See report of independent registered public accounting firm and accompanying notes to the financial statements.
Notes to the Condensed Financial Statements
5
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 Accounting and Presentation
The accompanying financial statements have been prepared using the accrual basis in accordance with accounting principles generally accepted in the United States of America.
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 June 30, 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 periods. 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 Financial Accounting Standards Board (FASB) Accounting Standards Codification. Pursuant to Accounting Standards Codification (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 year ended June 30, 2017 and 2016.
Income Taxes
The Company accounts for income taxes in accordance with the FASB ASC Section 740, Income Taxes (ASC 740), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company accounts for uncertain tax positions in accordance with ASC Section 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also prescribes direction on de-recognition, classification, and accounting for interest and payables in the financial statements. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized as of June 30, 2017 and 2016. The Company does not expect any significant changes in unrecognized tax benefits within twelve months of the reporting date.
Fair Value of Financial Instruments
6
The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
ASC 820 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value as follows:
●
Level 1 - quoted prices in active markets for identical assets or liabilities
●
Level 2 - inputs other than quoted prices in active markets that are observable either directly or indirectly.
●
Level 3 - inputs based on prices or valuation techniques that are both unobservable and significant to the
fair value markets.
The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts payable and advances from officier, approximated their fair value due to the short maturity of these financial instruments. There were no changes in methods or assumptions during the periods presented.
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 deficit of $134,136 at June 30, 2017, a net loss of $23,790 for the year ended June 30, 2017 and net cash used in operating activities of $11,175 for the year ended June 30, 2017. These factors raise substantial doubt about the Companys ability to continue as a going concern.
The Company, with its agreements to provide management services (See Note 7), hopes to generate sufficient revenue; however, the Companys cash position is not currently sufficient to support the Companys operations and it is not known when or if the services will provide sufficient working capital. 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 Companys 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 advances and/or 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.
7
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 year ended June 30, 2017 and 2016 were as follows:
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| |
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|
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For the
Year
Ended
June 30, 2017
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|
For the
Year
Ended
June 30, 2016
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|
|
|
|
|
|
|
|
President, Chief Executive Officer
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|
|
$ -
|
|
$ 3,000
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|
Chief Financial Officer, Secretary
and Treasurer
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-
|
|
2,400
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|
|
|
|
$ -
|
|
$ 5,400
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(i)
|
(i) During the year ended June 30, 2016, these related party consulting services were recognized in cost of revenues and officers compensation within operating expenses.
Advances
from
President and CEO
From time to time, the President, CEO and significant stockholder of the Company advances funds for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand. As of June 30, 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 the year ended June 30, 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, respectively.
Note 5 Stockholders (Deficit)
Shares authorized
Upon formation, the total number of shares of all classes of stock which the Company was authorized to issue 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.
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 Companys Chief Executive Officer and Director, and Ms. Tatiana Varuha, the Companys 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.
8
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, 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, 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.
Note 6 Income Tax Provision
Deferred Tax Assets
As of June 30, 2017 and 2016, the Company had net operating loss (NOL) carryforwards for Federal income tax purposes of $134,136 and $110,346, respectively that may be offset against future taxable income which begin to expire in 2034. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Companys net deferred tax assets was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance. In addition, due to the changes of controls of the Company on January 12, 2016 and March 12, 2016, the carry-forward losses generated through these dates will be significantly limited in their use.
The provision (benefit) for income taxes consisted of the following for the years ended June 30, 2017 and 2016:
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2017
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2016
|
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|
|
|
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Current
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$
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-
|
$
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-
|
Deferred
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(8,089)
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|
(5,856)
|
Change in valuation allowance
|
|
8,089
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|
5,856
|
Income tax provision (benefit)
|
$
|
-
|
$
|
-
|
Components of deferred tax assets are as follows:
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|
|
|
|
|
| |
|
|
|
|
|
|
|
|
June 30,
2017
|
|
June 30,
2016
|
Net deferred tax assets Non-current:
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|
|
|
|
|
|
Expected income tax benefit from NOL carry-forwards
|
$
|
24,640
|
$
|
16,551
|
Less valuation allowance
|
|
(24,640)
|
|
(16,551)
|
Deferred tax assets, net of valuation allowance
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
The following table reconciles the effective income tax rates with the statutory rates for the years ended June 30:
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2017
|
|
2016
|
|
|
|
|
|
|
|
U.S. federal statutory rate
|
|
34.0%
|
|
15.0%
|
Change in valuation allowance
|
|
(34.0)
|
|
(15.0)
|
Effective income tax rate
|
|
-%
|
|
-%
|
|
|
|
|
|
|
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 June 30, 2017 and 2016.
9
Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended June 30, 2017 and 2016, 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 June 30, 2017 and 2016 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 7 Subsequent Events
On August 9, 2017, the Company entered into separate Operating Management Agreements with three Chinese companies including Nanjing Xingfeng Agriculture Ecology Co, Ltd., Guoyang Huadu Properties Co, Ltd., and Xingguo Red World Camellia Oil Co., Ltd. Under these operating management agreements, for the term of 10 years, the Company will serve as the consultant for these companies to manage their business operations. The services the Company is to provide includes advice and assistance relating to development of the general business operations; advice on investment, financing, acquisition, disposition and allocation of major assets; advice and assistance in relation to the staffing, including assistance in the recruitment and employment of management personnel, administrative personnel and staff; advice and assistance in relation to research and development and strategic planning. In addition, the Company has the right to acquire equity ownership in these companies during the term of these agreements. The Company will receive 20% of their post-tax net profit as annual compensation under the agreement.
10
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On April 10, 2017, the Company terminated
Pritchett, Siler and Hardy PC (Pritchett, Siler and Hardy PC)
as its principal accountant. The decision of termination was adopted by its board of directors. None of the reports of
Pritchett, Siler and Hardy PC
, on the Company's financial statements for either of the past two years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements between the Company and
Pritchett, Siler and Hardy PC
, for the two most recent fiscal years and any subsequent interim period through April 10, 2017 (date of termination) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of
Pritchett, Siler and Hardy PC
, would have caused them to make reference to the subject matter of the disagreement in connection with its report.
On April 10, 2017, the board of director of the Company approved the engagement of
Wei, Wei & Co, LLP (Wei, Wei & Co, LLP)
as its principal accountant to audit the Company's financial statements. During the Company's two most recent fiscal years or subsequent interim period, the Company has not consulted with the entity of
Wei, Wei & Co, LLP
regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, nor did the entity of
Wei, Wei & Co, LLP
provide advice to the Company, either written or oral, that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of the end of the 2017 fiscal year. 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.
Conclusions
Based upon their 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.
11