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
September 30,
2012
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
(Registrants 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
issuers classes of common stock, as of the latest practicable date:
47,900,000 shares of common stock issued and outstanding as of
November 13, 2012.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
W&E Source Corp.
(Formerly News of China
Inc.)
Unaudited Condensed Consolidated Balance Sheets
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2012
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
$
|
55,280
|
|
$
|
327,215
|
|
Accounts receivable
|
|
533
|
|
|
1,380
|
|
Prepaid expense
|
|
-
|
|
|
24,453
|
|
Total current
assets
|
|
55,813
|
|
|
353,048
|
|
|
|
|
|
|
|
|
Property, plant & equipment, net
|
|
31,464
|
|
|
34,841
|
|
Deposits
|
|
37,686
|
|
|
35,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
124,963
|
|
$
|
422,924
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity (Deficit)
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
11,556
|
|
$
|
16,842
|
|
Accounts payable, related
parties
|
|
-
|
|
|
612
|
|
Advances from related parties
|
|
157,736
|
|
|
93,998
|
|
Customer deposits
|
|
-
|
|
|
8,225
|
|
Total current
liabilities
|
|
169,292
|
|
|
119,677
|
|
|
|
|
|
|
|
|
Shareholders' equity (deficit):
|
|
|
|
|
|
|
Common stock, $0.0001 par value,
500,000,000 shares authorized, 47,900,000 shares issued and outstanding
|
|
4,790
|
|
|
4,790
|
|
Additional paid-in capital
|
|
803,226
|
|
|
803,226
|
|
Capital reserved
|
|
(301,000
|
)
|
|
-
|
|
Accumulated other comprehensive income (loss)
|
|
(1,114
|
)
|
|
400
|
|
Accumulated deficit
|
|
(550,231
|
)
|
|
(505,169
|
)
|
Total
shareholders equity (deficit)
|
|
(44,329
|
)
|
|
303,247
|
|
Total liabilities and shareholders equity
(deficit)
|
$
|
124,963
|
|
$
|
422,924
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
W&E Source Corp.
(Formerly News of China
Inc.)
Condensed Consolidated Statements of Operations and
Comprehensive Loss
For the Three Months Ended September 30, 2012 and
2011
(Unaudited)
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
7,085
|
|
$
|
-
|
|
Operating expenses:
|
|
|
|
|
|
|
General and
administrative expenses
|
|
52,738
|
|
|
9,887
|
|
Total
operating expenses
|
|
52,738
|
|
|
9,887
|
|
Operating loss
|
|
(45,653
|
)
|
|
(9,887
|
)
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
Interest income
|
|
21
|
|
|
-
|
|
Foreign currency
exchange gain (loss)
|
|
570
|
|
|
(69
|
)
|
Total
other income (expense)
|
|
591
|
|
|
(69
|
)
|
Net loss
|
|
(45,062
|
)
|
|
(9,956
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
Cumulative foreign
currency translation adjustment
|
|
(1,513
|
)
|
|
(22
|
)
|
|
|
|
|
|
|
|
Comprehensive loss
|
$
|
(46,575
|
)
|
$
|
(9,978
|
)
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding - basic and diluted
|
|
47,900,000
|
|
|
25,900,000
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
W&E Source Corp.
(Formerly News of China
Inc.)
Statements of Cash Flows
(Unaudited)
|
|
|
|
|
For the three
|
|
|
|
For the three
|
|
|
months
|
|
|
|
months ended
|
|
|
ended
|
|
|
|
September
|
|
|
September
|
|
|
|
30,
|
|
|
30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from:
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
Net loss
|
$
|
(45,062
|
)
|
$
|
(9,956
|
)
|
Adjustments to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation
|
|
3,377
|
|
|
-
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Decrease in prepaid expenses
|
|
24,453
|
|
|
-
|
|
Decrease in accounts receivable
|
|
847
|
|
|
-
|
|
Increase in deposits
|
|
(2,651
|
)
|
|
-
|
|
Decrease in accounts payable and accrued
liabilities
|
|
(5,897
|
)
|
|
166
|
|
Decrease in customer deposits
|
|
(8,225
|
)
|
|
-
|
|
Cash
used in operating activities
|
|
(33,158
|
)
|
|
(9,790
|
)
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Capital reserved
|
|
(301,000
|
)
|
|
-
|
|
Advances from related parties
|
|
63,738
|
|
|
-
|
|
Cash
used in financing activities
|
|
(237,262
|
)
|
|
-
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment
|
|
(1,515
|
)
|
|
(22
|
)
|
|
|
|
|
|
|
|
Net Change in cash
|
|
(271,935
|
)
|
|
(9,812
|
)
|
Beginning of period
|
|
327,215
|
|
|
14,013
|
|
End of period
|
$
|
55,280
|
|
$
|
4,201
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
Income tax paid
|
$
|
-
|
|
$
|
-
|
|
Interest paid
|
|
-
|
|
|
-
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
W&E Source Corp.
(Formerly News of China,
Inc.)
Notes to 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 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.
Note 2 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 ATBIs
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.
4
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, 2012 and 2011.
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.
h. Property and equipment.
Property and 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. Companys 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.
Note 3 Going Concern
As reflected in the accompanying financial statements, the
Company has an accumulated deficit of $550,231, and a net loss for the quarter
ended September 30, 2012 and 2011 of $45,062 and $9,956, 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.
5
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 $11,557 consists
auditing fee payable of $2,000, accounting fee payable of $1,120, salaries
payable of $6,421 and credit card payable of $2,016.
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 Companys operations. These advances are due
on demand and non-interest bearing.
At September 30, 2012, the Company owes related parties a total
of $157,736 for advances and operating expenses paid by them on behalf of ATCI,
ATGI and ATBI.
Note 6 Commitment and Contingencies
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.
The following is a schedule by year of future minimum rental
payments required under the operating lease agreements:
Year Ending
September 30
|
|
Amounts
|
|
|
|
|
|
2013
|
$
|
128,796 -
|
|
2014
|
|
56,194
|
|
2015
|
|
32,524
|
|
2016
|
|
33,335
|
|
2017 and thereafter
|
|
2,784
|
|
|
|
|
|
Total
|
$
|
253,633
|
|
For the three months ended September 30, 2012 and 2011, the
Company recorded a rent expense of $28,788 and $0, respectively.
Note 7 Common Stock
The Company is authorized to issue 500,000,000 shares of common
stock. As of September 30 and June 30, 2012, 47,900,000 shares of common stock
were issued and outstanding.
6
Note 8 Capital Reserved
The Company made a capital reserved deposit at Bank of China
for required registration capital of ATBI in accordance with PRC Laws. At
September 30, 2012, the amount held for capital reserved was $301,000 and
recorded as a contra account of equity.
7
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our companys or our industrys
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States dollars
(US$) 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 are a development stage company incorporated in Delaware on
October 11, 2005. Our principal business until recently has been 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 Companys 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.
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 changed 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.
8
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.
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 recently set up three subsidiaries, Airchn Travel
Global, 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. We plan to set up additional subsidiaries in Hong Kong,
Macau, Taiwan, Japan and Korea in the near future.
We have begun to engage 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.
Results of Operations
The following summary of our results of operations should be
read in conjunction with our audited financial statements for the quarters ended
September 30, 2012 and 2011. We had no significant operation for the quarter
ended September 30, 2011, therefore there were no comparable historical data for
the three months ended September 30, 2011.
Quarters Ended September 30, 2012 and 2011:
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Revenues
|
$
|
7,085
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
General and
administrative expenses
|
|
49,361
|
|
|
9,887
|
|
Depreciation expenses
|
|
3,377
|
|
|
-
|
|
Interest (income)
|
|
(21
|
)
|
|
-
|
|
Foreign currency exchange loss(gain)
|
|
(570
|
)
|
|
69
|
|
Net loss
|
$
|
(45,062
|
)
|
$
|
(9,956
|
)
|
Revenues
We have generated total revenues of $7,085 from operations
during the quarter ended September 30, 2012.
General and administrative expenses
General and administrative expenses for the quarter ended
September 30, 2012 increased by $39,474 compared with the same period in 2011
primarily because of the monthly rent incurred for the new office spaces.
Net loss
We had net losses of $45,062 and $9,956 for the quarters ended
September 30, 2012 and 2011, respectively, and had an accumulated deficit of
$550,231 since the inception of our business.
9
Liquidity and Capital Resources
Our financial conditions for the quarters ended September 30,
2012 and 2011 are summarized as follows:
Working Capital
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Current Assets
|
$
|
55,813
|
|
$
|
4,201
|
|
Current Liabilities
|
|
(169,292
|
)
|
|
(6,044
|
)
|
Working Capital
|
$
|
113,479
|
|
$
|
(1,843
|
)
|
Our working capital significantly increased from deficit to
assets since the previous year because we started to generated revenues and also
in 2012 we received cash from issuance of common stock to our CEO.
Cash Flows
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Cash used in operating activities
|
$
|
(33,158
|
)
|
$
|
(9,790
|
)
|
Cash used in investing activities
|
|
-
|
|
|
-
|
|
Cash provided by financing activities
|
|
(237,262
|
)
|
|
-
|
|
Cumulative translation adjustment
|
|
(1,515
|
)
|
|
(22
|
)
|
Net increase (decrease) in cash
|
$
|
(271,935
|
)
|
$
|
(9,812
|
)
|
Cash Used in Operating Activities
For the quarter ended September 30, 2012, our cash used in
operating activities increased by $23,368 from $9,790 compared with previous
year. The increase is mainly due to general and administrative expenses incurred
to run our operations.
Cash Provided by Financing Activities
For the quarter ended September 30, 2012, the amount of
advances received from shareholders and related parties are $63,738.
The Company made a capital reserved deposit at Bank of China
for required registration capital of ATBI in accordance with PRC Laws. At
September 30, 2012, the amount held for capital reserved was $301,000.
Cash Requirements
Over the next 12-months ending September 30, 2013, we
anticipate that we will incur the following operating expenses:
Expense
|
|
Amount
|
|
General and administrative
|
$
|
350,000
|
|
Professional fees
|
|
25,000
|
|
Foreign currency exchange loss
|
|
5,000
|
|
Total
|
$
|
380,000
|
|
Management believes that our companys 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.
10
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.
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 companys 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
Commissions 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
companys disclosure controls and procedures as of the end of the period covered
by this quarterly report on Form 10-Q. Based on this evaluation, our management
concluded that as of the end of the period covered by this quarterly 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 contained in the Companys 2012 Annual Report on Form
10-K.
11
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control over financial
reporting during the first quarter of our fiscal year ended September 30, 2012
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.
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
None.
12
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*
|
Certification
Statement of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
31.2*
|
Certification
Statement of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
(32)
|
Section 906 Certification
|
32.1*
|
Certification
Statement of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
32.2*
|
Certification
Statement of the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
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
13
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
|
|
Date: November 19, 2012
|
|
|
|
/s/ Chenxi Shi
|
|
Chenxi Shi
|
|
CFO and Director
|
|
Principal Financial Officer and Principal
Accounting
|
|
Officer
|
|
Date: November 19, 2012
|
14
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