UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

Amendment No. 1

 

    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

 

 

     
 

 

EXPLANATORY NOTE

 

This Amendment No. 1 to the Company’s Form 10-K (the “Amendment”) amends the Annual Report of Prime Global Capital Group Incorporated on Form 10-K for the fiscal year ended October 31, 2019 (the “Form 10-K”), as filed with the Securities and Exchange Commission on February 3, 2020, and is being filed solely amend and restate the Report of the Independent Registered Public Accounting Firm included in Item 8. Financial Statements and Supplementary Data of the Form 10-K. Except as set forth above, no other changes to Item 8. Financial Statements and Supplementary Data were made.

 

This Amendment includes new certifications by our Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits 31.1 and 32. hereto.

 

Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the Form 10-K or reflect any events that have occurred after the filing of the original Form 10-K.

 

 

 

 

 

 

 

  2  
 

 

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

 

 

 

 

 

 

 

 

 

  3  
 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

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

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Prime Global Capital Group Incorporated and its subsidiaries (the “Company”) as of October 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for each of the two years in the period ended October 31, 2019, and the related notes and schedules (collectively referred to as the “financial statements”).

 

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Going concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company reported a net loss of $268,058, a net current asset deficiency with its current liabilities exceeding its current assets by $1,467,703, an accumulated deficit of $4,545,195 as of October 31, 2019 from recurring net losses, and significant short term debt maturing in less than one year. 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 financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ ShineWing Australia                           

ShineWing Australia

Chartered Accountants

 

We have served as the Company’s auditor since 2017.

 

Melbourne, Australia

January 31, 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

 

 

 

 

 

 

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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.

 

 

 

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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.

 

 

 

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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  
 

 

Part IV.

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit No. Description
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.
   
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Schema*
101.CAL XBRL Taxonomy Calculation Linkbase*
101.DEF XBRL Taxonomy Definition Linkbase*
101.LAB XBRL Taxonomy Label Linkbase*
101.PRE XBRL Taxonomy Presentation Linkbase*

 

* Previously filed

 

 

 

 

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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: March 31, 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   March 31, 2020
    (Principal Executive Officer and Principal Financial Officer)    
         

/s/ Maylee Gan Suat Lee*

Maylee Gan Suat Lee

  Director   March 31, 2020
         

/s/ Soo Choon Meng*

Soo Choon Meng

  Director   March 31, 2020

 

 

Representing all of the members of the Board of Directors.

 

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

 

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