UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 2007
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to _____
Commission File Number 0-26414
GLOBETECH VENTURES CORP.
(Exact Name of Registrant as specified in its charter)
Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)
Suite 1128 – 789 West Pender Street, Vancouver, British Columbia V6C 1H2
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered or to be registered pursuant to Section 12 (g) of the Act:
Common Shares, no par value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the period covered by this registration statement: 20,321,879 Common Shares as at September 30, 2007
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ____
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).
| | Large Accelerated Filer | | Accelerated Filer |X| Non-Accelerated Filer
Indicate by check mark which financial statement item the registrant has elected to follow.
|_| Item 17 |X| Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|_| Yes |X| No
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TABLE OF CONTENTS
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ITEM 16.E | 22 | |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 22 | |
PART III | 22 | |
ITEM 17 | 23 | |
Financial Statements | 23 | |
ITEM 18 | 23 | |
Financial Statements | 23 | |
ITEM 19 | 24 | |
Exhibits | 24 |
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FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact included in this Form 20-F, are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such forward-looking statements involve assumptions, known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Globetech Ventures Corp. (the “Company”) to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements contained in this Form 20-F. Such potential risks and uncertainties include, without limitation, the Company being in the exploration and development stages with its properties and projects, having limited financial resources, dealing in an industry with fluctuating demand and pricing, having to work with substantial governmental regulations, working in an industry involving hazardous operations, and other risk factors detailed herein. The forward-looking statements are made as of the date of this Form 20-F and the Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those projected in such forward-looking statements. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements.
The Company’s consolidated financial statements and all other references to currency throughout this Form 20-F are stated in Canadian Dollars (“Cdn”) unless specifically indicated otherwise and are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), the application of which, in the case of the Company, conforms in all material respects for the periods presented with U.S. GAAP, except as noted in the notes to the consolidated financial statements.
PART I
ITEM 1. Identity of Directors, Senior Management, and Advisors
Not applicable.
ITEM 2. Offer Statistics and Expected Timetable
Not applicable.
ITEM 3. Key Information
Selected Financial Data
The selected consolidated financial data for each of the years in the most recent five-year periods ended September 30, 2007 have been derived from our consolidated financial statements and the related notes. The consolidated financial statements for the year ended September 30, 2007 can be found included in this Annual Report beginning on page F-1.
Our consolidated financial statements have been prepared in accordance with Canadian GAAP. Refer to Note 12 of the consolidated financial statements included herein for a discussion of the material differences between Canadian GAAP and U.S. GAAP, and their effect on the Company’s financial statements.
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Summary Financial Data
Year | Year | Year | Year | Year | |||||||||||
ended | ended | ended | ended | ended | |||||||||||
September | September | September | September | September | |||||||||||
30, 2007 | 30, 2006 | 30, 2005 | 30, 2004 | 30, 2003 | |||||||||||
Canadian GAAP: | |||||||||||||||
Revenue | Nil | Nil | Nil | Nil | Nil | ||||||||||
Net Income/(Loss) | (600,851 | ) | (507,426 | ) | (778,853 | ) | (7,302,024 | ) | (47,171 | ) | |||||
Per Share | (0.03 | ) | (0.03 | ) | (0.05 | ) | (0.60 | ) | (0.00 | ) | |||||
Weighted Average | 17,315,172 | 15,036,926 | 14,340,414 | 12,246,150 | 9,489,939 | ||||||||||
Shares | |||||||||||||||
Dividends | Nil | Nil | Nil | Nil | Nil | ||||||||||
Total Assets | 107,926 | 83,482 | 133,628 | 309,598 | 19,021 | ||||||||||
Shareholder Equity | (73,756 | ) | (566,735 | ) | (269,079 | ) | (165,088 | ) | (938,464 | ) | |||||
(Deficiency) | |||||||||||||||
U.S. GAAP: | |||||||||||||||
Net Income/(Loss) | (617,351 | ) | (534,750 | ) | (829,260 | ) | (7,302,024 | ) | (47,171 | ) | |||||
Per Share | (0.03 | ) | (0.04 | ) | (0.06 | ) | (0.60 | ) | (0.00 | ) | |||||
Weighted Ave. Shares | 17,315,172 | 15,036,926 | 14,340,414 | 12,246,150 | 9,489,939 | ||||||||||
Total Assets | 13,695 | 5,751 | 83,321 | 309,598 | 19,021 | ||||||||||
Shareholder Equity | (167,987 | ) | (644,466 | ) | (319,486 | ) | (165,088 | ) | (938,464 | ) | |||||
(Deficiency) |
Currency and Exchange rates
All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated. The following table sets forth (i) the rates of exchange for the Canadian dollar, expressed in U.S. dollars, in effect at the end of each of the periods indicated; (ii) the average exchange rates in effect on the last day of each month during such periods; and (iii) the high and low exchange rate during such periods, in each case based on the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York:
Average | High | Low | Close | |||||||||
February 2008 | .9986 | 1.0297 | .9804 | .1.0220 | ||||||||
January 2008 | .9899 | 1.0240 | .9634 | 1.0034 | ||||||||
December 2007 | .9993 | 1.0247 | .9756 | 1.0194 | ||||||||
November 2007 | 1.0401 | 1.1038 | .9997 | 1.0104 | ||||||||
October 2007 | 1.0245 | 1.0510 | .9982 | 1.0478 | ||||||||
September 2007 | .9718 | 1.0084 | .9437 | 1.0881 | ||||||||
Fiscal Year Ended 09/30/2007 | .8997 | 1.0084 | .8420 | 1.0081 | ||||||||
Fiscal Year Ended 09/30/2006 | .8754 | .9148 | .8345 | .8979 | ||||||||
Fiscal Year Ended 09/30/2005 | .8181 | .8601 | .7836 | .8542 | ||||||||
Fiscal Year Ended 09/30/2004 | .7551 | .7886 | .7138 | .7876 | ||||||||
Fiscal Year Ended 09/30/2003 | .6858 | .7404 | .6329 | .7404 |
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On March 28, 2008, the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the “Exchange Rate”) was US $0.98273 = $1.00 Canadian.
Risk Factors
History of losses, likelihood of future losses and dependence on additional financing
Globetech’s principle business activities include the acquiring and developing of mineral properties and if warranted the processing of related mineral resources. The Company is currently pursuing and evaluating potential mineral properties and other business ventures. The Company does not have any positive cash flow from operations. The Company relies on private placements, exercise of stock options and warrants to raise funds from equity.
The Company is subject to a number of significant uncertainties and risks including those described below and those described elsewhere in this Annual Report. These and other risk factors, may ultimately affect the Company in a manner and to a degree that cannot be foreseen at this time.
Exploration and Mining Risks
The business of exploration for minerals involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. The properties in which the Company has, or is acquiring an interest in have no known body of commercial ore. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explorations, cave-ins, landslides, and the inability to obtain suitable adequate machinery, equipment, or labour are other risks involved in the operation of mines and the conduct of exploration programs. The Company has relied on and may continue to rely upon consultants and others for exploration and development expertise. Although substantial benefits may be derived from the discovery of a major mineral deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis. The economics of developing mineral properties are affected by many factors including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment, and other such factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. The Company has no producing mines.
Development Risks
The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection.
Need for Additional Financing
Due to the nature of the Company’s business, there can be no assurance that the Company will be profitable. For at least the last five years, the Company has incurred losses. The Company has paid no dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. The only present source of funds available to the Company is through the sale of its equity shares. Even if the results of exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists. While the Company may generate additional working capital through further equity offerings or
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through the sale or possible syndication of its property, there is no assurance that any such funds will be available. If available, future equity financings may result in substantial dilution to purchasers under the offering. At present it is impossible to determine what amounts of additional funds, if any, may be required. The Company’s ability to maintain its interests in its mineral properties and to fund ongoing exploration costs will be entirely dependant in its ability to raise additional funds by equity financings. If the Company is unable to raise such funds it may suffer dilution or loss of interest in its mineral properties.
Mineral Prices
The mining industry in general is intensely competitive and there is no assurance that, even if commercial quantities of ore are discovered, a profitable market may exist for the sale of minerals produced by the Company. Factors beyond the control of the Company affect the marketability of any substances discovered. Mineral prices, in particular gold prices, have fluctuated widely in recent years. The marketability of minerals is also affected by numerous other factors beyond the control of the Company. These other factors include government regulations relating to price, royalties, allowable production, and importing and exporting of minerals.
Uninsured Risks
In the course of exploration, development and production of mineral properties, certain risks, and in particular, unexpected or unusual geological operating conditions including rock bursts, cave-ins, fires, flooding, and earthquakes may occur. The Company may decide not to take out insurance against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the securities of the Company.
Competition
The Company competes against other companies possessing greater financial resources and technical facilities than itself for the acquisition of mineral concessions, claims, leases, and other mineral interests as well as for the recruitment and retention of qualified employees.
Dependence on Key Management
The Company’s development to date has depended, and in the future will continue to depend, on the efforts of key management. The Company does not have management contracts with any of the management of the Company.
Environmental and Other Regulatory Requirements
Mineral exploration activities require permits from various governmental authorities and are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters. Companies engaged in the exploration and development of mineral properties generally experience increased costs, and delays as a result of the need to comply with applicable laws, regulations, and permits. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory of judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
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instalment of additional equipment, or remedial actions. Parties engaged in mineral exploration and development activities may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
Amendments to current laws, regulations, and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties.
Price Fluctuations: Share Price Volatility
In recent years, securities markets have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly those considered development stage companies, have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. In particular, the share price of the Company’s common shares fluctuated from a high of US $0.32 to a low of US $0.17 within the twelve (12) months ended September 30, 2007. There can be no assurance that continual fluctuations in price will not occur.
Permits and Licenses
The operations of the Company may require licenses and permits for various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.
Dividends
All of the Company’s available funds will be invested to finance the growth of the Company’s business and therefore investors cannot expect to receive a dividend on the Company’s common shares in the foreseeable future.
ITEM 4.
Information on the Company
Globetech Ventures Corp. (“Globetech” or the “Company”), a public company quoted on the OTC Bulletin Board under the symbol GTVCF, was incorporated under the laws of the Province of British Columbia on November 20, 1991 under the name Universal Enterprises Corp. The Company then changed its name to Colossal Resources Corp. on August 17, 1992 and became a reporting issuer with its shares listed for trading on the Vancouver Stock Exchange under the symbol CLP. On February 24, 1997 the Company voluntarily de-listed its shares from the Vancouver Stock Exchange. Its shares were listed for trading on the NASDAQ Small Cap Exchange under the symbol CLPZF on April 3, 1996. On July 28, 1998 the Company’s shares were de-listed from the NASDAQ Small Cap Exchange for failing to maintain a bid price of not less than US $1.00 per share. The Company’s common shares began quotation on the OTC Bulletin Board under the symbol CLPZF. On September 20, 2000 the Company changed its name to Globetech Ventures Corp. with a new trading symbol of GTVCF.
The Company’s head office and principal place of business is located at Suite 1128 – 789 West Pender Street, Vancouver, British Columbia V6C 1H2.
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Globetech’s principal business activities are the exploration and development of mineral properties with the intent of developing a mine and the production and processing of mineral resources. The Company is currently pursuing and evaluating mineral properties and potential business ventures. The Company does not have any mineral properties containing a known ore deposit.
British Columbia, Canada
On February 28, 2005, Globetech announced that it entered into an option agreement whereby the Company can earn a 100% interest in the Gladys Lake porphyry molybdenum property from Mr. John Peter Ross of Whitehorse, Yukon.
In order to earn a 100% interest, the Company is required to pay a total of $95,000, in ascending payments over a period of four years. The agreement also calls for the issuing of 400,000 shares of Globetech over this same period. On April 12, 2005, the Company issued 50,000 shares from treasury. After the four-year period, the Company agrees to pay an annual advance royalty of $25,000 commencing February 28, 2010. On completion of a bankable feasibility, the Company will issue to the vendor a further 400,000 shares of Globetech. The vendor will retain a 3% Net Smelter Return Royalty, 2% of which can be purchased by the Company on a pro-rata basis for the sum of $2,000,000 at any time within five years of commencement of commercial production. An initial down payment of $10,000 was made and the $15,000 payment for the March 21, 2006 payment. The Company has not made the March 21, 2007 payment yet, but has intentions to do so.
Date | Amount | Paid | Shares | Issued |
March 21, 2008 | 25,000 | 100,000 | 50,000 shares | |
issued | ||||
March 21, 2009 | 25,000 | 150,000 |
The Gladys Lake property is located approximately 30 air miles northeast of the town of Atlin, British Columbia just south of the western end of Gladys Lake. It is accessible by gravel road that leads from the Atlin Road approximately six miles north of Atlin. The Gladys Lake property consists of 50 new grid claims or cells. Each cell is approximately 300 metres by 500 metres in size. The history of the property started in 1969 when an Atlin prospector staked 232 claims covering the showing. In 1970 Amax optioned the property and completed a program of geological mapping, geochemical sampling road building and trenching. In 1971 Amax completed a five-hole diamond drilling program totalling 726 metres. This work was not filed for assessment. In 1978 Quest Explorations completed a program of recovering core from the 1971 program, logging the core and analyzing composites of the mineralized sections of the core.
A detailed geological description of the Gladys Lake is as follows: The property is underlain by a sequence of sediments of the Late Paleozoic Cache Creek Group. These rocks are intruded by small bodies of Late Mesozoic alaskite. The alaskite consists of a ring-dyke complex exposed at higher elevations and a probable large stock-like body at depth. Roughly centered about the alaskite is a quartz vein stockwork zone lying within a larger zone of weakly to intensely altered rocks. The alaskite complex has an outer diameter ranging from 1600 feet (500 m) to 2300 feet (700 m). The hornfelsed and altered zones are both roughly centered about the alaskite outcrop. The hornfelsed zone measures approximately 11,000 feet (3500 m) and 7500 feet (2000 m) respectively. The wallrock alteration zone lies within the hornfelsed zone. The long and short axis, respectively are approximately 8200 feet (2500 m) and 5500 feet (1500 m). It is characterized by pervasive weak to intense degrees of bleaching and silicification with attendant development of sericite occurring along fractures and disseminated along margins of quartz veins. Quartz veining occurs widespread throughout the alteration zone with sedimentary rocks and alaskite. Veins commonly range from 1/8 in to ¾ in wide and are relatively
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continuous and sharp walled. The quartz vein stockwork zone is roughly centered about the alaskite ring dyke complex. Sulphide minerals recognized on the property include pyrite, molybdenite chalcopyrite, and pyrrhotite. Very minor amounts of scheelite and wolframite have been observed. Minor amounts of molybdenite occur in quartz veins and to a lesser extent along fractures throughout the stockwork zone. Molybdenite occurs as medium grained flakes, books, and rosettes along margins of quartz veins within the stockwork zone and in most of the stringer zones. Also fine grained molybdenite occurs along dry fractures within the stockwork zone.
The geochemistry survey completed by Amax in 1970 produced an anomalous target 4000 feet (1200 m) by 2700 feet (800 m). This soil geochemical anomaly outlines the trace of the main molybdenum mineralization in the quartz stockwork zone.
Surface rock sampling from outcrop and trenching gave range from 0.02% to 0.05% MoS2. Core sampling in 1978 gave the following values:
Hole 1 | 220’ to 401’ | 179’ | 0.110% MoS2. |
Hole 2 | 200’ to 586’ | 386’ | 0.089% MoS2 |
Hole 3 | 72’ to 175’ | 103’ | 0.051% MoS2 |
332’ to 490’ | 168’ | 0.022% MoS2 | |
Hole 4 | not sampled | ||
Hole 5 | 520’ to 556’ | 36’ | 0.087% MoS2 |
The Gladys Lake property hosts a molybdenum deposit similar in tenor and size to the Adanac Deposit to the south. The property has an excellent anomalous soil footprint and weakly mineralized surface showings of molybdenite. Limited diamond drilling suggests that the grade of the mineralized body is similar to that at Adanac around 0.05 to 0.1% molybdenum.
Amapa State, Brazil
Globetech announced on March 9, 2004, that it finalized a definitive agreement (the “Agreement”) to acquire all the issued and outstanding shares of Braz Gold LtdA, a Brazilian company which owns title to approximately 130,000 acres (approximately 53,000 hectares) of mineral claims (the “Mineral Claims”) prospective for gold and other minerals in the Vila Nova Greenstone belt in Amapa State, northern Brazil.
The principal terms of the Agreement required the Company to issue 2,000,000 common shares at a deemed value of US $1.50 per share, which shares would be released over a 2 ½ year period. In addition, the Company issued to the vendors a net smelter return royalty (“NSR”) of 1% to a maximum of US $8,000,000. Other provisions in the Agreement include the Company’s requirement to fund through Braz Gold, property payments for a total of US $2,000,000 by December 2005 and to make minimum exploration expenditures of US $1,750,000 to December 2005. Upon completion of a bankable feasibility study the Vendors may compel the Company to repurchase the NSR for US $4,000,000 in cash or by way of the issuance of shares in its capital at a deemed price of US $4.00 per share. In addition, upon completion of such bankable feasibility study verifying a minimum commercial grade mineral deposit of one million ounces, the Company will make a payment of US $2,000,000 to the landowners.
The subject claims are located on the prolific Vila Nova greenstone belt, in the south-central part of Amapa State some 100 km northwest of the state capital of Macapa. The area is easily accessed by road and rail and has access to electricity as well as water from the substantial surrounding river systems. The Vila Nova greenstone belt forms part of a stable Precambrian Guyanan Shield rock formation, which in the adjacent countries of Venezuela, French Guiana, and Guyana, hosts world class gold deposits. The Omai gold deposit in Guyana, has a reserve of approximately 4.2 million ounces of gold. The Guyanan
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shield has historically produced large amounts of gold, some 4.8 million ounces having been mined in the 19th century alone. In the Vila Nova greenstone belt, in similar rocks to those found in Globetech’s claim area, the Amapari gold deposit lies north of the Company’s claim area. The Amapari gold deposit which has a resource in excess of 2 million ounces of gold, was recently acquired by Wheaton River Minerals for $105 million. Located to the south of Globetech’s claim area lies the large open-pit and underground vein-gold working of Mineracao do Vila Nova with a multiple parallel quartz-vein deposit showing visible gold. In December 2003, the Company commissioned a review of the mineral resource by an independent geologist.
Notwithstanding, the Company’s mineral claims may have characteristics or be adjacent to properties that have reserves or have produced gold, for clarification the Company’s mineral claims have no “reserves” as defined by the SEC.
It was determined by the Company that in spite of an interesting potential, this property was difficult for the Company to handle. The property is located in Brazil where the Company has limited experience. The property is an early stage exploration property where geological targets may yield no results. The Company was concerned that a great deal of money may have to be spent with limited results. The Company experienced difficulties in obtaining proper information. The Company decided from a risk management point of view to discontinue exploration of the Amapa property, during the year ended September 30, 2004 and recorded a write-down of mineral properties of $4,425,208 at that time.
In regards to the Amapa property in Brazil the Company is trying to cancel two million shares issued pursuant to the Amapa agreement. The Company believes that these shares should be cancelled, and is prepared to take whatever action is necessary.
ITEM 5
Operating and Financial Review and Prospects
The Company has prepared Consolidated Financial Statements in accordance with Canadian generally accepted accounting principles, which differ in certain respects from U.S. GAAP. You can read about some of the principal differences in Note 12 to the Consolidated Financial Statements, where you will find a reconciliation of our Consolidated Financial Statements and U.S. GAAP.
Results of Operations
Year Ended September 30, 2007
For the year ended September 30, 2007, the Company had a net loss of $600,851 compared to a net loss of $507,426 for the previous year. The main differences were consulting fees of $248,500 as compared to $261,499 in 2006, interest expense of $68,065 compared to $88,986, public relations of $83,358 compared to $10,710 and travel expense of $16,034 compared to $4,620. The Company has looked at projects in India, Singapore and Mexico in the past year contributing to consulting and travel costs. With the decrease in loans payable interest expense has also decreased. The Company incurred $83,406 for a public relation and shareholder information program.
Year Ended September 30, 2006
For the year ended September 30, 2006, the Company had a net loss of $507,426 compared to a net loss of $778,853 for the previous year The main differences were stock-based compensation of $579,654 expensed in the previous year compared to $nil in 2006, consulting fees of $261,499 in 2006 compared to $39,000 in the previous year. As there were no options granted in 2006, there was no stock-based
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compensation expense. The Company looked at a number of projects in 2006 resulting in increased consulting expense. Under the terms of a convertible debenture dated July 28, 2004 the holders exercised their right to obtain 257,812 cashless warrants. The Company issued 257,812 common shares at a value of $165,000.
Year Ended September 30, 2005
For the year ended September 30, 2005, the Company had a net loss of $778,853 compared to a net loss of $7,302,024 for the previous year. The main differences were stock-based compensation of $579,654 expensed in the current year compared to $2,429,100 in the previous year and the write-down of mineral properties of $4,425,208 in the previous year as compared to nil in the current year. Stock-based compensation is a non-cash expense computed as a result of stock options being granted, and a fair value derived from the trading price of the company’s stock market price. The current stock-based compensation was calculated on a volatility of 199%, an expected life of 3 years and an interest risk-free rate of 2.18% as compared to the previous year where the volatility was calculated at 172%, the expected life was 4 years and a risk-free rate of 2.92% . The fair value of the stock options was $0.34 per share as compared to $1.32 per share in the previous year.
On January 24, 2005 the Company announced that it was no longer pursing any exploration or development work on the Amapa property. It was decided that the environment was too difficult to work within and that results found could be of a very preliminary nature with a potential for a high cost of exploration. This write-down of $4,425,208 was taken in the previous year.
There was a general decrease in the administrative expenses for the current year notably for accounting and legal, consulting fees, public relations, and travel and promotion. In the previous year there was an active program to find a suitable mineral property and preparations being made in anticipation of the exploration of the Amapa property. When the Company decided not to pursue this property there was a void in activity. The Company has taken on the Gladys Lake property and completed a geological report. The Company intends to complete a proposed Phase 1 work program of $50,000 and if warranted the Phase 2 program of $125,000.
As a result of the settlement of a lawsuit with one of the Company’s previous lawyers, a refund of some $18,000 was receivable at September 30, 2005 and the reduction in legal expense of some $24,000.
Liquidity and Capital Resources
At September 30, 2007, the Company had a working capital deficiency of $169,063 as compared to the previous year end deficiency of $645,966. The Company retired loans payable of $374,776 by issuing of 1,873,880 shares at a price of $0.20. In addition, the Company issued 1,857,248 of treasury stock for the settlement of debts of $405,554 during the year ended September 30, 2007. During the year, 900,000 stock options were exercised at a price of $0.30 USD (equivalent to $0.33 CAD). Pursuant to the acquisition of the Gladys Lake option, the Company issued 50,000 shares.
At September 31, 2006, the Company had a working capital deficiency of $645,964. The Company issued 861,000 shares at $0.23 to retire debt of $199,270. The Company will need to do a financing to enable the Company to move ahead.
The Company needs to raise additional cash for working capital or other expenses to properly continue operations. We may encounter lower than anticipated opportunities to raise equity funding, higher than anticipated expenses, or opportunities for acquisitions of other business initiatives that require significant cash commitments, or other unanticipated problems or expenses that could result in a requirement for additional capital before that time. If we need to raise additional cash, financing may not be available to
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us on favorable terms, or at all. No assurance can be given that the Company will be able to raise sufficient funds. In addition, the Company will be required to raise additional funds for working capital.
At September 30, 2005, the Company had $51,085 in cash with a working capital deficiency of $321,582. The Company issued 80,000 of treasury stock for the settlement of debts of $40,637 and 100,000 shares for debts of $36,067 during the year ended September 30, 2005. Pursuant to the acquisition of the Gladys Lake option, the Company issued 50,000 shares.
Research and Development
There are no research and development tasks currently being undertaken.
Legal Proceedings
In regards to the Amapa property in Brazil that the Company was previously involved in, the Company is trying to cancel two million shares issued pursuant to the Amapa agreement. The Company believes that these shares should be cancelled, and is prepared to take whatever action is necessary.
Tabular Disclosure of Contractual Obligations
The following table details loans payable as at September 30, 2007:
Interest on loan payable to Oloris Investments Corp., due on demand, interest | $ | 36,250 | ||
at 10% per annum, |
The following table details loans payable as at September 30, 2006:
Loan payable to Oloris Investments Corp., due on demand, interest at 10% per | $ | 343,098 | ||
annum, |
On January 31, 2007 the Company entered into debt settlement agreements to retire all of the above debt indebtedness plus additional interest of $31,678 for a total of $374,776. The debt was settled on May 4, 2007 by the issuance of 1,873,880 shares at a price of $0.20 per share. Additional interest of $36,250 was paid by the issuance of 241,667 shares on January 15, 2008.
ITEM 6
Directors, Senior Management, and Employees
The directors, and senior management of the Company are as follows:
Name | Position | Year in WhichElectedor | |
Appointed | |||
Casey Forward | President, CEO & Director | 2003 | |
Dr. K. Sachdeva | Director | 2004 | |
Ian Bartholomew | Director | 2006 | |
Ping Shen | Chief Financial Officer | 2006 |
10
Casey Forward, President, CEO, Director
Casey Forward is a Certified General Accountant and has been running an independent accountancy practice in Canada since 1990. He has worked for public companies in Canada, the United States, and Great Britain. He has owned companies in Canada and, in particular, he was an owner and president of a company in the construction and land development business and an owner and president of a storage and transport company, both located in Edmonton, Alberta, Canada. Before entering the field of accountancy, he was studying molecular biology at the University of Manitoba.
Dr. K Sachdeva, Director
Dr. Sachdeva is a practicing acupressurist and a businessman in Vancouver B.C.
Ian Bartholomew, Director
Ian Bartholomew is a Chartered Accountant in Vancouver B.C.
Ping Shen, Chief Financial Officer
Ping Shen is a Certified General Accountant in Vancouver B.C.
Cash Compensation:
Total compensation accrued and/or paid (directly and/or indirectly) to all directors/senior management during the fiscal year ended September 30, 2007 was $140,000.
The Company has no formal management agreements with any director or member of senior management.
Director Compensation:
The Company has no formal plan for compensating its Directors for their service in their capacity as such, or for services rendered to the Company as consultants or experts.
Stock Options:
During the financial ended September 30, 2007 the following stock options were outstanding to senior management and directors. There was no options granted for the year ended September 30, 2007.
Market Value | ||||
of Securities | ||||
Securities | Underlying | |||
Under | Exercise or | Options on | ||
Options | Base Price of | the Date of | ||
Name | Granted | Security | Grant | Expiry Date |
Casey Forward | 55,000 | US $0.30 | US $0.29 | February 3, 2008 |
Dr. Sachdeva | 600,000 | US $0.30 | US $0.29 | February 3, 2008 |
Ian | 15,000 | US $0.30 | US $0.29 | February 3, |
11
Bartholomew | 2008 | |||
Ping Shen | 30,000 | US $0.30 | US $0.29 | February 3, 2008 |
These options have been cancelled on December 20, 2007 and have been replaced with new options at $0.15 for a period of three years from December 20, 2007.
The new options are as follows:
Market Value | ||||
of Securities | ||||
Securities | Underlying | |||
Under | Exercise or | Options on | ||
Options | Base Price of | the Date of | ||
Name | Granted | Security | Grant | Expiry Date |
Casey Forward | 600,000 | $0.15 | US $0.16 | December 20, 2010 |
Dr. Sachdeva | 600,000 | $0.15 | US $0.16 | December 20, 2010 |
Ian Bartholomew | 200,000 | $0.15 | US $0.16 | December 20, 2010 |
Ping Shen | 200,000 | $0.15 | US $0.16 | December 20, 2010 |
Board Practices
The Company has elected an audit committee of which it is desirable to have not fewer than three directors, of whom a majority shall not be officers or employees of the Company or an affiliate of the Company. As the Company is small it may be impossible at times to have three members of which two are independent. The audit committee’s functions are to monitor overall adherence to Company policy, the effectiveness of the Company’s internal audit personnel and their audit activities and to meet with the Company’s accountants and auditors on financial and audit matters, as appropriate.
Employees
As of September 30, 2007, the end of the most resent fiscal year, the Company had no employees.
ITEM 7
Major Shareholders and Related Party Transactions
The Company’s securities are recorded on the books of its transfer agent in registered form. The majority of such shares are registered in the name of intermediaries such as brokerage houses and clearing houses on behalf of their respective clients. The Company does not have knowledge of the beneficial owners thereof. To the best of its knowledge the Company is not directly nor indirectly owned or controlled by another corporation(s) or by a foreign government. The following table lists as of March 28, 2008 each person who, to the knowledge of the Company, owns more than 5% of the Company’s voting securities and the total amount of the Company’s voting securities owned by the Company’s officers and directors.
12
Title of Class | Name of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership | Percent of Total |
Common Shares | YOUNG.JT/TEN, JOAO LUIS PULGATTI & JOHN | 2,000,000 | 9.8% |
Officers and directors | 1,250,000 | 6.2% |
Related Party Transactions
(a) Loans from Related Parties
2007 | 2006 | 2005 | |||||||
Companies with common directors | |||||||||
Loan payable bearing interest at 10% per | |||||||||
annum* | $ | - | $ | $ | 231,101 | ||||
Previous President | |||||||||
Previously a loan payable bearing interest at | |||||||||
10% per annum | - | 36,747 | |||||||
$ | - | $ | - | $ | 267,848 |
Loans from related parties are unsecured, and have no fixed terms of repayment; accordingly fair value cannot be reliably determined.
* This amount is no longer due to a related company, having no common directors and has been reclassified as a loan payable.
(b) Related Party Transactions
The Company has entered into the following | |||||||||
transactions with related parties: | 2006 | 2006 | 2005 | ||||||
Management or consulting fees to officers of the | |||||||||
Company | $ | 84,000 | $ | 84,000 | $ | 46,000 | |||
Consulting fees to a director | 56,000 | - | - | ||||||
$ | 140,000 | $ | 84,000 | $ | 46,000 |
Included in accounts payable and accrued liabilities was $13,958 (2006 - $99,753) due to a director, and $12,000 (2006 - $42,335) due to an officer of the Company.
Amounts due to related parties do not bear interest, are unsecured, and have no fixed payment terms. Accordingly the fair value cannot be readily determined.
ITEM 8
Financial Information
The Company has elected to provide financial statements pursuant to Item 18.
13
The financial statements filed as part of this Annual Report are listed in “Item 18. Financial Statements”.
All financial statements herein, unless otherwise stated, are presented in accordance with Canadian GAAP. Such financial statements have been reconciled to U.S. GAAP. For information regarding applicable exchange rates that were in effect for Canadian dollars against United States dollars, see “Item 3. Key Information”.
Neither the Company nor any of its subsidiaries are subject or has recently been subject to any legal or arbitration proceeding, including any bankruptcy, receivership or similar proceedings and those involving any third-party, which may have or have had in the recent past, significant effect on the Company’s financial position or profitability. To the knowledge of the Company, there are no such legal or arbitration proceedings contemplated.
ITEM 9
The Offer and Listing
The following table lists the volume of trading, high, low, and closing sales prices for the Company’s common shares for the last six months, the last eight fiscal quarters, and the last four fiscal years.
US Dollars | ||||
Period Ended | High | Low | Closing | |
Monthly | ||||
March, 2008 | 0.18 | 0.12 | 0.17 | |
February, 2008 | 0.17 | 0.10 | 0.17 | |
January, 2008 | 0.19 | 0.10 | 0.14 | |
December, 2007 | 0.20 | 0.16 | 0.19 | |
November, 2007 | 0.34 | 0.17 | 0.17 | |
October, 2007 | 0.24 | 0.16 | 0.22 | |
Quarterly | ||||
December 31, 2007 | 0.34 | 0.16 | 0.19 | |
September 30, 2007 | 0.30 | 0.16 | 0.20 | |
June 30, 2007 | 0.31 | 0.17 | 0.27 | |
March 31, 2007 | 0.32 | 0.20 | 0.26 | |
December 31, 2006 | 0.32 | 0.19 | 0.25 | |
September 30, 2006 | 0.48 | 0.19 | 0.21 | |
June 30, 2006 | 0.82 | 0.24 | 0.27 | |
March 31, 2006 | 0.62 | 0.16 | 0.59 | |
Annually | ||||
September 30, 2007 | 0.32 | 0.17 | 0.27 | |
September 30, 2006 | 0.82 | 0.19 | 0.21 | |
September 30, 2005 | 0.67 | 0.13 | 0.17 | |
September 30, 2004 | 2.50 | 0.20 | 0.46 | |
September 30, 2003 | 1.65 | 0.05 | 0.28 |
14
The principal trading market is the OTC Bulletin Board where the common shares of the Company are quoted under the stock symbol GTVCF.OB. Effective February 19, 2004, the Company’s common shares were approved for trading over the counter on the Frankfurt and Berlin Stock Exchanges under the stock symbols GTVCF.F and GTVCF.BE respectively.
ITEM 10
Additional Information
Share Capital
Our authorized share capital as at September 30, 2007 was unlimited common shares without par value. Our issued and outstanding share capital at September 30, 2007 was 20,321,879.
All our shares, both issued and unissued, are common shares of the same class and rank equally as to dividends, voting powers and participation in assets upon liquidation. At any general meeting, subject to the restrictions on joint registered owners of our common shares, on a show of hands every shareholder who is present in person and entitled to vote has one vote and on a poll every shareholder has one vote for each share of which he or she is the registered owner and may exercise such vote either in person or by proxy. Our directors may, from time to time, declare and authorize payment of dividends. No common shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights. There are no provisions for surrender, sinking or purchase funds.
Options to acquire common shares granted to our directors and officers are described under “Item 6 –Directors, Senior Management and Employees – Executive Compensation.
Memorandum and Articles of Association
We are registered in British Columbia, Canada, certificate of incorporation No. 188691. We do not have any stated "objects" or "purposes" as the Company Act of the Province of British Columbia does not require it. Our memorandum (“Memorandum”) has unlimited common shares without par value.
Pursuant to the laws of British Columbia, the province has enacted a new company act, the Business Corporations Act. We have registered our transition documents with the registrar of companies and we have obtained shareholder approval to change to the provisions of the new company act at our annual general meeting on March 22, 2005. Our articles of association (“Articles of Association”) contain the following provisions:
Voting Rights
Shareholders shall have the right to receive notice of, to attend, and to vote at all general meetings. Except as otherwise provided in the Articles of Association, on a show of hands each holder of shares present in person and entitled to vote shall have one vote and upon a poll each such holder who is present in person or by proxy and entitled to vote shall have one vote in respect of every share held by him.
Variation of Class Rights and Alteration of Capital
15
(i) | We may by ordinary resolution increase the share capital, and cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person. | |
(ii) | By special resolution that requires a three-fourths majority, we may consolidate and divide all or any of the share capital into shares of larger amount, sub-divide the shares into shares of smaller amount. |
Transfer of Shares
(i) | Any member can transfer shares by delivering an instrument of transfer to our transfer agent. |
Directors
(i) | Our business is managed by the Directors who may exercise all powers subject to the provisions of the Articles of Association and the Business Corporations Act of British Columbia. | |
(ii) | The number of Directors shall be not less than four. At our last annual general meeting, the number of directors was five. A Director shall not be required to hold any shares in the capital of our Company. At each annual general meeting of our Company, all of the board of directors retire and our shareholders elect a new board. | |
(iii) | A Director shall not vote but can be counted in the quorum present on any motion in respect of any contract, arrangement, transaction or any other proposal in which he has an interest that is to his knowledge a material interest. | |
(iv) | The Directors shall be paid for their services as Directors such sums (if any) as the Directors may from time to time determine. | |
(v) | The Directors may be paid all reasonable travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings or otherwise in connection with our business. | |
(vi) | Directors can vote to remove a director at a directors meeting. |
Borrowing Powers
(i) | The Directors may exercise all of the powers to borrow money and to mortgage or charge its undertakings, properties, assets and uncalled capital, or any part thereof, and, subject to the provisions of the Articles of Association, to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of us or of any third party. |
Dividends and Distributions on Liquidation to Shareholders
(i) | The Directors may declare dividends, and need not give notice to any member. Subject to any priority, preference or special rights, all dividends shall be declared and paid according to the number of shares held on a specified date with respect of the period of which the dividend is paid. |
16
(ii) | The Directors may pay such interim dividends as they may determine. | |
(iii) | No dividend shall bear interest. |
General Meetings
(i) | Each year we hold a general meeting as the annual general meeting in addition to any other meetings in that year, and not more than 13 months shall elapse between the date of one annual general meeting and that of the next. The annual general meeting shall be held at such time and place, as the Directors shall appoint. | |
(ii) | All general meetings other than annual general meetings are extraordinary general meetings. The Directors may, whenever they think fit, convene an extraordinary general meeting. |
Committees of the Board of Directors
Our board of directors has established an audit committee. Our audit committee will recommend a firm to be appointed as independent auditors to audit financial statements and to perform services related to the audit, review the scope and results of the audit with the independent auditors, review with management and the independent auditors our annual operating results and consider the adequacy of the internal accounting procedures and the effect of the procedures relating to the auditors' independence. In addition, the audit committee will monitor the board's corporate governance practices, propose nominees annually for election to the board, make recommendations as to the composition of the committees of the board and review the functioning of the board and the powers, mandates and performance of the committees.
Audit Committee Members: | ||
1. | Casey Forward | |
2. | Dr. Kanwaljit Sachdeva – independent director with financial experience | |
3. | Ian Bartholomew – independent director with financial experience |
Our board of directors has established a compensation committee to review remuneration paid to senior officers of the Company.
Compensation Committee Members:
1. | Casey Forward | |
2. | Dr. K. Sachdeva |
Our board of directors has established a corporate governance committee to (1) identify and select qualified individuals to serve as directors of the Company and nominate such individuals for election as directors at the Company's annual meeting of shareholders (2) develop and establish corporate governance policies and procedures for the Company and (3) administer the Code of Ethics adopted by the Company
Corporate Governance Committee:
1. | Casey Forward | |
2. | Ian Bartholomew |
17
Exchange Control and Other Limitations Affecting Security Holders
There is no law or government decree of regulation in Canada that restricts the export or import of capital, or that affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements.
There is no limitation imposed by Canadian law or by the articles or other charter documents of a company on the right of a non-resident to hold or vote common shares of a company, other than as provided in theInvestment Canada Act, as amended (the “Investment Act”).
The Investment Act generally prohibits implementation of a reviewable investment by an individual, government, corporation, partnership, trust or joint venture that is non-Canadian unless the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. If an investment by a non-Canadian is not a reviewable investment, it requires the filing of a short notice.
An investment in common shares of a company by a non-Canadian that is a “WTO investor” would be reviewable if the value of the assets of the Company equalled or exceeded $184 million, the threshold established for 1999. In subsequent years, the threshold amount may be increased or decreased in accordance with the provisions of the Investment Act. A WTO investor is a member of the World Trade Organization, current members of which include the European Community, Germany, Japan, Mexico, the United Kingdom and the United States, or a WTO investor-controlled entity, as defined in the Investment Act.
An investment in common shares of a company by a non-Canadian, other than a WTO investor, would be reviewable under the Investment Act if it were an investment to acquire control of a company and the value of the assets were $5.0 million.
The Investment Act would not apply to certain transactions in relation to our common shares, including:
An acquisition of common shares of a company by any person made in the ordinary course of that person’s business as a trader or dealer in securities;
An acquisition of control of a company by an amalgamation, merger, consolidation or corporate reorganization following which the control of the Company, remains unchanged.
Taxation - Certain Canadian Income Tax Consequences to United States Investors
This section is to make United States persons aware and caution them as to some of the consequences of investing in the Company (a Canadian company).
A brief description of certain provisions of the tax treaty between Canada and the United States is included below. The consequences of state and local taxes are not considered. The following information is general and security holders should seek the advice of their own tax advisors.
TAXATION OF DIVIDENDS
A holder of a common share who is not resident in Canada for purposes of the Income Tax Act will be subject to Canadian withholding tax on dividends paid or credited to the holder of the common share. The rate of withholding tax on dividends is 25% of the amount of the dividend. This rate may be reduced under the provisions of an international tax treaty to which Canada is a party. Under the tax treaty that
18
Canada has entered into with the United States, the rate of Canadian withholding tax is generally reduced to 15%, or 5% in the case of a corporate holder which owns 10% or more of the voting shares. A foreign tax credit for the tax withheld may be available to a holder resident in the United States against U.S. federal income taxes.
DISPOSITION OF COMMON SHARES
A non-resident holder of a common share will not be subject to tax under the Income Tax Act in respect of a capital gain realized on the disposition of a common share unless the common share is a "taxable Canadian property" (as defined in the Income Tax Act). Shares of a corporation that are listed on a prescribed stock exchange are generally not considered to be taxable Canadian property. Taxable Canadian property includes any common share held by a non-resident if used in carrying on a business (other than an insurance business) in Canada. A non-resident whose common shares constitute taxable Canadian property will realize upon disposition, a capital gain (or a capital loss).
One-half of any capital gain realized by a holder (a taxable capital gain) will be included in computing the holder's income.
Non-residents are advised to consult their tax advisers with regard to the availability of a treaty exemption and their own particular circumstances.
Passive Foreign Investment Company
A foreign corporation with one or more U.S. shareholders is a PFIC if 75% or more of its income is passive income or if at least 50% of its assets would be invested in instruments which produce interest, dividends and/or capital gains. Unlike a controlled foreign corporation or a foreign personal holding company, there is no minimum percentage ownership by U.S. shareholder to trigger application of the PFIC rules. If a foreign corporation has a high enough percentage of passive income or assets, it is a PFIC as regards any U.S. shareholder no matter how small their ownership percentage of the foreign corporation and regardless of whether the U.S. shareholders, individually or in the aggregate, have the ability to control the business or investments of the foreign corporation.
If a person owns shares in a PFIC and sells them for a profit, that person must generally pro-rate its profit over all the years it held the shares in the PFIC, pay U.S. income tax on the profit allocated to each year at the highest U.S. rate in effect for that year, and pay interest on all the prior year’s tax, computed from the tax return due date for the year to which the income is attributable.
The above rule may not apply if a person elects to treat its investment as a "Qualified Electing Fund" (QEF). This election is made by attaching Form 8621 to the annual tax return. This will permit the annual inclusion of the QEF in a person’s pro-rata share of ordinary income and long-term capital gains.
We do not believe it was a passive foreign investment company during the fiscal period ended September 30, 2004 or any other year.
Future Developments
The foregoing discussion is based on existing provisions of the United States tax laws, existing and proposed regulations thereafter, and current administrative rulings and court decisions, all of which are subject to change. Any such changes could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many such instances have not yet been promulgated and which may have retroactive effect. Furthermore,
19
legislation has been proposed which would replace the PFIC provisions with a consolidated anti-deferral regime. While this legislation was vetoed, it may be re-introduced in subsequent years.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.
ITEM 11
Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
ITEM 12
Description of Securities Other Than Equity Securities
Not applicable.
PART II
ITEM 13
Defaults, Dividends Arrearages and Delinquencies
Not applicable.
ITEM 14
Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
ITEM 15
Controls and Procedures
Globetech has performed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as at September 30, 2007. Disclosure controls and procedures are designed to ensure that the material financial and non-financial information required to be disclosed in this Form 20-F is accumulated and communicated to its management including the chief executive officer and the principal accounting and financial officer. The disclosure controls and procedures also ensures that the Form 20-F that it files is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. The evaluation was performed under the supervision of the chief executive officer and the chief financial officer.
In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management, including the chief executive officer and chief financial officer, recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable
20
assurance of achieving the desired control objectives, and the Company’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
The Company’s management, with the participation of the chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-14(c) as of the end of the period covered by this Form 20-F. Based on that evaluation, the chief executive officer and chief financial officer have concluded that these disclosure controls and procedures are effective at the reasonable assurance level. As the Company is a small company without employees, the preparation of this report, and all financial reports are prepared by the chief executive officer and chief financial officer. The Company does employ consultants for some needs, all of whom report directly to the chief executive officer and chief financial officer
There was no changes in our internal control over financial reporting that occurred during our most recently completed fiscal year ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Extension of Compliance Date for Management’s Report on Internal Control Over Financial Reporting
The Company is currently considered a non-accelerated filer pursuant to Rule 12b-2 of the Exchange Act. Therefore, the Company is not currently required to make statements regarding the effectiveness of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. However, the Company and its management, including its President and Chief Financial Officer, recognize that the Company, as a small business issuer, will likely be required to comply with disclosure report requirements of Section 404 at some future date.
ITEM 16.A
Audit Committee Financial Expert
The Board of Directors has determined that Ian Bartholomew, member of the audit committee, qualifies as Audit Committee Financial Expert in accordance with the terms of Item 16.A of Form 20-F. For further information please refer to ITEM 6. – Directors, Senior Management, and Employees.
ITEM 16.B
Code of Ethics
Globetech Ventures Corp. has adopted a written code of ethics that applies to, among others, the principal executive officer, principal financial officer, and principal accounting officer, or such persons performing similar functions. The Code of ethics was filed as Exhibit 10.3 to the 2003 Form 20-F Annual Report.
Good ethics and good business are inseparable. We shall apply these high standards in all relationships including with fellow employees, customers, partners, shareholders, government officials, suppliers, communities, competitors, and the general public. In turn, we expect each of these constituencies to maintain equally high standards of conduct.
21
The Company, its employees and its agents must comply fully will all laws and regulations. No employee should permit his or her personal interest to conflict, or appear to conflict, with the interests of the Company. Employees must be free of any personal relationships, activities or financial affairs that may influence any business decisions that could affect the Company.
While it is impossible to cover every situation where a violation or conflict could occur, there are many areas where care is required, including corporate records, political contributions, gifts and entertainment, relations with auditors, compliance with laws and regulations, and confidential information. However, this is not a substitute for sound judgment. Any actual, potential, or perceived conflict of interest or ethical violation should be reported immediately.
It is the responsibility of the Board of Directors to ensure the Code of Ethics is understood and complied with.
ITEM 16.C
Principal Accountant Fees and Services
MacKay LLP was appointed the Company’s auditor effective March 27, 2003. Audit fees paid or accrued are as follows:
Audit fees (MacKay LLP) 2007 | $ | 19,000 | ||
Other fees in 2006 | Nil | |||
Audit fees (MacKay LLP) 2006 | $ | 12,000 | ||
Other fees in 2006 | Nil | |||
Audit fees (MacKay LLP) 2005 | 10,160 | |||
Other fees in 2005 | Nil |
ITEM 16.D
Exemptions from the Listing Standards for Audit Committees
Not applicable.
ITEM 16.E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
PART III
22
ITEM 17
Financial Statements
Not applicable.
ITEM 18
Financial Statements
See our consolidated financial statements beginning on page F-1.
23
Auditors' Report
To the Shareholders of
Globetech Ventures Corp.
We have audited the consolidated balance sheets of Globetech Ventures Corp. as at September 30, 2007 and 2006 and the consolidated statements of operations and deficit, shareholders’ equity (deficiency) and cash flows for each of the years in the three year period ended September 30, 2007 and the period from December 1991 to September 30, 2007. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Canada and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at September 30, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three year period ended September 30, 2007 and the period from December 1991 to September 30, 2007 in accordance with Canadian generally accepted accounting principles.
The financial statements as at September 30, 2001 and for period from December 1991 to September 30, 2001 were audited by another auditor who expressed an opinion without reservation on those statements in their report dated February 20, 2002.
“MacKay LLP” | |
Vancouver, Canada | |
January 28, 2008 | Chartered Accountants |
mackay.ca refers to the Canadian firm MacKay LLP
F-1
Comments by Auditors for U.S. Readers on Canada – United States Reporting Differences
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Our report to the shareholders is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors report when they are adequately disclosed in the financial statements. Canadian generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States. Application of accounting principles generally accepted in the United States would have affected results of operations for each of the years in the three year period ended September 30, 2007 and assets, liabilities and shareholders’ equity as at September 30, 2007 and 2006 to the extent summarized in note 12 to the consolidated financial statements.
“MacKay LLP” | |
Vancouver, Canada | |
January 28, 2008 | Chartered Accountants |
mackay.ca refers to the Canadian firm MacKay LLP
F-2
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Financial Statements
For the year ended September 30, 2007
in Canadian dollars
F-3
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Balance Sheets |
(in Canadian dollars) |
September 30, | September 30, | |||||
2007 | 2006 | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash | $ | 128 | $ | 283 | ||
GST refundable | 12,491 | 3,968 | ||||
12,619 | 4,251 | |||||
Equipment (note 3) | 1,076 | 1,500 | ||||
Mineral properties (note 4) | 94,231 | 77,731 | ||||
$ | 107,926 | $ | 83,482 | |||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts payable and accrued liabilities | $ | 145,432 $ | 307,119 | |||
Loans payable (note 6) | 36,250 | 343,098 | ||||
181,682 | 650,217 | |||||
SHAREHOLDERS' DEFICIENCY | ||||||
Capital stock | ||||||
Authorized | ||||||
Unlimited common shares with no par value | ||||||
Issued and outstanding - (note 7) | 35,225,667 | 33,824,961 | ||||
Contributed surplus | 2,701,878 | 3,008,754 | ||||
Deficit accumulated during the exploration stage | (38,001,301 | ) | (37,400,450 | ) | ||
(73,756 | ) | (566,735 | ) | |||
$ | 107,926 | $ | 83,482 |
Contingencies (Notes 4 and 10)
Casey Forward | ||
President | ||
Ping Shen | ||
Chief Financial Officer |
The accompanying notes form an integral part of these consolidated financial statements
F-4
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Statements of Operations and Deficit |
(in Canadian dollars) |
Period from | ||||||||||||
December 1991 to | For the year ended September 30, | |||||||||||
September 30, | ||||||||||||
2007 | 2007 | 2006 | 2005 | |||||||||
Revenue | $ | 846,207 | $ | - | $ | - | $ | - | ||||
Cost of revenues | 1,362,702 | |||||||||||
Gross Profit (loss) | (516,495 | ) | - | - | - | |||||||
Administrative expenses | ||||||||||||
Accounting and legal (note 5) | 1,179,068 | 44,658 | 44,335 | 36,079 | ||||||||
Amortization | 610,823 | 424 | 596 | 840 | ||||||||
Consulting fees (note 5) | 1,279,964 | 248,500 | 261,499 | 39,000 | ||||||||
Directors fees | 97,149 | - | - | - | ||||||||
Interest and bank charges | 805,855 | 68,065 | 88,986 | 29,923 | ||||||||
Interest on long term debt | 164,704 | - | - | - | ||||||||
Management fees (note 5) | 562,117 | 60,000 | 60,000 | 46,000 | ||||||||
Office and miscellaneous | 1,041,325 | 41,133 | 24,290 | 14,297 | ||||||||
Property examination costs | 20,213 | 20,213 | - | - | ||||||||
Public relations | 809,765 | 83,358 | 10,710 | 17,119 | ||||||||
Regulatory and transfer agent fees | 172,440 | 8,818 | 10,796 | - | ||||||||
Repairs and maintenance | 497,118 | - | - | - | ||||||||
Salaries and wages | 1,483,601 | - | - | - | ||||||||
Stock-based compensation | 3,008,754 | - | - | 579,654 | ||||||||
Telephone | 325,295 | 9,471 | 624 | 2,367 | ||||||||
Travel and promotion | 1,595,094 | 16,034 | 4,620 | 3,405 | ||||||||
13,653,285 | 600,674 | 506,456 | 768,684 | |||||||||
Income (loss) before other items | (14,169,780 | ) | (600,674 | ) | (506,456 | ) | (768,684 | ) | ||||
Other items | ||||||||||||
Equity loss from investment | (102,449 | ) | - | - | - | |||||||
Foreign exchange loss | (204,804 | ) | (182 | ) | (970 | ) | (10,169 | ) | ||||
Gain on settlement or write-down of debt | 237,100 | - | - | - | ||||||||
Impairment of notes receivable | (1,367,945 | ) | - | - | - | |||||||
Interest income | 339,777 | 5 | - | - | ||||||||
Miscellaneous income | 114,695 | - | - | - | ||||||||
Write-down of investment | (89,626 | ) | - | - | - | |||||||
Write-down of mineral properties | (4,857,651 | ) | - | - | - | |||||||
Recovery (write-off) of subsidiaries | (18,968,185 | ) | - | - | - | |||||||
(24,899,088 | ) | (177 | ) | (970 | ) | (10,169 | ) | |||||
Loss from operations before income taxes and non-controlling interest | (39,068,868 | ) | (600,851 | ) | (507,426 | ) | (778,853 | ) | ||||
Non-controlling interest | 1,067,567 | - | - | - | ||||||||
Net loss and comprehensive loss for the period | (38,001,301 | ) | (600,851 | ) | (507,426 | ) | (778,853 | ) | ||||
Deficit, beginning of period | - | (37,400,450 | ) | (36,893,024 | ) | (36,114,171 | ) | |||||
Deficit, end of period | $ | (38,001,301 | ) | $ | (38,001,301 | ) | $ | (37,400,450 | ) | $ | (36,893,024 | ) |
Basic and diluted loss per share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.05 | ) | |||
Weighted average number of shares | ||||||||||||
Basic and diluted | 17,315,172 | 15,036,926 | 14,340,414 |
The accompanying notes form an integral part of these consolidated financial statements
F-5
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Statements of Shareholders' Equity (Deficiency) |
(in Canadian dollars) |
Contributed | |||||||||||||||
Surplus and Equity | |||||||||||||||
Common Shares | portion of | Deficit accumulated | |||||||||||||
issued and fully | convertible | during the | |||||||||||||
Number of shares | paid | debentures | exploration stage | Total | |||||||||||
Balance December, 1991 | - | $ | - | $ | - | $ | - | $ | - | ||||||
Issuance of shares for cash | |||||||||||||||
Private placements | 1,280,001 | 159,500 | - | - | 159,500 | ||||||||||
Loss for the period | - | - | - | (32,080 | ) | (32,080 | ) | ||||||||
Balance September 30, 1992 | 1,280,001 | 159,500 | - | (32,080 | ) | 127,420 | |||||||||
Issuance of shares for cash | |||||||||||||||
By way of prospectus | 600,000 | 360,000 | - | - | 360,000 | ||||||||||
Exercise of options | 112,000 | 67,200 | - | - | 67,200 | ||||||||||
Exercise of warrants | 100,000 | 60,000 | - | - | 60,000 | ||||||||||
Issuance of shares for property | 150,000 | 90,000 | - | - | 90,000 | ||||||||||
Share issue costs | - | (83,205 | ) | - | - | (83,205 | ) | ||||||||
Loss for the year | - | - | - | (105,902 | ) | (105,902 | ) | ||||||||
Balance September 30, 1993 | 2,242,001 | 653,495 | - | (137,982 | ) | 515,513 | |||||||||
Issuance of shares for cash | |||||||||||||||
Private placements | 400,000 | 576,000 | - | - | 576,000 | ||||||||||
Share issue costs | - | (60,622 | ) | - | - | (60,622 | ) | ||||||||
Loss for the year | - | - | - | (403,571 | ) | (403,571 | ) | ||||||||
Balance September 30, 1994 | 2,642,001 | 1,168,873 | - | (541,553 | ) | 627,320 | |||||||||
Issuance of shares for cash | |||||||||||||||
Private placements | 418,000 | 1,121,400 | - | - | 1,121,400 | ||||||||||
Exercise of options | 204,000 | 347,440 | - | - | 347,440 | ||||||||||
Issuance of shares for finders fees | 35,069 | 99,570 | - | - | 99,570 | ||||||||||
Share issue costs | - | (108,570 | ) | - | - | (108,570 | ) | ||||||||
Loss for the year | - | - | - | (343,044 | ) | (343,044 | ) | ||||||||
Balance September 30, 1995 | 3,299,070 | 2,628,713 | - | (884,597 | ) | 1,744,116 | |||||||||
Issuance of shares for cash | |||||||||||||||
Private placements | 1,488,000 | 6,178,000 | - | - | 6,178,000 | ||||||||||
Exercise of options | 1,128,584 | 4,161,930 | - | - | 4,161,930 | ||||||||||
Issuance of shares for finders fees | 75,624 | 197,379 | - | - | 197,379 | ||||||||||
Share issue costs | - | (365,874 | ) | - | - | (365,874 | ) | ||||||||
Loss for the year | - | - | - | (1,533,474 | ) | (1,533,474 | ) | ||||||||
Balance September 30, 1996 | 5,991,278 | $ | 12,800,148 | $ | - | $ | (2,418,071 | ) | $ | 10,382,077 |
The accompanying notes form an integral part of these consolidated financial statements
F-6
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Statements of Shareholders' Equity (Deficiency) (continued) |
(in Canadian dollars) |
Contributed | |||||||||||||||
Surplus and Equity | |||||||||||||||
Common Shares | portion of | Deficit accumulated | |||||||||||||
issued and fully | convertible | during the | |||||||||||||
Number of shares | paid | debentures | exploration stage | Total | |||||||||||
Balance forward | 5,991,278 | $ | 12,800,148 | $ | - | $ | (2,418,071 | ) | $ | 10,382,077 | |||||
Issuance of shares for cash | |||||||||||||||
Exercise of options | 243,000 | 639,730 | - | - | 639,730 | ||||||||||
Exercise of warrants | 845,447 | 3,696,723 | - | - | 3,696,723 | ||||||||||
Issued on conversion of debt | 2,464,950 | 4,821,079 | - | - | 4,821,079 | ||||||||||
Issuance of common shares for | |||||||||||||||
acquisition of subsidiary | 171,282 | 1,124,745 | - | - | 1,124,745 | ||||||||||
Issuance of shares for finders fees | 65,298 | 457,086 | - | - | 457,086 | ||||||||||
Share issue costs | - | (472,562 | ) | - | - | (472,562 | ) | ||||||||
Equity portion of convertible debentures | - | - | 169,760 | - | 169,760 | ||||||||||
Loss for the period | - | - | - | (2,822,786 | ) | (2,822,786 | ) | ||||||||
Balance September 30, 1997 | 9,781,255 | 23,066,949 | 169,760 | (5,240,857 | ) | 17,995,852 | |||||||||
Contingent consideration on acquisition of subsidiary | - | (1,086,901 | ) | - | - | (1,086,901 | ) | ||||||||
Issued on conversion of debt | 277,776 | 261,679 | (59,219 | ) | - | 202,460 | |||||||||
10,059,031 | 22,241,727 | 110,541 | (5,240,857 | ) | 17,111,411 | ||||||||||
Capital stock consolidation (7.5:1) | (8,717,827 | ) | - | - | - | - | |||||||||
Issued on conversion of debt | 221,234 | 519,691 | (110,541 | ) | - | 409,150 | |||||||||
Issued on settlement of debt | 550,000 | 111,152 | - | - | 111,152 | ||||||||||
Loss for the year | - | - | - | (20,236,904 | ) | (20,236,904 | ) | ||||||||
Balance September 30, 1998 | 2,112,438 | 22,872,570 | (110,541 | ) | (25,477,761 | ) | (2,605,191 | ) | |||||||
Issued on settlement of debt | 1,433,364 | 1,604,029 | - | - | 1,604,029 | ||||||||||
Loss for the year | - | - | (706,147 | ) | (706,147 | ) | |||||||||
Balance September 30, 1999 | 3,545,802 | 24,476,599 | - | (26,183,908 | ) | (1,707,309 | ) | ||||||||
Issuance of shares for cash | |||||||||||||||
Exercise of options | 24,100 | 56,321 | - | - | 56,321 | ||||||||||
Exercise of warrants | 227,273 | 370,612 | - | - | 370,612 | ||||||||||
Issued on conversion of debt | 1,830,073 | 1,078,550 | - | - | 1,078,550 | ||||||||||
Issued on settlement of debt | 220,748 | 489,660 | - | - | 489,660 | ||||||||||
Subscriptions received in advance | - | 369,875 | - | - | 369,875 | ||||||||||
Share issue costs | - | (74,141 | ) | - | - | (74,141 | ) | ||||||||
Loss for the year | - | - | - | (438,663 | ) | (438,663 | ) | ||||||||
Balance September 30, 2000 | 5,847,996 | $ | 26,767,476 | $ | - | $ | (26,622,571 | ) | $ | 144,905 |
The accompanying notes form an integral part of these consolidated financial statements
F-7
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Statements of Shareholders' Equity (Deficiency) (continued) |
(in Canadian dollars) |
Contributed | |||||||||||||||
Surplus and Equity | Deficit accumulated | ||||||||||||||
Common Shares | portion of | during the | |||||||||||||
issued and fully | convertible | exploration stage - | |||||||||||||
Number of shares | paid | debentures | unaudited | Total | |||||||||||
Balance forward | 5,847,996 | $ | 26,767,476 | $ | - | $ | (26,622,571 | ) | $ | 144,905 | |||||
Issuance of shares for cash | |||||||||||||||
Private placement | 2,000,000 | 456,840 | - | - | 456,840 | ||||||||||
Issued for subscriptions received in advance | 227,273 | 369,875 | - | - | 369,875 | ||||||||||
Subscriptions received in advance | - | (369,875 | ) | - | - | (369,875 | ) | ||||||||
Issued on acquisition of equity investment | 500,000 | 192,075 | - | - | 192,075 | ||||||||||
Issued on settlement of debt | 914,670 | 502,784 | - | - | 502,784 | ||||||||||
Share issue costs | - | (45,492 | ) | - | - | (45,492 | ) | ||||||||
Loss for the year | - | - | - | (1,822,692 | ) | (1,822,692 | ) | ||||||||
Balance September 30, 2001 | 9,489,939 | 27,873,683 | - | (28,445,263 | ) | (571,580 | ) | ||||||||
Loss for the year | - | - | - | (319,713 | ) | (319,713 | ) | ||||||||
Balance September 30, 2002 | 9,489,939 | 27,873,683 | - | (28,764,976 | ) | (891,293 | ) | ||||||||
Loss for the year | - | - | - | (47,171 | ) | (47,171 | ) | ||||||||
Balance September 30, 2003 | 9,489,939 | 27,873,683 | - | (28,812,147 | ) | (938,464 | ) | ||||||||
Issuance of shares for cash | |||||||||||||||
Private placements | 1,797,674 | 1,299,990 | - | - | 1,299,990 | ||||||||||
Issued on conversion of debt | 652,000 | 432,000 | - | - | 432,000 | ||||||||||
Acquisition of Brazil Gold Ltda. | 2,000,000 | 4,050,000 | - | - | 4,050,000 | ||||||||||
Share issue costs | - | (135,690 | ) | - | - | (135,690 | ) | ||||||||
Contributed surplus | - | - | 2,429,100 | - | 2,429,100 | ||||||||||
Loss for the year | - | - | - | (7,302,024 | ) | (7,302,024 | ) | ||||||||
Balance September 30, 2004 | 13,939,613 | 33,519,983 | 2,429,100 | (36,114,171 | ) | (165,088 | ) | ||||||||
Issuance of shares for cash | |||||||||||||||
Private placement - August 4, 2004 - shares issued | |||||||||||||||
due to repricing clause | 302,326 | - | - | - | - | ||||||||||
Acquisition of Gladys Lake option | 50,000 | 18,504 | - | - | 18,504 | ||||||||||
Issued on conversion of debt | 180,000 | 76,704 | - | - | 76,704 | ||||||||||
Contributed surplus | - | - | 579,654 | - | 579,654 | ||||||||||
Loss for the year | - | - | - | (778,853 | ) | (778,853 | ) | ||||||||
Balance September 30, 2005 | 14,471,939 | 33,615,191 | 3,008,754 | (36,893,024 | ) | (269,079 | ) | ||||||||
Warrant shares issued | 257,812 | - | - | - | - | ||||||||||
Acquisition of Gladys Lake option | 50,000 | 10,500 | - | - | 10,500 | ||||||||||
Issued on conversion of debt | 861,000 | 199,270 | - | - | 199,270 | ||||||||||
Loss for the year | - | - | - | (507,426 | ) | (507,426 | ) | ||||||||
Balance September 30, 2006 | 15,640,751 | 33,824,961 | 3,008,754 | (37,400,450 | ) | (566,735 | ) | ||||||||
Acquisition of Gladys Lake option | 50,000 | 16,500 | - | - | 16,500 | ||||||||||
Issued on conversion of debt | 3,731,128 | 780,330 | - | - | 780,330 | ||||||||||
Issued on exercise of stock options | 900,000 | 603,876 | (306,876 | ) | - | 297,000 | |||||||||
Loss for the year | - | - | - | (600,851 | ) | (600,851 | ) | ||||||||
Balance September 30, 2007 | 20,321,879 | $ | 35,225,667 | $ | 2,701,878 | $ | (38,001,301 | ) | $ | (73,756 | ) |
The accompanying notes form an integral part of these consolidated financial statements
F-8
Globetech Ventures Corp. |
(An exploration stage company) |
Consolidated Statements of Cash Flows |
(in Canadian dollars) |
Period from | ||||||||||||
December 1991 to | For the year ended September 30, | |||||||||||
September 30, | ||||||||||||
2007 | 2007 | 2006 | 2005 | |||||||||
Operating Activities | ||||||||||||
Net loss for the period | $ | (38,001,301 | ) | $ | (600,851 | ) | $ | (507,426 | ) | $ | (778,853 | ) |
Items not involving cash | ||||||||||||
Accrued interest and foreign exchange on converted debt | 531,386 | 31,678 | 88,887 | - | ||||||||
Accrued interest on notes receivable | (83,213 | ) | - | - | - | |||||||
Amortization | 610,823 | 424 | 596 | 840 | ||||||||
Equity loss from investment | 102,449 | - | - | - | ||||||||
Impairment of notes receivable | 1,367,945 | - | - | - | ||||||||
Non-controlling interest | (1,067,567 | ) | - | - | - | |||||||
Shares issued on settlement of subsidiary debt | 267,370 | - | - | - | ||||||||
Write-down of investment | 89,626 | - | - | - | ||||||||
Write-down of mineral properties | 4,857,651 | - | - | - | ||||||||
Write-off subsidiaries, net of cash | 18,738,788 | - | - | - | ||||||||
Write-down of debt | (112,214 | ) | - | - | - | |||||||
Stock-based compensation | 3,008,754 | - | - | 579,654 | ||||||||
Change in non-cash working capital | ||||||||||||
GST refundable and other receivables | (199,571 | ) | (8,523 | ) | 24,569 | (28,537 | ) | |||||
Inventory | (299,208 | ) | - | - | - | |||||||
Prepaid expenses and deposits | 2,275 | - | 1,503 | 772 | ||||||||
Accounts payable and accrued liabilities | 3,494,998 | 243,867 | 357,893 | 18,362 | ||||||||
Net cash used in operating activities | (6,691,009 | ) | (333,405 | ) | (33,978 | ) | (207,762 | ) | ||||
Financing Activities | ||||||||||||
Advances from related parties | 1,284,949 | - | - | - | ||||||||
Loans payable | 36,250 | 36,250 | - | - | ||||||||
Net proceeds on issuance of convertible debentures | 4,949,465 | - | - | - | ||||||||
Shares issued for cash (net of issue costs) | 18,872,405 | 297,000 | - | - | ||||||||
Net cash provided from (used in) financing activities | 25,143,069 | 333,250 | - | - | ||||||||
Investing Activities | ||||||||||||
Notes receivable advanced | (1,284,732 | ) | - | - | - | |||||||
Purchase of subsidiaries, net of cash | (1,355,771 | ) | - | - | - | |||||||
Purchase of equipment | (12,367,763 | ) | - | - | - | |||||||
Expenditures on mineral properties | (2,478,099 | ) | - | (16,824 | ) | (31,903 | ) | |||||
Due from related parties | (525,227 | ) | - | - | (13,637 | ) | ||||||
Deposit | (440,340 | ) | - | - | - | |||||||
Net cash used in investing activities | (18,451,932 | ) | - | (16,824 | ) | (45,540 | ) | |||||
Change in cash | 128 | (155 | ) | (50,802 | ) | (253,302 | ) | |||||
Cash at beginning of period | - | 283 | 51,085 | 304,387 | ||||||||
Cash at end of period | $ | 128 | $ | 128 | $ | 283 | $ | 51,085 |
Supplemental cash flow information (note 9)
The accompanying notes form an integral part of these consolidated financial statements
F-9
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
1. | Nature of Operations and Going Concern | |
Globetech Ventures Corp. ("the Company") is incorporated under the laws of British Columbia, Canada, and its principal business activities include acquiring, exploring and developing mineral properties and the processing of related mineral resources. | ||
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. Continued operations of the Company are dependent on the Company's ability to receive continued financial support, complete equity financing, or generate profitable operations in the future. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business. | ||
2. | Significant Accounting Policies | |
These financial statements have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP") and reflect the significant accounting policies outlined below. These policies conform, in all material respects, with accounting principles generally accepted in the United States ("U.S. GAAP"), except as discussed in Note 12. | ||
a) | Basis of consolidation | |
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sacolco (Pty) Ltd. ("Sacolco"), Glowing Green Minerals Ltd. ("Glowing"), and its 60% owned subsidiary Qasim Mining Enterprises Ltd. ("QMEL"). These consolidated financial statements also include the accounts of the wholly owned subsidiaries of Sacolco, Impro Metals (Pty) Ltd. and Sachemco (Pty) Ltd. All significiant inter-company balances and transactions have been eliminated. | ||
During the year ended September 30, 1998, the Company determined that it was not feasible to continue the operations of Sacolco, Glowing and QMEL. Consequently, all net assets and related costs were written-off to operations. | ||
b) | Financial instruments | |
Effective October 1, 2006, the Company adopted CICA Handbook Section 1530,Comprehensive Income,CICA Handbook Section 3855,Financial Instruments - Recognition and Measurement,CICA Handbook Section 3861,Financial Instruments - Presentation and Disclosureand CICA Handbook Section 3865,Hedges.These new Handbook Sections provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied. Handbook Section 1530 also introduces a new component of equity referred to as comprehensive income. | ||
Under Section 3855, all financial instruments are classified into one of five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments are measured in the balance sheet at fair value except for loans and receivables, held-to-maturity instruments and other financial liabilities, which are measured at amortized cost. Subsequent measurement and changes in fair value will depend on their initial classification. Held-for-trading financials assets and liabilities are measured at fair value and changes in fair value are recognized into net income. Available-for-sale financial instruments are measured at their fair value with changes in fair value recorded in other comprehensive income. | ||
As a result of the adoption of these new standards, the Company has classified its receivables as loans and receivables. Accounts payable and accrued liabilities are classified as other liabilities, which are measured at amortized cost. | ||
As a result of application of Section 3855, the Company's deficit as at October 1, 2006. | ||
c) | Mineral properties | |
Mineral properties consist of exploration and mining concessions, options and contracts. Acquisition and exploration costs are capitalized and deferred until such time as the property is put into production, or the property is disposed of by sale or abandonment. If put into production, the costs of acquisition and exploration will be written off over the life of the property based on estimated economic reserves. Proceeds received from the sale of any interest in a property will be credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the acquisition and deferred exploration costs will be written off to operations. | ||
Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry norms for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property may be subject to unregistered prior agreements or inadvertent non-compliance with regulatory requirements. | ||
Management reviews capitalized costs on its mineral properties on an annual basis and will recognize impairment in value based upon current exploration results and upon management’s assessment of the future probability of profitable revenues from the property or sale of the property. | ||
Recorded costs of mineral properties and deferred exploration costs are not intended to reflect present or future values of mineral properties. The recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that changes in future conditions could require a material change in the recognized amount. | ||
The Company records mineral exploration tax credits using the cost reduction approach. These credits are accrued when the qualifying expenditures are made and there is reasonable assurance the tax credits will be realized. |
F-10
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
2. | Significant Accounting Policies continued | |
d) | Equipment | |
Equipment is carried at cost less accumulated amortization. Amortization is being provided for annually using the declining balance method at the following annual rates: |
Office equipment | 20% | ||
Computer equipment | 30% |
e) | Income (loss) per share | |
Income (loss) per share amounts have been calculated based on the weighted average number of shares outstanding during the year. The weighted average number of shares outstanding during the year ended September 30, 2007 was 17,315,172 (2006 - 15,036,926; 2005 - 14,340,414). | ||
| ||
The Company uses the treasury stock method of calculating fully diluted per share amounts whereby any proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to purchase common shares at the average market price during the period. The assumed conversion of outstanding common share options and warrants have an anti-dilutive effect in the presented years. | ||
| ||
f) | Foreign currency translation | |
| ||
The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the exchange rate prevailing at the transaction date. Exchange gains and losses arising on translation are included in the consolidated statements of operations. | ||
| ||
All of the Company's foreign subsidiaries are integrated with the Company and translated using the temporal method. Under this method, monetary assets and liabilities are translated at the rate of exchange at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Income and expenses are translated at rates which approximate those in effect on transaction dates. Gains and losses arising from restatement of foreign currency monetary assets and liabilities at each period end are included in operations. | ||
| ||
g) | Estimates | |
| ||
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported. | ||
| ||
h) | Income taxes | |
| ||
Income taxes are accounted for using the future income tax method. Under this method income taxes are recognized for the estimated income taxes payable for the current year and future income taxes are recognized for temporary differences between the tax and accounting bases of assets and liabilities and for the benefit of losses available to be carried forward for tax purposes that are more likely than not to be realized. Future income tax assets and liabilities are measured using tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. | ||
| ||
i) | Stock based compensation | |
| ||
The Company uses the fair value method to account for stock-based compensation. Stock-based compensation awards expense is calculated using the Black-Scholes option pricing model and is charged to operations as the options vest with an offsetting credit to contributed surplus. | ||
| ||
j) | Impairment of long-lived assets | |
| ||
The Company determines if an impairment loss exists by determining if the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If an impairment exists, the amount of the loss is measured as the amount by which the long-lived asset's carrying amount exceeds its fair value. | ||
| ||
k) | Share issue costs | |
| ||
Cost associated with the issuance of share capital are charged directly to share capital. |
F-11
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
3. | Equipment |
September 30, 2007 | ||||||||||
Accumulated | Net book | |||||||||
Cost | amortization | value | ||||||||
Office equipment | $ | 5,222 | $ | 5,015 | $ | 207 | ||||
Computer equipment | 26,313 | 25,444 | 869 | |||||||
$ | 31,535 | $ | 30,459 | $ | 1,076 |
September 30, 2006 | ||||||||||
Accumulated | Net book | |||||||||
Cost | amortization | value | ||||||||
Office equipment | $ | 5,222 | $ | 4,963 | $ | 259 | ||||
Computer equipment | 26,313 | 25,072 | 1,241 | |||||||
$ | 31,535 | $ | 30,035 | $ | 1,500 |
4. | Mineral Properties and Deferred Mineral Property Expenditures |
On February 28, 2005, Globetech announced that it had entered into an option agreement whereby the Company can earn a 100% interest in the Gladys Lake porphyry molybdenum property from Mr. John Peter Ross of Whitehorse, Yukon. The Gladys Lake property is situated in northwestern British Columbia approximately 50 km northeast of Atlin and 15 km north of the Adanac Molybdenum Corporation molybdenum deposit presently undergoing final engineering studies and permitting. | |
In order to earn a 100% interest, the Company is required to pay a total of $95,000, in ascending payments over a period of four years. The agreement also calls for the issuing of 400,000 shares of Globetech over this same period. Since April 12, 2005, the Company has issued 150,000 shares from treasury. After the four-year period, the Company agrees to pay an annual advance royalty of $25,000 commencing February 28, 2010. On completion of a bankable feasibility, the Company will issue to the vendor a further 400,000 shares of Globetech. The vendor will retain a 3% Net Smelter Return Royalty, 2% of which can be purchased by the Company on a pro-rata basis for the sum of $2,000,000 at any time within five years of commencement of commercial production. An initial down payment of $10,000 was made. | |
On November 13, 2007, the Company announced that it had entered into an option agreement with Forbes and Manhattan B.C. Ltd. ("Manhattan"). Under this agreement Manhattan may earn a 65% interest in the Gladys Lake molybdenum property by incurring $1.0 million in exploration and development expense and making cash payments to the vendor. Globetech will continue to issue shares to the vendor as previously agreed. | |
During 2007, the Company paid $NIL (2006 - $15,000) and issued an additional 50,000 (2006 - 50,000) shares. Under the option agreement with Manhattan, the Company no longer needs to make cash payments to the vendor. |
The schedule of share issuances is as follows: | Date | Shares | Status | |||||||
March 21, 2007 | 50,000 | Issued | ||||||||
March 21, 2008 | 100,000 | |||||||||
March 21, 2009 | 150,000 | |||||||||
For the year | For the year | Cumulative to | ||||||||
ended September | ended September | September 30, | ||||||||
The Company has incurred the following costs on the Gladys Lake property: | 30, 2007 | 30, 2006 | 2007 | |||||||
Acquisition costs | $ | 16,500 | $ | 54,004 | $ | 70,504 | ||||
Exploration costs | ||||||||||
Report | - | 13,199 | 13,199 | |||||||
Assessment work | - | 1,789 | 1,789 | |||||||
Geologist | - | 4,000 | 4,000 | |||||||
Transportation | - | 4,739 | 4,739 | |||||||
$ | 16,500 | $ | 77,731 | $ | 94,231 |
F-12
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
5. | Related Parties |
The Company has entered into the following transactions with related parties which are in the normal course of operations and have been valued in these financial statements at the exchange amount which is the amount of consideration established and agreed to by the related parties. |
For the year ended | |||||||
September 30, | September 30, | ||||||
2007 | 2006 | ||||||
Management fees to officers of the Company | $ | 60,000 | $ | 60,000 | |||
Consulting fees paid to a director | 56,000 | - | |||||
Paid or accrued accounting fees to an officer | 24,000 | 24,000 | |||||
$ | 140,000 | $ | 84,000 |
Included in accounts payable and accrued liabilities was $13,958 (2006 - $99,753) due to a director, and $12,000 (2006 - $42,335) due to an officer of the Company.
Amounts due to related parties do not bear interest, are unsecured, and have no fixed payment terms. Accordingly the fair value cannot be readily determined.
6. | Loans Payable |
2007 | 2006 | ||||||
Loans payable which were unsecured, due on demand and bearing | |||||||
interest at 10% per annum | $ | 36,250 | $ | 343,098 |
On January 31, 2007 the Company entered into debt settlement agreements to retire all of the above debt indebtedness plus additional interest of $31,678 for a total of $374,776. The debt was settled in part on May 4, 2007 by the issuance of 1,873,880 shares at a price of $0.20 per share. Additional interest of $36,250 has been recognized and the Company has agreed to issue an additional 241,667 shares as payment in full.
7. | Share Capital | |
a) | Common Shares | |
The authorized share capital of the Company is unlimited without par value. |
b) | Issued | Number of Shares | Share Capital | ||||||||
Balance, September 30, 2005 | 14,471,939 | $ | 33,615,191 | ||||||||
Warrant shares issued (note 7d ) | 257,812 | - | |||||||||
Acquisition of Gladys Lake option (note 4 ) | 50,000 | 10,500 | |||||||||
Shares issued for debt | 861,000 | 199,270 | |||||||||
Balance, September 30, 2006 | 15,640,751 | 33,824,961 | |||||||||
Acquisition of Gladys Lake option (note 4 ) | 50,000 | $ | 0.33 | 16,500 | |||||||
Exercise of options | 900,000 | $ | 0.33 | 297,000 | |||||||
Shares issued for debt (note 6 ) | 1,873,880 | $ | 0.20 | 374,776 | |||||||
Shares issued for debt | 1,296,745 | $ | 0.20 | 259,349 | |||||||
Shares issued for debt | 271,500 | $ | 0.20 | 54,300 | |||||||
Shares issued for debt | 289,003 | $ | 0.318 | 91,905 | |||||||
Contributed surplus allocated | - | 306,876 | |||||||||
Balance, September 30, 2007 | 20,321,879 | $ | 35,225,667 |
F-13
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
7. | Share Capital continued | |
c) | Stock Options |
The Company has adopted an incentive stock option plan (the "Plan"). The essential elements of the Plan provide that the aggregate number of shares of the Company's capital stock issuable pursuant to options granted under the Plan may not exceed 5,800,630 shares. Options granted under the Plan may have a maximum term of five (5) years. The exercise price of the options granted under the Plan will not be less than the fair market value of the common stock at the date of grant. The Plan Administrator shall specify the vesting schedule for each stock option granted.
The Company is authorized to grant options to directors, employees and consultants. Stock option transactions and the number of stock options outstanding are summarized as follows:
Number of | |||||||
Options | Weighted average exercise price | ||||||
Outstanding and exercisable at September 30, 2005 | 2,100,000 | US$ 0.54 | |||||
Options granted | - | - | |||||
Options cancelled / expired | - | - | |||||
Options exercised | - | - | |||||
Outstanding and exercisable at September 30, 2006 | 2,100,000 | US$ 0.54 | |||||
Options granted | - | - | |||||
Options cancelled / expired | - | - | |||||
Options exercised | (900,000 | ) | US$ 0.30 | ||||
Outstanding and exercisable at September 30, 2007 | 1,200,000 | US$ 0.78 |
The Company has 1,200,000 stock options of which 800,000, exercisable at a price of US$0.30, were granted on February 3, 2005 that expire on February 3, 2008 and 400,000, exercisable at a price of US$1.75, were granted on March 12, 2004, expiring on March 12, 2008. Subsequent to year end the balance of the 800,000 stock options were cancelled. See subsequent events.
The following table summarizes information about stock options outstanding at September 30, 2007:
Options Outstanding | Options Exercisable | |||||||||||||||
Number | Weighted average | Number | ||||||||||||||
outstanding at | remaining | Weighted average | exercisable at | Weighted average | ||||||||||||
Range of exercise | September 30, | contractual life exercise | price | September 30, | exercise price | |||||||||||
prices (USD$) | 2007 | (years) | (USD$) | 2007 | (USD$) | |||||||||||
$ 0.30 - $1.75 | 1,200,000 | 0.4 | $ | 0.78 | 1,200,000 | $ | 0.78 |
d) | Warrants | |
Pursuant to a convertible debenture agreement dated July 28, 2004 the holders held 1,000,000 warrants to purchase shares at $0.475 USD per share and exercised their right to obtain 257,812 cashless warrants in lieu of exercising the 1,000,000 warrants. During the year ended September 30, 2006, the Company issued 257,812 shares at a deemed value of $nil per share. | ||
At September 30, 2007, the Company had NIL (2006 - 600,000) common share purchase warrants outstanding to purchase NIL (2006 - 600,000) common shares of the Company. |
Warrants outstanding at September 30, 2006 | Issue date | Outstanding | Purchase price | Expiry date | |||||||||
June 30, 2004 | 300,000 | USD $ 1.00 | 30-Jun-07 | ||||||||||
April 23, 2004 | 300,000 | USD $ 1.00 | 23-Apr-07 |
F-14
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
8. | Income Taxes |
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
2007 | 2006 | 2005 | ||||||||
Loss before income taxes | $ | (600,851 | ) | $ | (507,426 | ) | $ | (778,853 | ) | |
Income tax recovery at statutory rates | 205,010 | 173,134 | 265,745 | |||||||
Effect of tax rate change | (17,602 | ) | (613,762 | ) | - | |||||
Non-deductible items for tax purposes | - | (53,599 | ) | (198,065 | ) | |||||
Non-capital loss expired | (128,034 | ) | (89,356 | ) | - | |||||
Unrecognized benefit of non-capital loss | - | - | (67,680 | ) | ||||||
Change in valuation allowance | (47,006 | ) | 583,583 | - | ||||||
$ | 12,368 | $ | - | $ | - |
The significant components of the Company's future income tax assets are as follows:
2007 | 2006 | 2005 | ||||||||
Future income tax assets | ||||||||||
Property, plant and equipment | $ | 9,357 | $ | 9,225 | $ | 9,950 | ||||
Mineral properties | 1,805,862 | 1,805,862 | 1,987,613 | |||||||
Net capital losses available | 3,384,604 | 3,384,604 | 3,725,249 | |||||||
Non-capital losses available | 814,398 | 755,829 | 816,292 | |||||||
6,014,221 | 5,955,520 | 6,539,104 | ||||||||
Valuation allowance | (6,014,221 | ) | (5,955,520 | ) | (6,539,104 | ) | ||||
$ | - | $ | - | $ | - |
The Company has incurred non-capital losses of approximately $2,627,029 which may be applied to reduce taxable income in future years. These non-capital losses will expire as follows:
2008 | $ | 456,841 | |
2009 | 277,536 | ||
2010 | 176,816 | ||
2014 | 446,530 | ||
2015 | 198,359 | ||
2026 | 506,830 | ||
2027 | 564,177 | ||
$ | 2,627,089 |
In addition, the Company has net capital losses of approximately $10,918,080 which may be applied against taxable capital gains in the future. These net capital losses can be carried forward indefinitely.
Also, the Company has available certain exploration and development expenditures to reduce taxable income of future years.
Future tax benefits which arise as a result of these future income tax assets have not been recognized in these financial statements as they are not considered more likely than not to be realized.
9. | Supplemental Cash Flow Information |
2007 | 2006 | 2005 | ||||||||
Financing Activity | ||||||||||
Share capital issued for: | ||||||||||
Mineral property | $ | 16,500 | $ | 10,500 | $ | 18,504 | ||||
Debt | $ | 374,776 | ||||||||
Long-term debt (repayment) | $ | (374,776 | ) | |||||||
Investing Activity | ||||||||||
Investment in mineral property | $ | 16,500 | $ | (10,500 | ) | $ | (18,504 | ) |
F-15
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
10. | Contingencies |
On January 24, 2005 the Company announced that it is no longer interested in pursuing any exploration or development work on the Amapa property in Brazil and the Agreement was terminated. The company recorded a write down of mineral properties of $4,425,208 during the year. | |
The Company has made a demand for the return of 2,000,000 shares issued in connection with the Amapa property due to breach of the contract. The Company is of the opinion that the breaches incurred by the defendants occurred before any non-performance of the contract on its part and that it should able to exercise its rights under the contract to repurchase the 2,000,000 shares issued for $100.00. The outcome is not determinable and no provision has been made in these financial statements. | |
11. | Subsequent event |
The Company issued 360,000 shares at a price of $0.2333 USD per share to settle debts totaling $84,000 USD. | |
On December 20, 2007 the Company cancelled 800,000 stock options and set 1,200,000 new options to directors and officers at a rate of $0.15 per share for a period of 3 years. Stock-based compensation is calculated at $129,946 using the Black Scholes Option Pricing Model assuming no dividends are to be paid, with a weighted average expected stock option life of 3 years, a weighted average volatility of the Company's share price of 107.1% and an average annual risk free interest rate of 3.8%. | |
12. | Differences between Canadian and United States Generally Accepted Accounting Principles ("GAAP") (in Canadian dollars) |
These financial statements are prepared in accordance with GAAP in Canada, which differs in some respects from GAAP in the United States. The material differences between Canadian and United States GAAP, in respect of these financial statements, are as follows: |
Period from | For the year ended | ||||||||||||
December 1991 | |||||||||||||
to September 30, | |||||||||||||
2007 | 2007 | 2006 | 2005 | ||||||||||
Loss for the year under Canadian GAAP | $ | (38,001,301 | ) | $ | (600,851 | ) | $ | (507,426 | ) | $ | (778,853 | ) | |
Mineral property expenditures expensed under US GAAP | (94,231 | ) | (16,500 | ) | (27,324 | ) | (50,407 | ) | |||||
Compensation expense on granting of stock options | (3,388,662 | ) | - | - | - | ||||||||
Compensation expense on release of escrow shares | (3,435,000 | ) | - | - | - | ||||||||
United States GAAP | $ | (44,919,194 | ) | $ | (617,351 | ) | $ | (534,750 | ) | $ | (829,260 | ) | |
Gain (loss) per share - United States GAAP | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.06 | ) | ||||
2007 | 2006 | ||||||||||||
Total assets under Canadian GAAP | $ | 107,926 | $ | 83,482 | |||||||||
Mineral property expenditures expensed under United States GAAP | (94,231 | ) | (77,731 | ) | |||||||||
Total assets under United States GAAP | $ | 13,695 | $ | 5,751 | |||||||||
Total liabilities under United States GAAP | $ | 181,682 | $ | 650,217 | |||||||||
Capital stock under Canadian GAAP | $ | 35,225,667 | $ | 33,824,961 | |||||||||
Cumulative compensation expense on granting of stock options | 3,388,662 | 3,388,662 | |||||||||||
Cumulative compensation expense on release of escrow shares | 3,435,000 | 3,435,000 | |||||||||||
Contributed surplus as reported | 2,701,878 | 3,008,754 | |||||||||||
Capital stock under United States GAAP | $ | 44,751,207 | $ | 43,657,377 | |||||||||
Deficit under Canadian GAAP | $ | (38,001,301 | ) | $ | (37,400,450 | ) | |||||||
Mineral property expenditures expensed under US GAAP | (94,231 | ) | (77,731 | ) | |||||||||
Cumulative compensation expense on granting of stock options | (3,388,662 | ) | (3,388,662 | ) | |||||||||
Cumulative compensation expense on release of escrow shares | (3,435,000 | ) | (3,435,000 | ) | |||||||||
Deficit under United States GAAP | $ | (44,919,194 | ) | $ | (44,301,843 | ) | |||||||
Shareholders' deficiency under United States GAAP | (167,987 | ) | (644,466 | ) | |||||||||
Shareholders' deficiency and liabilities under United States GAAP | $ | 13,695 | $ | 5,751 |
F-16
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
12. | Differences between Canadian and United States Generally Accepted Accounting Principles ("GAAP") (in Canadian dollars) continued | |
a) | Mineral property exploration and development | |
Under United States GAAP, all mineral exploration and development property expenditures are expensed in the year incurred in an exploration stage company until there is substantial evidence that a commercial body of ore has been located. Canadian GAAP allows resource exploration and development property expenditures to be deferred during this process. This has resulted in a decrease to assets of $94,231 and an increase in loss for the year of $16,500. | ||
b) | Stock based compensation | |
Statement of Financial Accounting Standards ("SFAS") No. 123R, "Accounting for Stock Based Compensation" ("SFAS 123R") requires companies to record compensation cost for stock-based employee compensation plans at fair value. Effective October 1, 2003 the Company has chosen to account for stock-based compensation using the fair value method. | ||
The Company accounts for stock-based compensation issued to non-employees in accordance with the provisions of SFAS 123R and the consensus in Emerging Issues Task Force No. 96-18, "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". | ||
c) | Loss per share | |
Under United States generally accepted accounting principles, the weighted average number of common shares outstanding excludes any shares that remain in escrow, but may be earned out based on the Company incurring a certain amount of exploration and development expenditures. The weighted average number of shares outstanding under United States generally accepted accounting principles for the years ended September 30, 2007, 2006 and 2005 were 17,315,172, 15,036,926, and 14,340,414 respectively. | ||
d) | Income taxes | |
Under United States GAAP, the Company would have initially recorded an income tax asset for the benefit of the resource deduction pools and losses carried forward. This asset would have been reduced to $nil by a valuation allowance. | ||
e) | New accounting pronouncements | |
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 (“FIN No. 48”), which became effective for the Company on October 1, 2007. This interpretation clarifies the accounting for income tax benefits that are uncertain in nature. Under FIN No. 48, a company will recognize a tax benefit in its financial statements for an uncertain tax position only if management’s assessment is that its position is “more likely than not” (i.e. a greater than 50 percent likelihood) to be upheld on audit based only on the technical merits of the tax position. This accounting interpretation also provides guidance on measurement methodology, derecognition thresholds, financial statement classification and disclosures, interest and penalties recognition, and accounting for the cumulative effect adjustment. The new interpretation is intended to provide better financial statement comparability among companies. | ||
Required annual disclosures include a tabular reconciliation of unrecognized tax benefits at the beginning and end of the fiscal period; the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate; the amounts of interest and penalties recognized in the financial statements; any expected significant impacts from unrecognized tax benefits on the financial statements over the subsequent 12- month reporting period; and a description of the tax years remaining to be examined in major tax jurisdictions. FIN No. 48 is effective for fiscal years beginning on or after December 15, 2006. The Company is currently assessing the impact, if any, that the adoption of FIN No. 48 will have on its financial statements. | ||
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (“FAS No. 157”), which will become effective for the Company on October 1, 2008. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Statement does not require any new fair value measurements but would apply to assets and liabilities that are required to be recorded at fair value under other accounting standards. The impact, if any, to the Company from the adoption of FAS 157 in 2008 will depend on the nature of the Company’s assets and liabilities at the time that they are required to be measured at fair value. | ||
In September 2006, the Securities Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) SAB No. 108. SAB No.108 provides guidance on how prior year misstatements should be taken into consideration when qualifying misstatements in current years financial statements for purposes of determining whether the current years’ financial statements are materially misstated. SAB No. 108 permits companies to record the cumulative effect of initial adoption by recording the necessary “correcting” adjustments to the carrying values of assets and liabilities as of the beginning of the 2006 year with the offsetting adjustments recorded to the opening balance of retained earnings. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006. The application of SAB No. 108 did not have an impact on the Company’s consolidated balance sheets, statements of operations or statements of shareholders’ equity for 2007, 2006 or 2005. |
F-17
Globetech Ventures Corp. | |
Notes to Consolidated Financial Statements | |
September 30, 2007 | |
(in Canadian dollars) |
12. | Differences between Canadian and United States Generally Accepted Accounting Principles ("GAAP") (in Canadian dollars) continued |
In September 2006, the Securities Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) SAB No. 108. SAB No.108 provides guidance on how prior year misstatements should be taken into consideration when qualifying misstatements in current years financial statements for purposes of determining whether the current years’ financial statements are materially misstated. SAB No. 108 permits companies to record the cumulative effect of initial adoption by recording the necessary “correcting” adjustments to the carrying values of assets and liabilities as of the beginning of the 2006 year with the offsetting adjustments recorded to the opening balance of retained earnings. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006. The application of SAB No. 108 did not have an impact on the Company’s consolidated balance sheets, statements of operations or statements of shareholders’ equity for 2007, 2006 or 2005.
In February 2007 the FASB issued FAS 159, which allows an irrevocable option, Fair Value Option (FVO), to carry eligible financial assets and liabilities at fair value, with the election made on an instrument-by-instrument basis. Changes in fair value for these instruments would be recorded in earnings. The objective of FAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.
Under FAS 159 an entity must elect whether to use the FVO on the date an item is initially recognized, with limited exceptions. Since the FVO is an instrument by instrument election, companies may record identical financial assets and liabilities either at fair value or on another measurement basis permitted by US GAAP, such as amortized cost. One exception to the instrument-by-instrument guidance is that for investments that would otherwise fall under equity method accounting, the election must be made for all of the investor’s financial interests (equity and debt, including guarantees) in the same entity.
The company does not expect to have any eligible financial instruments where it is necessary to make any elections.
F-18
ITEM 19
Exhibits
24
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
/s/ Casey Forward | |
Casey Forward | |
President and Chief Financial Officer |
March 29, 2008
25