During the three months ended December 31, 2016 and 2015, $0 and $0 of these related party consulting
services was recognized in cost of revenues and $0 and $2,700, respectively, in officers compensation within operating expenses.
During the six months ended December 31, 2016 and 2015 $0 and $1,050 of these related party consulting services was recognized in cost of revenues and $0 and $4,350, respectively, in officers compensation within operating expenses.
Prior to January 2016, the former President and former Chief Financial Officer provided management consulting services to the Company. On February 1, 2014, we entered into consulting agreements with Michael Krichevcev, our former President, and Tatiana Varuha, our former Chief Financial Officer. These agreements were extended for the period from February 1, 2015 to January 31, 2016 on the same terms and conditions as the agreements dated February 1, 2014. In January 2016, when Michael Krichevcev and Tatiana Varuha were no longer the officers of the Company, the Company terminated the management consulting engagement with them. During the three and six months ended December 31, 2016, the Company did not incur any fee and expense in management consulting services with the former President and former Chief Financial Officer of the Company.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements and Associated Risks.
The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.
Frontera Group Inc. is an emerging growth company under the Jumpstart Our Business Startups Act and will remain an "emerging growth company" until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary of its initial public offering, (c) the date on which Frontera Group has, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (d) the date on which Frontera Group is deemed a "large accelerated filer" (with at least $700 million in public float) under the Securities and Exchange Act of 1934 (the "EXCHANGE ACT").
For so long as Frontera Group remains an "emerging growth company" as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" as described in further detail in the risk factors below. Frontera Group cannot predict if investors will find its shares of common stock less attractive because Frontera Group will rely on some or all of these exemptions. If some investors find Frontera Group's shares of common stock less attractive as a result, there may be a less active trading market for its shares of common stock and its stock price may be more volatile.
If Frontera Group avails itself of certain exemptions from various reporting requirements, its reduced disclosure may make it more difficult for investors and securities analysts to evaluate Frontera Group and may result in less investor confidence.
The recently enacted JOBS Act is intended to reduce the regulatory burden on "emerging growth companies". Frontera Group meets the definition of an "emerging growth company" and so long as it qualifies as an "emerging growth company," it will not be required to:
· have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
· comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
· submit certain executive compensation matters to shareholder advisory votes, such as say-on-pay and say-on-frequency; and
· disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEOs compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
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In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, Frontera Group is choosing to "opt out" of such extended transition period, and as a result, Frontera Group will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that its decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Notwithstanding the above, we are also currently a smaller reporting company, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a smaller reporting company, at such time are we cease being an emerging growth company, we will be required to provide additional disclosure in our SEC filings. However, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.
Results of operations for the three and six months periods ended December 31, 2016 and 2015.
Revenue
Our gross revenue for the three-month periods ended December 31, 2016 and 2015 was $0 and $0 respectively. Our cost of revenues for the three-month period ended December 31, 2016 was $0 (December 31, 2015: $0) resulting in a gross profit of $0 and $0, respectively. We did not perform any consulting services during the three months ended December 31, 2016 and 2015.
Our gross revenue for the six-month periods ended December 31, 2016 and 2015 was $0 and $2,000 respectively. Our cost of revenues for the six-month period ended December 31, 2016 was $0 (December 31, 2015: $1,050) resulting in a gross profit of $0 and $950, respectively. All of our revenues during the six months ended December 31, 2015 derived from consulting services related to market research and feasibility studies and translation services. We did not perform any consulting services during the six months ended December 31, 2016 resulting in a decrease in revenues and gross margin compared to the same period in our 2015 fiscal year.
Costs and Expenses
Operating Expenses
The major components of our expenses for the three-month periods ended December 31, 2016 and 2015 are outlined in the table below:
|
|
|
|
|
|
For the
Three Months
Ended
December 31, 2016
|
|
For the
Three Months
Ended
December 31, 2015
|
|
|
|
|
|
|
Compensation officers
|
$ -
|
|
$ 2,700
|
|
Professional fees
|
5,650
|
|
1,500
|
|
General and administrative
|
625
|
|
7,767
|
|
|
$ 6,275
|
|
$ 11,967
|
|
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The operating expenses for the
three months ended December 31, 2016 of $6,275 decreased by $5,692 from $11,967 for the three months ended December 31, 2015. The decrease was due to that we no longer paid compensation to officers and general and administrative expenses were also decreased due to our limited business activity.
The major components of our expenses for the six-month periods ended December 31, 2016 and 2015 are outlined in the table below:
|
|
|
|
|
|
For the
Six Months
Ended
December 31, 2016
|
|
For the
Six Months
Ended
December 31, 2015
|
|
|
|
|
|
|
Compensation officers
|
$ -
|
|
$ 4,350
|
|
Professional fees
|
5,650
|
|
6,250
|
|
General and administrative
|
1,290
|
|
14,859
|
|
|
$ 6,940
|
|
$ 25,459
|
|
The operating expenses for the
six-month periods ended December 31, 2016 were $6,940, decreased by $18,519 compared to the $25,459 for the six months ended December 31, 2015. The decrease was due to that we no longer paid compensation to officers and general and administrative expenses were also decreased due to our limited business activity.
Net Loss
During the three months ended December 31, 2016, we incurred a net loss of $6,275 compared to a net loss of $11,967 during the three months ended December 31, 2015. The decrease was due to that we no longer paid compensation to officers and general and administrative expenses were also decreased due to our limited business activity.
During the six months ended December 31, 2016, we incurred a net loss of $6,940 compared to a net loss of $24,509 during the six months ended December 31, 2015. The decrease was due to that we no longer paid compensation to officers and general and administrative expenses were also decreased due to our limited business activity.
Liquidity and Capital Resources
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
December 31,
|
|
June 30,
|
|
|
2016
|
|
2016
|
|
|
|
|
|
Total assets
|
$
|
3,350
|
$
|
9,000
|
Total liabilities
|
|
(11,588)
|
|
(10,298)
|
Working capital deficiency
|
$
|
(8,238)
|
$
|
(1,298)
|
12
Liquidity
If we are not successful in expanding our clientele base, maintaining profitability and positive cash flow, additional capital may be required to maintain ongoing operations. We have explored and are continuing to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from our directors or other third parties, and other similar actions. There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, our directors, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.
Cash Flows
The table below, for the period indicated, provides selected cash flow information:
|
|
|
|
|
|
|
For the Six Months
Ended
December 31, 2016
|
|
For the Three Months
Ended
December 31, 2015
|
|
|
|
|
|
Cash used in operating activities
|
$
|
(5,650)
|
$
|
(23,319)
|
Cash used in investing activities
|
|
-
|
|
-
|
Cash provided by financing activities
|
|
-
|
|
23,000
|
Net increase (decrease) in cash
|
$
|
(5,650)
|
$
|
(319)
|
Cash Flows from Operating Activities
During the six months ended December 31, 2016 we used $5,650 in operating activities compared to $23,319 used in operating activities during the six months ended December 31, 2015.
The decrease of the cash used in operating activities was due to reductions in operating expenses incurred during the six months ended December 31, 2016.
Cash Flows from Investing Activities
We did not generate or use any cash from investing activities during the six-month periods ended December 31, 2016 and 2015.
Cash Flows from Financing Activities
During the six months ended December 31, 2016, we neither generated nor used funds in financing activities. During the six months ended December 31, 2015, we generated $23,000 from advances from our Chief Executive Officer.
Management expects to keep operating costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek, in addition to equity financing, other sources of financing (e.g. bank loan, line of credit, shareholder loan) on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all.
If we are unable to generate profits sufficient to cover our operating costs or to obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of the Companys operations.
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Off-Balance Sheet Arrangements
We have no 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 are material to stockholders.