WESC W and E Source Corporation (CE)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

(Formerly News of China, Inc.)

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 OTC Markets was 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, Airchn 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 pay Baopiao RMB200,000 as repayment of the Debt and satisfy the remaining Debt of RMB 1,600,000 within 20 days from the execution of the Agreement.

Also pursuant to the Agreement, the Seller will provide guaranties that other than the information including financial statements provided to the Company, Baopiao does not have any other debts, and no third party has any rights or liens on the assets of Baopiao. The Seller and Baopiao will also indemnify the Company against any damages, liabilities, losses and expenses which the Company may sustain or suffer due to any breach of the guaranties made by the Seller or Baopiao.

Baopiao has obtained the necessary shareholder approval for the transfer of the Shares and will register the transfer of the Shares with the applicable State Administration for Industry and Commerce within three days from the date of the Agreement.

In connection with the Agreement, the Company also entered into an agreement with the Seller and Baopiao that as an incentive for the management team of Baopiao, the Company will reserve up to 26 million shares of its common stock for issuance to the Baopiao employees upon achievement of certain milestones over the next three years.

The Share Purchase Agreement with Mr. Wu Hao was not completed in January 2013 and both the Company and Mr. Wu Hao agreed to terminate the agreement entered on December 15, 2012.

a.      Basis of presentation.

The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the Securities and Exchange Commission (the "SEC"). In the opinion of management, the financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the results for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted as permitted by the rules and regulations of the United States Securities and Exchange Commission ("SEC"), although the Company believes that the disclosures contained in this report are adequate to make the information presented not misleading. The unaudited consolidated balance sheet information as of September 30, 2021 was derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 2021. These unaudited consolidated financial statements should be read in conjunction with the annual consolidated audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2021, and other reports filed with the SEC. Operating results for the three months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ended June 30, 2022.

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 consolidated 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' equity. The foreign exchange rates were adopted as of September 30, 2021:

c.       Principles of consolidation.

The 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 consolidated 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 consolidated 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 loss 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, 2021 and June 30, 2021.

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 non-cancellable, 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. Effective January 1, 2018, the Company adopted the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts. The implementation of ASC 606 did not have a material impact on the Company's consolidated financial statements. ASC 606 create a five-step model that requires entities to exercise judgement when considering the terms of contract, which includes (1) identifying the contracts or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligation, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company's revenue consists of revenue from providing travel consulting and travel arrangement advisory services ("service revenue"), and service revenue from travel schedule arrangements and advisory.

g.    Cash and cash equivalents.

The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months or less of their acquisition date. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. As of September 30, 2021 and June 30, 2021, we have no cash equivalents.

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. The 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 consolidated results of operations, financial position, or cash flows of the Company.

Recently Issued Accounting Pronouncements

In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify on how to apply certain aspects of the new lease accounting standard. The amendments in this update, among other things, better articulates the requirement for a lessee's reassessment of lease classification as of the effective date of a modification, clarifies that a change to an index or rate for variable lease payments does not constitute a resolution of a contingency that would result in the remeasurement of lease payments, and requires entities that apply Topic 842 retrospectively to each reporting period and do not adopt the practical expedients to write off any prior unamortized initial direct costs that do not meet the definition under Topic 842 to equity. The amendments in this update have the same effective date and transition requirements as the new lease standard summarized above. The Company has evaluated the impact of adoption of Topic 842 on the Company's consolidated financial position and results of operations as stated above. There would be no impact of the adoption of this guidance on its consolidated financial statements for the period ended as of September 30, 2021.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes". The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, "Income Taxes". The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for us beginning in the first quarter of fiscal 2021, with early adoption permitted. We are still evaluating the impact this guidance will have on our consolidated financial statements

Note 3 - Going Concern

As reflected in the accompanying consolidated financial statements, the Company had accumulated deficits of $1,267,906 and $1,255,841 as of September 30, 2021 and June 30, 2021, and net losses of $12,065 and $26,468, respectively, for the three months ended September 30, 2021 and 2020. 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 the current actions to obtain additional funding from independent investors or from the management and to implement its strategic plans should allow the Company to continue as a going concern. There are no assurances that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.

Note 4 - Prepayment

As of September 30, 2021, the Company prepaid a security deposit of $11,762 (CAD$15,000) (June 30, 2021 - $12,030 (CAD$15,000)) to Consumer Protection British Columbia Province for the guarantee of service quality.

Note 5 - Accounts Payable and Accrued Liabilities

Accounts Payable and Accrued Liabilities of $32,287 as of September 30, 2021, consists of payment of $2,625 in legal fees, $27,400 in audit and accounting fees and $2,262 in filing fees. (June 30, 2021 - $24,561).

Note 6 - 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, 2021, there was $13,698 (June 30, 2021 - $12,020) due to related parties in total.

As of the three months ended September 30, 2021, the CEO of the Company advanced $6,930 (June 30, 2021 - $7,048) to the Company for operating expenditure.

During the three months ended September 30, 2021, a company owned by Feng Li, the husband of Mrs. Hong Ba, our CEO, charged the Company $1,906 (CAD$2,400) (September 30, 2020 - $1,812) in rent and the debt of $5,646 has been due to the related party (June 30, 2021 - $3,850).

As of the period ended September 30, 2021, the husband of Mrs. Hong Ba, our CEO, advanced $900 (June 30, 2021 - $900) to the Company for the operating expenditure.

As of September 30, 2021, the Company has received an advance of $222 (June 30, 2021 - $222) for operating expenditure from a related party who is an over 10% shareholder of the Company.

Note 8 - Common Stock

On December 14, 2020, the Company entered into Debt Cancellation Agreement (the "Debt Cancellation Agreement") with certain creditors to the Company with a total outstanding aggregate balance of US$237,981 (the "Debts"). Pursuant to the Debt Cancellation Agreement the Company agreed to issue an aggregate total of 47,596,110 shares of its common stock, $0.0001 par value per share (the "Shares"), at the conversion rate of US$0.005 per share as full payment for the Debts. Upon issuance and delivery of the Shares, the Debts were fully paid and the Company no longer had any obligations to the creditors under the Debts.

As the filing date of these financial statements, there are 130,085,501 shares issued and outstanding.