Correspondence 0001477932-23-003282 from GlobalTech Corp (GLTK) (CIK 0001938338) (GLTK)
GlobalTech Corp (GLTK) (CIK 0001938338)
Date: May 11, 2023 · CIK: 0001938338 · Accession: 0001477932-23-003282
AI Filing Summary & Sentiment
File numbers found in text: 000-56482
Referenced dates: April 26, 2023
Letter
Division of Corporation Finance Office of Technology United States Securities and Exchange Commission GlobalTech Corporation Amendment No. 1 to Form 10-K for the Fiscal Year Ended December 31, 2022 File No. 000-56482
Re:
Dear Commission:
We are in receipt of your letter dated April 26, 2023. In reference to the additional disclosures, we will file these with our Form 10Q.
Our response to each of your comments is as follows:
Description of Business
General Information
Form and Year of Organization, page 4
1.
We note your response to prior comment 1. As previously requested, please reconcile the ownership structure disclosed in WorldCall Telecom Limited’s September 30, 2022 Quarterly Report to the corporate structure presented in your filing. That is, provide us with your computation of the percentage of shares held by Worldcall Services (Private) Limited and Ferret Consulting F.Z.C., and reconcile these amounts to the ownership structure disclosed by WorldCall Telecom Limited. You indicate that the local disclosure required by WorldCall Telecom Limited does not include Convertible Preference Shares. However, we note from your disclosure on page F-32 that the total number of Convertible Preference Shares issued by WorldCall Telecom Limited was only 52,500 and these shares were issued to Oman Telecommunications Company. Explain why your disclosure indicates that you own more than 50% of WorldCall Telecom Limited, while WorldCall Telecom Limited’s disclosure indicates your subsidiaries own less than 50% of WorldCall Telecom Limited, in aggregate
Response:
In Worldcall Public financials, issued ordinary shares are 3,732 million as on December 31, 2022. Being ordinary shares, this does not include the Convertible Preference Shares (CPS). CPS are USD denominated until converted into ordinary shares and the conversion ratio is a function of the face value of USD 100, applicable USD to Pakistani Rupee parity and price of Worldcall Public ordinary shares derived from trade on the Pakistan Stock Exchange (PSX). Given the variable nature of the conversion ratio, the accounting for shareholding is done on specific reporting date by the Share Registrar and provided to Worldcall Public.
3550 Barron Way Suite 13a, Reno, NV 89511
The Staff comment refers to disclosure in Worldcall Public accounts which only considers the outstanding ordinary shares and does not include CPS, which is disclosed separately in Worldcall Public financials. Local regulations do not require consolidated disclosure including CPS for shareholding purposes. Worldcall Public accounts does include information for ordinary shares and CPS separately that is used for consolidating Company’s shareholding in Worldcall Public.
The attached share certificate also includes the conversion ratio used for CPS translation in ordinary shares for inclusion in total shareholding on fully diluted basis and this ratio can vary at each reporting date. It also reconciles the shareholding of the Company in Worldcall Public to the extent of 55.2% as disclosed in FORM 10K.
In the certificate, the conversion ratio is defined as 01 CPS = 32,089.1148 ordinary shares.
For clarity
1 CPS
=
$100
Dividend 5.9%x5 Years
=
$29.5
USD Parity 1USD on December 31, 2022
=
226.37 Pak Rupees
Total in Pak Rupees
=
29,313.87
60% of WVAP1 (WTL Shares)
=
0.91
Equivalent ordinary shares
=
32,089.1148
Management's Discussion and Analysis of Financial Condition and Results of Operations Updates on Plans: page 49
2.
Provide more detail with whom you are finalizing "arrangements" to provide a public blockchain network in Pakistan.
Response:
The company has engaged development resources from an experienced software development entity ‘Software Alliance’(www.softwarealliance.io) for the development and deployment of a hybrid public blockchain.
3.
With respect to your planned Public Blockchain Network, we note that you plan to deploy your network as a “Blockchain-as-a-service”. Please provide more detail as to how your “Blockchain-as-a-service” will function. In this regard, explain how you will market this service to the "education, logistics and financial services" sectors. Provide examples of how you envision the commercialization of your network materializing
_________________
1 WVAP mean Weighted Volume Average Price discounted at 60% for conversion purposes as per approved conversion formula.
Response:
The architecture of the blockchain being developed is going to be a ‘permissioned’ ‘public blockchain’. Stringent rules for KYC (Know Your Customer) related to blockchain connectivity would be implemented and at the same time it would be open for public connectivity complying to KYC requirements.
Blockchain platform would only be capturing service data and transaction details with all customer information residing on third-party payment gateway platform. Our claim of ‘blockchain-as-a-service’ is based on the premise that its usage would be open to service providers as a backbone and they would be allowed to develop their own offering using inherent features of our platform for transaction processing. Development kit/architecture would be made public and authentication/integrity testing on test-net would be established before publishing the same on main-net for commercial activity.
Company plans to develop a basic set of smart contracts focused on ‘product authentication’, ‘online educational courses/tuitions’ and ‘financial services’ connected to third-party payment gateway in the launch phase and expects the connected community to be more participatory in development of future services.
On commercial activation, the architecture is based on service delivery authentication and executing settlements between parties from their respective bank accounts, where blockchain only delivers escrow like facilitation for settlements. The service can have different tiers of participants with requisite rights and obligations. For tiered services understanding, service enabler (product team), service provider and service consumer form a three-tier relationship. Service enabler develops a product that is utilized by the service provider to provide service to service consumers. Blockchain shall ensure settlement in such tiered service operations based on contractual parameters captured in a smart contract.
For example, in education services, lecture subscription, actual lecture delivery and course completion would be verified at each stage and funds blocked from lecture recipient would be disbursed to tutor and any intermediatory product owner / developer based on contract fulfilment. It is an essential need as more and more traffic is getting diverted towards e-learning.
In a similar manner, for financial services billing settlements are to be performed by the platform through the payment gateway with authentication and ease of transfer as main feature of the service.
As a Broadband Service Provider, we have ongoing relationships with Financial, Educational, and other institutions. We will leverage our existing relationship to market our service to these institutions by holding seminars, attending conventions, and direct marketing. We believe our existing relationships allow us to provide each of these institutions with the necessity of our service and how and our clients can use the service to increase revenue.
The company will generate revenue mainly from transaction fees, we may diversify our monetization to include other services as we scale up our network.
4.
To the extent that you plan to develop your network on an established blockchain, please revise your disclosure to identify which blockchain network you are planning to utilize and include a discussion of the impact of transaction fees.
Response
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
5.
We note that your Public Blockchain Network will be “integrated into payment platforms, providing transaction access through existing financial and banking institutions” and that “monetization will result from a percentage charge on financial transactions executed on the platform.” With a view toward expanded disclosure, please explain how your proposed network will be integrated into payment platforms at existing financial and banking institutions.
Response
Current focus is on on-boarding / integration with a licensed third-party digital banking network. Digital Banking licensing in Pakistan enables the entity to offer full bouquet of banking services. Integration would facilitate KYC compliance and data security, as credentials for account access and payment are maintained by the bank and not by the blockchain platform.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
6.
We note that you intend to utilize smart contracts for your target services. Please include risk factor disclosure regarding the risk of coding errors or security vulnerabilities within the smart contracts and provide a more complete discussion regarding smart contract functionality and limits.
Response
Smart contracts in this hybrid architecture are developed to service a specific requirement. Being a software code, although made secure to an extreme, they are still subject to coding errors and security vulnerabilities like any software product. The company recognizes the same as a reality and would be taking measures like authentication/integrity check on test-net before commercial activation. Still there exists a significant risk that any such code may be subject to vulnerability on account of coding errors and / or malicious action.
Smart contracts functionality is limited to settlement execution in a predefined manner when pre-requisites are fulfilled and trigger such an action.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
7.
Please disclose whether your planned Public Blockchain Network will utilize any native crypto asset(s) and, to the extent it does, whether you plan to issue any crypto assets to be used in connection with the payment of services. Additionally, please disclose whether your planned Public Blockchain Network and, to the extent you will utilize them, crypto assets will be available in the U.S. or to U.S. persons
Response
No crypto assets are being offered to any person in Pakistan or abroad. There is no native crypto asset(s) that can be offered.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
Liquidity and Capital Resources
Cash flows from operating, investing, and financing Activities, page 51
8.
You indicate that you held cash and cash equivalents of $3,120,572 and $3,670,589 as of December 31, 2022 and 2021, respectively, and this balance is a source of funding to satisfy your cash requirements over the next 12 months and beyond. Please revise to clarify that these amounts include restricted cash that is not available for immediate ordinary business use.
Response
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
Consolidated Statement of Cash Flows for the Years Ended December 31, 2022 and 2021, page F-6
9.
We note that cash flows from long-term loans and other assets are classified as operating activities and cash flows used in the issuance of long-term loan are classified as investing activities. Please explain the nature of these items and tell us why the classification is appropriate based on the guidance in ASC 230-10-45. In addition, please explain why the issuance of the long-term loan in 2021 is represented as a cash outflow. In this regard, tell us whether this line item should be described as the repayment of a long-term loan.
Response
Long-term loans and other assets: this represents loans to employees and advances to vendors for the provision of goods and services as disclosed on page F-12 of our Annual Report on Form 10-K. Such advances are being made in the normal course of business operations. Therefore, its classification is appropriate here in operating activities and as per guidance. Long term loans in comparative period 2021 is of the same nature, which we later reclassified under operating in 2022. Moreover, we keep classifying long-term loans and other assets under operating activities in our quarterly report on Form 10-Q to be filed.
Notes to Consolidated Financial Statements
Note 2. Basis of Preparation of Consolidated Financial Statements Business Combinations, page F-11
10.
We note the disclosure included in response to prior comment 13. Per ASC 805-10-45-2, the assets and liabilities of EBI, as the accounting acquiree, should be recognized and measured in accordance with the guidance in ASC 805 applicable to business combinations. As previously requested, please provide the disclosures in ASC 805-20-50 and ASC 805-30-50 related to the acquisition of EBI, the accounting acquiree. That is, also discloses the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed, the acquisition-date fair value of the total consideration transferred, and a qualitative description of the factors that make up the goodwill recognized. Refer to the example in ASC 805-10-55-37
Response
In response to Staff’s comment, we have updated the relevant disclosure under Business Combinations on Form 10-Q to be filed.
11.
We note your response to prior comment 14. Please clarify how you determined the acquisition-date fair value of the WHI shares effectively transferred. That is, your response indicates that you used the book value of WHI, but you also indicate that you used the valuation techniques of discounted cash flow and replacement cost methods. Tell us how the trading price of WorldCall Telecom Limited stock was considered in your valuation, considering that it appears that WHI’s assets primarily consist of its investments in WorldCall Telecom Limited through its ownership in Worldcall Services (Private) Limited and Ferret Consulting F.Z.C.
Response
In this case, we note that the assets of WHI primarily consist of its investments in WTL through its ownership in Worldcall Services (Private) Limited and Ferret Consulting F.Z.C. As such, the value of WHI is largely driven by the value of its investments in WTL.
To determine the acquisition-date fair value of the WHI shares effectively transferred, we used a combination of the book value of WHI as well as the valuation techniques of discounted cash flow and replacement cost methods.
·
We did not rely on the trading price of WTL as we determined that replacement cost of WTL Optic Fiber Network is substantially higher than the Market Capitalization of WTL.
Note 3. Acquisitions, page F-15
12.
In response to prior comment 17, you state that “WTL was not acquired before the acquisition of its parent.” However, your response then explains that WTL’s parent was not acquired until November 30, 2021, which is after the acquisition date of WTL on October 18, 2017. Therefore, it does appear that your financial statements reflect the acquisition of WTL before the acquisition of its parents. Tell us why this presentation is appropriate. Considering that your historical financial statements should reflect the continuation of WHI, the legal acquirer, pursuant to ASC 805-40-45-1, explain why your financial statements do not reflect WSL and Ferret Consulting investments in WTL starting
Show Raw Text
CORRESP
1
filename1.htm
global_corresp.htm
May 10, 2023
Division of Corporation Finance
Office of Technology
United States Securities and Exchange Commission
Washington, DC 20549
Re:
GlobalTech Corporation
Amendment No. 1 to Form 10-K for the Fiscal Year Ended December 31, 2022
File No. 000-56482
Dear Commission:
We are in receipt of your letter dated April 26, 2023. In reference to the additional disclosures, we will file these with our Form 10Q.
Our response to each of your comments is as follows:
Description of Business
General Information
Form and Year of Organization, page 4
1.
We note your response to prior comment 1. As previously requested, please reconcile the ownership structure disclosed in WorldCall Telecom Limited’s September 30, 2022 Quarterly Report to the corporate structure presented in your filing. That is, provide us with your computation of the percentage of shares held by Worldcall Services (Private) Limited and Ferret Consulting F.Z.C., and reconcile these amounts to the ownership structure disclosed by WorldCall Telecom Limited. You indicate that the local disclosure required by WorldCall Telecom Limited does not include Convertible Preference Shares. However, we note from your disclosure on page F-32 that the total number of Convertible Preference Shares issued by WorldCall Telecom Limited was only 52,500 and these shares were issued to Oman Telecommunications Company. Explain why your disclosure indicates that you own more than 50% of WorldCall Telecom Limited, while WorldCall Telecom Limited’s disclosure indicates your subsidiaries own less than 50% of WorldCall Telecom Limited, in aggregate
Response:
In Worldcall Public financials, issued ordinary shares are 3,732 million as on December 31, 2022. Being ordinary shares, this does not include the Convertible Preference Shares (CPS). CPS are USD denominated until converted into ordinary shares and the conversion ratio is a function of the face value of USD 100, applicable USD to Pakistani Rupee parity and price of Worldcall Public ordinary shares derived from trade on the Pakistan Stock Exchange (PSX). Given the variable nature of the conversion ratio, the accounting for shareholding is done on specific reporting date by the Share Registrar and provided to Worldcall Public.
3550 Barron Way Suite 13a, Reno, NV 89511
1
The Staff comment refers to disclosure in Worldcall Public accounts which only considers the outstanding ordinary shares and does not include CPS, which is disclosed separately in Worldcall Public financials. Local regulations do not require consolidated disclosure including CPS for shareholding purposes. Worldcall Public accounts does include information for ordinary shares and CPS separately that is used for consolidating Company’s shareholding in Worldcall Public.
The attached share certificate also includes the conversion ratio used for CPS translation in ordinary shares for inclusion in total shareholding on fully diluted basis and this ratio can vary at each reporting date. It also reconciles the shareholding of the Company in Worldcall Public to the extent of 55.2% as disclosed in FORM 10K.
In the certificate, the conversion ratio is defined as 01 CPS = 32,089.1148 ordinary shares.
For clarity
1 CPS
=
$100
Dividend 5.9%x5 Years
=
$29.5
USD Parity 1USD on December 31, 2022
=
226.37 Pak Rupees
Total in Pak Rupees
=
29,313.87
60% of WVAP1 (WTL Shares)
=
0.91
Equivalent ordinary shares
=
32,089.1148
Management's Discussion and Analysis of Financial Condition and Results of Operations Updates on Plans: page 49
2.
Provide more detail with whom you are finalizing "arrangements" to provide a public blockchain network in Pakistan.
Response:
The company has engaged development resources from an experienced software development entity ‘Software Alliance’(www.softwarealliance.io) for the development and deployment of a hybrid public blockchain.
3.
With respect to your planned Public Blockchain Network, we note that you plan to deploy your network as a “Blockchain-as-a-service”. Please provide more detail as to how your “Blockchain-as-a-service” will function. In this regard, explain how you will market this service to the "education, logistics and financial services" sectors. Provide examples of how you envision the commercialization of your network materializing
_________________
1 WVAP mean Weighted Volume Average Price discounted at 60% for conversion purposes as per approved conversion formula.
2
Response:
The architecture of the blockchain being developed is going to be a ‘permissioned’ ‘public blockchain’. Stringent rules for KYC (Know Your Customer) related to blockchain connectivity would be implemented and at the same time it would be open for public connectivity complying to KYC requirements.
Blockchain platform would only be capturing service data and transaction details with all customer information residing on third-party payment gateway platform. Our claim of ‘blockchain-as-a-service’ is based on the premise that its usage would be open to service providers as a backbone and they would be allowed to develop their own offering using inherent features of our platform for transaction processing. Development kit/architecture would be made public and authentication/integrity testing on test-net would be established before publishing the same on main-net for commercial activity.
Company plans to develop a basic set of smart contracts focused on ‘product authentication’, ‘online educational courses/tuitions’ and ‘financial services’ connected to third-party payment gateway in the launch phase and expects the connected community to be more participatory in development of future services.
On commercial activation, the architecture is based on service delivery authentication and executing settlements between parties from their respective bank accounts, where blockchain only delivers escrow like facilitation for settlements. The service can have different tiers of participants with requisite rights and obligations. For tiered services understanding, service enabler (product team), service provider and service consumer form a three-tier relationship. Service enabler develops a product that is utilized by the service provider to provide service to service consumers. Blockchain shall ensure settlement in such tiered service operations based on contractual parameters captured in a smart contract.
For example, in education services, lecture subscription, actual lecture delivery and course completion would be verified at each stage and funds blocked from lecture recipient would be disbursed to tutor and any intermediatory product owner / developer based on contract fulfilment. It is an essential need as more and more traffic is getting diverted towards e-learning.
In a similar manner, for financial services billing settlements are to be performed by the platform through the payment gateway with authentication and ease of transfer as main feature of the service.
As a Broadband Service Provider, we have ongoing relationships with Financial, Educational, and other institutions. We will leverage our existing relationship to market our service to these institutions by holding seminars, attending conventions, and direct marketing. We believe our existing relationships allow us to provide each of these institutions with the necessity of our service and how and our clients can use the service to increase revenue.
The company will generate revenue mainly from transaction fees, we may diversify our monetization to include other services as we scale up our network.
3
4.
To the extent that you plan to develop your network on an established blockchain, please revise your disclosure to identify which blockchain network you are planning to utilize and include a discussion of the impact of transaction fees.
Response
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
5.
We note that your Public Blockchain Network will be “integrated into payment platforms, providing transaction access through existing financial and banking institutions” and that “monetization will result from a percentage charge on financial transactions executed on the platform.” With a view toward expanded disclosure, please explain how your proposed network will be integrated into payment platforms at existing financial and banking institutions.
Response
Current focus is on on-boarding / integration with a licensed third-party digital banking network. Digital Banking licensing in Pakistan enables the entity to offer full bouquet of banking services. Integration would facilitate KYC compliance and data security, as credentials for account access and payment are maintained by the bank and not by the blockchain platform.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
6.
We note that you intend to utilize smart contracts for your target services. Please include risk factor disclosure regarding the risk of coding errors or security vulnerabilities within the smart contracts and provide a more complete discussion regarding smart contract functionality and limits.
Response
Smart contracts in this hybrid architecture are developed to service a specific requirement. Being a software code, although made secure to an extreme, they are still subject to coding errors and security vulnerabilities like any software product. The company recognizes the same as a reality and would be taking measures like authentication/integrity check on test-net before commercial activation. Still there exists a significant risk that any such code may be subject to vulnerability on account of coding errors and / or malicious action.
Smart contracts functionality is limited to settlement execution in a predefined manner when pre-requisites are fulfilled and trigger such an action.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
4
7.
Please disclose whether your planned Public Blockchain Network will utilize any native crypto asset(s) and, to the extent it does, whether you plan to issue any crypto assets to be used in connection with the payment of services. Additionally, please disclose whether your planned Public Blockchain Network and, to the extent you will utilize them, crypto assets will be available in the U.S. or to U.S. persons
Response
No crypto assets are being offered to any person in Pakistan or abroad. There is no native crypto asset(s) that can be offered.
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
Liquidity and Capital Resources
Cash flows from operating, investing, and financing Activities, page 51
8.
You indicate that you held cash and cash equivalents of $3,120,572 and $3,670,589 as of December 31, 2022 and 2021, respectively, and this balance is a source of funding to satisfy your cash requirements over the next 12 months and beyond. Please revise to clarify that these amounts include restricted cash that is not available for immediate ordinary business use.
Response
In response to Staff’s comment, we have revised to clarify in a relevant section of MD&A on Form 10-Q to be filed.
Consolidated Statement of Cash Flows for the Years Ended December 31, 2022 and 2021, page F-6
9.
We note that cash flows from long-term loans and other assets are classified as operating activities and cash flows used in the issuance of long-term loan are classified as investing activities. Please explain the nature of these items and tell us why the classification is appropriate based on the guidance in ASC 230-10-45. In addition, please explain why the issuance of the long-term loan in 2021 is represented as a cash outflow. In this regard, tell us whether this line item should be described as the repayment of a long-term loan.
5
Response
Long-term loans and other assets: this represents loans to employees and advances to vendors for the provision of goods and services as disclosed on page F-12 of our Annual Report on Form 10-K. Such advances are being made in the normal course of business operations. Therefore, its classification is appropriate here in operating activities and as per guidance. Long term loans in comparative period 2021 is of the same nature, which we later reclassified under operating in 2022. Moreover, we keep classifying long-term loans and other assets under operating activities in our quarterly report on Form 10-Q to be filed.
Notes to Consolidated Financial Statements
Note 2. Basis of Preparation of Consolidated Financial Statements Business Combinations, page F-11
10.
We note the disclosure included in response to prior comment 13. Per ASC 805-10-45-2, the assets and liabilities of EBI, as the accounting acquiree, should be recognized and measured in accordance with the guidance in ASC 805 applicable to business combinations. As previously requested, please provide the disclosures in ASC 805-20-50 and ASC 805-30-50 related to the acquisition of EBI, the accounting acquiree. That is, also discloses the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed, the acquisition-date fair value of the total consideration transferred, and a qualitative description of the factors that make up the goodwill recognized. Refer to the example in ASC 805-10-55-37
Response
In response to Staff’s comment, we have updated the relevant disclosure under Business Combinations on Form 10-Q to be filed.
11.
We note your response to prior comment 14. Please clarify how you determined the acquisition-date fair value of the WHI shares effectively transferred. That is, your response indicates that you used the book value of WHI, but you also indicate that you used the valuation techniques of discounted cash flow and replacement cost methods. Tell us how the trading price of WorldCall Telecom Limited stock was considered in your valuation, considering that it appears that WHI’s assets primarily consist of its investments in WorldCall Telecom Limited through its ownership in Worldcall Services (Private) Limited and Ferret Consulting F.Z.C.
Response
In this case, we note that the assets of WHI primarily consist of its investments in WTL through its ownership in Worldcall Services (Private) Limited and Ferret Consulting F.Z.C. As such, the value of WHI is largely driven by the value of its investments in WTL.
To determine the acquisition-date fair value of the WHI shares effectively transferred, we used a combination of the book value of WHI as well as the valuation techniques of discounted cash flow and replacement cost methods.
·
We did not rely on the trading price of WTL as we determined that replacement cost of WTL Optic Fiber Network is substantially higher than the Market Capitalization of WTL.
6
Note 3. Acquisitions, page F-15
12.
In response to prior comment 17, you state that “WTL was not acquired before the acquisition of its parent.” However, your response then explains that WTL’s parent was not acquired until November 30, 2021, which is after the acquisition date of WTL on October 18, 2017. Therefore, it does appear that your financial statements reflect the acquisition of WTL before the acquisition of its parents. Tell us why this presentation is appropriate. Considering that your historical financial statements should reflect the continuation of WHI, the legal acquirer, pursuant to ASC 805-40-45-1, explain why your financial statements do not reflect WSL and Ferret Consulting investments in WTL starting