XOTC:PGCG Prime Global Capital Group Inc Quarterly Report 10-Q Filing - 1/31/2012

Effective Date 1/31/2012

XOTC:PGCG Fair Value Estimate
Premium
XOTC:PGCG Consider Buying
Premium
XOTC:PGCG Consider Selling
Premium
XOTC:PGCG Fair Value Uncertainty
Premium
XOTC:PGCG Economic Moat
Premium
XOTC:PGCG Stewardship
Premium
 
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, 2012
 
      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 
 
Accelerated filer S
     
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 9, 2012, the issuer had outstanding 501,854,393 shares of common stock.
 
 

 

TABLE OF CONTENTS

   
Page
     
     
PART I
FINANCIAL INFORMATION
 
     
ITEM 1
Financial Statements
 
     
 
Condensed Consolidated Balance Sheets as of January 31, 2012 (Unaudited) and October 31, 2011 (Audited)
1
     
 
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended January 31, 2012 and 2011 (Unaudited)
2
     
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2012 and 2011 (Unaudited)
3
     
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
4
     
ITEM 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
     
ITEM 3
Quantitative and Qualitative Disclosures about Market Risk
30
     
ITEM 4
Controls and Procedures
30
     
PART II
OTHER INFORMATION
 
     
ITEM 1
Legal Proceedings
31
     
ITEM 1A
Risk Factors
31
     
ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
31
     
ITEM 3
Defaults upon Senior Securities
31
     
ITEM 4
(Removed and Reserved)
31
     
ITEM 5
Other Information
31
     
ITEM 6
Exhibits
31
     
SIGNATURES
 
33
 
 
i

 
 
PART I    FINANCIAL INFORMATION
 ITEM 1  Financial Statements
PRIME GLOBAL CAPITAL GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 2012 AND OCTOBER 31, 2011
(Currency expressed in United States Dollars (“US$”), except for number of shares)

   
January 31, 2012
   
October 31, 2011
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Current assets:
           
   Cash and cash equivalents
  $ 2,831,405     $ 2,592,687  
   Marketable securities, available-for-sale
    4,019,147       3,680,710  
   Accounts receivable
    13,333       27,422  
   Prepayments, deposits and other receivables
    84,567       95,426  
                 
Total current assets
    6,948,452       6,396,245  
                 
Non-current assets:
               
   Deposits on plantation purchase
    799,635       795,935  
   Plant and equipment, net
    236,556       245,723  
 
TOTAL ASSETS
  $ 7,984,643     $ 7,437,903  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
   Accounts payable
  $ 2,101     $ 9,367  
   Amount due to a director
    190,354       182,278  
   Amount due to a related company
    2,810       -  
   Income tax payable
    686,362       675,246  
   Current portion of obligation under finance lease
    8,421       7,411  
   Accrued liabilities and other payables
    67,394       98,270  
                 
Total current liabilities
    957,442       972,572  
                 
Long-term liabilities:
               
   Obligation under finance lease
    37,664       40,556  
                 
Total liabilities
    995,106       1,013,128  
                 
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; 500,110,613 shares issued and outstanding, as of January 31, 2012 and October 31, 2011
    500,111       500,111  
   Additional paid-in capital
    4,710,149       4,710,149  
   Accumulated other comprehensive income (loss)
    263,949       (367,009 )
   Retained earnings
    1,515,328       1,581,524  
                 
Total stockholders’ equity
    6,989,537       6,424,775  
                 
   TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 7,984,643     $ 7,437,903  
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, 2012 AND 2011
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

   
Three months ended January 31,
 
   
2012
   
2011
 
Revenues, net:
           
Software sales
  $ 199,158     $ 322  
Product sales
    -       743,683  
Plantation sales
    49,238       -  
Total revenues, net
    248,396       744,005  
                 
Cost of revenues, non related party
    (64,364 )     (586,249 )
                 
Gross profit
    184,032       157,756  
                 
Operating expenses:
               
General and administrative
    (304,572 )     (110,327 )
                 
(Loss) income from operations
    (120,540 )     47,429  
                 
Other income (expense):
               
Dividend income
    1,452       -  
Realized gain from sale of available-for-sale securities
    58,873       -  
Gain on disposal of plant and equipment
    1,421       -  
Interest income
    4,786       -  
Interest expense
    (479 )     (485 )
                 
(Loss) income before income taxes
    (54,487 )     46,944  
                 
Income tax expense
    (11,709 )     (23,938 )
                 
NET (LOSS) INCOME
    (66,196 )   $ 23,006  
                 
Other comprehensive income :
               
- Unrealized holding gain on available-for-sale securities
    602,702       -  
- Foreign exchange adjustment gain
    28,256       7,079  
                 
COMPREHENSIVE INCOME
  $ 564,762     $ 30,085  
                 
Net (loss) income per share – Basic and diluted
  $ (0.00 )   $ 0.00  
                 
Weighted average common stock outstanding – Basic and diluted
    500,110,613       87,122,224  
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, 2012 AND 2011
(Currency expressed in United States Dollars (“US$”))
(Unaudited)

 
Three months ended January 31,
 
 
2012
   
2011
 
           
Cash flows from operating activities:
           
Net (loss) income
  $ (66,196 )   $ 23,006  
Adjustments to reconcile net income (loss) to net cash used in operating activities:
               
Depreciation
    13,787       6,513  
Realized gain from sale of available-for-sale securities
    (58,873 )     -  
Gain on disposal of plant and equipment
    (1,421 )     -  
Changes in operating assets and liabilities:
               
Accounts receivable
    13,793       (638,421 )
Prepayments, deposits and other receivables
    11,189       (1,365 )
Accounts payable
    (7,092 )     (115,778 )
Amount due to a related company
    2,726       3,216  
Income tax payable
    7,740       23,938  
Accrued liabilities and other payables
    (30,779 )     (6,228 )
                 
Net cash used in operating activities
    (115,126 )     (705,119 )
                 
Cash flows from investing activities:
               
Purchase of marketable securities
    (1,557,324 )     -  
Proceeds from sale of marketable securities
    1,894,749       -  
Purchase of plant and equipment
    (11,256 )     -  
Change in investment in cash management fund
    (4,018 )     -  
Proceeds from disposal of plant and equipment
    8,894       -  
Payment of earnest deposits
    -       (797,584 )
                 
Net cash provided by (used in) investing activities
    331,045       (797,584 )
                 
Cash flows from financing activities:
               
Advances from a director
    7,793       583,300  
Payments on finance lease
    (2,043 )     (2,120 )
Proceed from sale of common stock
    -       800,000  
                 
Net cash provided by financing activities
    5,750       1,381,180  
                 
Foreign currency translation adjustment
    17,049       (5,430 )
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
    238,718       (126,953 )
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    2,592,687       527,189  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 2,831,405     $ 400,236  
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         
Cash paid for income tax
  $ -     $ -  
Cash paid for interest
  $ 479     $ 485  
See accompanying notes to condensed consolidated financial statements.
 
3

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
NOTE1    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, 2011 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, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending October 31, 2012 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, 2011.
 
NOTE2    ORGANIZATION AND BUSINESS BACKGROUND

Prime Global Capital Group Incorporated (“PGCG” or “the Company”), formerly Home Touch Holding Company, was incorporated in the State of Nevada on January 26, 2009. On January 25, 2011, the Company changed its name to its current name.

Currently, the Company, through its subsidiary and variable interest entity (“VIE”) is principally engaged in the operation of palm oil plantations, provision of IT consulting and programming services and distributing consumer products in Malaysia.

Recapitalization and reorganization

On July 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 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, Mr. Teh Liong Tat as the new chief financial officer.
 
4

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

On December 6, 2010, the Company acquired Union Hub Technology Sdn. Bhd. (“UHT”), a company incorporated under the laws of Malaysia, through a share exchange transaction, or the Share Exchange. Pursuant to the Share Exchange, the Company acquired from the UHT shareholders all of the issued and outstanding shares of UHT in exchange for the issuance of 16,500,000 shares of its common stock. As a result of the Share Exchange, UHT became a wholly owned subsidiary of the Company.

Concurrently, on December 6, 2010, the Company entered into and executed 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.

Summary of the Company’s subsidiary and VIE

   
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
July 13, 2011
 
1 issued share of US$ 1 each
 
Inactive operation
                 
3.
 
PGCG Properties Investment Limited (“PPIL”)
 
British Virgin Islands
September 1, 2011
 
1 issued share of US$ 1 each
 
Inactive operation
                 
4.
 
Virtual Setup Sdn. Bhd. (“VSSB”) #
 
Malaysia
July 17, 2010
 
2 issued shares of ordinary shares of MYR 1 each
 
Operation of palm oil plantation
                 
# represents variable interest entity (“VIE”)
 
5

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

PGCG and its subsidiaries and VIE 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.

l  
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.

l  
Basis of consolidation

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

The Company has adopted the Accounting Standards Codification (“ASC”) Topic 810-10-25, “Variable Interest Entities” (“ASC 810-10-25”). ASC 810-10-25 requires a variable interest entity or VIE to be consolidated by the Company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.
 
 
6

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
On July 8, 2011, the Company, through VSSB, entered into a Land Purchase Agreement (the “Purchase Agreement”) with an independent third party to purchase four parcels of palm oil plantation land in a purchase price consideration of $7,996,346 (equivalent to MYR24,425,640) with a refundable deposit of $799,635 equal to 10% of its purchase price consideration. Pursuant to the Purchase Agreement, the completion of the purchase transaction is subject to final approval from the local government and local regulatory agency. Also, the Company, through VSSB agreed to lease from the land owner and manage these four parcels of the palm oil plantation land with a monthly rental amount of $12,705 (equivalent to MYR 40,000) for a term of 12 months under an operating lease agreement, subject to automatic termination upon the completion of the Purchase Agreement.

On August 29, 2011, the Company, through its wholly-owned subsidiary, UHT, entered into a Memorandum of Understanding (the “MOU”) with the shareholders of VSSB, who are considered as related parties. Mr. Weng Kung Wong, the Chief Executive Officer and director of the Company, and Mr. Kok Wai Chai, a director of the Company’s subsidiary, are the shareholders and directors of VSSB. Pursuant to the MOU, the shareholders of VSSB mutually agreed to transfer all of their issued shares of VSSB to the Company, through UHT, upon the following conditions:

1.
the Company agreed to advance or continue to advance a sum equivalent to the purchase price or part thereof to complete the Purchase Agreement, and

2.
the shareholders of VSSB agreed to transfer their entire equity interest to the Company, upon the completion of the Purchase Agreement and the successful registration of the transfer of the land titles in favor of VSSB.

Management believes that all these contractual agreements with VSSB and the land owners are in compliance with laws of Malaysia and are legally enforceable.

With the above agreements, the Company has variable interest of VSSB, through UHT, including its financial interest and demonstrates its ability to control VSSB as a primary beneficiary. Under ASC 810-10-25, VSSB is considered a variable interest entity and its operating results are included in the accompanying condensed consolidated financial statements for the period presented. VSSB incurred an operating loss of $17,912 during the period ended January 31, 2012.

As of January 31, 2012, the deposit of $819,359 on the land purchase is considered as non-current asset, accordingly. Purchase deposit is recorded when payment is made by the Company and the remaining balances will be subsequently settled upon the successful transfer of land title.

l  
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.

The Company maintains cash and cash equivalent balances at a financial institution in Malaysia. As of January 31, 2012, the Company has cash concentration risk of $2,472,620 which is held by Malayan Banking Berhad in Malaysia.

l  
Marketable securities, available-for-sale

These marketable securities are classified as available-for-sale and are recorded at their fair market values with the corresponding unrealized holding gains or losses, recorded as a separate component of other comprehensive income within stockholders’ equity. The fair value of marketable securities is determined based on quoted market prices at the balance sheet dates. Realized gains and losses are determined by the difference between historical purchase price and gross proceeds received when the marketable securities are sold.
 
7

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its investments on a recurring basis pursuant to the ASC Topic 820.

l  
Accounts receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. The Company did not record any allowance for doubtful accounts for the periods presented.

l  
Deposits on plantation purchase

Deposits on plantation purchase represented refundable deposit payment for the purchase of four parcels of palm oil plantation land, which were interest-free and unsecured. Purchase deposits are recorded when payment is made by the Company and capitalized as fixed assets when the transfer of the land titles is successfully registered in favor of the Company. As of January 31, 2012, the purchase contract has been signed and it will be completed upon the approval from the government in the next twelve months.

l  
Plant and equipment

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
Office furniture and equipment
10 years
Motor vehicles
5 years
Computer equipment
5 years

Expenditures for maintenance and repairs is 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.

Depreciation expense for the three months ended January 31, 2012 and 2011 amounted to $13,787 and $6,513, respectively.

l  
Impairment of long-lived assets
 
Long-lived assets primarily include deposits on plantation purchase and 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 periods presented.
 
8

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
l  
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”.

As of January 31, 2012, the Company has one motor vehicle under finance lease included in plant and equipment with its carrying value of $92,806.

l  
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 are recorded as deferred revenue. Revenue is recognized when the related service is rendered.
 
9

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
(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 generally recognizes revenue from plantation sales 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.

l  
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.

l  
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.

l  
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.
 
10

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
For the three months ended January 31, 2012 and 2011, the Company did not have any interest and penalties associated with tax positions. As of January 31, 2012, the Company did not have any significant unrecognized uncertain tax positions.

The Company conducts major businesses in Malaysia and is subject to tax in its own jurisdiction. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authority.

l  
Foreign currencies translation

Transactions denominated in currencies other than the functional currency, which is Malaysian Ringgit (“MYR”), are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

The reporting currency of the Company is the United States Dollars ("US$") and the accompanying financial statements have been expressed in US$. In addition, the Company maintains its books and record in a local currency, MYR, 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 currency of the Company into US$ has been made at the following exchange rates for the respective periods:

 
January 31,
 
2012
 
2011
Period-end MYR : US$1 exchange rate
3.0546
 
3.0559
Period-average MYR : US$1 exchange rate
3.1483
 
3.1094

l  
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.

l  
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. The Company operates in three reportable operating segments in Malaysia.
 
11

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)


l  
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, deposits and other receivables, deferred revenue, income tax payable, amount due to a director, 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 a finance lease approximates the carrying amount.

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

·
Level 1 : Observable inputs such as quoted prices in active markets;

·
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

·
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions

The following table summarizes information on the fair value measurement of the Company’s assets as of January 31, 2012 grouped by the categories described above:

   
Quoted prices in active markets
(Level 1)
   
Significant other observable inputs
(Level 2)
   
Significant unobservable inputs
(Level 3)
 
                   
Securities available-for-sale
  $ 4,019,147     $ -     $ -  

Marketable securities available-for-sale were valued at the closing prices quoted on the Bursa Malaysia Securities Berhad Main Market with which the security is traded.

l  
Recently adopted accounting standards

As of November 1, 2011, the Company adopted new guidance on the testing of goodwill impairment that allows the option to assess qualitative factors to determine whether performing the two-step goodwill impairment assessment is necessary.  Under the option, the calculation of the reporting unit's fair value is not required to be performed unless as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than the unit's carrying amount. The adoption of this guidance impacts testing steps only, and therefore adoption did not have an impact on the condensed consolidated financial statements.
 
12

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
As of November 1, 2011, the Company adopted new guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. The Company elected to adopt the two separate but consecutive statement presentation, and the adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

As of November 1, 2011, the Company adopted new guidance regarding disclosures about fair value measurements. The guidance requires new disclosures related to activity in Level 3 fair value measurements. This guidance requires purchases, sales, issuances, and settlements to be presented separately in the rollforward of activity in Level 3 fair value measurements. The Company elected to adopt the new disclosure and the adoption of this guidance did not have a material impact on the condensed consolidated financial statements.
 
·
Recently issued accounting standards

There are no recently issued accounting standards for which the Company expects a material impact on our financial statements.
 
 
NOTE-4    MARKETABLE SECURITIES, AVAILABLE-FOR-SALE

   
January 31, 2012
   
October 31, 2011
 
             
Investment in equity securities and cash management fund
           
At original cost
  $ 3,755,479     $ 4,019,744  
Add: unrealized holding gain (loss) on available-for-sales securities
    263,668       (339,034 )
 
Total
  $ 4,019,147     $ 3,680,710  

Marketable securities available-for-sale were valued at the closing prices quoted on the Bursa Malaysia Securities Berhad Main Market with which the security is traded. The Company has an unrealized holding gain of $263,668 for the period ended January 31, 2012.

 
NOTE-5    AMOUNT DUE TO A DIRECTOR

As of January 31, 2012 and October 31, 2011, amount due to a director 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 repayable on demand.

 
NOTE-6    AMOUNT DUE TO A RELATED COMPANY

As of January 31, 2012, the amount due to a related company represented temporary advances made by Atomic Vision Sdn. Bhd., which is controlled by the director and chief executive office of the Company, Mr. Weng Kung Wong, which was unsecured, interest-free and repayable on demand. Imputed interest on this amount is considered insignificant.
 
13

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

NOTE-7    ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables consist of the following:

 
January 31, 2012
   
October 31, 2011
 
           
Accrued operating expenses
  $ 62,883     $ 95,771  
Advances from third parties
    3,441       652  
Deferred revenue
    1,070       1,847  
    $ 67,394     $ 98,270  
 
NOTE-8    OBLIGATION UNDER FINANCE LEASE

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

   
January 31, 2012
   
October 31, 2011
 
             
Finance lease
  $ 46,564     $ 49,939  
Less: interest expense
    (479 )     (1,972 )
                 
Net present value of finance lease
  $ 46,085     $ 47,967  
                 
Current portion
  $ 8,421     $ 7,411  
Non-current portion
    37,664       40,556  
                 
Total
  $ 46,085     $ 47,967  

As of January 31, 2012, the maturities of the finance lease for each of the five years and thereafter are as follows:

Years ending January 31:
     
2013
  $ 8,421  
2014
    8,421  
2015
    8,421  
2016
    8,421  
2017
    8,421  
Thereafter
    3,980  
         
Total
  $ 46,085  

 
14

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
NOTE-9    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,
 
 
2012
 
2011
 
         
Tax jurisdictions from:
           
– Local
  $ (148,616 )   $ (72,750 )
– Foreign
    94,129       119,694  
 
(Loss) income before income taxes
  $ (54,487 )   $ 46,944  

Provision for income taxes consisted of the following:

   
Three months ended January 31,
 
   
2012
   
2011
 
             
Current:
           
– Local
  $ -     $ -  
– Foreign
    11,709       23,938  
                 
Deferred:
               
– Local
    -       -  
– Foreign
    -       -  
 
Income tax expense
  $ 11,709     $ 23,938  

The effective tax rate in the years and periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the periods presented, the Company has a subsidiary that operates in Malaysia and is subject to tax in the jurisdictions in which it operates, as follows:

United States of America

PGCG is registered in the State of Nevada and is subject to United States of America tax law. As of January 31, 2012, the operations in the United States of America incurred $583,596 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2032, if unutilized. The Company has provided for a full valuation allowance of $198,423 against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

British Virgin Islands

Under the current BVI law, PGIL and PPIL are not subject to tax on income. For the three months ended January 31, 2012, there is no operating income or loss incurred.

Malaysia

UHT and VSSB 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:

 
15

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

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

   
Three months ended January 31,
 
   
2012
   
2011
 
             
Income before income taxes
  $ 94,129     $ 119,694  
Statutory income tax rate
    20 %     20 %
                 
Income tax at statutory tax rate
    18,825       23,938  
Tax effect of non-deductible expenses
    5,352       -  
Tax effect of non-taxable income
    (12,257 )     -  
Tax effect of tax allowances
    (2,966 )     -  
Net operating loss from VSSB
    2,755       -  
 
Income tax expense
  $ 11,709     $ 23,938  
 
NOTE10    RELATED PARTY TRANSACTIONS

For the three months ended January 31, 2012 and 2011, the Company leased an office premise at the current market value of $2,382 and $1,608, respectively from a related company, which is controlled by the director and chief executive officer of the Company, Mr. Weng Kung Wong in the normal course of business.

For the three months ended January 31, 2011, the Company had software sales of $160 and product sales of $743,683 to certain related companies, which are under common control of various shareholders with less than 5% but over 4.5% equity interest of the Company individually.
 
All of these related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of business.
 
NOTE11    SEGMENT INFORMATION

The Company operates three reportable business segments in Malaysia, as defined by ASC Topic 280:

l  
Software business – sale of software products and website development
l  
Trading business – trading of luxury consumer products
l  
Plantation business – operation of palm oil plantation

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, 2012
 
   
Software Business
   
Trading Business
   
Plantation Business
   
Corporate
   
Total
 
                               
Revenues, net
  $ 199,158     $ -     $ 49,238     $ -     $ 248,396  
Cost of revenues
    (6,718 )     -       (57,646 )     -       (64,364 )
 
Gross profit (loss)
    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  
 
 
16

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
 
   
Three months ended January 31, 2011
 
   
Software Business
   
Trading Business
   
Plantation Business
   
Corporate
   
Total
 
                               
Revenues, net
  $ 322     $ 743,683     $ -     $ -     $ 744,005  
Cost of revenues
    -       (586,249 )     -       -       (586,249 )
 
Gross profit
    322       157,434       -       -       157,756  
Depreciation
    -       -       -       6,513       6,513  
Net income (loss)
    -       95,756       -       (72,750 )     23,006  
Total assets
    -       -       -       2,128,104       2,128,104  
Expenditure for long-lived assets
  $ -     $ -     $ -     $ -     $ -  
 
NOTE12    CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

(a)         Major customers

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

     
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

For the three months ended January 31, 2011, one customer represented more than 10% of the Company’s revenues amounting to $743,683 with $756,700 of accounts receivable at that date.

(b)         Major vendors

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

   
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%
 
$
-
 
17

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

For the three months ended January 31, 2011, the vendor who accounted for 10% or more of the Company’s purchases and its outstanding balance at period-end date, is presented as follows:

   
Three months ended January 31, 2011
 
January 31, 2011
   
Purchase
 
Percentage
of purchase
 
Trade accounts
payable
                 
Vendor C
 
$
438,307
 
75%
 
$
267,399
Vendor D
   
147,942
 
25%
   
150,532
Total:
 
 
$
586,249
 
100%
 
$
417,931
 
(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)    Exchange rate risk

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

(e)    Economic and political risks

Substantially all of the Company’s services are conducted in Malaysia 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.

NOTE13    COMMITMENTS AND CONTINGENCIES

(a)           Operating lease commitment

The Company leases certain office premises, staff quarters and palm oil land under operating leases that expire at various dates through 2012. The leases, which cover periods from one to two years, generally provide for renewal options at specified rental amounts.
 
18

 
PRIME GLOBAL CAPITAL GROUP INCORPORATED
(Formerly Home Touch Holding Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

Aggregate rent expenses for the three months ended January 31, 2012 and 2011 were $41,051 and $1,608, respectively.

As of January 31, 2012, the Company has future minimum rental payments of $9,324 for office premise and staff quarters and $65,475 for plantation land due under various operating leases in the next year.

(b)         Capital commitment

As of January 31, 2012, the Company has future contingent payment of approximately $7,200,000 under the conditional purchase contract in connection of acquisition of palm oil plantation land within three months upon the receipt of the government and other consents required to effectuate the land transfer. Management anticipates the completion of the land purchase in the next twelve months.

NOTE14    SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued and filed with this Form 10-Q, except for the following events.

On February 13, 2012, an Offer Letter, or the Offer Letter, was issued on behalf of PGCG Properties Sdn. Bhd., one of our affiliated entities, pursuant to which PGCG Properties Sdn. Bhd., or a designee thereof, offered to purchase all of the issued and outstanding securities of Dunford Corporation Sdn. Bhd, or Dunford, at a purchase price equal to RM 55,000,000 less all liabilities (including contingent liabilities), subject to the satisfactory completion of due diligence within 30 days by Prime Global Capital Group Incorporated, a Nevada corporation, or “we”, “us” or the “Company.”  Dunford’s primary assets comprise of certain real properties located in Selangor, Malaysia.  We deposited into escrow the amount of RM 1,100,000, which amount will be applied toward the purchase price upon the consummation of the sale, forfeited as liquidated damages or otherwise refunded to us with interest in accordance with the terms of the Offer Letter.  We further agreed to deposit an additional amount equal to 8% of the purchase price upon the execution of the definitive purchase agreement by the parties.
 
On February 14, 2012, the Company entered into a binding memorandum of understanding (the “MOU) with the Sinan County government of China’s Guizhou District. Pursuant to the MOU, Sinan County government will allocate 100 mu of land located within Sinan Industrial Park free of charge for a period of three years commencing February 14, 2012, for the purpose of constructing a castor processing plant. The Company is required to begin construction by April 30, 2012, and invest a minimum of RMB 150 million before the end of January 15, 2015 to the project. If the Company fails to make the minimum investment, Sinan County shall be entitled to collect in a lump sum fees for the use of the allocated land since the initialization of the project.

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. The Company has received the net proceeds from the sale of the shares and will use it for general corporate purposes.

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.  The Company will receive net proceeds of approximately $3,200,000 from the sale of the shares and will use it for general corporate purposes.
 
19

 
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

History

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

On July 15, 2010, we effectuated a 1-for-20 reverse stock split, or the Reverse Split, of all issued and outstanding shares of the Company's Common Stock in connection with our plans to attract additional financing and potential business opportunities.  As a result of the Reverse Split, our issued and outstanding shares decreased from 40,000,000 to 2,000,003.

On September 27, 2010, we filed a report on Form 8-K disclosing the sale to certain accredited investors on September 21, 2010, of an aggregate of 1,500,000 shares of our Common Stock at a per share price of $0.10, or $150,000 in the aggregate, in accordance with the terms and conditions of certain subscription agreements made with such investors.  The Company received net proceeds of approximately $145,000 from the sale of the shares and intends to use the net proceeds for general corporate purposes.  Weng Kung Wong, who was appointed our Chief Executive Officer and director on November 15, 2010, purchased 375,000 shares of our Common Stock in this transaction.

 
20

 
Change in Control and Sale of HTL and Our Smart Home Business

On November 15, 2010, we consummated the sale to certain accredited investors of an aggregate of 80,000,000 shares of our Common Stock at a per share price of $0.01, or $800,000 in the aggregate, in accordance with the terms and conditions of certain subscription agreements made with such investors.  The Company received net proceeds of approximately $795,000 from the sale of the shares and intends to use the net proceeds for general corporate purposes. Weng Kung Wong, our Chief Executive Officer and director, purchased an additional 12,750,000 shares of our Common Stock in this transaction.

A change of control occurred in connection with the sale of such shares.  David Ng and Stella Wai Yau resigned from their positions as President and Chief Executive Officer of the Company, and as Chief Financial Officer, Chief Operating Officer and Secretary of the Company effective November 15, 2010.  The following individuals were appointed to serve as executive officers of the Company:
 
  Name   Office
  Weng Kung Wong   Chief Executive Officer
  Liong Tat Teh   Chief Financial Officer
  Sek Fong Wong    Secretary
 
Weng Kung Wong, Liong Tat Teh and Sek Fong Wong were further appointed to serve on our board of directors.

On December 6, 2010, we consummated a share exchange, or the Share Exchange, pursuant to which Wooi Khang Pua and Kok Wai Chai, or the UHT Shareholders, transferred to us all of the issued and outstanding shares of Union Hub Technology Sdn. Bhd., a company organized under the laws of Malaysia, or UHT, in exchange for the issuance of 16,500,000 shares of our common stock, par value $0.001 per share, or the Common Stock.  The Share Exchange was made pursuant to the terms of a Share Exchange Agreement, or the Exchange Agreement, by and among, and the Company, the UHT Shareholders and UHT.  As result of the Share Exchange, UHT became our wholly owned subsidiary.

Concurrently with the Share Exchange, we sold to Up Pride Investments Limited, a British Virgin Islands limited liability company owned by David Gunawan Ng, and Magicsuccess Investments Limited, a British Virgin Islands limited liability company owned by Stella Wai Yau, all of the issued and outstanding securities of Home Touch Limited, a Hong Kong Special Administrative Region of China corporation, or HTL, for cash consideration of $20,000.  In connection with the sale, Mr. Ng and Ms. Yau, our former founders and executive officers, resigned from their positions on our board of directors.  Our smart home business was conducted through HTL, and as result of the sale, we ceased our smart home business operations.  The sale of HTL securities was made pursuant to the terms of a Common Stock Purchased Agreement, or the Common Stock Purchase Agreement, by and among the Company, HTL, Up Pride Investments Limited and Magicsuccess Investments Limited.

In all instances above, we relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under, the Securities Act of 1933, as amended, or the Securities Act, in selling our securities and the HTL securities.

On January 25, 2011, we changed our name to Prime Global Capital Group Incorporated and increased our authorized capital to 1,000,000,000 shares of common stock and 100,000,000 shares of preferred stock from 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.  Effective January 25, 2011, we changed our fiscal year end from March 31 to October 31.

Current Business Segments

We operate in three business segments: (i) the design, development and operation of one or more technologies which enable a community of users to engage in social networking, research and e-commerce on a mobile platform, or the m-commerce business; (ii) the distribution of consumer goods such as high-end timepieces to distributors, independent retailers and individual end-users; and (iii) the operation of a palm oil plantation, or our oilseeds business.  Our m-commerce and consumer goods distribution businesses were launched in July 2010 and October 2010, respectively.  We commenced our palm oil plantation business in August 2011.  We conduct our software development and distribution and product distribution businesses through UHT and our oilseeds business through VSSB, our VIE.
 
21

 

Our Oilseeds Business

In July 2011, VSSB, a subsidiary of PGCG Plantations Sdn. Bhd. which is beneficially owned by Messrs. Wong, our Chief Executive Officer and director, and Chai, UHT’s director, obtained the right to purchase and operate a mature palm oil plantation located in Malaysia pursuant to the terms of the Land Purchase Agreement, and the Rental Agreement.  In August 2011, we entered into a binding MOU to acquire VSSB upon VSSB’s consummation of the Land Purchase Agreement.  We expect the consummation of the Land Purchase Agreement to occur within the next 6 months.

On December 8, 2011, we entered into a Memorandum of Understanding, or the Thailand MOU, with Srira Cha province, Thailand to initiate a contract farming arrangement with local farmers on a trial basis.  Pursuant to the Thailand MOU, the Srira Cha province government agreed to allocate to us 20 Rai (approximately 8 acres) of land to plant castor seeds provided by us.  If the local farmers and the provincial government are satisfied with the results of the trial arrangement, the provincial government agreed to allocate additional lands with a goal of reaching 500,000 Rai over a period of five years and promote and support the cultivation of castor among independent farmers.  Once a planting area of 4,000 Rai has been achieved, the Company intends to obtain the government’s approval to build and operate a castor processing plant with the goal of building and operating two castor processing plants over such five year period.  We intend to purchase the castor beans cultivated by contract farmers on the allocated land.  We expect to initiate trial planting within the next 6 months.

On February 14, 2012, we entered into a binding Memorandum of Understanding, or the Sinan MOU, with the Sinan County government of China’s Guizhou District pursuant to which the Sinan County government agreed to allocate to us land to construct a castor processing plant and plant castor seeds.  Pursuant to the terms of the MOU, Sinan agreed to allocate to us 100 mu of land located within Sinan Industrial Park free of charge for a period of three years commencing February 14, 2012, for the purpose of constructing a castor processing plant.  We are required to begin construction by April 30, 2012, and invest a minimum of RMB 150 million before the end of January 15, 2015, into the project.  If we fail to make the minimum investment, Sinan County shall be entitled to collect in a lump sum fees for the use of the allocated land since the initialization of the project.  Sinan County agrees to assist us in promoting castor planting in Sinan and other neighboring counties with a target of achieving 250,000 to 400,000 mu of plantation area within 1-3 years.  We will be responsible for developing and managing the castor operations.  The MOU is construed and enforceable in accordance with the laws of the People’s Republic of China.

A copy of the MOU, Thailand MOU and Sinan MOU are incorporated herein by reference and filed as Exhibits 10.4, 10.7 and 10.8 to this Quarterly Report on Form 10-Q.  The description of the transactions contemplated by the MOU, Thailand MOU and Sinan MOU 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.

Focus on Oil Seeds Business

In light of the opportunities presented by our oilseeds business, our management elected to focus our resources to develop our oilseeds business.  We intend to seek additional business opportunities in the castor oil and palm oil industries with a focus on the acquisition, lease or management of existing castor oil and palm oil plantations located in Asia. Except as described above, we are not parties to any binding agreements or commitments regarding any such disposition, acquisition or business venture, and there can be no assurance that we will be able to successfully consummate such disposition, acquisition or business venture.

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.
 
22

 
Sale of Company Securities

On February 16, 2012, we consummated the sale to Mr. Weng Kung Wong, our President and Chief Executive Officer, of an aggregate of 667,780 shares of our common stock with par value of $0.001, at a price of $2.995 per share, or $2,000,000 in the aggregate. The proceeds from the sale of the shares will be used for general corporate purposes.

On March 6, 2012, we consummated the sale to Mr. Weng Kung Wong, our President and Chief Executive Officer, and one other accredited shareholder of the Company, of an aggregate of 1,076,000 shares of our common stock with par value of $0.001, at a price of $2.984 per share, or approximately $3,210,784 in the aggregate.  Mr. Wong purchased 638,000 shares of our common stock. We expect to receive net proceeds of approximately $3,200,000 from the sale of the shares and will use the net proceeds for general corporate purposes.

Offer to Purchase Commercial Real Estate

On February 13, 2012, an Offer Letter, or the Offer Letter, was issued on behalf of PGCG Properties Sdn. Bhd., one of our affiliated entities, pursuant to which PGCG Properties Sdn. Bhd., or a designee thereof, offered to purchase all of the issued and outstanding securities of Dunford Corporation Sdn. Bhd, or Dunford, at a purchase price equal to RM 55,000,000 less all liabilities (including contingent liabilities), subject to the satisfactory completion of due diligence within 30 days by Prime Global Capital Group Incorporated, a Nevada corporation, or “we”, “us” or the “Company.”  Dunford’s primary assets comprise of certain real properties located in Selangor, Malaysia.
 
We deposited into escrow the amount of RM 1,100,000, which amount will be applied toward the purchase price upon the consummation of the sale, forfeited as liquidated damages or otherwise refunded to us with interest in accordance with the terms of the Offer Letter.  We further agreed to deposit an additional amount equal to 8% of the purchase price upon the execution of the definitive purchase agreement by the parties.
 
We are in the process of negotiating the terms of the definitive purchase agreement and expect to complete the acquisition in the near future.
 
A copy of the Offer Letter is incorporated herein by reference and filed as Exhibit 10.9 to this Quarterly Report on Form 10-Q.  The description of the transactions contemplated by the Offer Letter set forth herein does not purport to be complete and is qualified in its entirety by reference to the full text of the exhibit filed herewith and incorporated herein by reference.

We intend seek additional real estate acquisition opportunities.  Except as set forth above, we are not parties to any binding agreements or commitments regarding any such acquisition.  There can be no assurance, however, that we will be able to successfully consummate such acquisition in the near future.
 
Results of Operations

Comparison of the three months ended January 31, 2012 to the three months ended January 31, 2011

The following table shows our revenues by type for the three months ended January 31, 2012, compared to the three months ended January 31, 2011.

  
   
For the Three Months Ended January 31,
   
$
 
%
     
2012
     
2011
   
Change
 
Change
                         
Net Revenues
 
$
248,396
   
$
744,005
  $
(495,609)
 
(67%)
  Software sales
   
199,158
     
322
   
198,836
 
NM
  Product sales
   
-
     
743,683
   
(743,683)
 
(100%)
  Plantation sales
   
49,238
     
-
   
49,238
 
NM
Cost of revenue
   
(64,364)
     
(586,249)
   
(521,885)
 
(89%)
Gross profit
   
184,032
     
157,756
   
26,276
 
17%
General and administrative expenses
   
(304,572)
     
(110,327)
   
194,245
 
176%
Other income (expense)
   
66,053
     
(485)
   
66,538
 
NM
Income tax expense
   
(11,709)
     
(23,938)
   
(12,229)
 
(51%)
Net (loss) income
   
(66,196)
     
23,006
   
(89,202)
 
(388%)
*NM means not meaningful
 
23

 

Revenue.  We generated net revenue of $248,396 for the three months ended January 31, 2012 with software sales accounting for $199,158, or 80.2% of net revenues, and plantation sales accounting for $49,238, or 19.8% of net revenues. For the same period ended January 31, 2011, we generated net revenue of $744,005 with software sales accounting for $322, or 0.04% of net revenues, and product sales accounting for $743,683, or 99.96% of net revenues.  As we shift our focus to our oilseeds business, we anticipate revenues from our oilseeds business segment to increase and revenues from our product distribution business segment to decrease.

Cost of Revenue.  Our cost of revenue as a percentage of net revenue was approximately 25.9% for the three months ended January 31, 2012, as compared to 78.8% for the same period in 2011.  The decrease is primarily attributable to the reduction in our product distribution business.  Cost of revenue consisted primarily of the costs related to the palm oil business such as 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.

Gross Profit.  We achieved a gross profit of $184,032 for the three months ended January 31, 2012, as compared to $157,756 for the same period in 2011.  The increase is attributable to the reduction in our product distribution business during the three months ended January 31, 2012.
 
General and Administrative Expenses (“G&A”).  We incurred G&A expenses of $304,572 for the three months ended January 31, 2012, representing an increase of $194,245, as compared to $110,327 for the three months ended January 31, 2011.  The increase in G&A is primarily attributable to the marketing expenses incurred to promote our oilseeds business and consultancy fee incurred for uplisting process.  G&A as a percentage of net revenue was 122.6% for the three months ended January 31, 2012.

Other Income (Expense).  We incurred other income of $66,053 for the three months ended January 31, 2012, as compared to an expense of $485 for the three months ended January 31, 2011.  The increase in other income is attributable primarily to realized gain on sale of marketable securities of $58,873 and interest income of $4,786.
 
Income Tax Expense.  We recorded income tax expense of $11,709 for the three months ended January 31, 2012, as compared to $23,938 for the same period ended January 31, 2011.  The decrease is primarily attributable to the decrease in revenue generated from the software product sales business and the product distribution business during the three months ended January 31, 2012.

Liquidity and Capital Resources

Sources of Liquidity.  For the three months ended January 31, 2012, we incurred net loss of $66,196 as compared to a net income of $23,006 for the same period ended January 31, 2011.  During the three month period ended January 31, 2012, and up to the date of this Quarterly Report, we have financed our operations through private placements of our common stock as summarized below:

Private Placement Transactions
Gross Proceeds
Sale of 1,076,000 shares of common stock on 3/6/2012
$3,210,784
Sale of 667,780 shares of the Company’s common stock on 2/16/2012
$2,000,000
Total:
$5,210,784

Net Cash Used in Operating Activities.  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.
 
24

 
For the three months ended January 31, 2011, net cash used in operating activities was $705,119, which consisted primarily of net income of $23,006, depreciation of $6,513, and an increase in income tax payable of $23,938, offset by an increase in accounts receivable of $638,421, a decrease in accounts payable of $115,778, and a decrease in accrued liabilities and other payables of $6,228.

Net Cash Used in Investing Activities.  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.

For the three months ended January 31, 2011, net cash used in investing activities was $797,584, all of which was attributable to the payment of earnest deposit on the palm oil plantation to a prospective and independent vendor in Malaysia.

Net Cash Provided By Financing Activities.  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.

For the three months ended January 31, 2011, net cash provided by financing activities was $1,381,180, consisting primarily of $800,000 from the sale of our common stock, $583,300 of advances from Mr. Wong, our Chief Executive Officer and director, and offset by repayments of $2,120 on a finance lease.

Funding Requirements.  Pursuant to the MOU, we incurred a conditional obligation of approximately $7.2 million related to the acquisition of a palm oil plantation.  We intend to consummate the acquisition upon receipt of the relevant governmental approvals, which we expect to occur in the next twelve months. We also expect to incur greater expenses, including expenses related to the hiring of sales personnel and the establishment of international offices in the near future.  We expect that our general and administrative expenses will also increase as we expand our finance and administrative staff, add infrastructure, and incur additional costs related to being a public company, including directors’ and officers’ insurance, investor relations programs, and increased professional fees.  Our future capital requirements will depend on a number of factors, including the timing of future business acquisitions, if any, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing our intellectual property rights, the acquisition of strategic partnerships, the status of competitive products, the availability of financing, and our success in developing markets for our products and services.

We believe that the net proceeds from our recent private placement transactions, together with our existing cash, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through the end of calendar year 2012.  We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, especially if we acquire one or more businesses or choose to expand our product development efforts more rapidly than we presently anticipate.  In addition, we may decide to raise additional funds even before we need them if the conditions for raising capital are favorable.  In such event, we may finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements.  We may also seek to sell additional equity or debt securities or obtain one or more credit facilities.  We do not currently have any commitments for future external funding.

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.
 
25

 
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.

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 subsidiary and VIE. All significant inter-company balances and transactions between the Company and its subsidiary and VIE have been eliminated upon consolidation.

The Company has adopted the Accounting Standards Codification (“ASC”) Topic 810-10-25, “Variable Interest Entities” (“ASC 810-10-25”). ASC 810-10-25 requires a variable interest entity or VIE to be consolidated by the Company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.

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.

Marketable securities, available-for-sale

These marketable securities are classified as available-for-sale and are recorded at their fair market values with the corresponding unrealized holding gains or losses, recorded as a separate component of other comprehensive income within stockholders’ equity. The fair value of marketable securities is determined based on quoted market prices at the balance sheet dates. Realized gains and losses are determined by the difference between historical purchase price and gross proceeds received when the marketable securities are sold.

The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its investments on a recurring basis pursuant to the ASC Topic 820.

Plant and equipment

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:
 
26

 
 
 
Expected useful life
Office furniture and equipment
10 years
Motor vehicles
5 years
Computer equipment
5 years

Expenditures for maintenance and repairs is 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 deposits on plantation purchase and 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.

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 are recorded as deferred revenue. Revenue is recognized when the related service is rendered.
 
27

 
(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 generally recognizes revenue from plantation sales 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.

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.

Foreign currencies translation

Transactions denominated in currencies other than the functional currency, which is Malaysian Ringgit (“MYR”), are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

The reporting currency of the Company is the United States Dollars ("US$") and the accompanying financial statements have been expressed in US$. In addition, the Company maintains its books and record in a local currency, MYR, 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.

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.
 
28

 
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. The Company operates in three reportable operating segments in Malaysia.

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, deposits and other receivables, deferred revenue, income tax payable, amount due to a director, 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 a finance lease 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 Adopted Accounting Standards

As of November 1, 2011, we adopted new guidance on the testing of goodwill impairment that allows the option to assess qualitative factors to determine whether performing the two-step goodwill impairment assessment is necessary.  Under the option, the calculation of the reporting unit's fair value is not required to be performed unless as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than the unit's carrying amount. The adoption of this guidance impacts testing steps only, and therefore adoption did not have an impact on our condensed consolidated financial statements.

As of November 1, 2011, we adopted new guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. We elected to adopt the two separate but consecutive statement presentation, and the adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

As of November 1, 2011, we adopted new guidance regarding disclosures about fair value measurements. The guidance requires new disclosures related to activity in Level 3 fair value measurements. This guidance requires purchases, sales, issuances, and settlements to be presented separately in the rollforward of activity in Level 3 fair value measurements.  We elected to adopt the new disclosures, and the adoption of this guidance did not have a material impact on our condensed financial statements.
 
Recently Issued Accounting Standards
 
There are no recently issued accounting standards for which the Company expects a material impact on our financial statements.

 
29

 

ITEM 3                   Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

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 and the identification of a material weakness in internal control over financial reporting described below, 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, 2012, and during the period prior to and including the date of this report, were not effective.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.  In connection with management's assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weaknesses in our internal control over financial reporting as of October 31, 2011: We had not effectively implemented comprehensive entity-level internal controls and had not completed the documentation or testing of these controls at year end.

The material weakness identified by our Chief Executive Officer and Chief Financial Officer and our plans for remediation continue to be as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2011, which was filed with the SEC on January 31, 2012.  In addition, we expect to nominate directors who will serve as audit committee members in our upcoming 2012 Annual Stockholders Meeting.

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 during the three months ended January 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
30

 
 
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
 
On February 16, 2012, we filed a Current Report on Form 8-K with the Securities and Exchange Commission disclosing the sale of 667,780 shares of common stock to Weng Kung Wong, our President, Chief Executive Officer and Director, at a per share price of $2.995.  The foregoing description of the sale is qualified in its entirety by reference to that certain Subscription Agreement dated February 16, 2012, by and between the Company and Mr. Wong, which is filed as Exhibit 10.1 to this report, and is incorporated herein by reference.

On March 6, 2012, we filed a Current Report on Form 8-K with the Securities and Exchange Commission disclosing the sale of consummated the sale 1,076,000 shares of our common stock at a per share price of $2.984 to existing shareholders.  Weng Kung Wong, our Chief Executive Officer and director purchased 638,000 shares of our common stock.  The foregoing description of the sale is qualified in its entirety by reference to that certain form of Subscription Agreement dated March, 2012, which is filed as Exhibit 10.2 to this report, and is incorporated herein by reference.

ITEM 3                   Defaults upon Senior Securities
 
None.
 
ITEM 4                   (Removed and Reserved)


ITEM 5                   Other Information
 
None.

ITEM 6                   Exhibits

Exhibit No.
Name of Exhibit
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
Subscription Agreement, dated February 16, 2012, by and between Prime Global Capital Group Incorporated and Weng Kung Wong (5)
10.2
Form of Subscription Agreement, dated March, 2012, by and between Prime Global Capital Group Incorporated and certain accredited investors (6)
10.3
Tenancy Agreement (Commercial), dated October 29, 2010, by and between Atomic Vision Sdn. Bhd. and Union Hub Technology Sdn. Bhd. (2)
 
 
31

 
 
 
10.4
Memorandum of Understanding, dated August 29, 2011, by and among Wong Weng Kung, Chai Kok Wai and Union Hub Technology Sdn. Bhd. (7)
10.5
Sale and Purchase Agreement (Agricultural Land), dated July 8, 2011, by and between Persiaran Abadi Sdn. Bhd. And Virtual Setup Sdn. Bhd. (7)
10.6
Agreement for Rental of Oil Palm Land, dated July 1, 2011, by and between Persiaran Abadi Sdn. Bhd. And Virtual Setup Sdn. Bhd. (7)
10.7
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 (8)
10.8
Memorandum of Understanding for Investment in Castor Processing Plant Project, dated February 14, 2012, by and between Sinan County Government and Prime Global Capital Group Incorporated (6)
10.9
Offer Letter, dated February 13, 2012 (6)
10.10
Employment Agreement dated April 21, 2011, by and between Prime Global Capital Group Incorporated and Weng Kung Wong (9)
10.11
Employment Agreement dated April 21, 2011, by and between Prime Global Capital Group Incorporated and Liong Tat Teh (9)
10.12
Employment Agreement dated April 21, 2011, by and between Prime Global Capital Group Incorporated and Sek Fong Wong (9)
10.13
Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Weng Kung Wong (10)
10.14
Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Liong Tat Teh (10)
10.15
Letter of Appointment dated July 19, 2011, by and between Union Hub Technology Sdn. Bhd. and Sek Fong Wong (10)
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.*
 
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 our 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 Exhibit 10.1 to the Current Report on Form 8K filed with the Securities and Exchange Commission on February 16, 2012.
(6) 
Incorporated by reference from out Current Report on Form 8K filed with the Securities and Exchange Commission on March 6, 2012
(7) 
Incorporated by reference from our Current Report on Form 8-k filed with the Securities and Exchange Commission on August 30, 2011.
(8) 
Incorporated by reference from our Current Report on Form 8-k filed with the Securities and Exchange Commission on December 13, 2011.
(9) 
Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 21, 2011.
(10) 
Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2011.
 
 
 
32

 
 
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 9, 2012
 
Chief Financial Officer
 
 
 
 
 
 
 
 

33 

 

XOTC:PGCG Prime Global Capital Group Inc Quarterly Report 10-Q Filling

Prime Global Capital Group Inc XOTC:PGCG Stock - Get Quarterly Report SEC Filing of Prime Global Capital Group Inc XOTC:PGCG stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XOTC:PGCG Prime Global Capital Group Inc Quarterly Report 10-Q Filing - 1/31/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Popularity |  Our Choices |  Most Recent Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XOTC:PGCG Prime Global Capital Group Inc Insider Activity 4 Filing - 9/24/2012  |  Next: XOTC:PGCG Prime Global Capital Group Inc Quarterly Report 10-Q Filing - 4/30/2012