UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURTIES EXCHANGE ACT OF 1934
For the period ended September 30, 2005
Commission File Number: 0-26414
GLOBETECH VENTURES CORP.
_______________________________________________________________
Suite 677 – 999 Canada Place, Vancouver, British Columbia V6C 3E1
_______________________________________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
Form 20-F
[ X ]
Form 40-F
[ ]
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Security Exchange Act of 1934.
Yes
[ ]
No
[ X ]
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Financial Statements
For the year ended September 30, 2005
In Canadian dollars
Auditors' Report
To the Shareholders of
Globetech Ventures Corp.
We have audited the consolidated balance sheets of Globetech Ventures Corp. as at September 30, 2005 and 2004 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, 2005 and the period from December 1991 to September 30, 2005. 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 audit.
We conducted our audit 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, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three year period ended September 30, 2005 and the period from December 1991 to September 30, 2005 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.
Vancouver, Canada
“MacKay LLP”
January 25, 2006
Chartered Accountants
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, 20 05 and shareholders’ equity as at September 30, 2005, 2004, and 2003 to the extent summarized in note 12 to the consolidated financial statements.
Vancouver, Canada
“MacKay LLP”
January 25, 2006
Chartered Accountants
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Balance Sheets
(in Canadian dollars)
September 30, | 2005 | 2004 |
ASSETS | ||
Current Assets | ||
Cash and cash equivalents | $ 51,085 | $ 304,387 |
Refundable GST | 10,330 | - |
Other receivables (note 3) | 18,207 | - |
Prepaid expenses and deposits | 1,503 | 2,275 |
81,125 | 306,662 | |
Equipment (note 4) | 2,096 | 2,936 |
Mineral properties (note 5) | 50,407 | - |
$ 133,628 | $ 309,598 | |
LIABILITIES | ||
Current Liabilities | ||
Accounts payable and accrued liabilities | $ 148,496 | $ 206,838 |
Loans payable to related parties (note 6) | - | 267,848 |
Loans payable (note 7) | 254,211 | - |
402,707 | 474,686 | |
SHAREHOLDERS' DEFICIENCY | ||
Capital stock | ||
Authorized | ||
unlimited common shares of no par value | ||
Issued and outstanding (note 8) | 33,615,191 | 33,519,983 |
Contributed surplus | 3,008,754 | 2,429,100 |
Deficit accumulated during the exploration stage | (36,893,024) | (36,114,171) |
(269,079) | (165,088) | |
$ 133,628 | $ 309,598 | |
Nature of operations and going concern (note 1) | ||
Contingencies (Note 11) |
“Casey Forward”
“Dr. K. Sachdeva”
_____________________
_________________
Director
Director
The accompanying notes form an integral part of these consolidated financial statements
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Statements of Operations and Deficit
(in Canadian dollars)
Period from December 1991 to September 30, | For the year ended September 30 | |||
2005 | 2005 | 2004 | 2003 | |
Revenue | $ 846,207 | $ - | $ - | $ - |
Cost of revenues | 1,362,702 | - | - | - |
Gross profit (loss) | (516,495) | - | - | - |
Administrative expenses | ||||
Accounting and legal | 1,090,075 | 36,079 | 108,992 | 31,240 |
Amortization | 609,803 | 840 | 1,186 | 1,677 |
Consulting fees | 769,965 | 39,000 | 163,148 | 8,732 |
Directors fees | 97,149 | - | - | - |
Interest and bank charges | 648,804 | 29,923 | 45,361 | 61,221 |
Interest on long-term debt | 164,704 | - | - | - |
Management fees | 442,117 | 46,000 | 41,117 | 30,000 |
Office and miscellaneous | 975,902 | 14,297 | 9,295 | 17,439 |
Public relations | 715,697 | 17,119 | 86,204 | 16,844 |
Regulatory and transfer agent fees | 152,826 | - | 10,962 | 4,455 |
Repairs and maintenance | 497,118 | - | - | - |
Salaries and wages | 1,483,601 | - | - | 19,213 |
Telephone | 315,200 | 2,367 | 7,245 | 5,583 |
Travel and promotion | 1,574,440 | 3,405 | 70,092 | 8,348 |
Stock-based compensation (note 8(b)) | 3,008,754 | 579,654 | 2,429,100 | - |
12,546,155 | 768,684 | 2,972,702 | 204,752 | |
Income (loss) before other items | (13,062,650) | (768,684) | (2,972,702) | (204,752) |
Other items | ||||
Equity loss from investment | (102,449) | - | - | - |
Foreign exchange gain (loss) | (203,652) | (10,169) | (16,424) | 17,874 |
Gain on settle or write-down of debt | 237,100 | - | 112,214 | - |
Impairment of notes receivable | (1,367,945) | - | - | - |
Interest income | 339,772 | - | 96 | 68 |
Miscellaneous income | 114,695 | - | - | 8,317 |
Write-down of investment | (89,626) | - | - | - |
Write-down of mineral properties | (4,857,651) | - | (4,425,208) | - |
Recovery (write-off) of subsidiaries | (18,968,185) | - | - | 131,322 |
(24,897,941) | (10,169) | (4,329,322) | 157,581 | |
Loss from operations before income taxes and non-controlling interest | (37,960,591) | (778,853) | (7,302,024) | (47,171) |
Non-controlling interest | 1,067,567 | - | - | - |
Net loss for the period | (36,893,024) | (778,853) | (7,302,024) | (47,171) |
Deficit, beginning of period | - | (36,114,171) | (28,812,147) | (28,764,976) |
Deficit, end of period | $ (36,893,024) | $(36,893,024) | $(36,114,171) | $(28,812,147) |
Loss per share | $ (0.05) | $ (0.60) | $ (0.00) | |
Weighted average number of shares – Basic and diluted | 14,340,414 | 12,246,150 | 9,489,939 |
The accompanying notes form an integral part of these consolidated financial statements
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Statements of Shareholders’ Equity (Deficiency)
(in Canadian dollars)
Number of shares | Common shares issued and fully paid | Contributed Surplus and Equity portion of convertible debentures | Deficit accumulated during the 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 placement | 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 | - | - | 347,400 |
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 |
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 |
Issued on 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 (note 4) | 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 period | - | - | - | (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 | $ 35,519,983 | $ 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 (note 5) | 50,000 | 18,504 | - | - | 18,504 |
Issued on conversion of debt | 180,000 | 76,704 | - | - | 76,704 |
Contributed surplus (note 8) | - | - | 579,654 | - | 579,564 |
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) |
The accompanying notes form an integral part of these consolidated financial statements
Globetech Ventures Corp.
(An exploration stage company)
Consolidated Statements of Cash Flows
(in Canadian dollars)
For the year ended September 30 | |||||||
Period from December 1991 to September 30, 2004 – unaudited | 2005 | 2004 | 2003 | ||||
Operating Activities | |||||||
Net loss for the period | $ (36,591,024) | $ (778,853) | $ (7,302,024) | $ (47,171) | |||
Items not involving cash | |||||||
Accrued interest and foreign exchange on converted debt | 410,821 | - | - | - | |||
Accrued interest on notes receivable | (83,213) | - | - | - | |||
Amortization | 609,803 | 840 | 1,186 | 1,677 | |||
Equity loss from investment | 102,449 | - | - | - | |||
Impairment of notes receivable | 1,367,945 | - | - | - | |||
Non-controlling interest | (1,067,567) | - | - | - | |||
Share issued on settlement of subsidiary debt | 267,370 | - | - | - | |||
Write-down of investment | 89,626 | - | - | - | |||
Write-down of mineral properties | 4,857,651 | - | 4,425,208 | - | |||
Write-down of subsidiaries, net of cash | 18,738,788 | - | - | - | |||
Write-down of debt | (112,214) | - | (112,214) | - | |||
Stock-based compensation | 3,008,754 | 579,654 | 2,429,100 | - | |||
Change in non-cash working capital | |||||||
Refundable GST and other receivables | (215,617) | (28,537) | 3,904 | 17,678 | |||
Inventory | (299,208) | - | - | - | |||
Prepaid expenses and advances | 772 | 772 | - | 3,054 | |||
Accounts payable and accrued liabilities | 2,893,238 | 18,362 | 127,577 | 24,514 | |||
Deposit | - | - | - | (36,522) | |||
Net cash provided from operating activities | (6,323,626) | (207,762) | (427,263) | (36,770) | |||
Financing Activities | |||||||
Advances from related parties | 1,284,949 | - | - | 23,433 | |||
Net proceeds on issuance of convertible debentures | 4,949,465 | - | - | - | |||
Shares issued for cash (net of issue costs) | 18,575,405 | - | 1,164,300 | - | |||
Net cash provided from financing activities | 24,809,819 | - | 1,164,300 | 23,433 | |||
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 | (2,461,275) | (31,903) | (375,208) | - | |||
Due from related parties | (525,227) | (13,637) | (66,162) | 20,186 | |||
Deposit | (440,340) | - | - | - | |||
Net cash used in investing activities | (18,435,108) | (45,540) | (441,370) | 20,186 | |||
Change in cash and cash equivalents | 51,085 | (253,302) | 295,667 | 6,849 | |||
Cash and cash equivalents at beginning of year | - | 304,387 | 8,720 | 1,871 | |||
Cash and cash equivalents at end of year | $ 51,085 | $ 51,085 | $ 304,387 | $ 8,720 | |||
Supplemental Cash Flow Information (Note 10) |
The accompanying notes form an integral part of these financial statements.
Globetech Ventures Corp.
Notes to Consolidated Financial Statements
September 30, 2005
(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 includes acquiring, exploring and developing of 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.
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 significant 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
All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
(c)
Investments
The Company accounts for its investments in affiliated companies over which it has significant influence on the equity basis of accounting, whereby the investments are initially recorded at cost, adjusted to recognize the Company's share of earnings or losses of the investee company and reduced by dividends received. Declines in market value below costs are recognized when such declines are considered to be other than temporary.
(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, 2005 was 14,340,414 (2004 - 12,246,150; 2003 - 9,489,939).
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 has 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 operation.
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 earnings.
(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 tax
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 likely 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 for accounting for stock-based compensation. Stock-based compensation awards expense is calculated using the Black-Scholes option pricing model and is charged to operations with an offsetting credit to contributed surplus.
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
(j)
Impairment of long-lived assets
The Company determines if an impairment loss exits 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 loss exists, the amount of the loss is measured as the amount by which the long-lived asset's carrying amount exceeds its fair value.
3.
Other receivables
Pursuant to a claim for unpaid legal services, an amount of $36,415 was paid into trust at the Supreme Court of British Columbia on November 24, 2004. The claim was settled in September 2005 wherein one-half of the amount was paid for legal services and the other half was returnable to the Company.
4.
Equipment
2005 | 2004 | |||
Cost | Accumulated amortization | Net book value | Net book value | |
Office equipment | $ 5,222 | $ 4,899 | $ 323 | $ 403 |
Computer equipment | 26,314 | 24,541 | 1,773 | 2,533 |
$ 31,536 | $ 29,440 | $ 2,096 | $ 2,936 |
5.
Mineral Properties and Deferred Resource Property Expenditures
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. The Gladys Lake property is situated in northwestern British Columbia approximately 50 km northeast of Atlin and 15 km north of the Adanac 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. 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. The balance of payments and schedule of share issuances is as follows:
Date | Amount | Shares |
March 21, 2006 | 15,000 | 50,000 |
March 21, 2007 | 20,000 | 50,000 |
March 21, 2008 | 25,000 | 100,000 |
March 21, 2009 | 25,000 | 150,000 |
At September 30, 2005 the Company had incurred the following costs on the Gladys Lake property:
Acquisition costs | $ 28,504 |
Exploration costs | |
Report | 13,161 |
Geologist | 4,000 |
Transportation | 4,742 |
Total | $ 50,407 |
On March 8, 2004, the Company entered into a Purchase Agreement whereby the Company had the option to acquire a 100% undivided interest in approximately 130,000 acres (approximately 53,000 hectares) of mineral claims prospective for gold in Amapa State, Brazil for 2,000,000 common shares of the Company at a deemed value of US$1.50 with 400,000 shares released immediately and 400,000 shares each six months thereafter until all 2,000,000 shares have been released. On January 24, 2005 the Company announced that it was 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 ended September 30, 2004.
6.
Related Parties
(a)
Loans from Related Parties
|
|
|
| 2005 | 2004 | 2003 | ||
Companies with common directors | ||||||||
Loan payable bearing interest at 10% per annum* | $ - | $ 231,101 | $ 214,977 | |||||
Previous President | . | |||||||
Previously a loan payable bearing interest at 10% per annum | - | 36,747 | 320,470 | |||||
Relative of the previous President | ||||||||
Loan payable bearing interest at 10% per annum | - | - | 49,830 | |||||
|
|
|
|
|
| $ - | $ 267,848 | $ 585,277 |
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. (note 7)
(b)
Related Party Transactions
The Company has entered into the following transactions with related parties: | 2005 | 2004 | 2003 | |||||
Consulting fees to officers of the Company | $ 46,000 | $ 22,348 | $ - | |||||
Consulting fees to relatives of a director |
| - | - | 8,732 | ||||
Accrued interest on loans payable to a director and companies with common directors. | - | 43,893 | 53,207 | |||||
Issued common shares to a director as settlement of debt | - | 432,000 | - | |||||
Paid or accrued finders fees to a former officer of the company | - | 90,450 | - | |||||
|
|
|
|
|
| $ 46,000 | $ 588,691 | $ 61,939 |
All of the above transactions have been in the normal course of operations and, in management's opinion, undertaken with the same terms and conditions as transactions with unrelated parties.
As of July 19, 2004, there are no related companies having common directors. As of July 19, 2004 the past president is no longer considered a related party. On October 5, 2004, the debt of $36,747 was paid down by an amount of $32,000, and the balance is included in accounts payable.
Also, included in accounts payable is $43,613 due to a director.
7.
Loans Payable
Loan payable to a former related party (companies with common directors) with interest at 10% per annum due on demand, unsecured and with no fixed date of repayment.
8.
Share Capital
(a)
Common Shares
The authorized share capital of the Company is unlimited without par value.
The Company has issued 14,471,939 (2004: 13,939,613) common shares of which 25,000 (2004 – 25,000) shares are held in escrow as at September 30, 2005.
A private placement dated August 2, 2004 contained a price reset clause whereby 697,674 shares were issued prior to September 30, 2004 and an additional 302,326 were issued on November 3, 2004 making a total issued of 1,000,000 shares.
During the year ended September 30, 2005, the Company issued 80,000 shares for the settlement of debts of $40,637 and 100,000 shares for debts of $36,067.
Pursuant to the option on the Gladys Lake mineral property, the Company issued 50,000 shares. See note 5.
(b)
Stock Options
The Company has adopted an incentive stock option plan (the "Plan"). The essential elements of the Plan provide that the agrregate number of shares of the Company's capital stock issuable pursuant to options granted under the Plan may not exceed 5,800,630 shares. Options granted under the Plan may have a maximum term of five (5) years. The exercise price of the options granted under the Plan will not be less than the fair market value of the common stock at the date of grant. The Plan Administrator shall specify the vesting schedule for each stock option granted.
The Company is authorized to grant options to directors, employees and consultants. Stock option transactions and the number of stock options outstanding are summarized as follows:
|
|
|
|
| Number of Options | Weighted average exercise price | |
Outstanding and exercisable at September 30, 2003 | - | - | |||||
Options granted | 2,925,000 | US$ 1.75 | |||||
Options cancelled / expired | - | - | |||||
Options exercised |
|
|
|
| - |
| - |
Outstanding and exercisable at September 30, 2004 | 2,925,000 | US$ 1.75 | |||||
Options granted | 1,700,000 | US$ 0.30 | |||||
Options cancelled / expired | (2,525,000) | US$ 1.75 | |||||
Options exercised |
|
|
|
| - |
| - |
Outstanding and exercisable at September 30, 2005 |
|
| 2,100,000 |
| US$ 0.54 |
The Company had 2,100,000 stock options of which 1,700,000 were granted on February 3, 2005 that expire on February 3, 2008 and 400,000 were granted on March 12, 2004, expiring on March 12, 2008.
The fair value of each option granted was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:
|
|
|
|
| February 25, 2005 | March 12, 2004 |
Strike price | $0.37 | $1.75 | ||||
Spot price | $0.37 | $1.45 | ||||
Dividend rate | 0 | 0 | ||||
Risk-free Interest rate |
| 2.18% | 2.92% | |||
Expected Volatility | 199% | 172% | ||||
Expected life | 3 years | 4 years | ||||
Options | 1,700,000 | 400,000 | ||||
Fair value | $0.34 | $1.32 |
Based on the above fair values for each grant compensation expense of $579,654 (2004 - $2,429,100) has been recorded in the statement of operations, and credited to contributed surplus.
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models not necessarily provide a reliable single measure of the fair value of the Company's stock options.
(c)
Warrants
At September 30, 2005, the Company had 2,100,000 (2004 - 2,100,000) common share purchase warrants outstanding to purchase 2,100,000 common shares of the Company.
Issue date | Warrants outstanding | Purchase price | Expiry date |
June 30, 2004 | 300,000 | USD $ 0.90 | June 30, 2006 |
USD $ 1.00 | June 30, 2007 | ||
April 23, 2004 | 300,000 | USD $ 0.90 | April 23, 2006 |
USD $ 1.00 | April 23, 2007 | ||
June 30, 2004 | 500,000 | USD $ 0.60 | June 30, 2006 |
July 28, 2004 | 1,000,000 | USD $ 0.475 | March 28, 2006 |
9.
Income Taxes
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
|
|
|
|
| 2005 | 2004 | 2003 |
Loss before income taxes |
|
| $ (778,853) | $ (7,302,024) | $ (47,171) | ||
Income tax recovery at statutory rates | 265,745 | 2,747,021 | 17,746 | ||||
Non-deductible items for tax purposes | (198,065) | (914,274) | 647 | ||||
Unrecognized benefit of mineral property pools | - | (1,664,763) | - | ||||
Unrecognized benefit of non-capital loss carryforwards |
|
| (67,680) | (167,984) | (18,393) | ||
|
|
|
|
| $ - | $ - | $ - |
The significant components of the Company's future income tax assets are as follows:
|
|
|
|
| 2005 | 2004 | 2003 |
Future income tax assets | |||||||
Property, plant and equipment | $ 9,950 | $ 10,655 | $ 8,054 | ||||
Mineral properties | 1,987,613 | 2,191,500 | 526,738 | ||||
Net capital losses available | 3,725,249 | 4,107,381 | 4,082,680 | ||||
Non-capital losses available for future periods |
|
| 816,292 | 918,391 | 1,127,082 | ||
6,539,104 | 7,227,927 | 5,744,554 | |||||
Valuation allowance |
|
| (6,539,104) | (7,227,927) | (5,744,554) | ||
|
|
|
|
| $ - | $ - | $ - |
The Company has incurred non-capital losses of approximately $2,392,415 which may be applied to reduce taxable income in future years. These non-capital losses will expire through 2015.
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 losses have not been recognized in these financial statements as they are not considered likely to be realized.
10.
Supplemental Cash Flow Information
|
|
|
|
| 2005 | 2004 | 2003 |
Financing activities | |||||||
Share capital issued for: | |||||||
Debts and accounts payable | $ 76,704 | $ 43,200 | $ - | ||||
Investment | 18,504 | 4,050,000 | - | ||||
Investing Activity | |||||||
Investment in mineral property |
|
|
| $ (18,504) | $ (4,050,000) | $ - |
11.
Contingencies
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.
12.
Differences between Canadian and United States Generally Accepted Accounting Principles (“GAAP”) (in Canadian dollars)
Period from December 1991 to September 30, 2005 | |||||||
|
| For the year ended |
| ||||
|
|
|
| 2005 | 2004 | 2003 | |
Loss for the year under Canadian GAAP | $ (36,893,024) | $ (778,853) | $ (7,302,024) | $ (47,171) | |||
Mineral property expenditures expensed under US GAAP | (50,407) | $ (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 |
|
|
| $ (43,767,093) | $ (829,260) | $ (7,302,024) | $ (47,171) |
Gain (loss) per share - US GAAP |
|
|
| $ (0.06) | $ (0.60) | $ (0.00) |
|
|
|
|
|
| 2005 | 2004 |
Total assets under Canadian GAAP | $ 133,628 | $ 309,598 | |||||
Mineral property expenditures expensed under US GAAP | (50,407) | - | |||||
Total assets under United States GAAP |
|
|
|
| $ 83,221 | $ 309,598 | |
Total liabilities under United States GAAP |
|
|
| $ 402,707 | $ 474,686 | ||
Capital stock as reported | $ 33,615,191 | $ 33,519,983 | |||||
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 | 3,008,754 | 2,429,100 | |||||
Capital stock under United States GAAP |
|
|
| $ 43,447,607 | $ 42,772,745 | ||
Deficit as reported | $ (36,893,024) | $ (36,114,171) | |||||
Mineral property expenditures expensed under US GAAP | (50,407) | - | |||||
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 |
|
|
|
| $ (43,767,093) | $ (42,937,833) | |
Shareholders' deficiency under United States GAAP |
|
|
| (319,486) | (165,088) | ||
Shareholders' deficiency and liabilities under United States GAAP |
|
| $ 83,221 | $ 309,598 |
(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 and an increase in loss for the year of $50,407.
(b)
Stock based compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") 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 123 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".
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing model do not necessarily provide a reliable single measure of the fair value of the Company's stock options.
(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, 2005, 2004 and 2003 were 14,340,414, 12,246,150, and 9,489,939, 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)
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130 "Reporting comprehensive income", SFAS 130 requires that total comprehensive income and comprehensive income per share be disclosed with equal prominence as net income and net income per share. Comprehensive income is defined as changes in shareholders' equity exclusive of transactions with owners such as capital contributions and dividends. There are no comprehensive income items for the periods reported.
(f)
New accounting pronouncements
In March 2004, the Emerging Issues Task Force (“EITF”) issued EITF 04-3, “Mining Assets: Impairment and Business Combinations.” EITF 04-3 requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets proven and probable reserves, as well as anticipated market price fluctuations, when assigning value in a business combination in accordance with SFAS 141 and when testing the mining assets for impairment in accordance with SFAS 144. The consensus is effective for fiscal periods beginning after March 31, 2004. The adoption of EITF 04-3 did not have a material impact on the Company’s financial position, results of operations or cash flows.
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)), which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” SFAS 123(R) supersedes APB Opinion No. 24, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The adoption of this statement did not have a material impact on the financial statements of the Company, as the Company was already accounting for share-based payments this way.
In December 2004, the FASB issued SFAS 153, “Exchanges of Non-Monetary Assets – An Amendment of APB Opinion No. 29.” The guidance in APB No. 29, “Accounting for Non-Monetary Transactions” is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends APB No. 29 to eliminate the exception for exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement will be effective for fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges incurred durin g fiscal years beginning after the date this Statement is issued. The Company believes this Statement will have no impact on the financial statements of the Company once adopted.
On March 17, 2005 the EITF issued EITF 04-6, “Accounting for Stripping Costs in the Mining Industry.” The consensus indicated that costs of removing overburden and waste materials (“stripping costs”) after production begins, represent variable production costs and should be considered a component of mineral inventory cost subject to the guidance in Chapter 4 of Accounting Research Bulletin No. 43, “Restatement and Revision of Accounting Research Bulletins.” EITF 04-6 is effective for fiscal years beginning after December 15, 2005 and upon adoption, can be applied by either retroactively restating prior periods or using a cumulative catch-up adjustment. The Company does not believe that adoption of this Statement will have a material effect on the Company’s financial statements.
The adoption of these new pronouncements is not expected to have a material effect on the Company's consolidated financial position or results of operations.
GLOBETECH VENTURES CORP.
Management Discussion and Analysis
For the Year Ended September, 2005
January 27, 2006
The Company
Globetech Ventures Corp. (“Globetech” or the “Company”), a public company listed 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 and 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 subsequently listed its shares for trading on the OTC Bulletin Board under the symbol CLPZ F. 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 1400 – 400 Burrard Street, Vancouver, BC, V6C 3G2.
Business of the Company
Globetech’s principal business activities include the acquiring and exploration of mineral properties and the processing of related mineral resources.
On February 28, 2005, Globetech 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 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. 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. The qualified person as defined by NI 43-101 for this news release is John Kowalchuk, P.Geo. Exploration Manager.
The Gladys Lake molybdenite deposit lies about 2 to 3 kilometres south of the west end of Gladys Lake approximately 50 kilometres northeast of the town of Atlin, British Columbia. The deposit received extensive work by Amax Explorations Ltd. in 1970 and 1971 when geological and geochemical surveys, trenching and 726 metres of diamond drilling were completed. The drill results were not documented for assessment work. In 1978, Quest Explorations Ltd. recovered the drill core, logged and assayed the core. The results are shown in the table below.
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 500 m (1600 feet) to 700 m (2300 feet).
The hornfelsed and altered zones are both roughly centered about the alaskite outcrop. The hornfels measures approximately 3500 m (11,500 feet) and 2000 m (6,600 feet) respectively. The wallrock alteration zone lies within the hornfelsed zone and has an elliptical shape with the long axis being approximately 2500 m (8200 feet) and the short axis being 1500 m (5000 feet). The wallrock alteration zone 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 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 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 1200 m (4000 feet) by 800 m (2700 feet). 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, supervised by R.H. Seraphim, Ph.D., P.Eng. in 1978, gave the following values:
Hole 1
220’ to 401’
181’
0.110% MoS2.
Hole 2
200’ to 586’
386’
0.089% MoS2
Hole 3
72’ to 175’
103’
0.051% MoS2
332’ to 490’
158’
0.022% MoS2
Hole 4
not sampled
Hole 5
520’ to 556’
36’
0.087% MoS2
These drill hole assays are historical data and have not been verified by the Company’s qualified person and are not 43-101 compliant. They were obtained from the assessment records held by the Government of British Columbia and the reputation of the Geologist R. H. Seraphim would suggest that it is reliable, however because it was not completed under the rigors of NI 43-101 it must only be viewed as historical data. The Company will be contracting an independent Qualified Person to visit the property and prepare a NI 43-101 report on the project.
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 mineralization is similar to that at Adanac with grades ranging from 0.05 to 0.1% MoS2.
Molybdenum is a metallic element which is most frequently used as an alloying addition in stainless steels. It enhances the strength, hardenability, weldability, toughness and corrosion resistance. After more than 20 years of low molybdenum prices, molybdenum has finally come into its own with present prices moving from US$4.00 per pound Mo in 2003 to US$20 per pound Mo to US$30 per pound Mo in early 2005. Much of this price rise is related to increases in markets and shortage of supply. China, which has a huge shortage of supply, has been the major cause of this meteoric rise in price. Regardless of the recent very high prices; low metal stockpiles and extensive international pipeline construction projects are likely to keep long term prices for molybdenum above US$10 per pound Mo.
Previously the Company had planned on an exploration program on a mineral property in Brazil. This property has been written off as at September 30, 2004 and the Company has no further interest in pursuing this property.
Selected Annual Information
The following information is derived from the consolidated financial statements of the Company for each of the three years ended September 30, 2005, 2004 and 2003.
Year Ended, September 30, 2005 | Year Ended, September 30, 2004 | Year Ended, September 30, 2003 | |
Total Revenues | $NIL | $NIL | $NIL |
Net income (loss) per share, basic and fully diluted | (0.05) | (0.60) | (0.00) |
Total Assets | 133,628 | 309,598 | 19,021 |
Long Term Liabilities | NIL | NIL | NIL |
Cash dividends declared | NIL | NIL | NIL |
Number of securities outstanding | 14,471,939 | 13,939,613 | 9,489,939 |
Results of Operations
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 recently 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.
In addition to this lawsuit, 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.
Summary of Quarterly Results
Results for the eight most recently completed quarters are summarized as follows:
Total revenues | Income (loss) before other items | Net Income (loss) for the period | Net income (loss) per share (basic and diluted) | |
September 30, 2005 | NIL | $ 70,768 | $ 68,084 | $ 0.01 |
June 30, 2005 | NIL | (37,046) | (44,531) | (0.00) |
March 31, 2005 | NIL | (702,610) | (702,610) | (0.06) |
December 31, 2004 | NIL | (99,796) | (99,796) | (0.00) |
September 30, 2004 | NIL | (850,613) | (5,180,203) | (0.40) |
June 30, 2004 | NIL | (204,916) | (204,376) | (0.02) |
March 31, 2004 | NIL | (1,878,748) | (1,879,038) | (0.20) |
December 31, 2003 | NIL | (38,425) | (38,407) | (0.00) |
Liquidity and Capital Resources
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.
The Company completed several private placements prior to the September 30, 2004 year end, 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 us on favorable terms, or at all. We have several share purchase warrants outstanding and we will endeavor to have some of these exercised.
Sales and Marketing
There are no specific sales and marketing plans currently undertaken. The Company has recently found a mining property to explore, and may undertake some public relations campaigns. The Company is currently developing a marketing strategy.
Subsequent Events
Nil
Off-Balance Sheet Arrangements
The Company has not entered any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in conformity with Canadian GAAP requires the Company to select from possible alternative accounting principles, and to make estimates and assumptions that determine the reported amounts of assets and liabilities at the balance sheet date, and reported costs and expenditures during the reporting period. Estimates and assumptions may be revised as new information is obtained, and are subject to change. The Company’s accounting policies and estimates used in the preparation of the financial statements are considered appropriate in the circumstances, but are subject to judgments and uncertainties inherent in the financial reporting process.
The Company follows accounting guidelines in determining the fair value of stock-based compensation. This calculated amount is not based on historical cost, but is derived based on subjective assumptions input into an option-pricing mode. The model requires that management made several assumptions as to future events: 1) estimate the average future hold period of issued stock options before exercise, expiry or cancellation; 2) future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); 3) and the appropriate risk-free rate of interest. The resulting value calculated is not necessarily the value which the holder of the option could receive in an arm’s length transaction, given that there is no market for the options and they are not transferable. It is management’s view that the value derived is highly subjective and dependent entirely upon the input assumptions made.
Changes in Accounting Policies including Initial Adoption
Nil
Financial Instruments and Other Instruments
The fair values of cash, accounts receivable, accounts payable and accrued liabilities and loans payable approximate their carrying values due to the short term or demand nature of these instruments. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GLOBETECH VENTURES CORP.
By: /s/ “Casey Forward”__________
Casey Forward, CEO
January 30, 2006