The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.
The accompanying notes are an integral part of these
consolidated interim financial statements.
Note 1 Organization, Nature of Operations and Basis of
Presentation
W&E Source Corp. (the Company)
was incorporated in the State of Delaware on October 11, 2005 and is based in
Montréal, Québec, Canada. The Company is providing air ticket reservations,
hotel reservations and other travel related services.
On August 25, 2011, the Company
incorporated a company called Airchn Travel Global, Inc. (ATGI) in the State
of Washington, USA. ATGI is a wholly owned subsidiary of the Company. ATGI
focuses on a business segment of travel businesses which includes air ticket
reservations, hotel reservations and other travel services.
On October 4, 2011, the Company
incorporated a company called Airchn Travel (Canada) Inc. (ATCI) in the
Province of British Columbia, Canada. ATCI is a wholly owned subsidiary of ATGI.
ATCI has a similar business segment as ATGI.
In January 2012, the Company changed
its name from News of China, Inc. to W&E Source Corp. and increased its
authorized shares to 500,000,000 shares. As a result of the name change, the
Companys listing symbol on OTCQB is also changed to WESC.
During the period ended March 31, 2012,
the Company incorporated a company named Airchn Travel (Beijing) Inc. (ATBI)
in Beijing, China. ATBI is also a wholly owned subsidiary of ATGI. ATBI has a
similar business segment as ATGI.
On December 15, 2012, Airchn Travel
(Beijing) Inc., a wholly owned subsidiary of W&E Source Corp. (the
Company), entered into the Share Purchase Agreement (the Agreement) with Mr.
Wu Hao (the Seller), a majority shareholder of Chengdu Baopiao Internet Co.,
Ltd. (Baopiao), to acquire part of his ownership in Baopiao which equals 51%
of all issued and outstanding stock of Baopiao (the Shares).
The Company will pay for the aggregate
purchase price of RMB 2,550,000 for the Shares in cash and by assuming the
Sellers debt to Baopiao in the amount of RMB1,800,000 (approximately
US$289,000) (the Debt). According to the terms of the Agreement, the Company
will assume the Debt upon execution of the Agreement and pay the Seller the
remaining RMB750,000 of the purchase price within 20 days from the execution of
the Agreement. Also at execution, the Company will pay Baopiao RMB200,000 as
repayment of the Debt and satisfy the remaining Debt of RMB1,600,000 within 20
day from the execution of the Agreement.
Also pursuant to the Agreement, the
Seller will provide guaranties that other than the information including
financial statements provided to the Company, Baopiao does not have any other
debts, and no third party has any rights or liens on the assets of Baopiao. The
Seller and Baopiao will also indemnify the Company against any damages,
liabilities, losses and expenses, which the Company may sustain or suffer due to
any breach of the guaranties made by the Seller or Baopiao.
Baopiao has obtained the necessary
shareholder approval for the transfer of the Shares and will register the
transfer of the Shares with the applicable State Administration for Industry and
Commerce within three days from the date of the Agreement.
In connection with the Agreement, the
Company also entered into an agreement with the Seller and Baopiao that as an
incentive for the management team of Baopiao, the Company will reserve up to 26
million shares of its common stock for issuance to the Baopiao employees upon
achievement of certain milestones over the next three years.
The Share Purchase Agreement with Mr.
Wu Hao was not completed in January 2013, and both the Company and Mr. Wu Hao
agreed to terminate the agreement entered on December 15, 2012.
6
Note 2 Summary of Significant Accounting Policies
a.
Basis of
presentation.
The accompanying interim consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the
Securities and Exchange Commission (the SEC). In the opinion of management,
the financial statements include all adjustments of a normal recurring nature
necessary for a fair statement of the results for the periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in conjunction with generally accepted accounting principles have been
condensed or omitted as permitted by the rules and regulations of the United
States Securities and Exchange Commission (SEC), although the Company believes
that the disclosures contained in this report are adequate to make the
information presented not misleading. The unaudited consolidated balance sheet
information as of September 30, 2017 was derived from the consolidated audited
financial statements included in the Companys Annual Report on Form 10-K for
the year ended June 30, 2017. These unaudited consolidated financial statements
should be read in conjunction with the annual consolidated audited financial
statements and the notes thereto included in the Companys Annual Report on Form
10-K for the year ended June 30, 2017, and other reports filed with the SEC.
Operating results for the three months ended September 30, 2017 are not
necessarily indicative of the results that may be expected for the full year
ended June 30, 2018.
The accompanying unaudited interim
consolidated financial statements reflect all adjustments of a normal and
recurring nature, which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows of the
Company for the interim periods presented. The results of operations for these
periods are not necessarily comparable to, or indicative of, results of any
other interim period or for the fiscal year taken as a whole.
b.
Foreign currency
translation.
ATCI's and ATBIs functional currency
for operations and expenditure is the Canadian dollar and Chinese Yuan. However,
the Company's reporting currency is in U.S. dollars. Therefore, the financial
statements for all periods presented have been translated into U.S. dollars
using the current rate method. Under this method, the income statement and the
cash flows for each period have been translated into U.S. dollars using the
average rate of the reporting period, and assets and liabilities have been
translated using the exchange rate at the end of the period. All resulting
exchange differences are reported in the cumulative translation adjustment
account as a separate component of stockholders equity.
c.
Principles of
consolidation.
The unaudited consolidated statements
include the accounts of the Company and its wholly owned subsidiaries, ATGI,
ATCI and ATBI. All inter-company transactions and balances were eliminated.
d.
Use of
Estimates.
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the financial statements and the reported
amounts of revenues and expense during the period. Actual results could differ
from those estimates.
e.
Loss per
share.
Basic loss per share (EPS) is
computed by dividing net income available to common stockholders by the weighted
average number of common shares outstanding during the period, excluding the
effects of any potentially dilutive securities. Diluted EPS gives effect to all
dilutive potential of shares of common stock outstanding during the period
including stock options or warrants, using the treasury stock method (by using
the average stock price for the period to determine the number of shares assumed
to be purchased from the exercise of stock options or warrants), and convertible
debt or convertible preferred stock, using the if-converted method. EPS excludes
all potential dilutive shares of common stock if their effect is anti-dilutive.
There were no dilutive securities at September 30, 2017 and June 30, 2017.
7
f.
Revenue
recognition.
The Company recognizes revenue when it
is realized or realizable and earned. The Company considers revenue realized or
realizable and earned when it has persuasive evidence of an arrangement,
delivery has occurred, the sales price is fixed or determinable, and
collectability is reasonably assured. Revenue, which primarily consists of
commission fees from air ticketing and hotel booking operations, is recognized
as tickets and hotels are booked, and is recorded on a net basis (that is, the
amount billed to a customer less the amount paid to a supplier) as the Company
acts as an agent in these transactions.
g.
Cash and cash
equivalents.
The Company includes in cash and cash
equivalents all short-term, highly liquid investments that mature within three
months or less of their acquisition date. Cash equivalents consist principally
of investments in interest-bearing demand deposit accounts and liquidity funds
with financial institutions and are stated at cost, which approximates fair
value. As of September 30, 2017 and June 30, 2017, we have no cash equivalents.
h.
Recently issued
accounting pronouncements.
The Company does not expect that any
recently issued accounting pronouncement will have a significant impact on the
results of operations, financial position, or cash flows of the Company.
Recently Issued Accounting
Pronouncements
In August 2016, the FASB issued ASU
2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments. The new guidance is intended to reduce diversity in
practice in how certain transactions are classified in the statement of cash
flows. ASU 2016-15 is effective for public business entities for fiscal years
beginning after 15 December 2017, and interim periods within those years. For
all other entities, it is effective for fiscal years beginning after 15 December
2018, and interim periods within fiscal years beginning after 15 December 2019.
Early adoption is permitted. Entities will have to apply the guidance
retrospectively, but if it is impracticable to do so for an issue, the
amendments related to that issue would be applied prospectively. The Company is
currently evaluating the impact of the adoption of this guidance on its
consolidated financial statements, if any.
On November 17, 2016, the FASB issued
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. Entities will
be required to show the changes in the total of cash, cash equivalents,
restricted cash and restricted cash equivalents in the statement of cash flows.
As a result, entities will no longer present transfers between cash and cash
equivalents and restricted cash and restricted cash equivalents in the statement
of cash flows. There is no impact of the adoption of this guidance on its
consolidated financial statements.
i.
Going
Concern.
As reflected in the accompanying
unaudited consolidated financial statements, the Company had accumulated
deficits of $1,133,585 and $1,085,132, and net losses of $6,504 and $12,903,
respectively, for the three months ended September 30, 2017 and 2016. The
Company currently has limited business activities to generate funds from its own
operations and has not yet achieved profitable operations for the three months
ended September 30, 2017. These factors raise substantial doubt about our
ability to continue as a going concern within one year after the date that the
financial statements are issued. The Companys ability to continue as a going
concern is dependent on its ability to raise additional capital and carry out
its business plan by seeking a profitable business strategy or new
opportunities. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Management believes that the current
efforts to obtain additional funding from independent investors or from the
management and implementation of its strategic plans and seeking more business
opportunities for the Company should allow the Company to continue as a going
concern. There are no assurances that additional funds will be available when
needed from any source or, if available, will be available on terms that are
acceptable to us, or that the Company will succeed in implementing its business
strategy.
8
Note 3 Prepayment & Security Deposit
As of September 30, 2017, the Company
prepaid a security deposit of $12,191 (CAD$15,000) (June 30, 2017 - $11,565) to
Consumer Protection British Columbia Province for the guarantee of service
quality.
Note 4 - Accounts Payable and Accrued Liabilities
As of September 30, 2017, accounts
payable and accrued liabilities of $7,973 (June 30, 2017 - $10,681) consists of
payment for legal fees of $2,205, $3,350 in audit fees, $2,200 in filing fees
and others of $218.
Note 5 Related Parties
Mrs. Hong Ba serves as the Chief
Executive Officer and Director of the Company. Mr. Feng Li, the husband of Mrs.
Hong Ba, is the owner of the Canada Airchn Financial Inc. (CAFI). Mr. Chen Xi
Shi is the former Chief Financial Officer and Director of the Company. The
shareholders make advances to the Company from time to time for the Companys
operations. These advances are due on demand and non-interest bearing.
During the three months ended September
30, 2017, the Company owned by a director of the Company charged $1,916 (2016 -
$1,858) in rent and $9,752 has been due to the related party (2016 - $7,236 of
debt was transferred to an independent investor of the Company).
During the three months ended September
30, 2017, the CEO of the Company advanced $152 (2016 Nil) to the Company for
operating expenditure.
During three months ended June 30,
2016, the former director of the Company transferred the debt of $25,920 in full
to a related party, the sister in law of the CEO of the Company, and such debt
was cancelled in exchange for the issuance of 4,712,727 common shares of the
Company. As of September 30, 2017, the fair market value of the share issuance
was $47,127.
Note 6 Common Stock
The Company is authorized to issue
500,000,000 shares of common stock with par value of $0.0001.
As of September 30, 2017 and June 30,
2017, 82,489,391 and 82,489,391 shares of common stock were issued and
outstanding, respectively.
On August 5, 2016, the Company entered
into Debt Conversion Agreements (the Agreements) with each of Lin Li and
Youzhe Li, who were each creditors to the Company with total outstanding
balances of $25,920 (the Lin Li Loan) and $78,861 (the Youzhe Li Loan and,
together with the Lin Li Loan, the Loans), respectively. Pursuant to the
Agreements the Company agreed to issue an aggregate total of 19,051,091 shares
of its common stock, $0.0001 par value per share (the Shares), at the
conversion rate of $0.0055 per share as full payment for the Loans. Upon
issuance and delivery of the Shares, the Loans shall be fully paid and the
Company shall no longer have any obligations to the individuals under the Loans.
As of September 30, 2017, the fair market value of the share issuance was
$190,511.
Lin Li is the sister of Mr. Feng Li,
who is the husband of Hong Ba, the Companys director, CEO and CFO.
As of September 30, 2017 and June 30,
2017, the Company had received $61,403 and $47,986, respectively, advanced for a
future share issuance from an independent third party, which amounts do not bear
interest and are due on demand. On August 5, 2016, the Company issued 14,338,364
common shares of the Company to such independent party in cancellation of the
debt of $78,861 owed to such party at such time. As of September 30, 2017, the
fair market value of the share issuance was $143,384.
As the filing date of these unaudited
financial statements, there are 82,489,391 shares issued outstanding.
9