UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number
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(Exact Name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
Securities registered under Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered. |
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Common |
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N/A |
(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 under Section 12(g) of the Act:
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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.
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Large accelerated filer |
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Accelerated filer |
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☒ |
Smaller reporting company |
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Emerging Growth company |
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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
The aggregate market value of Common Stock held by non-affiliates of the Registrant was approximately N/A.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date:
Document Incorporated by Reference: None
We are a controlled company as 63.30% of our issued and outstanding shares are held by Babar Ali Syed.
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| 2 |
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| Table of Contents |
Forward-Looking Statements
Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “shall,” “should,” “could,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “forecasts,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology. Our operations involve risks and uncertainties, many of which are outside of our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.
Forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties, and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements as set forth under the heading “Risk Factors” in our Annual Report on Form 10-K/A filed with the SEC on September 20, 2023. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations, beliefs and views as of the date of this Quarterly Report on Form 10-Q concerning future developments and their potential effects on our business. Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We anticipate that subsequent events and developments may cause our assessments to change. Except as required by law, we are under no duty to update or revise any of such forward- looking statements, whether as a result of new information, future events, or otherwise, after the date of this Quarterly Report on Form 10-Q.
You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect. The forward-looking statements contained herein should not be relied upon as representing our assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
| 3 |
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| Table of Contents |
PART I. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements (Unaudited) |
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GLOBALTECH CORPORATION |
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CONSOLIDATED BALANCE SHEETS |
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AS OF September 30, 2023 and DECEMBER 31, 2022 |
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September 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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(Unaudited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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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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$ |
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$ |
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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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$ |
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$ |
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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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$ |
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$ |
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CONTINGENCIES AND COMMITMENTS |
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SHARE CAPITAL AND RESERVES |
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SHAREHOLDERS' EQUITY: |
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Preferred shares |
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Dividend on preferred shares |
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Common stock, $
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Accumulated other comprehensive loss |
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(
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(
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Accumulated deficit |
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(
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(
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Shareholders’ Equity Attributable to the Parent Company |
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(
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(
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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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$ |
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$ |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. |
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| 4 |
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| Table of Contents |
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GLOBALTECH CORPORATION |
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 |
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FOR THE THREE MONTHS ENDED |
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FOR THE NINE MONTHS ENDED |
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2023 |
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2022 |
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2023 |
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2022 |
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NET REVENUE |
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$ |
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$ |
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$ |
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$ |
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Direct operating costs |
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(
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(
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(
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(
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Other operating costs |
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(
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) |
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(
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(
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(
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Depreciation and amortization |
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(
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) |
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(
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) |
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(
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(
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Other income (expenses) |
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(
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) |
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(
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) |
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(
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) |
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(
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OPERATING (INCOME) LOSS |
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(
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) |
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(
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) |
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(
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(
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OTHER: |
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Other income – net |
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(
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(
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Finance cost |
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(
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(
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(
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(
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INCOME (LOSS) BEFORE TAXATION |
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(
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(
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) |
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(
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(
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Taxation |
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(
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(
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(
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NET INCOME (LOSS) |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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INCOME (LOSS) ATTRIBUTABLE TO: |
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Common shareholders of GlobalTech Corporation |
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(
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) |
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(
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) |
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(
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) |
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(
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Non – controlling interest (NCI) |
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(
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) |
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(
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) |
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(
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) |
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(
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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 income (loss) per common share: basic and diluted |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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) |
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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. |
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| 5 |
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| Table of Contents |
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GLOBALTECH CORPORATION |
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) |
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 |
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2023 |
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2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
(
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$ |
(
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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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Revenue from Indefeasible Right of Use ("IRU") agreement |
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(
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Liabilities written back |
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(
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Post employment benefits |
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Income on deposits, advances and savings accounts |
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(
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) |
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(
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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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Accounts receivables |
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(
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) |
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(
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) |
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Loans and advances |
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(
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) |
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Short term investment |
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Prepayments |
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(
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) |
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(
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) |
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Other receivables |
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(
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) |
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(
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Trade and other payables |
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(
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) |
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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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(
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) |
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(
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) |
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Other payables |
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(
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) |
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(
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) |
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Long term loans and other assets |
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(
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) |
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(
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) |
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Post employment benefits paid |
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(
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) |
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(
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) |
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Income on deposit and savings accounts |
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Lease rental payments |
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(
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) |
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(
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) |
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Finance cost paid |
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(
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) |
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(
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) |
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Income tax paid |
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(
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) |
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(
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) |
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Net cash used in operating activities |
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(
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) |
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(
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) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Payment on purchase of property and equipment - net |
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(
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) |
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(
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) |
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Net cash used in investing activities |
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(
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) |
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(
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) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Repayment of term finance certificates |
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(
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) |
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Repayment of long term financing |
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(
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) |
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Short term borrowings - net |
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(
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) |
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Net cash used in from financing activities |
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(
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) |
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(
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) |
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Net Decrease in Cash and Cash Equivalents |
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|
(
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) |
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(
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) |
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Cash and Cash Equivalents at the beginning of the Period |
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Exchange effect |
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Cash and Cash Equivalents at the End of the Period |
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$ |
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$ |
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SUPPLEMENTAL INFORMATION - Cash paid during the period for: |
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Income taxes |
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$ |
(
|
) |
|
$ |
(
|
) |
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Interest |
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$ |
(
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) |
|
$ |
(
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) |
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The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements. |
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| 6 |
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| Table of Contents |
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GLOBALTECH CORPORATION |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) |
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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 |
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FOR THE THREE MONTHS ENDED |
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FOR THE NINE MONTHS ENDED |
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2023 |
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2022 |
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2023 |
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2022 |
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NET INCOME/(LOSS) |
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$ |
(
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) |
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$ |
(
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) |
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$ |
(
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$ |
(
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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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(
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) |
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(
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Foreign currency translation adjustment |
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(
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) |
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Other Comprehensive income (loss) - net of tax |
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COMPREHENSIVE INCOME/( LOSS) |
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(
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) |
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(
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) |
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COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO: |
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Common shareholders of GlobalTech Corporation |
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$ |
(
|
) |
|
$ |
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$ |
(
|
) |
|
$ |
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|||
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Non - controlling interest (NCI) |
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(
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) |
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(
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) |
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|||
|
Comprehensive (Loss) income attributable to GLOBALTCH |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
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 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
|
|
|
Preferred Shares |
|
|
Dividend |
|
|
Common Shares |
|
|
|
|
|
Accumulated Other Comprehensive Income |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Description |
|
Shares |
|
|
Amount |
|
|
on Preferred Shares |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid in Capital |
|
|
Other Comprehensive Loss |
|
|
Translation Reserve |
|
|
Total |
|
|
Accumulated Deficit |
|
|
Non- Controlling Interest |
|
|
Total |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Balance as at January 01, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net loss attributable for the nine months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other comprehensive loss for the nine months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the nine months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
)) |
|
|
|
|
|
|
|
|
|
Translation and other adjustments for the nine months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 01, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net loss attributable for the nine months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other comprehensive loss for the nine months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the nine months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Elimination of preferred stock due to acquisition of CPS |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation and other adjustments for the nine months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
$ |
|
|
|
$ |
|
|
The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.
| 8 |
|
|
| Table of Contents |
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
|
|
|
Preferred Shares |
|
|
Dividend |
|
|
Common Shares |
|
|
|
|
|
Accumulated Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Description |
|
Shares |
|
|
Amount |
|
|
on Preferred Shares |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid in Capital |
|
|
Other Comprehensive Loss |
|
|
Translation Reserve |
|
|
Total |
|
|
Accumulated Deficit |
|
|
Non- Controlling Interest |
|
|
Total |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Balance as at July 01, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net loss attributable for the three months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other comprehensive loss for the three months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the three months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Translation and other adjustments for the three months ended September 30, 2022 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of July 01, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net loss attributable for the three months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other comprehensive loss for the three months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the three months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Translation and other adjustments for the three months ended September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Balance as at September 30, 2023 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
139,763,391 |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
$ |
|
|
|
$ |
|
|
The accompanying consolidated notes are an integral part of these unaudited consolidated financial statements.
| 9 |
|
|
| Table of Contents |
GLOBALTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)
1. ORGANIZATION AND BUSINESS
GlobalTech Corporation (“The Company”) is a Nevada Corporation, incorporated with name of Elko Broadband Inc (“EBI”) on December 12, 2017. The Company changed its name on March 23, 2022, to GlobalTech Corporation following a plan of reorganization as disclosed in a following paragraph, GlobalTech Corporation is a broadband company and provides broadband services.
A Plan and Agreement of Reorganization dated December 31, 2021, has been entered into by and between Elko Broadband Inc., (now as GlobalTech Corporation) and Worldcall Holding Inc.(“WHI”), wherein transfer of all assets, properties and business of WHI, in exchange of
However, if trading of shares of the common stock of the Company on OTC Markets is not commenced by December 31, 2022, or such later date as is agreed by WHI stockholders and EBI in writing, then such non-commencement of trading shall forthwith entitle the WHI stockholders to cancel, reverse and unwind the Overall Transaction, in consequence, whereof the
1.1. Legal Subsidiaries
1.1.1. WorldCall Telecom Limited
The Company - owned, directly and indirectly through shareholders in aggregate 55.2% of shares and control in WorldCall Telecom Limited (“WTL”).
WTL is a public limited Company, incorporated in Pakistan on March 15, 2001, under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). Its shares are quoted on Pakistan Stock Exchange. WTL commenced its operations on December 01, 2004, and is engaged in providing Wireless Local Loop (“WLL”) and Long Distance & International (“LDI”) services in Pakistan; re-broadcasting international/national satellite/terrestrial wireless and cable television and radio signals; interactive communication and to establish, maintain and operate the licensed telephony services. The Group has been licensed by Pakistan Telecommunication Authority (“PTA”) and Pakistan Electronic Media Regulatory Authority (“PEMRA”) for these purposes. WTL is domiciled in Pakistan and its registered office cum principal place of business is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore.
| 10 |
|
|
| Table of Contents |
1.1.2. WorldCall Services (Pvt) Limited
WorldCall Services (Private) Limited (“WSL”), a wholly owned subsidiary of the Company, was incorporated on October 05, 2009, as a private limited Company in Pakistan, under the Companies Ordinance 1984 (Repealed) now Companies Act 2017. The objects of WSL include, but not limited to carrying on and undertaking the business of providing channel placement services, payphone services and generating revenue from communication services. The registered office of WSL is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore, Pakistan.
1.1.3. Ferret Consulting - (FZC)
Ferret Consulting (FZC), a wholly owned subsidiary of the Company, is a limited liability company registered in Emirates of Ajman, UAE as a Free Zone Company, in accordance with the Free Zone laws and regulations enforced in the Emirates of Ajman, U.A.E. It was registered on 24 Aug 2016 and commenced operations thereon.
1.1.4. Rout 1 Digital (Pvt) Limited
Route 1 Digital is a private limited company, a wholly owned subsidiary of Worldcall Telecom Limited, incorporated under the Companies Ordinance 1984 (now Companies Act 2017) on December 21, 2016. The primary business is to carry out the business of all transport services, sharing motor vehicle transportation with another or others, and consultancy in the field of information technology, software development and all activities ancillary thereto. The registered office of the Company is situated at Plot # 112-113, Block S, Quaid -e Azam Industrial Estate, Kot Lakhpat, Lahore, Pakistan.
2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
Basis of Consolidation — We have prepared consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These financial statements include the operating results and financial condition of GlobalTech Corporation, its wholly-owned subsidiaries; WSL (acquired on November 2021), Ferret Consulting FZC (acquired on November 2021), its majority-owned subsidiary WTL and Rout 1 Digital (Pvt) Limited. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the consolidated financial statements for the fiscal year ended December 31, 2022, included in the Company’s year-end financial statements on Form 10-K/A filed with the Securities and Exchange Commission on September 21, 2023. Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on net earnings, financial position, or cash flows. The unaudited consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K/A. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine-months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
Going Concern –
The Company incurred a loss of $
Significant Accounting Policies:
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Revenue Recognition — We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration we expect to receive in exchange for those services. We enter contracts that can include various combinations of services, which are generally capable of being distinct and accounted for as separate performance obligations.
We derive revenue from six primary sources: (1) International Termination Services, (2) Indefeasible Right of Use (IRU) Services, (3) Cable TV and Internet Services, (4) Metro Fiber Solutions, (5) Capacity Sale Services, and (6) Advertisement Services. All our revenue arrangements are based on contracts with customers. Most of our contracts with customers contain single performance obligations, although certain contracts do contain multiple performance obligations where we perform more than one service for the same customer. We account for individual performance obligations separately if they are distinct within the context of the contract. For contracts where we provide multiple services such as where we perform multiple ancillary services, each service represents its own performance obligation. Selling or transaction prices are based on the contractual prices for each service at its stand-alone selling price. We act as the principal in all revenue transactions.
A five-step approach is applied in the recognition of revenue under ASC 606: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when we satisfy a performance obligation.
Payment of invoices is due as specified in the underlying customer agreement, typically advance payments to 30 days from the invoice date, which occurs on the date of transfer of control of the services to the customer. Since payment terms are less than a year, we have elected the practical expedient and do not assess whether a customer contract has a significant financing component. The Company’s revenue arrangements generally do not include a general right of refund for services provide.
| 11 |
|
|
| Table of Contents |
Direct Operating Costs — Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to client, annual PTA fees and other direct costs related to the Company’s services. Costs associated with the implementation of new clients are expensed as incurred.
Other Operating Costs — Other operating costs consist primarily of compensation and benefits, travel and advertising expenses and are expensed as incurred.
Business Combinations – Third Party — The Company accounts for third party business combinations under the provisions of ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. The fair value amount assigned to intangible assets is based on an exit price from a market participant’s viewpoint and utilizes data such as discounted cash flow analysis and replacement cost models. Critical estimates in valuing certain intangible assets include, but are not limited to, historical and projected client retention rates, expected future cash inflows and outflows, discount rates, and estimated useful lives of those intangible assets. ASC 805 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.
Business Combinations – Common Control — The Company accounts for common control business combinations under the provisions of ASC 805, Business Combinations, which requires business combinations under the common control method. 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. The financial statements reflect the assumption that the combining entities have been operating as a single economic entity throughout the period of common control. 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. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.
The Plan and Agreement of Reorganization (as disclosed in note 1) has been accounted for as a reverse acquisition where EBI is a legal acquirer (the accounting acquiree) and WHI; is a legal acquiree (the accounting acquirer). The fair value of WHI’s net assets was reliably measured using trading price of WTL Stock, which was $
In accordance with ASC 805-40, the fair value of the consideration effectively transferred has been calculated using the number of WHI’s shares that would have been issued to the shareholders of EBI on the acquisition date to give EBI’s shareholders an equivalent ownership interest in WHI as it has in the Company (WHI would had to issue
|
Cash |
|
$ |
|
|
|
Non-current assets (incl. tangible and intangible assets) |
|
|
|
|
|
Current liabilities (incl. trade and other payables) |
|
|
(
|
) |
|
|
|
$ |
|
|
The Company determined the fair value of the EBI’s assets acquired and liabilities assumed, as well as the valuation of the WHI’s shares to be issued to compute effective consideration. The Company used generally accepted valuation techniques and methodologies to arrive at the fair values disclosed above i.e., discounted cash flow and replacement cost method.
As per Guidance ASC 805-40-45-1, ASC 805-40-30-2, ASC 805-40-55-8 through ASC 805-40-55-10: As on December 31, 2021, following accounting treatment has been applied to reflect this reverse acquisition and also separately disclosed as Adjustments under business reorganization arrangement (note 1) in the consolidated statement of changes in equity on page F-7 of our annual report 10-K/A for the year ended December 31, 2022.
|
CR. Common stock |
|
|
|
|
$ |
|
|
|
|
CR. Bargain Purchase Gain |
|
|
|
|
$ |
|
|
|
|
DR. Net Assets of EBI |
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
This transaction resulted in a bargain purchase gain due to several factors including eventual listing of shares of common stock of the Company on NASDAQ in accordance with the applicable laws and regulations.
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.
| 12 |
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| Table of Contents |
Fair Value Measurements — ASC 820, Fair Value Measurement, requires the disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Company follows a fair value measurement hierarchy to measure financial instruments. The fair value of the Company’s financial instruments is measured using inputs from the three levels of the fair value hierarchy as follows:
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets.
Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.
These financial instruments are subject to fair value adjustments only in certain circumstances and include cash, restricted cash, accounts receivable, accounts payable and accrued expenses, borrowings under term loans and line of credit, and other payables. Due to the short-term nature of these financial instruments and that the borrowings bear interest at prevailing market rates, the carrying value approximates the fair value.
Accounts Receivable - net — Accounts receivable are presented on the consolidated balance sheet net of an allowance for credit losses, which is established based on reviews of the accounts receivable aging, an assessment of the customer’s history and current creditworthiness, and the probability of collection. The Company routinely reviews its receivables and makes provisions for the credit losses utilizing the Current Expected Credit Losses model (“CECL”). The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. However, those provisions are estimates and actual results may materially differ from those estimates. Trade receivables are deemed uncollectible and are removed from accounts receivable and the allowance for credit losses when collection efforts have been exhausted.
Property, Plant, and Equipment — Tangible assets classified as property, plant, and equipment are stated at cost less accumulated depreciation and any identified impairment loss. Additions are stated at cost less accumulated depreciation and any identified impairment loss. Cost in relation to self-constructed assets includes the direct cost of material, labor, and other allocable expenses.
Depreciation on owned assets is charged to the statement of profit or loss account on the straight-line method to write off the cost or revalued amount of an asset over its estimated useful life.
Depreciation on additions is charged from the month in which the assets are available for use while no depreciation is charged in the month in which the assets are disposed of.
The depreciation method, residual value, and useful lives of assets are reviewed at least at each financial year end and adjusted if the impact on depreciation is significant.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
The gain or loss on disposal of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognized as an income or expense.
Loans and advances — Loans to employees are provided as per the Company’s policies and are secured against their gratuity and are adjusted against the provision of adjustments.
Advances to vendors are provided for provision of goods and services and they are secured either by a security deposit or a legally enforceable right to recover.
Loans and advances are carried at fair value through profit or loss and are initially recognized at fair value and transaction costs are expensed in the statement of profit or loss account. The fair value is determined using inputs observable in the market, which are classified as level 2 in the fair value hierarchy. They are considered a non-recurring fair value measurement and are measured at fair value. The fair value measurement considers market interest rates and the creditworthiness of the borrowers or other parties.
| 13 |
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| Table of Contents |
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, 2023 and 2022.
Leases — We account for lease arrangements in accordance with ASC 842, Leases. An arrangement is determined as a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
Earnings Per Share — The company calculates earnings per share in accordance with Accounting Standards Codification (ASC) Topic 260, "Earnings Per Share." Basic EPS is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts that are potentially dilutive were exercised or converted into common stock.
The company presents both basic and diluted EPS on the face of the income statement. The company also provides a reconciliation of the numerator and denominator used in the EPS calculations in the footnotes to the financial statements, in case of any change occurred during the year.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
| 14 |
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| Table of Contents |
Foreign Currency Translation
— The financial statements of the Company’s foreign subsidiaries are translated from their functional currency into U.S. dollars, the Company’s functional currency. All foreign currency assets and liabilities are translated at the period-end exchange rate, and all revenue and expenses are translated at average exchange rates. The effects of translating the financial statements of the foreign subsidiaries into U.S. dollars are reported as a cumulative translation adjustment, a separate component of accumulated other comprehensive income/(loss) in the consolidated statements of shareholders’ equity. Foreign currency transaction gains/losses are reported as a component of other income–net in the consolidated statements of operations. The US$/PKR exchange rates used for the translation of PKR-denominated assets and liabilities are Rs.
Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include but are not limited to: (1) impairment of long-lived assets, (2) depreciable lives of assets, (3) allowance for doubtful accounts, (4) fair value of identifiable tangible and intangible assets, including determination of expected useful life, (5) estimating lease terms and incremental borrowing rates. Actual results could significantly differ from those estimates.
Recent Accounting Pronouncements — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently adopted and recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in Accounting Standards Update (“ASU”) 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It will apply to all entities. For trade receivables, loans, and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. This may result in the earlier recognition of credit losses. In November, the FASB issued ASU No. 2019-10, which delays this standard’s effective date for SEC smaller reporting companies to the fiscal years interim periods beginning on or after December 15, 2022. The Company adopted the new guidance January 1, 2023 and the adoption of this new guidance had no material impact of the consolidated financial statements. As per the new guidance accounts receivable are presented on the consolidated balance sheet net of an allowance for credit losses, which is established based on reviews of the accounts receivable aging, an assessment of the customer’s history and current creditworthiness, and the probability of collection. 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.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments are not required to be implemented until after 2022 for public entities. The Company adopted this standard on January 1, 2023 and there was no impact on the consolidated financial statements as a result of the adoption of this standard.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments are effective for public business entities for fiscal years beginning after December 15, 2022. The Company adopted this update on January 1, 2023. The Company determined that this update did not have a significant impact on the consolidated financial statements.
| 15 |
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| Table of Contents |
3. ACQUISITIONS
|
|
|
Ferret |
|
|
WSL |
|
||
|
Date of acquisition(s) |
|
30-Nov-2021 |
|
|
30-Nov-2021 |
|
||
|
Property and equipment |
|
|
|
|
|
|
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Long term loans |
|
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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 |
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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 on November 30, 2021, WHI entered into its
As on November 30, 2021, WHI entered into its
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.
| 16 |
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| Table of Contents |
4. CASH AND BANK
|
|
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September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Cash at bank |
|
|
|
|
|
|
||
|
Current accounts |
|
$ |
|
|
|
$ |
|
|
|
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cash in hand |
|
|
|
|
|
|
|
|
|
Pay orders in hand |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
5. RESTRICTED CASH
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Deposit in escrow account |
|
$ |
|
|
|
$ |
|
|
|
Margin and other deposits |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Deposits in escrow account : It represents balance in savings accounts accumulated in Escrow Account. The telecom operators challenged the legality of Access Promotion Contribution (APC) for Universal Service Fund (USF), as levied by Pakistan Telecommunication Authority ("PTA") in 2009, and the dispute was finally decided by the honorable Supreme Court in December 2015. During pendency of the court proceedings, International Clearing House (ICH) agreement was signed in 2012, whereby it was decided that regular contributions for APC, based on each operator’s share under the ICH agreement, shall be made by LDI operators in an Escrow Account.
The formation of ICH was declared anti-competitive by the Competition Commission of Pakistan, and resultantly PTA issued a policy directive in June 2014 terminating ICH arrangement. Some operators challenged this termination and obtained interim relief from Sindh High Court and Lahore High Court. However, Supreme Court adjudicated the matter in February 2015 in favor of termination of ICH, and pursuant upon this, PTA issued its notification of termination of ICH arrangement. As of now, the mechanism of the adjustment of the amount available in Escrow Account remains to be finalized.
Margin and other deposits include deposits placed with banks against various guarantees. This amount also includes approximately $
6. ACCOUNTS RECEIVABLE – NET
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Considered good – unsecured |
|
$ |
|
|
|
$ |
|
|
|
Considered doubtful – unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Provision for expected credit loss |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
$ |
|
|
|
$ |
|
|
Provision for expected credit losses has been approximately $
| 17 |
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| Table of Contents |
7. PROPERTY, PLANT AND EQUIPMENT
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Operating fixed assets |
|
$ |
|
|
|
$ |
|
|
|
Capital work-in-progress |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Operating fixed assets |
|
|
|
|
|
|
|
|
|
Building on freehold land |
|
$ |
|
|
|
$ |
|
|
|
Freehold land |
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|
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|
|
|
Leasehold improvements |
|
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Plant and equipment |
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Office equipment |
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Vehicles |
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Computers |
|
|
|
|
|
|
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|
|
Furniture and fixtures |
|
|
|
|
|
|
|
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|
Laboratory and other equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
$ |
|
|
|
$ |
|
|
Useful life of operating fixed assets is ranging between
|
Detail of additions |
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
|
|
|
Plant and equipment |
|
|
|
|
|
Office equipment |
|
|
|
|
|
Furniture and fixtures |
|
|
|
|
|
Computers |
|
|
|
|
|
|
|
$ |
|
|
| 18 |
|
|
| 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, 2023 and December 31, 2022. The Company does not have any finance leases.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates. Our lease terms include options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of less than 12 months are not recorded in the consolidated balance sheets. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the lease and non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate.
If a lease is modified after the effective date, the operating lease ROU asset and liability is re-measured using the current incremental borrowing rate. We review our incremental borrowing rate for our portfolio of leases on a quarterly basis. Lease expense is included in direct operating costs and general and administrative expenses in the consolidated statements of operations based on the nature of the expense.
Break down of operating lease expense:
|
|
|
Nine Months Ended |
|
|||||
|
|
|
September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Operating lease cost |
|
$ |
|
|
|
$ |
|
|
|
Short term lease cost |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Supplemental balance sheet information related to leases was as follows:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(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 |
|
|
|
% |
|
|
|
% |
| 19 |
|
|
| Table of Contents |
Supplemental cash flow and other information related to leases was as follows:
|
|
|
Nine Months Ended |
|
|||||
|
|
|
September, 30 |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
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, |
|
|
|
|
|
2023 (nine months) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease payments |
|
$ |
|
|
|
Less: imputed interest |
|
$ |
(
|
) |
|
Total lease obligations |
|
$ |
|
|
|
Less: current obligations |
|
$ |
|
|
|
Long-term lease obligations |
|
$ |
|
|
| 20 |
|
|
| Table of Contents |
9. INTANGIBLE ASSETS – NET
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Licenses |
|
$ |
|
|
|
$ |
|
|
|
Patents and copyrights |
|
|
|
|
|
|
|
|
|
IRU - media cost |
|
|
|
|
|
|
|
|
|
Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization - net |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
$ |
|
|
|
$ |
|
|
Useful life of intangible assets is ranging between
As of September 30, 2023, future amortization expense scheduled to be expensed is as follows:
|
Year ending December 31, |
|
|
|
|
|
2023 (three months) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2026 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
$ |
|
|
| 21 |
|
|
| Table of Contents |
10. TRADE AND OTHER PAYABLES
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(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: This includes payable to 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, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Term finance certificates |
|
$ |
|
|
|
$ |
|
|
|
Interest payable on TFCs |
|
|
|
|
|
|
|
|
|
Long term financing |
|
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Details of the current portion of non -current liabilities are provided in their respective notes.
12. ACCRUED INTEREST
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Short term borrowings |
|
$ |
|
|
|
$ |
|
|
|
Term finance certificates |
|
|
|
|
|
|
|
|
|
Long term financing |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
| 22 |
|
|
| Table of Contents |
13. SHORT TERM BORROWINGS
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Line of credit facility -commercial banks |
|
$ |
|
|
|
$ |
|
|
|
Line of credit facility - others |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Line of credit facility – commercial banks:
During the year ended 31 December 2022, Company restructured one of its line of credit facility with Askari Bank Limited amounting $
During the quarter the credit facility available from Standard Chartered Bank Limited was transferred as a result of settlement agreement from short term running finance (RF) facility to Term Loan Facility as on August 09, 2023.
This credit facility with commercial banks are secured against first pair passu hypothecation charge on all present and future current and fixed assets excluding building, Wireless Local Loop ("WLL")/Long Distance and International ("LDI") receivables, first joint pari passu hypothecation charge over all present and future current and fixed assets of the Company with security margin over the facility amount, pledge of shares of listed companies in Central Depository Company ("CDC") account of the Company, lien over cash deposit of $0.152 million first exclusive assignment of all present and future receivables of LDI business arm of the Company, collection accounts with Bank for routing of LDI receivables, counter guarantee of the Company, equitable mortgage over the property of office # 302, 303, 304, 3rd Floor, the Plaza on Plot # G-7, Block-9, KDA Scheme # 5, Kehkashan Clifton, Karachi and equitable mortgage over the property of office # 07, 08, 09 situated on 1st Floor, Ali Tower, MM Alam Road, Gulberg III.
Line of credit facility – others:
This represents various interest bearing and interest free loans from different parties.
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Loan from other parties |
|
$ |
|
|
|
$ |
|
|
|
Loan from related party * |
|
|
|
|
|
|
|
|
|
Loan from Elahi Group of Companies |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
* Loan from related party:
This represents payable to AMB Management Consultants (Pvt.) Ltd (AMB) (related party) against short term borrowings, which is due to payments made by AMB on behalf of the Company.
| 23 |
|
|
| 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, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|||
|
HTS Tel Communication |
|
$ |
|
|
|
$ |
|
|
|
TLT Communication |
|
|
|
|
|
|
|
|
|
Wisdom Information Technology Solution |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
14. TERM FINANCE CERTIFICATES (TFCs)
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Opening balance |
|
$ |
|
|
|
$ |
|
|
|
Repayments |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
Current portion |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
Add: Deferred markup |
|
|
|
|
|
|
|
|
|
Exchange adjustment |
|
|
(
|
) |
|
|
(
|
) |
|
Closing balance |
|
$ |
|
|
|
$ |
|
|
Term finance certificates (TFCs) have a face value of $
IGI Holding Limited (previously IGI Investment Bank Limited) is the Trustee (herein referred to as the Trustee) under the Trust Deed.
The liability of these TFCs has been rescheduled in December 2012 and then on April 03, 2015. During the year ended 31 December 2018, third rescheduling of these TFCs was successfully executed through signing of the Third Supplemental Trust Deed between the Trustees and the Company.
In accordance with the 3rd Supplemental Trust Deed executed during the year ended 31 December 2018, the outstanding principal is repayable by way of quarterly staggered instalments with downward revision in interest of
| 24 |
|
|
| Table of Contents |
The other main terms included appointment of one representative as a nominee director nominated by the Trustee which has been complied with. Further,
The Company has not paid due quarterly installments of June 2019 to September 2023 amounting USD
In the year 2021,
These TFCs are secured against first pair passu charge over the Company's present and future fixed assets including equipment, plant and machinery, fixtures excluding land and building with 25% margin in addition to all rights, benefits, claims and interests procured by the Company under:
|
|
A. |
Long Distance and International ("LDI") and Wireless Local Loop ("WLL") license issued by PTA to the Company; and |
|
|
B. |
Assigned frequency spectrum as per deed of assignment. |
| 25 |
|
|
| Table of Contents |
15. LONG TERM FINANCING – SECURED
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Allied Bank Limited |
|
|
|
|
|
$ |
|
|
|
Bank Islami Limited |
|
|
|
|
|
|
|
|
|
Askari Bank Limited |
|
|
|
|
|
|
|
|
|
Standard Chartered Bank Limited |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Allied Bank Limited:
This represents balance transferred as a result of restructuring of short-term running finance (RF) facility to Term Loan Facility and subsequently amended on 8
th
October 2020 and 30
th
September 2021. Principal will be repaid in 37 stepped up monthly instalments starting from August 2021 till August 2024. Interest will be accrued and will be serviced in 12 equal monthly instalments, starting from September 20, 2024.
Bank Islami Limited:
This represents balance transferred as a result of restructuring of short-term running finance (RF) facility to Term Loan Facility on 12th January 2021. Principal will be repaid in 29 installments starting from Feb 2022 till May 2026. Interest will be accrued and will be serviced in 24 equal monthly instalments, starting from July 01, 2024.
Askari Bank Limited: This represents balance transferred as a result of settlement agreement from short term running finance (RF) facility to Term Loan Facility as on November 02, 2022. Principal will be repaid in 48 installments starting from Nov 2022 till Oct 2026. Markup outstanding after effective discounts / waivers as per settlement agreement and markup to be accrued will be serviced in 36 monthly installments, starting from Nov 2024.
| 26 |
|
|
| Table of Contents |
Standard Chartered Bank Limited: 'This represents balance transferred from short term borrowings (Note no 13) as a result of settlement agreement from short term running finance (RF) facility to Term Loan Facility as on August 09, 2023.
16. LICENSE FEE PAYABLE
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(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 ("Ministry") through its letter dated August 30, 2011, allowed the operators, the staggering for settlement of Access Promotion Contribution ("APC") and Initial Spectrum Fee ("ISF") dues and required PTA to submit an installment plan for this purpose after consultations with the operators. In respect of an appeal filed by the Company, IHC took notice of the Ministry's letter and directed PTA through its order dated January 20, 2015, to expeditiously proceed with the preparation and submission of the said installment plan. As of this date, no such installment plan has been submitted by PTA.
PTA has withdrawn the frequencies 3.5 GHz, 479 MHz, 450 MHz, and 1900 MHz. PTA in haste and unilaterally has withdrawn 3.5 GHz and 479 MHz frequencies which have already been paid in full till 2024. Through said decision PTA has also withdrawn 1900 MHz frequency spectrum which was already withdrawn by PTA/FAB in 2015 (11th year) until which the spectrum is fully paid on the basis of actual period of usage by the Company, The WLL License provides for such eventuality that when frequency spectrum is withdrawn, the licensee is to be compensated for the balance life of the frequency spectrum, therefore, after withdrawal of spectrum, there is no outstanding amount to be paid related to 1900 MHz frequency spectrum.
As a consequence of above, during last year the outstanding liability for 1900 MHz was reduced to zero on the basis that 1900 MHz frequency had been fully paid for until 2015 (11th year). Similarly, liability for 450MHz frequency spectrum was reduced on pro-rata after withdrawal. Owing to these circumstances, the management does not expect the liability to materialize fully in the near future.
17. CONTINGENCIES AND COMMITMENTS
Billing disputes with Pakistan Telecommunication Company Limited (“PTCL”)
WHI and its subsidiaries (“The Group”) has a
| 27 |
|
|
| Table of Contents |
Disputes with Pakistan Telecommunication Authority (“PTA”)
WHI and its subsidiaries (“The Group”) has filed a suit before Civil Court, Lahore, Pakistan on December 15, 2016 in which it has sought restraining order against PTA demands of regulatory and other dues and claimed set off from damages / compensation claim of the Group on account of auction of preoccupied frequency spectrum. The Group has raised a claim of approximately $
During the year 2016, PTA again demanded immediate payment of the principal amount of APC amounting to approximately $6.11 million along with default surcharge thereon amounting to approximately $
PTA has raised demand amounting to approximately $
The Company maintains that PTA has allegedly issued an arbitrary order for recovery of annual radio frequency spectrum fee for the year ended 2013 along with late payment charges amounting in total to approximately $0.19 million. The Group has assailed the order before Honorable Lahore High Court on June 28, 2016 on the ground that officers of PTA could not issue such an order as they had not issued the show cause notice. The Honorable High Court has allowed the petition and remanded the case to PTA for decision afresh. In another suit filed by the Company before Honorable Lahore High Court, PTA has also demanded applicable late payment charges on impugned non-payment of annual radio spectrum fee. The question of law has been resolved by the Honorable High Court on March 21, 2018 and it was held that PTA’s decision was appealable before PTA. Same was also upheld by the Honorable Supreme Court on May 17, 2018. The management has filed appeals before PTA and the appeal was decided against the Group. Subsequent to year end appeal against PTA’s order has been filled before the next judicial forum on January 12, 2021. Management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements for late payment charges.
Moreover, the Group is confident that incidental liability, if any, will be set off by way of a claim filed against PTA.
The Group has filed a suit before the High Court of Sindh on July 2, 2011 for declaration, injunction and recovery of approximately $
| 28 |
|
|
| Table of Contents |
The said restraining order was dismissed by the learned single judge through a consolidated order dated July 27, 2018. The said order has been challenged by the Group before the Divisional Bench of the High Court on August 13, 2018 in High Court Appeal No. 222 of 2018. The management is hopeful that its viewpoint shall be upheld; thus no provision has been incorporated in these financial statements.
PTA has raised demand amounting to approximately $
PTA has filed recovery proceedings against the Group before the District Collector / District Officer Revenue, Lahore for an amount approximately of $
The Group has filed an appeal with Islamabad High Court on January 12, 2021 against said decision of PTA on similar lines as explained above and the Group’s management and legal advisor feels that there are strong grounds to defend the Group’s stance and that the principal amount and late payment charges determined unilaterally by PTA will not materialize, hence, no provision has been made in these financial statements.
PTA has demanded amounts of annual license fee (ALF) relating to Non-Voice Communication Network Services (NVCNS) through various demand notices. PTA has filed recovery proceedings against the Group before the District Collector / Deputy Commissioner, Lahore for an amount of
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.
PTA has issued show cause notice to the Group with the direction to pay annual regulatory dues for the years ended 2011, 2012, 2013 and 2014 cumulative amount of approximately $
| 29 |
|
|
| 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 $
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 $
| 30 |
|
|
| Table of Contents |
In computer balloting for total audit u/s 177 of the ITO, 2001, the Group was selected for total audit proceedings for the tax year 2014 and the same has been completed with the issuance of order under section 122(4) of Income Tax Ordinance, 2001 creating a demand of approximately $
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 show cause notice allegedly demanding approximately $
Other matters
One of the Group’s vendor has filed the suit for recovery on July 12, 2018 before the Civil Court, Lahore, Pakistan of certain moneys alleged to have not been paid by the Group under its agreements with the vendor. The principal claim is approximately $0.06 million however the claim is inflated to $
| 31 |
|
|
| Table of Contents |
One of the Group’s vendor has filed petition on November 21, 2014 before LHC. The vendor has claim of approximately $
One of Group’s vendor and its allied international identities (referred to as vendors) filed winding up petition dated October 16, 2017, before LHC and claim
The Group acquired the Indefeasible Right to Use (“IRU”) of media and related Operations and Maintenance Services (“O&M”) from one of the Group’s vendors through an agreement entered in August 2011. An agreement between the parties was reached in April 2015 for the payment against O&M services whereby it was decided that monthly payments in respect of O&M will be made by the Group and other deliverables under the IRU agreement shall be mutually agreed by June 30, 2016. However, the vendor illegally and violating the terms of the Agreement disconnected its services to the Group and filed a Civil Suit before the Sindh High Court in October 2016 for recovery of dues amounting to $
The management believes that vendor’s claim is invalid since it relates to the un-utilized future period and for the media which has never been provisioned as required under the Agreement and the vendor is/was under contractual obligation to provide (media) to the Group. That, a net sum of approximately $
Under these circumstances, the Group under the express contractual rights have claimed the amounts pertaining to (i) media which has yet not been delivered, and (ii) un-utilized future period on a pro-rata basis, as required under the terms and conditions of the Agreement. Moreover, the Vendor is also liable to make payments to the Group on account of different services received from the Group. The Group has filed an application before SHC in January 2017 under section 34 of the Arbitration Act, 1940 to refer the matter to Arbitrator as per the dispute resolution mechanism provided in the agreement dated 2011.
During 2019, the supplier has signed an MoU with the Group undertaking to withdraw all legal cases which has completed in August 2022 and both parties have withdrawn their respective cases.
A total of cases 30 are filed against the Group involving Regulatory, Employees, Landlords and Subscribers having aggregate claim of all cases amounting to approximately $
Contingency relating to the Plan and Agreement of Reorganization
As per ASC 450, the Company has determined that it is not possible to reasonably estimate the right of WHI shareholders to return the shares issued in the Plan and Agreement of Reorganization outlined in note 1 of these consolidated financial statements. However, the Company has received a CUSIP number and is currently in the process of applying for a trading symbol with the Financial Industry Regulatory Authority (“FINRA”). Management is confident that trading on OTC markets will be possible once a trading symbol is obtained.
| 32 |
|
|
| Table of Contents |
18. NET REVENUE
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Telecom services |
|
$ |
|
|
|
$ |
|
|
|
Broadband services |
|
|
|
|
|
|
|
|
|
Other services |
|
|
|
|
|
|
|
|
|
Gross Revenue |
|
|
|
|
|
|
|
|
|
Less: Discounts |
|
|
(
|
) |
|
|
(
|
) |
|
Less: Sales tax |
|
|
(
|
) |
|
|
(
|
) |
|
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 six primary sources: (1) International Termination Services, (2) Indefeasible Right of Use (IRU), (3) Cable TV and Internet Services, (4) Metro Fiber Solutions, (5) Capacity Sale Services and (6) Advertisement Services.
The following table represents a disaggregation of revenue for the nine months ended September 30, 2023 and 2022:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Telecom Services: |
|
|
|
|
|
|
||
|
International termination services |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Broadband Services: |
|
|
|
|
|
|
|
|
|
IRU services |
|
|
|
|
|
|
|
|
|
Cable TV and internet services |
|
|
|
|
|
|
|
|
|
Metro fibre solutions |
|
|
|
|
|
|
|
|
|
Capacity sale services |
|
|
|
|
|
|
|
|
|
Advertisement services |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
International termination services:
This service represents the international inbound traffic terminated in Pakistan via Company’s network to the local mobile network operators such as Mobilink, Zong, Telenor and Ufone etc. Revenue from terminating minutes is recognized at the time the call is made over the network of the Company. Revenue from terminating minutes is recognized at the time the call is made over the network of the Company. There is a postpaid billing invoicing cycle for such services.
| 33 |
|
|
| Table of Contents |
Indefeasible Right of Use (IRU) services:
It is a distinct performance obligation whereby the Company enters into a contractual agreement to grant Indefeasible Right of Use (IRU) of dark fiber up to 20 years or more. Revenue from IRU services is recognized at point in time, when the asset is transferred, and a customer obtains control over it.
Cable TV and internet services:
Cable television is a video delivery service provided by the Company to retail and commercial subscribers via a coaxial cable and fiber optics, whereas Internet service is the delivery of data service provided by the Company to the subscribers via a coaxial cable and fiber optics. The Company is providing Fiber to the Home (“FTTH”) services which is not a distinct performance obligation, but rather a component of a connectivity services. The Company charges connection and membership fee at the time of setting up of connection. Subscription revenue from Cable TV, internet over cable, cable connectivity and channels subscription fee is recognized on provision of services. Connection and membership fee is recognized as revenue when future services are provided. Such fee is paid by the customer at the time of the sale of the connection, and it entitles the customer to access the cable TV and internet services provided by the company. The Company follows an advance billing invoicing cycle for such services.
Metro fiber solutions:
This revenue stream represents point to point (P2P) connectivity, the latest Dark Fiber internet technology to its high-end large scale multinational companies, IT companies and leading educational institutions in major cities of Pakistan. Dark Fiber refers to fiber optic networks with no service or traffic running on the fiber strands. Unlike managed fiber services, Dark Fiber gives the maximum level of control to businesses, allowing them to use their preferred protocol and manage and maintain their own equipment. Dark Fiber has the capability to offer near limitless capacity, as well as providing the assurance of dedicated connectivity. It can be termed as a fiber corridor offering Committed information rate (CIR), fiber and data services, making it an excellent choice for organizations who require a dedicated, high capacity, secure service. Revenue from metro fiber solutions is recognized at point in time, when the asset is transferred, and a customer obtains control over it.
Capacity sale services:
These are the services arrangements whereby the Company enters into a contractual agreement to provide a portion of the capacity of fiber, wherein the rights are given to the customers for a longer period i.e., 20 years or more. Revenue from capacity sale services is recognized at point in time, when the asset is transferred, and a customer obtains control over it.
Advertisement services:
This revenue relates to the commercials of the different businesses, which are aired on the Company’s cable TV network. The Company offers advertisement to corporate, SME and retail customers on its in-house entertainment channels. There is vast range of advertising packages tailor-made and customized according to specific client requirements at high economical rates. Clients can opt for multiple modes of advertising like: Multiple Scroll, Multiple Logo, L-Shape, Time-checks, TVC, Documentary and Channel Branding. Advertisement income is recognized based on spots run when commercials are aired on the network. The Company follows a postpaid billing invoicing cycle for such services.
| 34 |
|
|
| Table of Contents |
Deferred revenue was $
19. DIRECT OPERATING COSTS
|
|
|
Nine Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Interconnect, settlement and other charges |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Salaries, wages and benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bandwidth and other PTCL charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power consumption and rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network maintenance and insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PTA fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable license fee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual spectrum fee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores and spares consumed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Metro fiber cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Fees and subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Content cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Security services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
20. FINANCE COST
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Unwinding of discount on liabilities |
|
$ |
|
|
|
$ |
|
|
|
Interest on term finance certificates |
|
|
|
|
|
|
|
|
|
Interest on long term loan |
|
|
|
|
|
|
|
|
|
Interest on short term borrowings |
|
|
|
|
|
|
|
|
|
Finance charges on lease liabilities |
|
|
|
|
|
|
|
|
|
Bank charges and commission |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
| 35 |
|
|
| Table of Contents |
21. TAXATION
The provision (benefit) for income taxes for the nine months ended September 30, 2023 and 2022 consisted of the following:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Current provision |
|
|
|
|
|
|
||
|
For the period |
|
$ |
|
|
|
$ |
|
|
|
Prior periods |
|
|
|
|
|
|
|
|
|
Total current provision |
|
|
|
|
|
|
|
|
|
Deferred provision |
|
|
|
|
|
|
|
|
|
Total provision |
|
$ |
|
|
|
$ |
|
|
The provision for current taxation represents minimum / final tax under the provisions of the Income Tax Ordinance, 2001 (ITO), as applicable in Pakistan.
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Current provision |
|
|
|
|
|
|
||
|
Federal |
|
$ |
|
|
|
$ |
|
|
|
State |
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
Total current provision |
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
|
|
|
|
State |
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
Total provision |
|
$ |
|
|
|
$ |
|
|
The components of the Company’s deferred income taxes as of September 30, 2023 and December 31, 2022 are as follows:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
Asset for deferred taxation comprising temporary differences related to: |
|
|
|
|||||
|
Unused tax losses |
|
$ |
|
|
|
$ |
|
|
|
Provision for doubtful debts |
|
|
|
|
|
|
|
|
|
Post employment benefits |
|
|
|
|
|
|
|
|
|
Provision for stores and spares & stock-in-trade |
|
|
|
|
|
|
|
|
|
Provision for doubtful advances and other receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for deferred taxation comprising temporary differences on other liabilities |
|
|
(
|
) |
|
|
(
|
) |
|
Exchange translation adjustment |
|
|
(
|
) |
|
|
(
|
) |
|
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.
| 36 |
|
|
| 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.
|
Transactions During the Year |
|
Nine Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
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 Interest charges |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Key management personnel Advances against expenses disbursed (adjusted) - net |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Balances (Due to) Due from Related Parties |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
Worldcall Business Solutions (Private) Limited Other receivable |
|
$ |
|
|
|
$ |
|
|
|
Worldcall Cable (Private) Limited Other receivable |
|
$ |
|
|
|
$ |
|
|
|
AMB Management Consultants (Pvt.) Ltd Short term loan |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
ACME Telecom (Private) Limited Other receivable |
|
$ |
|
|
|
$ |
|
|
|
Worldcall Ride Hail (Private) Limited Other receivable |
|
$ |
|
|
|
$ |
|
|
As on September 30, 2023 and December 31, 2022, outstanding balance from key management personnel was approximately $
The Company owes approximately $
23. PREFERRED SHARES
During the nine months ended September 30, 2023, 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.
| 37 |
|
|
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our consolidated financial condition and results of operations for the three and nine months ended September 30, 2023 and 2022, and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on September 20, 2023.
Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “ Forward-Looking Statements ” on page 2 of this Quarterly Report on Form 10-Q.
Quarter Period Highlights
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Reference is made to Item 1A. Risk Factors depict important factors that could cause actual results to differ from expectations. In addition, the following discussion should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto of GlobalTech Corporation included in “Item 18. Financial Statements and Supplementary Data.”
Overview
We are a leading cable and broadband operator in Pakistan and a prominent broadband communication services company providing video and broadband internet services in major cities of Pakistan through Hybrid Fiber Coaxial and state-of-the-art fiber optic networks. We also offer international voice/data interconnect services with a principal focus on the termination of international voice traffic into Pakistan. We were presented with the Best Media Company award and recognized as the largest cable operator in Pakistan by the Consumer’s Choice awards in Pakistan. https://cca.com.pk/company-award /
Video revenue decreased in their months ended September 30, 2023, 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.
Based on management assessment there is no material financial impact of COVID-19 in these financial statements. Furthermore, the Company assesses that its current operations are being performed at pre-Covid-19 levels as operational plans have been adjusted to accommodate for continuance observance of protocols without any disruptions.
| 38 |
|
|
| Table of Contents |
Broadband and Cable TV Operations
The Company has been investing in its ambition of providing affordable broadband connectivity across Pakistan besides making a concerted effort to improve its services to existing customers The company has already initiated a comprehensive deployment of consumer Fiber to the Home (FTTH) connectivity clusters converting and migrating its existing customers to a higher average revenue per user (ARPU) platform. The cluster delivered high-speed internet capped at 100 Mbps, a blend of HD resolution 200 + (Digital/ Analogue) channels in addition to user familiar Customer Relationship Module which gives ultimate freedom to the subscriber for a customized service management experience. As the metro fiber optic plant already traverses across our service areas, the conversion cost for migrating an existing HFC customer to FTTH service remains low. Set-top boxes deployed for Digital Cable TV service are fully compatible with RF Overlay FTTH deployment and need not be changed as part of this migration.
The company has nearly 1,900 kilometers (1,180 miles) of fiber optic infrastructure deployed across 20 major cities of Pakistan with a potential ability to access a market of almost 3 million households for subscriber acquisition. It is a major asset moving forward as access to subscriber concentration points is essential for GlobalTech future strategy.
For our FTTH network deployment, Company has achieved a good response to subscriber conversion and has already deployed phase 1 of the project successfully in populous areas of Lahore, a city in Pakistan. For optimum utilization of this infrastructure and synergizing of resources, we have made business collaborations to aggressively pursue Fiber to the Home (FTTH) service rollout across Pakistan. The FTTH initiative is not only limited to the aforementioned areas, but a comprehensive plan is also in place to convert all existing HFC connections in the various other areas of Lahore and other major cities of Pakistan in a phased manner. This activity will require minimal cost but improve the margin of the business to a large extent and resultantly augment its profitability. FTTH service is charged at a higher level as it delivers much higher bandwidth on fiber optic networks. Additionally, operational resource intensity is substantially lower in FTTH as compared to HFC networks. Higher ARPU with lower servicing costs would result in better performance moving forward.
Our financial numbers, the Revenue of broadband decreased by $2.24 million. The decrease in revenue is mainly due to revenue of duct sales recognized in the corresponding period of last year. Nonetheless, customer requirements are migrating towards a higher grade of service for data both in terms of availability and throughput and the Company has decided to make a shift towards the latest technology options in order to provide desired services to customers in a more secure manner. Company HFC deployments could have been upgraded to service the requirements, but FTTH offers a more cost-effective platform with a much higher capability set moving forward. Management has achieved the rollout of 15,000 subscribers on FTTH in the existing service areas. The management is emphasizing converting all coaxial cable connections with FTTH and in time it would contribute to a major positive shift in the revenue from the consumer segment of operations and the same is substantiated by the marginal increase recorded this year.
For consumer operations, FTTH continues to and will be a major revenue contributor for the Company in the future as well. Subject to the availability of funds Company plans to extend its service to all of the 20 cities covered by its fiber optic network. The management believes that since its inception WorldCall Public has had a large database of loyal customers that have been subscribing to its multiple services for more than fifteen years. To further supplement this effort the management is working on the customers’ loyalty program. Aggressive marketing strategy and on-field marketing activity have also been planned in achieving the desired objectives of new and initial subscribers. This activity is being strongly supported through corporate marketing initiatives and exploiting the digital social media platform fully as LinkedIn, Facebook, Instagram, and Twitter. The marketing campaign of FTTH are also being launched on our in-house cable network. The management is more or less certain that the revenue trend can only go up moving forward. The management also intends to facilitate its’ customers for easy payments after evaluating different payment platforms.
| 39 |
|
|
| Table of Contents |
Summary Table for Services offered
|
S.No. |
Service |
Service Area |
End-Consumer |
|
1 |
Long Distance and International (LDI) |
National |
|
|
1a |
Bulk Sales |
|
Telecom Operators |
|
1b |
Call termination charged per minute |
|
Telecom Operators |
|
2 |
Broadband |
|
|
|
2a |
Fiber to the Home (FTTH) |
Lahore |
Corporate/Residential |
|
2b |
Hybrid Fiber Coaxial (HFC) |
Lahore / Karachi / Islamabad |
Residential |
|
2c |
Affordable Broadband |
Lahore / Karachi / Islamabad |
Resellers/Residential |
|
2d |
Fiber Optic connectivity |
|
Telecom Operators/ Corporate |
|
3 |
Cable TV |
|
|
|
3a |
Analog and Digital Service (FTTH) |
Lahore |
Corporate/Residential |
|
3b |
Analog and Digital Service (HFC) |
Lahore / Karachi / Islamabad |
Residential |
|
3c |
Analog and Digital Service (Fiber Optic) |
Lahore / Karachi / Islamabad / Multan / Faisalabad |
*Local Cable Operator/ Local Loop Operator |
*We provide Analog and Digital services via our Fiber Optic network to local cable operators, wherein each of the local operators reduces capital costs by receiving our service rather than installing equipment for receiving programming directly from Networks.
Pricing information for the listed services is as follows.
Service 1a is charged at bulk monthly rates with unlimited volumes of traffic. The origination operator is able to generate additional volumes by offering discounted calling rates for Pakistan and local Pakistani operator connected to Company LDI network benefits from additional income by utilization of vacant capacity on the interconnect. Company margin is fixed irrespective of the volume of traffic.
Service 1b is charged on per minute of traffic (on per second incremental basis) to the originating party along with a corresponding termination rate charged by the terminating party connected to Company LDI network.
Service 2a and 3a is direct fiber connectivity to the end user through Fiber to the Home (FTTH) architecture. Service is charged as per subscription opted by the end user and include cable TV and broadband data. Cable TV offering further includes options to have analogue, digital or both services.
Service 2b and 3b is direct hybrid fiber coaxial (HFC) connectivity to the end user. Service is charged as per subscription opted by the end user and include cable TV and broadband data. Cable TV offering further includes options to have analogue, digital or both the services. Compared to FTTH, HFC offers a lower capacity broadband connectivity for the end-user.
Service 2c is connecting local resellers to Company backbone where service offering and packaging is done by the Company and local loop operator only manages subscriber services for connectivity and network maintenance. Company charges on individual packages on pre-paid top-up basis.
Service 2d provides backhaul and core network connectivity fort telecom operators along with P2P links for corporate data connectivity. For telecom operator’s charges are on long term lease basis with O&M charged on annual basis for a specific length of fiber optic network deployment. For corporate in includes one-time charges for network deployment with monthly O&M.
| 40 |
|
|
| Table of Contents |
Service 3c connects and provides local cable operators and local loop operators with Company Cable TV services (Analogue and Digital). The connection is made on fiber optic cable to end-user premises and further distribution is handled by local loop operator through its own resources.
Service 1 is monitored for volume of traffic and applicable rates. Service 2a, 2b, 2c, 3a and 3b are monitored on subscriber connected. Service 2d and 3c are monitored for new sales and Service Level Agreement (SLA) delivery for existing customers.
Subscriber conversion rate from HFC to FTTH:
We were able to covert 100% of our HFC customers located in Lahore City (Wapda Town), however, we do not expect 100% conversion of all of our HFC customers. Our experience in Wapda Town is an indication of the level of acceptance by our customers to convert from HFC to FTTH.
Our conversion rates are high because we provide equipment and installation free of charge to our existing HFC customers. FTTH service is reliable as it does not depend upon power, as compared to an HFC plant. HFC plants require electrical power to operate the network, due to regular power failures in Pakistan HFC networks are frequently affected whereby having service interruption our customers.
FTTH is not dependent upon Network electrical power, rather it requires power at our central switch and customer premises. The continuous availability of service to our end users is of extreme importance.
We expect our customers to thus convert, however we are expecting a conversion rate of at least 50% of our customers. We expect 100% of our customers to convert as we will over the next 36 months stop analog service and have complete FTTH service. We will continue using our HFC plant as a backup to our Fiber plant to continue support our customers.
The table below gives an example of conversion in one of our areas.
Subscriber conversion from HFC to FTTH:
Company deployed FTTH network in one target area of Lahore City (Wapda Town) and achieved the following results:
|
Total subscribers HFC |
= |
1,890 |
|
|
Converted to FTTH |
= |
1,890 |
|
|
ARPU on HFC |
= |
USD 2 |
|
|
ARPU on FTTH |
= |
USD 6 |
|
|
Conversion ratio |
= |
100 |
% |
|
Incremental revenue |
= |
110 |
% |
As per the national broadband policy 2021 of Pakistan, Pakistan’s market has huge potential for broadband/data and therefore has set the following targets keeping in view the market potential, the following table sets forth Government of Pakistan’s targets for broadband deployment.
Targets under National Broadband Policy
|
Description |
|
Current |
|
|
Before 2025 |
|
|
By 2030 |
|
|||
|
Fixed Broadband Penetration |
|
|
1.13 |
% |
|
> |
15 |
% |
|
> |
35 |
% |
|
Average Internet Usage/ Subscriber/Month (in GBs) |
|
|
1.91 |
% |
|
> |
20 |
% |
|
> |
50 |
% |
Based upon the above targets as set forth by the Government of Pakistan, we are able to leverage our existing fiber network thus allowing us to deploy in high-density areas with minimal capital expenditures using existing inventory of network equipment. However, the need for capital will increase over the years as fiber network is extended to areas that are currently not served by our existing Fiber Network. These capital needs will be substantial and may require us to raise capital by debt or equity raises. If we are to raise capital by issuing shares, your shareholding will be diluted.
| 41 |
|
|
| Table of Contents |
We believe that setting these targets can only be achieved with Government of Pakistan’s regulatory support such as clear guidance as to permitting and licensing.
The management is also planning to sign up large public and private sector organizations for a complete package of cable TV and internet services. While at the same time we are also planning to sign up with the large housing projects launched by Real Estate companies in different cities for the provision of CATV and broadband internet through our distribution channels with exclusivity right from the project launch. This would further improve and enhance the corporate outlook and revenue of the business.
Long Distance and International traffic operations
The company maintains a robust infrastructure and international interconnect portfolio for its international traffic operations. The operations target voice traffic coming to Pakistan principally originating from overseas Pakistani population calling home and not any significant business / corporate originations. Traditional traffic origination points are Middle Eastern countries, the United Kingdom, and North America. Termination of voice traffic is highly regulated in Pakistan and Company has been in operation since 2004 in this segment of operations.
International termination revenue is one of the major revenue streams, which increased by $1.90Million due to a increase in volume of international termination and increase in exchange rate. Volume increase was on account of bulk traffic arrangements and exchange rate increase is on account of USD value appreciation against Pakistani Rupee.
The company escalated its engagement with its interconnect partners in Pakistan and abroad to address the migration of voice business toward alternate platforms. The operating regime applicable to the business operations whereby charging on per minute basis of voice communications is shifting toward a bulk billing strategy which would address the recent decline in business by a significant increase in business volume at a lower margin.
The management is deliberating new products and services in different areas in emerging markets. The current business plan envisions an aggressive acquisition/collaboration roadmap for technology assets, focusing on both operators and technology platforms with the essential elements of robust operations and growth potential already in place. The same would be involved in getting better solutions in place for voice aggregation operations along with a better position in getting bulk deals in place for business growth.
The company plans to further transform its business strategy to a more globally integrated approach for its subsidiaries. Our future plans also include the mergers and acquisition of existing & new businesses having similar operations in different parts of the world, which include the Middle East, Europe, South Asia, and Africa. As part of our strategy, we intend to leverage our existing technical and managerial strengths in expanding our services to acquired or joint venture partners.
Results of Operations
Net Revenue: Revenue is derived from telecom services and broadband services. Telecom services-related revenue stood at US$ 6.77 million during the nine months ended September 30, 2023 compared to US$ 5.39 million during nine months ended September 30, 2022, this increase of approximately US$ 1.38 million was primarily due to the increase in volume of international termination business. Broadband services generated revenue of US$ 0.75 million during nine months ended September 30, 2023 compared to US$ 2.97 million during nine months ended September 30, 2022. This decrease of US$ 2.22 million is due to recognition of duct sale in corresponding period of last year.
| 42 |
|
|
| Table of Contents |
Adjusted EBITDA for the nine months ended September 30, 2023 is US$ 1.86 million, whereas Adjusted EBITDA for the corresponding period September 30, 2022 is US$1.33 million. Net loss for the nine months ended September 30, 2023 is US$4.76 million, and net loss for the nine months ended September 30, 2022 was US$2.71 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).
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Net revenues |
|
$ | 7,483,286 |
|
|
$ | 8,374,735 |
|
|
Adjusted EBITDA |
|
$ | 1,857,666 |
|
|
$ | 1,325,027 |
|
|
Loss from Operations |
|
$ | (4,759,994 | ) |
|
$ | (2,705,230 | ) |
Set forth below is a presentation and reconciliation of our adjusted EBITDA for the nine months ended September 30, 2023 and 2022:
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Net revenue |
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$ | 7,483,286 |
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$ | 8,374,735 |
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GAAP net loss |
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(6,207,002 | ) |
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(4,501,784 | ) |
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Depreciation and amortization |
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2,515,191 |
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3,281,660 |
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Finance cost |
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1,370,552 |
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1,694,258 |
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Taxation |
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76,456 |
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102,296 |
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Exchange loss |
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4,102,471 |
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748,598 |
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Adjusted EBITDA |
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$ | 1,857,066 |
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$ | 1,325,027 |
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Adjusted EBITDA is defined as net income attributable to GlobalTech Corporation shareholders plus net income attributable to non-controlling interest, net interest expense, income taxes, depreciation and amortization, and other operating (income) expenses, net, such as exchange loss/(gain).
Adjusted EBITDA and loss from operations during the nine months ended September 30, 2023 were impacted by the decline in revenue, mainly due to duct sale recognized in corresponding period of last year, whereas Adjusted EBITDA and income from operations during the nine months ended September 30,2022 were impacted by the increase in revenue mainly by rise in traffic (international minutes) originated/ terminated.
During this period, Company was also transforming its business operations and moving towards a service-centric operation that does not require heavy investments in infrastructure. Current business operations are being maintained at the optimal operating level and new investments were principally utilized for solutions development more suited for future needs. The company is focused on the development of products and services that would be better suited for its future roadmap as a technology-centric solutions Company.
Gross Margin: The Company recorded a gross margin of USD 0.52 million during the nine months ended September 30, 2023 compared to USD 2.42 million during the nine months ended September 30, 2022. LDI revenue was increased due to increase in traffic. The broadband revenue decreased was due to duct sale recognized in corresponding period of last year. Currency devaluation also impacted revenue and resulted in a net decrease of USD 0.89 million in revenues thus resulting in a decrease in gross margins.
Direct operating costs: Direct operating costs stood at USD 6.97 million during the nine months ended September 30, 2023 compared to USD 5.95 million during the nine months ended September 30, 2022. The increase in direct cost is mainly due to interconnect cost, which is aligned with termination revenue and increase in exchange rate. Operating costs remain practically the same in both periods and negative variance is on account of currency devaluation over the period. We intend to maintain our operating expenses at current levels, leveraging our existing systems with the increased customer base. Our staff levels would be maintained; our existing networking equipment has additional capacity to handle increased customer loads. Based on our current levels, we can substantially increase customer levels without incurring additional costs.
Other operating costs: Other operating costs stood at USD 1.46 million during the nine months ended September 30, 2023 compared to USD 1.65 million during the nine months ended September 30, 2022. Operating costs remain practically the same during the periods.
Other income and expenses : The Company recorded other income of USD 2.81 million during the nine months ended September 30, 2023 compared to USD 0.57 million during the nine months ended September 30, 2022. Other expenses stood at USD4.11 million during the nine months ended September 30, 2023 against USD 0.77 million during the nine months ended September 30, 2022.
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Updates on plans:
Long Distance and International traffic operations :
During the quarter our engagement with middle eastern operators has borne fruit. Our principal interconnect partner, ACMETEL has successfully enhanced traffic volumes in bulk arrangements and enhanced volume of traffic have started to flow. Correspondingly, business financial are reflected in this period quarter ending September 30, 2023.
LDI management team attended significant conference as planned namely Capacity Middle East (UAE) and GCCM Middle East (Oman). We plan to further enhance our participation in international forums for voice and data traffic.
Broadband and Cable TV Operations:
It is updated that arrangements with respective authorities have been finalized for the commencement of network roll-out to commence as early as September 2023. It is subject to the timely availability of both the equipment and the funds.
Blockchain:
Management has made a strategic decision to discontinue development of blockchain based upon current market conditions in Pakistan and to focus the company on its broadband strategy. Company has not incurred any costs to date which are directly attributable to development of Blockchain.
Additionally, the Company has started work on commercial monetization of its in-house Customer Relationship Management (CRM) system for third-party sales. The software has a good capability set for sales pipeline, call center integration, authority matrix, human resource, performance monitoring, and accounting integration. The first sector being targeted is commercial banking for loan and portfolio management. The Company is confident it can carry out commercial activation for external sales, but the market is still to be tested in this regard.
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Liquidity and Capital Resources
We have significant amounts of debt. The principal amount of our debt as of September 30, 2023, was $6.60 million, consisting of $4.11 million of Term Finance Certificates, a Term Loan of $ 1.38 million, and short-term borrowings including running finances of $ 1.10 million. These debt facilities are secured and require significant cash to fund principal and interest payments on our debt. We are required to make debt repayments of US$ 4.14 million in the coming twelve months and we believe that sufficient funds will be generated through the operations and also with the financial support of the parent company, however rising interest rates by the United States Federal Reserve and the ensuing threat of global recession may result in lower revenues. We are currently in discussions for a private placement of our common shares pursuant to Regulation S exclusion from the Section 5 registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) for offers made outside the United States by both U.S. and foreign issuers to non-U.S Persons.
We expect to raise a minimum of $5 million to a maximum of $10 million by March 31, 2024. Most likely shares will be placed at a 50% discount to the trading value of the common shares of the Company over a 30-day period.
While there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even if available will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global market uncertainties. However, we are very conscious of the dilutive effect and price pressures in raising equity-based capital.
Despite the challenging environment, we are continually expanding our FTTH network using our existing equipment inventory consisting of Fiber Optic Cable, Customer Premises Equipment without having to deploy additional capital to purchase such equipment. The continual deployment will result in additional revenues for the company.
As possible acquisitions and mergers, we actively review them against our objectives including, among other considerations, improving the operational efficiency, achieving synergies, product development or technical capabilities of our business, and achieving appropriate return targets, and we may participate in the extent we believe these possibilities present attractive opportunities. Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures with the main focus on growth in international termination traffic, FTTH rollout, Data, and Fiber sales and thereby converting the same in escalation in the bottom line of cash flows.
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The Company believes its balances of cash, and cash equivalents which totaled $3,016,592 as of September 30, 2023, 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 oof $2,212,809 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 $3,016,592 and $2,710,137 cash and cash equivalents as of September 30, 2023, and 2022, respectively, which includes restricted cash of $2,212,809 and $2,411,698 that is not available for immediate ordinary business use.
Operating Activities: Net cash used in operating activities increased during the ongoing period by $ 0.32 primarily due to a decrease in EBITDA mainly on account of a decline in broadband revenue and forex translational losses increasing operating expenses insurmountably. Net cash used in operating activities for the nine months ended September 30, 2023, and 2022 was $ (4.81) million and $ (5.13) million respectively.
Investing Activities : Net cash used in investing activities for the nine months ended September 30, 2023, and 2022 was $ (0.05) million and $ (0.05) million, respectively. The increase in cash used was primarily due to the investment in available opportunities to augment the returns.
Financing Activities: Net cash used in financing activities show a decrease of $0.36 million during the period ended September 30, 2023, compared to the period ended September 30, 2022.
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, 2022.
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, 2022, filed with the SEC on September 20, 2023.
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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, 2023. 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, 2022.
Off-Balance Sheet Arrangements
As of September 30, 2023, and December 31, 2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item, pursuant to Item 305(e) of Regulation S- K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has conducted, with the participation of our president (our principal executive officer and our principal accounting officer, and principal financial officer), an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 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 September 30, 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.
Based on the evaluation of our disclosure controls and procedures, as of September 30, 2023, our president (our principal executive officer and our principal accounting officer, and principal financial officer) concluded that, as of such date, our disclosure controls and procedures were ineffective.
This quarterly report does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only the management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the nine months ended September 30, 2023 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
See discussion of legal proceedings in “Note 17, Commitments And Contingencies” of the Notes to Consolidated Financial Statements in this Report, which is incorporated by reference herein.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A. “Risk Factors” in our Annual Report on Form 10-K/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
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
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Exhibit Number |
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Exhibit Description |
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101.INS |
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Inline XBRL Instance |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*The certifications on Exhibit 32 hereto are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GLOBALTECH CORPORATION |
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Dated: November 08, 2023 |
By: |
/s/ Dana Green |
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Dana Green |
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Chief Executive Officer, President and Director |
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(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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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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Dated: November 08, 2023 |
By: |
/s/ Dana Green |
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Dana Green |
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Chief Executive Officer, President and Director |
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(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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