See accompanying notes to the condensed unaudited financial statements
6
FRONTERA GROUP INC.
For the Three and Nine Month Periods Ended March 31, 2017 and 2016
Notes to the Condensed Financial Statements
(Unaudited)
Note 1 – Organization and Operations
Frontera Group Inc. (the “Company”) was incorporated under the laws of the State of Nevada on November 21, 2013, Frontera Group Inc. was an export management company providing business development and market consultancy services that assist small and medium-sized businesses in entering new markets in Central and South America. The Company currently has no operations and is a shell company.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation – Unaudited Interim Financial Information
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended June 30, 2016 and notes thereto contained in the information as part of the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on October 31, 2016.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of March 31, 2017 and June 30, 2016, the Company does not have any cash equivalents.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). Actual results could differ from those estimates.
Earnings (loss) per Share
Earnings (loss) Per Share is the amount of earnings (loss) attributable to each share of common stock. Earnings (loss) per share ("EPS") is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS is computed by dividing net income (loss) available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period.
The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangements, stock options or warrants. When the Company has a loss, dilutive shares are not included as they would be antidilutive.
There were no potentially dilutive debt or equity instruments issued and outstanding at any time during the three and nine months ended March 31, 2017 and 2016.
7
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, will have a material effect on the accompanying financial statements.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company has an accumulated deficit of $122,536 at March 31, 2017, a net loss of $12,190 for the nine months ended March 31, 2017 and net cash used in operating activities of $8,175 for the nine months ended March 31, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position is not currently sufficient to support the Company’s operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. Until such time, the Company will continue to be dependent on the availability of additional capital contributions from its CEO.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 4 – Related Party Transactions
Consulting services from President, Chief Executive Officer, Secretary and Treasurer and Chief Financial Officer
Consulting services provided by the former President, Chief Executive Officer, Secretary and the former Treasurer and Chief Financial Officer for the three and nine months ended March 31, 2017 and 2016 were as follows:
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For the
Three Months
Ended
March 31, 2017
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For the
Three Months
Ended
March 31, 2016
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For the
Nine Months
Ended
March 31, 2017
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For the
Nine Months
Ended
March 31, 2016
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President, Chief Executive Officer
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$ -
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(i)
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$ -
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(i)
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$ -
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(ii)
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$ 3,000
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(ii)
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Chief Financial Officer, Secretary
and Treasurer
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-
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-
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-
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2,400
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$ -
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$ -
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$ -
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$ 5,400
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(i)
During the three months ended March 31, 2017 and 2016, none of these related party consulting services was recognized in cost of revenues and none in officers’ compensation within operating expenses.
(ii)
During the nine months ended March 31, 2017 and 2016, $0 and $5,400 of related party consulting services were recognized in cost of revenues and officers’ compensation within operating expenses.
8
Advances
from
President and CEO
From time to time, the President, CEO and significant stockholder of the Company advances funds to the Company for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand. As of March 31, 2017 and June 30, 2016, the advance balance was $10,713 and $4,698, respectively.
Accrued Compensation
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 engagements with them. During three months ended March 31, 2017 and 2016, there was no fee and expense incurred. During nine months ended March 31, 2017 and 2016, fee and expense incurred in management consulting services with the former President and former Chief Financial Officer of the Company was $0 and $5,400.
Note 5 – Stockholders’ Equity (Deficit)
Shares authorized
Upon formation, the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share. On February 23, 2016, the Company increased its authorized common shares to one billion (1,000,000,000), and decreased the par value to $0.00001 per share. Due to this change, $7,207 was shifted from the Common Stock account to the Additional Paid-in Capital account.
Common stock
On March 12, 2016, the Company sold 300,000,000 common shares at $0.00003 per share for total proceeds of $9,000. The 300,000,000 shares of common stock were issued to Nanjing Dayu Xianneng Foods, Co, Ltd. The control person that Nanjing Dayu Xianneng Foods Co. Ltd is Mr. Daobing Xia.
Change in Control
On January 12, 2016, Mr. Michael Krichevcev, the Company’s Chief Executive Officer and Director, and Ms. Tatiana Varuha, the Company’s Chief Financial Officer and Director, sold all of their 4,000,000 shares of common stock of Frontera Group Inc. to Mr. Gan Ren. The 4,000,000 shares of common stock sold represented a majority of the total issued and outstanding common stock of the Company. As result of this share purchase transaction, Mr. Gan Ren became the controlling shareholder of the Company.
In connection with this share purchase transaction, on January 12, 2016, Mr. Krichevcev and Ms. Varuha resigned from all positions they held in the Company, including Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, and Board Director. On January 12, 2016, Mr. Gan Ren became the President, Board Director, Secretary, Treasurer, Chief Executive Officer and Chief Financial Officer of the Company.
On March 12, 2016, with the sale of 300,000,000 shares of common stock, Nanjing Dayu Xianneng Foods, Co, Ltd. is now the controlling shareholder of the Company. Mr. Gan Ren still remains the President, Board Director, Secretary, Treasurer, Chief Executive Officer and Chief Financial Officer of the Company.
Forgiveness of Advances from Former Stockholders and Accrued Compensation – Former Officers
On January 12, 2016, pursuant to the terms of their Stock Purchase Agreements, the former officers and stockholders forgave advances of $34,348 and accrued compensation of $20,700, respectively or $55,048 in aggregate. This amount was recorded as contributions to capital and recognized in additional paid in capital.
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Note 6 – Subsequent Events
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed.
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ITEM 2. MANAGEMENT’S 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 auditor’s 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 CEO’s 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.
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 we cease being an
11
“emerging growth company”, we will be required to provide additional disclosures 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-month periods ended March 31, 2017 and 2016.
Revenue
Our gross revenue for each of the three-month periods ended March 31, 2017 and 2016 was $0. Our cost of revenues for the three-month period ended March 31, 2017 and 2016 was $0, resulting in a gross profit of $0. The Company did not have any operations during the three months ended March 31, 2017 and 2016.
12
Operating Expenses
The major components of our expenses for the three-month periods ended March 31, 2017 and 2016 are outlined in the table below:
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For the
Three Months
Ended
March 31, 2017
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For the
Three Months
Ended
March 31, 2016
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Compensation – officers
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$ -
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$ -
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Professional fees
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4,650
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1,500
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General and administrative
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600
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4,236
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$ 5,250
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$ 5,736
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The operating expenses for the three months ended March 31, 2017 of $5,250 decreased from $5,736 for the three months ended March 31, 2016. The increase was due to a decrease in transfer agent fees.
Net Loss
During the three months ended March 31, 2017, we incurred a net loss of $5,250 compared to a net loss of $5,736 during the three months ended March 31, 2016 due to the decrease in operating expenses.
Results of operations for the nine-month periods ended March 31, 2017 and 2016.
Revenue
Our gross revenue for the nine-month periods ended March 31, 2017 and 2016 was $0 and $2,000 respectively. Our cost of revenues for the nine-month period ended March 31, 2017 and 2016 was $0 and $1,050, respectively, resulting in a gross profit of $0 and $950, respectively. All of our revenues were derived from consulting services related to market research and feasibility studies and translation services. The decrease in revenues was because the Company did not have any operations during the nine months ended March 31, 2017.
Operating Expenses
The major components of our expenses for the nine-month periods ended March 31, 2017 and 2016 are outlined in the table below:
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For the
Nine Months
Ended
March 31, 2017
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For the
Nine Months
Ended
March 31, 2016
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Compensation – officers
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$ 0
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$ 4,350
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Professional fees
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10,300
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7,750
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General and administrative
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1,890
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19,095
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$ 12,190
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$ 31,195
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The operating expenses for the nine month periods ended March 31, 2017 were $12,190, a decrease when compared to $31,195 for the nine months ended March 31, 2016. The decrease was due to the decrease in compensation and general /administrative expenses.
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Net Loss
During the nine months ended March 31, 2017 we incurred a net loss of $12,190 compared to a net loss of $30,245 during the nine months ended March 31, 2016 due to the decrease in operating expenses.
Liquidity and Capital Resources
Liquidity
The Company’s operations in the recent past have been financed primarily through cash flow from operations, equity financing, existing cash and cash advances from the Company’s Chief Executive Officer. The Company has incurred net losses for the majority of the past several years. Moving forward, the Company expects to have significant cash outflows in the near term based on the implementation of its business plan which should lead to increased corporate activities.
If we are not successful in implementing our business plan and achieving and maintaining profitability and positive cash flow, additional capital will be required to continue operations. We have explored and are continuing to explore options to raise 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, 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 achieve’pp 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