UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
Commission File Number 033-05384
FRONTIER ENERGY CORP.
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(Exact name of Registrant as specified in its charter)
NEVADA 87-0443026
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2413 Morocco Avenue, North Las Vegas, Nevada 89031
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(Address of principal executive offices)
(702) 648-5849
-------------------------------
(Registrant's telephone number)
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.
[X] Yes [] 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 188,409,448 shares as of
November 19, 2008 for common stock, 1 share as of November 19, 2008 for Class A
common stock and 130,000 shares as of November 19, 2008 for Class B common
stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
TABLE OF CONTENTS
Page No.
Financial Statements
Balance Sheets 4
Statements of Operations 5
Statements of Cash Flows 6
Notes to Financial Statements 7-15
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
BALANCE SHEETS
September 30, December 31,
2008 2007
(UNAUDITED) (AUDITED)
------------ -----------
ASSETS
Current assets:
Cash $ 405 $ 131
------------ -----------
Total current assets 405 131
------------ -----------
Fixed assets, net of accumulated depreciation of $383
and $219, respectively 711 875
Mineral leases, net of accumulated amortization of $1,908
and $1,091, respectively 8,997 9,814
------------ -----------
Total assets $ 10,113 $ 10,820
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 314,529 $ 300,197
Accrued interest - related parties 15,421 4,694
Due to related parties 104,121 27,567
Loans payable - related parties 131,585 47,000
Loans payable 60,351 145,322
------------ -----------
Total current liabilities 626,007 524,780
------------ -----------
Total liabilities 626,007 524,780
Stockholders' deficit:
Class A Common stock, $0.001 par value; 1 share authorized;
and 1 and 1 share issued and oustanding
as of September 30, 2008 and December 31, 2007, respectively - -
Class B Common stock, $0.001 par value; 130,000 shares authorized;
and 130,000 and 80,000 shares issued and outstanding
as of September 30, 2008 and December 31, 2007, respectively 130 80
Common stock, $0.001 par value; 500,000 shares authorized;
and 128,850,557 and 41,256,464 shares issued and oustanding
as of September 30, 2008 and December 31, 2007, respectively 128,850 41,256
Additional paid-in capital 7,868,913 6,631,034
Common stock subscribed 52,503 38,485
Common stock issued for future services on employment agreement (388,889) (29,750)
Accumulated deficit prior to reentering exploration stage (3,042,536) (3,042,536)
Accumulated deficit after reentering exploration stage (5,234,865) (4,152,529)
------------ -----------
Total stockholders' deficit (615,894) (513,960)
------------ -----------
Total liabilities and stockholders' deficit $ 10,113 $ 10,820
============ ===========
See Accompanying Notes to Financial Statements.
4
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
November 26, 2003
(Cumulative After
Reentering
For the Three Months Ended For the Nine Months Ended Exploration Stage)
September 30, September 30, through
2008 2007 2008 2007 September 30,
2008
------------- ----------- ----------- ----------- ----------------
Revenue $ - $ - $ - $ - $ -
Operating expenses:
Officer compensation 23,333 101,250 83,083 303,750 1,036,233
General and administrative 125,704 107,152 240,934 1,544,780 3,285,767
Exploration and development 2,024 - 45,046 59,500 114,525
Loss on impairment of mineral claims - - - - 80,000
------------- ----------- ----------- ----------- ----------------
Total operating expenses 151,061 208,402 369,063 1,908,030 4,516,525
------------- ----------- ----------- ----------- ----------------
Net operating loss (151,061) (208,402) (369,063) (1,908,030) (4,516,525)
Other expenses:
Litigation settlement - - (411,575) - (411,575)
Interest expense (103,035) (1,555) (301,698) (3,393) (306,765)
------------- ----------- ----------- ----------- ----------------
Total other expenses (103,035) (1,555) (713,273) (3,393) (718,340)
------------- ----------- ----------- ----------- ----------------
Net loss $ (254,096) $ (209,957) $(1,082,336) $(1,911,423) $ (5,234,865)
============= =========== =========== =========== ================
Earnings (loss) per common share - basic and diluted:
Net loss $ (0.00) $ (0.01) $ (0.01) $ (0.20)
============= =========== =========== ===========
Weighted average common shares outstanding -
Basic and diluted 101,225,813 14,228,203 73,026,693 9,610,896
============= =========== =========== ===========
See Accompanying Notes to Financial Statements.
5
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative After
Reentering
For the Nine Months Ended Exploration Stage
September 30, through
2008 2007 September 30,
2008
------------ ----------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,082,336) $(1,911,423) $ (5,234,865)
Adjustments to reconcile loss
to net cash used in operating activities:
Depreciation and amortization expense 981 164 2,291
Stock issued as finders fee for farmin agreement - - 800,000
Loss on impairment of mineral claims - - 80,000
Services paid with stock 40,861 - 40,861
Consulting service expense 92,796 1,767,804 2,778,880
Financing cost 285,548 - 285,548
Gain on legal settlement 411,575 - 411,575
Warrants issued as incentive 13,678 - 13,678
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities 49,087 44,005 153,175
Accrued interest payable 10,727 - 10,727
Due to related parties 84,154 - 84,154
------------ ----------- ----------------
Net cash used in operating activities (92,929) (99,450) (573,976)
------------ ----------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - - (1,094)
Acquisition of mineral leases - - (10,905)
------------ ----------- ----------------
Net cash used in investing activities - - (11,999)
------------ ----------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 33,518 15,000 289,025
Proceeds from subscriptions for common stock - 12,485 38,485
Proceeds from borrowings from loans payable - 57,000 192,527
Payments on borrowings from loans payable (45,000) - (45,000)
Proceeds from borrowings from loans payable - related parties 132,685 132,685
Payments on borrowings from loans payable - related parties (28,000) (8,258) (25,705)
------------ ----------- ----------------
Net cash provided by financing activities 93,203 76,227 582,017
------------ ----------- ----------------
NET CHANGE IN CASH 274 (23,223) (3,958)
CASH AT BEGINNING OF YEAR 131 23,390 4,363
------------ ----------- ----------------
CASH AT END OF YEAR $ 405 $ 167 $ 405
============ =========== ================
SUPPLEMENTAL INFORMATION:
Interest paid $ - $ - $ -
============ =========== ================
Income taxes paid $ - $ - $ -
============ =========== ================
Non-cash activities:
Shares issued pursuant to farm-in agreement $ - $ - $ 800,000
============ =========== ================
Shares issued in settlement of accounts payable $ 33,786 $ - $ 188,096
\ ============ =========== ================
Shares issued for mineral claims $ - $ - $ 80,000
============ =========== ================
Shares issued for settlement of lawsuit $ 411,575 $ - $ 6,000
============ =========== ================
Shares issued for notes payable $ 40,941 $ - $ 40,941
============ =========== ================
Shares issued for debts to related parties $ 27,700 $ - $ 490,661
============ =========== ================
Shares issued for financing expense $ 285,548 $ - $ 285,548
============ =========== ================
Shaes issued for future services from employment agreement $ 400,000 $ - $ 400,000
============ =========== ================
Shares issued for services $ 92,796 $ - $ 92,796
============ =========== ================
See Accompanying Notes to Financial Statements.
6
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with Securities and Exchange Commission requirements for interim
financial statements. Therefore, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. These financial statements
should be read in conjunction with the Form 10-KSB for the year ended December
31, 2007 of Frontier Energy Corp, (the "Company").
The interim financial statements present the balance sheet, statements of
operations and cash flows of the Company. The financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States.
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position as of
September 30, 2008 and the results of operations, stockholders' equity and cash
flows presented herein have been included in the financial statements. Interim
results are not necessarily indicative of results of operations for the full
year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Re-entering Exploration Stage
As described in the Form 10-KSB, the Company distributed the assets and
liabilities of the operating segment of the Company on November 26, 2003.
Subsequent to that date, the Company changed from a computer services company
to an exploration company pursuing interests in the oil and gas industry. The
Company has devoted most of its efforts to establish the new business with
raising capital and acquiring mineral leases.
Going concern
The Company incurred a net loss of approximately $1,082,000 and $1,911,423 for
the nine months ended September 30, 2008 and 2007, respectively, and $5,235,000
from November 26, 2003 (re-entry into exploration stage) to September 30, 2008.
The Company's current liabilities exceed its current assets by approximately
$626,000 as of September 30, 2008. The Company's sole operations have been
discontinued with no other source of operating revenues. These factors create
substantial doubt about the Company's ability to continue as a going concern.
The Company's management plan to continue as a going concern revolves around
its ability to develop and/or acquire new business operations, as well as,
raise necessary capital to maintain the corporate affairs of the Company.
The ability of the Company to continue as a going concern is dependent on
securing additional sources of capital and the success of the Company's plan.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
Reclassification
The financial statements for 2007 reflect certain reclassifications, which have
nominal effect on net income, to conform to classifications in the current
year.
7
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 revenue and
expenses during the periods presented. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The Company has financial instruments whereby the fair value of the financial
instruments could be different than that recorded on a historical basis in the
accompanying balance sheets. The Company's financial instruments consist of
cash and payables. The carrying amounts of the Company's financial instruments
approximate their fair values as of September 30, 2008 due to their short-term
nature.
Stock-based compensation
The Company applies SFAS No. 123R, "Accounting for Stock-Based Compensation,"
which requires the recognition of compensation cost based upon the fair value
of stock options at the grant date using the Black-Scholes option pricing
model.
3. NEW ACCOUNTING PROUNCEMENTS
FAS 161
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities", an amendment of SFAS No. 133. SFAS 161
applies to all derivative instruments and non-derivative instruments that are
designated and qualify as hedging instruments pursuant to paragraphs 37 and 42
of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161
requires entities to provide greater transparency through additional
disclosures about how and why an entity uses derivative instruments, how
derivative instruments and related hedged items are accounted for under SFAS
133 and its related interpretations, and how derivative instruments and related
hedged items affect an entity's financial position, results of operations, and
cash flows. SFAS 161 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2008. The Company does not expect
that the adoption of SFAS 161 will have a material impact on its financial
condition or results of operation.
FAS 162
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 will provide framework for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(GAAP) for nongovernmental entities. SFAS 162 will be effective 60 days
following the Securities and Exchange Commission's approval of the Public
Company Accounting Oversight Board (PCAOB) amendments to AU Section 411. The
Company does not expect the adoption of SFAS 162 will have a material impact on
its financial condition or results of operation.
FAS 163
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts - an interpretation of FASB Statement No. 60." SFAS 163
requires that an insurance enterprise recognize a claim liability prior to an
event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and
8
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
disclosure requirements of the Statement will improve the quality of
information provided to users of financial statements. SFAS 163 will be
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company does not expect the adoption of SFAS 163 will
have a material impact on its financial condition or results of operation.
4. RELATED PARTY TRANSACTIONS
Due to related parties
An officer of the Company loaned the Company $146,820 during the nine month
period ended September 30, 2008 and was repaid $137,004 in funds for personal
expenses. Additionally, the officer converted $7,600 of debt into 3,800,000
shares of common stock at a conversion rate of $0.002 per share. The fair
value of the common stock was $0.004 as of the grant date. The difference
between the fair value and the conversion rate was $7,600 and was recorded as a
financing expense which is included with interest expense. The balance at
September 30, 2008 was a payable of $1,153. The payable was included with the
accrued salary owed to the officer of $102,968. The total due to related
parties as of September 30, 2008, was $104,121.
Loans payable - related parties
During the three months ended March 31, 2008, a family member of an officer and
director of the Company loaned the Company $100,000. The unsecured loans bear
an interest rate of 12% per annum and are due in April and September 2009. On
February 11, 2008, the individual converted $10,000 of debt into 5,000,000
shares of common stock at a rate of $0.002 per share. On April 15, 2008, the
individual converted $500 of debt into 500,000 shares of common stock at a rate
of $0.001 per share. The fair value of the common stock was $0.033 as of the
grant date. The difference between the fair value and the conversion rate was
$16,000 and recorded as a financing expense which is included with interest
expense. The balance at September 30, 2008 was $89,500 of principal and $6,973
of accrued interest. Interest expense for the nine month period ended
September 30, 2008 was $6,973.
During the three months ended September 30, 2008, a family member of an officer
and director of the Company loaned the Company $31,200. The unsecured loans
bear an interest rate of 0% per annum and are due upon demand. During the
three months ended September 30, 2008, the Company paid $28,000 in cash to
repay a portion of the principal balance of the loan. The balance at September
30, 2008 was $3,200 of principal and $0 of accrued interest.
As of January 1, 2008, a director of the Company had an outstanding loan to the
Company totaling $47,000. The unsecured loans bear an interest rate of 12% per
annum and are due upon demand. During the three months ended March 31, 2008,
the director was repaid $1,485 in cash and converted $4,600 of debt into
2,300,000 shares of common stock at a rate of $0.002 per share. The fair value
of the common stock was $0.004 as of the grant date. The difference between
the fair value and the conversion rate was $4,600 and recorded as a financing
expense which is included with interest expense. During the three months ended
June 30, 2008, the director converted $5,000 of debt into 5,000,000 shares of
common stock at a rate of $0.001 per share. The fair value of the common stock
was $0.033 as of the grant date. The difference between the fair value and the
conversion rate was $160,000 and recorded as a financing expense which is
included with interest expense. The balance at September 30, 2008 was $38,885
of principal and $8,448 of accrued interest. Interest expense for the nine
month period ended September 30, 2008 was $3,754.
9
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. NOTES PAYABLE
Loans payable consists of the following at September 30, 2008:
September December
30, 2008 31, 2007
-------- --------
Note payable to entity, unsecured, 0% interest, due upon demand $ 30,000 $ 30,000
Note payable to an individual, unsecured, interest at 10%
per annum, maturity date of May 31, 2008, lump - 10,000
payment on date of maturity
Convertible note payable to an individual, unsecured, interest
at 10% per annum, maturity date of December 30,351 105,322
2008, monthly principal payments of $8,777 which the
balance of principal and accrued interest due upon maturity
-------- --------
$ 60,351 $145,322
======== ========
As of January 1, 2008, an individual had an outstanding loan to the Company
totaling $10,000. The unsecured loan bears an interest rate of 10% per annum
and was due in May 2008. The note was in default and the Company renegotiated
the terms with the noteholder. The noteholder agreed to convert the entire
principal amount of $10,000 plus accrued interest of $970 into 833,000 shares
of common stock.
As of January 1, 2008, an individual had an outstanding loan to the Company
totaling $105,322. The unsecured loans bear an interest rate of 10% per annum.
A payment of principal and interest of $8,777 was due on a monthly basis with
any remaining amount of principal and interest due in December 2008. During
the nine months ended September 30, 2008, the Company paid $45,000 in cash
which reduced the principal balance of the note. The note was in default and
the Company renegotiated the terms with the noteholder. The noteholder agreed
to convert the $29,971 of principal amount into 29,970,820 shares of common
stock. The difference between the fair value and the conversion rate was
$97,348 and recorded as a financing expense which is included with interest
expense.
Interest expense for the nine month period ended September 30, 2008 was $5,422.
6. STOCKHOLDERS' EQUITY
Class A Common Stock
On September 10, 2008, the Company's board of directors approved the change
from Series A preferred stock to Class A common stock.
During the three months ended September 30, 2008, the Company cancelled 1 share
of Series A preferred stock and replaced it with 1 share of Class A common
stock.
10
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Class B Common Stock
On September 10, 2008, the Company's board of directors approved the change
from Series B preferred stock to Class B common stock. The Class B common
stock has voting rights of 2,000 to 1.
During the three months ended September 30, 2008, the Company cancelled 80,000
shares of Series B preferred stock and replaced it with 80,000 shares of Class
B common stock.
On September 9, 2008, the Company issued 50,000 shares of Class B common stock
to an officer of the Company as part of his three year employment agreement
totaling $400,000. The shares were valued at the fair value of the shares of
common stock on the grant date adjusted to account for the 2,000 to 1 voting
rights of the Class B common stock. During the three months ended September
30, 2008, the Company amortized $11,111 of the prepaid stock compensation.
Common Stock
On April, 29, 2008, the Company amended its articles of incorporation and
increased its authorized capital to 500,000,000 shares of common stock with a
par value of $0.001.
On January 2, 2008, the Company issued a total of 6,100,000 shares of common
stock to one individual who is an officer and director of the Company and to
another individual who is a director of the Company in exchange for the
conversion of debt totaling $12,200. The shares were converted at a rate of
$0.002 per share. The fair value of the common stock was $0.004 as of the
grant date and the difference between the fair value and the conversion rate
was $12,200 and recorded as a financing expense which is included with interest
expense. The fair value of the shares issued was $24,400.
On February 11, 2008, the Company issued 5,000,000 shares of common stock to a
family member of an officer and director of the Company in exchange for the
conversion of debt totaling $10,000. The shares were converted at a rate of
$0.002 per share.
On February 12, 2008, the Company issued 1,000,000 shares of common stock to an
entity in exchange for services rendered totaling $8,000. The shares were
valued at the fair value of the shares of common stock on the grant date.
On March 18, 2008, the Company received $10,000 from an investor which was
recorded as common stock subscribed. The shares were issued on June 3, 2008
and the common stock subscribed was reduced by $10,000.
On April 15, 2008, the Company issued 9,500,000 shares of common stock to a
family member of an officer and director of the Company in exchange for cash
totaling $9,500.
On April 15, 2008, the Company issued 500,000 shares of common stock to a
family member of an officer and director of the Company in exchange for the
conversion of debt totaling $500. The shares were converted at a rate of
$0.001 per share. The fair value of the common stock was $0.033 as of the grant
date and the difference between the fair value and the conversion rate was
$16,000 and recorded as a financing expense which is included with interest
expense. The fair value of the shares issued was $16,500.
11
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On April 15, 2008, the Company issued 5,000,000 shares of common stock to a
director of the Company in exchange for the conversion of debt totaling $5,000.
The shares were converted at a rate of $0.001 per share. The fair value of the
common stock was $0.033 as of the grant date and the difference between the
fair value and the conversion rate was $160,000 and recorded as a financing
expense which is included with interest expense. The fair value of the shares
issued was $165,000.
On May 2, 2008, the Company settled a lawsuit with a creditor and agreed to
issue a total of 15,357,273 shares of common stock to extinguish the debt. On
May 7, 2008, the Company issued a total of 9,000,000 shares and on May 19,
2008, the Company issued the remaining balance of 6,357,273 shares of common
stock.
On June 3, 2008, the Company issued 1,800,000 shares for cash of $10,000 from
an investor. The cash was received from the investor on March 18, 2008 and
originally recorded as common stock subscribed. Upon issuance of the shares
the common stock subscribed was reduced by $10,000.
On August 1, 2008, the Company received $5,670 from an entity owned and
controlled by an officer of the Company which was recorded as common stock
subscribed. The shares were issued on October 20, 2008 and the common stock
subscribed was increased by $5,670.
On August 6, 2008, the Company issued 833,000 shares of common stock to a
noteholder of the Company in exchange for the conversion of debt totaling
$10,970. The shares were converted at a rate of $0.013 per share.
On August 6, 2008, the Company issued 4,000,000 shares of common stock to an
individual in exchange for consulting services rendered totaling $48,000. The
shares were valued at the fair value of the shares of common stock on the grant
date.
On August 6, 2008, the Company issued 833,000 shares of common stock to an
individual in exchange for consulting services rendered totaling $9,996. The
shares were valued at the fair value of the shares of common stock on the grant
date.
On August 7, 2008, the Company received $8,348 from an entity owned and
controlled by an officer of the Company which was recorded as common stock
subscribed. The shares were issued on October 20, 2008 and the common stock
subscribed was increased by $8,348.
On August 14, 2008, the Company issued 700,000 shares of common stock to an
individual in exchange for consulting services rendered totaling $6,300. The
shares were valued at the fair value of the shares of common stock on the grant
date.
On August 26, 2008, the Company issued 21,002,510 shares of common stock to a
noteholder of the Company in exchange for the conversion of debt totaling
$21,003. The shares were converted at a rate of $0.001 per share. The fair
value of the common stock was $0.0035 as of the grant date. The difference
between the fair value and the conversion rate was $52,506 and recorded as a
financing expense which is included with interest expense. The fair value of
the shares issued was $73,509.
On September 1, 2008, the Company issued 4,000,000 shares of common stock to an
individual in exchange for consulting services rendered totaling $10,000. The
shares were valued at the fair value of the shares of common stock on the grant
date.
12
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On September 2, 2008, the Company issued 3,000,000 shares of common stock to an
officer of the Company in exchange for consulting services rendered totaling
$10,500. The shares were valued at the fair value of the shares of common
stock on the grant date.
On September 4, 2008, the Company issued 3,600,000 warrants to purchase shares
of common stock to a shareholder in exchange as incentive to invest totaling
$13,678. The warrants were valued using the Black Scholes model. The
assumptions used for the calculation was an exercise price of $0.015, an
expected term of 7 years, volatility of 297% and a risk free interest rate of
3.21%.
On September 15, 2008, the Company issued 8,968,310 shares of common stock to a
noteholder Company in exchange for the conversion of debt totaling $8,968. The
shares were converted at a rate of $0.001 per share. The fair value of the
common stock was $0.006 as of the grant date. The difference between the fair
value and the conversion rate was $44,842 and recorded as a financing expense
which is included with interest expense. The fair value of the shares issued
was $53,810.
7. STOCK WARRANTS
The following is a summary of the status of all of the Company's stock warrants
as of September 30, 2008 and changes during the nine months ended on that date:
Number Weighted-Average
Of Warrants Exercise Price
----------- --------------
Outstanding at January 1, 2008 - $ 0.000
Granted 3,600,000 $ 0.015
Exercised - $ 0.000
Cancelled - $ 0.000
----------- --------------
Outstanding at September 30, 2008 3,600,000 $ 0.015
=========== ==============
Warrants exercisable at January 1, 2008 - $ 0.000
=========== ==============
Warrants exercisable at September 30, 2008 3,600,000 $ 0.015
=========== ==============
The following tables summarize information about stock warrants outstanding and
exercisable at September 30, 2008:
STOCK WARRANTS OUTSTANDING
------------------------------------------------------
Weighted-Average
Number of Remaining Weighted-
Warrants Contractual Average
Exercise Price Outstanding Life in Years Exercise Price
- -------------- ----------- ---------------- --------------
$ 0.015 3,600,000 6.93 $ 0.015
STOCK WARRANTS EXERCISABLE
------------------------------
Number of Weighted-
Exercise Prices Shares Average
Exercisable Exercise Price
- --------------- ----------- --------------
$ 0.015 3,600,000 $ 0.015
13
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
8. LITIGATION
On May 1, 2008, the Company was served with a summons and complaint in an
action for the repayment of a debt owed to its former legal counsel in the
amount of $33,786 which the Company has carried as a payable on its financial
statements. Also on May 1, 2008, the Company and the Creditor entered into a
settlement agreement in which the creditor agreed to dismiss the Action,
release the Company from any further obligations to the Creditor, plus all
accrued interest, through the issuance of 15,357,273 shares of the Company's
common stock to the Creditor at a price of $0.0022 per share, pursuant to a
court order. On May 2, 2008, the court approved the settlement. On May 7,
2008 and May 19, 2008, in accordance with the Settlement Agreement and the
Order, the Company instructed its transfer agent to issue 9,000,000 and
6,357,273 shares of unrestricted common stock according to the instructions of
the Creditor.
The fair value of the common stock was $0.029 as of the grant date and the
difference between the fair value and the conversion rate was $411,575 and
recorded as a litigation expense which is included as other expense.
9. AGREEMENTS
On June 27, 2008, the Company signed a letter of intent to purchase the
assets and business of Cancen Oil Processors, Inc. ("Cancen"), an Alberta
corporation (the "Proposed Acquisition"). The Proposed Acquisition is subject
to Cancen's rights to a due diligence investigation and the execution of a
definitive agreement for the Proposed Acquisition. On August 7, 2008, the
proposed acquisition was cancelled by Cancen.
On September 8, 2009, the Company executed an employment agreement with Richard
Shykora for the position of Chief Executive Officer. The term of the agreement
is for a period of three years. As part of the employment agreement, Mr.
Shykora will receive 20,000,000 shares of common stock and 50,000 shares of
Class B common stock. The 20,000,000 shares of common stock were valued at
$80,000 which is the fair value of the shares of common stock on the grant
date. The 20,000,000 shares of common stock were issued on October 20, 2008.
The 50,000 shares of Class B common stock were valued at $400,000 which is the
fair value of the shares of common stock on the grant date adjusted to account
for the 2,000 to 1 voting rights of the Class B common stock. The 50,000
shares of Class B common stock were issued on September 17, 2008. The fair
value of the shares will be amortized on a straight line basis over the three
year service period. During the three months ended September 30, 2008, the
Company recorded executive compensation of $13,333.
10.SUBSEQUENT EVENTS
On October 20, 2008, the Company issued 1,000,000 shares to Robert Genesi, a
director and former officer of the Company, for services rendered to the
Company.
On October 20, 2008, the Company issued 1,000,000 shares to Richard Shykora, an
officer of the Company, for services rendered to the Company.
On October 20, 2008, the Company issued 5,000,000 shares to an entity for
public relations and market awareness.
On October 20, 2008, the Company issued 20,000,000 shares to Robert Genesi, a
director and former officer of the Company, for employment services as a former
officer of the Company.
14
FRONTIER ENERGY CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On October 20, 2008, the Company issued 20,000,000 shares to Richard Shykora,
an officer of the Company, as part of his employment agreement.
On October 20, 2008, the Company issued 1,558,891 shares to MSK Holdings, an
entity owned and controlled by an officer of the Company for cash received in
August 2008.
On November 10, 2008, the Company executed a secured promissory note for
$13,500 with an entity. The loan bears interest of 13% per annum and is due
upon demand. The loan is secured by 50,000 shares of Class B common stock
which was pledged by Richard Shykora. On November 12, 2008, the Company
received net proceeds of $10,000. The difference of $3,500 was used to pay for
legal costs.
On November 13, 2008, the Company issued 11,000,000 shares to two individuals
for consulting services totaling $31,900.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of
operations should be read in conjunction with the Company's unaudited financial
statements, and notes thereto, included elsewhere in this quarterly report.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors including,
but not limited to, those discussed in the Company's filings under the
Securities Exchange Act of 1934, as amended.
IN GENERAL
Frontier Energy Corp., through subsidiaries and agreements in which we
intend to participate, is engaged in the acquisition, exploration, development
and operation of oil and gas reserves. We have cancelled the contracts on
certain prospects in 2006 and acquired a working interest in another prospect
during the second quarter of 2007. We have been unable to fund the
exploitation of this prospect, but are seeking to partner with another party.
Our ability to emerge from the exploration stage with respect to any planned
principal business activity is dependent upon our successful efforts to raise
additional equity financing and generate significant revenue. In the nine-
month period ended September 30, 2008, the Company had no revenues from
operations or other sources.
We intend to acquire prospects and raise the funds necessary to extract
oil and/or natural gas from such prospects. To date, we have acquired a
working interest in one prospect and are seeking a partner to exploit this
prospect. We intend to seek out other prospects, with the intention of raising
funds to exploit such prospects.
In the alternative, if we are unable to acquire oil or gas properties,
the Company may seek to enter into a merger with an operating company, provided
the Board deems it in the best interests of the Company's stockholders. We
have not identified any potential merger target as of the date of this report.
Material Changes in Financial Condition
The Company's financial condition has changed since the end of the year
ended December 31, 2007. On September 30, 2008, the Company had approximately
$405 in cash, compared with $131 at the end of the last year. The changes in
the Company's cash position are due to the Company's attempts at raising
additional capital for operations, either through borrowings or through the
sales of its securities privately.
Material Changes in Results of Operations
Because of the Company's poor financial condition, the Company has cut
operating expenses as much as we deem possible. Our total operating expenses
for the nine months ended September 30, 2008 were $369,063, compared with
operating expenses of $1,908,030 for the nine months ended September 30, 2007.
The comparison with September 30, 2007 may not be informative, since these
expenses included $1,767,804 in stock-based expenses for common stock issued as
compensation to officers, directors, employees and consultants, while the
stock-based expenses for the nine months ended September 30, 2008 was $844,458,
which includes $411,575 in stock-based expenses incurred in the settlement of
litigation. The Company's operating expenses for the three months ended
September 30, 2008 were $151,061, as compared to $208,402 for the three months
ended September 30, 2007. In the three and nine month periods ended September
30, 2008, the Company has substantially reduced its officer compensation and
general and administrative expenses, compared to the same periods in 2007.
Three Months Ended September 30, 2008 Compared with Three Months ended
September 30, 2007
Liquidity and Capital Resources
The Company did not generate any revenue in the quarter ended September
30, 2008, the quarter ended September 30, 2007 or the year ended December 31,
2007; nor has the Company had access to sufficient capital to implement our
business plan. Since our future revenues from operations (if any) will not
provide sufficient capital to allow us to implement our acquisition and merger
plans in the near future, we must secure a source of additional capital.
We currently have very limited operating funds ($405 as of September 30,
2008), and we will require additional cash to maintain our operations for the
next twelve months. Our operating expenses for the three-month period ending
September 30, 2008 were $151,061, as compared to $208,402 for the same period
in 2007. Of the $151,061 in operating expenses during the three months ended
September 30, 2008, $109,585 was stock-based expenses and $327 was
depreciation, which are non-cash items. Based on the cash we currently have,
we will likely need additional financing to continue operations beyond November
30, 2008. We have been dependent on loans and private sales of our common
stock to continue operations. Thus, our success is entirely dependent upon our
ability to raise additional capital. If the Company cannot raise additional
capital in the very near term, the Company may be forced to discontinue
operations.
We believe that we will require an additional $3,000,000 to fund our
currently anticipated requirements for our proposed operations to implement our
business plan over the next twelve-month period, most of which the Company must
raise through loans or the sale of equity. In the longer term, we hope to
satisfy our liquidity requirements from cash flow from operations and to the
extent such funds are insufficient, we must raise additional funds to sustain
operations. We can give no assurances that we will be able to obtain the
required capital from any source or that we will be able to commence
operations.
Nine Months Ended September 30, 2008 Compared with Nine Months Ended September
30, 2007
Liquidity and Capital Resources
The Company did not generate any revenue in the Nine Months ended
September 30, 2008 or the Nine Months ended September 30, 2007.
We currently have very limited operating funds ($405 as of September 30,
2008), and we will require additional cash to maintain our operations for the
next twelve months. Our operating expenses for the nine-month period ending
September 30, 2008 were $369,063, as compared to $1,980,030 for the same period
in 2007. Of the $1,082,336 in total expenses during the nine months ended
September 30, 2008, $844,458 was stock-based compensation expenses, $411,575
was stock-based expenses in the settlement of litigation and $981 was
depreciation, which are non-cash items. If the Company cannot raise
additional capital in the very near term, the Company may be forced to
discontinue operations.
We believe that we will require an additional $3,000,000 to fund our
currently anticipated requirements for our proposed operations to implement our
business plan over the next twelve-month period, most of which the Company must
raise through loans or the sale of equity. In the longer term, we hope to
satisfy our liquidity requirements from cash flow from operations and to the
extent such funds are insufficient, we must raise additional funds to sustain
operations. We can give no assurances that we will be able to obtain the
required capital from any source or that we will be able to commence
operations.
Variables and Trends
We have no operating history with respect to oil and natural gas
exploration. In the event we are able to obtain the necessary financing to
move forward with our business plan, we expect our expenses to increase
significantly as we grow our business with the acquisition of property or
through acquisitions. Accordingly, the comparison of the financial data for
the periods presented may not be a meaningful indicator of our future
performance and must be considered in light of our operating history.
Recent Accounting Pronouncements
In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities", an amendment of SFAS No. 133.
SFAS 161 applies to all derivative instruments and non-derivative instruments
that are designated and qualify as hedging instruments pursuant to paragraphs
37 and 42 of SFAS 133 and related hedged items accounted for under SFAS 133.
SFAS 161 requires entities to provide greater transparency through additional
disclosures about how and why an entity uses derivative instruments, how
derivative instruments and related hedged items are accounted for under SFAS
133 and its related interpretations, and how derivative instruments and related
hedged items affect an entity's financial position, results of operations, and
cash flows. SFAS 161 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2008. The Company does not expect
that the adoption of SFAS 161 will have a material impact on its financial
condition or results of operation.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles." SFAS 162 will provide framework for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(GAAP) for nongovernmental entities. SFAS 162 will be effective 60 days
following the Securities and Exchange Commission's approval of the Public
Company Accounting Oversight Board (PCAOB) amendments to AU Section 411. The
Company does not expect the adoption of SFAS 162 will have a material impact on
its financial condition or results of operation.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial
Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60."
SFAS 163 requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company does not expect the adoption of SFAS 163 will have a material impact on
its financial condition or results of operation.
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 investors.
ITEM 3. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not engaged in any transactions, issued or bought any
financial instruments or entered into any contracts that are required to be
disclosed in response to this item.
ITEM 4. CONTROLS AND PROCEDURES
See Item 4T, below.
ITEM 4T. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule 13a-
15(f) of the Exchange Act. Under the supervision and with the participation of
our management, including our Chief Executive Officer, we conducted an
evaluation of the effectiveness of our internal control over financial
reporting based upon the framework in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on that evaluation, our management concluded that our internal
control over financial reporting is not effective as of September 30, 2008. In
that regard, we identified the following material weaknesses in our internal
control over financial reporting as of September 30, 2008.
1. Lack of Effective Control in Certain Accounting Areas. There were not
effective financial reporting controls in certain areas that could lead to
inaccurate financial reporting, including: (i) financial personnel have the
ability to change account structures without approval (ii) general ledger
journal entries are not always approved or reviewed prior to entry, and (iii)
accounting staff employees with payable responsibilities also have access to
vendor maintenance controls.
2. Lack of Sufficient Segregation of Authority and Duties. We have not
maintained sufficient segregation of duties or responsibilities, as evidenced
by executive officers (i) having the ability to purchase and receive goods,
(ii) assuming payables activities without verification or maintenance of vendor
controls by others, (iii) holding multiple executive positions simultaneously,
and (iv) having the ability to negotiate contracts with third parties in which
they have an interest, without conflict of interest or oversight control by the
Board of Directors. In addition, the Company lacked a Board of Directors with
a majority of independent directors.
Remediation of Material Weaknesses
1. At this time, management has evaluated the need for additional
accounting personnel to implement segregation of duties but found that this
solution would be expensive and inefficient since the Company has so few
transactions that two accounting personnel would be excessive.
2. Segregation of Authority and Duties. Management has evaluated the
requirement for increased segregation of authority and duties and, in response
to that need, the Company has hired Richard Shykora as the Company's new Chief
Executive Officer. Mr. Shykora is in the process of evaluating the Company's
internal controls, with the intention to remediate the existing weaknesses
before the end of the year.
Management is committed to continuing efforts aimed at improving the
design adequacy and operational effectiveness of its system of internal
controls. The remediation efforts noted above will be subject to our
continuing internal control assessment, testing and evaluation process.
(b) Changes in internal control over financial reporting.
In the quarter ended September 30, 2008, the Company's former Chief
Executive Officer resigned and the Company hired a new Chief Executive Officer,
Richard Shykora, who is in the process of evaluating the Company's internal
controls, with the intention of improving the Company's internal controls
before the end of the year and implement changes to overcome the reported
weaknesses in internal controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any pending legal proceeding or litigation, except
as described in the following paragraph. In addition, none of our property is
the subject of a pending legal proceeding. We are not aware of any legal
proceedings against the Company or our property contemplated by any
governmental authority.
In 2006, the Company was sued by a former its former legal counsel for
fees allegedly owed and repayment of funds purportedly lent to the Company.
The Company and the consultant have agreed to a settlement of this dispute.
On May 1, 2008, the Company was served with a summons and complaint in an
action for the repayment of a debt owed to its former legal counsel in the
amount of $33,786 (the "Debt") which the Company has carried as a payable on
its financial statements. This obligation was transferred to Corporate Debt
Solutions, Inc. (the "Creditor"). This action was brought by the Creditor
against the Company in the Circuit Court of the Twelfth Judicial Circuit,
Sarasota County, Florida (the "Court"), Case Number 2008-CA-006952-NC, and
asserted failure to pay the Debt, plus sums due for interest (the "Action").
Also on May 1, 2008, the Company and the Creditor entered into a settlement
agreement (the "Settlement Agreement") in which the creditor agreed to dismiss
the Action, release the company from any further obligations to the Creditor,
plus all accrued interest, through the issuance of 15,357,273 shares of the
Company's common stock to the Creditor at a price of $0.0013 per share,
pursuant to a court order (the "Order"), in a manner intended to be exempt from
the registration provisions of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 3(a)(10) of the Act. On May 2, 2008, the Court
held a "fairness" hearing with respect to the Settlement Agreement, pursuant to
Section 3(a)(10) of the Act. On May 2, 2008, the Court issued the Order,
approving the Settlement Agreement and determining that the Settlement
Agreement was "fair" within the meaning of section 3(a)(10) of the Act. The
Court further ordered that the issuance of the Company's common stock to the
Creditor pursuant to the Settlement Agreement and the resale of such shares by
the Creditor, "assuming satisfaction of all other securities laws and
regulations," will be exempt from registration under the Act pursuant to
Section 3(a)(10).
On May 7, 2008, in accordance with the Settlement Agreement and the
Order, the Company instructed its transfer agent to issue 9,000,000 shares of
unrestricted common stock according to the instructions of the Creditor. On
May 19, 2008, the Company issued the remaining balance of 6,357,273 shares of
common stock.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On August 1, 2008, the Company received $5,670 from an entity owned and
controlled by an officer of the Company which was recorded as common stock
subscribed. The shares were issued on October 20, 2008 and the common stock
subscribed was increased by $5,670.
On August 6, 2008, the Company issued 833,000 shares of common stock to a
noteholder of the Company in exchange for the conversion of debt totaling
$10,970. The shares were converted at a rate of $0.013 per share.
On August 6, 2008, the Company issued 4,000,000 shares of common stock to
an individual in exchange for consulting services rendered totaling $48,000.
The shares were valued at the fair value of the shares of common stock on the
grant date.
On August 6, 2008, the Company issued 833,000 shares of common stock to
an individual in exchange for consulting services rendered totaling $9,996.
The shares were valued at the fair value of the shares of common stock on the
grant date.
On August 7, 2008, the Company received $8,348 from an entity owned and
controlled by an officer of the Company which was recorded as common stock
subscribed. The shares were issued on October 20, 2008 and the common stock
subscribed was increased by $8,348.
On August 14, 2008, the Company issued 700,000 shares of common stock to
an individual in exchange for consulting services rendered totaling $6,300.
The shares were valued at the fair value of the shares of common stock on the
grant date.
On August 26, 2008, the Company issued 21,002,510 shares of common stock
to a noteholder of the Company in exchange for the conversion of debt totaling
$21,003. The shares were converted at a rate of $0.001 per share. The fair
value of the common stock was $0.0035 as of the grant date and the difference
between the fair value and the conversion rate was $52,506 and recorded as a
financing expense which is included with interest expense. The fair value of
the shares issued was $73,509.
On September 1, 2008, the Company issued 4,000,000 shares of common stock
to an individual in exchange for consulting services rendered totaling $10,000.
The shares were valued at the fair value of the shares of common stock on the
grant date.
On September 2, 2008, the Company issued 3,000,000 shares of common stock
to an officer of the Company in exchange for consulting services rendered
totaling $10,500. The shares were valued at the fair value of the shares of
common stock on the grant date.
On September 4, 2008, the Company issued 3,600,000 warrants to purchase
shares of common stock to a shareholder in exchange for consulting services
rendered totaling $13,678. The warrants were valued using the Black-Scholes
model. The assumptions used for the calculation was an exercise price of
$0.015, an expected term of 7 years, volatility of 297% and a risk free
interest rate of 3.21%.
On September 15, 2008, the Company issued 8,968,310 shares of common
stock to a noteholder Company in exchange for the conversion of debt totaling
$8,968. The shares were converted at a rate of $0.001 per share. The fair
value of the common stock was $0.006 as of the grant date and the difference
between the fair value and the conversion rate was $44,842 and recorded as a
financing expense which is included with interest expense. The fair value of
the shares issued was $53,810.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On May 1, 2008, the Company was served with a summons and complaint in an
action for the repayment of a debt owed to its former legal counsel in the
amount of $33,786 (the "Debt") which the Company has carried as a payable on
its financial statements. This obligation was transferred to Corporate Debt
Solutions, Inc. (the "Creditor"). This action was brought by the Creditor
against the Company in the Circuit Court of the Twelfth Judicial Circuit,
Sarasota County, Florida (the "Court"), Case Number 2008-CA-006952-NC, and
asserted failure to pay the Debt, plus sums due for interest (the "Action").
Also on May 1, 2008, the Company and the Creditor entered into a settlement
agreement (the "Settlement Agreement") in which the creditor agreed to dismiss
the Action, release the company from any further obligations to the Creditor,
plus all accrued interest, through the issuance of 15,357,273 shares of the
Company's common stock to the Creditor at a price of $0.0013 per share,
pursuant to a court order (the "Order"), in a manner intended to be exempt from
the registration provisions of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 3(a)(10) of the Act. On May 2, 2008, the Court
held a "fairness" hearing with respect to the Settlement Agreement, pursuant to
Section 3(a)(10) of the Act. On May 2, 2008, the Court issued the Order,
approving the Settlement Agreement and determining that the Settlement
Agreement was "fair" within the meaning of section 3(a)(10) of the Act. The
Court further ordered that the issuance of the Company's common stock to the
Creditor pursuant to the Settlement Agreement and the resale of such shares by
the Creditor, "assuming satisfaction of all other securities laws and
regulations," will be exempt from registration under the Act pursuant to
Section 3(a)(10).
On May 7, 2008, in accordance with the Settlement Agreement and the
Order, the Company instructed its transfer agent to issue 9,000,000 shares of
unrestricted common stock according to the instructions of the Creditor. On
May 19, 2008, the Company issued the remaining balance of 6,357,273 shares of
common stock.
ITEM 6. EXHIBITS
EXHIBIT NUMBER. DESCRIPTION
31.1 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
promulgated under the Securities Exchange Act of 1934, as amended
32.1 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: November 20, 2008
FRONTIER ENERGY CORP.
By: /s/ Rick Shykora
- --------------------
Name: Rick Shykora
Title: President and Acting Chief Financial Officer
Principal Financial Officer