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W&E SOURCE CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) 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 are 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. 11 -------------------------------------------------------------------------------- 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 quarter ended December 31, 2013 and 2012. Three Months Ended December 31, 2013 and 2012. Three Months Ended Three Months Ended December 31, December 31, 2013 2012 Revenues $ 4,812 $ 4,584 Expenses General and administrative expenses 70,433 88,719 Interest Income - - Foreign currency exchange gain (loss) (38 ) - Net loss $ (65,659 ) $ (84,135 ) Revenues We have generated total revenues of $4,812 from our operations during for the three months ended December 31, 2013 compared to $4,584 from the same period a year ago, an increase of $228 or 5%. The increase was attribute to the growth of business. Expenses General and administrative expenses for the three months ended December 31, 2013 decreased by $18,286 or 21% compared with the same period in 2012 primarily because of decreased operating cost in rent and payroll expenses. Net loss We had net losses of $65,659 and $84,135 for the three months ended December 31, 2013 and 2012, respectively, a decrease of $18,476 or 22% and had an accumulated deficit of $884,543 since the inception of our business. The decrease in net loss is mainly attribute to general and administrative expenses decrease discussed above. 12 -------------------------------------------------------------------------------- Six Months Ended December 31, 2013 and 2012: Six Months Ended Six Months Ended December 31, December 31, 2013 2012 Revenues $ 14,235 $ 11,669 Expenses General and administrative expenses 131,875 152,047 Depreciation expenses 6,965 6,715 Interest income (loss) - 21 Foreign currency exchange gain (loss) (521 ) - Net loss $ (118,161 ) $ (140,357 ) Revenues We have generated total revenues of $14,235 from operations during the six months ended December 31, 2013 as compared to $11,669 for the same period in 2012, an increase of $2,566 or 22%. The increase was mainly due to growth in our travel business. General and administrative expenses General and administrative expenses for the six months ended December 31, 2013 decreased by $20,172 or 13%, compared with the same period in 2012 primarily because of decreased operating cost in rent and payroll expenses. Net loss We had net losses of $118,161 and $140,357 for the six months ended December 31, 2013 and 2012, respectively, an decrease of $22,296 or 16% and had an accumulated deficit of $884,543 since the inception of our business. The decrease in net loss is mainly attributable to a decrease in general and administrative expenses discussed above. Liquidity and Capital Resources Our financial conditions for the three months ended December 31, 2013 and 2012 are summarized as follows: Working Capital December 31, December 31, 2013 2012 Current Assets $ 34,309 $ 355,897 Current Liabilities (139,221 ) (247,270 ) Working Capital $ (61,073 ) $ 108,627 Our working capital significantly decreased from the previous year because current assets were insufficient to cover liabilities; the deficit magnitude increased by some $169,700 as we have not generated any significant revenue to cover expenses. Cash Flows December 31, December 31, 2013 2012 Cash used in operating activities $ (110,282 ) $ (108,170 ) Cash used in investing activities - 108 Cash provided by (used in) financing activities (88,082 ) 136,876 Cumulative translation adjustment (493 ) (431 ) Net increase (decrease) in cash $ (198,857 ) $ 28,384 13 -------------------------------------------------------------------------------- Cash Used in Operating Activities For the six months ended December 31, 2013, our cash used in operating activities remained about the same with a slight increase of $2,112 or 2% from the previous year. Cash Used in Investing Activities For the six months ended December 31, 2013, we have no cash investing activities as compared to $108 from the same period last year from sale of property and equipment. Cash Provided by Financing Activities For the six months ended December 31, 2013, we used $88,082 in financing activities in repayments to advances from related parties compared to the same period last year where we received $136,876 in advances from related parties. Cash Requirements Over the next 12-months, we anticipate that we will incur the following operating expenses: Expense Amount General and administrative $ 140,000 Professional fees 28,000 Foreign currency exchange loss 5,000 Total $ 173,000 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. 14 -------------------------------------------------------------------------------- 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. |