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EX-32.2 - CERTIFICATION - PRIME GLOBAL CAPITAL GROUP Incprime_ex3202.htm
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EX-32.1 - CERTIFICATION - PRIME GLOBAL CAPITAL GROUP Incprime_ex3201.htm
EX-31.1 - CERTIFICATION - PRIME GLOBAL CAPITAL GROUP Incprime_ex3101.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q

 

S      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2013

 

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 333-158713

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

 

NEVADA   26-4309660
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or Organization)   Identification No.)

 

11-2, Jalan 26/70A, Desa Sri Hartamas
50480 Kuala Lumpur, Malaysia
603 6201 3198
(Address of Principal Executive Offices and Issuer’s
Telephone Number, including Area Code)

 

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 S     No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  S  No  

 

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

Large accelerated filer S   Accelerated filer 
     
Non-accelerated filer    Smaller reporting company 
(Do not check if smaller reporting company)    

 

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

 

As of March 8, 2013, the issuer had outstanding 512,682,393 shares of common stock. 

 

 
 

 

 

TABLE OF CONTENTS

 

    Page
     
     
PART I FINANCIAL INFORMATION  
     
ITEM 1 Financial Statements  
     
  Condensed Consolidated Balance Sheets as of January 31, 2013 (Unaudited) and October 31, 2012 (Audited) 1
     
  Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended January 31, 2013 and 2012 (Unaudited) 2
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2013 and 2012 (Unaudited) 3
     
  Notes to Condensed Consolidated Financial Statements (Unaudited) 4
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 34
     
ITEM 4 Controls and Procedures 34
     
PART II OTHER INFORMATION  
     
ITEM 1 Legal Proceedings 35
     
ITEM 1A Risk Factors 35
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 35
     
ITEM 3 Defaults upon Senior Securities 35
     
ITEM 4 Mine Safety Disclosures 35
     
ITEM 5 Other Information 35
     
ITEM 6 Exhibits 36
     
SIGNATURES   37
     

 

 
 

 

PART I   FINANCIAL INFORMATION

ITEM 1  Financial Statements

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JANUARY 31, 2013 AND OCTOBER 31, 2012

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

 

   January 31, 2013   October 31, 2012 
   (Unaudited)   (Audited) 
ASSETS          
Current assets:          
Cash and cash equivalents  $895,686   $1,336,849 
Marketable securities, available-for-sale       6,473,773 
Accounts receivable   37,740    63,157 
Advances to suppliers   875,044     
Deposits and other receivables   7,225    85,360 
           
Total current assets   1,815,695    7,959,139 
           
Property, plant and equipment, net   57,765,202    30,557,652 
           
Non-current assets:          
Deposits on commercial buildings   971,126    3,068,167 
           
TOTAL ASSETS  $60,552,023   $41,584,958 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $1,098   $5,431 
Amount due to a related party   292,295    1,988,516 
Income tax payable   1,037,414    834,925 
Current portion of obligation under finance lease   8,343    8,413 
Accrued liabilities and other payables   79,740    82,435 
           
Total current liabilities   1,418,890    2,919,720 
           
Long-term liabilities:          
Obligation under finance lease   28,973    31,321 
Amount due to a related party   6,520,070     
Long term bank loan   13,298,735     
           
Total liabilities   21,266,668    2,951,041 
           
Commitments and contingencies          
           
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 and 512,682,393 shares issued and outstanding, respectively   512,683    512,683 
Additional paid-in capital   35,088,677    35,088,677 
Accumulated other comprehensive income (loss)   54,399    (21,683)
Retained earnings   3,629,596    3,054,240 
           
Total stockholders’ equity   39,285,355    38,633,917 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $60,552,023   $41,584,958 

 

See accompanying notes to condensed consolidated financial statements.

1
 

 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

   Three months ended January 31, 
   2013   2012 
Revenues, net:          
Software business  $1,638,627   $199,158 
Trading business        
Plantation business   61,043    49,238 
Total revenues, net   1,699,670    248,396 
           
Cost of revenues, non related party   (25,796)   (64,364)
           
Gross profit   1,673,874    184,032 
           
Operating expenses:          
General and administrative   (483,594)   (304,572)
           
Income (loss) from operations   1,190,280    (120,540)
           
Other income (expense):          
Dividend income   26,292    1,452 
Realized (loss) gain from sale of available-for-sale securities   (364,227)   58,873 
Other income       1,421 
Interest income       4,786 
Interest expense       (479)
           
Income (loss) before income taxes   852,345    (54,487)
           
Income tax expense   (276,989)   (11,709)
           
NET INCOME (LOSS)  $575,356   $(66,196)
           
Other comprehensive income:          
- Unrealized holding gain on available-for-sale securities       602,702 
- Foreign exchange adjustment gain   76,082    28,256 
           
COMPREHENSIVE INCOME  $651,438   $564,762 
           
Net income per share – Basic and diluted   0.00    0.00 
           
Weighted average common stock outstanding – Basic and diluted   504,752,402    500,110,613 

 

See accompanying notes to condensed consolidated financial statements.

 

 

2
 

 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

   Three months ended January 31, 
   2013   2012 
         
Cash flows from operating activities:          
Net income (loss)  $575,356   $(66,196)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:          
Depreciation   15,208    13,787 
Realized loss (gain) from sale of available-for-sale securities   364,227    (58,873)
Gain on disposal of plant and equipment       (1,421)
Changes in operating assets and liabilities:          
Accounts receivable   25,099    13,793 
Advances to suppliers   (795,081)    
Deposits and other receivables   (30,138)   11,189 
Accounts payable   (4,317)   (7,092)
Amount due to a related company       2,726 
Income tax payable   210,676    7,740 
Accrued liabilities and other payables   (2,281)   (30,779)
Net cash provided by (used in) operating activities   358,749    (115,126)
           
Cash flows from investing activities:          
Purchase of marketable securities       (1,557,324)
Proceeds from sale of marketable securities   6,374,611    1,894,749 
Change in investment in cash management fund       (4,018)
Payment on commercial buildings purchase   (25,413,080)    
Purchase of plant and equipment   (13,089)   (11,256)
Proceeds from disposal of property, plant and equipment       8,894 
Net cash (used in) provided by investing activities   (19,051,558)   331,045 
           
Cash flows from financing activities:          
Advances from a director   4,869,229    7,793 
Payments on finance lease   (2,100)   (2,043)
Proceeds from bank loan   13,388,542     
Net cash provided by financing activities   18,255,671    5,750 
           
Foreign currency translation adjustment   (4,025)   17,049 
NET CHANGE IN CASH AND CASH EQUIVALENTS   (441,163)   238,718 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   1,336,849    2,592,687 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD  $895,686   $2,831,405 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:     
Cash paid for income tax  $46,063   $ 
Cash paid for interest  $   $479 
           

 

See accompanying notes to condensed consolidated financial statements.

 

3
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

NOTE 1          BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

In the opinion of management, the consolidated balance sheet as of October 31, 2012 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended January 31, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year ending October 31, 2013 or for any future period.

 

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended October 31, 2012.

 

NOTE 2          ORGANIZATION AND BUSINESS BACKGROUND

 

Prime Global Capital Group Incorporated (“PGCG” or “the Company”) was incorporated in the State of Nevada on January 26, 2009. On January 25, 2012, the Company changed its current name.

 

Currently, the Company, through its subsidiaries, is principally engaged in the operation of its oilseeds business, the provision of IT consulting and programming services, the real estate business and the business of distributing consumer products. 

 

Recapitalization and reorganization

 

On January 15, 2010, the Company approved a 1 for 20 reverse split of its common stock. All common stock and per share data for all periods presented in these condensed consolidated financial statements have been restated to give effect to the reverse stock split.

 

On September 21, 2010, the Company consummated the sale to certain accredited investors of an aggregate of 1,500,000 shares of its common stock, par value $0.001, at a per share price of $0.10, or $150,000 in the aggregate, pursuant to certain subscription agreements.

 

On November 15, 2010, the Company consummated the sale to 18 accredited investors of an aggregate of 80,000,000 shares of its common stock, par value $0.001, at a per share price of $0.01, or $800,000 in the aggregate, pursuant to certain subscription agreements.

 

Concurrently, on November 15, 2010, the Company appointed three new directors, Mr. Weng Kung Wong, Mr. Liong Tat Teh and Ms. Sek Fong Wong to the Company’s Board of Directors. Furthermore, all of the Company’s former officers resigned from their positions and Mr. Weng Kung Wong was appointed as the new chief executive officer and Mr. Teh Liong Tat as the new chief financial officer.

 

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.

4
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

Concurrently, on December 6, 2010, the Company entered into and executed 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, were 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). The Company is deemed to be a continuation of the business of UHT.

 

On January 25, 2011, the Company changed its fiscal year from March 31 to October 31 and increased its authorized capital to 1 billion shares of common stock and 100 million shares of preferred stock.

 

On February 8, 2011, the Company consummated the sale to certain accredited investors of an aggregate of 400,000,000 shares of its common stock, par value $0.001, at a per share price of $0.01, or $4,000,000 in the aggregate, pursuant to certain subscription agreements.

 

On September 7, 2011, the Company issued 110,610 shares of restricted common stock to the executive officers as services compensation equal to $70,000 at the market price of $1.58 per share.

 

On December 8, 2011, the Company entered into a Memorandum of Understanding with Mr. Wichai Samphantharat, Chief District Officer of Srira Cha province, Thailand, pursuant to which the Srira Cha province government agreed to allocate to the Company 20 Rai (approximately 8 acres) of land for trial planting of castor seeds. The Company shall provide castor seeds for cultivation by third party farmers and station a minimum of two personnel at the trial planting site at its expense. The Company intends to purchase the castor beans cultivated at the trial planting site.

 

On December 12, 2011, the board of directors of the Company approved to initiate the process for listing shares of the Company’s common stock on one or more U.S. national securities exchanges including the NYSE Amex Equities Exchange.

 

On February 16, 2012, the Company consummated the sale to Mr. Weng Kung Wong, the director and chief executive officer of the Company, of an aggregate of 667,780 shares of its common stock with par value of $0.001, at a price of $2.995 per share, or $2,000,000 in the aggregate.

 

On March 6, 2012, the Company consummated the sale to Mr. Weng Kung Wong, the director and chief executive officer of the Company, and an existing shareholder of the Company, of an aggregate of 1,076,000 shares of its common stock with par value of $0.001, at a price of $2.984 per share, or approximately $3,210,784 in the aggregate.

 

On April 3, 2012, the Company consummated the sale to three accredited shareholders of the Company, of an aggregate of 628,000 shares of its common stock with par value of $0.001, at a price of $2.887 per share, or $1,813,036 in the aggregate.

 

On May 2, 2012, the Company consummated the sale to Mr. Weng Kung Wong, the director and chief executive officer of the Company, of an aggregate of 540,000 shares of its common stock with par value of $0.001, at a price of $2.812 per share, or $1,518,480 in the aggregate.

 

On June 26, 2012, the Company consummated the sale to three accredited shareholders of the Company, of an aggregate of 760,000 shares of its common stock with par value of $0.001, at a price of $2.7 per share, or $2,052,000 in the aggregate. 

 

On January 16, 2012, the Company consummated the sale to three accredited shareholders of the Company, of an aggregate of 920,000 shares of its common stock with par value of $0.001, at a price of $2 per share, or $1,840,000 in the aggregate.

5
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

On August 6, 2012, the Company consummated the sale to three accredited shareholders of the Company of an aggregate of 2,988,000 shares of its common stock with par value of $0.001, at a price of $2 per share, or $5,976,000 in the aggregate. The Company has received the net proceeds from the sale of the shares and will use it for general corporate purposes. Mr. Weng Kung Wong, the director and chief executive officer of the Company, participated in the sale and purchased 2,038,000 of the 2,988,000 shares of common stock sold on the same terms and conditions as the other investors.

 

On September 24, 2012, the Company consummated the sale to three accredited shareholders of the Company of an aggregate of 2,652,000 shares of our common stock, par value $0.001, at a price of $2.40, or $6,364,800 in the aggregate. The Company has received the net proceeds from the sale of the shares and will use to fund the real estate acquisitions and for general corporate purposes. Mr. Weng Kung Wong, the director and chief executive officer of the Company, participated in the sale and purchased 2,260,000 of the 2,652,000 shares of common stock sold on the same terms and conditions as the other investors.

 

On October 18, 2012, the Company consummated the sale to two accredited shareholders of the Company of an aggregate of 2,340,000 shares of our common stock, par value $0.001, at a price of $2.40, or $5,616,000 in the aggregate. The Company has received the net proceeds from the sale of the shares and will use to fund the real estate acquisitions and for general corporate purposes. Mr. Weng Kung Wong, the director and chief executive officer of the Company, participated in the sale and purchased 1,860,000 of the 2,340,000 shares of common stock sold on the same terms and conditions as the other investors.

 

Summary of the Company’s subsidiaries

 

    Company name   Place/date of incorporation   Particulars of issued capital   Principal activities
                 
1.   Union Hub Technology Sdn. Bhd. (“UHT”)  

Malaysia

February 28, 2008

  1,000,000 issued shares of ordinary shares of MYR 1 each   Provision of IT consulting and programming services and distributing consumer products
                 
2.   Power Green Investments Limited (“PGIL”)  

British Virgin Islands

January 13, 2012

  1 issued share of US$ 1 each   Inactive operation
                 
3.   PGCG Properties Investment Limited (“PPIL”)  

British Virgin Islands

September 1, 2012

  1 issued share of US$ 1 each   Inactive operation
                 
4.   Virtual Setup Sdn. Bhd. (“VSSB”)  

Malaysia

January 17, 2010

  2 issued shares of ordinary shares of MYR 1 each   Operation of palm oil plantation
                 
5.   PGCG Assets Holdings Sdn. Bhd. (“PGCG Assets”)  

Malaysia

March 21, 2012

  2 issued shares of ordinary shares of MYR 1 each   Investment in land
                 
6.   PGCG Development Sdn. Bhd. (“PGCG Development”)  

Malaysia

March 21, 2012

  2 issued shares of ordinary shares of MYR 1 each   Inactive operation

 

6
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

                 
7.   PGCG Plantations Sdn. Bhd. (“PGCG Plantation”)  

Malaysia

October 4, 2011

  2 issued shares of ordinary shares of MYR 1 each   Holding company of VSSB
                 
8.   Max Trend International Limited (“Max Trend”)  

Hong Kong

August 18, 2010

  2 issued shares of ordinary shares of HK$ 1 each   Holding company of SMTG
                 
9.   Shenzhen Max Trend Green Energy Company Limited (“SMTG”)  

The PRC

January 7, 2011

  RMB 1,000,000   Castor cultivation and trading
                 
10.   Dunford Corporation Sdn. Bhd.  

Malaysia

October 4, 2009

  242,000 issued shares of ordinary shares of MYR 1 each   Property holding land
                 

PGCG and its subsidiaries are hereinafter referred to as (the “Company”).

 

NOTE – 3          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

 

·Use of estimates

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

·Basis of consolidation

 

The condensed consolidated financial statements include the accounts of PGCG and its subsidiaries. All significant inter-company balances and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

 

·Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

·Accounts receivable

 

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 management’s assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. The Company did not record any allowance for doubtful accounts for the periods presented.

 

7
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

·Advances to suppliers

 

The Company generally makes advanced payments to suppliers for material in the normal course of business. Advances to suppliers are recorded when payment is made by the Company and relieved against inventory when goods are received. The advance payments to suppliers may include provisions that set the purchase price and delivery date of raw materials.

 

Advances to suppliers are interest free and unsecured.

 

·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:

 

  Expected useful life
Freehold plantation land Indefinite
Land under development Indefinite or 99 years
Commercial building 99 years
Motor vehicles 5 years
Furniture, fixture and equipment 10 years

 

Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of 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.

 

·Impairment of long-lived assets

 

Long-lived assets primarily include property, plant and equipment. In accordance with the provision of ASC Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment charge for the years or periods presented.

 

·Finance leases

 

Leases that transfer substantially all of the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with the Company’s depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 835-30, “Imputation of Interest”.

 

8
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

·Revenue recognition

 

The Company recognizes its revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of its products when: (1) title and risk of loss are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. The Company’s sale arrangements do not contain general rights of return.

 

(a) Software sales

 

The Company generally sells the software products in an arrangement that is bundled with maintenance and support service and/or website development service, based upon the customers’ specification or modification.

 

The Company adopts ASC 985-20 and allocates the total arrangement fee among each element based on vendor-specific objective evidence of the relative fair value of each of the elements. The Company limits its assessment of fair value of each element to the price charged when the same element is sold separately. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue, assuming collection is probable. For the billed software product sales, the revenue from the undelivered element is included in deferred revenue and amortized ratably to revenue over its contractual term, typically one year.

 

Revenues from the sale of software products are recognized and completely earned upon shipment or electronic delivery of the product provided that persuasive evidence of an arrangement exists, collection is probable, payment terms are fixed and determinable and no significant obligations remain.

 

Revenues from the provision of website development service including website design and development are recognized upon the ownership and operating rights of website domain are transferred to the customers.

 

Revenues from the provision of maintenance and support service are recognized when service rendered, which consist of technical support and software upgrades and enhancements. The Company generally offers maintenance and support service to its customers for a period of twelve months, free of charge or at a monthly fixed fee. Amounts invoiced or collected in advance from the customers of delivering maintenance and support service is recorded as deferred revenue. Revenue is recognized when the related service is rendered.

 

(b) Luxury consumer products

 

The Company earns the revenue from trading of luxury consumer products. Revenue is recognized when title passes to the customer, which is generally when the product is shipped and delivered to the customers, assuming no significant obligations of the Company remain and the collection of relevant receivables is probable.

 

(c) Plantation sales

 

The Company offers two types of plantation products comprising of palm oil products and castor products.

 

Revenue from the sale of palm oil product is recognized upon confirmation of the weight of fresh fruit bunches and shipment to the customer, when there is persuasive evidence of an arrangement, delivery has occurred and risk of loss has passed, the sales price is fixed or determinable at the date of sale, and collectibility is reasonably assured.

 

Revenue from castor products includes sale of seeding and rendering of technical know-how under a bundled sales arrangement. The Company adopts ASC 985-20 and allocates the total arrangement fee among each element based on vendor-specific objective evidence of the relative fair value of each of the elements. The Company limits its assessment of fair value of each element to the price charged when the same element is sold separately. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue, assuming collection is probable. Sale of castor oilseeds is recognized when legal title passes to the customer, which is generally upon delivery of oilseeds. Rendering of technical know-how service is recognized when the principal terms of the service agreement are fulfilled and the certificate of satisfaction is confirmed by the customers.

9
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

·Cost of revenues

 

Cost of revenue on software sales primarily includes the purchase cost of software products and the labor cost incurred in the modifications, customization and enhancement of software products, the development of websites and maintenance and support services. All costs are expensed off when the title of software products and its related website domain are transferred to the customer. The cost incurred in website development is not capitalized because the ownership and operating right of its website domain is vested on the customer, not the Company itself.

 

The cost of software products is not capitalized because of the related party nature of the development and the quickly changing software market.

Cost of revenue on sales of luxury consumer products primarily consists of the purchase cost of luxury consumer products.

 

Cost of revenue on plantation sales includes rental on plantation land, material supplies and subcontracting costs incurred for planting, fertilizing and harvesting the palm oil tree. Shipping and handling costs associated with the distribution of fresh fruit bunches to the customers are also included in cost of revenues.

 

·Comprehensive income

 

ASC Topic 220, “Comprehensive Income” establishes standards for the 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 comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation and available-for-sale marketable securities. This comprehensive income is not included in the computation of income tax expense or benefit.

 

·Income taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 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.

 

For the three months ended January 31, 2013, the Company did not have any interest and penalties associated with tax positions. As of January 31, 2013, the Company did not have any significant unrecognized uncertain tax positions.

 

The Company conducts major businesses in Malaysia and China 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 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 Dollar ("US$") and the accompanying financial statements have been expressed in US$. In addition, the Company’s operating subsidiaries maintain their books and record in a local currency, MYR Renminbi (“RMB”) and Hong Kong Dollars (“HK$”), which is functional currency as being the primary currency of the economic environment in which the entity operates.

10
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity. The gains and losses are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:

 

  January 31,
  2013   2012
Period-end MYR : US$1 exchange rate 3.08300   3.0546
Period-average MYR : US$1 exchange rate 3.06232   3.1483
Period-end RMB : US$1 exchange rate 6.28860   -
Period-average RMB : US$1 exchange rate 6.28867   -
Period-end HK$ : US$1 exchange rate 7.75850   -
Period-average HK$ : US$1 exchange rate 7.75153   -

 

·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 period ended January 31, 2013, the Company operates in four reportable operating segments.

11
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

·Fair value of financial instruments

 

The carrying value of the Company’s financial instruments (excluding obligation under finance lease): cash and cash equivalents, accounts receivable, amounts due from related parties, deposits and other receivables, income tax payable, amount due to related parties, accrued liabilities and other payables approximate at their fair values because of the short-term nature of these financial instruments.

 

Management believes, based on the current market prices for interest rates on similar debt instruments, the fair value of its obligation under finance lease and long term bank loan approximates the carrying amount.

 

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1 : Observable inputs such as quoted prices in active markets;
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions
   
·Recent accounting pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations, as follows:

 

In January 2013, the Financial Accounting Standards Board issued ASC Update No. 2013-02, “Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2013-02”). ASU 2013-02 provides companies with the option to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If the Company concludes that it is more likely than not that the asset is impaired, it is required to determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with Topic 350. If the Company concludes otherwise, no further quantitative assessment is required. The Company does not expect the adoption of ASU 2013-02 to impact its results of operations or financial position.

 

NOTE 4          DEPOSITS ON COMMERICAL BUILDINGS

 

    January 31, 2013   October 31, 2012
             
Deposit on fifteen-storey commercial building   $ -   $ 2,665,838
Deposit on twelve-storey commercial building (a)   971,126     402,329

Total

 

$

971,126  

$

3,068,167

 

On June 25, 2012, PGCG Assets entered into a binding Confirmation of Salient Terms & Conditions of Sales & Purchase Agreement (“the Confirmation Letter”), to purchase a twelve-storey commercial building located in Kuala Lumpur, Malaysia at a purchase price of $3,864,643 (equivalent to MYR12,300,000).

12
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

On August 6, 2012, PGCG Assets entered into twelve separate sales and purchase agreement to purchase from FNAC Holdings Sdn. Bhd. each floor of a twelve story commercial building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia at an aggregate purchase price of MYR12,300,000 on an “AS IS WHERE IS” basis. The sales and purchase agreements generally contain the same terms and are collectively referred to as the Megan SPA. Pursuant to the terms of the Megan SPA, PGCG Assets is obligated to consummate the purchases within three (3) months of the date of the Megan SPA, which date may be extended by a period of 90 days upon payment of interest at the rate of 8% per annum on the unpaid portion of the Purchase Price for the actual number of days of extension.

 

If PGCG Assets fails to pay the purchase price or breach any provision of the Megan SPA for any reason not attributable to seller, seller will be entitled to terminate the Megan SPA. In such event, the seller shall refund to PGCG Assets all funds previously paid toward the purchase price and PGCG Assets will be required to deliver vacant possession of the property to the seller.

 

If the seller fails to complete the sale or breaches any provision of the Megan SPA for any reason not attributable to PGCG Assets, PGCG Assets will be entitled to take action for specific performance against the seller at seller’s cost and expense or terminate the Megan SPA and receive as liquidated damages an amount equal to the 10% of the purchase price. If PGCG Assets elect to terminate the Megan SPA, the seller will return all funds previously paid toward the purchase price and PGCG Assets will deliver to the seller vacant passion of the property.

 

In the event the asset becomes subject to an intended acquisition by the government or any public authority without fault of either party, PGCG Assets will be entitled to terminate the Megan SPA and receive a return of all prior sums paid toward the purchase price. Alternatively, PGCG Assets may elect to consummate the purchase agreement, in which event, PGCG Assets shall be entitled to receive all compensation payable by the government in connection with such compulsory acquisition.

 

Pursuant to the terms of the Offer Letters, the Lender agreed to lend the aggregate principal amount of RM 8,610,000 to finance the acquisition of the Building (the “Loan”). The outstanding principal amount will accrue interest at a monthly rate equal to Lender’s publicized base lending rate less 2%. As of the date of the Offer Letters, the Bank Lending Rate was 6.60% per annum. The Loan will be repayable over a period of 24 years in monthly installments of RM 49,433 and will be secured by the Building. Lender will be entitled to assess additional fees equal to 2% of the facility (but no less than RM 5000 per facility) in the event the Loan is refinanced or the Building is redeemed or disposed of or released or discharged from the security created pursuant to the Loan within 5 years from the date of the first drawdown.

 

PGCG Assets will have four months from January 25, 2013, to draw down on the loan. Funding will be contingent upon the fulfillment of several conditions precedent, including without limitation, an appraisal of the Building and any other conditions precedent as may be set forth in the definitive loan documents. The terms and conditions of the Loan will be governed by definitive documents to be prepared by the Lender.

 

13
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

NOTE 5          PROPERTIES, PLANT AND EQUIPMENT, NET

 

   January 31, 2013   October 31, 2012 
           
Plantation land  $7,845,805   $7,845,805 
Land under development   22,368,233    22,355,144 
Commercial building   27,313,980     
Motor vehicles   277,355    277,355 
Furniture, fixture and equipment   30,760    30,760 
Foreign translation difference   44,797    150,058 
    57,880,930    30,659,122 
Less: accumulated depreciation   (116,123)   (100,914)
Less: foreign translation difference   395    (556)
Total  $57,765,202   $30,557,652 

 

Depreciation expense for the three months ended January 31, 2013 and 2012 was $15,208 and $13,787, respectively.

 

On December 11, 2012, PGCG Assets consummated the purchase of a fifteen story office building located at Geran 10010, Lot 238, Section 43, Townend District of Kuala Lumpur, Wilayah Persekutuan, Kuala Lumpur, Malaysia, which is reclassified as commercial building under Property, plant and equipment.

 

NOTE6          AMOUNTS DUE TO RELATED PARTIES

 

As of January 31, 2013, amount due to a related party of $292,295 represented temporary advances made to the Company by the former shareholder of a subsidiary, Max Trend International Limited, which was unsecured, interest-free and repayable on demand.

 

As of January 31, 2013, amount due to a related party of $6,520,070 represented temporary advances made to the Company by the director and chief executive officer of the Company, Mr. Weng Kung Wong, which was unsecured, interest-free and have no fixed term of repayment. It is expected not to be repayable in the next twelve months.

 

NOTE7          ACCRUED LIABILITIES AND OTHER PAYABLES

 

Accrued liabilities and other payables consist of the following:

 

   January 31, 2013   October 31, 2012 
           
Accrued operating expenses  $69,740   $69,387 
Advances from third parties   10,000    10,000 
Deferred revenue       3,048 
   $79,740   $82,435 
           

 

14
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

NOTE8          OBLIGATION UNDER FINANCE LEASE

 

The Company purchased a motor vehicle under a finance lease agreement with the effective interest rate of 6.58% per annum, due through January 21, 2017, with principal and interest payable monthly. The obligation under the finance lease is as follows:

 

   January 31, 2013   October 31, 2012 
           
Finance lease  $37,808   $41,671 
Less: interest expense   (492)   (1,937)
           
Net present value of finance lease  $37,316   $39,734 
           
Current portion  $8,343   $8,413 
Non-current portion   28,973    31,321 
           
Total  $37,316   $39,734 

 

As of January 31, 2013, the maturities of the finance lease for each of the five years are as follows:

 

Period ending January 31:            
2014         $ 8,343
2015           8,343
2016           8,343
2017           8,343
2018           3,944
             
Total         $ 37,316

 

NOTE9          LONG TERM BANK LOAN

 

In December 2012, the Company, through PGCG Assets obtained a loan in the principal amount of RM 41,000,000 from Hong Leong Bank Berhad, a financial institution in Malaysia to finance the acquisition of a fifteen story office building property, which bears interest at a rate of 1.75% per annum over the lending rate, variable rate quoted by the bank, with 180 monthly installments over a period of 15 years and will mature on January 31, 2028.

 

For the three months ended January 31, 2013, the lending rate is 6.6% per annum.

 

The loan is secured by all assets held by PGCG Assets and is personally guaranteed by the director and chief executive officer of the Company, Mr. Weng Kung Wong and the director of the Company’s subsidiary, Mr. Kok Wai Chai and its subsidiary, UHT.

 

NOTE10          INCOME TAXES

 

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

 

   Three months ended January 31, 
   2013   2012 
Tax jurisdictions from:          
– Local  $153,166   $(148,616)
– Foreign, representing          
BVI        
Malaysia   719,111    94,129 
Hong Kong   (52)    
The PRC   (19,880)    
Income (loss) before income taxes  $852,345   $(54,487)

 

 

15
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

Provision for income taxes consisted of the following:

 

   Three months ended January 31, 
   2013   2012 
Current:          
– Local  $   $ 
– Foreign, representing          
Malaysia   276,989    11,709 
Hong Kong        
The PRC         
           
Deferred:          
– Local        
– Foreign, representing          
Malaysia        
Hong Kong        
The PRC        
Income tax expense  $276,989   $11,709 

 

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the periods presented, the Company has subsidiaries that operate in Malaysia, Hong Kong and the PRC that are subject to tax in the jurisdictions in which they operate, as follows:

 

United States of America

 

As of January 31, 2013, the operations in the United States of America incurred $271,497 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2033, if unutilized. There is also a capital loss of $126,282 from the sale of a subsidiary. The Company has provided a full valuation allowance of $139,223 against deferred tax assets on the expected future benefits from the net operating loss carryforwards and the capital loss as the management believes it is more likely than not that these assets will not be realized in the future.

 

British Virgin Islands

 

Under the current BVI law, PGIL and PPIL are not subject to tax on income.

 

Hong Kong

 

Max Trend is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on its assessable income.

 

The PRC

 

SMTG is subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%.

16
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

Malaysia

 

UHT, VSSB, PGCG Assets and PGCG Development are subject to the Malaysia Corporate Tax Laws at a progressive income tax rate starting from 20% on the assessable income for its tax year. A reconciliation of income before income taxes to the effective tax rate as follows:

 

   Three months ended January 31, 
   2013   2012 
         
Income before income taxes  $719,111   $94,129 
Statutory income tax rate   20%   20%
Income tax at statutory tax rate   143,821    18,825 
Tax effect of non-deductible expenses   47,147    5,352 
Tax effect of non-taxable income       (12,257)
Tax effect of tax allowances       (2,966)
Tax adjustment   46,578     
Net operating loss   39,443    2,755 
Income tax expense  $276,989   $11,709 

 

The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of January 31, 2013 and October 31, 2012:

 

    January 31, 2013   October 31, 2012
Deferred tax assets:            
Capital loss   $ 44,199   $ 44,199
Net operating loss carryforwards            
– Local (United States)     95,024     148,632
– Hong Kong     727     718
      139,950     193,549
Less: valuation allowance     (139,950)     (193,549)

Deferred tax assets

  $ -   $ -

 

NOTE11          STOCKHOLDERS’ EQUITY

 

As of January 31, 2013, the number of shares of the Company’s common stock issued and outstanding is 512,682,393 shares. There are no shares of preferred stock issued and outstanding.

 

NOTE12          RELATED PARTY TRANSACTIONS

 

For the three months ended January 31, 2013 and 2012, the Company leased an office premise at the current market value of $2,447 and $2,382 from a related company, respectively, which is controlled by the director and chief executive officer of the Company, Mr. Weng Kung Wong in the normal course of business.

17
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

NOTE13          SEGMENT INFORMATION

 

(a) Business Segment Reporting

 

The Company operates four reportable business segments in Malaysia and the PRC, as defined by ASC Topic 280:

 

·Software business – sale of software products and website development
·Trading business – trading of luxury consumer products
·Plantation business – sale of palm oil products and oilseed
·Real estate business – acquisition and development of commercial and residential real estate properties in Malaysia

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 4). The Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below:

 

   Three months ended January 31, 2013 
    Software Business    Trading Business    Plantation Business    Real Estate Business    Corporate    Total 
                               
Revenues, net  $1,638,627   $   $61,043   $   $   $1,699,670 
Cost of revenues   (6,907)       (18,889)           (25,796)
Gross profit   1,631,720        42,154            1,673,874 
Depreciation   1,060        4,719        9,429    15,208 
Net income (loss)   859,353        (8,939)       (275,058)   575,356 
Total assets   24,327        9,076,787    51,270,441    180,468    60,552,023 
Expenditure for long-lived assets  $   $   $   $25,426,169   $   $25,426,169 

 

 

   Three months ended January 31, 2012 
    Software Business    Trading Business    Plantation Business    Real Estate Business    Corporate    Total 
                               
Revenues, net  $199,158   $   $49,238   $   $   $248,396 
Cost of revenues   (6,718)       (57,646)           (64,364)
Gross profit   192,440        (8,408)           184,032 
Depreciation           3,963        9,824    13,787 
Net income (loss)   100,331        (17,911)       (148,616)   (66,196)
Total assets            1,314,653        6,669,990    7,984,643 
Expenditure for long-lived assets  $   $   $114   $   $11,142   $11,256 

 

 

18
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

(b) Geographic Segment Reporting

 

In respect of geographical segment reporting, sales are based on the countries in which the customer is located, as follows:

 

  Three months ended January 31, 
   2013   2012 
Revenues, net          
Malaysia  $1,689,993   $248,396 
The PRC   9,677     
Total revenues, net  $1,699,670   $248,396 

 

NOTE14          CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For the three months ended January 31, 2013 and 2012, the customer who accounted for 10% or more of the Company’s revenues is presented as follows:

 

      Three months ended January 31, 2013   January 31, 2013 
   Business segment  Revenues   Percentage
of revenues
   Trade accounts
receivable
 
                
Customer D  Software  $489,825    29%  $ 
Customer E  Software   489,825    29%    
Customer F  Software   653,099    38%    
Total:     $1,632,749    96%  $ 

 

 

19
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

      Three months ended January 31, 2012   January 31, 2012 
   Business segment  Revenues   Percentage
of revenues
   Trade accounts
receivable
 
                
Customer A  Software  $106,440    43%  $ 
Customer B  Software   91,956    37%    
Customer C  Plantation   49,238    20%   13,333 
Total:     $247,634    100%  $13,333 

 

(b) Major vendors

 

For the three months ended January 31, 2013 and 2012, the vendor who accounted for 10% or more of the Company’s purchases is presented as follows:

 

   Three months ended January 31, 2013   January 31, 2013 
   Purchase   Percentage
of purchase
   Trade accounts
payable
 
             
Vendor C  $6,907    27%  $ 
Vendor D   8,575    33%    
Total:  $15,482    60%  $ 

 

   Three months ended January 31, 2012   January 31, 2012 
   Purchase   Percentage
of purchase
   Trade accounts
payable
 
             
Vendor A  $38,116    59%  $ 
Vendor B   10,132    16%    
Total:  $48,248    75%  $ 

 

(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

 

As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.

 

The Company’s interest-rate risk arises from bank loans and finance lease. Borrowings issued at variable rates expose the Company to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Company to fair value interest-rate risk. Company policy is to maintain approximately all of its borrowings in fixed rate instruments. At the period-end, the bank borrowings were at fixed and floating rates.

 

(e) Exchange rate risk

 

The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in MYR and RMB and a significant portion of the assets and liabilities are denominated in MYR and RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$, MYR and RMB. If MYR and RMB depreciates against US$, the value of MYR and RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose it to substantial market risk.

 

20
 

PRIME GLOBAL CAPITAL GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

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

(Unaudited)

 

(f) Economic and political risks

 

Substantially all of the Company’s services are conducted in Malaysia, the PRC and Asian region. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in Malaysia. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations in Malaysia.

 

The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

 

NOTE15          COMMITMENTS AND CONTINGENCIES

 

(a) Operating lease commitment

 

The Company leases certain office premises under operating lease that expire at various dates through 2014. The leases, which cover periods from one to two years, generally provide for renewal options at specified rental amounts.

 

Aggregate rent expenses for the three months ended January 31, 2013 and 2012 were $2,449 and $2,935, respectively.

 

As of January 31, 2013, the Company has future minimum rental payments due under non-cancelable operating lease in the next two years and thereafter, as follows:

 

Year ending January 31:            
2014         $ 9,731
2015           8,109
             
Total         $ 17,840

 

(b) Capital commitment

 

As of January 31, 2013, the Company has future contingent payment of $3.2 million under the conditional purchase contract in connection of purchase of a commercial building within six months of the date of the purchase agreement, which will be financed by a combination of cash and external borrowings.

 

NOTE16          SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with this Form 10-Q. Except as set forth below, there were no subsequent events that required recognition or disclosure.

 

On February 4, 2013, Weng Kung Wong, our Chief Executive Officer and Director, became a party to twelve separate Letters of Offer (collectively, the “Offer Letters”) issued by United Overseas Bank (Malaysia) Bhd. (the “Lender”) to finance the acquisition of a twelve story office building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia (the “Building”) at an aggregate purchase price of RM 12,300,000 on an “AS IS WHERE IS” basis. Mr. Wong entered into the Offer Letters for the benefit of PGCG Assets Holdings Sdn. Bhd., our wholly owned subsidiary, or PGCG Assets.

 

Pursuant to the terms of the Offer Letters, the Lender agreed to lend to Mr. Wong the aggregate principal amount of RM 8,610,000 to finance the acquisition of the Building (the “Loan”). The outstanding principal amount will accrue interest at a monthly rate equal to Lender’s publicized base lending rate less 2%. As of the date of the Offer Letters, the Bank Lending Rate was 6.60% per annum. The Loan will be repayable over a period of 24 years in monthly installments of RM 49,433 and will be secured by the Building. Lender will be entitled to assess additional fees equal to 2% of the facility (but no less than RM 5000 per facility) in the event the Loan is refinanced or the Building is redeemed or disposed of or released or discharged from the security created pursuant to the Loan within 5 years from the date of the first drawdown.

 

PGCG Assets will have four months from January 25, 2013, to draw down on the loan. Funding will be contingent upon the fulfillment of several conditions precedent, including without limitation, an appraisal of the Building and any other conditions precedent as may be set forth in the definitive loan documents. The terms and conditions of the Loan will be governed by definitive documents to be prepared by the Lender.

 

On March 1, 2013, the Board of Directors of the Company approved the dismissal of Borgers & Cutler CPA’s PLLC (“B&C”) as our independent accountant due to the dissolution of B&C. B&C audited our consolidated financial statements for the fiscal years ended October 31, 2012 and 2011, and reviewed our financial statements for the related interim periods. Concurrently therewith, the Company retained the firm of BF Borgers CPA PC, to audit our financial statement for our fiscal year ending October 31, 2013. The Company's change in its certifying accountant is more fully described in its Current Report on Form 8-K filed with the SEC on March 1, 2013.

 

 

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ITEM 2          Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-looking statements

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report on Form 10-Q. This quarterly report on Form 10-Q contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this discussion, including, without limitation, statements containing the words "believes," "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained herein to reflect future events or developments.

 

Currency and exchange rate

 

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

 

Overview

 

During the three months ended January 31, 2013, we operated in the following four business segments: (i) the provision of IT consulting, programming and website development services; (ii) our oilseeds business; (iii) our real estate business and (iv) the distribution of consumer products. Our software and oilseeds businesses accounted for all of our revenues for fiscal quarter January 31, 2013. We did not generate any revenues from any of our other business segments during such period. Summarized financial information regarding each revenue generating segment and the real estate business segment as of fiscal quarter end January 31, 2013 is as follows:

 

   Three months ended January 31, 2013 
    Software Business    Trading Business    Plantation Business    Real Estate Business    Corporate    Total 
                               
Revenues, net  $1,638,627   $   $61,043   $   $   $1,699,670 
Cost of revenues   (6,907)       (18,889)           (25,796)
Gross profit   1,631,720        42,154            1,673,874 
Depreciation   1,060        4,719        9,429    15,208 
Net income (loss)   859,353        (8,939)       (275,058)   575,356 
Total assets   24,327        9,076,787    51,270,441    180,468    60,552,023 
Expenditure for long-lived assets  $   $   $   $25,426,169   $   $25,426,169 

 

 

22
 

 

Our m-commerce and consumer distribution products businesses are operated through UHT. Our oilseeds business is operated through Virtual Setup Sdn. Bhd., or VSSB, and Max Trend WFOE. Our real estate business is operated through PGCG Assets Holding Sdn. Bhd.

 

Our initial business plan which was launched in July 2010 broadly encompassed the development, distribution and operation of mobile and online social networking, ecommerce and search products and services. However, as a result of the challenges we experienced in implementing our m-commerce business plan, we began seeking business opportunities in the oilseeds industry in fiscal year 2011 with a specific focus on the acquisition, lease or management of existing castor seed and oil palm plantations located in Asia. On May 29, 2012, we consummated our acquisition of VSSB and its palm oil plantation and VSSB became our wholly owned subsidiary.

 

We entered into a trial planting arrangement with Srira Cha province, Thailand, for the cultivation of castor plants in December 2011. Upon a successful trial planting, we anticipate entering into a five year contract farming arrangement with Srira Cha province involving up to 500,000 Rai of land with the goal of building and operating two castor processing plants during such five year period. We hope to commence trial planting by the second quarter of 2013.

 

We acquired for nominal consideration a dormant company Max Trend International Limited, a Hong Kong limited liability company, or Max Trend HK. Max Trend HK owns Shenzhen Max Trend Green Energy Company Limited, a wholly foreign owned enterprise under the laws of the People’s Republic of China, or Max Trend WFOE, which was dormant at the time of acquisition. Max Trend WFOE began operations during the quarter ended July 31, 2012 and sells castor seeding and provides technical know-how under a bundled sales arrangement.

 

We have scaled back our m-commerce activities except for the provision of IT consulting, programming and website development services related to software previously sold. We intend to continue to engage in limited after sales consulting/website development activities and future sales activities only if such opportunities become readily available. Our sales consulting/website development activities accounted for approximately 96.4% of our net revenue for the three months ended January 31, 2013, as compared to 80.2% of our net revenue during the three month period ended January 31, 2012. We expect this business segment to account for a decreasing share of our net revenue in the near future as we focus on our oilseeds and real estate businesses.

 

We expect to continue distributing consumer goods only if such opportunities become readily available. We do not expect to invest significantly in our consumer product distribution operations and did not generate any revenue from this business segment during the three months ended January 31, 2013 and 2012. We do not expect this business segment to generate significant revenue in the near future.

 

In March 2012, we began our real estate business operations which consist of the acquisition, development, management, operation and sale of commercial and residential real estate properties located in Malaysia, primarily in Kuala Lumpur and Selangor. We anticipate generating revenues from sales of developed properties and from rental income from our commercial properties. Developed property sales can include condominium units, individual villas and bungalows at our future Shah Alam 2 Eco Residential Development project and Bandar Sungai Long High Grade Villas development project located in Selangor, Malaysia. We may also sell properties under development, undeveloped properties or commercial properties, if opportunities arise that we believe will maximize overall asset values.

 

On July 26, 2012, PGCG Assets Holdings Sdn. Bhd., (a wholly owned subsidiary of our wholly owned subsidiary Union Hub Technology Sdn. Bhd.), or PGCG Assets, consummated the purchase of 21.8921 hectares (54.10 acres) of vacant development land located in Selangor, Malaysia, or the Land. PGCG Assets was the successful bidder at a public auction held on March 30, 2012, in Kuala Lumpur, Malaysia, for the Land, which was acquired on an “As Is Where Is” basis. The land is subject to a 99-year leasehold, expiring July 30, 2100, and was sold for MYR12,660,000.

 

In August 2012, we executed a Sales and Purchase Agreement to purchase a 12 story commercial building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia at an aggregate purchase price of US MYR12,300,000. We are in discussions to extend the closing date of this transaction but have not agreed upon definitive terms.

23
 

 

 

On October 17, 2012, we consummated the acquisition of Dunford Corporation Sdn. Bhd., or Dunford, for MYR55,000,000. Dunford’s primary assets consist of two parcels of undeveloped land located in Selangor, Malaysia aggregating approximately 31 acres and assets related to Dunford’s insurance agency and secretarial services businesses. As of October 31, 2012, we disposed of Dunford’s previous insurance agency and secretarial services businesses. We intend to develop the Dunford Parcels land for commercial and residential purposes.

 

In December 2012, we consummated the purchase of a 15 story commercial building located at Geran 10010, Lot 238 Section 43, Town and District of Kuala Lumpur, Wilayah Persekutuan, Kuala Lumpur, Malaysia at a purchase price of MYR 81,500,000.

 

As of January 31, 2013, we had cash and cash equivalents of $895,686, purchase prepayments of $875,044 representing advanced payments to an oilseed supplier.  The decrease in cash and cash equivalents and our marketable securities available for sale resulted from the consummation of the purchase of a commercial building in December 2012, which was financed through a combination of US $13.5 million in cash and a bank loan. We will require approximately $3.2 million to consummate the purchase of a 12 story commercial building and US$ 10,000 to initiate trial planting of castor plants. We are currently in discussions with the seller to extend the consummation date for the purchase of the 12 story building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, but have not entered into a definitive agreement regarding the terms of such extension. In February 4, 2013, Weng Kung Wong, our Chief Executive Officer and Director, obtained a loan in the aggregate principal amount of RM 8,610,000, or approximately US$ 2.8 million, from United Overseas Bank (Malaysia) Bhd. (the “Lender”) to finance the acquisition of such 12 story building.

 

Consistent with past practice, we hope to obtain the necessary additional financing from our shareholders, executive officers and directors or through external financing. We are currently conducting internal discussions to obtain the necessary financing, however, there can be no assurance that we will be able to obtain sufficient funds on acceptable terms to timely meet our obligations.

 

Approval to Initiate Uplisting Process

 

On December 12, 2011, our board of directors approved, authorized and directed our officers to initiate the process for listing shares of the Company’s common stock on one or more U.S. national securities exchanges including the NYSE Amex Equities Exchange. We have elected to delay uplisting efforts until the end of calendar year 2013 or 2014 to focus on implementing our business plan.

 

Results of Operations

 

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

 

  Fiscal Quarter Ended
      January 31, 2013       January 31, 2012
               
Total net revenues   $ 1,699,670     $ 248,396
    Software sales     1,638,627       199,158
    Product sales     -       -
    Plantation sales     61,043       49,238
Total cost of revenue     (25,796     (64,364)
    Software sales     (6,907 )     (6,718)
    Product sales     -       -
    Plantation sales     (18,889 )     (57,646)
Gross profit     1,673,874       184,032
    Software sales     1,631,720       192,440
    Product Sales     -       -
    Plantation Sales     42,154       (8,408)
General and administrative expenses     (483,594     (304,572)
Other income, net (expense)     (337,935 )     66,053
Income tax expense     (276,989     (11,709)
Net income (loss)     575,356       (66,196)

 

24
 

 

Comparison of the three months ended January 31, 2013 and January 31, 2012

 

Net Revenue. We generated net revenue of $1,699,670 and $248,396 for the three months ended January 31, 2013 and 2012, respectively.

 

Software sales accounted for approximately 96.4% as compared to 80.2% of our net revenue for the three months ended January 31, 2013 and 2012, respectively. Our oilseeds business accounted for approximately 3.6% of our net revenue for three months ended January 31, 2013, compared to 19.8% for three months ended January 31, 2012. The increase of software related revenue as compared to oilseeds related revenue is a result of successful sales of software and delays in the implementation of our oilseeds business. We expect to our oilseeds revenue and real estate related revenues to gradually account for an increasing share of our net revenue in the future as those business segments continue to mature.

 

We did not derive any revenue from product sales in three months ended January 31, 2013 and 2012. On a going forward basis, we expect to make product sales only as such opportunities may arise. Accordingly, we do not expect product sales to account for a significant portion of our net revenues.

 

Cost of Revenue. Our cost of revenue as a percentage of revenue was 1.5% for the three months ended January 31, 2013 with software sales and plantation sales accounting for approximately 27% and 73%, respectively. Cost of revenue as a percentage of revenue was 26% for the three months ended January 31, 2012, with software sales and plantation sales accounting for approximately 80.2% and 19.8%, respectively. The decrease is primarily attributable to the lower cost of revenue associated with the software derived revenue as compared to the cost of revenue associated with oilseeds revenue. Cost of revenue in 2013 consisted primarily of software purchase costs, costs of labor that are directly attributable to the sale of software and costs related to the palm oil business such as rental of plantation land, material supplies and subcontracting costs incurred for planting, fertilizing and harvesting the palm oil tree. Shipping and handling costs associated with the distribution of fresh fruit bunches to the customers are also included in cost of revenues.

 

We expect our cost of revenue attributable to our oilseeds and real estate businesses to continue to increase and those attributable to our other segments to decrease as we shift our focus to our oilseeds and real estate businesses.

 

Gross Profit. We achieved a gross profit of $1,673,874 for the three months ended January 31, 2013, as compared to $184,032 for the three months ended January 31, 2012. Software sales and plantation sales accounting for approximately 97.5% and 2.5%, respectively of our gross profit as of January 31, 2013. As of January 31, 2012, software sales accounted for all of our net gross profit, with plantation sales recording a gross loss of $8,408. The decrease of gross profit attributable to software sales is attributable to our focus on our oilseeds and real estate businesses. We expect gross profit attributable to software sales to decrease as we shift our focus to our oilseeds and real estate businesses. Similarly, we expect our gross profit derived from our oilseeds and real estate businesses to gradually increase.

 

General and Administrative Expenses (“G&A”). We incurred G&A expenses of $483,594 for the three months ended January 31, 2013, representing an increase of $179,022, as compared to $304,572 for the three months ended January 31, 2012. The increase in G&A is primarily attributable to the commencement of our oilseeds and real estate operations and the increased costs of compliance associated with being a large accelerated filer. We believe that G&A expenses may continue to increase in the future as we continue developing our oilseeds and real estate operations.

 

We did not make any significant investments in our consumer goods business and did not generate sales in the three months ended January 31, 2013 and 2012. We expect to continue relying on the personal relationships of our executive officers and directors in generating sales on a going forward basis and do not expect our consumer goods business to incur significant G&A expenses.

 

25
 

 

 

As a general matter, we expect our G&A to increase in the foreseeable future as acquire real estate or other businesses and assets. However, we expect G&A as a percentage of net revenue to decrease as our net revenue increases. G&A as a percentage of net revenue was approximately 28.5% and 122.6% for the three months ended January 31, 2013 and 2012, respectively.

 

Other Income (Expense), net. We incurred net other expense of $337,935 for the three months ended January 31, 2013, as compared to $66,053 of net other income for the three months ended January 31, 2012. The increase in net expense is attributable primarily to realized loss from the sale of available-for-sale securities of $364,227 and stock dividend income of $26,292.

 

Income Tax Expense. We recorded income tax expenses of $276,989 for the three months ended January 31, 2013, as compared to $11,709 for the same period ended January 31, 2012. The increase is primarily attributable to our increase in revenues. Tax expense as a percentage of income before income tax was approximately 32.5% for the three months ended January 31, 2013. In the three months ended January 31, 2012, we recorded loss before income taxes of $54,487.

 

Liquidity and Capital Resources

 

As of January 31, 2012, we had cash and cash equivalents of $2,831,405 and marketable securities available for sale of $4,019,147.

 

As of January 31, 2013, we had cash and cash equivalents of $895,686, purchase prepayments of $875,044 representing advanced payments to an oilseed supplier.  The decrease in cash and cash equivalents and our marketable securities available for sale resulted from the consummation of the purchase of a commercial building in December 2012, which was financed through a combination of US $13.5 million in cash and a bank loan. We will require approximately $3.2 million to consummate the purchase of a 12 story commercial building and US$ 10,000 to initiate trial planting of castor plants. We are currently in discussions with the seller to extend the consummation date for the purchase of the 12 story building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, but have not entered into a definitive agreement regarding the terms of such extension. In February 4, 2013, Weng Kung Wong, our Chief Executive Officer and Director, obtained a loan in the aggregate principal amount of RM 8,610,000, or approximately US$ 2.8 million, from United Overseas Bank (Malaysia) Bhd. (the “Lender”) to finance the acquisition of such 12 story building.

 

We expect to incur significantly greater expenses in the near future, including the contractual obligations that we have assumed discussed below, to consummate the purchase of our commercial property and begin development activities. We also expect our general and administrative expenses to increase as we expand our finance and administrative staff, add infrastructure, and incur additional costs related to being a large accelerated filer, including directors’ and officers’ insurance and increased professional fees.

 

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

 

The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which include common and preferred stock sold in private transactions and public offerings, capital leases and long-term debt. In fiscal year 2012 alone, we raised $30.4 million from sales of our securities to existing shareholders including $20,890,272 from Weng Kung Wong, our Chief Executive Officer. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months.

 

  Fiscal Quarter Ended
  1/31/2013 1/31/2012
Net cash provided by (used in) operating activities 358,749 (115,126)
Net cash (used in) provided by investing activities (19,051,558) 331,045
Net cash provided by financing activities 18,255,671 5,750

 

26
 

 

Net Cash Provided By Operating Activities.

 

For the three months ended January 31, 2013, net cash provided by operating activities was $358,749, which consisted primarily of net income of $575,356, realized loss from sale of available-for-sale securities of $364,227, an decrease in accounts receivable of $25,099 and depreciation of $15,208, offset primarily by decreases in advances to suppliers of $795,081 and a decrease in deposits and other receivables of $30,138.

 

For the three months ended January 31, 2012, net cash used in operating activities was $115,126, which consisted primarily of net loss of $66,196, depreciation of $13,787, a decrease in accounts receivable and prepayments, deposits and other receivables of $13,793 and $11,189, respectively, offset by realized gain on sale of marketable securities of $58,873, and a decrease in accrued liabilities and other payables of $30,779.

 

As we shift away from our software and product sales businesses, we expect cash derived from these activities to decrease. We anticipate cash from our oilseeds operating activities to increase as we focus on our oilseeds operations. We expect to receive cash from our real estate operations once we consummate the purchase of our commercial buildings, which will be offset by the increased expenses associated with developing our residential projects. We expect to continue to rely on cash generated through private placements of our securities, however, to finance our operations and future acquisitions.

 

Net Cash Used in Investing Activities.

 

For the three months ended January 31, 2013, net cash used in investing activities was $19,051,558, which was primarily attributable to payments in connection with the purchase of our commercial buildings in Malaysia of $25,413,080 and plant and equipment purchases of $13,089, offset by proceeds from the sale of marketable securities of $6,374,611.

 

For the three months ended January 31, 2012, net cash provided by investing activities was $331,045, consisting primarily of proceeds derived from the sale of marketable securities of $1,894,749 and proceeds from the disposal of plant and equipment of $8,894, offset by the purchase of marketable securities of $1,557,324, the purchase of plant and equipment of $11,256 and changes in investment in cash management fund of $4,018.

 

Net Cash Provided By Financing Activities.

 

For the three months ended January 31, 2013, net cash provided by financing activities was $18,255,671, consisting primarily of proceeds from a bank loan of $13,388,542, advances from Weng Kung Wong, our Chief Executive Officer and director, of $4,869,229, offset by repayments of $2,100 on a finance lease. Advances by Messrs. Wong and Khang were made to us was made on an interest-free, unsecured basis and are repayable on demand.

 

For the three months ended January 31, 2012, net cash provided by financing activities was $5,750, consisting advances from Mr. Wong, our Chief Executive Officer and director of $7,793, and offset by repayment of $2,043 on a finance lease.

 

Off-Balance Sheet Arrangements

 

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

 

27
 

 

Contractual Obligations and Commercial Commitments

 

We had the following contractual obligations and commercial commitments as of January 31, 2013:

 

Contractual Obligations Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Operating lease obligations          
        Office premises 17,840 9,731 8,109 - -
Total operating lease obligations 17,840 9,731 8,109 - -

 

As of January 31, 2013, the Company has future contingent payment of $3.2 million under the conditional purchase contract in connection of purchase of a commercial building within six months of the date of the purchase agreement, which will be financed by a combination of cash and external borrowings.

 

In February 4, 2013, Weng Kung Wong, our Chief Executive Officer and Director, became a party to twelve separate Letters of Offer (collectively, the “Offer Letters”) issued by United Overseas Bank (Malaysia) Bhd. (the “Lender”) to finance the acquisition of a twelve story office building located at Megan Avenue 1, No. 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia (the “Building”) at an aggregate purchase price of RM 12,300,000 (approximately US $3.97 million) on an “AS IS WHERE IS” basis. Mr. Wong entered into the Offer Letters for the benefit of PGCG Assets Holdings Sdn. Bhd., our wholly owned subsidiary, or PGCG Assets.

 

Pursuant to the terms of the Offer Letters, the Lender agreed to lend to Mr. Wong the aggregate principal amount of RM 8,610,000 (approximately US $2.8 million) to finance the acquisition of the Building (the “Loan”). The outstanding principal amount will accrue interest at a monthly rate equal to Lender’s publicized base lending rate less 2%. As of the date of the Offer Letters, the Bank Lending Rate was 6.60% per annum. The Loan will be repayable over a period of 24 years in monthly installments of RM 49,433 and will be secured by the Building. Lender will be entitled to assess additional fees equal to 2% of the facility (but no less than RM 5000 per facility) in the event the Loan is refinanced or the Building is redeemed or disposed of or released or discharged from the security created pursuant to the Loan within 5 years from the date of the first drawdown.

 

A copy of a form of the Offer Letters is incorporated herein by reference and filed as Exhibit 10.5 to this Current Report on report. The description of the transactions contemplated by the Offer Letters set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text of the exhibits filed herewith and incorporated herein by reference.

 

Off-Balance Sheet Arrangements

 

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

 

Critical Accounting Policies and Estimates

 

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

 

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·Use of estimates

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

·Basis of consolidation

 

The condensed consolidated financial statements include the accounts of PGCG and its subsidiaries. All significant inter-company balances and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

 

·Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

·Accounts receivable

 

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 management’s assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. The Company did not record any allowance for doubtful accounts for the periods presented.

 

·Advances to suppliers

 

The Company generally makes advanced payments to suppliers for material in the normal course of business. Advances to suppliers are recorded when payment is made by the Company and relieved against inventory when goods are received. The advance payments to suppliers may include provisions that set the purchase price and delivery date of raw materials.

 

Advances to suppliers are interest free and unsecured.

 

·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:

 

  Expected useful life
Freehold plantation land Indefinite
Land under development Indefinite or 99 years
Commercial building 99 years
Motor vehicles 5 years
Furniture, fixture and equipment 10 years

 

Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of 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.

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·Impairment of long-lived assets

 

Long-lived assets primarily include property, plant and equipment. In accordance with the provision of ASC Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment charge for the years or periods presented.

 

·Finance leases

 

Leases that transfer substantially all of the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with the Company’s depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 835-30, “Imputation of Interest”.

 

·Revenue recognition

 

The Company recognizes its revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of its products when: (1) title and risk of loss are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. The Company’s sale arrangements do not contain general rights of return.

 

(a) Software sales

 

The Company generally sells the software products in an arrangement that is bundled with maintenance and support service and/or website development service, based upon the customers’ specification or modification.

 

The Company adopts ASC 985-20 and allocates the total arrangement fee among each element based on vendor-specific objective evidence of the relative fair value of each of the elements. The Company limits its assessment of fair value of each element to the price charged when the same element is sold separately. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue, assuming collection is probable. For the billed software product sales, the revenue from the undelivered element is included in deferred revenue and amortized ratably to revenue over its contractual term, typically one year.

 

Revenues from the sale of software products are recognized and completely earned upon shipment or electronic delivery of the product provided that persuasive evidence of an arrangement exists, collection is probable, payment terms are fixed and determinable and no significant obligations remain.

 

Revenues from the provision of website development service including website design and development are recognized upon the ownership and operating rights of website domain are transferred to the customers.

 

Revenues from the provision of maintenance and support service are recognized when service rendered, which consist of technical support and software upgrades and enhancements. The Company generally offers maintenance and support service to its customers for a period of twelve months, free of charge or at a monthly fixed fee. Amounts invoiced or collected in advance from the customers of delivering maintenance and support service is recorded as deferred revenue. Revenue is recognized when the related service is rendered.

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(b) Luxury consumer products

 

The Company earns the revenue from trading of luxury consumer products. Revenue is recognized when title passes to the customer, which is generally when the product is shipped and delivered to the customers, assuming no significant the Company’s obligations remain and the collection of relevant receivables is probable.

 

(c) Plantation sales

 

The Company offers two types of plantation products comprising of palm oil products and castor products.

 

Revenue from the sale of palm oil product is recognized upon confirmation of the weight of fresh fruit bunches and shipment to the customer, when there is persuasive evidence of an arrangement, delivery has occurred and risk of loss has passed, the sales price is fixed or determinable at the date of sale, and collectibility is reasonably assured.

 

Revenue from castor products includes sale of seeding and rendering of technical know-how under a bundled sales arrangement. The Company adopts ASC 985-20 and allocates the total arrangement fee among each element based on vendor-specific objective evidence of the relative fair value of each of the elements. The Company limits its assessment of fair value of each element to the price charged when the same element is sold separately. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue, assuming collection is probable. Sale of castor oilseeds is recognized when legal title passes to the customer, which is generally upon delivery of oilseeds. Rendering of technical know-how service is recognized when the principal terms of the service agreement are fulfilled and the certificate of satisfaction is confirmed by the customers.

 

·Cost of revenues

 

Cost of revenue on software sales primarily includes the purchase cost of software products and the labor cost incurred in the modifications, customization and enhancement of software products, the development of websites and maintenance and support services. All costs are expensed off when the title of software products and its related website domain are transferred to the customer. The cost incurred in website development is not capitalized because the ownership and operating right of its website domain is vested on the customer, not the Company itself.

 

The cost of software products is not capitalized because of the related party nature of the development and the quickly changing software market.

 

Cost of revenue on sales of luxury consumer products primarily consists of the purchase cost of luxury consumer products.

 

Cost of revenue on plantation sales includes rental on plantation land, material supplies and subcontracting costs incurred for planting, fertilizing and harvesting the palm oil tree. Shipping and handling costs associated with the distribution of fresh fruit bunches to the customers are also included in cost of revenues.

 

·Comprehensive income

 

ASC Topic 220, “Comprehensive Income” establishes standards for the 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 comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation and available-for-sale marketable securities. This comprehensive income is not included in the computation of income tax expense or benefit.

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·Income taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 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.

 

For the three months ended January 31, 2013, the Company did not have any interest and penalties associated with tax positions. As of January 31, 2013, the Company did not have any significant unrecognized uncertain tax positions.

 

The Company conducts major businesses in Malaysia and China 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 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’s operating subsidiaries maintain their books and record in a local currency, MYR Renminbi (“RMB”) and Hong Kong Dollars (“HK$”), which is functional currency as being the primary currency of the economic environment in which the entity operates.

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity. The gains and losses are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:

 

  January 31,
  2013   2012
Period-end MYR : US$1 exchange rate 3.08300   3.0546
Period-average MYR : US$1 exchange rate 3.06232   3.1483
Period-end RMB : US$1 exchange rate 6.28860   -
Period-average RMB : US$1 exchange rate 6.28867   -
Period-end HK$ : US$1 exchange rate 7.75850   -
Period-average HK$ : US$1 exchange rate 7.75153   -

 

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·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 period ended January 31, 2013, the Company operates in four reportable operating segments.

 

·Fair value of financial instruments

 

The carrying value of the Company’s financial instruments (excluding obligation under finance lease): cash and cash equivalents, accounts receivable, amounts due from related parties, deposits and other receivables, income tax payable, amount due to related parties, accrued liabilities and other payables approximate at their fair values because of the short-term nature of these financial instruments.

 

Management believes, based on the current market prices for interest rates on similar debt instruments, the fair value of its obligation under finance lease and long term bank loan approximates the carrying amount.

 

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1 : Observable inputs such as quoted prices in active markets;
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions

 

Recent accounting pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations, as follows:

 

In January 2013, the Financial Accounting Standards Board issued ASC Update No. 2013-02, “Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2013-02”). ASU 2013-02 provides companies with the option to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If the Company concludes that it is more likely than not that the asset is impaired, it is required to determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with Topic 350. If the Company concludes otherwise, no further quantitative assessment is required. The Company does not expect the adoption of ASU 2013-02 to impact its results of operations or financial position.

 

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ITEM 3                   Quantitative and Qualitative Disclosures about Market Risk

 

Foreign Exchange Risk

 

While our reporting currency is the US dollar, almost all of our consolidated revenues and consolidated costs and expenses are denominated in MYR and RMB. All of our assets are denominated in MYR except for some cash and cash equivalents and accounts receivables. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate among US dollar, MYR and RMB. If the MYR/RMB depreciates against the US dollar, the value of our MYR/RMB revenues, earnings and assets as expressed in our US dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

 

Commodity price

 

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

 

Malaysian real estate market risk

 

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

 

Market risk related to marketable securities

 

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

 

ITEM 4                   Controls and Procedures  

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures, subject to limitations as noted below, as of January 31, 2013, and during the period prior to and including the date of this report, were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

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Inherent Limitations

 

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

 

Changes in Internal Control over Financial Reporting

 

Subject to the foregoing disclosure, there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter ended January 31, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II OTHER INFORMATION

 

ITEM 1                   Legal Proceedings

 

We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.

 

ITEM 1A                Risk Factors

 

None.

 

ITEM 2                   Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

ITEM 3                   Defaults upon Senior Securities

 

None.

 

ITEM 4                   Mine Safety Disclosures

 

Not applicable.

 

ITEM 5                   Other Information

 

None.

 

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ITEM 6                   Exhibits

 

2.1 Articles of Exchange (1)
2.2 Share Exchange Agreement, dated December 6, 2010, by and between Home Touch Holding Company, on the one hand, and Union Hub Technology Sdn.  Bhn., Wooi Khang Pua and Kok Wai Chai, on the other hand (2)
2.3 Share Exchange Agreement, dated January 26, 2009, by and between Home Touch Holding Company and Home Touch Limited (3)
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amended and Restated Bylaws (4)
4.1 Form of common stock certificate (1)
10.1 Common Stock Purchase Agreement, dated December 6, 2010, by and among Home Touch Holding Company, Home Touch Limited, Up Pride Investments Limited and Magicsuccess Investments Limited (2)
10.2 Tenancy Agreement (Commercial), dated October 29, 2010, by and between Atomic Vision Sdn. Bhd. and Union Hub Technology Sdn.  Bhd.  (2)
10.3 Memorandum of Understanding For Cooperation In Castor Cultivation, dated December 8, 2011, by and between Prime Global Capital Group Incorporated and Mr. Wichai Samphantharat, Srira Cha Chief District Officer (5)
10.4 Form of Sales and Purchase Agreement dated August 6, 2012, by and between FNAC Holdings Sdn. Bhd. and PGCG Asset Holdings Sdn. Bhd.  (6)
10.5 Form of Offer Letter (7)
10.6 Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Weng Kung Wong (8)
10.7 Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Liong Tat Teh (8)
10.8 Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Sek Fong Wong (8)
14 Code of Business Conduct and Ethics (9)
21 List of Subsidiaries*
31.1 Certification of Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
31.2 Certification of Principal Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1 Charter to Compensation Committee (10)
99.2 Charter to Audit Committee (10)
99.3 Charter to Corporate Governance Committee (10)
101.INS XBRL Instance Document*
101.SCH XBRL Schema Document*
101.CAL XBRL Calculation Linkbase Document*
101.DEF XBRL Definition Linkbase Document*
101.LAB XBRL Label Linkbase Document*
101.PRE XBRL Presentation Linkbase Document*

 ______________________

* Filed herewith.

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

(2) Incorporated by reference from Exhibit 2.1 to Current Report on Form 8-K filed with the Securities and Exchange on December 7, 2010.

(3) Incorporated by reference from Amendment No. 2 to our registration statement filed on Form S-1 with the Securities and Exchange Commission on September 2, 2009.

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

(5) Incorporated by reference from our Current Report on Form 8-k filed with the Securities and Exchange Commission on December 13, 2011.

(6) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6, 2012.

(7) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange on February 5, 2013.

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

(9) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2012.

(10) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Commission on April 27, 2012.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  PRIME GLOBAL CAPITAL GROUP INCORPORATED
   
   
  By: /s/Weng Kung Wong
    Weng Kung Wong
    Chief Executive Officer
     
     
  By: /s/ Liong Tat Teh
    Liong Tat Teh
Date:       March 11, 2013   Chief Financial Officer

 

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