FRONTERA GROUP INC. - Quarter Report: 2015 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the transition period from                    to                   

Commission File Number: 333-198524

Frontera Group Inc.

(Exact Name of Registrant as Specified in its Charter)

150 Drake Street, Room 7F

Pomona CA 91767

 (Address of principal executive offices)   (Zip Code)

Phone: 909-374-5750

Copy of Communications to:

Bernard & Yam, LLP

Attn: Man Yam, Esq.

140-75 Ash Avenue, Suite 2D,

Flushing, NY 11355

Phone: 2122197783

Fax: 2122193604

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.  Yes [X]  No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [   ]  No [X]

Applicable Only to Corporate Issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

FRONTERA GROUP INC.

TABLE OF CONTENTS

2

PART 1 – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

FRONTERA GROUP INC.

For the Three and Six Month Periods December 31, 2015 and 2014

(Unaudited)

Index to the Condensed Financial Statements

3

4

public or private offering, among other factors;

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.  

The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued expenses, approximate their fair value because of the short maturity of those instruments.  

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.

Revenue Recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

The Company derives its revenues from sales contracts with its customer with revenues being generated upon rendering of services.  Persuasive evidence of an arrangement is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.

Deferred Tax Assets and Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  

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.

Our Business

Frontera Group Inc. (“the Company”, “we”, “us” or “our”) is 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. Our target clients are manufacturers of food products, who are looking for assistance in the areas of marketing, sales and logistics as they expand their sales territories. We specifically target these types of companies because of experience of our management in providing marketing and distribution services to manufacturer of food products.

We generate revenue by providing consulting services to small and medium businesses.  We acquire customers through direct marketing and referrals.

Our services will include:

Market and Competitor Research

Breaking into new markets is inherently risky due to the unfamiliarity of the competition and consumer demand. Our comprehensive market and competitor research allows our customers to have insight into their new target market. Our customers are better able to price their products and services competitively and position their brand effectively. Market research services include market, economic and political overview, logistics and cost environment, partnership identification, competitor research including availability of distribution channels, competitor promotional strategies and identification of specific differentiation opportunities. Market and competitor research is the first step for a client's launch into a new market. These services are billed on a project basis, with the scope determined in collaboration with the client. Research can be done as a one-off service prior to a new launch, or as an on-going project with a smaller scope to monitor competition in a particular market.

Marketing Strategy Development

Essential to the success of entering a new market is an appropriate and effective marketing strategy. After establishing a budget and target market, we develop a marketing plan that can help our clients reach their potential customers. A core part of our marketing services is the design and deployment of specialized reports that capture, measure and analyze target market data to provide insights into market opportunities, value proposition, positioning and messaging development. The result is a custom Business Development plan that addresses overall marketing strategy for a launch to a new market.

Translation Services

Launching a product in a new market often requires adaptation of packaging, corporate identity documents, and marketing materials to a new language. Our translation services ensure complete compatibility with local culture and market conditions for any corporate communication materials.

Trade show and commercial event management

An important part of a product or service launch is effective presentation at industry and consumer trade shows. We ensure an effective presentation at trade shows by developing target market appropriate booth design and sales material, as well as helping to manage staffing and logistics. We also consult and manage other commercial events, such as marketing events, product demos, and public relations events.

Administration and On-Going Business services

We provide services offering ongoing assistance with marketing, sales, and distribution after initial product launch. The scope of services depends on customer requirements. We can provide one-off consultations regarding marketing or distribution strategies, resulting in short-term engagements. For customers who require extra support, we can act as broker of record for a line of products in a specific geographic area. We customarily charge the client a flat monthly fee, with an additional commission depending on a portion of sales made in the target market.

As of December 31, 2015 we provided consulting services related to market feasibility studies, competitor research and translation services. Our plan over the next twelve months is to expand our client base and the range of services we provide.

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 sold 4,000,000 shares of common stock represented 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.   

Results of operations for the three-month periods ended December 31, 2015 and 2014.

Revenue

Our gross revenue for the three-month periods ended December 31, 2015 and 2014 was $0 and $4,500 respectively.  Our cost of revenues for the three-month period ended December 31, 2015 was $0 and $1,350, respectively, resulting in a gross profit of $0 and $3,150, respectively. All of our revenues during the three months ended December 31, 2014 derived from consulting services related to market research and feasibility studies and translation services. The Company did not have any projects during the three months ended December 31, 2015 compared to the three months ended December 31, 2014.

Operating Expenses

The major components of our expenses for the three-month periods ended December 31, 2015 and 2014 are outlined in the table below:

The operating expenses for the three months ended December 31, 2015 of $11,967 increased by $2,610 from $9,357 for the three months ended December 31, 2014. The increase was due to an increase in OTC market and transfer agent fees.

Net Loss

During the three months ended December 31, 2015, we incurred a net loss of $11,967 compared to a net loss of $6,207 during the three months ended December 31, 2014 due to the decrease in revenue and the increase in operating expenses.

Results of operations for the six-month periods ended December 31, 2015 and 2014.

Revenue

Our gross revenue for the six-month periods ended December 31, 2015 and 2014 was $2,000 and $12,300 respectively.  Our cost of revenues for the six-month period ended December 31, 2015 was $1,050 (December 31, 2014: $2,700) resulting in a gross profit of $950 and $9,600 respectively. All of our revenues derived from consulting services related to market research and feasibility studies and translation services. The decrease in revenues was due to fewer number of projects completed during the six months ended December 31, 2015 compared to the same period in our fiscal 2015.

Operating Expenses

The major components of our expenses for the six-month periods ended December 31, 2015 and 2014 are outlined in the table below:

The operating expenses for the six-month periods ended December 31, 2015 were $25,459, increased compared to the $21,258 for the six months ended December 31, 2014. The increase was due to an increase in OTC market and transfer agent fees.

Net Loss

During the six months ended December 31, 2015 we incurred a net loss of $24,509 compared to a net loss of $11,658 during the six months ended December 31, 2014 due to the decrease in revenue and the increase 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, in the first quarter of fiscal 2016, a cash advance 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 increase in corporate activities and implementation of its business plan.

Our total current liabilities exceed our current assets resulting in working capital deficiency of $50,812 as of December 31, 2015. Our total current liabilities exceed our current assets resulting in working capital deficiency of $26,303 as of June 30, 2015. The increase in our working capital deficit during the period was principally due to operating losses incurred in this period.

From time to time, the President, Chief Executive Officer 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 December 31, 2015 and June 30, 2015, the advance balance was $30,500 and $7,500, respectively.

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

Cash Flows from Operating Activities

During the six months ended December 31, 2015 we used $23,319 in operating activities compared to $5,601 used in operating activities during the six months ended December 31, 2014.

Cash Flows from Investing Activities

We did not generate or use any cash from investing activities during the six-month periods ended December 31, 2015 and 2014.

Cash Flows from Financing Activities

During the six months ended December 31, 2015, we generated $23,000 from advances from our Chief Executive Officer while we neither generated nor used funds in financing activities during the six months ended December 31, 2014. 

Recent Accounting Pronouncements 

See Note 2 to the Unaudited Financial Statements.

Off Balance Sheet Arrangements

As of December 31, 2015, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.  We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

We were not subject to any legal proceedings during the three-month periods ended December 31, 2015, and currently we are not involved in any pending litigation or legal proceeding.

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

No equity securities were sold during the three months ended December 31, 2015 and 2014.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

No senior securities were issued and outstanding during the three-month periods ended December 31, 2015 and 2014.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable to our Company.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS
 
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated: