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 unaudited
condensed 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
Company’s listing symbol on OTCQB is also changed to WESC.
During the quarter 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
Seller’s 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
days 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, 2018 was derived from the consolidated audited
financial statements included in the Company’s Annual Report on Form 10-K for
the year ended June 30, 2018. These unaudited consolidated financial statements
should be read in conjunction with the annual consolidated audited financial
statements and the notes thereto included in the Company’s Annual Report on Form
10-K for the year ended June 30, 2018, and other reports filed with the SEC.
Operating results for the three months ended September 30, 2018 are not
necessarily indicative of the results that may be expected for the full year
ended June 30, 2019.
b. Foreign currency
translation.
ATCI's and ATBI’s functional currency
for operations is the Canadian dollar and Chinese yuan. However, the Company's
reporting currency is the U.S. dollar. Therefore, the consolidated financial
statements for all periods presented have been translated into the U.S. dollar
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 shareholders’ equity.
c. Principles of
consolidation.
The 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 consolidated
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
consolidated 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 loss 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, 2018 and June 30, 2018.
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 non-cancellable, 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. Effective
January 1, 2018, the Company adopted the guidance of Accounting Standards
Codification (ASC) 606, Revenue from Contracts. The implementation of ASC 606
did not have a material impact on the Company’s consolidated financial
statements. ASC 606 create a five-step model that requires entities to exercise
judgement when considering the terms of contract, which includes (1) identifying
the contracts or agreement with a customer, (2) identifying our performance
obligations in the contract or agreement, (3) determining the transaction price,
(4) allocating the transaction price to the separate performance obligation, and
(5) recognizing revenue as each performance obligation is satisfied. The Company
only applies the five-step model to contracts when it is probable that the
Company will collect the consideration it is entitled to in exchange for the
services it transfers to its clients. The Company’s revenue consists of revenue
from providing travel consulting and travel arrangement advisory services
(“service revenue”), and service revenue from travel schedule arrangements and
advisory.
7
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, 2018 and June 30, 2018, we have no cash equivalents.
h. Equipment.
Equipment is stated at cost and
depreciated using the straight-line method over the estimated useful life of the
asset. The estimated useful lives of our property and equipment are generally
three years. As of September 30, 2018, there is no property or equipment.
i. Income taxes.
Deferred tax assets and liabilities are
recognized for future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. In addition, the Company recognizes future tax
benefits, such as carryforwards, to the extent that realization of such benefits
is more likely than not and that a valuation allowance is provided when it is
more likely than not that some portion of the deferred tax asset will not be
realized. The Company’s net operating losses carryforwards are subject to
Section 382 limitation.
j. Recently issued accounting
pronouncements.
The Company does not expect that any
recently issued accounting pronouncement will have a significant impact on the
consolidated 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.
8
Note 3 - Going Concern
As reflected in the accompanying consolidated financial
statements, the Company had accumulated deficits of $1,190,252 and $1,133,585,
and net losses of $12,132 and $6,504, respectively, for the three months ended
September 30, 2018 and 2017. The Company currently has business activities to
generate funds for its own operations, however, has not yet achieved profitable
operations. These factors raise substantial doubt about our ability to continue
as a going concern. The Company’s ability to continue as a going concern is
dependent on its ability to raise additional capital and implement its business
plan. 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 actions to obtain
additional funding from independent investors or from the management and to
implement its strategic plans 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.
Note 4 – Prepayment
As of September 30, 2018, the Company prepaid a security
deposit of $11,627 (Cnd$15,000) ($11,415 – 2018) to Consumer Protection British
Columbia Province for the guarantee of service quality.
Note 5 - Accounts Payable and Accrued Liabilities
Accounts Payable and Accrued Liabilities of $7,390 as of
September 30, 2018 consists of payment of $2,100 in legal fees, $3,528 in audit
fees, $1,553 in filing fees and others of $209 (June 30, 2018 - $11,283).
Note 6 – 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”). The shareholders make advances to the
Company from time to time for the Company’s operations. These advances are due
on demand and non-interest bearing.
During the three months ended September 30, 2018, the CEO of
the Company advanced $146 (June 30, 2018 – $151) to the Company for operating
expenditure.
During the three months ended September 30, 2018, a company
owned by Feng Li, the husband of Mrs. Hong Ba, our CEO, charged the Company
$1,847 (Cnd$2,400) (2017 - $1,916) in rent and the debt of $16,742 has been due
to the related party (2017 - $9,752).
During the three months ended September 30, 2018, the husband
of Mrs. Hong Ba, our CEO, advanced $1,100 (June 30, 2018 –$Nil) to the Company
for the operating expenditure.
As of September 30, 2018, the Company has received advances for
future share issuance of $100,017 (June 30, 2018 - $87,243) from a related
party.
Note 7 – Commitment and Contingencies
The Company leases an office space in Canada for a term under a
long-term, non-cancelable operating lease agreement. Monthly rent is $616
(Cdn$800).
|
2018
|
Cdn $9,600
|
|
2019
|
Cdn $9,600
|
|
2020
|
Cdn $9,600
|
|
2021
|
Cdn $9,600
|
|
2022
|
Cdn $9,600
|
The lease agreement for the Beijing office was terminated
effective from October 1, 2013.
9
For each of the three months ended September 30, 2018 and 2017,
the Company recorded a rent expense of $1,847 (Cdn$2,400) and $1,916
(Cdn$2,400), respectively.
Note 8 – Common Stock
On January 23, 2012, the Company entered into a subscription
agreement with the significant shareholder Hong Ba, for the sale of 22,000,000
common shares for $630,000 from cash received and expense paid on behalf by Hong
Ba. Subsequent to the sale, Hong Ba owns 22,000,000 common shares which
represent 45.9% of the issued and outstanding shares of the Company.
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. On October 26, 2014, the Company issued
15,538,300 common shares of the Company to settle the debts payable of $155,383
to related parties at $0.01 per share.
The Company is authorized to issue 500,000,000 shares of common
stock with par value of $0.0001. As of September 30, 2018 and June 30, 2018
82,489,391 and 82,489,391 shares of common stock were issued and outstanding,
respectively.
On October 26, 2014, the Company issued 15,538,300 common
shares of the Company to settle the debts payable of $155,383 to related parties
at $0.01 per share.
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 were
fully paid and the Company no longer had any obligations to the individuals
under the Loans.
Lin Li is the sister of Mr. Feng Li, who is the husband of Hong
Ba, the Company’s director, CEO and CFO.
As of September 30, 2018 and June 30, 2018, the Company has
received $100,017 and $87,243, respectively, advanced for a future share
issuance from a related 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 a related party in cancellation of the debt of $78,861 owed to
such party at such time.
As the filing date of these financial statements, there are
82,489,391 shares issued outstanding.
10