GlobalTech Corp 10-Q for FY2024 Q3
GlobalTech Corp (GLTK)
About this 10-Q
GlobalTech Corp filed this 10-Q on November 12, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.02M
- up 128.3% from $2.2M a year earlier
- Net loss
- $260.84K
- compared with a net loss of $1.28M a year earlier
- Diluted EPS
- -$0.00
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number
(Exact Name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code.)
(Telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
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.
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).
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 | ☐ |
☒ | Smaller reporting company | ||
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| 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date:
We are a controlled company as 63.30% of our issued and outstanding shares are held by Babar Ali Syed.
Index | ||||
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PART I. FINANCIAL INFORMATION | ||||
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Item 1. | Consolidated Financial Statements (Unaudited) |
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| Consolidated Balance Sheets as on September 30, 2024 and December 31, 2023 | 3 |
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| Consolidated Statements of Cash flows for the nine months ended September 30, 2024 and 2023 | 6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 |
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| 2 |
| Table of Contents |
GLOBALTECH CORPORATION | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
As of September 30, 2024 and December 31, 2023 | ||||||||
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Restricted cash |
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Accounts receivable – net |
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Short term investments |
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Prepayments |
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Stores and spares |
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Loans and advances |
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Other receivables |
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Total current assets |
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Property, plant and equipment |
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Operating lease right-of-use assets |
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Intangible assets – net |
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Long term loans and other assets |
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Deferred tax asset |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Trade and other payables |
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Current portion of non-current liabilities |
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Accrued interest |
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Short term borrowings |
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Provision for taxation – net |
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Total current liabilities |
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Term finance certificates |
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Long term financing – secured |
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Long term deposits and payable |
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License fee payable |
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Operating lease liability |
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Other payables |
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Total non- current liabilities |
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TOTAL LIABILITIES |
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CONTINGENCIES AND COMMITMENTS |
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SHAREHOLDERS' EQUITY: |
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Common stock, $ |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Shareholders Attributable to the Parent Company |
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Non-Controlling interest |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. | ||||||||
| 3 |
| Table of Contents |
GLOBALTECH CORPORATION | |||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 | |||||||||||||||||
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| FOR THE THREE MONTHS ENDED |
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NET REVENUE |
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Direct operating costs |
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Other operating costs |
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Depreciation and amortization |
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Other expenses |
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OPERATING LOSS |
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OTHER: |
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Other income/(loss) – net |
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Finance cost |
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LOSS BEFORE TAXATION |
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Taxation |
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NET LOSS |
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| $ | ( | ) |
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NET LOSS ATTRIBUTABLE TO: |
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Common shareholders of GlobalTech Corporation |
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Non - controlling interest (NCI) |
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Net loss per common share: basic and diluted |
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Weighted-average common shares used to compute basic and diluted loss per share |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. | |||||||||||||||||
| 4 |
| Table of Contents |
GLOBALTECH CORPORATION | ||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) | ||||||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
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| FOR THE THREE MONTHS ENDED |
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| FOR THE NINE MONTHS ENDED |
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NET LOSS |
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Items that will not be reclassified to profit or loss: |
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Changes in fair value of financial assets through other comprehensive income |
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Foreign currency translation adjustment |
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Other Comprehensive income - net of tax |
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COMPREHENSIVE LOSS |
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COMPREHENSIVE (LOSS) ATTRIBUTABLE TO: |
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Common shareholders of GlobalTech Corporation |
| $ | ( | ) |
| $ | ( | ) |
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Non - controlling interest (NCI) |
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Comprehensive (Loss)/ attributable to GLOBALTECH |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. |
| 5 |
| Table of Contents |
GLOBALTECH CORPORATION | ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) | ||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 | ||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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Adjustment for non-cash charges and other items: |
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Depreciation and amortization |
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Interest accretion on liabilities |
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Liabilities written back on settlements with parties |
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Post-employment benefits |
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Income on deposits, advances and savings accounts |
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Exchange loss on liabilities |
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Changes in operating assets and liabilities: |
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Stores and spares |
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Trade debts |
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Loans and advances |
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Short term investment |
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Prepayments |
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Other receivables |
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Trade and other payables |
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Increase / (Decrease) in non-current liabilities and assets: |
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Long term deposits and payables |
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Other payables |
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Long term loans and other assets |
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Post employment benefits paid |
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Income on deposit and savings accounts |
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Lease rental payments |
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Finance cost paid |
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Income tax paid |
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Net cash generated from/(used in) operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Proceeds from disposal (Payment on purchase) of property and equipment – net |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Repayment of long-term financing |
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Payment against directors' loan |
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Net cash used in financing activities |
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Net increase/(decrease) in Cash and Cash Equivalents |
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Cash and Restricted Cash at the beginning of the Period |
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Exchange effect |
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Cash and Restricted Cash at the End of the Period |
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SUPPLEMENTAL INFORMATION - Cash paid during the period for: |
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Income taxes |
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Interest |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. | ||||||||||
| 6 |
| Table of Contents |
GLOBALTECH CORPORATION | ||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
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| Preferred Stock |
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Accumulated Other Comprehensive Income |
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Description |
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| Dividend on Preferred Stocks |
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| Additional Paid in Capital |
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| Other Comprehensive Loss |
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| Translation Reserve |
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| Total |
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| Non-Controlling Interest |
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| Total |
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Balance as of January 1, 2023 |
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Net loss attributable for the nine months ended September 30, 2023 |
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Other comprehensive loss for the nine months ended September 30, 2023 |
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Total comprehensive loss for the nine months ended September 30, 2023 |
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Elimination of preferred stock due to acquisition of CPS |
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Translation and other adjustments for the nine months ended September 30, 2023 |
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Balance as at September 30, 2023 |
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Balance as at January 1, 2024 |
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Net loss attributable for the nine months ended September 30, 2024 |
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Other comprehensive income for the Nine months ended September 30, 2024 |
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Total comprehensive income for the nine months ended September 30, 2024 |
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Issue of Common Stock |
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Translation and other adjustments |
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| - |
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| - |
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Balance as at September 30, 2024 |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.
| 7 |
| Table of Contents |
GLOBALTECH CORPORATION | ||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
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| Preferred Stock |
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| Common Share |
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| Accumulated Other Comprehensive Income |
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| Shares |
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| Amount |
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| Additional Paid in Capital |
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| Other Comprehensive Loss |
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| Translation Reserve |
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| Total |
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| Accumulated Deficit |
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| Non-Controlling Interest |
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| Total |
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Balance as of July 1, 2023 |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ |
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Net profit attributable for the three months ended September 30, 2023 |
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| - |
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| - |
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Other comprehensive loss for the three months ended September 30, 2023 |
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| - |
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| - |
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Total comprehensive income for the three months ended September 30, 2023 |
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| - |
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| - |
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Translation and other adjustments for the three months ended September 30, 2023 |
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| - |
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| - |
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Balance as at September 30, 2023 |
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| - |
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| ( | ) |
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Balance as at July 1, 2024 |
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Net Income attributable for the three months ended September 30, 2024 |
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| - |
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| ( | ) |
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| ( | ) |
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Other comprehensive income for the three months ended September 30, 2024 |
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| - |
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| - |
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Total comprehensive income/(loss) for the three months ended September 30, 2024 |
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| - |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
Issue of Common Stock |
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Translation and other adjustments |
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| - |
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| - |
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Balance as at September 30, 2024 |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.
| 8 |
| Table of Contents |
GLOBALTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
GlobalTech Corporation (the “Company”) is a Nevada Corporation, incorporated with the 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 GlobalTech Corporation.
A Plan and Agreement of Reorganization dated December 31, 2021, was entered into by and between Elko Broadband Inc., (now as GlobalTech Corporation) and Worldcall Holding Inc.(“WHI”), wherein the transfer of all assets, properties and business and goodwill of WHI, were exchanged for
The transaction has been consummated and trading over the counter (OTC) commenced on April 24, 2024.
1.2. Legal Subsidiaries
1.2.1. WorldCall Telecom Limited
The Company owns, directly and indirectly through associates an aggregate of around
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 the Pakistan Stock Exchange. WTL commenced its operations on December 1, 2004, and it 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 establishing, maintaining and operating the licensed telephony services. WTL and its subsidiaries have 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/principal place of business is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore. |
| 9 |
| Table of Contents |
1.2.2. WorldCall Services (Pvt) Limited
WorldCall Services (Private) Limited (“WSL”), is a wholly-owned subsidiary of the Company, which was incorporated on October 5, 2009, as a private limited Company in Pakistan, under the Companies Ordinance 1984 (Repealed) now Companies Act 2017. The purpose of WSL includes, but is 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 August 24, 2016, and commenced operations on that date. The purpose of FZC includes management consultancy and technology services.
1.2.4. Rout 1 Digital (Pvt) Limited
Route 1 Digital (Pvt) Limited (“Route 1 Digital”) is a private limited company, which is wholly-owned by Worldcall Telecom Limited, incorporated under the Companies Ordinance 1984 (now Companies Act 2017) on December 21, 2016. The primary business of Route 1 Digital 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 Route 1 Digital 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 Presentation — The Company’s unaudited interim consolidated financial statements are prepared 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 Route 1 Digital. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited interim consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited interim consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, we have included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023 and notes thereto and other pertinent information contained in our Annual Report on Form 10-K/A.
| 10 |
| Table of Contents |
Significant Accounting Policies:
Revenue Recognition — We account for revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 of 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 provided.
Direct Operating Costs — Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to clients, annual Pakistan Telecommunication Authority (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. |
| 11 |
| Table of Contents |
Short Term Investments — ASC 320, Investments – Debt and Equity Securities. Short-term investments primarily consist of marketable securities with maturities greater than three months but less than one year at the time of purchase and are classified based on management’s intent regarding these assets. These investments are categorized as follows:
| · | Available-for-Sale Securities: Securities that the Company may sell in response to liquidity needs or changes in interest rates are classified as available-for-sale. They are reported at fair value, with unrealized gains and losses excluded from net income and recorded in other comprehensive income (OCI) within equity, net of applicable taxes. Realized gains and losses, along with other-than-temporary impairments, are included in earnings and are determined using the specific identification method. |
| · | Held-to-Maturity Securities: Securities that the Company has both the intent and ability to hold until maturity are classified as held-to-maturity. These securities are reported at amortized cost, with interest income, including the amortization of premiums and accretion of discounts, recognized in earnings. |
| · | Trading Securities: Securities purchased with the intent of selling them in the short term to generate profits are classified as trading securities. These investments are also reported at fair value, with unrealized gains and losses included in earnings. |
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 six 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 Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in ASU 2016-13 replaces the incurred loss impairment methodology under current Generally Accepted Accounting Principles (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 interim periods beginning on or after December 15, 2022. The Company adopted the guidance on January 1, 2023 and the adoption of this guidance had no material impact of the consolidated financial statements. As per the 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.
| 12 |
| Table of Contents |
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.
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 nine months ended September 30, 2024 and 2023.
| 13 |
| Table of Contents |
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 (EPS) in accordance with 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.
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$/Pakistani Rupee (PKR) exchange rates used for the translation of PKR-denominated assets and liabilities are PKR.
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, and (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 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 FASB issued ASU 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.
| 14 |
| Table of Contents |
3. ACQUISITIONS
|
| Ferret |
|
| WSL |
| ||
Date of acquisition(s) |
| November 30, 2021 |
|
| November 30, 2021 |
| ||
Property and equipment |
|
|
|
|
|
| ||
Long term loans |
|
|
|
|
|
| ||
Long term investments |
|
|
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|
| ||
Receivable from associates |
|
|
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|
| ||
Trade and other receivables |
|
|
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|
| ||
Short term investment |
|
|
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|
| ||
Cash and bank balances |
|
|
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|
|
| ||
Total assets |
|
|
|
|
|
| ||
Long term loans |
|
|
|
|
| ( | ) | |
Loan from directors |
|
|
|
|
| ( | ) | |
long term payables |
|
| ( | ) |
|
| ( | ) |
Short term borrowings |
|
| ( | ) |
|
| ( | ) |
Accrued interest |
|
| ( | ) |
|
| ( | ) |
Trade and other payables |
|
| ( | ) |
|
| ( | ) |
Provision for taxation |
|
|
|
|
| ( | ) | |
Total liabilities |
|
| ( | ) |
|
| ( | ) |
Net assets |
| $ |
|
| $ | ( | ) | |
As of November 30, 2021, WHI entered into a
As of November 30, 2021, WHI entered into a
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.
| 15 |
| Table of Contents |
4. CASH AND CASH EQUIVALENTS
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
| |||
Cash at bank |
|
|
|
|
|
| ||
Current accounts |
| $ |
|
| $ |
| ||
Savings accounts |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Cash in hand |
|
|
|
|
|
| ||
Pay orders in hand |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
5. RESTRICTED CASH
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Deposit in escrow account |
| $ |
|
| $ |
| ||
Margin and other deposits |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Deposits in escrow account: Deposits in escrow account represent the balance in the Company’s saving account maintained with a bank under an escrow arrangement. This account was established in 2012 in accordance with the International Clearing House (ICH) Policy directive issued by Ministry of Information and Technology (MoIT) for settlement of disputed Access Promotion Charges (APC). Certain portions of the Company’s revenues were deposited in this account; Policy Directive was withdrawn later on, but the settlement of the amount available in the escrow account is yet to be finalized.
Margin and other deposits include deposits placed with banks against various guarantees. This amount also includes approximately $
6. ACCOUNTS RECEIVABLE – NET
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Considered good – unsecured |
| $ |
|
| $ |
| ||
Considered doubtful – unsecured |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Provision for expected credit loss |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
Provision for expected credit losses was $nil and $
| 16 |
| Table of Contents |
7. PROPERTY, PLANT AND EQUIPMENT
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Operating fixed assets |
| $ |
|
| $ |
| ||
Capital work-in-progress |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Operating fixed assets |
|
|
|
|
|
|
|
|
Building on freehold land |
| $ |
|
| $ |
| ||
Freehold land |
|
|
|
|
|
| ||
Leasehold improvements |
|
|
|
|
|
| ||
Plant and equipment |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Vehicles |
|
|
|
|
|
| ||
Computers |
|
|
|
|
|
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Laboratory and other equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
The useful life of operating fixed assets ranges between
7.1.1. Details of additions for the nine months ended September 30, 2024 and the year ended December 31, 2023
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Leasehold improvements |
| $ |
|
| $ |
| ||
Plant and equipment |
|
|
|
|
|
| ||
Office equipment |
| $ |
|
| $ |
| ||
Furniture and Fixtures |
|
|
|
|
|
| ||
Computers |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
| ||
7.1.2. Details of disposals for the nine months ended September 30, 2024 and the year ended December 31, 2023
| ||||||||
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Plant and equipment |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
| 17 |
| Table of Contents |
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 September 30, 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.
Breakdown of operating lease expense:
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Operating lease cost |
| $ |
|
| $ |
| ||
Short term lease cost |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Supplemental balance sheet information related to leases was as follows:
|
|
| September 30, 2024 |
|
| December 31, 2023 |
| |||
|
|
| (Unaudited) |
|
|
|
| |||
Operating leases |
|
|
|
|
|
|
| |||
Operating lease ROU assets, net |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
| |
Current operating lease liabilities |
|
|
|
|
|
|
| |||
Non-Current operating lease liabilities |
|
|
|
|
|
|
| |||
|
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
| |
Operating leases |
|
|
|
|
|
|
|
|
| |
ROU Assets |
|
|
|
|
|
|
| |||
Asset lease expense |
|
|
| ( | ) |
|
| ( | ) | |
Foreign exchange loss |
|
|
|
|
|
| ( | ) | ||
ROU Assets – net |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
| |
Weighted average remaining lease term (in years): |
|
|
|
|
|
|
|
|
| |
Operating leases |
|
|
|
|
|
|
| |||
Weighted average discount rate: |
|
|
|
|
|
|
|
|
| |
Operating leases |
|
|
| % |
|
| % | |||
| 18 |
| Table of Contents |
Supplemental cash flow and other information related to leases was as follows:
|
| Nine Months Ended |
| |||||
|
| September, 30 |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash flows from operating leases |
| $ |
|
| $ |
| ||
Maturities of lease liabilities are as follows:
Operating leases - Years Ending December 31, |
|
|
| |
2024 (Three months) |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
Total lease payments |
| $ |
| |
Less: imputed interest |
| $ | ( | ) |
Total lease obligations |
| $ |
| |
Less: current obligations |
| $ | ( | ) |
Long-term lease obligations |
| $ |
| |
| 19 |
| Table of Contents |
9. INTANGIBLE ASSETS – NET
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
| |||
Licenses |
| $ |
|
| $ |
| ||
Patents and copyrights |
|
|
|
|
|
| ||
IRU - media cost |
|
|
|
|
|
| ||
Software |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated amortization – net |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
Useful life of intangible assets ranges between
As of September 30, 2024, future amortization expense scheduled to be expensed is as follows:
Year ending December 31, |
|
|
| |
2024 (Three months) |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
|
| $ |
| |
| 20 |
| Table of Contents |
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Trade creditors |
| $ |
|
| $ |
| ||
Accrued and other liabilities |
|
|
|
|
|
| ||
Payable to PTA against APC charges |
|
|
|
|
|
| ||
Payable against long term investment |
|
|
|
|
|
| ||
Contract liabilities |
|
|
|
|
|
| ||
Withholding taxes payable |
|
|
|
|
|
| ||
Sales tax payable |
|
|
|
|
|
| ||
Security deposits |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Trade creditors include payable to the PTA amounting to $
Accrued and other liabilities: This includes payable to key management personnel amounting to $
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
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Term finance certificates |
| $ |
|
| $ |
| ||
Interest payable on term finance certificates |
|
|
|
|
|
| ||
Long term financing |
|
|
|
|
|
| ||
Lease liabilities |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Details of the current portion of non-current liabilities are provided in their respective notes.
| 21 |
| Table of Contents |
12. ACCRUED INTEREST
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Short term borrowings |
| $ |
|
| $ |
| ||
Term finance certificates |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
13. SHORT TERM BORROWINGS
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Repurchase agreement borrowings |
| $ |
|
|
|
| ||
Line of credit facility – others |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Line of credit facility – commercial banks:
During the year ended December 31, 2022, the Company restructured one of its line of credit facilities with Askari Bank Limited amounting to $
Line of credit facility – others:
This represents various interest bearing and interest free loans from different parties.
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Loan from other parties |
| $ |
|
| $ |
| ||
Loan from related party * |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
* Loan from related party:
This represents payable to AMB Management Consultants (Pvt.) Ltd (AMB) (related party) due to common directorship, against short-term borrowings, which is due to payments made by AMB on behalf of the Company.
| 22 |
| Table of Contents |
Loan from third parties: This represents various interest bearing and interest free loans denominated in US$ from different companies, as detailed below.
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
| |||
HTS Tel Communication |
| $ |
|
| $ |
| ||
TLT Communication |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
14. TERM FINANCE CERTIFICATES (TFCs)
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Opening balance |
| $ |
|
| $ |
| ||
Repayments |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current portion |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
| ||
Add: Deferred interest |
|
|
|
|
|
| ||
Exchange adjustment |
|
| ( | ) |
|
| ( | ) |
Closing balance |
| $ |
|
| $ |
| ||
Term finance certificates (TFCs) have a face value of $17.98 per certificate. These TFCs carry interest at the rate of six months average Karachi Interbank Offered Rate (KIBOR) plus
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 was rescheduled in December 2012 and then on April 3, 2015. During the year ended December 31, 2018, a third rescheduling of these TFCs was successfully executed through signing of the Third Supplemental Trust Deed between the Trustee and the Company.
In accordance with the 3rd Supplemental Trust Deed executed during the year ended December 31, 2018, the outstanding principal is repayable by way of quarterly staggered instalments with downward revision in interest of
The other main terms included appointment of one representative as a nominee director nominated by the Trustee which has been complied with. Further,
| 23 |
| Table of Contents |
The Company has not paid quarterly installments due from June 2019 to September 2024, amounting to $
Due to non-payment of due instalments, the
These TFCs are secured pair passu with the Company's present and future fixed assets including equipment, plant and machinery, fixtures excluding land and building with a 25% margin in addition to all rights, benefits, claims and interests procured by the Company under:
| A. | The Long Distance and International ("LDI") and Wireless Local Loop ("WLL") license issued by PTA to the Company; and |
| B. | The assigned frequency spectrum as per deed of assignment. |
| 24 |
| Table of Contents |
15. LONG TERM FINANCING – SECURED
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Allied Bank Limited |
|
|
|
| $ |
| ||
Bank Islami Limited |
|
|
|
|
|
| ||
Askari Bank Limited |
|
|
|
|
|
| ||
Standard Chartered Bank Limited |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Allied Bank Limited: This represents a balance transferred as a result of the restructuring of a short-term running finance (RF) facility to Term Loan Facility and subsequently amended on October 8, 2020 and September 30, 2021. Principal will be repaid in 37 stepped up monthly instalments starting from August 2021 until August 2024. Interest will be accrued and will be serviced in 12 equal monthly instalments, starting from September 20, 2024. The
Bank Islami Limited: This represents a balance transferred as a result of a restructuring of a short-term running finance (RF) facility to Term Loan Facility on February 12, 2021. Principal will be repaid in 29 installments starting from February 2022 until May 2026. Interest will be accrued and will be serviced in 24 monthly installments, starting from June 1, 2024. The
Subsequently in June 2023, the Bank approved the Company's restructuring request as a result of which overall repayment tenure was extended by one year and six months, as a result of which the 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 the reporting date, five monthly installments are pending. The Company is in negotiations with the Bank for settling its liability in full.
Last year, the period for repayment of principal and deferred interest was extended and according to revised terms both will be repaid in November 1, 2027.
Askari Bank Limited(AKBL): This represents a balance transferred as a result of a settlement agreement from a short-term running finance (RF) facility to Term Loan Facility as of November 2, 2022. Principal will be repaid in 48 installments starting from November 2022 until October 2026. Interest outstanding after effective discounts / waivers as per the settlement agreement and interest to be accrued, will be serviced in 36 monthly installments, starting from November 2024. The
As of the reporting date the bank has approved a restructuring of installments, provided total tenor of the facility remains unchanged.
| 25 |
| Table of Contents |
The Company used a post tax weighted average borrowing rate for amortization of deferred interests.
Standard Chartered Bank Limited: This represents a balance transferred from a short-term borrowing as a result of a settlement agreement from a short-term running finance (RF) facility to Term Loan Facility on August 9, 2023. Principal will be repaid in stepped up 23 installments starting from August 2023 until June 2025. Interest outstanding after effective discounts / waivers as per a settlement agreement and interest to be accrued, will be serviced in six monthly installments, starting from January 2025. The |
16. LICENSE FEE PAYABLE
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
License fee payable |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
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 (the "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 the 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 until 2024. Through said decision PTA has also withdrawn 1900 MHz frequency spectrum which was already withdrawn by PTA/Frequency Allocation Board (FAB) in 2015 (11th year) until which the spectrum is fully paid on the basis of the 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 the above, during the last year the outstanding liability for 1900 MHz was reduced to zero on the basis that the 1900 MHz frequency had been fully paid for until 2015 (11th year). Similarly, liability for the 450 MHz frequency spectrum was reduced on pro-rata after withdrawal. Owing to these circumstances, management does not expect the liability to materialize fully in the near future.
| 26 |
| Table of Contents |
17. CONTINGENCIES AND COMMITMENTS
Billing disputes with Pakistan Telecommunication Company Limited (“PTCL”)
GlobalTech Corporation and its subsidiaries (collectively, the “Group”) have a
Disputes with Pakistan Telecommunication Authority (“PTA”)
The Group has filed a suit before Civil Court, Lahore, Pakistan on December 15, 2016, in which it has sought a restraining order against PTA in relation to demands of regulatory and other dues and claimed set off from damages / compensation claim of the Group on account of the auction of preoccupied frequency spectrum. The Group has raised a claim of approximately $
During 2016, PTA again demanded immediate payment of the principal amount of APC amounting to approximately $
PTA has raised a demand amounting to approximately $
The Group maintains that PTA has allegedly issued an arbitrary order for recovery of an annual radio frequency spectrum fee for the years ended 2011, 2012, 2013, 2014 and 2015 along with late payment charges amounting in total to approximately $
Moreover, the Group is confident that incidental liability, if any, will be set off by way of a claim filed against PTA.
| 27 |
| Table of Contents |
The Group has filed a suit before the High Court of Sindh on July 2, 2011, for declaration, injunction and recovery of approximately $
The restraining order was dismissed by the learned single judge through a consolidated order dated July 27, 2018. The order was challenged by the Group before the Divisional Bench of the High Court on August 13, 2018 in High Court Appeal No. 222 of 2018. 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 $
PTA has filed recovery proceedings against the Group before the District Collector / District Officer Revenue, Lahore for an amount of approximately $
The Group has filed an appeal with the 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 feel 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
PTA had demanded an amount of approximately $
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.
| 28 |
| Table of Contents |
PTA determined the demand amounting to approximately $
Other than the amounts recognized in the financial statements and amounts disclosed in the above contingencies, PTA has also demanded amounts of approximately $
| 29 |
| Table of Contents |
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 $
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 $
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 $
A demand of approximately $
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 an order under section 122(4) of Income Tax Ordinance, 2001 creating a demand of approximately $
| 30 |
| Table of Contents |
The Commissioner Inland Revenue (“CIR”) has raised demand against the Group for super tax for the tax year 2018, amounting to approximately $
A sales tax demand of approximately $
On September 30, 2016, Punjab Revenue Authority (PRA) issued a show cause notice allegedly demanding approximately $
Other matters
One of the Group’s vendors has filed a 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 $
One of the Group’s vendors has filed a petition on November 21, 2014 before LHC. The vendor has a claim of approximately $
| 31 |
| Table of Contents |
One of the Group’s vendors and its allied international identities (referred to as vendors) filed a winding up petition dated
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 violated 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 $
Management believes that the 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 that the vendor is/was under contractual obligation to provide (media) to the Group; and that, a net sum of approximately $
Under these circumstances, the Group under the express contractual rights has 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 Company believes that the vendor is also liable to make payments to the Group on account of different services received from the Group. The Group filed an application before Sindh High Court (SCH) 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 30 cases are filed against the Group involving Regulatory, Employees, Landlords and Subscribers having an aggregate claim of all cases amounting to approximately $
| 32 |
| Table of Contents |
18. NET REVENUE
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
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| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
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Telecom services |
| $ |
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| $ |
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| $ |
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Broadband services |
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Technology services |
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| ( | ) |
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Gross revenue |
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| ||||
Less: Discounts |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Less: Sales tax |
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| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Total revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
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 seven 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, (6) Advertisement Services, and (7) Technology Services.
The following table represents a disaggregation of revenue for the nine months ended September 30, 2024 and 2023:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
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| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
| ||||
Telecom Services: |
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|
|
|
| ||||
International termination services |
|
|
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|
| ||||
|
| $ |
|
| $ |
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| $ |
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| $ |
| ||||
Broadband Services: |
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Cable TV and internet services |
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| ||||
Metro fiber solutions |
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| ||||
Capacity sale services |
|
|
|
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|
|
|
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|
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 33 |
| Table of Contents |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
| ||||
Telecom |
|
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| ||||
Technology services |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
|
| $ |
|
| $ | ( | ) |
|
|
|
| $ |
| |||
International termination services:
This service represents the international inbound traffic terminated in Pakistan via the 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. There is a postpaid billing invoicing cycle for such services. |
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 the 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 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 a connection and membership fee at the time of the setting up of the connection. Subscription revenue from Cable TV, internet over cable, cable connectivity and a channels subscription fee is recognized on provision of services. A 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.,
| 34 |
| Table of Contents |
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.
Technology services:
This revenue relates to the sale of CADNZ CRM Solution.
Deferred revenue was $
19. DIRECT OPERATING COSTS
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
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| 2023 |
|
| 2024 |
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| 2023 |
| ||||
Interconnect, settlement and other charges |
| $ |
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| $ |
|
| $ |
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| $ |
| ||||
Salaries, wages and benefits |
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Bandwidth and other PTCL charges |
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Power consumption and rent |
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Network maintenance and insurance |
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PTA fees |
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Cable license fee |
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Annual spectrum fee |
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Store and spares consumed |
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Fees and subscriptions |
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Content cost |
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Security services |
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Others |
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| ||||
|
| $ |
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| $ |
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| $ |
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| $ |
| ||||
| 35 |
| Table of Contents |
20. FINANCE COST
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
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| 2023 |
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| 2024 |
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| 2023 |
| ||||
Unwinding of discount on liabilities |
| $ |
|
| $ |
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| $ |
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| ||||
Interest on term finance certificates |
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Interest on long term loan |
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| ( | ) |
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Interest on short term borrowings |
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Finance charges on lease liabilities |
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Bank charges and commission |
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| ||||
|
| $ |
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| $ |
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| $ |
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| ||||
21. TAXATION
The provision (benefit) for income taxes for the nine months ended September 30, 2024 and 2023 consisted of the following:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
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| 2023 |
|
| 2024 |
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| 2023 |
| ||||
Current provision |
|
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| ||||
For the period |
| $ |
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| $ | ( | ) |
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| |||
Prior periods |
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Total current provision |
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| ( | ) |
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| |||
Deferred provision |
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| ||||
Total provision |
| $ |
|
| $ | ( | ) |
|
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| |||
| 36 |
| Table of Contents |
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 September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Current provision |
|
|
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|
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| ||||
Federal |
| $ |
|
|
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| ||||
State |
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Foreign |
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| ( | ) |
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| |||
Total current provision |
|
|
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| ( | ) |
|
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| |||
Deferred |
| $ |
|
|
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| ||||
State |
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Foreign |
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Total provision |
|
|
|
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| ( | ) |
|
|
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| |||
The components of the Company’s deferred income taxes as of September 30, 2024 and December 31, 2023 are as follows:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| Unaudited |
|
|
|
| ||
Asset for deferred taxation comprising temporary differences related to: |
|
|
| |||||
Unused tax losses |
| $ |
|
| $ |
| ||
Provision for doubtful debts |
|
|
|
|
|
| ||
Post employment benefits |
|
|
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|
| ||
Provision for stores and spares & stock-in-trade |
|
|
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| ||
Provision for doubtful advances and other receivables |
|
|
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|
| ||
|
|
|
|
|
|
| ||
Liability for deferred taxation comprising temporary differences on other liabilities |
|
| ( | ) |
|
| ( | ) |
Deferred tax asset |
| $ |
|
| $ |
| ||
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.
| 37 |
| Table of Contents |
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.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Worldcall Business Solutions (Private) Limited Expenses borne on behalf of associate |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Worldcall Business Solutions (Private) Limited Interest charges |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Worldcall Cable (Private) Limited Interest charges |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
ACME Telecom (Private) Limited Interest charges |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Worldcall Ride Hail (Private) Limited Expenses borne on behalf of associate |
| $ |
|
|
|
|
|
| $ |
|
|
|
|
| ||
Worldcall Ride Hail (Private) Limited Interest charges |
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| |||
Key management personnel Advances against expenses disbursed (adjusted) – net |
| $ |
|
| $ | ( | ) ) |
| $ |
|
| $ |
| |||
Balances (Due to) Due from Related Parties |
| September 30, 2024 |
|
| December 31, 2023 |
| ||
|
| (Unaudited) |
|
|
|
| ||
|
|
|
|
|
|
| ||
Worldcall Business Solutions (Private) Limited Other receivable |
| $ |
|
| $ |
| ||
Worldcall Cable (Private) Limited Other receivable |
| $ |
|
| $ |
| ||
AMB Management Consultants (Pvt.) Ltd Other (payable) receivable |
| $ | ( | ) |
| $ | ( | ) |
ACME Telecom (Private) Limited Other receivable |
| $ |
|
| $ |
| ||
Worldcall Ride Hail (Private) Limited Other receivable |
| $ |
|
| $ |
| ||
As on September 30, 2024 and December 31, 2023, the outstanding balance of amounts owed to key management personnel was approximately $
The Company owes approximately $
| 38 |
| Table of Contents |
23. PREFERRED SHARES
Last year, the Company acquired the remaining convertible preference shares (“CPS”) of WorldCall Telecom Limited of
24. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
| 39 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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”. 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/A filed with the SEC on June 28, 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.
All dollar amounts provided herein which are designated by a “$” are reported in U.S. dollars.
The following is a discussion of our consolidated financial condition and results of operations for the three and nine months ended September 30, 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 3 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on June 28, 2024.
| 40 |
| Table of Contents |
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” above in this section.
Certain capitalized terms used below but not otherwise defined, are defined in, and shall be read along with the meanings given to such terms in, the notes to the unaudited financial statements of the Company for the three and nine months ended September 30, 2024, above.
In addition, unless the context otherwise requires and for the purposes of this Report only:
| · | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| · | “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; |
| · | “Securities Act” refers to the Securities Act of 1933, as amended. |
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC. The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge at our website (www.globaltechcorporation.com) under “Investor” – “SEC Filings”, when such reports are available on the SEC’s website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company periodically provides other information for investors on its corporate website, www.pedevco.com. This includes press releases and other information about financial performance, information on corporate governance and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.
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.
Video revenue for the nine months ended September 30, 2024 was $0.17 million whereas the revenue in the corresponding period ended September 30, 2023 was $0.26 million, resulting in a decrease of $0.09 million. The decrease was 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.
| 41 |
| Table of Contents |
Broadband and Cable TV Operations
The Company has been investing in its ambition of providing affordable broadband connectivity across Pakistan as well as 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 megabits per second (Mbps), a blend of high definition (HD) resolution 200 + (Digital/ Analogue) channels in addition to a 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. We believe this is a major asset moving forward as access to subscriber concentration points is essential for GlobalTech’s future strategy.
For our FTTH network deployment, the 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 entered into business collaborations to aggressively pursue our FTTH service rollout across Pakistan. The FTTH initiative is not limited to the aforementioned areas, and 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 is expected to improve our margins. 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.
Revenue relating to broadband during the current nine months ended September 30, 2024 was $0.98 million, whereas in the last year’s corresponding period, revenue was $0.75 million, representing an increase of $0.23 million. The increase in revenue was mainly due to an increase in connections. 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 our existing service areas. Management is emphasizing converting all coaxial cable connections with FTTH and in time we expect that this 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 be a major revenue contributor for the Company and projects to be in the future as well. Subject to the availability of funds, the Company plans to extend its service to all of the 20 cities covered by its fiber optic network. 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, management is working on a customers’ loyalty program. An aggressive marketing strategy and on-field marketing activity have also been planned to achieve the desired objectives of new subscribers. This activity is being strongly supported through corporate marketing initiatives and exploiting digital social media platforms such as LinkedIn, Facebook, Instagram, and Twitter. A marketing campaign for FTTH is also being launched on our in-house cable network. Management also intends to facilitate easier customer payment options 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 the 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 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 the 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 includes cable TV and broadband data. Cable TV offerings also include 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 includes cable TV and broadband data. Cable TV offerings further include options to have analogue, digital or both of the services. Compared to FTTH, HFC offers a lower capacity broadband connectivity for the end-user. |
|
|
|
| · | Service 2c is connecting local resellers to the Company’s backbone where service offerings and packaging is done by the Company and the local loop operator only manages subscriber services for connectivity and network maintenance. The Company charges on individual packages on a pre-paid top-up basis. |
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| · | Service 2d provides backhaul and core network connectivity for telecom operators along with P2P links for corporate data connectivity. For telecom operators, charges are on a long term lease basis, with O&M charged on an annual basis for a specific length of fiber optic network deployment. For corporate, this includes one-time charges for network deployment with monthly O&M. |
|
|
|
| · | 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. |
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|
| · | 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.
We believe that 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, and due to regular power failures in Pakistan, HFC networks are frequently affected creating service interruptions for our HFC 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 convert from HTC to FTTH and are expecting a conversion rate of at least 50% of our customers. We expect 100% of our customers to eventually convert as we will over the next 36 months stop analog service and move to only FTTH service. We plan to continue using our HFC plant as a backup to our Fiber plant to continue to support our customers.
The table below gives an example of conversion in one of our areas.
Subscriber conversion from HFC to FTTH:
The Company deployed FTTH network in target areas of Lahore City (Wapda Town, Gulberg and Askari V) and achieved the following results:
Total subscribers HFC | = | 2,601 |
|
Converted to FTTH | = | 2,601 |
|
ARPU on HFC | = | USD 1.50 |
|
ARPU on FTTH | = | USD 7.55 |
|
Conversion ratio | = | 100% |
|
Incremental revenue | = | 110% |
|
As per the national broadband policy 2021 of Pakistan, we believe that Pakistan’s market has huge potential for broadband/data and the Government of Pakistan has set the following targets for broadband deployment:
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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 set forth by the Government of Pakistan, we expect to be able to leverage our existing fiber network thus allowing us to deploy in high-density areas with minimal capital expenditures using existing inventories of network equipment. However, the need for capital will increase over the years as our 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. If we are to raise capital by issuing shares, your shareholding will be diluted.
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.
Management is also planning to seek 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 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. Operations target voice traffic coming to Pakistan principally originating from the 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 the Company has been in operation since 2004 in this segment of operations.
International termination revenue is one of the Company’s major revenue streams, and such revenue increased by $5.15 million for the nine months ended September 30, 2024, compared to 2023, due to an increase in volume of international termination. The volume increase was on account of bulk traffic arrangements. Revenue during the nine months ended September 30, 2024 was $11.92 million compared with $6.77 million for the corresponding period of last year.
The Company escalated its engagement with its interconnect partners in Pakistan and abroad during the period to address the migration of voice business toward alternate platforms. The operating regime of charging on a per minute basis of voice communications is shifting toward a bulk billing strategy which addresses the recent decline in business by a significant increase in business volume at a lower margin.
Management is deliberating offering 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 acquisition of existing and new businesses having similar operations in different parts of the world, which include the Middle East, Europe, South Asia, and Africa, funding permitting. 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.
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Non-GAAP Financial Measures
We have included Adjusted EBITDA in this Report as a supplement to generally accepted accounting principles in the United States of America (“GAAP”) measures of performance to provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: Adjusted EBITDA does not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments; Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments. For example, although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements. Additionally, other companies in our industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure. You should not consider Adjusted EBITDA in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. The Company’s presentation of this measure should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of this non-GAAP measure to the most comparable GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view this non-GAAP measure in conjunction with the most directly comparable GAAP financial measure.
Adjusted EBITDA for the nine months ended September 30, 2024 was $0.65 million, whereas Adjusted EBITDA for the corresponding prior year’s period was $1.86 million. Net loss for the nine months ended September 30, 2024 was $3.11 million, and net loss for the nine months ended September 30, 2023 was $6.21 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). The increase in revenue was primarily due to the increase in volume of international termination business and technology services. The decrease in net loss was due to exchange loss recorded in the corresponding period of last year.
|
| Nine months ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net revenues |
| $ | 13,282,159 |
|
| $ | 7,483,286 |
|
Adjusted EBITDA |
| $ | 646,187 |
|
| $ | 1,857,667 |
|
Loss from Operations |
| $ | (1,483,537 | ) |
| $ | (4,759,994 | ) |
Set forth below is a presentation and reconciliation of our adjusted EBITDA for the nine months ended September 30, 2024 and 2023:
|
| Nine months ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
GAAP net loss |
|
| (3,108,591 | ) |
|
| (6,207,002 | ) |
Add (deduct) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 2,232,909 |
|
|
| 2,515,191 |
|
Finance cost |
|
| 1,431,785 |
|
|
| 1,370,552 |
|
Taxation |
|
| 193,269 |
|
|
| 76,456 |
|
Exchange loss |
|
| (103,184 | ) |
|
| 4,102,471 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
| $ | 646,187 |
|
| $ | 1,857,667 |
|
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Adjusted EBITDA is defined as net income attributable to GlobalTech Corporation shareholders plus net income attributable to non-controlling interest, less net interest expense, income taxes, depreciation and amortization, and other operating (income) expenses, net, such as exchange loss/(gain).
Adjusted EBITDA during the nine months ended September 30, 2024 was mainly impacted by the increase in international termination business and technology services provided during the period, whereas loss from operations during the nine months ended September 30, 2023 was impacted by the increase in cost.
During this period, the 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 are principally being utilized for solutions development more suited for future needs. The Company is focused on the development of products and services that it anticipates would be better suited for its future roadmap as a technology-centric solutions Company.
Results of Operations
Three Months Ended September 30, 2024, Compared to the Three Months Ended September 30, 2023
Net Revenue: Revenue for three months ended September 30, 2024 was $5.02 million, an increase of $2.82 million compared to the prior year quarter. This increase was primarily due to an increase in volume of international termination business and Technology Services provided during the quarter.
Gross Margin: Gross margin during the three months ended September 30, 2024 was US $ 0.37 million and $0.013 million compared to the prior year’s quarter. The increase in gross margin is due to an increase in traffic volume and technology services.
Direct operating costs: Direct operating costs during the three months ended September 30, 2024 were $4.65 million compared to $2.18 million for the quarter ended September 30, 2023, representing an increase of $2.47 million, compared to the prior year quarter. The increase was primarily due to an increase in interconnect cost, which is aligned with termination revenue.
Other operating costs: Other operating costs during the three months ended September 30, 2024 and 2023 were $0.7 million, compared to $0.64 million during the nine months ended September 30, 2023, an increase of $0.06 million for the quarter ended September 30, 2024.
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Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023
Net Revenue: Revenue is derived from telecom services, broadband and technology services. Telecom services-related revenue stood at $11.92 million during the nine months ended September 30, 2024, compared to $6.77 million during nine months ended September 30, 2023. This increase of approximately $5.15 million or 76% was primarily due to the increase in volume of international termination business. Broadband services generated revenue of $0.98 million during the nine months ended September 30, 2024, compared to $0.75 million during the nine months ended September 30, 2023. This increase of $0.23 million or 32% is due to an increase in connections. Technology services generated revenue of $0.40 million, which is a new stream of revenue started during the period.
Gross Margin: The Company recorded a gross margin of $0.90 million during the nine months ended September 30, 2024 compared to $0.52 million during the nine months ended September 30, 2023. LDI revenue increased due to an increase in traffic. The broadband revenue increased due to an increase in connections. Technology services revenue was added as a new stream during the period.
Direct operating costs: Direct operating costs stood at $12.38 million during the nine months ended September 30, 2024, compared to $6.97 million during the nine months ended September 30, 2023. The increase in direct operating costs is mainly due to interconnect cost, which is aligned with termination revenue.
Other operating costs: Other operating costs stood at $1.72 million during the nine months ended September 30, 2024 compared to $1.46 million during the nine months ended September 30, 2023. Operating costs remain practically the same during the periods.
Other income and expenses: The Company recorded other income of $1.69 million during the nine months ended September 30, 2024, compared to $2.81 million during the nine months ended September 30, 2023. Other expenses stood at $1.2 million during the nine months ended September 30, 2024, compared to other loss of $0.28 million during the nine months ended September 30, 2023, which was mainly due to currency devaluation.
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Updates on plans:
Broadband and Cable TV Operations:
The Company has started deployment of a 200,000 connection project for low-cost broadband connectivity in underserved areas. The roll-out areas are already covered by Company fiber optic Metro networks and are spread over twenty (20) cities across Pakistan. The roll-out is planned to complement our existing Fiber to the Home project for a more efficient utilization of IP bandwidth and we believe that this holds good potential for growth in this segment of operations. We plan to augment and expand our core network to handle additional bandwidth requirement and subscriber loads. An access network from the existing fiber optic deployment is also being expanded.
CADNZ:
The Company, in coordination with other partners, has finalized Go To Market (GTM) plans for its CADNZ product. CADNZ is a 360-degree Customer Relationship Management solution with integrated Customer Contact Center. Specifically tailored for the banking and financial sector, it provides a system automation interface for financial institutions for their digital lending platform needs. All aspects of non-core banking software would be covered by this application. We believe that this product has significant potential in the United States (USA) with small and mid-sized banks as its primary market. The product is modular and in the future can be tailored / customized for other possible markets in Europe, the UK and the Middle East. Client engagement has started and on successful sales the Company stands to gain revenues from technology assets. The Company continues its investments in software for commercial activation.
Technology Transformation:
The Company has started client engagement for its technology solutions. The engagement is focused on existing solutions with integration of recently matured technology tracks in AI and Big Data domains. Resources have been aligned for back-office operations out of Pakistan for a lower cost of development and product support. The Company plans to mature its client offering over the next three quarters with corresponding escalation in market engagement for sales.
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Liquidity and Capital Resources
We have significant amounts of debt. The principal amount of our debt as of September 30, 2024, was $6.45 million, consisting of $4.72 million of Term Finance Certificates. Long term and short-term borrowings were $1.095 million and $1.106 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 $4.56 million in the coming twelve months and we believe that sufficient funds to pay such amounts will be generated through operations, however rising interest rates by the United States Federal Reserve and the ensuing threat of global recession may result in lower revenues. In the future, we may need to refinance debt or raise funding through the sale of equity, which could cause dilution to existing shareholders.
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. We expect this continual deployment will result in additional revenues for the Company.
As to possible acquisitions and mergers, we actively review them against our objectives including, among other considerations, improving operational efficiency, achieving synergies, product development or technical capabilities of our business, and achieving appropriate return targets, and we may participate in mergers or acquisition in the future, to the extent we believe these possibilities present attractive opportunities, and funding permitting. 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 $3,435,015 as of September 30, 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 $2,669,725 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 $3,435,015 and $3,016,593 of cash and cash equivalents as of September 30, 2024, and 2023, respectively, which includes restricted cash of $2,669,725 and $2,212,810 that is not available for immediate ordinary business use.
Operating Activities: Net cash generated from operating activities increased during the nine months ended September 30, 2024, compared to the prior period, by $5.47 million, to cash generated of $0.66 million, compared to cash used of $4.81 million, respectively, primarily due to a decrease in net loss, mainly on account of an increase in LDI revenue.
Investing Activities: Net cash used in investing activities for the nine months ended September 30, 2024, and 2023 was $0.10 million and $0.05 million, respectively. The increase in cash used in investing activities was primarily due to the sale of property and equipment.
Financing Activities: Net cash used in financing activities was $0.45 million for the nine months ended September 30, 2024, compared to $0.07 million for the nine months ended, reflecting an increase of $0.38 million. The increase in cash used in financing activities was due to the increased repayment of long-term financing and loans due to directors.
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/A 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/A for the year ended December 31, 2023, filed with the SEC on June 28, 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 September 30, 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/A for the year ended December 31, 2023.
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
We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.
Management has also 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 December 31, 2023, 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 December 31, 2023, 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.
Management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. As of September 30, 2024, based on the evaluation of these disclosure controls and procedures, and in light of the material weakness we found in our internal controls over financial reporting as of December 31, 2023 (as described in greater detail above), our CEO and CFO have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
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Inherent Limitations over Internal Controls
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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 September 30, 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
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.
Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “Item 1. Legal Proceedings” of this Form 10-Q from, “Part I” - “Item 1. Financial Statements” in the Notes to Consolidated Financial Statements in “Note 17, Commitments and Contingencies”. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
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/A, 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/A 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
There have been no sales of unregistered securities during the quarter ended September 30, 2024, and from the period from October 1, 2024, to the filing date of this Report.
Use of Proceeds from Sale of Registered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliate Purchasers
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
Rule 10b5-1 Trading Plans. Our directors and executive officers may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act. During the quarter ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f)) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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Item 6. Exhibits
The following exhibits are filed herewith or incorporated by reference herein:
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101.INS |
| Inline XBRL Instance |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase |
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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
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.
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| GLOBALTECH CORPORATION |
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Dated: November 12, 2024 | By: | /s/ Dana Green |
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| Dana Green |
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| Chief Executive Officer and President (Principal Executive Officer) |
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Dated: November 12, 2024 | By: | /s/ Muhammad Azhar Saeed |
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Muhammad Azhar Saeed |
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| Chief Financial Officer |
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| (Principal Financial/Accounting Officer) |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dana Green, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of GlobalTech Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 12, 2024 | By: | /s/ Dana Green |
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| Dana Green |
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| Chief Executive Officer and President |
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| (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Muhammad Azhar Saeed, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of GlobalTech Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 12, 2024 | By: | /s/ Muhammad Azhar Saeed |
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| Muhammad Azhar Saeed |
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| Chief Financial Officer |
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| (Principal Financial/Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Based on my knowledge, I, Dana Green, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of GlobalTech Corporation. on Form 10-Q for the quarter ended September 30, 2024 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of GlobalTech Corporation.
| Dated: November 12, 2024 | By: | /s/ Dana Green |
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| Dana Green |
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| Chief Executive Officer and President |
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| (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Based on my knowledge, I, Muhammad Azhar Saeed, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of GlobalTech Corporation. on Form 10-Q for the quarter ended September 30, 2024 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of GlobalTech Corporation.
| Dated: November 12, 2024 | By: | /s/ Muhammad Azhar Saeed |
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| Muhammad Azhar Saeed |
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| Chief Financial Officer |
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| (Principal Financial/Accounting Officer) |
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