NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
NOTE–1
|
BASIS OF PRESENTATION
|
The accompanying unaudited condensed consolidated
financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United
States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate
to make the information not misleading.
These condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s
Annual Report on Form 10-K for the year ended October 31, 2016. All significant intercompany balances and transactions have been
eliminated on consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals)
considered necessary for a fair presentation of the operating results for the periods presented have been included in the interim
period. Operating result for the nine months ended July 31, 2017 is not necessarily indicative of the results that may be expected
for other interim periods or the year ending October 31, 2017. The condensed consolidated financial data at October 31, 2016 is
derived from audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2016, filed
on February 10, 2017.
|
NOTE–2
|
ORGANIZATION AND BUSINESS BACKGROUND
|
Prime Global Capital Group Incorporated
(formerly Home Touch Holding Company) (“PGCG” or “the Company”) was incorporated in the State of Nevada
on January 26, 2009. On January 25, 2011, the Company changed its name to Prime Global Capital Group Incorporated.
Currently, the Company, through its subsidiaries,
is principally engaged in the operation of oil palm and durian plantation, leasing of commercial properties and development of
residential real estate properties in Malaysia.
Summary of the Company’s subsidiaries
|
|
Name of entities
|
|
Place of
incorporation
|
|
Date of incorporation
|
|
Issued capital
|
|
Nature of business
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Union Hub Technology Sdn. Bhd. (“UHT”)
|
|
Malaysia
|
|
February 22, 2008
|
|
1,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Provision of corporate services to group companies
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Power Green Investments Limited (“PGIL”)
|
|
British Virgin Islands
|
|
July 13, 2011
|
|
1 issued share of US$ 1 each
|
|
De-registered
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
PGCG Properties Investment Limited (“PPIL”)
|
|
British Virgin Islands
|
|
September 1, 2011
|
|
1 issued share of US$ 1 each
|
|
De-registered
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Virtual Setup Sdn. Bhd. (“VSSB”)
|
|
Malaysia
|
|
July 19, 2010
|
|
4,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Operation of oil palm and durian plantation
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
PGCG Assets Holdings Sdn. Bhd. (“PGCG Assets”)
|
|
Malaysia
|
|
March 21, 2012
|
|
50,000,000 issued shares of ordinary shares of MYR 1 each
|
|
Investment in land & buildings
|
|
|
|
|
|
|
|
|
|
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
6.
|
|
PGCG Development Sdn. Bhd. (“PGCG Development”)
|
|
Malaysia
|
|
March 21, 2012
|
|
250,000 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
PGCG Plantations Sdn. Bhd. (“PGCG Plantation”)
|
|
Malaysia
|
|
October 4, 2011
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Holding company of VSSB
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Max Trend International Limited (“Max Trend”)
|
|
Hong Kong
|
|
August 19, 2010
|
|
2 issued shares of ordinary shares of HK$ 1 each
|
|
De-registered
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Dunford Corporation Sdn. Bhd.
|
|
Malaysia
|
|
October 4, 1990
|
|
242,000 issued shares of ordinary shares of MYR 1 each
|
|
Property holding land
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
Impiana Maksima Sdn. Bhd.
|
|
Malaysia
|
|
March 15, 2013
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Property development
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
|
PGCG Constructions Sdn. Bhd.
|
|
Malaysia
|
|
April 16, 2013
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Construction of properties
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
|
Fiesta Senada Sdn Bhd
|
|
Malaysia
|
|
November 28, 2012
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
|
Havana Avenue Sdn Bhd
|
|
Malaysia
|
|
April 4, 2014
|
|
2 issued shares of ordinary shares of MYR 1 each
|
|
Inactive operation
|
PGCG and its subsidiaries are hereinafter
referred to as (the “Company”).
|
NOTE–3
|
GOING CONCERN UNCERTAINTIES
|
The accompanying condensed consolidated
financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
For the nine months ended July 31, 2017,
the Company reported a loss of $497,185 and working capital deficit of $5,145,044 as of July 31, 2017.
In order to continue as a going concern,
the Company will expect, among other things, to generate more profitable operations in the future and/or additional capital resources.
Management’s plan is to raise adequate resources for the Company by obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing.
These condensed consolidated financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
and liabilities that may result in the Company not being able to continue as a going concern.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
NOTE–4
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The accompanying condensed consolidated
financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere
in the accompanying condensed consolidated financial statements and notes.
In preparing these condensed consolidated
financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.
The condensed consolidated financial statements
include the accounts of PGCG and its subsidiaries. All significant inter-company balances and transactions between the Company
and its subsidiaries have been eliminated upon consolidation.
·
|
Cash and cash equivalents
|
Cash and cash equivalents are carried at
cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments.
Accounts receivable are recorded at the
invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business
but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful
accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment
history, the customer’s current credit worthiness and the economic environment. The Company will consider the allowance for
doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables
that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection,
including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet
credit exposure related to its customers. Based upon the aforementioned criteria, the Company did not write off accounts receivable
on uncollectible rental receivable at July 31, 2017 and October 31, 2016.
·
|
Available-for-sale equity securities
|
Available-for-sale marketable securities
are reported at fair value using the market approach based on the quoted prices in active markets at the reporting date. The Company
classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. Any unrealized losses that are
deemed other-than-temporary are included in current period earnings and removed from accumulated other comprehensive income (loss).
Realized gains and losses on marketable
securities are included in current period earnings. For purposes of computing realized gains and losses, the cost basis of each
investment sold is generally based on the weighted average cost method.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company regularly evaluates whether
the decline in fair value of available-for-sale securities is other-than-temporary and objective evidence of impairment could include:
|
·
|
The severity and duration of the fair value decline;
|
|
·
|
Deterioration in the financial condition of the issuer; and
|
|
·
|
Evaluation of the factors that could cause individual securities to have an other-than-temporary impairment.
|
During the nine months ended July 31, 2017,
the Company invested in equity securities listed on Bursa Malaysia with a total cost of $265,606 and escrow funds (which invested
in equity securities listed in the U.S.) with a total cost of $200,000. The Company entered into an escrow agreement with Peijin
Wu Hoppe (“Hoppe”), the Company’s former director, to set up an escrow fund up to $500,000 as a reserve to indemnify
Hoppe from any claim of liability until July 29, 2022, the seventh year anniversary of the termination of Director Retainer Agreement,
or any mutual agreement with the Company and Hoppe. The unrealized loss representing the change in fair value of $40,011 and $67,930
was charged against accumulated other comprehensive income (loss) for the nine months ended July 31, 2017 and 2016, respectively.
|
·
|
Deferred development costs
|
Deferred development costs consist of replanting
costs of durian such as soil amendments, cultivation, fertilization and purchase costs of sapling. Costs related to durian development
projects at the Company’s plantation land are capitalized during the sapling, developing and planting durian fruit tree and
until the harvests are substantially available for commercial sale, and deferred development costs will then commence to be amortized
as components of plantation costs and expenses.
·
|
Property, plant and equipment
|
Property, plant and equipment are stated
at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line
basis over the following expected useful lives from the date on which they become fully operational:
Categories
|
|
Location of properties
|
|
Expected useful life
|
Freehold plantation land
|
|
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 commercial building
|
|
Land portion of 15 storey buildings “Menara CMY” in Kuala Lumpur, Malaysia
|
|
Indefinite, as per property titles
|
Building structure and improvements
|
|
Building structure of commercial buildings in Kuala Lumpur, Malaysia, including: 12 story building “Megan Avenue” and 15 story building “Menara CMY”
|
|
33 years
|
Office furniture and equipment
|
|
|
|
3-10 years
|
Motor vehicle
|
|
|
|
5 years
|
Expenditure for maintenance and repairs
is expensed as incurred. The gain or loss on the disposal of property, plant and equipment is the difference between the net sales
proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Long-lived assets primarily include freehold
plantation land, leasehold land held for development, freehold land and land improvement for rental purpose and building structure
and improvements. In accordance with the provision of ASC Topic 360, “
Impairment or Disposal of Long-Lived Assets”
,
the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each
year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The
recoverability of long-lived assets is measured at the 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 periods presented.
The Company has separately identified the
portion of freehold land and building structure, in which freehold land is not subject to amortization and buildings are to be
amortized over 33 years on a straight-line method, 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 July 31, 2017
and October 31, 2016, 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 we capitalize 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.
The Company recognizes its revenue in accordance
with ASC Topic 605, “Revenue Recognition”, upon the delivery of its plantation products when: (1) title and risk of
loss are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer;
and (4) the collection of related accounts receivable is probable. The Company’s sale arrangements do not contain general
rights of return.
(a) Plantation
sales
Revenue from the sale of palm oil fruit
bunches is recognized upon confirmation of the weight of fresh fruit bunches and transported 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 three months ended July 31, 2017 and 2016, sale of palm oil fruits
was $12,287 and $nil, respectively. For the nine months ended July 31, 2017 and 2016, sale of palm oil fruits was $96,305 and $nil,
respectively.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Pursuant to a 8-K filing on September 23,
2015, in order to concentrate on durian plantation, the Company suspended the direct operation of oil palm plantation and leased
out the oil palm land to a third party, BJ Bentong Trading Company (“BJ”) under an operating lease for 30 months from
September 21, 2015 to March 20, 2018. Pursuant to this tenancy agreement, the tenant is entitled to manage the plantation, harvest
and sell palm oil fresh fruit bunches and receive all proceeds thereto. Rental income of $nil and $25,974 was recognized for the
three months ended July 31, 2017 and 2016, respectively, and was included in revenue from plantation business. Rental income of
$nil and $76,420 was recognized for the nine months ended July 31, 2017 and 2016, respectively, and was included in revenue from
plantation business.
On September 29, 2016, the Company and
BJ entered into a letter agreement pursuant to which the parties mutually agreed to terminate the Tenancy Agreement.
The Company is currently directly managing
its oil palm and durian plantation.
(b) Rental
income
The Company generally leases the units
under operating leases with terms of two years or less. For the nine months ended July 31, 2017 and 2016, we have recorded $818,147
and $1,208,230 in lease revenue, based upon its annual rental over the life of the lease under operating lease, using the straight-line
method in accordance with ASC Topic 970-605, “
Real Estate – General – Revenue Recognition
” (“ASC
Topic 970-605”).
As of July 31, 2017, the commercial buildings
for lease are as follows:
Name of Commercial building
|
Number of units
(by floor)
|
Footage area
(square feet)
|
Vacancy percentage
|
Megan Avenue
|
12
|
19,987
|
67%
|
Le Apple Boutique Hotel KLCC
(fka “Menara CMY”)
|
15
|
91,848
|
0%
|
The Company expects to record approximately
$1.1 million in annual lease revenue under the operating lease arrangements in the next twelve months through July 31, 2018.
The Company leases store location and office
spaces to the tenants under operating lease arrangements. The Company receives rental income from the real estates it owns for
a stated period of times. Rental income is recognized over the life of the operating lease agreement as it is earned in the period
under ASC Topic 970-605. The typical leases contain initial terms of one to two years with renewal options and do not contain escalating
rent amounts. Under the lease agreement of Le Apple Boutique Hotel KLCC (fka “Menara CMY”), the initial term of lease
is one year. Provided that there are no existing breaches by the tenant, an irrecoverable annual renewal option is granted for
up to twenty-nine years, with a maximum aggregate term of thirty years. Six-months’ rent-free period under the operating
lease agreement is treated as long-term rent concession, which is being amortized as an offset to revenues collected over the term
of the underlying lease of 30 years on a straight-line basis.
|
|
July 31, 2017
|
|
|
October 31, 2016
|
|
Rental concession:
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
25,707
|
|
|
$
|
26,231
|
|
Non-current portion
|
|
|
676,950
|
|
|
|
710,425
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
702,657
|
|
|
$
|
736,656
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The estimated amortization on long-term
rent concession in the next five years and thereafter is as follows:
Period ending July 31:
|
|
|
|
|
|
2018
|
|
|
$
|
25,707
|
|
|
2019
|
|
|
|
25,707
|
|
|
2020
|
|
|
|
25,707
|
|
|
2021
|
|
|
|
25,707
|
|
|
2022
|
|
|
|
25,707
|
|
|
Thereafter
|
|
|
|
574,122
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
702,657
|
|
As of July 31, 2017, the minimum future
rental receivables on the commercial properties to be collectible in the next five years and thereafter are as follows:
Period ending July 31:
|
|
|
|
|
|
2018
|
|
|
$
|
1,115,681
|
|
|
2019
|
|
|
|
1,112,409
|
|
|
2020
|
|
|
|
1,096,050
|
|
|
2021
|
|
|
|
1,096,050
|
|
|
2022
|
|
|
|
1,096,050
|
|
|
Thereafter
|
|
|
|
23,382,410
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
28,898,650
|
|
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 as expenses when incurred.
Cost of revenue on plantation sales includes
material supplies, subcontracting costs and transportation costs incurred for planting, fertilizing and harvesting the palm oil
tree. Transportation and handling costs associated with the distribution of fresh fruit bunches to the customers are also included
in cost of revenues.
Cost related to real estate business shown
on the accompanying statements of operations include costs associated with land tax, on-site and property management personnel,
repairs and maintenance, property insurance, marketing, landscaping and other on-site and related administrative costs. Utility
expenses are paid directly by tenants.
ASC Topic 220, “Comprehensive Income”
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive
income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income,
as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on
foreign currency translation and cumulative net change in the fair value of available-for-sale investments held at the balance
sheet date. This comprehensive income is not included in the computation of income tax expense or benefit.
·
|
Non-controlling interests
|
Non-controlling interests represent the
equity interest in the capital contributions, income and loss of less than wholly-owned and consolidated entities that is not attributable
to the Company.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Income taxes are determined in accordance
with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected
to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model
for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken
or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements
when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must
initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in
Malaysia and 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$. In addition,
the Company maintains its books and record in a local currency, Malaysian Ringgit (“MYR”) and Hong Kong Dollars (“HK$”),
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.
Translation of amounts from the local currency
of the Company into US$1 has been made at the following exchange rates for the respective periods:
|
|
As of and for the period ended
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
Period-end HK$ : US$1 exchange rate
|
|
|
7.8099
|
|
|
|
7.7566
|
|
Period-average HK$ : US$1 exchange rate
|
|
|
7.7736
|
|
|
|
7.7621
|
|
Period-end MYR : US$1 exchange rate
|
|
|
4.2790
|
|
|
|
4.0500
|
|
Period-average MYR : US$1 exchange rate
|
|
|
4.3788
|
|
|
|
4.1285
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Parties, which can be a corporation or
individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Companies are also considered
to be related if they are subject to common control or common significant influence.
ASC Topic 280, “
Segment Reporting
”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business segments and major customers in financial statements.
During the period ended July 31, 2017 and 2016, the Company operates in two reportable operating segments in Malaysia.
·
|
Fair value of financial instruments
|
The carrying value of the Company’s
financial instruments (excluding obligation under finance lease, long-term bank loans and available-for-sale marketable securities):
cash and cash equivalents, 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.
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 July 31, 2017 and October 31, 2016, 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 July 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, available-for-sale
|
|
$
|
236,011
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities, available-for-sale
|
|
$
|
279,042
|
|
|
$
|
–
|
|
|
$
|
–
|
|
As of July 31, 2017, 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.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
·
|
Recent accounting pronouncements
|
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance
in U.S. GAAP when it becomes effective. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue
recognition standard. The amendments in ASU 2014-09 are effective for public companies for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. The standard permits the use of either the retrospective or cumulative
effect transition method. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal
versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts
with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue
from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09
and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients.
These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606.
The Company is evaluating the effect the ASUs will have on its consolidated financial statements and related disclosures. The Company
has not yet selected a transition method nor has it determined the effect of these standards on its ongoing financial reporting.
In June 2016, the FASB issued Accounting
Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure
all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of
credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact
that the standard will have on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU No.
2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of
certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for
fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company
is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.
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.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
NOTE–5
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
July 31, 2017
|
|
|
October 31, 2016
|
|
Freehold plantation land
|
|
$
|
7,845,805
|
|
|
$
|
7,845,805
|
|
Leasehold land under development
|
|
|
4,276,764
|
|
|
|
4,276,764
|
|
Freehold land under development
|
|
|
18,091,173
|
|
|
|
18,091,173
|
|
Freehold land and land improvement for rental purpose commercial building
|
|
|
15,191,123
|
|
|
|
15,191,123
|
|
Building structure and improvements
|
|
|
15,857,410
|
|
|
|
15,857,410
|
|
Office furniture, fixture and equipment
|
|
|
129,133
|
|
|
|
125,959
|
|
Motor vehicles
|
|
|
162,392
|
|
|
|
173,811
|
|
Foreign translation difference
|
|
|
(16,920,215
|
)
|
|
|
(16,009,829
|
)
|
|
|
|
44,633,585
|
|
|
|
45,552,216
|
|
Less: accumulated depreciation
|
|
|
(2,821,532
|
)
|
|
|
(2,457,773
|
)
|
Less: foreign translation difference
|
|
|
530,702
|
|
|
|
490,329
|
|
|
|
|
42,342,755
|
|
|
$
|
43,584,772
|
|
Depreciation expense for the three months
ended July 31, 2017 and 2016 was $121,964 and $132,579, respectively.
Depreciation expense for the nine months
ended July 31, 2017 and 2016 was $363,759 and $388,733, respectively.
As of July 31, 2017 and October 31, 2016,
the Company has one motor vehicle under finance lease with a carrying value of $nil and $3,378, respectively.
Both commercial buildings in Kuala Lumpur,
Malaysia are pledged against the bank loans (note 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”). 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 are unable to agree and finalize the terms of the Proposed JV. The parties
further confirmed that there was no monetary payment due to either party pursuant to the MOU or the Termination MOU.
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 as of
July 31, 2017.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
NOTE–6
|
AMOUNTS DUE (FROM) TO RELATED PARTIES
|
|
|
July 31, 2017
|
|
|
October 31, 2016
|
|
Current portion:
|
|
|
|
|
|
|
|
|
Amount due (from) to a related party, which were
unsecured, interest-free and repayable on demand,
|
|
|
|
|
|
|
|
|
Mr. Kok Wai Chai, a director of UHT
|
|
$
|
(72,065
|
)
|
|
$
|
–
|
|
Mr. Woi Khang Pua, a former director of UHT
|
|
|
–
|
|
|
|
108,149
|
|
Non-current portion:
|
|
|
|
|
|
|
|
|
Amount due to a related party, which where
unsecured, interest-free and not expected to be repaid in the next twelve months
|
|
|
|
|
|
|
|
|
Mr. Weng Kung Wong, the Company’s director
|
|
$
|
1,931,977
|
|
|
$
|
1,279,196
|
|
During the period ended July 31, 2017,
the related party loan to Mr. Wooi Khang Pua was re-assigned to Mr. Kok Wai Chai, a director of UHT because Mr. Wooi Khang Pua
was no longer a director of UHT.
|
|
July 31, 2017
|
|
|
October 31, 2016
|
|
Bank loans from financial institutions in Malaysia
|
|
|
|
|
|
|
|
|
Bank of China (Malaysia) Berhad
|
|
$
|
7,490,439
|
|
|
$
|
8,213,970
|
|
RHB Bank Berhad
|
|
|
2,089,219
|
|
|
|
2,180,786
|
|
|
|
|
9,579,658
|
|
|
|
10,394,756
|
|
Less: current portion
|
|
|
(860,704
|
)
|
|
|
(844,436
|
)
|
Bank loans, net of current portion
|
|
$
|
8,718,954
|
|
|
$
|
9,550,320
|
|
15 Story Bank Loan
In December 2014, the Company, through
PGCG Assets obtained a loan in the principal amount of RM40,000,000 from Bank of China (Malaysia) Berhad, which bears interest
at a rate of 1% per annum over the lending rate, currently 6.6% per annum, with 120 monthly installments of RM476,898 each (including
interests) over a period of 10 years or until full settlement. The loan will mature in December 2024.
The loan from Bank of China (Malaysia)
Berhad is secured by the first party charge over 15-story commercial office building Le Apple Boutique Hotel KLCC (fka Menara CMY”)
in Kuala Lumpur, Malaysia, deed of assignment of rental proceeds over the rights and interest to the rental of the 15-story commercial
office building and is personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and
a subsidiary of the Company, UHT. The loan is also secured by a debenture incorporating fixed and floating charge for RM55 million
plus interest thereon over the assets of PGCG Assets. The cost of funds was 7.6% per annum for the period ended July 31, 2017.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
12 Story Bank Loan
In May 2013, the Company, through PGCG
Assets obtained a loan in the aggregate amount of RM9,840,000 from RHB Bank Berhad, a financial institution in Malaysia to finance
the acquisition of a twelve story office building property, which bears interest at a rate of 1.90% per annum below the lending
rate, variable rate quoted by the bank, with 288 monthly installments of RM57,045 each (including interests) over a period of 24
years and will mature in 2037.
The loan is secured by the 12-story commercial
office building “Megan Avenue” in Kuala Lumpur, Malaysia and is personally guaranteed by the director and chief executive
officer of the Company, Mr. Weng Kung Wong and a director of the Company’s subsidiary, Mr. Kok Wai Chai and a subsidiary
of the Company, UHT. The cost of funds was 4.70% for the periods ended July 31, 2017.
As of July 31, 2017, the minimum future
payments of the aggregate bank borrowings in the next five years and thereafter are as follows:
Period ending July 31:
|
|
|
|
|
|
2018
|
|
|
$
|
860,673
|
|
|
2019
|
|
|
|
926,411
|
|
|
2020
|
|
|
|
997,227
|
|
|
2021
|
|
|
|
1,073,515
|
|
|
2022
|
|
|
|
1,155,703
|
|
|
Thereafter
|
|
|
|
4,566,129
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
$
|
9,579,658
|
|
|
NOTE–8
|
SHORT-TERM BANK BORROWINGS
|
The revolving line of credit was granted
concurrent with the term loans and pursuant to the same facility letter by Bank of China (Malaysia) Berhad to the Company, which
provided for up to RM15,000,000 (equal to $3,388,047) for its working capital purpose. The line bears interest at an annual rate
of 1.5% above the bank’s cost of funds on a daily basis. The line is repayable on demand or at rollover options of 1, 3,
6 & 12 months. The effective interest rate was 4.99% per annum for the period ended July 31, 2017.
The local (United States) and foreign components
of loss before income taxes were comprised the following:
|
|
Nine months ended July 31,
|
|
|
|
2017
|
|
|
2016
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
(111,273
|
)
|
|
$
|
(105,349
|
)
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
Malaysia
|
|
|
(515,197
|
)
|
|
|
(129,198
|
)
|
Hong Kong
|
|
|
164,668
|
|
|
|
–
|
|
BVI
|
|
|
19,767
|
|
|
|
–
|
|
Loss before income taxes
|
|
$
|
(442,035
|
)
|
|
$
|
(234,547
|
)
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Provision for income taxes consisted of
the following:
|
|
Nine months ended July 31,
|
|
|
|
2017
|
|
|
2016
|
|
Current:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
–
|
|
|
$
|
–
|
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
BVI
|
|
|
–
|
|
|
|
–
|
|
Malaysia
|
|
|
65,234
|
|
|
|
277,601
|
|
Hong Kong
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
– Local
|
|
|
–
|
|
|
|
–
|
|
– Foreign
|
|
|
(10,084
|
)
|
|
|
(26,733
|
)
|
Income tax expense
|
|
$
|
55,150
|
|
|
$
|
250,868
|
|
The effective tax rate in the periods presented
is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the
periods presented, the Company has a number of subsidiaries that operates in different countries and is subject to tax in the jurisdictions
in which its subsidiaries operate, as follows:
United States of America
PGCG is registered in the State of Nevada
and is subject to United States of America tax law. As of July 31, 2017 and October 31, 2016, the operations in the United States
of America incurred $810,381 and $646,189, respectively, of cumulative net operating losses which can be carried forward to offset
future taxable income. The net operating loss carryforwards begin to expire in 2031, if unutilized. The Company has provided for
a full valuation allowance of $283,633 (October 31, 2016: $226,166) against the deferred tax assets on the expected future tax
benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will
not be realized in the future.
The
Company has adopted ASC 740-10 “
Accounting for Income Taxes
” and recorded a liability for an uncertain income
tax position, tax penalties and any imputed interest thereon. The amount, recorded as an obligation, is $135,000 at July 31, 2017
and October 31, 2016 (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.
British Virgin Islands
Under the current BVI law, the Company’s
subsidiaries are not subject to tax on income. No provision for income tax is required due to operating loss incurred.
Hong Kong
Max Trend is subject to Hong Kong Profits
Tax, which is charged at the statutory income rate of 16.5% on its assessable income. No provision for income tax is required due
to operating loss incurred. As of July 31, 2017 and October 31, 2016, the Company has provided for a full valuation allowance against
the deferred tax assets of $nil and $1,065 on the expected future tax benefits from the net operating loss carryforwards as the
management believes it is more likely than not that these assets will not be realized in the future.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Malaysia
All of the Company’s subsidiaries
operating in Malaysia subject to the Malaysia Corporate Tax Laws at a progressive income tax rate starting from 19% on the assessable
income for its tax year (for company with paid up capital not more than RM2.5 million and on the first RM 500,000 income) and 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 20% for Company with paid up capital not more than RM2.5 million) on the assessable income for its
tax year. Any unutilized losses can be carried forward indefinitely to be utilized against income from any business source. As
of July 31, 2017 and October 31, 2016, the Company has provided for a full valuation allowance against the deferred tax assets
of $248,699 and $227,729, respectively, 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:
|
|
Nine months ended July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(515,197
|
)
|
|
|
(129,198
|
)
|
Statutory income tax rate
|
|
|
24%
|
|
|
|
25%
|
|
Income tax at statutory tax rate
|
|
|
(123,647
|
)
|
|
|
(32,299
|
)
|
Tax effect of non-deductible expenses
|
|
|
107,157
|
|
|
|
10,823
|
|
Tax effect of different tax rate
|
|
|
1,947
|
|
|
|
3,019
|
|
Tax effect of non-business source rental income
|
|
|
38,524
|
|
|
|
243,738
|
|
Net operating loss
|
|
|
31,169
|
|
|
|
25,587
|
|
Income tax expense
|
|
$
|
55,150
|
|
|
|
250,868
|
|
During fiscals 2017 and 2016, the Company
revisited the facts and circumstances and determined that rental income at “Megan Avenue” and “Menara CMY”
should be more appropriately taxed as a non-business source under Section 4(d) of the Income Tax Act.
The following table sets forth the significant
components of the aggregate deferred tax assets of the Company as of July 31, 2017 and October 31, 2016:
|
|
July 31, 2017
|
|
|
October 31, 2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Capital loss
|
|
$
|
11,713
|
|
|
$
|
10,055
|
|
Accrued interest expenses
|
|
|
11,893
|
|
|
|
13,694
|
|
Net operating loss carryforwards:
|
|
|
|
|
|
|
|
|
– United States of America
|
|
|
283,633
|
|
|
|
226,166
|
|
– Malaysia
|
|
|
248,699
|
|
|
|
221,223
|
|
– Hong Kong
|
|
|
–
|
|
|
|
1,065
|
|
Total deferred tax assets
|
|
|
555,938
|
|
|
|
472,203
|
|
Less: valuation allowance
|
|
|
(544,045
|
)
|
|
|
(458,509
|
)
|
Deferred tax assets
|
|
$
|
11,893
|
|
|
$
|
13,694
|
|
Deferred tax liabilities, current
|
|
|
|
|
|
|
|
|
Rent concession
|
|
$
|
6,170
|
|
|
$
|
6,558
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities, non-current
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
2,702
|
|
|
|
2,757
|
|
Rent concession
|
|
|
162,468
|
|
|
|
177,606
|
|
|
|
$
|
165,170
|
|
|
$
|
180,363
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE–10
|
STOCKHOLDERS’ EQUITY
|
As of July 31, 2017 and October 31, 2016,
the number of shares of the Company’s common stock issued and outstanding is 512,682,393 shares. There are no shares of preferred
stock issued and outstanding.
NOTE–11
|
SEGMENT INFORMATION
|
(a)
|
Business segment reporting
|
The Company currently operates two reportable
business segments, as defined by ASC Topic 280:
·
|
Plantation business –oil palm and durian plantation in Malaysia
|
·
|
Real estate business – acquisition and development of commercial and residential real estate properties in Malaysia
|
The accounting policies of the segments
are the same as those described in the summary of significant accounting policies (see Note 4). Summarized financial information
concerning the Company’s reportable segments is shown as below:
|
|
Three months ended July 31, 2017
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customer
|
|
$
|
12,287
|
|
|
$
|
282,639
|
|
|
$
|
–
|
|
|
$
|
294,926
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(6,246
|
)
|
|
|
–
|
|
|
|
(6,246
|
)
|
Revenues, net
|
|
|
12,287
|
|
|
|
276,393
|
|
|
|
–
|
|
|
|
288,680
|
|
Cost of revenues
|
|
|
(10,801
|
)
|
|
|
(110,950
|
)
|
|
|
–
|
|
|
|
(121,751
|
)
|
Gross profit
|
|
|
1,486
|
|
|
|
165,443
|
|
|
|
–
|
|
|
|
166,929
|
|
Depreciation
|
|
|
5,032
|
|
|
|
120,135
|
|
|
|
(3,203
|
)
|
|
|
121,964
|
|
Net loss
|
|
|
(39,861
|
)
|
|
|
(117,246
|
)
|
|
|
115,670
|
|
|
|
(41,437
|
)
|
Total assets
|
|
|
5,823,333
|
|
|
|
37,879,921
|
|
|
|
345,870
|
|
|
|
44,049,124
|
|
Expenditure for long-lived assets
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
2,900
|
|
|
$
|
–
|
|
|
|
Three months ended July 31, 2016
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
25,974
|
|
|
$
|
417,122
|
|
|
$
|
–
|
|
|
$
|
443,096
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(6,634
|
)
|
|
|
–
|
|
|
|
(6,634
|
)
|
Revenues, net
|
|
|
25,974
|
|
|
|
410,462
|
|
|
|
–
|
|
|
|
436,462
|
|
Cost of revenues
|
|
|
–
|
|
|
|
(126,155
|
)
|
|
|
–
|
|
|
|
(126,155
|
)
|
Gross profit
|
|
|
25,974
|
|
|
|
284,333
|
|
|
|
–
|
|
|
|
310,307
|
|
Depreciation
|
|
|
1,970
|
|
|
|
127,645
|
|
|
|
2,964
|
|
|
|
132,579
|
|
Net loss
|
|
|
7,251
|
|
|
|
(132,109
|
)
|
|
|
(95,132
|
)
|
|
|
(219,990
|
)
|
Total assets
|
|
|
6,186,616
|
|
|
|
41,587,087
|
|
|
|
403,215
|
|
|
|
48,176,918
|
|
Expenditure for long-lived assets
|
|
$
|
5
|
|
|
$
|
14
|
|
|
$
|
–
|
|
|
$
|
19
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
|
Nine months ended July 31, 2017
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customer
|
|
$
|
96,305
|
|
|
$
|
836,521
|
|
|
$
|
–
|
|
|
$
|
932,826
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(18,374
|
)
|
|
|
–
|
|
|
|
(18,374
|
)
|
Revenues, net
|
|
|
96,305
|
|
|
|
818,147
|
|
|
|
–
|
|
|
|
914,452
|
|
Cost of revenues
|
|
|
(42,580
|
)
|
|
|
(385,521
|
)
|
|
|
–
|
|
|
|
(428,101
|
)
|
Gross profit
|
|
|
53,725
|
|
|
|
432,626
|
|
|
|
–
|
|
|
|
486,351
|
|
Depreciation
|
|
|
9,448
|
|
|
|
353,494
|
|
|
|
817
|
|
|
|
363,759
|
|
Net loss
|
|
|
(43,036
|
)
|
|
|
(337,857
|
)
|
|
|
(116,292
|
)
|
|
|
(497,185
|
)
|
Total assets
|
|
|
5,823,333
|
|
|
|
37,879,921
|
|
|
|
345,870
|
|
|
|
44,049,124
|
|
Expenditure for long-lived assets
|
|
$
|
274
|
|
|
$
|
–
|
|
|
$
|
2,900
|
|
|
$
|
3,174
|
|
|
|
Nine months ended July 31, 2016
|
|
|
|
Plantation Business
|
|
|
Real Estate Business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
76,420
|
|
|
$
|
1,227,719
|
|
|
$
|
–
|
|
|
$
|
1,304,139
|
|
Inter-segment revenue
|
|
|
–
|
|
|
|
(19,489
|
)
|
|
|
–
|
|
|
|
(19,489
|
)
|
Revenues, net
|
|
|
76,420
|
|
|
|
1,208,230
|
|
|
|
–
|
|
|
|
1,284,650
|
|
Cost of revenues
|
|
|
–
|
|
|
|
(420,796
|
)
|
|
|
–
|
|
|
|
(420,796
|
)
|
Gross profit
|
|
|
76,420
|
|
|
|
787,434
|
|
|
|
–
|
|
|
|
863,854
|
|
Depreciation
|
|
|
2,946
|
|
|
|
374,968
|
|
|
|
10,819
|
|
|
|
388,733
|
|
Net income (loss)
|
|
|
10,563
|
|
|
|
(230,649
|
)
|
|
|
(265,329
|
)
|
|
|
(485,415
|
)
|
Total assets
|
|
|
6,186,616
|
|
|
|
41,587,087
|
|
|
|
403,215
|
|
|
|
48,176,918
|
|
Expenditure for long-lived assets
|
|
$
|
484
|
|
|
$
|
1,370
|
|
|
$
|
–
|
|
|
$
|
1,854
|
|
All long-lived assets are located in Malaysia.
|
NOTE–12
|
CONCENTRATIONS OF RISK
|
The Company is exposed to the following
concentrations of risk:
(a) Major
customers
For the three and nine months ended July
31, 2017 and 2016, the customers who accounted for 10% or more of the Company’s revenues is presented as follows:
|
|
|
|
Three months ended July 31, 2017
|
|
|
July 31, 2017
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
Real estate
|
|
$
|
273,080
|
|
|
|
93%
|
|
|
$
|
–
|
|
Customer B
|
|
Plantation Business
|
|
|
12,287
|
|
|
|
4%
|
|
|
|
18,878
|
|
|
|
|
|
$
|
285,367
|
|
|
|
97%
|
|
|
$
|
18,878
|
|
|
|
|
|
Three months ended July 31, 2016
|
|
|
July 31, 2016
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
Real estate
|
|
$
|
401,335
|
|
|
|
92%
|
|
|
$
|
135,802
|
|
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
|
|
|
Nine months ended July 31, 2017
|
|
|
July 31, 2017
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
Real estate
|
|
$
|
803,302
|
|
|
|
88%
|
|
|
$
|
–
|
|
Customer B
|
|
Plantation Business
|
|
|
96,305
|
|
|
|
10%
|
|
|
|
18,878
|
|
|
|
|
|
$
|
899,607
|
|
|
|
98%
|
|
|
$
|
18,878
|
|
|
|
|
|
Nine months ended July 31, 2016
|
|
|
July 31, 2016
|
|
|
|
Business segment
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Trade accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
Real estate
|
|
$
|
1,178,994
|
|
|
|
92%
|
|
|
$
|
135,802
|
|
All customers are located in Malaysia.
(b) Major
vendors
For the three and nine months ended July
31, 2017 and 2016, no vendor accounted for 10% or more of the Company’s purchases.
All vendors are located in Malaysia.
(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.
(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.
PRIME GLOBAL CAPITAL GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
(f) Commodity
price
The Company’s primary market risk
exposure results from the price it receives for its palm oil product and oilseeds. 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 product and oilseeds. Pricing for palm oil product and oilseeds
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.
|
NOTE–13
|
COMMITMENTS AND CONTINGENCIES
|
(a) Operating
lease commitment
As of July 31, 2017, the Company occupied
its own building premises and has no future minimum rental payments due under various operating leases in the next twelve months.
(b) Capital
commitment
As of July 31, 2017, the Company does not
have any significant capital commitments.
|
NOTE–14
|
SUBSEQUENT EVENTS
|
In accordance with ASC Topic 855, “
Subsequent Events
”,
which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued, the Company has evaluated all events or transactions that occurred after July 31, 2017 up through
the filing date of these condensed consolidated financial statements. During the period, the Company did not have any material
recognizable subsequent events.