, 2011   2 issued shares of ordinary shares of MYR 1 each   Holding company of VSSB
                     
6.   Dunford Corporation Sdn. Bhd   Malaysia   October 4, 1990   242,000 issued shares of ordinary shares of MYR 1 each   Property holding land
                     
7.   Impiana Maksima Sdn. Bhd.   Malaysia   March 15, 2013   2 issued shares of ordinary shares of MYR 1 each   Property development
                     
8.   PGCG Constructions Sdn. Bhd.   Malaysia   April 16, 2013   2 issued shares of ordinary shares of MYR 1 each   Construction of properties
                     
9.   Fiesta Senada Sdn. Bhd.       Malaysia   November 28, 2012   2 issued shares of ordinary shares of MYR 1 each   Inactive operation
                     
10.   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”).

         

  F- 7  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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, 2019, the Company reported a net loss of $268,058 and working capital deficit of $1,467,703 as of October 31, 2019. The Company had accumulated deficit of $4,545,195 as of October 31, 2019 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

 

· Basis of presentation

 

These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

· Use of estimates

 

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.

 

· Basis of consolidation

 

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,  
    2019     2018  
             
Cash and bank balances held by financial institutions located in Malaysia   $ 198,113     $ 503,197  

  

 

 

  F- 8  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

  

· Accounts receivable

 

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 did not record any allowance for doubtful accounts for the years ended October 31, 2019 and 2018.

 

· Marketable securities at fair value

 

Marketable securities at fair value 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 fair value-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 years ended October 31, 2019 impairment loss on fair value-sale securities did not occur and 2018, $43,530 of losses previously classified in other comprehensive losses were reclassified into earnings to recognize an other-than-temporary decline in fair value.

 

During the years ended October 31, 2019 and 2018, 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 gain representing the change in fair value of $14,294 and unrealized loss of $50,830 was charged against accumulated other comprehensive income (loss) for the years ended October 31, 2019 and 2018, respectively.

 

 

 

  F- 9  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

·

Biological assets

 

Biological assets are measured at their fair value less costs to sell at each reporting date. The fair value is determined as the net present value of cash flows expected to be generated by these crops (including a risk adjustment factor). Where fair value cannot be measured reliably, biological assets are measured at cost.

 

The valuation takes into account expected sales prices, yields, picked fruit quality and expected direct costs related to the production and sale of the assets and management must make a judgment as to the trend in these factors.

 

· 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 and orchard   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 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   33 years
Office furniture and equipment       3-10 years
Motor vehicles       5 years
Bearer plants   Oil palm and durian plantation in Malaysia   50 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.

 

Bearer plants consist of replanting costs of durian such as soil amendments, cultivation, fertilization and purchase costs of sapling. Costs related to durian development projects on our plantation land, are capitalized during the sapling, developing and planting durian fruit bunches and when the harvests are substantially available for commercial sale. The bearer plants will then commence to be depreciated as components of plantation costs and expenses.

 

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 conduct 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 reporting unit level. 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.

 

 

 

  F- 10  
 

 

 PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

The Company 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, based on applicable local laws and practice.

 

Deferred development cost for oil palms that had been capitalized as part of freehold plantation land were not amortized over the useful life of the oil palms since these costs were not separately identifiable from the cost of freehold plantation land and buildings when the whole oil palm plantation was purchased in July 2011.

 

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, 2019 and 2018, 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.

 

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.

 

· Revenue recognition

 

Revenue recognition applicable from 1 November 2018

The Company recognizes its revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. Revenue is measured based on a consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, usually upon delivery of palm oil fruit bunches and durian fruits. There are no significant payments terms, no significant financing component or any variable consideration. All of the company’s revenue from contracts with customers in the scope of ASC 606 is recognized in one geographical market in Malaysia, and one major product line, and plantation sales are transferred at a point in time.

 

Revenue recognition applicable until 31 October 2019

We recognize our revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of our 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 probable. Our sale arrangements do not contain general rights of return.

 

 

  F- 11  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

(a)       Plantation sales

 

Revenue from plantation sales include the sale of palm oil fruit bunches and sale of durian fruits. The sale is recognized upon confirmation of the weight of produce and transport 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 year ended October 31, 2019, sale of palm oil palm and durian was $286,084. For the year ended October 31, 2018, sales of palm oil was $164,947.

  

(b)       Rental income

 

The Company generally leases the units under operating leases with terms of two years or less. For the years ended Oct 31, 2019 and 2018, we have recorded $1,632,055 and $1,364,639, 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, 2019, 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 33%

Le Apple Boutique Hotel KLCC

(fka “Menara CMY”)

15 91,848 0%

 

The Company expects to record approximately $1.62 million in annual lease revenue under the operating lease arrangements in the next twelve months, through October 31, 2020.

 

· Rental concession

 

The Company leases retail and office spaces to the tenants under operating lease arrangements. The Company receives rental income over a stated period of time from the real estate properties it leased out. 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 with Le Apple Boutique Hotel KLCC, 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,  
    2019     2018  
Rental concession:                
Current portion   $ 26,350     $ 26,304  
Non-current portion     608,257       633,484  
                 
Total   $ 634,607     $ 659,788  

 

 

 

  F- 12  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

   

The estimated amortization on long-term rent concession in the next five years and thereafter is as follows:

 

Period ending October 31:      
2020   $ 26,350  
2021     26,350  
2022     26,350  
2023     26,350  
2024     26,350  
Thereafter     502,857  
         
Total   $ 634,607  

 

As of October 31, 2019, 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:      
2020   $ 1,627,979  
2021     1,573,123  
2022     1,554,677  
2023     1,554,677  
2024     1,554,677  
Thereafter     29,668,424  
         
Total   $ 37,533,557  

 

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 revenues

 

Costs of revenue on plantation sales includes material supplies, subcontracting costs and transportation costs incurred for planting, fertilizing and harvesting the oil palm tree and durian tree. Transportation and handling costs associated with the distribution of fresh fruit bunches and durians fruits to the customers are also included in cost of revenues.

 

Costs 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.

 

· Comprehensive income

 

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.

 

 

 

  F- 13  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

· 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

 

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.

 

· 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 reporting 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”), 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 within the statement of stockholders’ equity. The gains and losses are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

  

 

  F- 14  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

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,  
    2019     2018  
Year-end MYR : US$1 exchange rate     4.1745       4.1819  
Yearly average MYR : US$1 exchange rate     4.1653       4.0248  

 

· Related parties

 

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.

 

· Segment reporting

 

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, 2019 and 2018, 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 marketable securities at fair value): cash and cash equivalents, accounts receivable, deposits and other receivables, 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.

 

 

  

  F- 15  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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, 2019 and 2018, 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, 2019                        
Marketable securities at fair value   $ 186,835     $     $  
As of October 31, 2018                        
Marketable securities at fair value   $ 172,532     $     $  

 

As of October 31, 2019 and 2018, the Company did not have any non-financial 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.

 

· Adoption of new accounting standards

 

On 1 November 2018, the company adopted ASU 2014-09 Revenue from Contracts with Customers.

 

The adoption of this Topic does not have a material impact on our consolidated financial statements. There have been no significant judgments or changes in judgments made in applying the guidance in this Topic. There were no contract assets or liabilities recognized at year end.

 

On 1 November 2018, the company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).

 

The adoption of this Topic does not have a material impact on our consolidated financial statements. There have been no significant judgments or changes in judgments made in applying the guidance in this Topic.

 

The adoption of the other new accounting standards did not have a material impact on our consolidated financial statements.

 

 

 

 

  F- 16  
 

  

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

· Recent accounting pronouncements

 

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 does not anticipate that the adoption of this ASU to have a significant impact on our consolidated financial statements .

 

In February 2017, FASB issued Accounting Standards Update 2017-06; Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force). The amendments in this ASU requires an employee benefit plan within the scope of Topic 960,1 962,2 or 9653 to present its interest in a master trust and the change in its interest in that master trust as single line items in the statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively. In addition, the amendments update and align the disclosure requirements for an interest in a master trust across Topics 960, 962, and 965. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The amendments in the ASU should be adopted on a retrospective basis. We do not expect that adoption of this ASU to have a material effect on our consolidated financial statements.

  

In March 2017, FASB issued Accounting Standards Update 2017-08; Receivables—Non refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shortens the amortization period for certain purchased callable debt securities held at a premium. Specifically, it requires the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

  

In July 2017, FASB issued Accounting Standards Update 2017-11; Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480): Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non public Entities and Certain Mandatorily Redeemable Non controlling Interests with a Scope Exception. The guidance is intended to reduce the complexity associated with issuers’ accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2017, FASB issued Accounting Standards Update 2017-12; Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance in this ASU will result in the simplification of certain accounting requirements for hedging activities, resolve hedge accounting practice issues that have arisen under the current guidance, and better align hedge accounting with an organization’s risk management activities. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early application is permitted in any interim period after issuance of the amendments for existing hedging relationships on the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

 

  F- 17  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

In December 2017, FASB issued Accounting Standards Update 2017-15; Codification Improvements to Topic 995, U.S. Steamship Entities: Elimination of Topic 995. The amendments in this ASU affect all entities that have unrecognized deferred taxes related to statutory reserve deposits that were made on or before December 15, 1992. Entities are required to recognize the unrecognized income taxes in accordance with Topic 740. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We do not anticipate that adoption of this ASU to have a significant impact on our consolidated financial statements.

 

In February 2018, FASB issued Accounting Standards Update 2018-02; Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in the ASU addresses the accounting issue pertaining to the deferred tax amounts that are “stranded” in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the Act). We do not expect that the adoption will have a material impact on our consolidated financial statements. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We do not expect that the adoption will have a material impact on our consolidated financial statements.

 

In May 2018, FASB issued Accounting standards Update 2018-06; Codification Improvements to Topic 942 Financial Services – Depository and Lending which supersedes outdated guidance related to the office of the Comptroller of the Currency’s Baking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202). The amendments in this update remove outdated guidance related to Circular 202 and is effective upon issuance of this update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In July 2018, the FASB issued ASU 2018-08—Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made which clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations and business enterprises. The amendment is effective for fiscal years beginning after June 15, 2018 (serving as resource recipient) and December 15, 2018 (serving as resource provider), including interim periods within that fiscal year. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

 

  F- 18  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

In July 2018, the FASB issued ASU 2018-09—Codification Improvements which clarifies, corrects errors in, and makes improvements to several Codification Topics, including to:

 

- Clarify when excess tax benefits should be recognized for share-based compensation awards
- Remove inconsistent guidance in income tax accounting for business combinations
- Clarify the circumstances when derivatives may be offset
- Clarify the measurement of liability or equity-classified financial instruments when an identical asset is held as an asset
- Allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives to use the portfolio exception to valuation

 

The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this Update do not require transition guidance and will be effective upon issuance of this Update. However, many of the amendments in this Update do have transition guidance with effective dates for annual periods beginning after December 15, 2018. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In July 2018, the FASB issued ASU 2018-10—Codification Improvements to Topic 842, Leases which clarifies and corrects unintended application of narrow aspects of the lease accounting guidance. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-11—Leases (Topic 842): Targeted Improvements which simplifies transition requirements and, for lessors, provides a practical expedient for the non separation of non-lease components from lease components if certain conditions are met. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. The practical expedient may be applied either retrospectively or prospectively. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-12—Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts which improves financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application of the amendments is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

  F- 19  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which improves the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending after December 15, 2020, for public business entities. Early adoption is permitted for all entities. An entity should apply the amendments in this Update on a retrospective basis to all periods presented. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-15—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) which aligns the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract or incurred to develop or obtain internal-use software (and hosing arrangements that include an internal –use software license). This standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In October 2018, FASB issued Accounting Standards Update 2018-16, Derivatives and Hedging (Topic 805): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU amends ASC 815 to add the OIS rate based on the SOFR as a fifth US benchmark interest rate. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In October 2018, FASB issued Accounting Standards Update 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard expands the application of a specific private company accounting alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2018, FASB issued Accounting Standards Update 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The ASU amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

  F- 20  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

In November 2018, FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The ASU changes the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Thus, the effective date for such entities’ annual financial statements is now aligned with that for these interim financial statements. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.

 

In December 2018, FASB issued Accounting Standards Update 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. The amendments are designed to make lessors adoption of the new leases standard easier such as accounting policy election on sales tax, exclude variable payments for all lessor costs, and clarification on lessor costs. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.

 

In March 2019, FASB Issued Accounting Standards Update 2019-01, Leases (Topic 842): Codification Improvements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In March 2019, FASB Issued Accounting Standards Update 2019-02, Leases (Topic 842): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In March 2019, FASB Issued Accounting Standards Update 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections (Topic 958). We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements as the ASU is applicable to not-for-profit entities.

 

In April 2019, FASB Issued Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU 2019-04 clarifies and improves guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments: The effective dates for amendments related to ASUs 2016-13 and 2017-12 align with the effective dates of those standards, unless an entity has already adopted one or both. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In May 2019, FASB Issued Accounting Standards Update 2019-05, Targeted Transition Relief. ASU 2019-05 provides transition relief for ASU 2016-13 (“credit losses standard”) by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the new credit losses standard. For entities that have not yet adopted ASU 2016-13, the effective dates are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In May 2019, FASB Issued Accounting Standards Update 2019-06, Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities. The amendments are affective upon issuance of the ASU. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

 

 

 

 

  F- 21  
 

 

 PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

In November 2019, the ASB issued Accounting Standards Update 2019-08-Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer. This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in the supplier. For entities that have not yet adopted the amendments in Update 2018-07, the amendments in this update are effective in fiscal years beginning after December 15, 2019. We do not expect the adoption of this ASU to have a material affect on our consolidate financial statements.

 

In November 2019, the FASB issued Accounting Standards Update 2019-09-Financial Services-Insurance (Topic 944). This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in the supplier. The amendments in this Update are effective in fiscal years beginning after December 15, 2021. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In November 2019, the FASB issued Accounting Standards Update 2019-10-Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This ASU discusses the FASB’s proposed ASU Codification Improvements to Hedge Accounting, which would clarify certain amendments made by ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to the guidance in ASC 815 on hedging activities. The FASB issued the proposal in response to feedback and questions received from stakeholders related to their implementation of ASU 2017-12. The ASU also discusses the recent issuance of FASB ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The ASU provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for ASU 2017-12 on hedging, ASU 2016-02 on leasing, ASU 2016-13 on current expected credit losses, and ASU 2017-04 on simplifying the goodwill impairment test. The amendments in this Update amend the mandatory effective dates Credit Losses for all entities as follows or fiscal years beginning after December 15, 2019. The effective dates for Hedging after applying this update are as follows: for fiscal years beginning after December 15, 2018. The effective dates for Leases after applying this Update are as follows for fiscal years beginning after December 15, 2018. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In December 2019, the FASB issued Accounting Standards Update 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU summarizes the FASB’s recently issued Accounting Standards Update (ASU) No. 2019-12, simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

In January 2020, the FASB issued Accounting Standards Update 2020-01-Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This ASU clarifies the interaction between accounting standards related to equity securities (ASC 321), equity method investments (ASC 323), and certain derivatives (ASC815). The amendments in this Update are effective for fiscal years beginning after December 15, 2020. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.

 

The Company has reviewed all other 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. 

 

 

 

  F- 22  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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,  
    2019     2018  
Freehold plantation land and orchard   $ 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     175,738       157,084  
Motor vehicles     177,161       162,300  
Bearer Plants     308,743       241,670  
Foreign translation difference     (15,803,916 )     (15,884,845 )
      46,120,001       45,938,484  
Less: accumulated depreciation     (3,730,599 )     (3,248,963 )
Less: foreign translation difference     483,672       487,503  
Property, plant and equipment, net   $ 42,873,074     $ 43,177,024  

 

Depreciation expense for the years ended October 31, 2019 and 2018 amounted to $481,636 and $308,011, 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 the land (the “Land”) located at Puncak Alam (the “Proposed JV”). The parties terminated the MOU on February 15, 2017, in accordance with the terms of a Mutual Termination of Memorandum of Understanding (the “Termination MOU”). The parties further confirmed that there was no monetary payment due to either party pursuant to the MOU or the Termination MOU.

 

In light of the termination of the Proposed JV with YTB, the Company plans to develop, market, promote and complete the construction on its own. Due to market forces, we plan to begin construction by the end of calendar 2023 to maximize profits. The Company hopes to begin construction in the fourth calendar quarter of 2019 and complete construction by the end of calendar 2021. The Company believes that it will require approximately RM5 to RM10 million in the aggregate to market, promote and complete construction of each phase of our Shah Alam 2 Eco Residential Development Project.

 

 

  F- 23  
 

 

 PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

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, 2019 and 2018.

 

5. AMOUNT DUE TO RELATED PARTIES

 

    As of October 31,  
    2019     2018  
Current portion:                
Amount due to a related party, unsecured, interest-free and repayable on demand                
Mr. Chai Kok Wai, a director of UHT   $ 86,420     $ 86,420  
                 
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   $ 1,515,153     $ 2,270,089  

 

6. ACCRUED LIABILITIES AND OTHER PAYABLES

 

Accrued liabilities and other payables consist of the following:

 

    As of October 31,  
    2019     2018  
             
Accrued operating expenses   $ 104,475     $ 96,519  
Potential tax penalty liability (Note 10)           135,000  
Other payable     222,856       99,308  
    $ 327,331     $ 330,827  

 

7. BANK LOANS

 

    As of October 31,  
    2019     2018  
Bank loans from financial institutions in Malaysia,                
Public Islamic Bank Berhad              
-  15 Story bank loan   $ 12,644,115     $ 12,001,461  
-   Financing loan            
RHB Bank Berhad     2,000,382       2,057,952  
      14,644,497       14,059,413  
Less: current portion     (717,475 )     (598,795 )
Bank loans, net of current portion   $ 13,927,022     $ 13,460,618  

 

 

 

  F- 24  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

  

 

15 Story Bank Loan

 

In August 2018, the Company, through PGCG Assets obtained a loan in the principal amount of RM50,000,000 from Public Islamic 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 1.50% per annum below the base financing rate, currently 6.97% per annum, with 180 monthly installments of RM407,750 each (including interests) over a period of 15 years or until full settlement and will mature in September 2033.

 

The loan from Public Islamic Bank Berhad is secured by the first party charge over 15-story commercial office building 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 RM50 million plus interest thereon over the assets of PGCG Assets. The cost of funds was 5.47% per annum for the years ended October 31, 2019 and 2018.

 

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 12-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 RM58,317 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, 2019 (2018: 4.95% per annum).

 

Financing Loan

 

In March 2019, the Company, through VSSB obtained a loan in the aggregate amount of RM5,000,000 from Public Islamic Bank Berhad, a financial institution in Malaysia for working capital purpose, which bears interest at a rate of 1.00% per annum above base financing rate, variable rate quoted by the bank, with 120 monthly instalments of RM60,590 each (including interests) over a period of 10 years and will mature in 2029.

 

The loan is secured by the first party charge over agricultural lands under Lot 3695, Lot 3696 and Lot 1552 situated at Pahang, Malaysia, and a third-party charge over the 15-story commercial office building registered under PGCG Assets. The loan is also secured by a specific debenture on the oil palm and durian plantation is to be obtained, and personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and subsidiaries of the Company, UHT and PGCG Assets. The cost of funds was 7.97% per annum for the period ended July 31, 2019.

 

 

 

 

  F- 25  
 

 

  PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

As of October 31, 2019, the minimum future payments of the aggregate bank loans in the next five years and thereafter are as follows:

 

Year ending October 31:      
2020   $ 717,475  
2021     759,342  
2022     803,711  
2023     850,739  
2024     900,112  
Thereafter     10,613,118  
         
Total:   $ 14,644,497  

 

8. STOCKHOLDERS’ EQUITY

 

As of October 31, 2019 and 2018, 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.

 

9. NET LOSS PER SHARE

 

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,  
    2019     2018  
Basic and diluted net loss attributable to Prime Global Capital Group Incorporated stockholders:                
Numerator:                
- Net loss attributable to Prime Global Capital Group Incorporated stockholders   $ (268,058 )   $ (532,332 )
                 
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

 

 

 

  F- 26  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

10. INCOME TAXES

 

The local (United States) and foreign components of loss before income taxes were comprised of the following:

 

    Years ended October 31,  
    2019     2018  
Tax jurisdictions from:                
– Local   $ (128,220 )   $ (116,549 )
– Foreign, representing:                
Malaysia     38,106       (223,990 )
Loss before income taxes   $ (90,114 )   $ (340,539 )

 

Provision for income taxes consisted of the following:

 

    Years ended October 31,  
    2019     2018  
Current:                
– Local   $     $  
– Foreign, representing:                
Malaysia     183,545       226,297  
                 
Deferred:                
– Local            
– Foreign     (6,338 )     (12,874 )
Income tax expense   $ 177,207     $ 213,423  

 

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, 2019 and 2018, the operations in the United States of America incurred $1,163,399 and $1,035,179, 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, 2019, the Company has provided for a full valuation allowance of $407,190 (2018: $362,313) 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 is $135,000 at October 31, 2019 and 2018 (included in accrued liabilities and other payables) in respect of potential tax penalty of the late filing of IRS return and, if recognized, will affect the Company’s effective tax rate.

  

 

 

  F- 27  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

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 18% (2019: 17%) (for Company with paid up capital not more than RM2.5 million and on the first RM 500,000 income) and 24% (2019: 24%) (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 24% 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, 2019, the Company has provided for a full valuation allowance against the deferred tax assets of $163,702 (2018: $162,104) 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.

 

A reconciliation of loss before income taxes to the effective tax rate as follows:

 

    Years ended October 31,  
    2019     2018  
             
Loss before income taxes   $ 38,106     $ (223,990 )
Statutory income tax rate     24%       24%  
Income tax at statutory tax rate     9,146       (53,758 )
                 
Tax effect of non-deductible expenses     29,652       40,398  
Tax effect of non-taxable income     672       (377 )
Tax effect of non-business source rental income     130,962       212,404  
Under-provision in prior years     (292 )     554  
Net operating loss     7,067       14,202  
Income tax expense   $ 177,207     $ 213,423  

 

During fiscals 2019 and 2018, the Company revisited the facts and circumstances and determined that rental income at “Megan Avenue” and “Le Apple” should be more appropriately taxed as a non-business source under Section 4(d) of the Income Tax Act.

 

 

 

 

 

  F- 28  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of October 31, 2019 and 2018:

 

    As of October 31,  
    2019     2018  
Deferred tax assets:                
Net operating loss carry forwards                
- United States of America   $ 407,190     $ 362,313  
- Malaysia     163,702       162,104  
Total deferred tax assets     570,892       524,417  
Less: valuation allowance     (570,892 )     (524,417 )
Deferred tax assets   $     $  
                 
Deferred tax liabilities – current                
Rental concession   $     $  
                 
Deferred tax liabilities – non-current                
Property, plant and equipment     1,947       1,701  
Rental concession     152,306       158,349  
    $ 154,253     $ 160,050  

 

11. PENSION PLAN

 

The Company is required to make contribution on behalf of its employees under a government-mandated defined contribution pension scheme for its eligible full-time 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 $21,823 and $23,602 for the years ended October 31, 2019 and 2018, respectively.

 

12. SEGMENT INFORMATION

 

(a) Business segment reporting

 

During the years ended October 31, 2019 and 2018, 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

 

 

 

 

 

 

  F- 29  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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, 2019  
    Plantation Business     Real Estate Business     Corporate     Total  
                         
Revenues, net   $ 286,084     $ 1,657,811     $     $ 1,943,895  
Less: inter-company revenues           (25,756 )           (25,756 )
Revenues from external customers     286,084       1,632,055             1,918,139  
Cost of revenues     (82,983 )     (566,513 )           (649,496 )
Gross profit     203,101       1,065,542             1,268,643  
                                 
Depreciation     12,434       463,140       6,062       481,636  
Net income (loss)     30,933       47,123       (345,377 )     (267,321 )
Total assets     6,308,836       37,943,770       220,675       44,473,281  
Expenditure for long-lived assets   $ 33,515     $     $     $ 33,515  

  

    Year ended October 31, 2018  
    Plantation Business     Real Estate Business     Corporate     Total  
                         
Revenues, net   $ 164,947     $ 1,391,294     $     $ 1,556,241  
Less: inter-company revenues           (26,655 )           (26,655 )
Revenues from external customers     164,947       1,364,639             1,529,586  
Cost of revenues     (79,679 )     (615,361 )           (695,040 )
Gross profit     85,268       749,278             834,546  
                                 
Depreciation     6,757       294,980       6,274       308,011  
Net income (loss)     (5,272 )     (157,970 )     (390,720 )     (553,962 )
Total assets     6,151,655       38,572,563       248,526       44,972,744  
Expenditure for long-lived assets   $ 1,566     $ 26,359     $     $ 27,925  

 

All long-lived assets are located in Malaysia.

 

 

 

  F- 30  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), except for number of shares or stated otherwise)

 

 

13. CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For the years ended October 31, 2019 and 2018, the customer who accounted for 10% or more of the Company’s revenues is presented as follows:

 

        Year ended October 31, 2019     October 31, 2019  
    Business
segment
  Revenues     Percentage
of revenues
    Trade accounts
receivable
 
Le Apple Boutique Hotel (KLCC) Sdn. Bhd.   Real estate   $ 1,558,111       83%     $ 4,104  
Lim Joo Soon Enterprise   Plantation Business     286,084       15%       8,852  
        $ 1,844,195       98%     $ 12,956  

 

        Year ended October 31, 2018     October 31, 2018  
    Business
segment
  Revenues     Percentage
of revenues
    Trade accounts
receivable
 
Le Apple Boutique Hotel (KLCC) Sdn. Bhd.   Real estate   $ 1,289,505       89%     $ 2,398  

 

(b) Major vendors

 

During the fiscal year ended October 31, 2019, and 2018, there is no vendor accounted for 10% or more of our purchase.

 

(c) Credit risk

 

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 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.

 

 

 

  F- 31  
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“$”), 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 foreign exchange risk.

 

(f) Commodity price

 

The Company’s primary market risk exposure results from the price it receives for its palm oil. The Company does not currently engage in any commodity hedging activities, although it may do so in the future. Realized commodity pricing for the Company’s operation is primarily driven by the prevailing worldwide price for palm oil. Pricing for palm oil has been volatile and unpredictable in recent years, and the Company expects this volatility to continue in the foreseeable future. The prices the Company receives for operation depend on many factors outside of its control, including volatility in the differences between product prices at sales points and the applicable commodity index price.

 

(g) Malaysian real estate market risk

 

The Company’s real estate business may be affected by market conditions and economic challenges experienced by the economy as a whole in Malaysia, conditions in the credit markets or by local economic conditions in the markets in which its properties are located. Such conditions may impact the Company’s results of operations, financial condition or ability to expand its operations.

 

(h) Market risk related to marketable securities

 

The Company is also exposed to the risk of changes in the value of financial instruments, caused by fluctuations in equity prices related to marketable securities. Changes in these factors could cause fluctuations in earnings and cash flows.

 

14. COMMITMENTS AND CONTINGENCIES

 

(a) Operating lease commitments

 

As of October 31, 2019, 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 October 31, 2019, the Company does not have any significant capital commitments.

 

15. 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 October 31, 2019 up through the date of the these condensed consolidated financial statements. During the period, the Company did not have any material recognizable subsequent events.

    

 

 

 

  F- 32  
 

 

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

ITEM 9A. Controls and Procedures.

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Interim Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Interim Chief Financial Officer, concluded that our disclosure controls and procedures, subject to limitations as noted below, as of October 31 2019, and during the period prior to and including the date of this report, were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company that could have a material effect on the financial statements.

 

Under the supervision and with the participation of our Chief Executive Officer, and Interim Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of October 31, 2018.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

During the fourth quarter of fiscal 2019, there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

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Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting

 

Because of its inherent limitations, our disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

ITEM 9B. Other Information.

 

In March 2019, the Company, through VSSB obtained a loan in the aggregate amount of RM5,000,000 from Public Islamic Bank Berhad, a financial institution in Malaysia for working capital purpose, which bears interest at a rate of 1.00% per annum above base financing rate, variable rate quoted by the bank, with 120 monthly instalments of RM60,590 each (including interests) over a period of 10 years and will mature in 2029.

 

The loan is secured by the first party charge over agricultural lands under Lot 3695, Lot 3696 and Lot 1552 situated at Pahang, Malaysia, and a third-party charge over the 15-story commercial office building registered under PGCG Assets. The loan is also secured by a specific debenture on the oil palm and durian plantation is to be obtained, and personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and subsidiaries of the Company, UHT and PGCG Assets. The cost of funds was 7.97% per annum for the period ended July 31, 2019.

 

 

 

 

 

 

 

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PART III

 

ITEM 10.  Directors, Executive Officers and Corporate Governance.

 

Set forth below are the present directors and executive officers and director nominees of the Company. There are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, director nominees, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.

 

Name Age Position
Weng Kung Wong 47 Chief Executive Officer, Interim Chief Financial Officer, Interim Secretary and Director
Maylee Gan Suat Lee 42 Director
Soo Choon Meng 51 Director

 

Weng Kung Wong, age 47, our Chief Executive Officer and Director since November 15, 2010, founded Mobile Wallet Sdn. Bhd., MWSB, one of the first Malaysian m-commerce companies, in 2004 and currently serves as its Executive Director and Chief Executive Officer. Prior to founding MWSB, Mr. Wong served as an Agency Unit Manager of MAA Insurance from April, 2001 to November, 2003. From January, 2000 to April, 2001, he was the Marketing Director of Spider Holding Sdn. Bhd., an herb products distribution company. Mr. Wong began his professional career in 1995 with Forever Living Products, a health products multilevel marketing company, where he spent four years in positions of accelerating responsibility in the areas of business development and marketing. Mr. Wong obtained a bachelor’s degree in Management Information Systems from the National Central University of Taiwan in 1995. As our Chief Executive Officer, Mr. Wong brings to our Board of Directors knowledge of our operations and history, business leadership, corporate strategy and entrepreneurial expertise.

 

Maylee Gan Suat Lee, age 42, joined our Board of Directors on April 1, 2016. She is currently the founder and senior partner of Messrs. Maylee Gan & Tai. Prior to founding her firm in 2008, Ms. Gan practiced at one of the top 5 legal firms in Malaysia, Lee Hishammuddin Allen & Gledhill from 2004 to 2008. Ms. Gan graduated with a Bachelor of Laws (Hons) degree from the University of London, England in 1999. She obtained her Certificate of Legal Practice in 2000 and has a Masters of Science in Information Technology (MSc IT) from the University of Staffordshire in 2004.

 

Ms. Gan was admitted and enrolled as an advocate and solicitor of the High Court of Malaya in 2005. She has vast experience in various complex corporate matters, and she was the lead associate in charge of the largest worldwide business disposal to-date which involves the worldwide sale of its Healthcare business division in 2006, and the largest Asset-Backed Securities transaction carried out by a listed corporation in Malaysia in the year 2008. Ms. Gan is also a Non-executive Director of G&L Trading Sdn. Bhd, as a successor of her late father. G&L Trading Sdn. Bhd supplies cleaning detergent to hotels and food & beverages related businesses. Through her vast experience in legal corporate matters with numerous large corporations, with which her legal firm is a panel of solicitor, Ms. Gan brings to the Board of Directors her legal insight, knowledge and experience in legal corporate matters.

 

Soo Choon Meng, 51, joined our Board of Directors on August 1, 2017. He is currently the Managing Proprietor of C.M.SOO Associates, an accounting and audit firm. Mr. Soo has served as a director of Galasys GLT Sdn. Bhd. since 2004, and has been responsible for the day to day running of the business. Mr. Soo also serves on the Board of Directors of various other private Malaysian and international companies that are in the field of property holding and investment holding. Mr. Soo is a Chartered Accountant by training, having qualified by completing the professional examination of the Chartered Association of Certified Accountants (UK) in June 1996, and received his membership of the Malaysian Institute of Accountants (Chartered Accountant) in February 1999 and admitted as a Fellow Member of the Chartered Association of Certified Accountants (UK) in July 2003. Mr. Soo brings to the Board of Directors his expertise in financial and tax matters.

  

 

 

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Family Relationships

 

There are no family relationships between any of our directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

No executive officer or director is a party in a legal proceeding adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

 

No executive officer or director has been involved in the last ten years in any of the following:

 

  · Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  · Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

  · Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

 

  · Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

  · Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or

 

  · Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Board Committees

 

The members of each of our Compensation, Audit, and Nominations and Corporate Governance committees are comprised of our two independent directors Maylee Gan Suat Lee and Soo Choon Meng. Maylee Gan Suat Lee and Soo Choon Meng were appointed to serve as the Chairman or Chairperson, as applicable, of the Compensation Committee and the Nominations and Corporate Governance Committee, respectively. The Company current does not have an Audit Committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act but hopes to have one as its business develops. Copies of the charters for each of the Compensation, Audit and Nominations and Corporate Governance Committees are filed as Exhibits 99.1, 99.2 and 99.3, respectively.

 

Code of Ethics

 

On February 2, 2012, our Board of Directors adopted a Code of Business Conduct and Ethics applicable to all employees of the Company including the principal executive officer, the principal financial officer and the principal accounting officer. The Board also adopted a separate Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which contains provisions specifically applicable to our Chief Executive Officer and senior financial officers including the Chief Financial Officer. A copy of the Code of Business Conduct and Ethics and Code of Ethics for the Chief Executive Officer and Senior Financial Officers are filed as Exhibit 14 to this Annual Report and are incorporated herein by reference. The Company will provide a copy of its Code of Business Conduct and Ethics and Code of Ethics for the Chief Executive Officer and Senior Financial Officers upon written request addressed to the Secretary of the Company.

 

 

 

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ITEM 11.  Executive Compensation.

 

Compensation Philosophy and Objectives

 

Our executive compensation philosophy is to create a long-term direct relationship between pay and our performance. Our executive compensation program is designed to provide a balanced total compensation package over the executive’s career with us. The compensation program objectives are to attract, motivate and retain the qualified executives that help ensure our future success, to provide incentives for increasing our profits by awarding executives when corporate goals are achieved and to align the interests of executives and long-term stockholders. The compensation package of our named executive officers consists of two main elements:

 

  1. base salary for our executives that is competitive relative to the market, and that reflects individual performance, retention and other relevant considerations; and

 

  2. discretionary bonus awards payable in cash and tied to the satisfaction of corporate objectives.

 

Process for Setting Executive Compensation

 

Our Compensation Committee is responsible for developing and overseeing the implementation of our philosophy with respect to the compensation of executives and for monitoring the implementation and results of the compensation philosophy to ensure compensation remains competitive, creates proper incentives to enhance stockholder value and rewards superior performance. The Compensation Committee annually reviews and approves for each named executive officer, and particularly with regard to the Chief Executive Officer, all components of the executive’s compensation. The Compensation Committee may award discretionary bonuses to each of the named executives, and reviews and approves the process and factors (including individual and corporate performance measures and actual performance versus such measures) used by the Chief Executive Officer to recommend such awards. Additionally, the Compensation Committee reviews and approves the base salary, equity-incentive awards (if any) and any other special or supplemental benefits of the named executive officers.

 

The Chief Executive Officer periodically provides the Compensation Committee with an evaluation of each named executive officer’s performance, based on the individual performance goals and objectives developed by the Chief Executive Officer at the beginning of the year, as well as other factors. The Compensation Committee provides an evaluation for the Chief Executive Officer. These evaluations serve as the bases for bonus recommendations and changes in the compensation arrangements of our named executives.

 

Our Compensation Peer Group

 

We currently engage in informal market analysis in evaluating our executive compensation arrangements. As the Company and its businesses mature, we may retain compensation consultants that will assist us in developing a formal benchmark and selecting a compensation peer group of companies similar to us in size or business for the purpose of comparing executive compensation levels.

 

Program Components

 

Our executive compensation program consists of the following elements:

 

Base Salary

 

Our base salary structure is designed to encourage internal growth, attract and retain new talent, and reward strong leadership that will sustain our growth and profitability. The base salary for each named executive officer reflects our past and current operating profits, the named executive officer’s individual contribution to our success throughout his career, internal pay equity and informal market data regarding comparable positions within similarly situated companies. In determining and setting base salary, the Compensation Committee considers all of these factors, though it does not assign specific weights to any factor. The Compensation Committee generally reviews the base salary for each named executive officer on an annual basis. For each of our named executive officers, we review base salary data internally obtained by the Company for comparable executive positions in similarly situated companies to ensure that the base salary rate for each executive is competitive relative to the market.

 

 

 

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Discretionary Bonus

 

The objectives of our bonus awards are to encourage and reward our employees, including the named executive officers, who contribute to and participate in our success by their ability, industry, leadership, loyalty or exceptional service and to recruit additional executives who will contribute to that success.

 

Each of our named executive officers is eligible for consideration for a discretionary cash bonus. The Chief Executive Officer makes recommendations regarding bonus awards for the named executive officers and the Compensation Committee provides the bonus recommendation for the Chief Executive Officer. However, the Compensation Committee has sole and final authority and discretion in designating to whom awards are made, the size of the award, if any, and its terms and conditions. The bonus recommendation for each of the named executive officers depends on a number of factors, including (i) the performance of the Company for the year, (ii) the satisfaction of certain individual and corporate performance measures, and (iii) other factors which the Compensation Committee may deem relevant. The Company did not award any cash bonuses during fiscal year 2019.

 

Stock Holdings

 

The Compensation Committee recognizes the importance of having a portion of the named executive officers’ compensation be paid in the form of equity, to help align the executives’ interests with the interests of the Company’s stockholders. At this point, however, the Compensation Committee has chosen to emphasize the cash-based portion of our compensation program over a stock program because it believes the discretionary nature of the cash-based compensation gives it the needed flexibility to factor in and reward the attainment of longer-term goals for the Company and the executives, as the Compensation Committee deems appropriate.

 

Accordingly, we encourage, but do not insist on, executive ownership of our common stock. Methods of supporting ownership include turning to executives to support the financing needs of the Company. We have historically allowed our named executives to participate in private placements of the Company’s securities on the same terms and conditions as other investors. During fiscal year 2012, our Chief Executive Officer invested approximately $20,890,272 into the Company resulting in a beneficial ownership of 54,811,085 shares of common stock, or approximately 10.69% of our issued and outstanding common stock. Our executive officers did not purchase any of our securities during fiscal year 2019 ended October 31, 2019. We believe that this practice achieves the dual goals of meeting the Company’s financing needs and aligning our executives’ interests with the interests of our stockholders.

 

We have not timed nor do we plan to time our release of material non-public information for the purpose of affecting the value of executive compensation.

 

Summary Compensation Table

 

The following summary compensation table sets forth the aggregate compensation we paid or accrued during the fiscal years ended October 31, 2019, and 2018 to (i) our Chief Executive Officer (principal executive officer), (ii) our Chief Financial Officer (principal financial officer), (iii) our three most highly compensated executive officers other than the principal executive officer and the principal financial officer who were serving as executive officers on October 31, 2019, whose total compensation was in excess of $100,000, and (iii) up to two additional individuals who would have been within the two-other-most-highly compensated but were not serving as executive officers on October 31, 2019.

 

Name and
Principal Position
  Year   Salary (1)     Bonus     Stock
Awards
    Option
Awards
    Non-Equity
Incentive Plan Compensation
    Nonqualified
Deferred
Compensation Earnings
    All Other
Compensation
    Total(1)  
Weng Kung Wong   2019     81,107       0       0       0       0       0       0     $ 81,107  
Chief Executive Officer and President   2018     83,939       0       0       0       0       0       0     $ 83,939  

 

  (1) All cash compensation was paid in Malaysian Ringgit, our functional currency. The Malaysian Ringgit was converted into United States Dollars using the exchange rate prevailing at the dates of payment at an average annualized rate of 4.1653 and 4.0248 for fiscal years ended October 31, 2019 and 2018, respectively.

 

 

 

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Narrative disclosure to Summary Compensation Table

 

Mr. Wong is a party to an employment agreement with UHT, our subsidiary, dated July 19, 2011, or the Employment Agreement. Pursuant to the terms of the Employment Agreement, Mr. Wong will receive an annual base salary of MYR 337,836 or $81,107.

 

Mr. Wong may terminate his employment agreement by giving two months prior written notice or, in lieu of such notice, electing to immediately terminate and receive a sum equal to two month salary. UHT may terminate each Employment Agreement by giving 24 hours prior written notice in the event of any gross misconduct, criminal activities committed by the employee, or serious default or breach by the employee of any terms of his employment agreement or the rules and regulations of UHT.

 

Mr. Wong also executed a noncompetition and nondisclosure agreement containing non-solicitation obligations that survive the termination of the agreement for a period of two years, confidentiality obligations and other obligations relating to employee inventions by Mr. Wong.

 

The foregoing descriptions of the Employment Agreement is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.6 to this Annual Report and is incorporated herein by reference.

 

Our executive officers are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with their services on our behalf.

 

Equity Awards

 

There are no options, warrants or convertible securities outstanding. At no time during the last fiscal year with respect to any of any of our executive officers was there:

 

  · any outstanding option or other equity-based award repriced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);

 

  · any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

 

  · any option or equity grant;

 

  · any non-equity incentive plan award made to a named executive officer;

 

  · any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

 

  · any payment for any item to be included under All Other Compensation in the Summary Compensation Table.

 

 

 

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Director Compensation Table

 

The following director compensation table sets forth the aggregate compensation we paid or accrued during the fiscal year ended October 31, 2019:

 

Name   Fees earned or paid in cash*
($)
    Stock awards
($)
    Option awards
($)
    Non-equity incentive plan compensation
($)
    Change in pension value and nonqualified deferred compensation earnings     All other compensation
($)
    Total
($)
 
(a)     (b)       (c)       (d)       (e)       (f)       (g)       (h)  
Maylee Gan Suat Lee     8,643 *                                   8,643  
                                                         
Soo Choon Meng **     8,643 *                                   8,643  

 

  * All fees were paid in Malaysian Ringgit, our functional currency. The Malaysian Ringgit was converted into United States Dollars using the exchange rate prevailing at the dates of payment at an average annualized rate of 4.1653 for fiscal year ended October 31, 2019.

 

  ** Soo Choon Meng was appointed to serve as a director effective August 1, 2017.

 

Narrative disclosure to Director Compensation Table

 

During our fiscal year ended October 31, 2019, we did not provide compensation to any of our employee directors for serving as our director. We currently have no formal plan for compensating our employee directors for their services in their capacity as directors, although we may elect to issue stock options to such persons from time to time.

 

Non-Employee Director Fees

 

Our Compensation Committee and Board determines the form and amount of compensation for our non-employee directors based on informal surveys of similar companies and the amount necessary to attract and retain such directors. Directors who are residents of Malaysia receive a monthly retainer in the amount of RM3,000. All directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Compensation Committee may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

 

 

 

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Compensation Risk Management

 

The Compensation Committee collaborated with our Board of directors and human resources staff to conduct an assessment of potential risks that may arise from our compensation programs. Based on this assessment, the Compensation Committee concluded that our policies and practices do not encourage excessive and unnecessary risk taking that would be reasonably likely to have material adverse effect on the Company. The assessment included our cash incentive programs, which awards non-executives with cash bonuses for punctuality. Our compensation programs are substantially identical among business units, corporate functions and global locations (with modifications to comply with local regulations as appropriate). The risk-mitigating factors considered in this assessment included:

 

  · the alignment of pay philosophy, peer group companies and compensation amounts relative to local competitive practices to support our business objectives; and

 

  · effective balance of cash, short- and long-term performance periods, caps on performance-based award schedules and financial metrics with individual factors and Compensation Committee and management discretion.

 

Compensation Committee Interlocks and Insider Participation

 

Maylee Gan Suat Lee and Soo Choon Meng served on our Compensation Committee during fiscal year ended October 31, 2019.

 

During the fiscal year ended October 31, 2019, none of our executive officers has served: (i) on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our compensation committee; (ii) as a director of another entity, one of whose executive officers served on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of the registrant; or (iii) on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as our director.

 

 Compensation Committee Report

 

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis in this report with management. Based on its review and discussion with management, the Board of Directors recommended that the Compensation Discussion and Analysis be included in this Annual Report. The material in this report is not deemed filed with the SEC and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this Annual Report and irrespective of any general incorporation language in such filing.

 

Submitted by members of the Compensation Committee:

Maylee Gan Suat Lee

Soo Choon Meng

 

 

 

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ITEM 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of January 13, 2020 certain information with regard to the record and beneficial ownership of the Company’s common stock by (i) each person known to the Company to be the record or beneficial owner of more than 5% of the Company’s common stock, (ii) each director of the Company, (iii) each of the named executive officers, and (iv) all executive officers and directors of the Company as a group:

 

Name of Beneficial Owner   Amount
(number
of shares)
    Percentage of Outstanding Shares of Common Stock  
Weng Kung Wong (1)     54,811,085        10.69 %  
Maylee Gan Suat Lee (1)     0         %  
Soo Choon Meng (1)     0         %  
All executive officers and directors as a group (three persons)     54,811,085       10.69 %  

 

* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o Prime Global Capital Group Incorporated, E-5-2, Megan Avenue 1, Block E, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.
(2) Applicable percentage ownership is based on 512,682,393 shares of common stock outstanding as of January 13, 2020, together with securities exercisable or convertible into shares of common stock within 60 days of January 13, 2020. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Shares of common stock that a person has the right to acquire beneficial ownership of upon the exercise or conversion of options, convertible stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within 60 days of January 13, 2020 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

ITEM 13.   Certain Relationships and Related Transactions, and Director Independence.

 

Escrow Arrangement with Peijin Wu Hoppe

 

We are party to an escrow agreement dated July 7, 2014, with Peijin Wu Hoppe, our former director, pursuant to which we agreed to deposit $100,000 on an annual basis in an escrow account up to an aggregate of $500,000. The funds will be used to finance our indemnification obligations, if any, to Ms. Hoppe under our director retainer agreement with Ms. Hoppe. Unless earlier terminated in accordance with its terms, the escrow agreement expires upon the seventh anniversary of the termination of Ms. Hoppe’s director retainer agreement, or July 29, 2022.  Our legal counsel, Chen-Drake Law Group, PC serves as the escrow agent at an annual fee of $3,000.

 

As of the date of this report, we have deposited $200,000 into the escrow account. After the escrow balance reaches $500,000, we will be obligated to make additional deposits to ensure that the escrow balance is maintained at or above $500,000 during the term of the escrow agreement.

 

The foregoing description of the escrow agreement is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.7, to this Annual Report and is incorporated herein by reference.

 

Transactions With Weng Kung Wong and Kok Wai Chai

 

As of October 31, 2019, we obtained from Kok Wai Chai, UHT’s director, several unsecured, interest-free temporary advances made to the Company with the aggregate principal amount of $86,420. The advances are repayable on demand.

 

 

 

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As of October 31, 2019, we obtained from Weng Kung Wong, our Chief Executive Officer and director, several unsecured, interest-free advances which, together with prior advances, have an aggregate principal amount of approximately $1,515,153. The advances are not expected to be repayable within the next twelve months. We repaid approximately $760,331 during fiscal year ended October 31, 2019. The advances are not expected to be repayable within the next twelve months.

 

In August 2018, we through PGCG Assets, obtained a loan in the aggregate principal amount of RM50,000,000 from Public Islamic Bank Berhad in connection with the acquisition of its 15-story commercial office building. This loan is personally guaranteed by Weng Kung Wong, our Chief Executive Officer and Director, and UHT, our wholly owned subsidiary. The foregoing description of the loan with the Public Islamic Bank Berhad is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.5, to this Annual Report and is incorporated herein by reference.

 

In April 2019, our subsidiary, VSSB is obtained a loan from Public Islamic Bank Berhad in the aggregate principal amount of RM5,000,000 in April 2019. This loan is personally guaranteed by Weng Kung Wong, our Chief Executive Officer and Director, UHT and PGCG Assets, our wholly owned subsidiaries. The foregoing description of the loan with the Public Islamic Bank Berhad is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.8.

 

We were parties to a loan from the Bank of China (Malaysia) Berhad consisting of a revolving line of credit, or the RC, in the amount of RM15,000,000 and a term loan, or the TL, in the amount of RM40,000,000, for an aggregate of RM55,000,000 in December 2014. This loan was personally guaranteed by Weng Kung Wong, our Chief Executive Officer and Director, and also guaranteed by UHT, our wholly owned subsidiary. The loan with Bank of China (Malaysia) Berhad has been redeemed through the loan granted by Public Islamic Bank Berhad in April 2019.

 

Weng Kung Wong and Kok Wai Chai also have jointly and severally guaranteed the repayment of the loans made by RHB Bank Berhad to PGCG Assets in the principal amount of RM9,840,000 in connection with the acquisition of its twelve story commercial building in Kuala Lumpur, Malaysia. The foregoing description of the loans with RHB Bank Berhad is qualified in its entirety by reference to such agreements, which are filed as Exhibits 10.2 through and including 10.4 to this Annual Report and are incorporated herein by reference.

 

Transactions with Chai Sook Tieng

 

As of 31 October 2019, we derived rental income from Keen Solution Sdn. Bhd., a company in which Chai Sook Tieng is a director and a 55% shareholder. Keen Solution Sdn. Bhd. owns 45% of the shares in Le Apple Boutique Hotel (KLCC) Sdn Bhd. which is the tenant and operator in the Le Apple Hotel.

 

We have not adopted policies or procedures for approval of related person transactions but review them on a case-by-case basis. We believe that all related party transactions were on terms at least as favorable as we would have secured in arm’s-length transactions with third parties. Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.

 

Director Independence

 

We have adopted standards for director independence that correspond to NYSE listing standards and SEC rules. An “independent director” means a person who is not an officer or employee of the Company or its subsidiaries, or any other individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To be considered independent, the Board must affirmatively determine that neither the director, nor any member of his or her immediate family, has had any direct or indirect material relationship with the Company within the previous three years. In addition, to be considered “independent” under SEC rules, each member of the Audit Committee may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from us, other than compensation for his or her services as a director.

 

 

 

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The Board considered relationships, transactions and/or arrangements with each of the directors and concluded that none of the non-employee directors, or any of his or her immediate family members, has any relationship with us that would impair his or her independence. The Board has determined that each member of the Board, other than Mr. Wong, is an independent director under applicable NYSE listing standards and SEC rules. Mr. Wong does not meet the independence standards because he is an employee and executive officer of the Company.

 

ITEM 14.   Principal AccountING Fees And Services.

 

Our Audit Committee has adopted certain pre-approval policies and procedures which are more fully described in Exhibit 99.4.

 

ShineWing Australia audited our financial statements for the fiscal years ended October 31, 2019, and 2018. All audit work was performed by the full time employees of ShineWing Australia for the above mentioned fiscal years. Our board of directors does not have an audit committee. The functions customarily delegated to an audit committee are performed by our full board of directors. Our board of directors approves in advance, all services performed by ShineWing Australia. Our board of directors has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s independence, and has approved such services.

 

The following table sets forth fees billed by our auditors during the last two fiscal years for services rendered for the audit of our annual consolidated financial statements and the review of our quarterly financial statements, services by our auditors that are reasonably related to the performance of the audit or review of our consolidated financial statements and that are not reported as audit fees, services rendered in connection with tax compliance, tax advice and tax planning, and all other fees for services rendered.

 

    Years ended October 31,  
    2019     2018  
             
Audit fees (1)   $ 76,000     $ 76,000  
                 
Audit related fees (2)     16,000       16,000  
                 
Tax fees            
                 
All other fees            

 

(1) Audit Fees represent fees for professional services billed and to be billed in connection with the audit of our consolidated annual financial statements, the audit of the effectiveness of internal control over financial reporting and review of the quarterly financial statements and internal controls over financial reporting, and audit services in connection with statutory or regulatory filings, consents or other SEC matters.

 

ShineWing Australia has billed us $76,000 and $76,000, in the aggregate, for the fiscal year ended October 31, 2019 and 2018, respectively, for audit services rendered.

 

(2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” In fiscal 2019 and 2018, this category consisted of fees billed by CH Fiduciary Ltd in connection with compiling the Company’s financial statements for fiscal 2019 and 2018.

 

 

 

 

 

  50  
 

 

PART IV

 

ITEM 15.  Exhibits and Financial Statement Schedules.

 

The following documents are filed as part of this report:

 

(1) Financial Statements

 

Financial Statements are included in Part II, Item 8 of this report.

 

(2) Financial Statement Schedules

 

No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the consolidated financial statements or notes thereto.

 

(3) Exhibits

 

Exhibit No. Name of Exhibit
2.1 Articles of Exchange (1)
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amended and Restated Bylaws (2)
4.1 Form of common stock certificate (1)
10.1 Tenancy Agreement, dated October 18, 2014, by and between PGCG Assets Holdings Sdn. Bhd. and Le Apple Boutique Hotel (KLCC) Sdn. Bhd. (3)
10.2 Offer Letter dated March 26, 2013, issued by RHB Bank Berhad with respect to four banking facilities in the aggregate principal amount of up to RM 3,452,000 (4)
10.3 Offer Letter dated March 26, 2013, issued by RHB Bank Berhad with respect to two banking facilities in the aggregate principal amount of up to RM 1,680,000 (4)
10.4 Offer Letter dated March 26, 2013, issued by RHB Bank Berhad with respect to six banking facilities in the aggregate principal amount of up to RM 4,708,000 (4)
10.5 Letter of Offer issued by Public Islamic Bank Berhad to PGCG Assets Holdings Sdn. Bhd. Effective July 10, 2018 (5)
10.6 Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Weng Kung Wong (6)
10.7 Escrow Agreement dated July 7, 2014, by and among Chen-Drake Law Group, P.C. Prime Global Capital Group Incorporated, and Peijin Wu Hoppe (7)
10.8

Letter of Offer issued by Public Islamic Bank Berhad to Virtual Setup Sdn. Bhd. effective March 28, 2019 (8)

14 Code of Business Conduct and Ethics (9)
21 List of Subsidiaries (10)
24 Power of Attorney*

 

 

 

 

  51  
 

 

31.1 Certification of Certification of Chief Executive Officer and Interim Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1 Charter to Compensation Committee (11)
99.2 Charter to Audit Committee (11)
99.3 Charter to Corporate Governance Committee (11)
99.4 Audit Committee Pre-Approval Procedures (7)

 

101.INS XBRL Instance Document*
101.SCH XBRL Schema Document*
101.CAL XBRL Calculation Linkbase Document*
101.DEF XBRL Definition Linkbase Document*
101.LAB XBRL Label Linkbase Document*
101.PRE XBRL Presentation Linkbase Document*

 

  * Filed herewith.

 

(1) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange on February 22, 2011.

 

(2) Incorporated by reference from Exhibit 2 to Preliminary Information Statement on Schedule 14C filed with the Securities and Exchange Commission on December 23, 2010.

 

(3) Incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange on August 18, 2014.

 

(4) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2013.

 

(5) Incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 29, 2019.

 

(6) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2011.

 

(7) Incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 29, 2016.

 

(8) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on  June 14, 2019.
   
(9) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2012.
   
(10) Incorporated by reference from Exhibit 21.1 to the Company’s Form 10-K filed with the Securities and Exchange Commission on January 20, 2018.
   
(11) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2012

  

 

 

  

 

 

 

 

  52  
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Prime Global Capital Group Incorporated
  (Registrant)  
       
  By: /s/Weng Kung Wong  
    Weng Kung Wong  
    Chief Executive Officer  
       
  Dated: February 3, 2020  

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:

 

Signature   Title   Date
         
/s/ Weng Kung Wong   Chief Executive Officer, Interim Chief Financial Officer,    
Weng Kung Wong   Interim Secretary and Director   February 3, 2020
    (Principal Executive Officer and Principal Financial Officer)    
         

/s/ Maylee Gan Suat Lee*

Maylee Gan Suat Lee

  Director   February 3, 2020
         

/s/ Soo Choon Meng*

Soo Choon Meng

  Director   February 3, 2020

 

 

Representing all of the members of the Board of Directors.

 

 
   
* By /s/    Weng Kung Wong
  Weng Kung Wong
  Attorney-in-Fact**

 

 

** By authority of the power of attorney filed herewith

 

 

 

 

  53  

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