FRONTERA GROUP INC. - Quarter Report: 2018 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2018
or
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from                    to

 

Commission File Number: 333-198524

 

FRONTERA GROUP INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada		46-4429598
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
701 S Carson Street, Suite 200 Carson City, NV		89701
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number including area code: 909-374-5750

 

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.

 

Large accelerated filer [   ]		Accelerated filer [   ]
Non-accelerated filer [   ]		Smaller reporting company [X]

 

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

 

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

Class		Outstanding as of June 18, 2018
Common Stock, $0.00001 par value		307,280,150

 

FRONTERA GROUP INC.

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
SIGNATURES

 

 

 

 

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PART 1 – FINANCIAL INFORMATION

 

 

ITEM 1.  FINANCIAL STATEMENTS

 

 FRONTERA GROUP INC.

For the Three and Nine Months Periods ended March 31, 2018 and 2017

(Unaudited)

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See accompanying notes to the condensed unaudited financial statements

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FRONTERA GROUP INC.

CONSENSED STATEMENT OF OPERATIONS

(Unaudited)

See accompanying notes to the condensed unaudited financial statements

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FRONTERA GROUP INC.

For the Three and Six Months Ended December 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 for a fair presentation of the results for the interim periods. 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, 2017 and notes thereto contained in the information as part of the Company’s Annual Report on the Form 10-K, which was filed with the Securities and Exchange Commission on October 23, 2017.

 

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 Per Share

 

Earnings per share is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share.  Earnings 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 the 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 potential dilutive common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants. When the Company has a loss, potential dilutive shares are not included as they would be anti-dilutive.

 

There were no potentially dilutive debt or equity instruments issued and outstanding at any time during the three and nine months ended March 31, 2018 and 2017

 

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Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

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 a stockholders’ deficit at March 31, 2018 , a net loss and net cash used in operating activities for the reporting period ended March 31, 2018. 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 sufficient to support the Company’s daily 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.

 

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.

 

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Note 4 – Related Party Transactions

Advances from officer

 

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 March 31, 2018 and June 30, 2017, the advance balance was $10,713.

 

Note 5 – Income Tax Provision

Deferred Tax Assets

As of March 31, 2018, and June 30, 2017, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $144,336 and $134,136, respectively that may be offset against future taxable income which begin to expire in 2037. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.

The provision (benefit) for income taxes consisted of the following for the three and nine months ended March 31, 2018 and 2017:

		For the Three Months Ended March 31,			For the NineMonths Ended March 31,
		2018	2017		2018	2017
		(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
Deferred	$	(630)	(1,785)	$	(2,142)	(4,145)
Change in valuation allowance		630	1,785		2,142	4,145
Income tax provision (benefit)	$	-	-	$	-	-

The following table reconciles the effective income tax rates with the statutory rates for the three and nine months ended March 31, 2018 and 2017: 

				2018		2017
U.S. federal statutory rate				21.0%			34.0%
Change in valuation allowance				(21.0)%			(34.0)%
Effective income tax rate				-%			-%

Deferred tax assets (liabilities) are comprised of the following:

				March 31, 2018		June 30, 2017
Net operating loss carryforwards			$	30,311	$		45,606
Valuation allowance				(30,311)			(45,606)
Net deferred tax assets			$	-	$		-

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.

We follow ASC 740 Accounting for Uncertainty in Income Taxes. Under ASC 740, tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. We had no liabilities for unrecognized tax benefits at March 31, 2018 and June 30, 2017.

Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the three and nine months ended March 31, 2018 and 2017, we did not recognize any interest or penalties in our statement of operations, nor did we have any interest or penalties accrued in our balance sheet at March 31, 2018 and June 30, 2017 relating to unrecognized tax benefits.

The tax years 2015 to 2017 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.

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 adjusted for and / or 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 non-affiliated 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 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 JOBS Act reduces 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

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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 non-affiliated 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 and 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 nine months periods ended March 31, 2018 and 2017.

 

Revenue

 

We had no revenue or cost of revenues for the three months ended March 31, 2018 and 2017. We did not perform any consulting services during the three months ended December 31, 2017 and 2016. 

We had no revenue or cost of revenues for the nine months ended March 31, 2018 and 2017. We did not perform any consulting services during the nine months ended March 31, 2018 and 2017. 

Costs and Expenses

 

Operating Expenses

 

The major components of our expenses for the three-month periods ended March 31, 2018 and 2016 are outlined in the table below:

 

 

 

The operating expenses for the three months ended March 31, 2018 of $0.

Net Loss

 

During the three months ended March 31, 2018, we incurred a net loss of $3,000 compared to a net loss of $5,250 during the three months ended March 31, 2017 due to the decrease in operating expenses.

 

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During the nine months ended March 31, 2018 we incurred a net loss of $10,200 as compared to a net loss of         $12, 190 during the nine months ended March 31, 2017.

 

Liquidity and Capital Resources

 

		As of		As of
		March 31,		June 30,
		2018		2017
		(Unaudited)
Total current assets	$	216	$	7,825
Total current liabilities		(20,454)		(22,913)
Working capital deficiency	$	(20,238)	$	(15,088)

 

Liquidity

 

We have explored and are continuing to explore options to provide additional financing to fund other possible courses of action. Such actions include, but are not limited to, 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 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:

 

Cash Flows

Cash Flows from Operating Activities

 

During the nine months ended March 31, 2018 we used $12,609 in operating activities compared to $8,175 used in operating activities during the nine months ended March 31, 2017.

Cash Flows from Investing Activities

 

We did not generate or use any cash from investing activities during the nine months ended March 31, 2018 and 2017.

 

Cash Flows from Financing Activities

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During the nine months ended March 31, 2018, we generated $5,000 from contributions from our chief executive officer.

During the nine months ended March 31, 2017,  we generated $10,000 from contributions from our chief executive officer.

 

Management expects to keep operating costs to a minimum until cash is available through financing activities. Management plans to continue to seek, in addition to equity financing, other sources of financing (e.g. 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 achieve and 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 Company’s operations.

  

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.

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

 

We evaluated the effectiveness of our disclosure controls and procedures as of the end of the three months ended March 31, 2018.  This evaluation was conducted with the participation of our chief executive officer and our principal accounting officer.

 

Disclosure controls are controls and other procedures that are designed to ensure that information that we are required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported. 

 

Limitations on the Effective of Controls

Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met.  Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs.  These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control.  A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

 

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Conclusions

 

Based upon his evaluation of our controls, the chief executive officer and principal accounting officer have concluded that, subject to the limitations noted above, the disclosure controls are not effective providing reasonable assurance that material information relating to us is made known to management on a timely basis during the period when our reports are being prepared.  There were no changes in our internal controls that occurred during the year covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.

 

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

 

We were not subject to any legal proceedings during the three-month periods ended March 31, 2018, 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. 

 

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

 

No equity securities were sold during the three months ended March 31, 2018.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

No senior securities were issued and outstanding during the three-month periods ended March 31, 2018.

 

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:

 

 

 

EXHIBIT

NUMBER        DESCRIPTION

 

3.1		Articles of Incorporation. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on September 3, 2014.
3.2		Bylaws. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on September 3, 2014.
4.2		Subscription Agreement. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on September 3, 2014.
10.1		Management Consultant Agreement (President). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on September 3, 2014.
10.2		Management Consultant Agreement (C.F.O.). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on September 3, 2014.
31.1		Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document **
101.SCH		XBRL Taxonomy Extension Schema Document **
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB		XBRL Taxonomy Extension Label Linkbase Document **
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document **

 

   *  Filed herewith.

 

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** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Frontera Group Inc

Mr. Gan Ren

CEO, CFO

June 18, 2018

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