UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-52276
W&E SOURCE
CORP.
(Exact name of registrant as specified in its
charter)
| Delaware | 98-0471083 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
113 Barksdale Professional Center, Newark, DE
19711
(Address of principal executive offices) (Zip Code)
(302) 722-6266
(Registrant’s telephone number,
including area code)
News of China, Inc.
(Former name of
Registrant)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
[ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting company [X] |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [
] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 47,900,000 shares of common stock issued and outstanding as of May 13, 2013.
TABLE OF CONTENTS
ITEM 1. FINANCIAL STATEMENTS
W&E Source Corp.
(Formerly News of China,
Inc.)
Condensed Consolidated Balance Sheets
| As Restated | ||||||
| March 31, 2013 | June 30, 2013 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 317,313 | $ | 327,215 | ||
| Accounts receivable | - | 1,380 | ||||
| Prepaid expenses | - | 24,453 | ||||
| Total current assets | 317,313 | 353,048 | ||||
| Security deposit | 35,283 | 35,035 | ||||
| Equipment, net | 24,986 | 34,841 | ||||
| Total Asset | 377,582 | 422,924 | ||||
| LIABILITY AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | 6,883 | $ | 16,842 | ||
| Accounts payable, related parties | - | 612 | ||||
| Advances from related parties | 262,613 | 93,998 | ||||
| Customer deposits | 10,369 | (2,365 | ) | |||
| Total liabilities | 279,865 | 109,087 | ||||
| Commitments and Contingencies | ||||||
| Stockholders’ Equity | ||||||
| Common Stock, $0.0001 par value, 47,900,000 issued, | ||||||
| 500,000,000 shares authorized | 4,790 | 4,790 | ||||
| Additional paid-in capital | 803,226 | 803,226 | ||||
| Accumulated deficit | (711,506 | ) | (494,579 | ) | ||
| Accumulated other comprehensive income (loss) | 1,207 | 400 | ||||
| Total Stockholders’ Equity | 97,716 | 313,837 | ||||
| Total Liability and Stockholders’ Equity | $ | 377,582 | $ | 422,924 |
(The accompanying notes are an integral part of these financial statements)
1
W&E Source Corp.
(Formerly News of China,
Inc.)
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| For the | For the | For the | For the | |||||||||
| Three Months | Three Months | Nine Months | Nine Months | |||||||||
| Ended | Ended | Ended | Ended | |||||||||
| March 31, 2013 | March 31, 2012 | March 31, 2013 | March 31, 2012 | |||||||||
| Revenue | 4,569 | 16,238 | ||||||||||
| Gross profit | 4,569 | 16,238 | ||||||||||
| Expenses | ||||||||||||
| General and administrative | 78,403 | 164,050 | 23,450 | 213,212 | ||||||||
| Total Expenses | 78,403 | 164,050 | 230,450 | 213,212 | ||||||||
| Other Income (Expenses) | ||||||||||||
| Interest Income | - | 14 | 21 | 14 | ||||||||
| Exchange Loss | (2,895 | ) | (2737 | ) | (69 | ) | ||||||
| Total Other Income (Expense) | (2,895 | ) | 14 | (2,715 | ) | (55 | ) | |||||
| Net Loss Before Income Tax Expense | ||||||||||||
| (76,729 | ) | (164,036 | ) | (216,928 | ) | (213,267 | ) | |||||
| Income Tax Expense, Net of Income Tax | ||||||||||||
| Benefit | ||||||||||||
| Net Loss | ||||||||||||
| (76,729 | ) | (164,036 | ) | (216,928 | ) | (213,267 | ) | |||||
| Other Comprehensive Income | ||||||||||||
| Foreign Currency Translation | ||||||||||||
| Adjustment | 808 | 296 | (1,198 | ) | 353 | |||||||
| Comprehensive Income | (75,921 | ) | (163,740 | ) | (218,126 | ) | (212,914 | ) | ||||
| Net Loss Per Share – Basic and Diluted | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.01 | ) | ||||
| Weighted Average Shares Outstanding | ||||||||||||
| 47,900,000 | 33,113,115 | 47,900,000 | 30,700,000 |
(The accompanying notes are an integral part of these financial statements)
2
W&E Source Corp.
(Formerly News of China,
Inc.)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the | For the | |||||
| Nine Months | Nine Months | |||||
| Ended | Ended | |||||
| March 31, 2013 | March 31, 2012 | |||||
| Operating Activities | ||||||
| Net loss | (216,928 | ) | (213,267 | ) | ||
| Adjustment to reconcile net loss to net cash used in | ||||||
| operating activities: | ||||||
| Amortization | 10,118 | 2,248 | ||||
| Changes in operating assets and liabilities: | ||||||
| Prepaid expenses and deposits | 24,561 | (25,445 | ) | |||
| Accounts receivable | (19 | ) | (452 | ) | ||
| Commission receivable | 743 | - | ||||
| Accounts payable and accrued liabilities | (13,209 | ) | 7,903 | |||
| Customer deposits | 12,751 | (20,302 | ) | |||
| Due to related parties | - | 7,824 | ||||
| Net Cash (Used for) by Operating Activities | (181,983 | ) | (241,491 | ) | ||
| Investing Activities | ||||||
| Purchase of equipment and furniture | 108 | (40,460 | ) | |||
| Net Cash (Used for) Provided by Investing Activities | 108 | (40,460 | ) | |||
| Cash flows from financing activities | ||||||
| Proceeds from related party | 166,859 | 35,433 | ||||
| Proceeds from advances-related parties | - | (4,113 | ) | |||
| Issuance of Common stock | - | 630,000 | ||||
| Net Cash Provided by Financing Activities | 166,859 | 661,320 | ||||
| Effect of exchange rate changes on cash | 5,113 | 353 | ||||
| Increase (Decrease) In Cash | (9,903 | ) | 379,722 | |||
| Cash – Beginning of Period | 327,215 | 14,013 | ||||
| Cash – End of Period | 317,313 | 393,735 | ||||
| Supplemental Schedule of Cash Flows Disclosures | ||||||
| Interest paid | - | - | ||||
| Income taxes paid | - | - |
(The accompanying notes are an integral part of these financial statements)
3
W&E Source Corp.
(Formerly News of China, Inc.)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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, 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 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 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 provided 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 is not completed in January, 2013 and both the Company and Mr. Wu Hao agreed to terminate the agreement entered on December 15, 2012.
4
Note 2 – Restatement
A prior period adjustment was made to the June 30, 2012 financial statements for an accounting error. The Company recorded in error the cash transfer of customer deposits to its travel services provider as travel expenses incurred by the Company.
| As Originally | Effect on | Effect on | ||||||||||
| Item | Reported | As Restated | Earnings | Net Equity | ||||||||
| Balance Sheet | ||||||||||||
| Customer Deposit | 8,225 | (2,365 | ) | 10,590 | 10,590 | |||||||
| Accumulated Deficit | (505,169 | ) | (494,579 | ) | ||||||||
| Statement of Operations | ||||||||||||
| Travel expense | 11,271 | 681 | 10,590 | 10,590 |
Note 3 – Summary of Significant Accounting Policies
a. Basis of presentation. The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The financial statements are expressed in U.S. dollars. These unaudited financial statements should be read in conjunction with a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, as filed with the U.S. Securities and Exchange Commission.
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 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’ deficit.
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 March 31, 2013 and 2012.
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.
5
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 March 31, 2013 and June 30, 2012, 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.
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. 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 results of operations, financial position, or cash flows of the Company.
k. Going Concern. As reflected in the accompanying financial statements, the Company has an accumulated deficit of $711,506, and a net loss for the nine months ended March 31, 2013 and 2012 of $216,928 and $212,914, 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 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 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 4 - Accounts Payable and Accrued Liabilities
Accounts Payable and Accrued Liabilities of $6,883 consists of accounting fee payable of $1,550, rent payable of $2,362, payroll payable of $2,040, GST payable of $93, audit fee payable of $2,000, and payment of BMO Master Card payable of $1,162.
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 Chief Financial Officer and Director of the Company. 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.
At March 31, 2013, the Company owes related parties a total of $262,612 for advances and operating expenses paid by them on behalf of ATCI, ATGI and ATBI.
Note 6 – Commitment
The Company leases three office spaces for different terms under long-term, non-cancelable operating lease agreements. Monthly rent ranges from $780 to $8,151 and deposit ranges from $4,000 to $16,302. The leases expire at various dates through 2016 and provide for renewal options ranging from twenty-six months to three years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
6
The following is a schedule by year of future minimum rental payments required under the operating lease agreements:
| Year Ending December 31 | Amounts | ||
| 2013 | $ | 120,555 | |
| 2014 | 62,928 | ||
| 2015 | 38,475 | ||
| 2016 | 33,345 | ||
| 2017 and thereafter | - | ||
| Total | $ | 255,303 |
For the nine months ended March 31, 2013 and 2012, the Company recorded a rent expense of $98,632 and $8,926, respectively.
Note 7 – Common Stock
The Company is authorized to issue 500,000,000 shares of common stock. As of March 31, 2013 and June 30, 2012, 47,900,000 shares of common stock were issued and outstanding.
Note 8 – Subsequent Event
Mr. Chenxi Shi resigned as the Company’s CFO and director effective May 13, 2013. The Company’s Board of Directors has appointed our current CEO to the position of the Company’s CFO effective on the same date.
7
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
In this quarterly report, unless otherwise specified, all references to “common shares” refer to the common shares of our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our”, “W&E Source Corp.”, “the Company” means W&E Source Corp., unless otherwise indicated.
Corporate Overview
We were incorporated in Delaware on October 11, 2005. Our principal business was to provide an online financial media outlet for researching China-related stocks. This media outlet provided financial news and commentary, online video broadcasting, and other information for researching China-related stocks. China-related stocks refer to the stocks issued by companies whose main operations are located in China. However, due to our online financial media outlet software problems and other difficulties, we were not able to achieve the milestones we set to fully implement our business operations in online financial media outlet for researching China-related stocks.
In July 2011, the Company’s new management team began re-evaluating our business plan and determined that it would be in the best interest of the Company to take a new business direction. In the new business model, the Company will serve as an incubator for innovative enterprises across various industries with diverse practices. The Company will identify such enterprises and acquire them through various business combination transactions. As an incubator, the Company will provide the necessary assistance and environment for the acquired businesses to grow with the eventual goal of spinning them off as independent publicly reporting entities.
The Company has identified the global tourism market as its first investment target. As it currently exists, the tourism industry is fragmented into various geographic regions. We believe that approaching this industry from a global perspective is an emerging market with tremendous growth potential. We plan to set up and/or acquire offices in various regions of the world and through them, develop the local tourism industry and expand our local tourism market. Ultimately, we plan to unify and manage our regional offices and to market our global services through the internet.
We have set up three subsidiaries, Airchn Travel Globla, Inc. in Seattle, Washington (“ATGI”) and Airchn Travel (Canada) Inc., in Vancouver, British Columbia in Canada (“ATCI”) and Airchn Travel (Beijing) Inc. in Beijing, China (“ATBI”). We plan to set up additional subsidiaries in Hong Kong, Macau, Taiwan, Japan and Korea in the near future.
8
We are engaged in services such as, airline and cruise ticketing, customized and packaged tours, travel blogs, travel magazines, sales of travel related merchandise, group hotel reservations, business travel arrangements, conference travel arrangements, car rental and admission ticket sale for local tourist attractions.
As per of our new business plan, we will continue to explore other business growth opportunities, regardless of industry, in order to diversify our business operations and investments.
In order to reflect our new business plan better, on January 17, 2012, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware to change its name from New of China, Inc. to W&E Source Corp. In connection the name change, our listing symbol on the OTCQB also changed from “NWCH” to “WESC.” Our new website which is currently under construction can be accessed at www.wescus.com . In addition, the Company also increased its total authorized shares to 500,000,000 to anticipate future financing through the issuance of our equity or convertible debt to finance our business.
Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the three and nine months ended March 31, 2013 and 2012.
Three Months Ended March 31, 2013 and 2012.
| Three Months Ended | Three Months Ended | |||||
| March 31, | March 31, | |||||
| 2013 | 2012 | |||||
| Revenues | $ | 4,569 | $ | - | ||
| Expenses | ||||||
| General and administrative expenses | 78,403 | 164,050 | ||||
| Depreciation expenses | - | - | ||||
| Interest (income) | - | - | ||||
| Foreign currency exchange loss(gain) | 808 | 296 | ||||
| Net loss | $ | (76,729 | ) | $ | (164,036 | ) |
Revenues
We have generated total revenues of $4,569 from operations during the three months ended March 31, 2013. We did not generate any revenue for the same period in 2012 and therefore there was no data for comparison.
General and administrative expenses for the three months ended March 31, 2013 decreased by $85,647 or 52% compared with the same period in 2012 primarily because start-up expense of ATBI for the three months ended March 31, 2012 is large.
Net loss
We had net losses of $76,729 and $164,036 for the three months ended March 31, 2013 and 2012, respectively, an decrease of 53%, and had an accumulated deficit of $711,506 since the inception of our business. The increase in net loss is mainly attributable to general and administrative expenses discussed above.
9
Nine Months Ended March 31, 2013 and 2012:
| March 31, | March 31, | |||||
| 2013 | 2012 | |||||
| Revenues | $ | 16,238 | $ | - | ||
| Expenses | ||||||
| General and administrative expenses | 220,330 | 213,212 | ||||
| Depreciation expenses | 10,120 | 69 | ||||
| Interest (income) | (21 | ) | (14 | ) | ||
| Foreign currency exchange loss(gain) | 2,737 | (353 | ) | |||
| Net loss | $ | (216,928 | ) | $ | (212,914 | ) |
Revenues
We have generated total revenues of $16,238 from operations during the nine months ended March 31, 2013. We did not generate any revenue for the same period in 2012 and therefore there was no data for comparison.
General and administrative expenses
General and administrative expenses for the nine months ended March 31, 2013 increased by $7,118 or 3%, compared with the same period in 2012 primarily because of the salaries and wages expenses and monthly rent incurred for the new office spaces.
Net loss
We had net losses of $216,928 and $212,914 for the nine months ended March 31, 2013 and 2012, respectively, an increase of $4,014 or approximately 2% and had an accumulated deficit of $711,506 since the inception of our business.
Liquidity and Capital Resources
Our financial conditions for the nine months ended March 31, 2013 and 2012 are summarized as follows:
| Working Capital | ||||||
| March 31, | March 31, | |||||
| 2013 | 2012 | |||||
| Current Assets | $ | 317,313 | $ | 419,632 | ||
| Current Liabilities | ( 279,865 | ) | (82,958 | ) | ||
| Working Capital | $ | 37,448 | $ | 336,674 |
Our working capital significantly decreased since the previous year because advances from related parties increased a lot.
Cash Flows
| March 31, | March 31, | |||||
| 2013 | 2012 | |||||
| Cash used in operating activities | $ | ( 181,983 | ) | $ | ( 241,491 | ) |
| Cash provided by investing activities | 108 | (40,460 | ) | |||
| Cash provided by financing activities | 166,859 | 661,320 | ||||
| Cumulative translation adjustment | 5,113 | 353 | ||||
| Net increase (decrease) in cash | $ | (9,903 | ) | $ | 379,722 |
10
Cash Used in Operating Activities
For the nine months ended March 31, 2013, our cash used in operating activities decreased by $59,508 from $241,491 compared with previous year. The decrease is mainly due to general and administrative expenses decrease.
Cash Used in Investing Activities
For the six months ended December 31, 2012, we made a reversion for furniture and some office equipment in the amount of $108 due to the over record in the previous quarter.
Cash Provided by Financing Activities
For the nine months ended March 31, 2013, the amount of advances received from shareholders and related parties are $166,859.
Cash Requirements
Over the next 12-months ending March 31, 2014, we anticipate that we will incur the following operating expenses:
| Expense | Amount | ||
| General and administrative | $ | 360,000 | |
| Professional fees | 28,000 | ||
| Foreign currency exchange loss | 5,000 | ||
| Total | $ | 393,000 |
Management believes that our company’s cash will be sufficient to meet our working capital requirements for the next 12 month period for our company has already successfully raised the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next 12 months primarily through the private placement of our equity securities.
There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations, and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
In addition to the issues set out above regarding our ability to raise capital, global economies are currently undergoing a period of economic uncertainty related to the tightening of credit markets worldwide. This has resulted in numerous adverse effects, including unprecedented volatility in financial markets and stock prices, slower economic activity, decreased consumer confidence and commodity prices, reduced corporate profits and capital spending, increased unemployment, liquidity concerns and volatile but generally declining energy prices. We anticipate that the current economic conditions and the credit shortage will adversely impact our ability to raise financing. In addition, if the future economic environment continues to be less favorable than it has been in recent years, we may experience difficulty in completing our current business plan.
Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
11
Recently Issued Accounting Standards
We continue to assess the effects of recently issued accounting standards. The impact of all recently adopted and issued accounting standards has been disclosed in the Footnotes to the financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting officer to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarter report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarter report on Form 10-Q, our disclosure controls and procedures were not effective due to the material weaknesses described in Management's Report on Internal Control over Financial Reporting below.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
As of the date of this filing, there have been no material changes from the risk factors disclosed in Part I, Item 1A (Risk Factors) contained in our Annual Report on Form 10-K for the year ended June 30, 2012. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect out operations. The risks, uncertainties and other factors set forth in our Annual Report on Form 10-K for the year ended June 30, 2012 may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.
12
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Mr. Chenxi Shi resigned as the Company’s Chief Financial Officer effective May 13, 2013. Mr. Shi’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
On May 13, 2013, the Board of Directors of the Company appointed the Company’s current Chief Executive Officer, Ms. Hong Ba, as Chief Financial Officer of the Company, effective immediately, to fill the vacancy created by Mr. Shi’s resignation.
Ms. Ba graduated from Taiyuan University Software in 1988. She had worked in China Eastern Airline from 1988. She has over 20 years of work experience in aviation marketing. Mrs. Ba has been working for Shanxi Jinyan Aviation Business Inc. as the president and a director from 2008 until she joined the Company in 2011.
Ms. Ba will not receive compensation for her services to the Company.
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ITEM 6. EXHIBITS
| (3) | Articles of Incorporation and By-laws |
| 3.1 |
Articles of Incorporation (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006) |
| 3.2 |
By-Laws (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006) |
| 3.3 |
Certificate of Amendment to the Certificate of Incorporation filed on January 17, 2012. (attached as an exhibit to our Form 10-Q filed February 10, 2012) |
| (10) |
Material Contracts |
| 10.1 |
Form of Subscription Agreement between News of China Inc. and placees (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006) |
| 10.2 |
Form of Private Placement Subscription Agreement with Chenling Shi (attached as an exhibit to our current report on Form 8-K filed on June 22, 2009) |
| 10.3 |
Stock Purchase Agreement dated as of January 23, 2012 by and between the Company and Hong Ba (attached as an exhibit to Form 8-K filed January 24, 2012) |
| (14) |
Code of Ethics |
| 14.1 |
Code of Ethics adopted September 10, 2007 (attached as an exhibit to our annual report on Form 10- KSB filed September 28, 2007) |
| (16) |
Letter re change in certifying accountant |
| 16.1 |
Letter dated October 13, 2011 from RSM Richter Chamberland LLP, Chartered Accountants (attached as an exhibit to our current report on Form 8-K filed on October 13, 2011) |
| (21) |
Subsidiaries |
| 21.1 |
List of Subsidiaries. (attached as an exhibit to Form 10-Q filed on February 10, 2012) |
| (31) |
Section 302 Certification |
| 31.1* | |
| (32) |
Section 906 Certification |
| 32.1* | |
| 101.INS* |
XBRL INSTANCE DOCUMENT |
| 101.SCH* |
XBRL TAXONOMY EXTENSION SCHEMA |
| 101.CAL* |
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
| 101.DEF* |
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
| 101.LAB* |
XBRL TAXONOMY EXTENSION LABEL LINKBASE |
| 101.PRE* |
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
*filed herewith
14
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.
| W&E Source Corp. | |
| /s/ Hong Ba | |
| Hong Ba | |
| CEO and Director | |
| Principal Executive Officer, Principal Financial Officer | |
| and Principal Accounting Officer | |
| Date: May 15, 2013 |
15
Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
I, Hong Ba, certify that:
1. I have reviewed this quarterly report on Form 10-Q of W&E Source Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 15, 2013
| /s/ Hong Ba | |
| Hong Ba, Principal Executive Officer, | |
| Principal Financial Officer and Principal | |
| Accounting Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of W&E Source Corp. (the "Company") on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Hong Ba, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 15, 2013
| /s/ Hong Ba | |
| Hong Ba | |
| Principal Executive Officer, Principal | |
| Financial Officer and Principal Accounting Officer |