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
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 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 ("ATBI"). Our Beijing office has been closed as of September 30, 2022 due to lack of business and to reduce operating costs.
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.
We will continue to explore other business growth opportunities, regardless of industry, in order to diversify our business operations and investments.
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 News of China, Inc. to W&E Source Corp. In connection the name change, our listing symbol also changed from "NWCH" to "WESC." 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.
COVID-19
In December 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China, and has since spread to other regions, including Europe and North America. On March 11, 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic ("COVID-19 pandemic"). In response to the pandemic, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses. These government mandates have forced many of the companies on whom our business relies, including hotels and other accommodation providers and airlines, to seek government support in order to continue operating, to curtail drastically their service offerings or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, and our customers. The COVID-19 pandemic and the resulting economic conditions and government orders have resulted in a material decrease in consumer spending and an unprecedented decline in travel activities and consumer demand for related services. Our financial results and prospects are almost entirely dependent on the sale of such travel-related services. Our results for the quarter ended September 30, 2022 have been significantly and negatively impacted, with a material decline in gross travel bookings and total revenues as compared to the corresponding periods prior to the COVID-19 pandemic. We expect to continue to see severely reduced new travel reservation bookings as compared to prior levels for the foreseeable future, which will have a materially adverse impact on our business, financial condition, results of operations and cash flows. Due to the uncertain and rapidly evolving nature of current conditions around the world, we are unable to predict accurately the impact that the COVID-19 pandemic will have on our business going forward. With the continued spread of COVID-19 in the United States and various other countries, we expect the pandemic and its effects to continue to have a significant adverse impact on our business for the duration of the pandemic, during any resurgences of the pandemic and during the subsequent economic recovery, which could be an extended period of time.
Results of Operations
The following summary of our results of operations should be read in conjunction with our unaudited financial statements for the three months ended September 30, 2022 and 2021 contained in this Report.
Three Months Ended September 30, 2022 and 2021:
| |
|
|
Three Months Ended |
|
|
Three Months Ended |
|
| |
|
|
September 30, |
|
|
September 30, |
|
| |
|
|
2022 |
|
|
2021 |
|
| Expenses |
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
(11,689 |
) |
|
(9,631 |
) |
|
Imputed interest expenses
|
|
|
(588 |
) |
|
(38 |
) |
|
Foreign currency exchange loss
|
|
|
(8,471 |
) |
|
(2,396 |
) |
| Net loss |
|
$ |
(20,748 |
) |
$ |
(12,065 |
) |
Revenues
We had no revenue for the three months ended September 30, 2022 and 2021, mainly due to the decrease in our travel business arrangement income caused by the COVID-19 pandemic globally.
General and administrative expenses
General and administrative expenses for the three months ended September 30, 2022 increased by $2,058 or 21%, compared with the same period in 2021. The increase was mainly due to an increase in audit and accounting fees and filing fees.
Net loss
We had net losses of $20,748 and $12,065 for the three months ended September 30, 2022 and 2021, respectively, an increase of $8,683 or 72%, and had an accumulated deficit of $1,348,182 since the inception of our business as at September 30, 2022. The increase in net loss is mainly attributable to an increase of general and administrative expenses, the imputed interest expense incurred in connection with the advanced from related parties for operating expenses during the quarter ended September 30, 2022 and the increase in foreign currency exchange loss during the quarter ended September 30, 2022.
Liquidity and Capital Resources
Our financial condition at the end of September 30, 2022 and June 30, 2022 are summarized as follows:
Working Capital
| |
|
September 30,
2022 |
|
|
June 30,
2022 |
|
| Current Assets |
$ |
854 |
|
$ |
893 |
|
| Current Liabilities |
|
(110,117 |
) |
|
(100,784 |
) |
| Working Capital |
$ |
(109,263 |
) |
$ |
(99,891 |
) |
Our working capital deficit increased from the previous year-end and current assets were still insufficient to cover liabilities; the deficit magnitude increased by $9,372 due to an increase in amounts due to related parties.
Cash Flow
| |
|
September 30,
2022 |
|
|
September 30,
2021 |
|
| Cash used in operating activities |
$ |
(31,917 |
) |
$ |
(2,396 |
) |
| Cash provided by financing activities |
|
23,446 |
|
|
- |
|
| Cumulative translation adjustment |
|
8,434 |
|
|
2,364 |
|
| Net decrease in cash |
$ |
(37 |
) |
$ |
(32 |
) |
Cash Used in Operating Activities
For the three months ended September 30, 2022, our cash used in operating activities increased by $29,521 or 1,232% to $31,917, compared with $2,396 for the three months in the prior year as of September 20, 2021. The increase is mainly due to an increase in net loss and accounts payable and accrued liabilities.
Cash Used in Investing Activities
For the three months ended September 30, 2022 and 2021, we have no cash investing activities as compared from the same period last year.
Cash Provided by Financing Activities
For the three months ended September 30, 2022, the Company advanced $23,446 for operating expenses, compared with $Nil in the same period in 2021.
Cash Requirements
Over the next 12 months, we anticipate that we will incur the following operating expenses:
| Expense |
|
Amount |
|
| General and administrative |
$ |
5,000 |
|
| Professional fees |
|
50,000 |
|
| Foreign currency exchange loss |
|
5,000 |
|
| Total |
$ |
60,000 |
|
Our Director, Christina Chen, has committed to providing our working capital requirements for the next 12 months.
Management believes that the Company will be able to raise sufficient capital to meet our working capital requirements for the next 12-month period. Management is currently seeking financing opportunities to meet our estimated funding requirements for the next 12 months primarily through private placements 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.
Transactions with related parties
Mrs. Hong Ba serves as the Chief Executive Officer and Director of the Company. Mr. Feng Li, the husband of Mrs. Hong Ba, is the owner of the Canada Airchn Financial Inc. ("CAFI"). The shareholders make advances to the Company from time to time for the Company's operations. These advances are due on demand and non-interest bearing.
As of September 30, 2022, there was $73,559 (June 30, 2022 - $51,474) due to related parties in total.
As of September 30, 2022, the CEO of the Company advanced $43,015 (June 30, 2022 - $28,910) to the Company for operating expenditures.
During the three months ended September 30, 2022, a company owned by Feng Li, the husband of Mrs. Hong Ba, our CEO, charged the Company $1,816 (CAD$2,400) (September 30, 2021 - $1,906 (CAD$2,400) in rent and the debt of $12,217 has been due to the related party (June 30, 2022 - $11,187).
As of September 30, 2022, Mr. Feng Li advanced $3,586 (June 30, 2022 - $3,529) to the Company for operating expenditures.
As of September 30, 2022, the Company has received advances of $14,539 (June 30, 2022 - $7,633) for operating expenditures from related party, a director of the Company
As of September 30, 2022, the Company has received an advance of $202 (June 30, 2022 - $214) for operating expenditure from a related party who was an over 10% shareholder of the Company.
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.