Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q /A
(Amendment No. 1)
R |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
£ |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 333-205571
FRONTIER DIGITAL MEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)
Colorado |
| 46-2276094 |
2605 Red Hawk Ridge Drive, Castle Rock, Colorado 80109
(Address of principal executive offices) (Zip Code)
(303) 999-8171
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨ No þ
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 þ |
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| (Do not check if a smaller reporting company) |
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Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes þ No ¨
1
APPLICABLE TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
| Outstanding as of May 8, 2017 |
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| Common Stock, $0.001 |
| 5,364,400 |
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
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Explanatory Note | 4 | |
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Item 1. | Condensed Consolidated Financial Statements (unaudited) | 5 |
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| Notes to Condensed Consolidated Financial Statements | 8 |
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 12 |
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 17 |
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Item 4. | Controls and Procedures | 17 |
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PART II - OTHER INFORMATION |
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Item 1. | Legal Proceedings | 19 |
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Item 1A. | Risk Factors | 19 |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
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Item 3. | Defaults Upon Senior Securities | 19 |
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Item 4. | Mine Safety Disclosures | 19 |
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Item 5. | Other Information | 19 |
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Item 6. | Exhibits | 19 |
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SIGNATURES | 20 | |
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EXPLANATORY NOTE
Frontier Digital Media Group, Inc. (the “Company”) is filing this amendment to its Quarterly Report on Form 10-Q for the interim period ended March 31, 2017, which was originally filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2017 (the “Original Filing”), solely to correct the cover page. The cover page on the Original Filing incorrectly stated that the Company was not a shell company (as defined in Rule 12b-2 of the Exchange Act). The cover page for this Form 10-Q/A correctly states that the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).
For the convenience of the reader, this Form 10-Q/A sets forth the Quarterly Report on Form 10-Q in its entirety. Other than the correction on the cover page described above, the Original Filing has not been amended or updated. Forward-looking statements made in the Original Filing have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Filing. This Form 10-Q/A should be read in conjunction with the Company’s filings subsequent to the Original Filing with the SEC.
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PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Frontier Digital Media Group, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2017, and December 31, 2016
(Unaudited)
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| March 31, 2017 |
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| December 31, 2016 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 8,398 |
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| $ | 10,031 |
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Accounts and other receivables |
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| 1,097 |
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| 870 |
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Total current assets |
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| 9,495 |
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| 10,901 |
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Total assets |
| $ | 9,495 |
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| $ | 10,901 |
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Liabilities and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable |
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| 3,750 |
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| 2,408 |
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Accrued liabilities |
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| 3,170 |
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| 5,160 |
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Notes payable, related parties |
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| 25,122 |
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| 25,122 |
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Current liabilities |
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| 32,042 |
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| 32,690 |
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Total liabilities |
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| 32,042 |
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| 32,690 |
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Stockholders’ Deficit |
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Common stock, $0.001 par value; 100,000,000 shares authorized; 5,304,400 and 5,077,000 shares issued and outstanding as of March 31, 2017, and December 31, 2016 |
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| 5,304 |
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| 5,077 |
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Additional paid-in capital |
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| 22,116 |
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| 10,973 |
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Accumulated deficit |
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| (49,967) |
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| (37,839) |
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Total Stockholders’ Deficit |
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| (22,547) |
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| (21,789) |
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Total Liabilities and Stockholders’ Deficit |
| $ | 9,495 |
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| $ | 10,901 |
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See accompanying notes to unaudited condensed consolidated financial statements
5
Frontier Digital Media Group, Inc.
Condensed Consolidated Statements of Operations
For the three months ended March 31, 2017 and 2016
(Unaudited)
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| For the three months ended March 31, |
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| 2016 |
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Revenues |
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Revenue |
| $ | 8,835 |
| $ | 2,351 |
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Revenue, related parties |
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| 960 |
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| 1,000 |
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Total revenues |
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| 9,795 |
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| 3,351 |
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Operating expenses |
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Cost of sales |
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| 27 |
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| – |
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Related party compensation |
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| 12,810 |
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| – |
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General and administrative |
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| 9,086 |
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| 4,143 |
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Total operating expenses |
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| 21,923 |
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| 4,143 |
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Loss from operations |
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| (12,128) |
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| (792) |
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Provision for income taxes |
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| – |
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| – |
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Net loss |
| $ | (12,128) |
| $ | (792) |
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Net Loss per common share |
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Basic and diluted |
| $ | (0.00) | * | $ | (0.00) | * |
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Weighted average shares outstanding |
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Basic and diluted |
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| 5,131,727 |
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| 5,019,033 |
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*denotes net loss per common share of less than $0.01 per share.
See accompanying notes to unaudited condensed consolidated financial statements
6
Frontier Digital Media Group, Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2017 and 2016
(Unaudited)
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| For the three months ended March 31, | ||||||
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| 2017 |
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| 2016 |
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Cash flows from operating activities: |
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Net loss |
| $ | (12,128) |
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| $ | (792) |
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Changes in operating assets and liabilities: |
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Accounts and other receivables |
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| (227) |
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| 77 |
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Accounts payable |
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| 1,342 |
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| – |
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Accrued liabilities |
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| (1,990) |
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| 74 |
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Accrued liabilities - related party |
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| – |
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| (4,000) |
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Net cash used in operating activities |
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| (13,003) |
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| (4,641) |
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Cash flows from investing activities: |
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Net cash provided by (used in) investing activities |
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| – |
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| – |
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Cash flows from financing activities: |
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Proceeds from the sale of common stock |
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| 11,370 |
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| 1,700 |
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Proceeds from issuance of notes payable, related party |
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| – |
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| 7,622 |
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Repayment of notes payable, related party |
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| – |
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| (2,200) |
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Net cash provided by financing activities |
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| 11,370 |
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| 7,122 |
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Net increase (decrease) in cash and cash equivalents |
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| (1,633) |
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| 2,481 |
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Cash and cash equivalents at beginning of period |
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| 10,031 |
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| 3,809 |
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Cash and cash equivalents at end of period |
| $ | 8,398 |
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| $ | 6,290 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for interest |
| $ | – |
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| $ | – |
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Cash paid during the period for income taxes |
| $ | – |
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| $ | – |
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See accompanying notes to unaudited condensed consolidated financial statements
7
Frontier Digital Media Group, Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
March 31, 2017
Note 1 — Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required for audited annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the condensed consolidated financial statements not misleading have been included. The balance sheet at December 31, 2016, has been derived from the Company’s audited consolidated financial statements as of that date.
The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, that was filed with the SEC on March 28, 2017. The results of operations for the three months ended March 31, 2017, are not necessarily indicative of the results to be expected for the full year.
The unaudited condensed consolidated financial statements include the accounts of the Company and Smile Producer, Inc., its wholly owned subsidiary. Intercompany balances and transactions have been eliminated in consolidation.
Note 2 — Going Concern
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.
The Company is in the development stage with limited trading history, has yet to achieve sustained profitability, does not have the existing financial resources to fully implement its business plan and is consequently dependent on outside sources of financing for continuation of its operations. These conditions raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.
The Company plans to improve its financial condition through raising capital, however, there is no assurance that the Company will be successful in accomplishing this objective. Management believes that this plan provides an opportunity for the Company to continue as a going concern. The Company cannot give any assurances regarding the success of its management’s plans. The Company’s financial statements do not include adjustments relating to the recoverability of recorded assets or liabilities that might be necessary should it be unable to continue as a going concern.
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Note 3 — Summary of Significant Accounting Policies
The significant accounting policies followed by the Company for interim reporting are consistent with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There were no material changes to our significant accounting policies during the interim period ended March 31, 2017.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued guidance to clarify the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. However, entities reporting under U.S. GAAP are not permitted to adopt the standard earlier than the original effective date of December 15, 2016. An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. The Company is currently in the process of evaluating the impact of adoption of the new accounting guidance on its consolidated financial statements and has not determined the impact of adoption on its consolidated financial statements.
Note 4 — Notes Payable – Related Parties
In September 2015, the Company issued a non-convertible promissory note payable to Venture Vest Capital Corporation, a related party, in the total amount of $8,000 to replace convertible notes payable issued in January 2015 and March 2015 to the same related party. The non-convertible promissory note had a maturity date of December 31, 2016, and was interest free until December 31, 2016. In January 2017, the promissory note was amended to extend the maturity date and the interest-free period to December 31, 2017.
In August 2015, the Company issued a promissory note payable to Patrick Dunda, the Company’s President and Chief Executive Officer, for $2,200. The promissory note had a maturity date of December 31, 2016, and paid zero interest through May 31, 2016, at which point an annual interest rate of 6% would have become effective until maturity. In March 2016, the Company repaid this promissory note payable in full.
In September 2015, the Company issued a second non-convertible promissory note payable to Venture Vest Capital Corporation for $6,500. The promissory note had a maturity date of December 31, 2016, and was interest free until December 31, 2016. In January 2017, the promissory note was amended to extend the maturity date and the interest-free period to December 31, 2017.
In March 2016, the Company issued a non-convertible promissory note payable to Terayco Enterprises, a related party, for $7,622. The promissory note had a maturity date of December 31, 2016, and was interest free until December 31, 2016. In January 2017, the promissory note was amended to extend the maturity date and the interest-free period to December 31, 2017.
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In August 2016, the Company issued a promissory note payable to Patrick Dunda, the Company’s President and Chief Executive Officer, for $3,000. The promissory note has a maturity date of December 31, 2017, and pays zero interest through October 31, 2017, at which point an annual interest rate of 6% becomes effective until maturity or repayment.
Note 5 — Other Related Party Transactions
Related party revenue
The Company provides services to certain customers that the Company has determined to be related parties. The president of these customers (VentureVest Capital Corporation, Terayco, Americans for Truth, and Carriage House) is the father of Janel Dunda, a principal of the Company.
Revenues, generated from website design services, from these related parties were $960 and $1,000 for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, and December 31, 2016, there were no accounts receivable due from related parties.
Related party compensation
An employee of the Company, Janel Dunda, is considered a related party as she is the spouse of the President and the majority shareholder of the Company. During the three months ended March 31, 2017 and 2016, the Company incurred compensation expense of $12,810 and $0, respectively, for payroll expenses associated with Mrs. Dunda.
Professional fees paid by related party
In August 2015 and January 2016, $7,622 of our legal expenses were paid by Terayco Enterprises, a company owned and operated by the father of Janel Dunda, a principal of the Company. In March 2016, the Company issued a note payable, discussed above in Note 4, to Terayco Enterprises in the amount of $7,622 to cover the legal expenses paid by Terayco Enterprises on behalf of the Company.
Note 6 — Stockholder Equity
Common Stock
The Company is authorized to issue 100,000,000 shares of common stock, par value $0.001 per share. All shares of the Company’s common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of Common Stock entitles the holder thereof to:
| a) | One non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders; |
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| b) | To participate equally and to receive any and all such dividends as may be declared by the Board of Directors out of funds legally available therefore; and |
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| c) | To participate pro rata in any distribution of assets available for distribution upon liquidation. |
Stockholders have no pre-emptive rights to acquire additional shares of common stock or any other securities. Common shares are not subject to redemption and carry no subscription or conversion rights. All outstanding shares of common stock are fully paid and non-assessable.
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In 2015, the Company filed an S-1 Registration Statement to register 1,000,000 shares of the Company’s common stock to be sold to the public at the price of $0.05 per share for a total of $50,000. The Registration Statement became effective on December 30, 2015. During the three months ended March 31, 2017 and 2016, the Company sold 227,400 and 77,000 shares, respectively, at $0.05 per share for gross proceeds of $11,370 and $3,850, respectively. The shares were sold by the officers and Directors of the Company and no broker commissions were paid as a result of the sales.
As of March 31, 2017, 304,400 shares of common stock have been sold pursuant to the S-1 Registration Statement at $0.05 per share for total gross proceeds of $15,220. There can be no assurances that additional shares of common stock will be sold on the S-1 offering or that a trading market will develop for the shares.
As of March 31, 2017, 5,304,400 shares of common stock were issued and outstanding.
Note 7 — Subsequent Events
The Company has evaluated subsequent events through the date of the filing of this interim report on Form 10-Q. Based on this evaluation, the Company did not identify any significant subsequent events that would have a material effect on the consolidated financial statements, which would require an adjustment and/or additional disclosure.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report.
Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new products or services; our statements concerning litigation or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; our financing plans or growth strategies; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
Business Overview
Frontier Digital Media Group, Inc. (“we, “us,” “our,” or the “Company”) was incorporated in the state of Colorado on September 19, 2011. On March 20, 2013, we formed a wholly owned subsidiary company, Smile Producer, Inc., a Colorado corporation. Our principal executive offices are located at 2605 Red Hawk Ridge Drive, Castle Rock, Colorado 80109, telephone 303-999-8171.
We are a digital design and media company which develops and maintains websites and is a provider of marketing communications services to customers in the United States. We conduct our operations primarily through Smile Producer, Inc., our wholly owned subsidiary company.
We provide a range of marketing communications and consulting services, including all types of advertising, print and digital design, digital motion graphics and client website construction, interactive and mobile marketing, direct marketing, sales promotion, market research, corporate identity and branding, social media and other marketing related services. We have two revenue streams, marketing services and website hosting subscriptions.
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As of the date of this filing our management only devotes approximately 35-50 hours in the aggregate per week to our affairs. This time may increase if and when our business activity increases, of which there is no assurance. We have not yet generated sustained profits from our operations. Our independent accountants have expressed a “going concern” opinion.
In 2015, the Company filed an S-1 Registration Statement to register 1,000,000 shares of the Company’s common stock to be sold to the public at the price of $0.05 per share for a total of $50,000. The Registration Statement became effective on December 30, 2015. As of March 31, 2017, the Company had sold 304,400 shares of common stock at $0.05 per share for gross proceeds of $15,220. The shares were sold by the officers and Directors of the Company and no broker commissions were paid. There is no guarantee that additional shares will be sold from the Registration Statement.
Even if all of the shares offered on the S-1 Registration Statement are sold, our management will continue to own over a majority of the outstanding shares of the Company. As a result, they have the ability to determine the outcome on all matters requiring approval of our shareholders, including the election of directors and approval of significant corporate transactions.
We are preparing to boost our business with the use of proceeds gained with the offering and other investments. We intend to continue to build our business through additional advertising and marketing, specifically to Orthodontic and Dental Magazines and online marketing. Our plan is to target these niches, which we believe have been underserved or even un-served by other developers by creating original applications that address common problems. We have also identified these industries because our management has had extensive experience in these areas and has developed significant business contacts within these fields. No assurances can be provided that these business contacts or experience will result in our attempts to build a successful business.
We also intend to focus our marketing efforts on the general audience and intend to market on a more local level and through referrals. If need arises we will broaden our marketing efforts in a wider range of national on-line advertising.
Today’s marketing is focused around digital design, using the internet as its primary outlet. We utilize all sources of digital design to produce marketing materials for our clients, including websites and social media, logo design, and print design as well as any other marketing necessary for the client’s business growth. We intend to continue to attempt to expand our business of hosting websites and in the development of websites, and other marketing programs, SEO management, designing ads, brochures, logo design, social media and other advertising media.
Based upon our current business plan, we may continue to incur losses in the foreseeable future and there can be no assurances that we will ever establish profitable operations. These and other factors raise substantial doubt about our ability to continue as a going concern.
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Critical Accounting Policies, Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, such as when a purchase order or contract is received from a customer, the price is fixed, title to the goods has passed or services have been rendered, and there is reasonable assurance of collection. The Company classifies selling discounts and rebates, if any, as a reduction of revenue.
Accounts receivable
The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. As of March 31, 2017, and December 31, 2016, no allowance for doubtful accounts was deemed necessary.
Income Taxes
The Company follows the asset and liability method of accounting for future income taxes. Under this method, future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of assets and liabilities and their corresponding tax basis. In addition, the future benefits of income tax assets including unused tax losses, are recognized, subject to a valuation allowance to the extent that it is more likely than not that such future benefits will ultimately be realized. Future income tax assets and liabilities are measured using enacted tax rates and laws expected to apply when the tax liabilities or assets are to be either settled or realized. The Company’s effective tax rate approximates the Federal statutory rates.
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Results of Operations for the Three Months Ended March 31, 2017 compared to the Three Months Ended March 31, 2016
During the three months ended March 31, 2017, we generated revenues of $9,795 compared to revenues of $3,351 during the three months ended March 31, 2016, an increase of $6,444. The increase in revenues were attributable to an increase in our customer and client base and increased billings from our existing customers.
Operating expenses, including general and administrative expenses, during the three months ended March 31, 2017, were $21,923 compared to $4,143 during the three months ended March 31, 2016.
The increase of $17,780 in operating expenses during the three months ended March 31, 2017, compared with the same period during 2016 was attributed to increases of $12,810 in related party compensation, $4,896 in accounting fees, and $74 in other operating and administrative costs during the three months ended March 31, 2017.
During the three months ended March 31, 2017, the Company incurred a net loss of $12,128 compared to a net loss of $792 during the three months ended March 31, 2016. The increase in the net loss of $11,336 for the three months ended March 31, 2017, was related to the increase of $17,780 in operating expenses, partially offset by an increase of $6,444 in revenues as discussed above.
Liquidity and Capital Resources
As of March 31, 2017, we had a cash balance of $8,398, a decrease of $1,633 from a balance of $10,031 at December 31, 2016. The decrease during the three months ended March 31, 2017, was the result of net cash used for operations of $13,003, partially offset by net cash provided by financing activities of $11,370 during the period.
Operating Activities
Net cash used in operating activities was $13,003 during the three months ended March 31, 2017, compared with $4,641 used in operating activities during the three months ended March 31, 2016. The $8,362 increase in cash used in operations was due to an increase in net loss of $11,336, partially offset by a decrease of $2,974 in working capital requirements during the nine three months ended March 31, 2017.
Investing Activities
We neither generated nor used cash in investing activities during the three months ended March 31, 2017 and 2016.
Financing Activities
Cash flows provided by financing activities were $11,370 and $7,122 during the three months ended March 31, 2017 and 2016, respectively.
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During the three months ended March 31, 2017 and 2016, the Company sold 227,400 and 34,000 shares, respectively, at $0.05 per share for gross proceeds of $11,370 and $1,700, respectively. The shares were sold by the officers and Directors of the Company and no broker commissions were paid as a result of the sales.
In March 2016, the Company repaid the promissory note payable issued to Patrick Dunda, the Company's President and Chief Executive Officer, in the amount of $2,200.
In March 2016, the Company issued a third non-convertible promissory note payable to Venture Vest Capital Corporation for $7,622. The promissory note has a maturity date of December 31, 2016, and is interest free until December 31, 2016, after which time it shall bear interest at an annual interest rate of 6% until maturity or repaid.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we have incurred net losses of $12,128 and $792 for the three months ended March 31, 2017 and 2016, respectively, and have a working capital deficit of $22,547 as of March 31, 2017, which raises substantial doubt about the Company’s ability to continue as a going concern.
Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms.
In 2015, the Company filed an S-1 Registration Statement to register 1,000,000 shares of the Company’s common stock to be sold to the public at the price of $0.05 per share for a total of $50,000. The Registration Statement became effective on December 30, 2015. As of the date of this filing, the Company has sold 304,400 shares of common stock at $0.05 per share for gross proceeds of $15,220.
The shares were sold by the officers and Directors of the Company and no broker commissions were paid. There is no guarantee that additional shares will be sold from the Registration Statement.
The funds raised on the offering will be used for the payment of costs incurred in the filing of the S-1 Registration Statement and for operating capital for the Company.
With the filing of the S-1 Registration Statement, the Company will become a “Reporting Company” as that term is defined by the SEC. As a “Reporting Company”, we will be filing quarterly and annual reports with the SEC, thus incurring the additional costs of audits and legal fees.
While it is hoped that the sale of common stock will be sufficient to meet the financial needs of the Company for the next 12 months, it may be necessary for current management to advance the Company additional funds to meet the needs of the Company.
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Our current management has agreed to advance funds to the Company on an “as needed” basis.
Should existing management, stockholders or our affiliates refuse to advance needed funds, however, we would be forced to turn to outside parties to either lend funds to us or buy our securities. There is no assurance that we will be able to raise the necessary funds, when needed, from outside sources. Such a lack of funds could result in severe consequences to us, including among others:
| ● | failure to make timely filings with the SEC as required by the Exchange Act, which may also result in suspension of trading or quotation of our stock and could result in fines and penalties to us under the Exchange Act; and |
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| ● | failure to increase sales and income for the company. |
The Company’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve our operating results.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Inflation
We do not believe that inflation has had in the past or will have in the future any significant negative impact on our operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of March 31, 2017. Based on this evaluation, our chief executive officer and principal financial officer have concluded such controls and procedures to be ineffective as of March 31, 2017, to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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In connection with the preparation of our financial statements for the year ended December 31, 2016, and the interim period during 2017, due to resource constraints, material weaknesses became evident to management regarding our inability to generate all the necessary disclosure for inclusion in our filings with the Securities and Exchanges Commission (the "SEC") due to the lack of resources and segregation of duties. A material weakness is a significant deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level the risk that material misstatements in our consolidated financial statements will not be prevented or detected on a timely basis.
Change in Internal Control over Financial Reporting
During the three months ended March 31, 2017, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rules 13a-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We intend to recruit additional professionals, as our business conditions warrant, to ensure that we include all necessary disclosure in our filings with the Securities and Exchange Commission. Although we believe that these corrective steps will enable management to conclude that the internal controls over our financial reporting are effective when the staff is in place and trained, we cannot provide assurance that these steps will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in internal control.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings, which are pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.
Item 1A. Risk Factors
Not required for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities during the interim periods ended March 31, 2017 and 2016.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit 31.1 — Section 302 Certificate of Principal Executive Officer
Exhibit 31.2 — Section 302 Certificate of Principal Financial Officer
Exhibit 32.1 — Section 906 Certificate of Principal Executive Officer
Exhibit 32.2 — Section 906 Certificate of Principal Financial Officer
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRONTIER DIGITAL MEDIA GROUP, INC.
By: | /s/ Patrick Dunda |
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| Patrick Dunda |
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| Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) |
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| Dated: August 7, 2017 |
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