UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM  10-Q

 

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

 

For the quarterly period ended March 31, 2024

 

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

 

Commission file number 000-56482

 

GLOBALTECH CORPORATION

 (Exact Name of registrant as specified in its charter)

 

Nevada

 

82-3926338

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

Securities registered under Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered.

Common

 

 N/A

 

3550 Barron Way Suite 13a, Reno, NV 89511

(Address of principal executive offices, including zip code.)

 

775 624 4817

(Telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

 

Securities registered under Section 12(g) of the Act:

 

Common Stock, $0.0001 par value

(Title of class)

 

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

 

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

 

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

 

Large accelerated filer       

Accelerated filer               

Non-accelerated Filer       

Smaller reporting company

 

 

Emerging Growth company

 

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

 

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

 

The aggregate market value of Common Stock held by non-affiliates of the Registrant was approximately N/A.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: 139,763,391 of Common Stock as of March 31, 2024.

 

Document Incorporated by Reference: None

 

We are a controlled company as 63.30% of our issued and outstanding shares are held by Babar Ali Syed.

  

 

 

 

  

Index

 

 

 

Page

 

Forward-Looking Statements

3

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

4

 

 

Consolidated Balance Sheets as on March 31, 2024 and December 31, 2023

4

 

 

Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

5

 

 

Consolidated Statements of Cash flows for the three months ended March 31, 2024 and 2023

6

 

 

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023

7

 

 

Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023

8

 

 

Notes to the Consolidated Financial Statements 

9

 

Item 2.

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

37

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

46

 

Item 4.

Controls and Procedures

46

 

 

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

47

 

Item 1A.

Risk Factors

47

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

 

Item 3.

Defaults upon Senior Securities

47

 

Item 4.

Mine Safety Disclosures

47

 

Item 5.

Other Information

47

 

Item 6.

Exhibits

48

 

 

 
2

Table of Contents

  

Forward-Looking Statements

 

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “shall,” “should,” “could,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “forecasts,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology. Our operations involve risks and uncertainties, many of which are outside of our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.

 

Forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties, and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements as set forth under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on April 16, 2024. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements.

 

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations, beliefs and views as of the date of this Quarterly Report on Form 10-Q concerning future developments and their potential effects on our business. Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We anticipate that subsequent events and developments may cause our assessments to change. Except as required by law, we are under no duty to update or revise any of such forward- looking statements, whether as a result of new information, future events, or otherwise, after the date of this Quarterly Report on Form 10-Q.

 

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect. The forward-looking statements contained herein should not be relied upon as representing our assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

 

 
3

Table of Contents

   

GLOBALTECH CORPORATION

CONSOLIDATED BALANCE SHEETS

As of March 31, 2024 and December 31, 2023

 

 

 

 March 31,

 

 

 December 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

ASSETS

 

(Unaudited)

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$457,096

 

 

$908,097

 

Restricted cash

 

 

2,413,878

 

 

 

2,353,442

 

Accounts receivable – net

 

 

3,727,582

 

 

 

4,045,485

 

Short term investments

 

 

961,984

 

 

 

149,427

 

Prepayments

 

 

26,481

 

 

 

11,448

 

Stores and spares

 

 

864,758

 

 

 

859,271

 

Loans and advances

 

 

4,650,183

 

 

 

4,213,468

 

Other receivables

 

 

2,521,503

 

 

 

2,120,283

 

Total current assets

 

 

15,623,465

 

 

 

14,660,921

 

Property, plant and equipment

 

 

17,868,944

 

 

 

17,904,180

 

Operating lease right-of-use assets

 

 

488,757

 

 

 

503,701

 

Intangible assets - net

 

 

11,307,071

 

 

 

11,575,524

 

Long term loans and other assets

 

 

2,104,136

 

 

 

4,253,358

 

Deferred tax asset

 

 

8,506,919

 

 

 

8,389,438

 

TOTAL ASSETS

 

$55,899,292

 

 

$57,287,121

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Trade and other payables

 

$26,485,184

 

 

$  $ 26,383,588

 

Current portion of non-current liabilities

 

 

6,334,370

 

 

 

5,968,424

 

Accrued interest

 

 

2,972,525

 

 

 

2,706,788

 

Short term borrowings

 

 

1,110,075

 

 

 

1,507,307

 

Provision for taxation - net

 

 

1,216,313

 

 

 

1,161,384

 

Total current liabilities

 

 

38,118,467

 

 

 

37,727,491

 

Term finance certificates

 

 

1,858,643

 

 

 

2,119,667

 

Long term financing - secured

 

 

1,353,562

 

 

 

1,329,890

 

Long term deposits and payable

 

 

1,417,510

 

 

 

1,873,896

 

License fee payable

 

 

163,422

 

 

 

161,165

 

Operating lease liability

 

 

690,075

 

 

 

689,416

 

Other payables

 

 

1,528,017

 

 

 

1,159,342

 

Total non- current liabilities

 

 

7,011,229

 

 

 

7,333,376

 

TOTAL LIABILITIES

 

 

45,129,695

 

 

 

45,060,867

 

CONTINGENCIES AND COMMITMENTS

 

 

 

 

 

 

 

 

SHARE CAPITAL AND RESERVES

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred shares

 

 

-

 

 

 

-

 

Dividend on preferred shares

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value - authorized 500,000,000 shares at March 31, 2024 and December 31, 2023 and issued 139,763,391 and 139,763,391 shares at March 31, 2024 and December 31, 2023

 

 

13,976

 

 

 

13,976

 

Accumulated other comprehensive loss

 

 

(1,781,520 )

 

 

(1,761,998 )

Accumulated deficit

 

 

(37,263,734 )

 

 

(36,484,513 )

Shareholders’ Equity Attributable to the Parent Company

 

 

(39,031,278)

 

 

(38,232,535 )

Non-Controlling interest

 

 

49,800,877

 

 

 

50,458,789

 

TOTAL SHAREHOLDERS’ EQUITY

 

 

10,769,599

 

 

 

12,226,254

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

55,899,292

 

 

 

57,287,121

 

 

 

 

 

 

 

 

 

 

The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.

 

 
4

Table of Contents

 

GLOBALTECH CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

 

 

 

2024

 

 

2023

 

NET REVENUE

 

$3,702,258

 

 

$2,468,372

 

Direct operating costs

 

 

(3,582,159 )

 

 

(2,138,821 )

Other operating costs

 

 

(486,008 )

 

 

(481,141 )

Depreciation and amortization

 

 

(778,368 )

 

 

(707,176 )

Other expenses

 

 

(3,795 )

 

 

(3,074,818 )

OPERATING LOSS

 

 

(1,148,073 )

 

 

(3,933,584 )

OTHER:

 

 

 

 

 

 

 

 

Other income - net

 

 

265,651

 

 

 

15,553

 

Finance cost

 

 

(493,290 )

 

 

(425,095 )

LOSS BEFORE TAXATION

 

 

(1,375,713 )

 

 

(4,343,127 )

Taxation

 

 

(45,446 )

 

 

(39,108 )

NET LOSS

 

$(1,421,158 )

 

$(4,382,235 )

NET LOSS ATTRIBUTABLE TO:

 

 

 

 

 

 

 

 

Common shareholders of GlobalTech Corporation - (a)

 

 

(779,221 )

 

 

(2,598,665 )

Non - controlling interest (NCI)

 

 

(641,937 )

 

 

(1,783,569 )

 

 

 

(1,421,158 )

 

 

(4,382,235 )

 

 

 

 

 

 

 

 

 

Net loss per common share: basic and diluted - (a/b)

 

$(0.01 )

 

$(0.02 )

Weighted-average common shares used to compute basic and diluted loss per share - (b)

 

 

139,763,391

 

 

 

139,763,391

 

 

 

 

 

 

 

 

 

 

The annexed notes form an integral part of these unaudited consolidated financial statements.

 

 
5

Table of Contents

 

GLOBALTECH CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$(1,421,158 )

 

$(4,382,235 )

Adjustment for non-cash charges and other items:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

778,368

 

 

 

707,176

 

Interest accretion on liabilities

 

 

462,373

 

 

 

369,213

 

Post employment benefits

 

 

166,662

 

 

 

11,576

 

Income on deposits, advances and savings accounts

 

 

(146 )

 

 

(168 )

Exchange loss on liabilities

 

 

-

 

 

 

3,071,100

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Stores and spares

 

 

(5,487)

 

 

218,665

 

Trade debts

 

 

317,903

 

 

 

(2,363,096 )

Loans and advances

 

 

(436,715)

 

 

297,858

 

Short term investment

 

 

-

 

 

 

42,679

 

Prepayments

 

 

(15,033 )

 

 

(10,469 )

Other receivables

 

 

(401,220 )

 

 

(2,656,539 )

Trade and other payables

 

 

101,596

 

 

 

(4,050,339 )

Increase / (Decrease) in non-current liabilities and assets:

 

 

 

 

 

 

 

 

Long term deposits and payables

 

 

(456,385 )

 

 

(181,514 )

Other payables

 

 

368,675

 

 

 

(531,863 )

Long term loans and other assets

 

 

2,149,220

 

 

 

3,541,580

 

Post employment benefits paid

 

 

(5,835 )

 

 

(1,232 )

Income on deposit and savings accounts

 

 

146

 

 

 

168

 

Lease rental payments

 

 

(35,691 )

 

 

(27,927 )

Finance cost paid

 

 

(149,863 )

 

 

(59,034 )

Income tax paid

 

 

(7,356 )

 

 

(5,642 )

Net cash generated from/(used in) operating activities

 

 

1,410,055

 

 

 

(6,010,043 )

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from disposal (Payment on purchase) of property and equipment - net

 

 

(43,794 )

 

 

(9,087 )

Proceeds from the encashment of short term investments

 

 

-

 

 

 

-

 

Net cash used in investing activities

 

 

(43,794 )

 

 

(9,087 )

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Repayment of term finance certificates

 

 

-

 

 

 

-

 

Repayment of long term financing

 

 

(81,150 )

 

 

(67,237 )

Net cash used in from financing activities

 

 

(81,150 )

 

 

(67,237 )

Net increase/(decrease) in Cash and Cash Equivalents

 

 

1,285,111

 

 

 

(6,086,368 )

Cash and Restricted Cash at the beginning of the Period

 

 

2,566,538

 

 

 

14,772,761

 

Exchange effect

 

 

(980,674)

 

 

(6,119,855 )

Cash and Restricted Cash at the End of the Period

 

$2,870,975

 

 

$2,566,538

 

SUPPLEMENTAL INFORMATION - Cash paid during the period for:

 

 

 

 

 

 

 

 

Income taxes

 

$(7,356 )

 

$(5,642 )

Interest

 

$(149,863 )

 

$(59,034 )

 

 

 

 

 

 

 

 

 

The annexed notes form an integral part of these unaudited consolidated financial statements.

  

 
6

 

 

GLOBALTECH CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

NET LOSS

 

$(1,421,158 )

 

$(4,382,235 )

 

 

 

 

 

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

 

 

 

 

 

Remeasurement of post employment benefit obligations - net of tax

 

 

-

 

 

 

-

 

Changes in fair value of financial assets through other comprehensive income

 

 

(1,691)

 

 

(499,434 )

Foreign currency translation adjustment

 

 

(33,804)

 

 

2,913,595

 

Other Comprehensive (loss)/ income - net of tax

 

 

(35,495)

 

 

2,414,161

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

 

(1,456,654 )

 

 

(1,968,074 )

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS ATTRIBUTABLE TO:

 

 

 

 

 

 

 

 

Common shareholders of GlobalTech Corporation

 

 

(798,743 )

 

 

(1,186,381 )

Non - controlling interest (NCI)

 

 

(657,910 )

 

 

(781,693 )

 

 

 

(1,456,654 )

 

 

(1,968,074 )

 

 

 

 

 

 

 

 

 

The annexed notes form an integral part of these unaudited consolidated financial statements.

 

 
7

Table of Contents

 

GLOBALTECH CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY  (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

 

 

 

 

 

 

 

Dividend

 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

on

Preferred

 

 

Common Shares  

 

 

Additional 

Paid in

 

 

Other Comprehensive

 

 

Translation

 

 

 

 

 

Accumulated

 

 

Non-Controlling

 

 

 

 

Description

 

Shares

 

 

Amount

 

 

Stocks

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Reserve

 

 

 Total

 

 

 Deficit

 

 

Interest

 

 

Total

 

Balance as of January 01, 2024

 

 

-

 

 

$-

 

 

 

-

 

 

 

139,763,391

 

 

$13,976

 

 

 

-

 

 

$(1,866,623)

 

$104,625

 

 

$(1,761,998)

 

$(36,484,513)

 

$50,458,787

 

 

$12,226,254

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(779,221)

 

 

(641,937)

 

 

(1,421,158)

Other comprehensive loss net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(930)

 

 

(18,592)

 

 

(19,522)

 

 

-

 

 

 

(15,973)

 

 

(35,497)

Total comprehensive income -net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(930)

 

 

(18,592)

 

 

(19,522)

 

 

(779,221)

 

 

(657,911)

 

 

(1,456,656)

Transfer of CPS Shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at March 31, 2024

 

 

-

 

 

 

-

 

 

 

-

 

 

 

139,763,391

 

 

 

13,976

 

 

 

-

 

 

 

(1,867,553)

 

 

86,033)

 

 

(1,781,520)

 

 

(37,263,734)

 

$49,800,876

 

 

$10,769,599

 

Balance as at January 01, 2023

 

 

52,500

 

 

$2,978,090

 

 

$1,085,625

 

 

$139,763,391

 

 

$13976

 

 

 

-

 

 

$(1,873,824)

 

$1,104,465

 

 

$(769,359)

 

$(35,079,562)

 

$50,112,161

 

 

$18,340,931

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,598,665)

 

 

(1,783,569)

 

 

(4,382,235)

Other comprehensive loss net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(296,164)

 

 

1,727,762

 

 

 

1,431,598

 

 

 

-

 

 

 

(982,564)

 

 

(2,414,161)

Total comprehensive income net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(296,164)

 

 

1,727,762

 

 

 

1,431,598

 

 

 

(2,598,665)

 

 

(801,006)

 

 

(1,968,074)

Translation and other adjustments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

423,300

 

 

 

423,300

 

Balance as at March 31,2023

 

$52,500

 

 

$2,978,090

 

 

$1,085,625

 

 

 

139,763,391

 

 

$

13,976

 

 

 

 

 

 

$2,169,988

 

 

$2,832,227

 

 

$662,238

 

 

$(37,678,226)

 

$49,734,456

 

 

$16,796,160

 

 

The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.

 

 
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GLOBALTECH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS ON AND FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 (UNAUDITED)

 

1. ORGANIZATION AND BUSINESS

 

GlobalTech Corporation (“The Company”) is a Nevada Corporation, incorporated with name of Elko Broadband Inc (“EBI”) on December 12, 2017. The Company changed its name on March 23, 2022, to GlobalTech Corporation following a plan of reorganization as disclosed in note 1.1.1. GlobalTech Corporation is a broadband company and provides broadband services.

 

1.1.1 A Plan and Agreement of Reorganization between Worldcall Holding Inc. and Global Tech corporation.

 

A Plan and Agreement of Reorganization dated December 31, 2021, has been entered into by and between Elko Broadband Inc., (now as GlobalTech Corporation) and Worldcall Holding Inc.(“WHI”), wherein transfer of all assets, properties and business and goodwill of WHI, in exchange of 117,299,473 common stocks of GlobalTech Corporation the then Elko Broadband Inc.(“EBI”) par value $0.0001 per share. As soon as practically possible thereafter, EBI will undergo a change of name to GlobalTech Corporation, with such change of name to be promptly filed with the competent authorities of the State of Nevada.                                                                                     

 

However, if trading of shares of the common stock of the Company on OTC Markets is not commenced by June 30, 2024, or such later date as is agreed by WHI stockholders and EBI in writing, then such non-commencement of trading shall forthwith entitle the WHI stockholders to cancel, reverse and unwind the Overall Transaction, in consequence, whereof the 117,299,473 shares of the Company, representing eighty-five percent (85%) of the voting power in the Company, that are held by the WHI Stockholders shall be returned to the EBI Shareholders, and all of the WorldCall Services Limited shares and the Ferret Consulting shares that are then held by the Company shall be returned to the WHI Stockholders, at no further cost to either side involved. On March 29, 2024 Merger and Reorganization Agreement was amended for extension in trading date specifically to June 30, 2024.

 

The Company applied for and received a Cusip Number 37892L 106 and the Company applied for a symbol and filing with DTC/ OTC to commence trading. We obtained Trading Symbol GLTK on November 14, 2023 after successful completion of process.  We have applied with Depository Trust and Clearing Corporation (“DTC”) for clearing and settlement. All requisite documents have been submitted to DTC once DTC approves trading in common shares of the Company will commence.

 

1.2. Legal Subsidiaries

 

1.2.1. WorldCall Telecom Limited

 

The Company - owned, directly and indirectly through associates in aggregate 55% of shares and control in WorldCall Telecom Limited (“WTL”).

 

WTL is a public limited Company, incorporated in Pakistan on March 15, 2001, under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). Its shares are quoted on Pakistan Stock Exchange. WTL commenced its operations on December 01, 2004, and is engaged in providing Wireless Local Loop (“WLL”) and Long Distance & International (“LDI”) services in Pakistan; re-broadcasting international/national satellite/terrestrial wireless and cable television and radio signals; interactive communication and to establish, maintain and operate the licensed telephony services. The Group has been licensed by Pakistan Telecommunication Authority (“PTA”) and Pakistan Electronic Media Regulatory Authority (“PEMRA”) for these purposes. WTL is domiciled in Pakistan and its registered office cum principal place of business is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore.  

 

 
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1.2.2. WorldCall Services (Pvt) Limited

 

WorldCall Services (Private) Limited (“WSL”), a wholly owned subsidiary of the Company, was incorporated on October 05, 2009, as a private limited Company in Pakistan, under the Companies Ordinance 1984 (Repealed) now Companies Act 2017. The objects of WSL include, but not limited to carrying on and undertaking the business of providing channel placement services, payphone services and generating revenue from communication services. The registered office of WSL is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore, Pakistan.

 

1.2.3. Ferret Consulting - (FZC)

 

Ferret Consulting (FZC), a wholly owned subsidiary of the Company, is a limited liability company registered in Emirates of Ajman, UAE as a Free Zone Company, in accordance with the Free Zone laws and regulations enforced in the Emirates of Ajman, U.A.E. It was registered on 24 Aug 2016 and commenced operations thereon.

 

1.2.4. Rout 1 Digital (Pvt) Limited

 

Route 1 Digital is a private limited company, a wholly owned subsidiary of Worldcall Telecom Limited, incorporated under the Companies Ordinance 1984 (now Companies Act 2017) on December 21, 2016. The primary business is to carry out the business of all transport services, sharing motor vehicle transportation with another or others, and consultancy in the field of information technology, software development and all activities ancillary thereto. The registered office of the Company is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore, Pakistan.

 

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

 

Basis of Consolidation — We have prepared consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These financial statements include the operating results and financial condition of GlobalTech Corporation, its wholly-owned subsidiaries; WSL (acquired on November 2021), Ferret Consulting FZC (acquired on November 2021), its majority-owned subsidiary WTL and Rout 1 Digital (Pvt) Limited. All intercompany accounts and transactions have been eliminated in consolidation.  

 

Significant Accounting Policies:

 

Revenue Recognition — We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. We enter contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations.

 

We derive revenue from six primary sources: (1) International Termination Services, (2) Indefeasible Right of Use (IRU) Services, (3) Cable TV and Internet Services, (4) Metro Fiber Solutions, (5) Capacity Sale Services, and (6) Advertisement Services. All our revenue arrangements are based on contracts with customers. Most of our contracts with customers contain single performance obligations, although certain contracts do contain multiple performance obligations where we perform more than one service for the same customer. We account for individual performance obligations separately if they are distinct within the context of the contract. For contracts where we provide multiple services such as where we perform multiple ancillary services, each service represents its own performance obligation. Selling or transaction prices are based on the contractual prices for each service at its stand-alone selling price. 

 

A five-step approach is applied in the recognition of revenue under ASC 606: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when we satisfy a performance obligation.

 

Payment of invoices is due as specified in the underlying customer agreement, typically advance payments to 30 days from the invoice date, which occurs on the date of transfer of control of the services to the customer. Since payment terms are less than a year, we have elected the practical expedient and do not assess whether a customer contract has a significant financing component. The Company’s revenue arrangements generally do not include a general right of refund for services provide.

 

 
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Direct Operating Costs — Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to client, annual PTA fees and other direct costs related to the Company’s services. Costs associated with the implementation of new clients are expensed as incurred.

 

Other Operating Costs —Other operating costs consist primarily of compensation and benefits, travel and advertising expenses and are expensed as incurred.

 

Business Combinations – Third Party— The Company accounts for third party business combinations under the provisions of ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. The fair value amount assigned to intangible assets is based on an exit price from a market participant’s viewpoint and utilizes data such as discounted cash flow analysis and replacement cost models. Critical estimates in valuing certain intangible assets include, but are not limited to, historical and projected client retention rates, expected future cash inflows and outflows, discount rates, and estimated useful lives of those intangible assets. ASC 805 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.

 

Income Taxes — Income tax expense includes U.S., Pakistan and other international income taxes, and interest and penalties on uncertain tax positions. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred tax assets are reported net of a valuation allowance when it is more likely than not that a tax benefit will not be realized. All deferred income taxes are classified as long-term.

 

 
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Table of Contents

 

Fair Value Measurements — ASC 820, Fair Value Measurement, requires the disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Company follows a fair value measurement hierarchy to measure financial instruments. The fair value of the Company’s financial instruments is measured using inputs from the three levels of the fair value hierarchy as follows:

 

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

 

These financial instruments are subject to fair value adjustments only in certain circumstances and include cash, restricted cash, accounts receivable, accounts payable and accrued expenses, borrowings under term loans and line of credit, and other payables. Due to the short-term nature of these financial instruments and that the borrowings bear interest at prevailing market rates, the carrying value approximates the fair value.

 

Accounts Receivable - net — In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in Accounting Standards Update (“ASU”) 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It will apply to all entities. For trade receivables, loans, and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. This may result in the earlier recognition of credit losses. In November, the FASB issued ASU No. 2019-10, which delays this standard’s effective date for SEC smaller reporting companies to the fiscal years interim periods beginning on or after December 15, 2022. The Company adopted the new guidance January 1, 2023 and the adoption of this new guidance had no material impact of the consolidated financial statements. As per the new guidance accounts receivable are presented on the consolidated balance sheet net of an allowance for credit losses, which is established based on reviews of the accounts receivable aging, an assessment of the customer’s history and current creditworthiness, and the probability of collection. Accounts receivable are presented on the consolidated balance sheet net of an allowance for credit losses, which is established based on reviews of the accounts receivable aging, an assessment of the customer’s history and current creditworthiness, and the probability of collection.  The Company routinely reviews its receivables and makes provisions for the credit losses utilizing the Current Expected Credit Losses model (“CECL”). The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. However, those provisions are estimates and actual results may materially differ from those estimates. Trade receivables are deemed uncollectible and are removed from accounts receivable and the allowance for credit losses when collection efforts have been exhausted.

 

Property, Plant, and Equipment — Tangible assets classified as property, plant, and equipment are stated at cost less accumulated depreciation and any identified impairment loss.  Additions are stated at cost less accumulated depreciation and any identified impairment loss. Cost in relation to self-constructed assets includes the direct cost of material, labor, and other allocable expenses.

 

Depreciation on owned assets is charged to the statement of profit or loss account on the straight-line method to write off the cost or revalued amount of an asset over its estimated useful life.

 

Depreciation on additions is charged from the month in which the assets are available for use while no depreciation is charged in the month in which the assets are disposed of.

 

The depreciation method, residual value, and useful lives of assets are reviewed at least at each financial year end and adjusted if the impact on depreciation is significant.

 

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

 

The gain or loss on disposal of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognized as an income or expense.

 

Loans and advances — Loans to employees are provided as per the Company’s policies and are secured against their gratuity and are adjusted against the provision of adjustments.

 

Advances to vendors are provided for provision of goods and services and they are secured either by a security deposit or a legally enforceable right to recover.

 

Loans and advances are carried at fair value through profit or loss and are initially recognized at fair value and transaction costs are expensed in the statement of profit or loss account. The fair value is determined using inputs observable in the market, which are classified as level 2 in the fair value hierarchy. They are considered a non-recurring fair value measurement and are measured at fair value. The fair value measurement considers market interest rates and the creditworthiness of the borrowers or other parties.

 

 
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Long term loans and other assets — Loans and other assets including deposits are provided to different parties and vendors which are recoverable either through a security deposit or a legally enforceable right.

 

These assets are carried at fair value through profit or loss and are initially recognized at fair value and transaction costs are expensed in the statement of profit or loss account. The fair value is determined using inputs observable in the market, which are classified as level 2 in the fair value hierarchy. They are considered a non-recurring fair value measurement and are measured at fair value on a recurring basis. The fair value measurement considers market interest rates and the creditworthiness of the borrowers or other parties.

 

Intangible Assets — Intangible assets are subject to amortization and are amortized using the straight-line method over their estimated period of benefit. The recoverability of intangible assets is evaluated periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

 

Evaluation of Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset group, the Company will recognize an impairment loss based on the fair value of the asset.

 

There was no impairment of internal-use software costs, intangible assets or property and equipment during the three months ended March 31, 2024 and 2023. 

 

Leases - We account for lease arrangements in accordance with ASC 842, Leases.  An arrangement is determined as a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.

 

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

 

Earnings Per Share The company calculates earnings per share in accordance with Accounting Standards Codification (ASC) Topic 260, “Earnings Per Share.” Basic EPS is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts that are potentially dilutive were exercised or converted into common stock.

 

The company presents both basic and diluted EPS on the face of the income statement. The company also provides a reconciliation of the numerator and denominator used in the EPS calculations in the footnotes to the financial statements, in case of any change occurred during the year.

 

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.

 

 
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Foreign Currency Translation — The financial statements of the Company’s foreign subsidiaries are translated from their functional currency into U.S. dollars, the Company’s functional currency. All foreign currency assets and liabilities are translated at the period-end exchange rate, and all revenue and expenses are translated at average exchange rates. The effects of translating the financial statements of the foreign subsidiaries into U.S. dollars are reported as a cumulative translation adjustment, a separate component of accumulated other comprehensive income/(loss) in the consolidated statements of shareholders’ equity. Foreign currency transaction gains/losses are reported as a component of other income–net in the consolidated statements of operations. The US$/PKR exchange rates used for the translation of PKR-denominated assets and liabilities are Rs. 278.5 and Rs.282.4 as on March 31, 2024 and December 31, 2023, respectively.

 

Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include but are not limited to: (1) impairment of long-lived assets, (2) depreciable lives of assets, (3) allowance for doubtful accounts, (4) fair value of identifiable tangible and intangible assets, including determination of expected useful life, (5) estimating lease terms and incremental borrowing rates. Actual results could significantly differ from those estimates.

 

Recent Accounting Pronouncements — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently adopted and recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows.

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes, which enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

 

In November 2023, the FASB issued Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting, which improves reportable segment disclosure requirements. ASU 2023-07 primarily enhances disclosures about significant segment expenses by requiring that a public entity disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss. This ASU also (i) requires that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment, and a description of its composition; (ii) requires that all annual disclosures are provided in the interim periods; (iii) clarifies that if the CODM uses more than one measure of profitability in assessing segment performance and deciding how to allocate resources, that one or more of those measures may be reported; (iv) requires disclosure of the title and position of the CODM and a description of how the reported measures are used by the CODM in assessing segment performance and in deciding how to allocate resources; (v) requires that an entity with a single segment provide all new required disclosures. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application. Early adoption is permitted. The amendments under ASU 2023-07 relate to financial disclosures and its adoption will not have an impact on the Company’s results of operations, financial position or cash flows. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

 

 
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Table of Contents

 

3. ACQUISITIONS

 

 

 

Ferret

 

 

WSL

 

Date of acquisition(s)

 

30-Nov-2021

 

 

30-Nov-2021

 

Property and equipment

 

 

-

 

 

 

30,983

 

Long term loans

 

 

16,576,630

 

 

 

2,987,911

 

Long term investments

 

 

5,849,298

 

 

 

5,197,957

 

Receivable from associates

 

 

-

 

 

 

7,216,311

 

Trade and other receivables

 

 

59,581

 

 

 

411,002

 

Short term investment

 

 

4,875,764

 

 

 

10,679

 

Cash and bank balances

 

 

375,600

 

 

 

20,753

 

Total assets

 

 

27,736,873

 

 

 

15,875,596

 

Long term loans

 

 

-

 

 

 

(6,163,627 )

Loan from directors

 

 

-

 

 

 

(1,873,446 )

long term payables

 

 

(1,613,556 )

 

 

(4,814,974 )

Short term borrowings

 

 

(47,993 )

 

 

(2,113,637 )

Accrued interest

 

 

(84,972 )

 

 

(1,897,713 )

Trade and other payables

 

 

(1,348 )

 

 

(15,787 )

Provision for taxation

 

 

-

 

 

 

(9,645 )

Total liabilities

 

 

(1,747,869 )

 

 

(16,888,829 )

Net assets

 

$25,989,004

 

 

$(1,013,233 )

 

As on November 30, 2021, WHI entered into its 100,000 shares swap agreement with the shareholders of Ferret Consulting (FZC), a UAE-based corporation, to acquire i) all of the issued and outstanding capital stock of Ferret, and (ii) all of the Ferret assets and liabilities that were used in business.

 

As on November 30, 2021, WHI entered into its 100,000 shares swap agreement with the shareholders of WSL, a Pakistan based corporation, to acquire i) all of the issued and outstanding capital stock of WSL, and (ii) all of the WSL assets and liabilities that were used in business.

 

Under the common control method, we recognize the business combination by combining the historical carrying amounts of the assets, liabilities, and equity of the combining entities as of the date of combination.  No fair value adjustments are made to the carrying amounts of the combining entities’ assets, liabilities, and equity, as the transaction is considered a transfer of ownership interests between entities under common control.

 

 
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4. CASH AND BANK

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Cash at bank

 

 

 

 

 

 

Current accounts

 

$439,131

 

 

$844,553

 

Savings accounts

 

 

3,945

 

 

 

16,822

 

 

 

 

443,076

 

 

 

861,374

 

Cash in hand

 

 

11,384

 

 

 

9,540

 

Pay orders in hand

 

 

2,636

 

 

 

37,183

 

 

 

$457,096

 

 

$908,097

 

 

5. RESTRICTED CASH

 

 

 

March

31,

2024

 

 

December 31,

2023

 

 

 

(Unaudited)

 

 

 

 

Deposit in escrow account

 

$2,188,047

 

 

$2,157,829

 

Margin and other deposits

 

 

225,831

 

 

 

195,613

 

 

 

$2,413,878

 

 

$2,353,442

 

 

Deposits in escrow account:  It represents balance in savings accounts accumulated in Escrow Account. The telecom operators challenged the legality of Access Promotion Contribution (APC) for Universal Service Fund (USF), as levied by Pakistan Telecommunication Authority (“PTA”) in 2009, and the dispute was finally decided by the honorable Supreme Court in December 2015. During pendency of the court proceedings, International Clearing House (ICH) agreement was signed in 2012, whereby it was decided that regular contributions for APC, based on each operator’s share under the ICH agreement, shall be made by LDI operators in an Escrow Account.

 

The formation of ICH was declared anti-competitive by the Competition Commission of Pakistan, and resultantly PTA issued a policy directive in June 2014 terminating ICH arrangement. Some operators challenged this termination and obtained interim relief from Sindh High Court and Lahore High Court. However, Supreme Court adjudicated the matter in February 2015 in favor of termination of ICH, and pursuant upon this, PTA issued its notification of termination of ICH arrangement. As of now, the mechanism of the adjustment of the amount available in Escrow Account remains to be finalized.

 

Margin and other deposits include deposits placed with banks against various guarantees. This amount also includes approximately $71,813 (2023: $88,144) in year 2023 deposited in a Court of Law as disclosed in a relevant note of contingencies and commitments.

 

6. ACCOUNTS RECEIVABLE – NET

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Considered good – unsecured

 

$3,727,582

 

 

$4,045,485

 

Considered doubtful – unsecured

 

 

2,314,316

 

 

 

2,314,316

 

 

 

 

6,041,898

 

 

 

6,359,801

 

Less: Provision for expected credit loss

 

 

(2,314,316 )

 

 

(2,314,316 )

 

 

$3,727,582

 

 

$4,045,485

 

 

Provision for expected credit losses has been approximately $ nil and $139,557 for the three months ended March 31, 2024 and 2023, respectively.

 

 
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7. PROPERTY, PLANT AND EQUIPMENT

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Operating fixed assets

 

$17,805,569

 

 

$17,841,680

 

Capital work-in-progress

 

 

63,375

 

 

 

62,500

 

 

 

$17,868,944

 

 

$17,904,180

 

Operating fixed assets

 

 

 

 

 

 

 

 

Building on freehold land

 

$350,090

 

 

$345,255

 

Freehold land

 

 

188,905

 

 

 

186,296

 

Leasehold improvements

 

 

693,976

 

 

 

684,392

 

Plant and equipment

 

 

29,669,657

 

 

 

29,259,913

 

Office equipment

 

 

380,044

 

 

 

374,796

 

Vehicles

 

 

110,150

 

 

 

108,629

 

Computers

 

 

649,438

 

 

 

640,470

 

Furniture and fixtures

 

 

135,451

 

 

 

133,581

 

Laboratory and other equipment

 

 

77,144

 

 

 

76,078

 

 

 

 

32,254,855

 

 

 

31,809,410

 

Less: Accumulated depreciation

 

 

(14,449,286 )

 

 

(13,967,730 )

 

 

$17,805,569

 

 

$17,841,680

 

 

Useful life of operating fixed assets is ranging between 5 years to over 20 years. There has not been significant additions and disposals have been made during the three months ended March 31, 2024 and 2023. Moreover, depreciation on operating assets has been allocated to depreciation and amortization on face of the statement of profit or loss.

 

 
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8. LEASES

 

We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space. Operating leases are included in operating lease ROU assets, current operating lease liability and non-current operating lease liability in our consolidated balance sheets as of March 31, 2024 and December 31, 2023. The Company does not have any finance leases.

 

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

 

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates. Our lease terms include options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of less than 12 months are not recorded in the consolidated balance sheets. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the lease and non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate.

 

If a lease is modified after the effective date, the operating lease ROU asset and liability is re-measured using the current incremental borrowing rate. We review our incremental borrowing rate for our portfolio of leases on a quarterly basis. Lease expense is included in direct operating costs and general and administrative expenses in the consolidated statements of operations based on the nature of the expense.

 

Break down of operating lease expense:

 

 

 

Three Months Ended

 

 

 

 March 31,

 

 

 

2024

 

 

2023

 

Operating lease cost

 

$41,604

 

 

$80,058

 

Short term lease cost

 

 

8,699

 

 

 

8,836

 

 

 

$50,303

 

 

$88,394

 

 

Supplemental balance sheet information related to leases was as follows:

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Operating leases

 

 

 

 

 

 

Operating lease ROU assets, net

 

$488,757

 

 

$503,701

 

 

 

 

 

 

 

 

 

 

Current operating lease liabilities

 

 

200,093

 

 

 

199,044

 

Non-Current operating lease liabilities

 

 

690,075

 

 

 

689,416

 

 

 

$890,168

 

 

$888,459

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

 

 

 

ROU Assets

 

 

503,701

 

 

 

707,991

 

Asset lease expense

 

 

(15,065 )

 

 

(82,467 )

Foreign exchange loss

 

 

121

 

 

 

(121,824 )

ROU Assets – net

 

$488,757

 

 

$503,701

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (in years):

 

 

 

 

 

 

 

 

Operating leases

 

 

6.78

 

 

 

7.09

 

Weighted average discount rate:

 

 

 

 

 

 

 

 

Operating leases

 

 

13.35%

 

 

13.35%

 

 
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Supplemental cash flow and other information related to leases was as follows:

 

 

 

Three Months Ended

 

 

 

 March, 31

 

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows from operating leases

 

$35,691

 

 

$27,927

 

 

Maturities of lease liabilities are as follows:

 

Operating leases - Years Ending December 31,

 

 

 

2024 (nine months)

 

$113,127

 

2025

 

 

161,567

 

2026

 

 

174,900

 

2027

 

 

182,547

 

2028

 

 

200,211

 

Thereafter

 

 

473,414

 

Total lease payments

 

$1,305,766

 

Less: imputed interest

 

$(415,597 )

Total lease obligations

 

$890,168

 

Less: current obligations

 

$200,093

 

Long-term lease obligations

 

$690,075

 

 

 
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9. INTANGIBLE ASSETS – NET

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Licenses

 

$4,636,199

 

 

$4,636,199

 

Patents and copyrights

 

 

29,848

 

 

 

29,848

 

IRU - media cost

 

 

18,499,686

 

 

 

18,231,794

 

Software

 

 

63,133

 

 

 

63,133

 

 

 

 

23,228,867

 

 

 

22,960,975

 

Less: Accumulated amortization - net

 

 

(11,921,796 )

 

 

(11,397,858 )

 

 

$11,307,071

 

 

$11,575,524

 

 

Useful life of intangible assets is ranging between 5 years to 20 years. Moreover, amortization of intangible assets has been allocated to depreciation and amortization on face of the statement of profit or loss.

 

As of March 31, 2024, future amortization expense scheduled to be expensed is as follows:

 

Year ending December 31,

 

 

 

2024 (nine months)

 

 

847,064

 

2025

 

1,129,419

 

2026

 

 

961,005

 

2027

 

 

942,842

 

2028

 

 

942,842

 

Thereafter

 

 

6,483,900

 

 

 

$11,307,071

 

 

 
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10. TRADE AND OTHER PAYABLES

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Trade creditors

 

$11,563,758

 

 

$11,416,441

 

Accrued and other liabilities

 

 

4,662,567

 

 

 

4,788,780

 

Payable to PTA against APC charges

 

 

6,254,214

 

 

 

6,254,214

 

Payable against long term investment

 

 

157,989

 

 

 

155,807

 

Contract liabilities

 

 

3,196,255

 

 

 

3,157,741

 

Withholding taxes payable

 

 

259,781

 

 

 

207,525

 

Sales tax payable

 

 

264,459

 

 

 

278,661

 

Security deposits

 

 

126,162

 

 

 

124,419

 

 

 

$26,485,184

 

 

$26,383,588

 

 

Trade creditors: This includes payable to PTA amounting to $2.11 million and $2.04 million as on March 31, 2024 and December 31, 2023, respectively. Out of this $1.90 million (2023: $1.877 million) represents payable regarding Annual Radio Spectrum Fee in respect of WLL licenses. PTA has issued multiple determinations that have been challenged and contested by the Company on legal grounds as well as on account of preoccupation of frequency / spectrums and losses suffered by the Company due to such preoccupancy for which the Company has demanded due compensation from PTA. In all these matters, the Company has filed appeals against PTA’s determinations before the honorable Lahore High Court and the honorable Islamabad High Court and stay orders were obtained against the recovery. This matter has been decided in favor of the Company; however, PTA has gone into appeal before the Honorable Supreme Court of Pakistan.

 

Accrued and other liabilities: This includes payable to key management personnel amounting to $0.67 million and $0.66 million as on March 31, 2024 and December 31, 2023, respectively.

 

Security Deposits: These represent security deposits received from customers. These are interest-free and refundable on termination of the relationship with the Company. The relationship of these customers with the Company has ended and these deposits are now payable on demand. These have been utilized by the Company before the promulgation of the Companies Act, 2017.

 

11. CURRENT PORTION OF NON-CURRENT LIABILITIES

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Term finance certificates

 

$3,018,811

 

 

$2,764,678

 

Mark-up payable on TFCs

 

 

1,729,519

 

 

 

1,602,319

 

Long term financing

 

 

1,385,947

 

 

 

1,404,097

 

Lease liabilities

 

 

200,093

 

 

 

197,330

 

 

 

$6,334,370

 

 

$5,968,424

 

 

Details of the current portion of non -current liabilities are provided in their respective notes.

 

12. ACCRUED INTEREST

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Short term borrowings

 

$362,783

 

 

$383,357

 

Term finance certificates

 

 

2,609,742

 

 

 

2,323,431

 

 

 

$2,972,525

 

 

$2,706,788

 

 

 
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13. SHORT TERM BORROWINGS

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Repurchase agreement borrowings

 

$807,899

 

 

 

1,210,003

 

Line of credit facility – others

 

 

302,176

 

 

 

297,304

 

 

 

$1,110,075

 

 

$1,507,307

 

 

Line of credit facility – commercial banks:

 

During the year ended 31 December 2022, Company restructured one of its line of credit facility with Askari Bank Limited amounting $1.37 million which is transferred to long term financing due to restructuring for detail refer Note 15. During the year 2023, the Company restructured its running finance facility with Standard Chartered Bank Limited amounting to $ 0.12 million, which is transferred to long term finance facility. For detail refer Note 15

 

Borrowings against repurchase agreement, obtained from Elahi Group of Companies amounting to USD 0.54 million against 100 million shares of WTL and from Hamdard Laboratories amounting USD 0.27 million against 50 million shares of WTL for the purpose of working capital requirements and/or to meet other business obligations. The facility carries mark-up at rate of 30.00 %. The market value of securities given as collateral against these borrowings is given in note.

 

Line of credit facility – others:

 

This represents various interest bearing and interest free loans from different parties.

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Loan from other parties

 

$89,502

 

 

$89,502

 

Loan from related party *

 

 

212,674

 

 

 

207,802

 

 

 

$302,176

 

 

$297,304

 

 

* Loan from related party:

This represents payable to AMB Management Consultants (Pvt.) Ltd (AMB) (related party) against short term borrowings, which is due to payments made by AMB on behalf of the Company.

 

 
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Loan from third parties: This represents various interest bearing and interest free loans denominated in US$ from different companies, as detailed below.

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

HTS Tel Communication

 

$68,747

 

 

$68,747

 

TLT Communication

 

 

20,755

 

 

 

20,755

 

 

 

$89,502

 

 

$89,502

 

 

14. TERM FINANCE CERTIFICATES (TFCs)

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

Opening balance

 

$7,458,750

 

 

$7,458,750

 

Repayments

 

 

-

 

 

 

-

 

 

 

 

7,458,750

 

 

 

7,458,750

 

Current portion

 

 

(3,018,811 )

 

 

(2,764,678 )

 

 

 

4,439,939

 

 

 

4,694,072

 

Add: Deferred interest

 

 

612,266

 

 

 

678,063

 

Exchange adjustment

 

 

(3,193,561 )

 

 

(3,252,468)

Closing balance

 

$1,858,643

 

 

$2,119,667

 

 

Term finance certificates (TFCs) have a face value of $17.95 per certificate. These TFCs carry mark up at the rate of six months average KIBOR plus 1.0% per annum (2023: six-month average KIBOR plus 1.0% per annum), payable quarterly. The interest rate charged during the three months ended March 31, 2024, on the outstanding balance ranged from 22.45% to 24.08% (2023: 17.10% to 24.08%) per annum.

 

IGI Holding Limited (previously IGI Investment Bank Limited) is the Trustee (herein referred to as the Trustee) under the Trust Deed.

 

The liability of these TFCs has been rescheduled in December 2012 and then on April 03, 2015. During the year ended 31 December 2018, third rescheduling of these TFCs was successfully executed through signing of the Third Supplemental Trust Deed between the Trustees and the Company.

 

In accordance with the 3rd Supplemental Trust Deed executed during the year ended 31 December 2018, the outstanding principal is repayable by way of quarterly staggered instalments with downward revision in interest of 0.60% i.e. revised interest rate of nine months average KIBOR + 1%. The outstanding interest payable as at the date of restructuring and up to December 20, 2018 is agreed to be deferred and shall be paid from March 20, 2021 in quarterly instalments. 50% of the interest accrued for the period between December 20, 2018, to December 20, 2020, shall be paid on regular quarterly basis commencing from March 20, 2019, and the remaining 50% shall be deferred and paid from March 20, 2021. Interest deferred has been measured at present value. Under the revised term sheet, these TFCs are due to mature on September 20, 2026.

 

 
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The other main terms included appointment of one representative as a nominee director nominated by the Trustee which has been complied with. Further, 175 million sponsor’s shares were pledged for investors which was to be released with quarterly scheduled principal repayments proportionately starting from June 2019.

 

The Company has not paid due quarterly installments of June 2019 to March 2024 amounting USD 2.21 million against principal and USD 3.40 million against accrued mark up. In case of failure to make due payments by the Company, Trustee can instruct the security agent to enforce the letter of pledge and sell the quantum of the pledged shares to generate the amount required for the settlement of the outstanding redemption amount.

 

Due to non-payment of due instalments, Trustee enforced the letter of pledge in 2021 and called 128.2 million shares from sponsors account out of which 50.38 million shares (2021:13.6 million shares) were sold for the amount of $ 0.50 (2021: $0.26 million) out of which $ 0.31 million settled against principal and $ 0.19 million against accrued interest (2021 $ 0.16 million settled against principal and $ 0.10 million against accrued interes).

 

These TFCs are secured against first pair passu charge over the Company’s present and future fixed assets including equipment, plant and machinery, fixtures excluding land and building with 25% margin in addition to all rights, benefits, claims and interests procured by the Company under:

 

 

A.

Long Distance and International (“LDI”) and Wireless Local Loop (“WLL”) license issued by PTA to the Company; and

 

B.

Assigned frequency spectrum as per deed of assignment.

 

 
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15. LONG TERM FINANCING – SECURED

 

 

 

March

31,

2024

 

 

December 31,

2023

 

 

 

(Unaudited)

 

 

 

 

Allied Bank Limited

 

 

116,926

 

 

$110,057

 

Bank Islami Limited

 

 

240,750

 

 

 

251,073

 

Askari Bank Limited

 

 

974,664

 

 

 

921,062

 

Standard Chartered Bank Limited

 

 

21,221

 

 

 

47,698

 

 

 

$1,353,561

 

 

$1,329,890

 

 

Allied Bank Limited: This represents balance transferred as a result of restructuring of short-term running finance (RF) facility to Term Loan Facility and subsequently amended on 8th October 2020 and 30th September 2021. Principal will be repaid in 37 stepped up monthly instalments starting from August 2021 till August 2024. Interest will be accrued and will be serviced in 12 equal monthly instalments, starting from September 20, 2024. Effective interest rate applicable will be 3 Month KIBOR + 85 bps. The interest charged during the year on the outstanding balance ranged from 22.31% (2023: 17.85% to 23.76%) per annum. The facility is secured against 1st joint pari passu charge on present and future current and fixed assets excluding building of the Company for $1.92 million and right to set off on collection account.

 

Bank Islami Limited : This represents balance transferred as a result of restructuring of short term running finance (RF) facility to Term Loan Facility as on 12th Feb 2021. Principal will be repaid in 29 installments starting from Feb 2022 till May 2026. Interest will be accrued and will be serviced in 24 monthly installments, starting from June 01, 2024. Effective interest rate applicable will be 6 Month KIBOR (Floor 7.5% and capping 17%). The interest charged during the period on the outstanding balance at 17% (2023: 15.87% to 17%). The facility is secured against 1st joint pair passu charge on present and future current and fixed assets excluding land & building & licences/receivable of LDI & WLL of the Company for USD 3.15 million with 25% margin, pledge of various listed securities of the Company having carrying value USD 0.13 Million and along with Mortgage over the Company’s Offices at Ali Tower MM Alam Road Lahore and at The Plaza Shoping Mall Kehkashan Karachi

 

 ‘Subsequently in June 2023 Bank approved Company’s restructuring request as a result of which overall repayment tenure was extended by 01 year and 06 months i.e. principal repayment will end in November 2025 instead of May 2024 and Interest repayment will end in November 2027 instead of May 2026. As of reporting date all overdue has been settled.

 

Last year, period for repayment of principal and deferred interest was extended and according to revised terms both will be repaid till 1st Nov 2027.

 

Askari Bank Limited: This represents balance transferred as a result of settlement agreement from short term running finance (RF) facility to Term Loan Facility as on November 02, 2022. Principal will be repaid in 48 installments starting from Nov 2022 till Oct 2026. Interest outstanding after effective discounts / waivers as per settlement agreement and interest to be accrued will be serviced in 36 monthly installments, starting from Nov 2024. Effective interest rate applicable will be 1MK - 2% (Floor 10%). The mark up charged during the period on the outstanding balance ranged from 19.26% to 20.26% (2023: 14.4% to 21.14%). The facility is secured against 1st joint pair passu charge on present and future current and fixed assets (excluding land & building & licenses) of the Company with Margin 25%, collection account with AKBL for routing of LDI receivables along with additional mortgage on Properties situated in Sindh., Pakistan.

 

As of reporting date bank has approved restructuring of installments provided total tenor of the facility remains unchanged.

 

The Company used post tax weighted average borrowing rate for amortization of deferred interest

 

Standard Chartered Bank Limited:This represents balance transferred from short term borrowings as a result of settlement agreement from short term running finance (RF) facility to Term Loan Facility as on August 09, 2023. Principal will be repaid in stepped up 23 installments starting from Aug 2023 till June 2025. Interest outstanding after effective discounts / waivers as per settlement agreement and interest to be accrued will be serviced in 6 monthly installments, starting from Jan 2025. Effective interest rate applicable will be at Cost of Funds (subject to change on yearly basis as advised by state bank of pakistan). The interest charged during the period on the outstanding balance @ 4.25%. The facility is secured against 1st joint pari passu charge on present and future current and fixed assets (excluding land & building & licences) of the Company for USD 1.15 million.

 

 
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16. LICENSE FEE PAYABLE

 

 

 

March

31,

2024

 

 

December 31,

 2023

 

 

 

(Unaudited)

 

 

 

 

License fee payable

 

$163,422

 

 

$161,165

 

 

 

$163,422

 

 

$161,165

 

 

This represents the balance amount of the license fee payable to the Pakistan Telecommunication Authority (PTA) for WLL licenses. The Company had filed an application with PTA for a grant of moratorium overpayment of balance amount of WLL license. However, PTA rejected the Company’s application and demanded its payment. Being aggrieved by this, the Company filed an appeal before Islamabad High Court (“IHC”) against PTA’s order. Meanwhile, the Ministry of Information Technology (“Ministry”) through its letter dated August 30, 2011, allowed the operators, the staggering for settlement of Access Promotion Contribution (“APC”) and Initial Spectrum Fee (“ISF”) dues and required PTA to submit an installment plan for this purpose after consultations with the operators. In respect of an appeal filed by the Company, IHC took notice of the Ministry’s letter and directed PTA through its order dated January 20, 2015, to expeditiously proceed with the preparation and submission of the said installment plan. As of this date, no such installment plan has been submitted by PTA.

 

PTA has withdrawn the frequencies 3.5 GHz, 479 MHz, 450 MHz, and 1900 MHz . PTA in haste and unilaterally has withdrawn 3.5 GHz and 479 MHz frequencies which have already been paid in full till 2024.  Through said decision PTA has also withdrawn 1900 MHz frequency spectrum which was already withdrawn by PTA/FAB in 2015 (11th year) until which the spectrum is fully paid on the basis of actual period of usage by the Company, The WLL License provides for such eventuality that when frequency spectrum is withdrawn ,the licensee is to be compensated for the balance life of the frequency spectrum, therefore, after withdrawal of spectrum, there is no outstanding amount to be paid related to 1900 MHz frequency spectrum.

 

As a consequence of above, during last year the outstanding liability for 1900 MHz was reduced to zero on the basis that 1900 MHz frequency had been fully paid for until 2015 (11th year). Similarly, liability for 450MHz frequency spectrum was reduced on pro-rata after withdrawal. Owing to these circumstances, the management does not expect the liability to materialize fully in the near future .

 

17. CONTINGENCIES AND COMMITMENTS

 

Billing disputes with Pakistan Telecommunication Company Limited (“PTCL”)

 

GlobalTech Corporation and its subsidiaries (“The Group”) has a dispute of approximately $0.26 million with Pakistan Telecommunication Limited (PTCL) in respect of non-revenue time of prepaid calling cards and approximately $0.17 million in respect of excess minutes billed on account of interconnect and settlement charges. Similarly, PTCL has charged the Group excess Domestic Private Lease Circuits (“DPLC”) and other media charges amounting to approximately $1.18 million (2023: $1.20 million) on account of difference in rates, distances, and date of activations. The management has taken up these issues with PTCL and considers that these would most likely be decided in Group’s favor as there are reasonable grounds to defend the Group’s stance. Hence, no provision has been made in these financial statements for the above amounts.

 

Disputes with Pakistan Telecommunication Authority (“PTA”)

 

GlobalTech Corporation and its subsidiaries (“The Group”) has filed a suit before Civil Court, Lahore, Pakistan on December 15, 2016 in which it has sought restraining order against PTA demands of regulatory and other dues and claimed set off from damages / compensation claim of the Group on account of auction of preoccupied frequency spectrum. The Group has raised a claim of approximately $19.03 million against PTA. The matter is pending adjudication. As per management it is difficult to predict the outcome of the case at this stage.

 

 
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Table of Contents

 

During the year 2016, PTA again demanded immediate payment of the principal amount of APC amounting to approximately $6.34 million along with default surcharge thereon amounting to approximately $5.94 million as of July 31, 2016, vide its notice dated December 1, 2016. Through the aforesaid show cause notice, PTA has also shown intentions to impose penal provisions to levy fine up to approximately $1.26 million or to suspend or terminate the LDI license by issuance of an enforcement order against the Group. The Group has challenged the show cause notice before the Sindh High Court on December 13, 2016 wherein the Court has passed orders restraining PTA from cancelling the licenses of the Group and from taking any coercive action against it. The matter is at the stage of hearing of applications. Based on the advice of the legal counsel, the Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements for the amounts of default surcharge and fine.

 

PTA has raised demand amounting to approximately $0.11 million on account of using extra Radio Spectrum not assigned to the Group. The Group challenged this amount on July 3, 2012 before Islamabad High Court which has allowed appeal of the Group. PTA went into appeal before the Honorable Supreme Court of Pakistan in March 2017 which got dismissed. Now, PTA has filed review application which is still pending. The management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements against this demand.

 

The Group maintains that PTA has allegedly issued an arbitrary order for recovery of annual radio frequency spectrum fee for the year ended 2013 along with late payment charges amounting in total to approximately $0.19 million. The Group has assailed the order before Honorable Lahore High Court on June 28, 2016 on the ground that officers of PTA could not issue such an order as they had not issued the show cause notice. The Honorable High Court has allowed the petition and remanded the case to PTA for decision afresh. In another suit filed by the Company before Honorable Lahore High Court, PTA has also demanded applicable late payment charges on impugned non-payment of annual radio spectrum fee. The question of law has been resolved by the Honorable High Court on March 21, 2018 and it was held that PTA’s decision was appealable before PTA. Same was also upheld by the Honorable Supreme Court on May 17, 2018. The management has filed appeals before PTA and the appeal was decided against the Group. Subsequent to year end appeal against PTA’s order has been filled before the next judicial forum on January 12, 2021. Management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements for late payment charges.

 

Moreover, the Group is confident that incidental liability, if any, will be set off by way of a claim filed against PTA.

 

The Group has filed a suit before the High Court of Sindh on July 2, 2011 for declaration, injunction and recovery of approximately $17.75 million against PTA praying, inter alia, for direction to PTA to determine the Access Promotion Contribution for Fixed Line Local Loop (APCL contribution) and Access Promotion Cost (APC) for Universal Service Fund (USF) strictly in accordance with the formula as per Rule 8(2) and (4) of 2004 Rules and Regulation 7 of 2005 Regulations; restraining PTA from taking coercive actions against the Group to recover the amounts of APCL and APC for USF and direction to PTA to submit accounts and information to the Honorable High Court with regard to collection and, utilization and application of APCL and APC for USF contributions. During the pendency of proceedings, the Court granted interim injunction to the Group and restrained PTA from taking any coercive action against the Group.

 

The said restraining order was dismissed by the learned single judge through a consolidated order dated July 27, 2018. The said order has been challenged by the Group before the Divisional Bench of the High Court on August 13, 2018 in High Court Appeal No. 222 of 2018. The management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements.

 

PTA has raised demand amounting to approximately $0.06 million on account of BTS registration and microwave charges for the year 2007 till 2014. The Group challenged this amount in November 2019 before Lahore High Court which is pending adjudication. The management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements against this demand.

 

 
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Table of Contents

 

PTA has filed recovery proceedings against the Group before the District Collector / District Officer Revenue, Lahore for an amount approximately of $9.50 million including late payment charges on November 4, 2016, due to non-payment of initial spectrum fee (ISF). The Group has not received any notice from the Revenue department. During the year PTA again issued the notice against non-payment of ISF and increased the claim by approximately $3.73 million. PTA has withdrawn the frequencies 3.5 GHz, 479 MHz, 450 MHz and 1900 Mhz. As per management the ISF for 3.5 GHz and 479 MHz is already fully paid till 2024. The outstanding liability for 1900 MHz is reduced to zero on the basis that 1900 MHz frequency has been fully paid for until 2015 (actual withdrawal year), Similarly, liability for 450 Mhz frequency spectrum be reduced on pro-rata after withdrawal. Corresponding assets has also been retired. For detail refer note 17.

 

The Group has filed an appeal with Islamabad High Court on January 12, 2021 against said decision of PTA on similar lines as explained above and the Group’s management and legal advisor feels that there are strong grounds to defend the Group’s stance and that the principal amount and late payment charges determined unilaterally by PTA will not materialize, hence, no provision has been made in these financial statements.

 

PTA has demanded amounts of annual license fee (ALF) relating to Non-Voice Communication Network Services (NVCNS) through various demand notices. PTA has filed recovery proceedings against the Group before the District Collector / Deputy Commissioner, Lahore for an amount of approximately $0.22 million on February 7, 2020, due to non-payment of annual license fee (ALF) relating to Non-Voice Communication Network Services (NVCNS). This includes principal portion of approximately $0.11 million already recognized in the financial statements and late payment charges amounting to approximately $0.11 million. The Group has not received any notice from the Revenue department. The Group’s management and legal advisor feels that there are strong grounds to defend the Group’s stance and that the late payment charges determined unilaterally by PTA will not materialize, hence, no provision has been made in these financial statements.

 

PTA had demanded an amount of approximately $1.21 million in respect of fine and loss of approximately $1.91 million on account of international telephony traffic. The case was decided by Islamabad High Court in favor of the Group, however, PTA went into appeal before the honorable Supreme Court of Pakistan. The honorable Supreme Court dismissed the appeal of PTA.

 

PTA has now filed review petition No. 708 of 2019 before the Supreme Court of Pakistan on November 23, 2019, which is pending adjudication. The Group has not received any notice in this regard. The Group’s management feels that there are strong grounds to defend the Group’s stance, hence, no provision has been made in these financial statements.

 

PTA has issued show cause notice to the Group with the direction to pay annual regulatory dues for the years ended 2011, 2012, 2013 and 2014 cumulative amount of approximately $0.43 million along with late payment charges. The Group has filled the appeals against said notices with PTA which dismissed on December 04, 2020. The Group therefore filled the appeal in Sindh High Court on December 31, 2020, to set aside the order passed by PTA. The Court directed PTA not to take any coercive action against the Group. The management is hopeful that its viewpoint shall be upheld; thus, no provision has been incorporated in these financial statements against this demand.

 

PTA determined the demand amounting to approximately $0.80 million, on account of annual spectrum fee and other regulatory charges, vide its determination dated February 22, 2010. Being aggrieved, the Group’s management preferred an appeal before the Honorable Lahore High Court (“LHC”) on March 20, 2010, against the PTA’s determination. LHC granted stay against the recovery subject to payment of approximately $0.14 million which was complied by the Group. Based on the advice of the Group’s legal counsel, the Group’s management feels that there are strong grounds to defend the Group’s position and the ultimate decision would be in the Group’s favor.

 

Other than the amounts recognized in the financial statements and amounts disclosed in the above contingencies, PTA has also demanded amounts of approximately $5.87 million on account of various charges, default surcharges / penalties / fines. Since the principal amount is disputed, the Group’s management feels that there are strong grounds to defend the Group’s stance and that the liability determined unilaterally by PTA will not materialize, hence, no provision has been made in these financial statements.

 

 
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Taxation issues in Pakistan

 

Separate returns of total income for the Tax Year 2003 were filed by M/s WorldCall Communications Limited, M/s Worldcall Multimedia Limited, M/s Worldcall Broadband Limited and M/s Worldcall Phone Cards Limited, now merged into the Group. Such returns of income were amended by relevant officials under section 122(5A) of the Income Tax Ordinance, 2001 (“Ordinance”) through separate orders. Through such amendment orders, in addition to enhancement in aggregate tax liabilities by an amount of approximately $0.04 million, tax losses declared by the respective companies too were curtailed by an aggregate amount of approximately $0.24 million. The Group contested such amendment orders before Commissioner Inland Revenue (Appeals) [CIR(A)] and while amendment order for Worldcall Broadband Limited was annulled, partial relief was extended by CIR(A) in respect of appeals pertaining to other companies. The appellate orders extending partial relief were further assailed by the Group before Appellate Tribunal Inland Revenue (ATIR) in January 2010, which are pending adjudication. The Group’s management considers that meritorious grounds exist to support the Group’s stances and expects relief from ATIR in respect of all the issues being contested. Accordingly, no adjustments / liabilities on these accounts have been incorporated / recognized in these financial statements.

 

Through amendment order passed under section 122(5A) of the Ordinance, the Group’s return of total income for Tax Year 2006 was amended and declared losses were curtailed by an amount of approximately $2.80 million. The Group’s appeal filed on September 18, 2007 was not entertained by CIR(A) and the amendment order was upheld whereupon the matter was further agitated before ATIR on July 8, 2008, which is pending adjudication. The Group’s management expects relief from ATIR in respect of issues involved in the relevant appeal there being valid precedents available on record supporting the Group’s stance. Accordingly, no adjustment on this account has been incorporated in these financial statements.

 

In computer balloting for total audit u/s 177 of the Ordinance, the Group was selected for total audit proceedings for the tax year 2009 and the same has been completed with the issuance of order under section 122(1)/122(5) of the Ordinance creating a demand of approximately $0.75 million. Against the said impugned order, appeal has been filed before CIR(A) on August 5, 2019 by legal counsel of the Group. Based on the advice of the legal counsel, the Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements.

 

A demand of approximately $3.80 million (including default surcharge of approximately $1.17 million) was raised against the Group under section 161/205 of the Ordinance for the period relevant to Tax Year 2012 alleging non-compliance with various applicable withholding provisions contained in the Ordinance. The management assailed the subject order on March 28, 2014 in usual appellate course and while first appellate authority decided certain issues in the Group’s favor, major issues were remanded back to department for adjudication afresh. Such appellate order was further assailed by the Group before ATIR on May 20, 2014, at which forum, adjudication is pending. Meanwhile, the Department concluded the reassessment proceedings, primarily repeating the treatment earlier accorded, however, based on relief allowed by first appellate authority, demand now stands reduced to approximately $3.42 million (including default surcharge of approximately $1.11 million). Such reassessment order was assailed by the Group in second round of litigation and the first appellate authority, through its order dated June 29, 2015, has upheld the Departmental action. The management has contested this order before ATIR on August 20, 2015 for favorable outcome. The Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements.

 

In computer balloting for total audit u/s 177 of the ITO, 2001, the Group was selected for total audit proceedings for the tax year 2014 and the same has been completed with the issuance of order under section 122(4) of Income Tax Ordinance, 2001 creating a demand of approximately $0.18 million and curtailment of losses by approximately $21.12 million. The said demand was curtailed to approximately $0.02 million through a revised demand order on account of rectification application filed by the Group. Against the said impugned order, appeal has been filed before CIR(A) on January 24, 2018 by legal counsel of the Group. Based on the advice of the legal counsel, the Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements.

 

The Commissioner Inland Revenue(“CIR”) has raised demand against the Group for super tax for the tax year 2018 amounting to approximately $0.16 million. The chargeability has been challenged by the Group through writ petition in LHC filed on May 16, 2019. Based on the advice of the legal counsel, the Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements.

 

 
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A sales tax demand of approximately $0.60 million was raised against the Group for recovery of an allegedly inadmissible claim of sales tax refund in Tax Year 2006 filed and sanctioned under section 66 of the Sales Tax Act, 1990. The Group’s appeal against such order was allowed to the extent of additional tax and penalties; however, principal amount was held against the Group by the then relevant Customs, Excise and Sales Tax Appellate Tribunal (CESTAT). The Group further assailed the issue on November 10, 2009 before Lahore High Court (LHC) where the litigation is presently pending. While, recovery to the extent of 20% of principal demand of sales tax has been made by the tax authorities, an interim injunction by honorable Court debars the Department for enforcing any further recovery. Since the management considers the refund to be legally admissible to the Group, no liability on this account has been recognized in these financial statements and the amount already recovered has been recorded as being receivable from the tax authorities. It is pertinent to highlight here that adverse judgment earlier passed by CESTAT no longer holds the field as through certain subsequent judgments, controversy has been decided by ATIR (forum now holding appellate jurisdiction under the law) in favor of other taxpayers operating in the Telecom Sector. The Honorable LHC has set aside the judgment of the Tribunal on May 24, 2017 and has remanded the case for decision afresh. The Tribunal is yet to issue notice for the hearing. The Group’s management feels that there are strong grounds to defend the Group’s stance and the liability will not materialize, hence, no provision has been made in these financial statements.

 

On September 30, 2016, Punjab Revenue Authority (PRA) issued show cause notice allegedly demanding approximately $1.51 million for the periods from May 2013 to December 2013. The Group challenged imposition of sales tax on LDI services on the first appellate authority in 2016 and relief granted by CIR(A) through set aside the demand created by PRA with direction of reassessment proceedings. The Group challenged these proceedings through filing a writ petition in LHC heard on February 9, 2017 on the grounds that it was unconstitutional and in violation of fundamental principles of sales tax and international commitments of Government of Pakistan. The writ petition has been allowed with instructions passed by honorable Judge of Lahore High Court Lahore to PRA restraining from passing final order in pursuance of proceedings. The matter has been taken up by other LDI operators against PRA in June 2015 before LHC on the grounds that imposition of sales tax is unconstitutional and in violation of fundamental principles of sales tax and international commitments of Government of Pakistan. The period pertains to ICH time when amount of sales tax was withheld by PTCL. Based on the advice of the Group’s tax advisor, the management is of the view that the Group’s case is based on meritorious grounds and hence, relief would be secured from the Court. In view of the above, provision for sales tax on LDI services aggregating approximately $4.33 million (2023: $3.13 million) has not been made in these financial statements.

 

Other matters

 

One of the Group’s vendor has filed the suit for recovery on July 12, 2018 before the Civil Court, Lahore, Pakistan of certain moneys alleged to have not been paid by the Group under its agreements with the vendor. The principal claim is approximately $0.06 million however the claim is inflated to $0.83 million on frivolous basis. The Group denies the claim and is hopeful for positive outcome. The management is of the view that it is unlikely that any claim of said vendor will materialize.

 

One of the Group’s vendor has filed petition on November 21, 2014 before LHC. The vendor has claim of approximately $0.78 million receivable from the Group. Further details of the litigations have not been disclosed as it may prejudice the Group’s position. The Group has denied the veracity of such claims and has also challenged the maintainability of the proceedings. Also, the Group has filed a counter petition during the year 2015 claiming approximately $1.13 million under the same contract against which the vendor has claimed its dues. The Group had to deposit an amount of approximately $0.07 million in the Court in respect of this case. The honorable High Court has already required both Companies to resolve disputes in terms of their Agreement. The matter stands adjourned sine die. Based on the advice of the Group’s legal counsel, the management is of the view that it is unlikely that any adverse order will be passed against the Group.

 

 
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One of Group’s vendor and its allied international identities (referred to as vendors) filed winding up petition dated October 16, 2017, before LHC and claim of approximately $0.24 million and $4.87 million which was dismissed on September 26, 2018. The vendors have also filed civil suit before Islamabad Civil Court dated September 17, 2018, for recovery of approximately $12.35 million and $0.24 million along with damages of $20 million. The learned civil judge accepted the application under Order VII Rule 10 CPC and returned the plaint. The vendors have now filed an appeal before the Honorable Islamabad High Court, Islamabad against the order passed on July 10, 2019 by the learned civil judge, Islamabad. The Group has already filed suit for recovery of $93.3 million against this vendor for default in performance of agreements before Civil Court, Lahore in August 2017. The Group has also filed another suit before Civil Court, Lahore for recovery of $5.39 million for causing damage to the Group for filing frivolous winding up petition. Based on the legal advice, the management is of the view that it is unlikely that any claim of said suppliers will materialize.

 

The Group acquired the Indefeasible Right to Use (“IRU”) of media and related Operations and Maintenance Services (“O&M”) from one of the Group’s vendors through an agreement entered in August 2011. An agreement between the parties was reached in April 2015 for the payment against O&M services whereby it was decided that monthly payments in respect of O&M will be made by the Group and other deliverables under the IRU agreement shall be mutually agreed by June 30, 2016. However, the vendor illegally and violating the terms of the Agreement disconnected its services to the Group and filed a Civil Suit before the Sindh High Court in October 2016 for recovery of dues amounting to $7.03 million equivalent to approximately $3.86 million along with interest @ 15% amounting to $1.58 million equivalent to approximately $0.88 million, allegedly due under the stated agreement. The subject suit is pending adjudication.

 

The management believes that vendor’s claim is invalid since it relates to the un-utilized future period and for the media which has never been provisioned as required under the Agreement and the vendor is/was under contractual obligation to provide (media) to the Group. That, a net sum of approximately $2.98 million is due and payable by Vendor to the Group, in respect of reimbursement and refund obligation under and pursuant to the IRU Contract. The net sum is calculated on the basis of actual utilization of the capacity calculated on pro rata basis hence the Group was/is entitled to and Vendor was/is liable to refund approximately $2.98 million within 90 days of the termination of the IRU instead of claiming approximately $7.03 million. The subject media / services have never been provisioned therefore the Vendor is not entitled to claim any amount for media or services. As the Group holds an indefeasible right to use the vendor’s media for the contract duration of 15 years, early and unilateral termination of services by vendor, amounts to a breach.

 

Under these circumstances, the Group under the express contractual rights have claimed the amounts pertaining to (i) media which has yet not been delivered, and (ii) un-utilized future period on a pro-rata basis, as required under the terms and conditions of the Agreement. Moreover, the Vendor is also liable to make payments to the Group on account of different services received from the Group. The Group has filed an application before SHC in January 2017 under section 34 of the Arbitration Act, 1940 to refer the matter to Arbitrator as per the dispute resolution mechanism provided in the agreement dated 2011.

 

During 2019, the supplier has signed an MoU with the Group undertaking to withdraw all legal cases which has completed in August 2022 and both parties have withdrawn their respective cases.

 

A total of cases 30 are filed against the Group involving Regulatory, Employees, Landlords and Subscribers having aggregate claim of all cases amounting to approximately $0.41 million (2023: $0.39 million). Because of number of cases and their uncertain nature, it is not possible to quantify their financial impact. Management and legal advisors of the Group are of the view that the outcome of these cases is expected to be favorable and liability, if any, arising out on the settlement is not likely to be material.

 

Contingency relating to the Plan and Agreement of Reorganization

 

As per ASC 450, the Company has determined that it is not possible to reasonably estimate the right of WHI shareholders to return the shares issued in the Plan and Agreement of Reorganization outlined in note 1 of these consolidated financial statements. However, the Company has received a CUSIP number and is currently in the process of applying for a trading symbol with the Financial Industry Regulatory Authority (“FINRA”). Management is confident that trading on OTC markets will be possible once a trading symbol is obtained. 

 

 
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18. NET REVENUE

 

 

 

Three Months Ended

March 31,

 

 

 

2024

 

 

2023

 

Telecom services

 

$3,477,385

 

 

$2,108,861

 

Broadband services

 

 

234,001

 

 

 

368,858

 

Other services

 

 

7,608

 

 

 

8,356

 

Gross Revenue

 

 

3,718,994

 

 

 

2,486,074

 

Less: Discounts

 

 

(693 )

 

 

(579 )

Less: Sales tax

 

 

(16,044 )

 

 

(17,123 )

Total Revenue

 

$3,702,258

 

 

$2,468,372

 

 

Introduction

 

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as our performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under ASC 606.

 

Most of our current contracts with customers contain a single performance obligation. For contracts where we provide multiple services, such as where we perform multiple ancillary services, each service represents its own performance obligation. The standalone selling prices are based on the contractual price for the service. Our contracts generally include standard commercial payment terms. We have no significant obligations for refunds, warranties or similar obligations and our revenue includes sales taxes collected from our customers.

 

Disaggregation of Revenue from Contracts with Customers

 

We derive revenue from six primary sources: (1) International Termination Services, (2) Indefeasible Right of Use (IRU), (3) Cable TV and Internet Services, (4) Metro Fiber Solutions, (5) Capacity Sale Services and (6) Advertisement Services.

 

The following table represents a disaggregation of revenue for the three months ended March 31, 2024 and 2023:

 

 

 

Three Months Ended

March 31,

 

 

 

2024

 

 

2023

 

Telecom Services:

 

 

 

 

 

 

International termination services

 

 

3,477,385

 

 

 

2,108,861

 

 

 

$3,477,385

 

 

$2,108,861

 

Broadband Services:

 

 

 

 

 

 

 

 

Cable TV and internet services

 

 

115,463

 

 

 

134,091

 

Metro fiber solutions

 

 

79,436

 

 

 

100,630

 

Capacity sale services

 

 

39,102

 

 

 

134,137

 

 

 

$3,711,386

 

 

$2,477,719

 

 

International termination services:

 

This service represents the international inbound traffic terminated in Pakistan via Company’s network to the local mobile network operators such as Mobilink, Zong, Telenor and Ufone etc. Revenue from terminating minutes is recognized at the time the call is made over the network of the Company. Revenue from terminating minutes is recognized at the time the call is made over the network of the Company. There is a postpaid billing invoicing cycle for such services.   

 

 
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Indefeasible Right of Use (IRU) services:

 

It is a distinct performance obligation whereby the Company enters into a contractual agreement to grant Indefeasible Right of Use (IRU) of dark fiber up to 20 years or more. Revenue from IRU services is recognized at point in time, when the asset is transferred, and a customer obtains control over it.

 

Cable TV and internet services:

 

Cable television is a video delivery service provided by the Company to retail and commercial subscribers via a coaxial cable and fiber optics, whereas Internet service is the delivery of data service provided by the Company to the subscribers via a coaxial cable and fiber optics. The Company is providing Fiber to the Home (“FTTH”) services which is not a distinct performance obligation, but rather a component of a connectivity services. The Company charges connection and membership fee at the time of setting up of connection. Subscription revenue from Cable TV, internet over cable, cable connectivity and channels subscription fee is recognized on provision of services.  Connection and membership fee is recognized as revenue when future services are provided. Such fee is paid by the customer at the time of the sale of the connection, and it entitles the customer to access the cable TV and internet services provided by the company. The Company follows an advance billing invoicing cycle for such services.

 

Metro fiber solutions:

 

This revenue stream represents point to point (P2P) connectivity, the latest Dark Fiber internet technology to its high-end large scale multinational companies, IT companies and leading educational institutions in major cities of Pakistan. Dark Fiber refers to fiber optic networks with no service or traffic running on the fiber strands. Unlike managed fiber services, Dark Fiber gives the maximum level of control to businesses, allowing them to use their preferred protocol and manage and maintain their own equipment. Dark Fiber has the capability to offer near limitless capacity, as well as providing the assurance of dedicated connectivity. It can be termed as a fiber corridor offering Committed information rate (CIR), fiber and data services, making it an excellent choice for organizations who require a dedicated, high capacity, secure service. Revenue from metro fiber solutions is recognized at point in time, when the asset is transferred, and a customer obtains control over it.

 

Capacity sale services:

 

These are the services arrangements whereby the Company enters into a contractual agreement to provide a portion of the capacity of fiber, wherein the rights are given to the customers for a longer period i.e., 20 years or more. Revenue from capacity sale services is recognized at point in time, when the asset is transferred, and a customer obtains control over it.

 

Advertisement services:

 

This revenue relates to the commercials of the different businesses, which are aired on the Company’s cable TV network. The Company offers advertisement to corporate, SME and retail customers on its in-house entertainment channels. There is vast range of advertising packages tailor-made and customized according to specific client requirements at high economical rates. Clients can opt for multiple modes of advertising like: Multiple Scroll, Multiple Logo, L-Shape, Time-checks, TVC, Documentary and Channel Branding. Advertisement income is recognized based on spots run when commercials are aired on the network. The Company follows a postpaid billing invoicing cycle for such services.

 

Deferred revenue was $5,677 as on March 31, 2024, and $31,131 as on DECEMBER 31, 2023.

 

 
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19. DIRECT OPERATING COSTS

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Interconnect, settlement and other charges

 

$3,236,188

 

 

$1,736,738

 

Salaries, wages and benefits

 

 

127,677

 

 

 

126,697

 

Bandwidth and other PTCL charges

 

 

57,782

 

 

 

61,033

 

Power consumption and rent

 

 

52,346

 

 

 

49,906

 

Network maintenance and insurance

 

 

33,544

 

 

 

9,162

 

PTA fees

 

 

5,147

 

 

 

14,325

 

Cable license fee

 

 

18,559

 

 

 

9,859

 

Annual spectrum fee

 

 

14,881

 

 

 

16,317

 

Fees and subscriptions

 

 

24,827

 

 

 

29,370

 

Content cost

 

 

668

 

 

 

1,096

 

Security services

 

 

914

 

 

 

1,616

 

Others

 

 

9,626

 

 

 

82,658

 

 

 

$3,582,159

 

 

$2,138,821

 

 

20. FINANCE COST

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Unwinding of discount on liabilities

 

$30,917

 

 

$55,883

 

Interest on term finance certificates

 

 

252,290

 

 

 

203,746

 

Interest on long term loan

 

 

116,657

 

 

 

128,792

 

Interest on short term borrowings

 

 

60,401

 

 

 

-

 

Finance charges on lease liabilities

 

 

26,541

 

 

 

30,192

 

Bank charges and commission

 

 

6,484

 

 

 

6,482

 

 

 

$493,290

 

 

$425,095

 

 

 
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21. TAXATION

 

The provision (benefit) for income taxes for the three months ended March 31, 2024 and 2023 consisted of the following:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Current provision

 

 

 

 

 

 

For the period

 

$45,446

 

 

$39,108

 

Prior periods

 

 

-

 

 

 

-

 

Total current provision

 

 

45,446

 

 

 

39,108

 

Deferred provision

 

 

-

 

 

 

-

 

Total provision

 

$45,446

 

 

$39,108

 

 

The provision for current taxation represents minimum / final tax under the provisions of the Income Tax Ordinance, 2001 (ITO), as applicable in Pakistan.

 

 

 

 Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Current provision

 

 

 

 

 

 

Federal

 

$-

 

 

$-

 

State

 

 

-

 

 

 

-

 

Foreign

 

 

45,446

 

 

 

39,108

 

Total current provision

 

 

45,446

 

 

 

39,108

 

Deferred

 

 

 

 

 

 

 

 

Federal

 

 

-

 

 

 

-

 

State

 

 

-

 

 

 

-

 

Foreign

 

 

-

 

 

 

-

 

Total provision

 

$45,446

 

 

$39,108

 

 

The components of the Company’s deferred income taxes as of March 31, 2024 and December 31, 2023 are as follows:

 

 

 

March 31,

2024

 

 

December 31,

 2023

 

 

 

Unaudited

 

 

 

 

Asset for deferred taxation comprising temporary differences related to:

 

 

 

Unused tax losses

 

$12,085,438

 

 

$11,939,320

 

Provision for doubtful debts

 

 

3,254,316

 

 

 

3,228,272

 

Post employment benefits

 

 

211,630

 

 

 

209,936

 

Provision for stores and spares & stock-in-trade

 

 

4,187

 

 

 

4,154

 

Provision for doubtful advances and other receivables

 

 

280,852

 

 

 

278,605

 

 

 

 

15,836,423

 

 

 

15,660,287

 

Liability for deferred taxation comprising temporary differences on other liabilities

 

 

(7,329,503 )

 

 

(7,270,849 )

 

 

 

 

 

 

 

 

 

Deferred tax asset

 

$8,506,919

 

 

$8,389,438

 

 

Deferred tax asset on tax losses available for carry forward has been recognized to the extent that the realization of related tax benefit is probable from reversal of existing taxable temporary differences and future taxable profit. These unused tax losses mainly represent allowable depreciation expenses for indefinite period. However, there are no such tax benefits which remain unrecognized into the financial statements and tax related contingencies have been adequately disclosed in note 17 of these financial statements. Management’s assertion of future taxable profit is mainly based on income due to write back of liabilities and business plan to initiate fiber to home services with monetary support from the majority shareholder.

 

 
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22. RELATED PARTIES

 

Related parties comprise the parent Company, associated companies / undertakings, directors of the Company and their close relatives and key management personnel of the Company. The Company in the normal course of business carries out transactions with various related parties. Credit terms with related parties are more than normal business arrangements. Amounts due from and due to related parties are shown under respective notes to these financial statements.

 

Transactions During the Year

 

 

 

 

March 31,

2024

 

 

 December 31,

2023

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Worldcall Business Solutions (Private)

Expense borne on behalf of associate

 

$-

 

 

$10,194

 

Worldcall Business Solutions (Private) Limited

Interest charged during the year

 

$21,332

 

 

$11,756

 

Worldcall Cable (Private) Limited

Interest charged during the year

 

$489

 

 

$771

 

ACME Telecom (Private) Limited

Interest charged during the year

 

$-

 

 

$4

 

Worldcall Ride Hail (Private) Limited

Expenses borne on behalf of associate

 

$4

 

 

$-

 

 

Interest charges

 

 

4

 

 

 

8

 

Key management personnel Advances against expenses disbursed (adjusted) - net

Advances against expenses disbursed / (adjusted) - net

 

$(1,410 )

 

$49,667

 

 

Balances (Due to) Due from Related Parties

 

March 31,

2024

 

 

 December 31,

2023

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Worldcall Business Solutions (Private) Limited Other receivable

 

$515,964

 

 

$398,926

 

Worldcall Cable (Private) Limited Other receivable

 

$11,846

 

 

$9,447

 

AMB Management Consultants (Pvt.) Ltd  Other(payable) receivable

 

$(212,674 )

 

$(210,431 )

ACME Telecom (Private) Limited Other receivable

 

$-

 

 

$134

 

Worldcall Ride Hail (Private) Limited Other receivable

 

$93

 

 

$82

 

 

As on March 31, 2024 and December 31, 2023, outstanding balance from key management personnel was approximately $570,000 and $605,000, respectively against miscellaneous expenses including salaries and other employee benefits etc.

 

The Company owes approximately $0.79 million and $0.43 million interest free loan to its director as on March 31, 2024 and December 31, 2023, respectively, which is repayable at discretion of the Company.

 

23. PREFERRED SHARES

 

Last year, the Company acquired the remaining convertible preference shares (“CPS”) of WorldCall Telecom Limited of 52,500 from Oman Telecommunication Company, previously held under a lockup agreement. The CPS shares owned by the Company have been eliminated.

 

24. SUBSEQUENT EVENTS

 

The Company obtained Trading Symbol GLTK on November 14, 2023 after successful completion of process. It applied with Depository Trust and Clearing Corporation (“DTC”) for clearing and settlement. All requisite documents were submitted to DTC and on April 24, 2024 the Commenced trading on over the counter.

 

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

 

The following is a discussion of our consolidated financial condition and results of operations for the three and three months ended March 31, 2024 and 2023, and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 16, 2024.

 

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “Forward-Looking Statements” on page 3 of this Quarterly Report on Form 10-Q.

 

Quarter Period Highlights

 

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

 

Reference is made to Item 1A. Risk Factors depict important factors that could cause actual results to differ from expectations. In addition, the following discussion should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto of GlobalTech Corporation included in “Item 18. Financial Statements and Supplementary Data.”

 

Overview

 

We are a leading cable and broadband operator in Pakistan and a prominent broadband communication services company providing video and broadband internet services in major cities of Pakistan through Hybrid Fiber Coaxial and state-of-the-art fiber optic networks. We also offer international voice/data interconnect services with a principal focus on the termination of international voice traffic into Pakistan. We were presented with the Best Media Company award and recognized as the largest cable operator in Pakistan by the Consumer’s Choice awards in Pakistan. https://cca.com.pk/company-award/

 

Video revenue decreased in their months ended March 31, 2024, primarily due to a decline in the number of residential video customers. We expect that the number of residential video customers will continue to decline, negatively impacting video revenue as a result of the competitive environment and shifting video consumption patterns.

 

We offer a full range of residential and business solutions including fiber optic-delivered communications and managed IT solutions to large enterprise customers. For Corporate Clients, we focus on high-quality service in the provision of dedicated lines having Committed Information Rates (CIR) features to enhance productivity. They are also provided fiber optic network solutions including dark fiber optic connectivity on an IRU (Indefeasible / irrefutable Right of Usage) basis, managed circuits, and Point to Point (P2P) and Point to Multipoint (PTMP) connectivity. On our Cable TV Infrastructure, we distribute satellite TV content to our customers on Hybrid Fiber Coaxial (HFC) and Fiber to the Home (FTTH) networks. We carry both analog and digital TV channels to our customers over our cable network. We have gathered a number of awards over the years for our services from the Consumer Association of Pakistan for the quality and affordability of our services. Our subsidiary WorldCall Public is one of the oldest operators in Pakistan and has good brand recognition for its current portfolio of services. With over two decades of service under our brand, we believe the value generated by our brand gives us a competitive edge over our competition.

 

 
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Broadband and Cable TV Operations

 

The Company has been investing in its ambition of providing affordable broadband connectivity across Pakistan besides making a concerted effort to improve its services to existing customers The company has already initiated a comprehensive deployment of consumer Fiber to the Home (FTTH) connectivity clusters converting and migrating its existing customers to a higher average revenue per user (ARPU) platform. The cluster delivered high-speed internet capped at 100 Mbps, a blend of HD resolution 200 + (Digital/ Analogue) channels in addition to user familiar Customer Relationship Module which gives ultimate freedom to the subscriber for a customized service management experience. As the metro fiber optic plant already traverses across our service areas, the conversion cost for migrating an existing HFC customer to FTTH service remains low. Set-top boxes deployed for Digital Cable TV service are fully compatible with RF Overlay FTTH deployment and need not be changed as part of this migration.

 

The company has nearly 1,900 kilometers (1,180 miles) of fiber optic infrastructure deployed across 20 major cities of Pakistan with a potential ability to access a market of almost 3 million households for subscriber acquisition. It is a major asset moving forward as access to subscriber concentration points is essential for GlobalTech future strategy.

 

For our FTTH network deployment, Company has achieved a good response to subscriber conversion and has already deployed phase 1 of the project successfully in populous areas of Lahore, a city in Pakistan. For optimum utilization of this infrastructure and synergizing of resources, we have made business collaborations to aggressively pursue Fiber to the Home (FTTH) service rollout across Pakistan. The FTTH initiative is not only limited to the aforementioned areas, but a comprehensive plan is also in place to convert all existing HFC connections in the various other areas of Lahore and other major cities of Pakistan in a phased manner. This activity will require minimal cost but improve the margin of the business to a large extent and resultantly augment its profitability. FTTH service is charged at a higher level as it delivers much higher bandwidth on fiber optic networks. Additionally, operational resource intensity is substantially lower in FTTH as compared to HFC networks. Higher ARPU with lower servicing costs would result in better performance moving forward.

 

Our financial numbers, the Revenue of broadband decreased by $ 0.13 million when compared with corresponding period of last year. The decrease in revenue is mainly due to decrease in house passes. Nonetheless, customer requirements are migrating towards a higher grade of service for data both in terms of availability and throughput and the Company has decided to make a shift towards the latest technology options in order to provide desired services to customers in a more secure manner. Company HFC deployments could have been upgraded to service the requirements, but FTTH offers a more cost-effective platform with a much higher capability set moving forward. Management has achieved the rollout of 15,000 subscribers on FTTH in the existing service areas. The management is emphasizing converting all coaxial cable connections with FTTH and in time it would contribute to a major positive shift in the revenue from the consumer segment of operations and the same is substantiated by the marginal increase recorded this year.

 

For consumer operations, FTTH continues to and will be a major revenue contributor for the Company in the future as well. Subject to the availability of funds Company plans to extend its service to all of the 20 cities covered by its fiber optic network. The management believes that since its inception WorldCall Public has had a large database of loyal customers that have been subscribing to its multiple services for more than fifteen years. To further supplement this effort the management is working on the customers’ loyalty program. Aggressive marketing strategy and on-field marketing activity have also been planned in achieving the desired objectives of new and initial subscribers. This activity is being strongly supported through corporate marketing initiatives and exploiting the digital social media platform fully as LinkedIn, Facebook, Instagram, and Twitter. The marketing campaign of FTTH are also being launched on our in-house cable network. The management is more or less certain that the revenue trend can only go up moving forward. The management also intends to facilitate its’ customers for easy payments after evaluating different payment platforms.

 

 
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Summary Table for Services offered

 

S.No.

Service

Service Area

End-Consumer

1

Long Distance and International (LDI)

National

 

1a

Bulk Sales

 

Telecom Operators

1b

Call termination charged per minute

 

Telecom Operators

2

Broadband

 

 

2a

Fiber to the Home (FTTH)

Lahore

Corporate/Residential

2b

Hybrid Fiber Coaxial (HFC)

Lahore / Karachi / Islamabad

Residential

2c

Affordable Broadband

Lahore / Karachi / Islamabad

Resellers/Residential

2d

Fiber Optic connectivity

 

Telecom Operators/ Corporate

3

Cable TV

 

 

3a

Analog and Digital Service (FTTH)

Lahore

Corporate/Residential

3b

Analog and Digital Service (HFC)

Lahore / Karachi / Islamabad

Residential

3c

Analog and Digital Service (Fiber Optic)

Lahore / Karachi / Islamabad / Multan / Faisalabad

*Local Cable Operator/ Local Loop Operator

 

*We provide Analog and Digital services via our Fiber Optic network to local cable operators, wherein each of the local operators reduces capital costs by receiving our service rather than installing equipment for receiving programming directly from Networks.

 

Pricing information for the listed services is as follows.

 

Service 1a is charged at bulk monthly rates with unlimited volumes of traffic. The origination operator is able to generate additional volumes by offering discounted calling rates for Pakistan and local Pakistani operator connected to Company LDI network benefits from additional income by utilization of vacant capacity on the interconnect. Company margin is fixed irrespective of the volume of traffic.

 

Service 1b is charged on per minute of traffic (on per second incremental basis) to the originating party along with a corresponding termination rate charged by the terminating party connected to Company LDI network.

 

Service 2a and 3a is direct fiber connectivity to the end user through Fiber to the Home (FTTH) architecture. Service is charged as per subscription opted by the end user and include cable TV and broadband data. Cable TV offering further includes options to have analogue, digital or both services.

 

Service 2b and 3b is direct hybrid fiber coaxial (HFC) connectivity to the end user. Service is charged as per subscription opted by the end user and include cable TV and broadband data. Cable TV offering further includes options to have analogue, digital or both the services. Compared to FTTH, HFC offers a lower capacity broadband connectivity for the end-user.

 

Service 2c is connecting local resellers to Company backbone where service offering and packaging is done by the Company and local loop operator only manages subscriber services for connectivity and network maintenance. Company charges on individual packages on pre-paid top-up basis.

 

Service 2d provides backhaul and core network connectivity fort telecom operators along with P2P links for corporate data connectivity. For telecom operator’s charges are on long term lease basis with O&M charged on annual basis for a specific length of fiber optic network deployment. For corporate in includes one-time charges for network deployment with monthly O&M.

 

 
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Service 3c connects and provides local cable operators and local loop operators with Company Cable TV services (Analogue and Digital). The connection is made on fiber optic cable to end-user premises and further distribution is handled by local loop operator through its own resources.

 

Service 1 is monitored for volume of traffic and applicable rates. Service 2a, 2b, 2c, 3a and 3b are monitored on subscriber connected. Service 2d and 3c are monitored for new sales and Service Level Agreement (SLA) delivery for existing customers.

 

Subscriber conversion rate from HFC to FTTH:

 

We were able to covert 100% of our HFC customers located in Lahore City (Wapda Town, Gulberg and Askari V), however, we do not expect 100% conversion of all of our HFC customers. Our experience in said areas is an indication of the level of acceptance by our customers to convert from HFC to FTTH.

 

Our conversion rates are high because we provide equipment and installation free of charge to our existing HFC customers. FTTH service is reliable as it does not depend upon power, as compared to an HFC plant. HFC plants require electrical power to operate the network, due to regular power failures in Pakistan HFC networks are frequently affected whereby having service interruption our customers.

 

FTTH is not dependent upon Network electrical power, rather it requires power at our central switch and customer premises. The continuous availability of service to our end users is of extreme importance.

 

We expect our customers to thus convert, however we are expecting a conversion rate of at least 50% of our customers. We expect 100% of our customers to convert as we will over the next 36 months stop analog service and have complete FTTH service. We will continue using our HFC plant as a backup to our Fiber plant to continue support our customers.

 

The table below gives an example of conversion in one of our areas.

 

Subscriber conversion from HFC to FTTH:

 

Company deployed FTTH network in target areas of Lahore City (Wapda Town, Gulberg and Askari V) and achieved the following results:

 

Total subscribers HFC

=

2,231

 

Converted to FTTH

=

2,231

 

ARPU on HFC

=

USD 2

 

ARPU on FTTH

=

USD 6

 

Conversion ratio

=

100%

 

Incremental revenue

=

110%

 

 

As per the national broadband policy 2021 of Pakistan, Pakistan’s market has huge potential for broadband/data and therefore has set the following targets keeping in view the market potential, the following table sets forth Government of Pakistan’s targets for broadband deployment.

 

Targets under National Broadband Policy

 

Description

 

Current

 

 

Before 2025

 

 

By 2030

 

Fixed Broadband Penetration

 

 

1.13%

 

 

 

15%

 

 

 

35%

Average Internet Usage/ Subscriber/Month (in GBs)

 

 

1.91

 

 

 

 

20

 

 

 

 

50

 

 

Based upon the above targets as set forth by the Government of Pakistan, we are able to leverage our existing fiber network thus allowing us to deploy in high-density areas with minimal capital expenditures using existing inventory of network equipment. However, the need for capital will increase over the years as fiber network is extended to areas that are currently not served by our existing Fiber Network. These capital needs will be substantial and may require us to raise capital by debt or equity raises. If we are to raise capital by issuing shares, your shareholding will be diluted.

 

 
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We believe that setting these targets can only be achieved with Government of Pakistan’s regulatory support such as clear guidance as to permitting and licensing.

 

The management is also planning to sign up large public and private sector organizations for a complete package of cable TV and internet services. While at the same time we are also planning to sign up with the large housing projects launched by Real Estate companies in different cities for the provision of CATV and broadband internet through our distribution channels with exclusivity right from the project launch. This would further improve and enhance the corporate outlook and revenue of the business.

 

Long Distance and International traffic operations

 

The company maintains a robust infrastructure and international interconnect portfolio for its international traffic operations. The operations target voice traffic coming to Pakistan principally originating from overseas Pakistani population calling home and not any significant business / corporate originations. Traditional traffic origination points are Middle Eastern countries, the United Kingdom, and North America. Termination of voice traffic is highly regulated in Pakistan and Company has been in operation since 2004 in this segment of operations.

 

International termination revenue is one of the major revenue streams, which increased by $1.37 million due to an increase in volume of international termination. Volume increase was on account of bulk traffic arrangements.

 

The company escalated its engagement with its interconnect partners in Pakistan and abroad to address the migration of voice business toward alternate platforms. The operating regime applicable to the business operations whereby charging on per minute basis of voice communications is shifting toward a bulk billing strategy which would address the recent decline in business by a significant increase in business volume at a lower margin.

 

The management is deliberating new products and services in different areas in emerging markets. The current business plan envisions an aggressive acquisition/collaboration roadmap for technology assets, focusing on both operators and technology platforms with the essential elements of robust operations and growth potential already in place. The same would be involved in getting better solutions in place for voice aggregation operations along with a better position in getting bulk deals in place for business growth.

 

The company plans to further transform its business strategy to a more globally integrated approach for its subsidiaries. Our future plans also include the mergers and acquisition of existing & new businesses having similar operations in different parts of the world, which include the Middle East, Europe, South Asia, and Africa. As part of our strategy, we intend to leverage our existing technical and managerial strengths in expanding our services to acquired or joint venture partners.

 

Results of Operations

 

Net Revenue: Revenue is derived from telecom services and broadband services. Telecom services-related revenue stood at US$ 3.47 million during the three months ended March 31, 2024 compared to US$ 2.10 million during three months ended March 31, 2023. This increase of approximately US$ 1.37 million was primarily due to the increase in volume of international termination business. Broadband services generated revenue of US$ 0.23 million during three months ended March 31, 2024 compared to US$ 0.37 million during three months ended March 31, 2023. This decrease of US$ 0.13 million is due to decrease in house passes.

 

 
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Adjusted EBITDA for the three months ended March 31, 2024 is US$ (0.35) million, whereas Adjusted EBITDA for the corresponding period March 31, 2023 is US$ (0.14) million. Net loss for the three months ended March 31, 2024 is US$ 0.88 million, and net loss for the three months ended March 31, 2023 was US$ 3.92 million. We realized revenue, Adjusted EBITDA and income from operations during the periods presented as follows (all percentages are calculated using whole numbers. Minor differences may exist due to rounding).

 

 

 

Three months ended

March 31,

 

 

 

2024

 

 

2023

 

Net revenues

 

$3,702,258

 

 

$2,468,372

 

Adjusted EBITDA

 

$(354,352)

 

$(139,756)

Loss from Operations

 

$(882,422 )

 

$(3,918,031 )

 

Set forth below is a presentation and reconciliation of our adjusted EBITDA for the three months ended March 31, 2024 and 2023:

 

 

 

Three months ended

March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Net revenue

 

$3,702,258

 

 

$2,469,372

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

 

(1,421,158 )

 

 

(4,382,235 )

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

778,368

 

 

 

707,176

 

Finance cost

 

 

493,290

 

 

 

425,095

 

Taxation

 

 

45,446

 

 

 

39,108

 

Exchange loss

 

 

(250,298 )

 

 

3,071,100

 

Adjusted EBITDA

 

$(354,352 )

 

$(139,756)

 

Adjusted EBITDA is defined as net income attributable to GlobalTech Corporation shareholders plus net income attributable to non-controlling interest, net interest expense, income taxes, depreciation and amortization, and other operating (income) expenses, net, such as exchange loss/(gain).

 

Adjusted EBITDA and loss from operations during the three months ended March 31, 2024 were impacted by the increase in cost, whereas Adjusted EBITDA and loss from operations during the three months ended march 31,2023 were impacted by the decline in revenue mainly due to duct sale recognized in the corresponding period of last year.

 

During this period, Company was also transforming its business operations and moving towards a service-centric operation that does not require heavy investments in infrastructure. Current business operations are being maintained at the optimal operating level and new investments were principally utilized for solutions development more suited for future needs. The company is focused on the development of products and services that would be better suited for its future roadmap as a technology-centric solutions Company.

 

Gross Margin: The Company recorded a gross margin of USD 0.12 million during the three months ended March 31, 2024 compared to USD 0.33 million during the three months ended March 31, 2023. LDI revenue was increased due to increase in traffic. The broadband revenue decreased due to decrease in dark fiber revenue.

 

Direct operating costs: Direct operating costs stood at USD 3.58 million during the three months ended March 31, 2024 compared to USD 2.14 million during the three months ended March 31, 2023. The increase in direct cost is mainly due to interconnect cost, which is aligned with termination revenue.  Operating costs remain practically the same in both periods. We intend to maintain our operating expenses at current levels, leveraging our existing systems with the increased customer base. Our staff levels would be maintained; our existing networking equipment has additional capacity to handle increased customer loads. Based on our current levels, we can substantially increase customer levels without incurring additional costs.

 

Other operating costs: Other operating costs stood at USD 0.49 million during the three months ended March 31, 2024 compared to USD 0.48 million during the three months ended March 31, 2023. Operating costs remain practically the same during the periods.

 

Other income and expenses: The Company recorded other income of USD 0.27 million during the three months ended March 31, 2024 compared to USD 0.02 million during the three months ended March 31, 2023. Other expenses stood at USD 0.004 million during the three months ended March 31, 2024 against USD 3.07 million during the three months ended March 31, 2023,  hich was mainly due to currency devaluation.

 

 
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Updates on plans:

 

Broadband and Cable TV Operations:

 

The Company is at the advance stage to collaborate with an operator to expand its business across Pakistan and expect to add 200,000 broadband subscribers in low income areas under sharing economy vision. This will enhance Company’s revenue and contribute positively to the bottom line. These addition of subscribers will be energized on the existing network of the Company.

 

CADNZ:

 

During the quarter our engagement with middle eastern operators has borne fruit. Our principal interconnect partner, The Company is also launching a new and unique project called CADNZ. It is a 360-degree Customer Relationship module based application specifically developed for banking sector. All aspects of non-core banking would be covered by this application. This product has huge potential in United States (US) small and medium sized banks. In future the Company would plan to penetrate in Europe, UK and Middle East. This project will generate significant revenue.

 

 
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Liquidity and Capital Resources

 

We have significant amounts of debt. The principal amount of our debt as of March 31, 2024, was $6.54 million, consisting of $4.27 million of Term Finance Certificates, long term and short-term borrowings of $1.19 million and $ 1.09 million respectively. These debt facilities are secured and require significant cash to fund principal and interest payments on our debt. We are required to make debt repayments of US$ 6.13 million in the coming twelve months and we believe that sufficient funds will be generated through the operations and also with the financial support of the parent company, however rising interest rates by the United States Federal Reserve and the ensuing threat of global recession may result in lower revenues. We are currently in discussions for a private placement of our common shares pursuant to Regulation S exclusion from the Section 5 registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) for offers made outside the United States by both U.S. and foreign issuers to non-U.S Persons.

 

We expect to raise a minimum of $5 million to a maximum of $10 million by September 30, 2024. Delay in private placement is due to delay in trading of Company’s common shares

 

While there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even if available will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global market uncertainties. However, we are very conscious of the dilutive effect and price pressures in raising equity-based capital.

 

Despite the challenging environment, we are continually expanding our FTTH network using our existing equipment inventory consisting of Fiber Optic Cable, Customer Premises Equipment without having to deploy additional capital to purchase such equipment. The continual deployment will result in additional revenues for the company.

 

As possible acquisitions and mergers, we actively review them against our objectives including, among other considerations, improving the operational efficiency, achieving synergies, product development or technical capabilities of our business, and achieving appropriate return targets, and we may participate in the extent we believe these possibilities present attractive opportunities. Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures with the main focus on growth in international termination traffic, FTTH rollout, Data, and Fiber sales and thereby converting the same in escalation in the bottom line of cash flows.

 

 
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The Company believes its balances of cash, and cash equivalents which totaled $2,892,928 as of March 31, 2024, along with cash generated by ongoing operations and continued access to debt/capital markets, will be sufficient to satisfy its cash requirements over the next 12 months and beyond. However, this includes restricted cash of $2,413,878 that is not available for immediate ordinary business use. We believe that our existing staffing levels are sufficient to service additional customers.

 

Cash flows from operating, investing, and financing Activities:

 

Cash and Cash Equivalents: We held $2,892,928 and $2,566,538 cash and cash equivalents as of March 31, 2024, and 2023, respectively, which includes restricted cash of $2,413,878 and $2,353,442 that is not available for immediate ordinary business use.

 

Operating Activities: Net cash generated from operating activities increased during the ongoing period by $ 7.42 million primarily due to increase in EBITDA mainly on account of an increase in LDI revenue. Net cash generated from operating activities for the three months ended March 31, 2024, and 2023 was $ 1.41 million and $ (6.01) million respectively.

 

Investing Activities: Net cash used in investing activities for the three months ended March 31, 2024, and 2023 was $ (0.04) million and $ (0.01) million, respectively. The increase in cash used was primarily due to the investment in available opportunities to augment the returns.

 

Financing Activities: Net cash used in financing activities show a decrease of $0.01 million during the period ended March 31, 2024, compared to the period ended March 31, 2023.

 

Critical Accounting Policies and Estimates

 

The critical accounting policies and estimates used in the preparation of our consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 16, 2024. 

 

 
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Contractual Obligations and Commitments

 

We have contractual obligations under our financing arrangements. We also maintain operating leases for office premises. We have been in compliance with all debt covenants as of March 31, 2024. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2024, and December 31, 2023, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item, pursuant to Item 305(e) of Regulation S- K.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

 

Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has conducted, with the participation of our president (our principal executive officer and our principal accounting officer, and principal financial officer), an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024, in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Tread Way Commission (“COSO”) in Internal Control—Integrated Framework. Based on this assessment, management concluded that as of March 31, 2024, our company’s internal control over financial reporting was ineffective based on present company activity. In the course of making our assessment, we identified a material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company. The relatively small number of staff who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness that could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Our company is in the process of adopting specific internal control mechanisms with our board and officers’ collaboration to ensure effectiveness as we grow. We are presently engaging an outside consultant to assist in adopting new measures to improve upon our internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.

 

Based on the evaluation of our disclosure controls and procedures, as of March 31, 2024, our president (our principal executive officer and our principal accounting officer, and principal financial officer) concluded that, as of such date, our disclosure controls and procedures were ineffective.

 

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

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2024 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 
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Part II. Other Information

 

Item 1. Legal Proceedings

 

See discussion of legal proceedings in “Note 17, Commitments And Contingencies” of the Notes to Consolidated Financial Statements in this Report, which is incorporated by reference herein.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A. “Risk Factors” in our Annual Report on Form 10-K, which could materially affect our business, financial condition and/or future results and may be further impacted by the coronavirus pandemic. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or future results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Not applicable.

 

Item 3. Defaults Upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not applicable.

 

 
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Item 6. Exhibits

 

Exhibit Number

 

Exhibit Description

 

 

 

31.1

 

Certification of the Company’s Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.

 

 

 

31.2

 

Certification of the Company’s Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.

 

 

 

32.1*

 

Certification of the Company’s 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 the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

Inline XBRL Instance

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*The certifications on Exhibit 32 hereto are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

 

 
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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

GLOBALTECH CORPORATION

 

 

 

 

 

Dated: May 13, 2024

By:

/s/ Dana Green

 

 

 

Dana Green

 

 

 

Chief Executive Officer, President and Director

 

 

 

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

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

 

Dated: May 13, 2024

By:

/s/ Dana Green

 

 

 

Dana Green

 

 

 

Chief Executive Officer, President and Director

 

 

 

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

 
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