Microsoft Word 10.0.2627;UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 2006
------------------
[ ] 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.
(Name of Small Business Issuer in its charter)
NEVADA 87-0443026
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
2413 Morocco Avenue, North Las Vegas, Nevada 89031
- ----------------------------------------------------- --------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (702) 648-5849
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: 3,189,702
Shares of Common Stock
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
TABLE OF CONTENTS
Page No.
Financial Statements
Balance Sheet 2
Statements of Operations 3
Statement of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
1
FRONTIER ENERGY CORP.
(fka GTDATA CORPORATION)
BALANCE SHEET
SEPTEMBER 30, 2006
(UNAUDITED)
ASSETS
Current assets
Cash $ 15,437
Receivable from former officer 70,803
Prepaid salaries 476,000
----------------
Total current assets 562,240
----------------
Total assets $562,240
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 184,377
Accrued compensation 39,772
Note payable 30,000
Payable to former officers 31,717
----------------
Total current liabilities 285,816
----------------
Total liabilities 285,816
Commitments and contingencies -
Stockholders' equity
Series A preferred stock, $0.001 par value; 40,001 shares
authorized, issued and outstanding 40
Series B preferred stock, $0.001 par value; 10,000,000
authorized; and no shares issued or outstanding -
Common stock, $0.001 par value; 100,000,000 shares
authorized, 3,189,702 shares issued and 3,189,702 outstanding 3,189
Common stock payable related to compensation 110,500
Additional paid-in capital 4,743,000
Accumulated deficit (4,580,305)
----------------
Total stockholders' equity 276,424
----------------
Total liabilities and stockholders' equity $ 562,240
================
2
FRONTIER ENERGY CORP.
(fka GTDATA CORPORATION)
STATEMENT OF OPERATIONS
SEPTEMBER 30, 2006
(UNAUDITED)
For the Three Months Ended
-------------------------------
September 30, September 30,
2006 2005
Revenue $ - $ -
Operating expenses
General and administrative 27,421 3,650
Officer Compensation 101,250 -
---------------------------------------------
Total operating expenses 128,671 3,650
---------------------------------------------
Operating loss (128,671) (3,650)
Other income (expense):
Interest expense, net - -
---------------------------------------------
Total other income (expense) - -
---------------------------------------------
Loss before provision for income taxes (128,671) (3,650)
Provision for income taxes - -
---------------------------------------------
Net loss $ (128,671) $ (3,650)
=============================================
Earnings (loss) per common share - basic and diluted:
Net loss $ (0.05) $ (0.01)
=============================================
Weighted average common shares outstanding -
basic 2,424,645 312,417
=============================================
For the Nine Months Ended
-----------------------------
September 30, September 30,
2006 2005
---------------- -------------
Revenue $ - $ -
Operating expenses
General and administrative 59,302 15,250
Officer Compensation 446,900 -
---------------------------------------------
Total operating expenses 506,202 15,250
--------------------------------------------
Operating loss (506,202 (15,250)
Other income (expense):
Interest expense, net -
--------------------------------------------
Total other income (expense) - -
--------------------------------------------
Loss before provision for income taxes (506,202) (15,250)
Provision for income taxes -
--------------------------------------------
Net loss $ (506,202) $ (15,250)
==========================================
Earnings (loss) per common share - basic and diluted:
Net loss $ (0.28) $ (0.06)
=============================================
Weighted average common shares outstanding -
basic 1,824,111 253,951
=============================================
3
1
FRONTIER ENERGY CORP.
(fka GTDATA CORPORATION)
STATEMENT OF STOCKHOLDERS EQUITY
SEPTEMBER 30, 2006
(UNAUDITED)
Preferred A Preferred B Common Stock
Shares Amount Shares Amount Shares
Balance, December 31, 2005 1 $ - - $ - 829,606
Exercise of stock options for loan - - - - 500,000
Exercise of stock options for cash - - - - 434,000
Issuance of shares per employment
agreements - - - - 2,000,000
Return of shares for employment agreements
agreements - - - - (1,300,000)
Compensation payable in 254,167
shares of common stock - - - - -
Issuance of shares to Director
containing 1,000 votes per share40,000 40 - - -
Issuance of Reg S Shares - - - - 726,096
Net loss - - - - -
Balance, September 30, 2006 40,001 $ 40 - $ - 3,189,702
Common Stock Additional Common
Amount Paid-in Capital Stock Payable
Balance, December 31, 2005 $ 829 $ 3,830,950 $ -
Exercise of stock options for loan 500 - -
Exercise of stock options for cash 434 - -
Issuance of shares per employment
agreements 2,000 2,038,000 -
Return of shares for employment agreements
agreements (1,300) (1,324,700) -
Compensation payable in 254,167
shares of common stock - - 110,500
Issuance of shares to Director
containing 1,000 votes per share - 40,360 -
Issuance of Reg S Shares 726 158,390 -
Net loss - - -
Balance, September 30, 2006 $ 3,189 $ 4,743,000 $ 110,500
Total
Accumulated Stockholders'
Deficit Equity
Balance, December 31, 2005 $(4,074,103) $ (242,324)
Exercise of stock options for loan - 500
Exercise of stock options for cash - 434
Issuance of shares per employment
agreements - 2,040,000
Return of shares for employment agreements
agreements - (1,326,000)
Compensation payable in 254,167
shares of common stock - 110,500
Issuance of shares to Director
containing 1,000 votes per share - 40,400
Issuance of Reg S Shares - 159,116
Net loss (506,202) (506,202)
Balance, September 30, 2006 $(4,580,305) $ 276,424
4
1
FRONTIER ENERGY CORP.
(fka GTDATA CORPORATION)
STATEMENT OF CASHFLOWS
FOE THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
(UNAUDITED)
For the Nine Months Ended
--------------------------------------------------
September 30, 2006 September 30, 2005
------------------------ ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(506,202) $ (15,250)
Adjustments to reconcile
loss from continuing
operations to net cash used
in operating activities:
Stock based expenses 388,900 -
Changes in operating assets
and liabilities:
Accounts payable and
accrued liabilities 46,328 1,650
-------------------------------------
Net cash used in operating
activities of continuing operations (70,974) (13,600)
CASH FLOW FINANCING ACTIVITIES
Proceeds from issuance of
common stock 159,550 -
Proceeds from borrowings
from related parties 14,985 -
Payments on borrowing to
related parties (88,368)
Proceeds from borrowings on
notes payable to related parties - 13,500
-------------------------------------
Net cash provided by
financing activities of continuing
operations 86,167 13,500
-------------------------------------
NET CHANGE IN CASH 15,193 (100)
CASH AT BEGINNING OF YEAR 244 1,149
-------------------------------------
CASH AT END OF PERIOD $ 15,437 $ 1,049
=====================================
SUPPLEMENTAL INFORMATION
Interest Paid $ - $ -
=====================================
Income Taxes Paid $ - $ -
=====================================
Shares issued to in exercise
of stock options, 500,000 shares
for loan $ 500 $ -
=====================================
650,000 stock options issued in
settlement of accounts payable
exercisable at $0.001 per share $ - $ 47,216
=====================================
5
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
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. The NOTE financial
statements should be read in conjunction with the Form 10-KSB for the year
ended December 31, 2005 of Frontier Energy, Corp, fka (GTData Corporation)
(the "Company").
The interim financial statements present the balance sheet, statements of
operations, stockholders' deficit, 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, 2006 and the results of operations,
stockholders' deficit, 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.
Going concern - The Company incurred a net loss of approximately $506,202
and $15,250 for the nine months ended September 30, 2006 and 2005. The
Company's liabilities exceed its assets by approximately $199,576 as of
September 30, 2006, not including prepaid salaries for stock issued under
officer employment agreements. 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 plans 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 2005 reflect certain
reclassifications, which have nominal effect on net income, to conform to
classifications in the current year.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
6
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Effective January 1, 2006, the Company adopted SFAS 123(R) using the
modified prospective transition method, which requires the measurement and
recognition of compensation expense for all share-based payment awards made
to the Company's employees and directors including stock options under the
New Plan. The Company's financial statements as of September 30, 2006, and
for the three months and nine months ended September 30, 2006 reflect the
effect of SFAS 123(R). In accordance with the modified prospective
transition method, the Company's financial statements for prior periods
have not been restated to reflect, and do not include, the impact of SFAS
123(R). Share-based compensation expense recognized is based on the value
of the portion of share-based payment awards that is ultimately expected to
vest. Share-based compensation expense recognized in the Company's
Statements of Operations during the three months and nine months ended
September 30, 2006 included compensation expense for share-based payment
awards granted prior to, but not yet vested, as of December 31, 2005 based
on the grant date fair value estimated in accordance with the pro forma
provisions of SFAS 123 and compensation expense for the share-based payment
awards granted subsequent to December 31, 2005 based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R). In
conjunction with the adoption of SFAS 123(R), the Company elected to
attribute the value of share-based compensation to expense using the
straight-line attribution. Share-based compensation expense related to
stock options was $ - and $ - for the three and nine months ended September
30, 2006, respectively. During the three months and nine months ended
September 30, 2005, there was no share-based compensation expense related
to stock options recognized under the intrinsic value method in accordance
with APB 25.
Upon adoption of SFAS 123(R), the Company elected to value its share-based
payment awards granted after January 1, 2006 using the Black-Scholes
option-pricing model, which was previously used for its pro-forma
information required under SFAS 123. The Black-Scholes model was developed
for use in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. The Black-Scholes model requires
the input of certain assumptions. The Company's options have
characteristics significantly different from those of traded options, and
changes in the assumptions can materially affect the fair value estimates.
The Company issued 2,000,000 shares for stock compensation to officers of
the Company on February 17, 2006. The employment agreements vest the shares
over a 24 month period beginning with the date of issue. Valuation of
$2,040,000 was based upon the weighted average stock price of $1.02 for the
5 trading days preceding the issuance of the shares. The compensation is
being expensed on a monthly basis as the shares vest. Payroll taxes are
being accrued on the vested shares. The Company incurred stock based
compensation expense of $89,250 and $348,500 for the three and nine months
ended September 30, 2006. Associated payroll taxes of $4,674 and 20,511
were accrued for the three and nine month periods ending September 30,
2006. The Company has taken possession of two certificates totaling
1,300,000 shares and is holding them for cancellation. The Company will
issue shares to the terminated officers for the vested 108,333 shares
instead of the certificates for the full amount. The third officer holds
his 700,000 restricted share certificate, valued at $714,000. The Company
has recorded the issued shares as a prepaid expense and accrued the vested
shares against the prepaid monthly. As of September 30, 2006, the Company
vested 233,336 shares valued at $238,000, with a remaining prepaid of
466,664 shares valued at $476,000.
3. NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 123R
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123R, "Share-Based Payment" ("SFAS No. 123R") using
the Modified Prospective Approach. See Note 2 for further detail regarding
the adoption of this standard.
7
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SFAS No. 155
In February 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments--an
Amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). SFAS No.
155 allows financial instruments that contain an embedded derivative and
that otherwise would require bifurcation to be accounted for as a whole on
a fair value basis, at the holders' election. SFAS No. 155 also clarifies
and amends certain other provisions of SFAS No. 133 and SFAS No. 140. This
statement is effective for all financial instruments acquired or issued in
fiscal years beginning after September 15, 2006. We do not expect that the
adoption of SFAS No. 155 will have a material impact on our consolidated
financial statements.
SFAS No. 155
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets--an Amendment of FASB Statement No. 140" ("SFAS No. 156").
SFAS No. 156 provides guidance on the accounting for servicing assets and
liabilities when an entity undertakes an obligation to service a financial
asset by entering into a servicing contract. This statement is effective
for all transactions in fiscal years beginning after September 15, 2006. We
do not expect that the adoption of SFAS No. 156 will have a material impact
on our consolidated financial condition or results of operations.
EITF Issue No. 06-3
In June 2006, the Emerging Issues Task Force ("EITF") reached a consensus
on EITF Issue No. 06-3, "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That
Is, Gross versus Net Presentation)" ("EITF 06-3"). EITF 06-3 provides that
the presentation of taxes assessed by a governmental authority that is
directly imposed on a revenue-producing transaction between a seller and a
customer on either a gross basis (included in revenues and costs) or on a
net basis (excluded from revenues) is an accounting policy decision that
should be disclosed. The provisions of EITF 06-3 will be effective for us
as of January 1, 2007. We do not expect that the adoption of EITF 06-3 will
have a material impact on our consolidated financial statements.
FASB Interpretation No. 48
In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes--an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
clarifies the recognition threshold and measurement of a tax position taken
on a tax return. FIN 48 is effective for fiscal years beginning after
December 15, 2006. FIN 48 also requires expanded disclosure with respect to
the uncertainty in income taxes. We are currently evaluating the
requirements of FIN 48 and the impact this interpretation may have on our
financial statements.
SAB No. 108
In September 2006, the SEC Staff issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial Statements" ("SAB No. 108").
SAB No. 108 requires the use of two alternative approaches in
quantitatively evaluating materiality of misstatements. If the misstatement
as quantified under either approach is material to the current year
financial statements, the misstatement must be corrected. If the effect of
correcting the prior year misstatements, if any, in the current year income
statement is material, the prior year financial statements should be
corrected. In the year of adoption (fiscal years ending after November 15,
2006 or calendar year 2006 for us), the misstatements may be corrected as
an accounting change by adjusting opening retained earnings rather than
being included in the current year income statement. We are currently
evaluating the requirements of SAB No. 108 and the impact it may have on
our consolidated financial statements.
8
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SFAS No. 158
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158").
SFAS No. 158 requires companies to recognize in their statement of
financial position an asset for a plan's overfunded status or a liability
for a plan's underfunded status and to measure a plan's assets and its
obligations that determine its funded status as of the end of the company's
fiscal year. Additionally, SFAS No. 158 requires companies to recognize
changes in the funded status of a defined benefit postretirement plan in
the year that the changes occur and those changes will be reported in
comprehensive income. The provision of SFAS No. 158 that will require us to
recognize the funded status of our postretirement plans, and the disclosure
requirements, will be effective for us as of December 31, 2006. We do not
expect that the adoption of SFAS No. 158 will have a material impact on our
consolidated financial statements.
4. RELATED PARTY TRANSACTIONS
Receivable from Officers - officers received advances from the Company
through September 30, 2006 totaling $76,108 consisting primarily advances a
Company officer charged against the corporate bank account. The advances
are non-interest bearing, unsecured and due on demand. One officer applied
his advances against fourth quarter payroll. Demand has been made on the
other officer for repayment, of which $70,803 was outstanding at September
30, 2006.
On February 17, 2006, the Company entered into employment agreements
("Agreements") with three officers of the Company. All three agreements
have a term of February 15, 2006 through March 31, 2008 and may be extended
upon mutual agreement of the parties or may be terminated prior to March
31, 2008 upon occurrence of certain conditions. Under the Agreements:
The Chief Executive Officer will be paid an annual salary of $48,000. He is
to receive 700,000 shares vesting monthly over twenty-four (24) months. The
shares are subject to a lock agreement and may not be sold prior to
February 17, 2008.
The Chief Operating Officer will be paid an annual salary of $48,000. He is
to receive 650,000 shares vesting monthly over twenty-four (24) months. The
shares are subject to a lock agreement and may not be sold prior to
February 17, 2008. The agreement was cancelled on April 5, 2006, as
detailed in Note 5.
The Chief Exploration Officer will be paid an annual salary of $48,000. He
is to receive 650,000 shares vesting monthly over twenty-four (24) months.
The shares are subject to a lock agreement and may not be sold prior to
February 17, 2008. The agreement was cancelled on April 5, 2006, as
detailed in Note 5.
Under the terms of the agreement, the officers' compensation of $12,000 and
$58,000 has been expensed for the three month and nine months ending
September 30, 2006, respectively.
5. STOCKHOLDERS' EQUITY
Common Stock - Pursuant to the upset provision in the Bindloss Agreement
that was signed by the Company on October 12, 2005, the Company cancelled
4,500,000 of the 5,000,000 shares issued to Mr. Jeffrey A. Cocks in March
2006. The remaining shares were accounted for by the Company as a finder's
fee for the agreement.
During 2006, Consultants to the Company exercised options to acquire
500,000 shares of common stock at par value. The consultants paid for the
exercise by reducing accounts payable owed by the Company.
9
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
During 2006, The Company issued 2,000,000 shares for stock compensation to
officers of the Company on February 17, 2006. The employment agreements
vest the shares over a 24 month period beginning with the date of issue.
Valuation was based upon the weighted average stock price of $1.02 for the
5 trading days preceding the issuance of the shares. The compensation is
being expenses on a monthly basis as the shares vest. For the nine months
ended September 30, 2006, 341,667 shares of stock under the employment
agreements have vested to the officers, at an expense of $348,500.
On April 5, 2006, the Registrant's Board of Directors terminated the
employment contracts of Jeffery Cocks as the Registrant's Chief Operating
Officer and Kevin Tattersall as the Registrant's Chief Exploration Officer.
The Registrant has not appointed successors to either position. The
Registrant terminated these contracts as part of a re-evaluation of the
Registrant's entire management team and overhead expenses and should not be
construed as a negative judgment on Messrs. Cocks and Tattersall. Pursuant
to the agreement, termination of employment without cause obligates the
Company to pay two months of the officers' salaries, totaling $8,000 to
each officer. The share certificates for all 2,000,000 shares are being
held by the Company and are to be returned to the transfer agent. New
certificates for the vested shares will be issued by the Company upon
cancellation of the original certificates. Each officer will receive new
certificates of 54,166 vested shares valued at $55,250.
In February 2006, the Registrant commenced an offering under Regulation S
(the "Offering"), solely to non-US persons located outside of the United
States. On April 5, 2006, before accepting any subscriptions or funds from
investors in the Offering, the Registrant cancelled the Offering and
requested the return of all offering materials
On April 5, 2006, the Company issued 50,000,000 shares of common stock to
Sol-Terra Energy, Inc. in exchange for all of Sol-Terra's assets, which
include a substantial interest in gas-bearing property in Alberta. The
Company has held the stock certificate pending valuation of the assets and
closing of the transaction. The Company will record the transaction upon
completion of the asset valuation. Due to the Company's possession of the
certificate, it is deemed un-issued and not outstanding.
On May 31, 2006, the Company issued 40,000 shares of Class A preferred
stock to the Chairman, Robert Genesi in exchange for his services. The
preferred shares carry voting rights of 1,000 votes per share.
On July 6, 2006, the Registrant commenced an offering under Regulation S
(the "Offering"), solely to non-US persons located outside of the United
States. Terms of the agreement were to raise up to $2,000,000 by sale of
common shares at a per share purchase price equal to 40% of the previous
day's last trade price, as traced on the Other the Counter Bulletin Board.
The sales agent received 10% of the proceeds. Through September 30, 2006,
the Company sold 726,096 shares for net $159,116.
On July 28, 2006, 309,000 options were exercised at $0.001 for $309. On
September 5, 2006, 50,000 options were exercised at $0.001 for $50. On
September 13, 2006, 75,000 options were exercised at $0.001 for $75.
6. COMMITMENTS AND CONTINGENCIES
Potential Securities Act Violation. On April 4, 2006, the Company brought
in a new president and director and hired counsel to review certain of the
Company's stock issuances and other transactions. At that time, the Company
cancelled the consulting agreements with two non-employee consultants.
10
FRONTIER ENERGY CORP.
fka GTDATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
7. SUBSEQUENT EVENTS
On October 16, 2006, failing to receive an appraisal for the assets of
Sol-Terra, the Company cancelled the 50,000,000 share certificate and
terminated the April 5, 2006 agreement.
On October 18, 2006, the stock transfer agent cancelled the share
certificates for Jeffery Cocks and Kevin Tattersall, as described above.
Certificates for 54,000 shares each were issued to the former officers.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion of our plan of operations, financial condition
and results of operations should be read in conjunction with the Company's
unaudited financial statements, and notes thereto, included elsewhere herein.
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 during this period, since we were unable to obtain a
professional appraisal of the prospect. We have been unable to acquire or fund
the exploitation of any other prospects. 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 three-month period ended September 30,
2006, the Company had no revenues from operations or other sources.
PLAN OF OPERATIONS
We intend to acquire prospects and raise the funds necessary to extract
oil and/or natural gas from such prospects. To date, we have entered into
contracts, but were unable to obtain proper appraisals of such prospects and
discontinued such operations. 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, if 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.
Liquidity and Capital Resources
The Company did not generate any revenue in the quarter ended September
30, 2006; 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 ($15,437 as of
September30, 2006), 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, 2006 were $128,671, as compared to only
$3,650 for the same period in 2005. Based on the cash we currently have, we will
likely need additional financing to continue operations beyond December 2006. We
have been dependent on loans 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.
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
11
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
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123(R), "Share-Based Payment" ("SFAS No. 123(R)") using
the modified prospective approach, which requires the measurement and
recognition of compensation expense for all share-based payment awards made to
the Company's employees and directors including stock options under the New
Plan. The Company's financial statements as of September 30, 2006, and for the
three months and nine months ended September 30, 2006 reflect the effect of SFAS
123(R). Share-based compensation expense recognized is based on the value of the
portion of share-based payment awards that is ultimately expected to vest.
Share-based compensation expense recognized in the Company's Statements of
Operations during the three months and nine months ended September 30, 2006
included compensation expense for share-based payment awards granted prior to,
but not yet vested, as of December 31, 2005 based on the grant date fair value
estimated in accordance with the pro forma provisions of SFAS 123 and
compensation expense for the share-based payment awards granted subsequent to
December 31, 2005 based on the grant date fair value estimated in accordance
with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS
123(R), the Company elected to attribute the value of share-based compensation
to expense using the straight-line attribution. Share-based compensation expense
related to stock options was $___ - and $ ___- for the three and nine months
ended September 30, 2006, respectively. During the three months and nine months
ended September 30, 2005, there was no share-based compensation expense related
to stock options recognized under the intrinsic value method in accordance with
APB 25.
In February 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments--an
Amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). SFAS No. 155
allows financial instruments that contain an embedded derivative and that
otherwise would require bifurcation to be accounted for as a whole on a fair
value basis, at the holders' election. SFAS No. 155 also clarifies and amends
certain other provisions of SFAS No. 133 and SFAS No. 140. This statement is
effective for all financial instruments acquired or issued in fiscal years
beginning after September 15, 2006. We do not expect that the adoption of SFAS
No. 155 will have a material impact on our consolidated financial condition or
results of operations.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
of Financial Assets--an Amendment of FASB Statement No. 140" ("SFAS No. 156").
SFAS No. 156 provides guidance on the accounting for servicing assets and
liabilities when an entity undertakes an obligation to service a financial asset
by entering into a servicing contract. This statement is effective for all
transactions in fiscal years beginning after September 15, 2006. We do not
expect that the adoption of SFAS No. 156 will have a material impact on our
consolidated financial condition or results of operations.
In June 2006, the Emerging Issues Task Force ("EITF") reached a
consensus on EITF Issue No. 06-3, "How Taxes Collected from Customers and
Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation)" ("EITF 06-3"). EITF 06-3 provides that
the presentation of taxes assessed by a governmental authority that is directly
imposed on a revenue-producing transaction between a seller and a customer on
either a gross basis (included in revenues and costs) or on a net basis
(excluded from revenues) is an accounting policy decision that should be
disclosed. The provisions of EITF 06-3 will be effective for us as of January 1,
2007. We do not expect that the adoption of EITF 06-3 will have a material
impact on our consolidated financial statements.
In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in
Income Taxes--an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
clarifies the recognition threshold and measurement of a tax position taken on a
tax return. FIN 48 is effective for fiscal years beginning after December 15,
2006. FIN 48 also requires expanded disclosure with respect to the uncertainty
in income taxes. We are currently evaluating the requirements of FIN 48 and the
impact this interpretation may have on our financial statements.
12
In September 2006, the SEC Staff issued Staff Accounting Bulletin No.
108, "Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial Statements" ("SAB No. 108"). SAB No.
108 requires the use of two alternative approaches in quantitatively evaluating
materiality of misstatements. If the misstatement as quantified under either
approach is material to the current year financial statements, the misstatement
must be corrected. If the effect of correcting the prior year misstatements, if
any, in the current year income statement is material, the prior year financial
statements should be corrected. In the year of adoption (fiscal years ending
after November 15, 2006 or calendar year 2006 for us), the misstatements may be
corrected as an accounting change by adjusting opening retained earnings rather
than being included in the current year income statement. We are currently
evaluating the requirements of SAB No. 108 and the impact it may have on our
consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158").
SFAS No. 158 requires companies to recognize in their statement of financial
position an asset for a plan's overfunded status or a liability for a plan's
underfunded status and to measure a plan's assets and its obligations that
determine its funded status as of the end of the company's fiscal year.
Additionally, SFAS No. 158 requires companies to recognize changes in the funded
status of a defined benefit postretirement plan in the year that the changes
occur and those changes will be reported in comprehensive income. The provision
of SFAS No. 158 that will require us to recognize the funded status of our
postretirement plans, and the disclosure requirements, will be effective for us
as of December 31, 2006. We do not expect that the adoption of SFAS No. 158 will
have a material impact on our consolidated financial statements.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the quarter ended June 30, 2006, the Company issued 40,000 shares of
Class A preferred stock to Robert Genesi for services rendered to the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not Applicable.
13
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.
- --------------------------------------------------------------------------------
14
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 17, 2006
FRONTIER ENERGY CORP.
By: /s/ Robert Genesi
Name: Robert Genesi
Title: President and Acting Chief Financial Officer
Principal Financial Officer