The accompanying notes are an integral part of these
consolidated interim financial statements.
The accompanying notes are an integral part of these
consolidated interim financial statements.
The accompanying notes are an integral part of these
consolidated interim financial statements.
The accompanying notes are an integral part of these
consolidated interim financial statements.
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated 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, Airchin 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 paid 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
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 consolidated balance sheet information
as of June 30, 2016 was derived from the consolidated audited financial
statements included in the Companys Annual Report on Form 10-K for the year
ended June 30, 2016. These 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, 2016, and other reports filed with the SEC. Operating results for
the three months ended September 30, 2016 are not necessarily indicative of the
results that may be expected for the full year ended June 30, 2017.
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. dollar. Therefore, the financial
statements for all periods presented have been translated into 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 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, 2016 and June 30, 2016.
7
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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, 2016 and June 30, 2016, we have no cash equivalents.
h.
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 carry forwards, 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. Companys net operating losses carry forwards are subject to
Section 382 limitation.
i.
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 July 2015, the FASB issued ASU
2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The
amendments in ASU 2015-11 require an entity to measure in scope inventory at the
lower of cost and net realizable value. Net realizable value is the estimated
selling prices in the ordinary course of business, less reasonably predictable
costs of completion, disposal, and transportation. Subsequent measurement is
unchanged for inventory measured using LIFO or the retail inventory method. The
amendments do not apply to inventory that is measured using last-in, first-out
(LIFO) or the retail inventory method. The amendments apply to all other
inventory, which includes inventory that is measured using first-in, first-out
(FIFO) or average cost. The amendments in this ASU are effective for public
business entities for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years. For all other entities, the
amendments are effective for fiscal years beginning after December 15, 2016, and
interim periods within fiscal years beginning after December 15, 2017. A
reporting entity should apply the amendments prospectively with earlier
application permitted as of the beginning of an interim or annual reporting
period. The adoption of ASU 2015-11 is not expected to have a material impact on
the Companys consolidated financial statements.
In August 2015, the FASB issued ASU
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU
2014-09 for all entities by one year. Public business entities, certain
not-for-profit entities, and certain employee benefit plans should apply the
guidance in ASU 2014-09 to annual reporting periods beginning after December 15,
2017, including interim reporting periods within that reporting period. Earlier
application is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim reporting periods within that reporting
period. The Company is currently in the process of evaluating the impact of the
adoption on its consolidated financial statements.
8
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
In September 2015, the FASB issued ASU
2015-16, Business Combinations (Topic 805): Simplifying the Accounting for
Measurement-Period Adjustments. The amendments in ASU 2015-16 require that an
acquirer recognize adjustments to estimated amounts that are identified during
the measurement period in the reporting period in which the adjustment amounts
are determined. The amendments require that the acquirer record, in the same
periods financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the
change to the estimated amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments also require an entity to
present separately on the face of the income statement or disclose in the notes
the portion of the amount recorded in current-period earnings by line item that
would have been recorded in previous reporting periods if the adjustment to the
estimated amounts had been recognized as of the acquisition date. The amendments
in this ASU are effective for public business entities for fiscal years
beginning after December 15, 2015, including interim periods within those fiscal
years. The amendments should be applied prospectively to adjustments to
provisional amounts that occur after the effective date with earlier application
permitted for financial statements that have not been issued. The adoption of
ASU 2015-16 is not expected to have a material impact on the Companys
consolidated financial statements.
In November 2015, the FASB issued ASU
2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes. The amendments in ASU 2015-17 eliminates the current requirement for
organizations to present deferred tax liabilities and assets as current and
noncurrent in a classified balance sheet. Instead, organizations will be
required to classify all deferred tax assets and liabilities as noncurrent. The
amendments in this ASU are effective for public business entities for financial
statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. The amendments may be applied
prospectively to all deferred tax liabilities and assets or retrospectively to
all periods presented. The Company is currently in the process of evaluating the
impact of the adoption on its consolidated financial statements.
In January 2016, the FASB issued ASU
2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities. The amendments in
ASU 2016-01, among other things, requires equity investments (except those
accounted for under the equity method of accounting, or those that result in
consolidation of the investee) to be measured at fair value with changes in fair
value recognized in net income; Requires public business entities to use the
exit price notion when measuring the fair value of financial instruments for
disclosure purposes; Requires separate presentation of financial assets and
financial liabilities by measurement category and form of financial asset (i.e.,
securities or loans and receivables); Eliminates the requirement for public
business entities to disclose the method(s) and significant assumptions used to
estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost. The amendments in this ASU are effective
for public companies for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years. The new guidance permits
early adoption of the own credit provision. In addition, the new guidance
permits early adoption of the provision that exempts private companies and
not-for-profit organizations from having to disclose fair value information
about financial instruments measured at amortized cost. The Company is currently
in the process of evaluating the impact of the adoption on its consolidated
financial statements.
In February 2016, the FASB issued ASU
2016-02, Leases (Topic 842). Among other things, in the amendments in ASU
2016-02, lessees will be required to recognize the following for all leases
(with the exception of short-term leases) at the commencement date: A lease
liability, which is a lessees obligation to make lease payments arising from a
lease, measured on a discounted basis; and A right-of-use asset, which is an
asset that represents the lessees right to use, or control the use of, a
specified asset for the lease term. Under the new guidance, lessor accounting is
largely unchanged. Certain targeted improvements were made to align, where
necessary, lessor accounting with the lessee accounting model and Topic 606,
Revenue from Contracts with Customers. The amendments in this ASU are effective
for public business entities for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. Early application is
permitted for all public business entities and all nonpublic business entities
upon issuance. Lessees (for capital and operating leases) and lessors (for
sales-type, direct financing, and operating leases) must apply a modified
retrospective transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the financial
statements. The modified retrospective approach would not require any transition
accounting for leases that expired before the earliest comparative period
presented. Lessees and lessors may not apply a full retrospective transition
approach. The Company is currently in the process of evaluating the impact of
the adoption on its consolidated financial statements.
9
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
In March 2016, the FASB issued ASU
2016-03, Intangibles-Goodwill and Other (Topic 350); Business Combinations
(Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815):
Effective Date and Transition Guidance. The amendments in this ASU make the
guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by
removing their effective dates. The amendments also include transition
provisions that provide that private companies are able to forgo a preferability
assessment the first time they elect the accounting alternatives within the
scope of this ASU. Any subsequent change to an accounting policy election
requires justification that the change is preferable under Topic 250, Accounting
Changes and Error Corrections. The amendments in this ASU also extend the
transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely.
While this ASU extends transition guidance for Updates 2014-07 and 2014-18,
there is no intention to change how transition is applied for those two ASUs.
The Company is currently in the process of evaluating the impact of the adoption
on its consolidated financial statements.
j.
Going Concern.
As reflected in the accompanying
financial statements, the Company has an accumulated deficit of $1,085,132, and
a net loss for the quarters ended September 30, 2016 and 2015 of $12,903 and
$10,784, respectively. 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 Companys 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 actions
presently being taken to obtain additional funding and implement its strategic
plans provide the opportunity for the Company to continue as a going concern.
Note 3 - Accounts Payable and Accrued Liabilities
Accounts payable and accrued
liabilities of $13,149 as of September 30, 2016 (June 30, 2016 - $13,245)
consists of a payment for vendor (hotel) of $572 (June 30, 2016 572), various
vendors of $12,501(June 30, 2016 - $12,673) in professional fees and credit card
of $76 (June 30, 2016 - $Nil).
Note 4 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, 2016, the Company owned by a director of the Company charged $1,858 (2015
-1,833) in rent.
During the three months ended September
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 CEO of the Company and was settled
in 4,712,727common share of the Company at fair value of $0.0055 per share.
Note 5 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, 2016 and June 30,
2016, 82,489,391 and 63,438,300 shares of common stock were issued and
outstanding, respectively.
10
W&E Source Corp. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
On August 5, 2016, the Company issued
19,051,091 common shares of the Company to settle the debts payable of $25,920
to a related party and $78,861 to an independent party of the Company for the
share insurance advance at fair value of $0.0055 per share, respectively.
During the three months ended September
30, 2016 and twelve months ended June 30, 2016, the Company has received $20,399
and 79,098, respectively, advanced for a future share issuance from an
independent third party with no interest bearing and due on demand.
11