UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2015
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____________ to____________
Commission
File No. 000-49652
FONU2
Inc.
(Exact
name of registrant as specified in its charter)
Nevada |
|
65-0773383 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer Identification No.) |
incorporation
or organization) |
|
|
135
Goshen Road Ext. Suite 205,
Rincon,
GA 31326
(Address
of principal executive offices)
(912)
655-5321
(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 ☒ 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 ☐
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 definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ☐ Accelerated filer ☐ Non-accelerated
filer ☐ Smaller reporting company ☒
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate
the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:
June 2, 2015 - Common – 235,183,331
June
2, 2015 - Preferred – 6,250
FONU2,
INC.
FORM
10-Q
For
the quarterly period ended March 31, 2015
INDEX
|
|
Page |
PART
1 – FINANCIAL INFORMATION |
|
|
|
|
|
Item
1. Financial Statements (Unaudited) |
|
3 |
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
22 |
Item
3. Quantitative and Qualitative Disclosure About Market Risk |
|
26 |
Item
4. Controls and Procedures |
|
27 |
|
|
|
PART
II – OTHER INFORMATION |
|
|
|
|
|
Item
1. Legal Proceedings |
|
28 |
Item
1A. Risk Factors |
|
28 |
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds |
|
28 |
Item
3. Defaults upon Senior Securities |
|
29 |
Item
4. Mine Safety Disclosures |
|
29 |
Item
5. Other Information |
|
29 |
Item
6. Exhibits |
|
29 |
|
|
|
SIGNATURES |
|
31 |
PART
1. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS (UNAUDITED)
The
financial statements of the registrant required to be filed with this Quarterly Report on Form 10-Q were prepared by management
and commence below, together with related notes. In the opinion of management, the financial statements fairly present the financial
condition of the registrant.
FONU2,
INC. AND SUBSIDIARY
Consolidated
Balance Sheets
| |
March 31, 2015 | | |
September 30, 2014 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
ASSETS | |
| | |
| |
CURRENT ASSETS | |
| | |
| |
Cash and Bank | |
| 9,400 | | |
| 5,143 | |
Prepaid Expenses
| |
| 1,625 | | |
| 31,516 | |
Assets from Discontinued Operations | |
| - | | |
| 35,949 | |
Total Current Assets | |
| 11,025 | | |
| 72,608 | |
| |
| | | |
| | |
FIXED ASSETS | |
| | | |
| | |
Site Development | |
| 159,575 | | |
| - | |
Land Lease | |
| 4,996,787 | | |
| - | |
Computer Equipment & Software (Net) | |
| 2,035 | | |
| - | |
Furniture & Fittings
(Net) | |
| 10,321 | | |
| - | |
Total Fixed Assets | |
| 5,168,718 | | |
| - | |
| |
| | | |
| | |
OTHER ASSETS | |
| | | |
| | |
Film Assets | |
| 1,547,825 | | |
| - | |
Security Deposits | |
| 6,500 | | |
| - | |
Total Other Assets | |
| 1,554,325 | | |
| - | |
TOTAL ASSETS | |
| 6,734,068 | | |
| 72,608 | |
| |
| | | |
| | |
LIABILITIES and STOCKHOLDER'S EQUITY (DEFICIT) | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts Payable & Accrued Expenses | |
| 194,985 | | |
| 7,866 | |
Accrued Interest Payable | |
| 20,051 | | |
| 32,208 | |
Payroll & Payroll Tax Liabilities
| |
| 11,662 | | |
| 10,002 | |
Capital Lease Obligation, net | |
| 507,777 | | |
| - | |
Derivative Liability | |
| 1,609,539 | | |
| 247,880 | |
Notes Payable | |
| 30,000 | | |
| 19,000 | |
Convertible Notes Payable, net
| |
| 140,784 | | |
| 195,320 | |
Notes Payable - Related Party | |
| 18,000 | | |
| 18,000 | |
Make Whole Provision Liability | |
| 250,000 | | |
| - | |
Total Current Liabilities | |
| 2,782,798 | | |
| 530,276 | |
| |
| | | |
| | |
NON - CURRENT LIABILITIES | |
| | | |
| | |
Notes Payable | |
| 65,517 | | |
| 25,000 | |
Capital Lease Obligation, net | |
| 4,489,010 | | |
| - | |
Total Non-Current Liabilities | |
| 4,554,527 | | |
| 25,000 | |
TOTAL LIABILITIES | |
| 7,337,325 | | |
| 555,276 | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | |
| | |
Preferred Stock Series A: 20,000,000
Shares Authorized; at $0.001 Par Value, -0- and -0- Shares Issued and Outstanding, respectively | |
| - | | |
| - | |
Preferred Stock Series B: 20,000,000
Shares Authorized; at $0.001 Par Value, 6,250 and -0- Shares Issued and Outstanding, respectively | |
| 6 | | |
| - | |
Common Stock: 2,000,000,000
Shares Authorized; at $0.001 Par Value, 214,194,576 and 312,284 Shares Issued and Outstanding, respectively | |
| 214,195 | | |
| 312 | |
Additional Paid-In Capital | |
| 42,839,294 | | |
| 39,918,053 | |
Accumulated (Deficit) | |
| (43,656,752 | ) | |
| (40,401,033 | ) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | |
| (603,257 | ) | |
| (482,668 | ) |
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT) | |
| 6,734,068 | | |
| 72,608 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
FONU2,
INC. AND SUBSIDIARY
Consolidated
Statements of Operations
(Unaudited)
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
March 31, 2015 | | |
March 31, 2014 | | |
March 31, 2015 | | |
March 31, 2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
REVENUES | |
| - | | |
| - | | |
| - | | |
| - | |
COST OF SALES | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Depreciation | |
| 728 | | |
| 1,104 | | |
| 728 | | |
| 2,232 | |
Product Development | |
| 30,000 | | |
| - | | |
| 34,124 | | |
| - | |
Compensation | |
| 9,699 | | |
| - | | |
| 9,699 | | |
| - | |
Professional Fees | |
| 278,094 | | |
| 109,253 | | |
| 337,311 | | |
| 217,637 | |
General & Administrative | |
| 172,436 | | |
| 200,893 | | |
| 180,390 | | |
| 502,411 | |
Total Operating Expenses | |
| 490,957 | | |
| 311,250 | | |
| 562,252 | | |
| 722,280 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (490,957 | ) | |
| (311,250 | ) | |
| (562,252 | ) | |
| (722,280 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSES) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Interest Expense | |
| (542,376 | ) | |
| (14,641 | ) | |
| (646,991 | ) | |
| (127,264 | ) |
Gain on Settlement of Debt | |
| 11,434 | | |
| - | | |
| 13,524 | | |
| 5,719 | |
Loss on Extinguishment of Debt | |
| (21,300 | ) | |
| - | | |
| (21,300 | ) | |
| - | |
Gain (Loss) on Derivative Liability | |
| (1,512,307 | ) | |
| (9,650 | ) | |
| (1,752,133 | ) | |
| 664,185 | |
Loss on Make Whole Provision | |
| (250,000 | ) | |
| - | | |
| (250,000 | ) | |
| - | |
Total Other Income (Expenses) | |
| (2,314,549 | ) | |
| (24,291 | ) | |
| (2,656,900 | ) | |
| 542,640 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | |
| (2,805,506 | ) | |
| (335,541 | ) | |
| (3,219,152 | ) | |
| (179,640 | ) |
Net (Loss ) Profit from Discontinued Operations | |
| (19,259 | ) | |
| 35,283 | | |
| (36,567 | ) | |
| 87,515 | |
INCOME (LOSS) BEFORE TAXATION | |
| (2,824,765 | ) | |
| (300,258 | ) | |
| (3,255,719 | ) | |
| (92,125 | ) |
| |
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | (2,824,765 | ) | |
$ | (300,258 | ) | |
$ | (3,255,719 | ) | |
$ | (92,125 | ) |
| |
| | | |
| | | |
| | | |
| | |
BASIC and DILUTED INCOME (LOSS PER SHARE) | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.04 | ) | |
$ | (1.76 | ) | |
$ | (0.08 | ) | |
$ | (0.98 | ) |
Discontinued operations | |
$ | (0.00 | ) | |
$ | 0.19 | | |
$ | (0.00 | ) | |
$ | 0.48 | |
Net loss | |
$ | (0.04 | ) | |
$ | (1.58 | ) | |
$ | (0.08 | ) | |
$ | (0.50 | ) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |
| 79,109,468 | | |
| 190,262 | | |
| 39,697,910 | | |
| 182,812 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
FONU2,
INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
| |
For
the Six Months Ended | |
| |
March
31, 2015 | | |
March
31, 2014 | |
| |
$ | | |
$ | |
OPERATING ACTIVITIES | |
| | |
| |
Net
Loss | |
| (3,255,719 | ) | |
| (92,125 | ) |
Adjustments
to Reconcile Loss from Cash Flows used in Operating Activities |
Depreciation | |
| 728 | | |
| 2,232 | |
Amortization
of Debt Discount | |
| 582,314 | | |
| 97,298 | |
Loss
on Derivative Liability | |
| 1,752,133 | | |
| (664,185 | ) |
Make
Whole Provision | |
| 250,000 | | |
| (5,719 | ) |
Stock
for Services | |
| - | | |
| 24,600 | |
Gain on due to forgiveness of debt | |
| (13,524 | ) | |
| - | |
Stock based Compensation | |
| 18,675 | | |
| - | |
Loss
on Settlement of Debt
| |
| 21,300 | | |
| - | |
Original issuance discount | |
| 3,000 | | |
| - | |
Changes
in Operating Assets and Liabilities | |
| | | |
| | |
Inventory | |
| 9,007 | | |
| - | |
Accrued
Expenses | |
| (762 | ) | |
| - | |
Prepaid
Expenses and Other Current Assets | |
| 25,676 | | |
| 124,951 | |
Accounts
Payable & Accrued Liabilities | |
| 114,914 | | |
| 8,491 | |
Net Cash Used in Operating
Activities | |
| (492,258 | ) | |
| (504,457 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES | |
| | | |
| | |
Purchase
of Property & Equipment | |
| (158,502 | ) | |
| (4,919 | ) |
Net Cash Used In Investing Activities | |
| (158,502 | ) | |
| (4,919 | ) |
| |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds
from Notes Payable | |
| 30,000 | | |
| - | |
Proceeds
from Notes Payable - Long Term | |
| 40,517 | | |
| - | |
Net Proceeds
from Convertible Notes | |
| 574,000 | | |
| 313,500 | |
Payments
on Convertible Notes | |
| - | | |
| (53,000 | ) |
Common
& Preferred Stock Issued for Cash | |
| - | | |
| 130,000 | |
Common
Stock Issued in Exercise of Options | |
| - | | |
| 90,000 | |
Net Cash Provided by Financing
Activities | |
| 644,517 | | |
| 480,500 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| (6,243 | ) | |
| (28,876 | ) |
| |
| | | |
| | |
CASH AT BEGINNING OF PERIOD | |
| 15,643 | | |
| 54,197 | |
| |
| | | |
| | |
CASH AT END OF PERIOD | |
| 9,400 | | |
| 25,321 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
FONU2,
INC. AND SUBSIDIARY.
Consolidated Statements of Cash Flows
(Unaudited)
(Continued)
SUPPLEMENTAL CASH FLOW INFORMATION | |
| | |
| |
NON-CASH INVESTING ACTIVITY | |
| | |
| |
Debt Discount from Derivative Liability | |
| 1,171,558 | | |
| 53,000 | |
Net present value of the capital lease | |
| 4,996,787 | | |
| - | |
Preferred Stock Issued for Studioplex City, LLC | |
| 259,062 | | |
| - | |
Deemed Distribution – Shares Issued for Capital Lease | |
| 10,000 | | |
| - | |
Convertible Notes Assumed – Moon River Studios, Inc | |
| 710,558 | | |
| - | |
Liabilities Assumed – Moon River Studios, Inc.
| |
| 70,205 | | |
| - | |
Shares Issued for Eagle Productions, LLC | |
| 166,667 | | |
| - | |
Conversion of Notes and Accrued Interest | |
| 722,968 | | |
| 43,500 | |
Common Stock Issued to Settle Debt
| |
| 50,000 | | |
| - | |
Reclassification of Convertible Note to Derivative
| |
| 27,087 | | |
| - | |
Stock issued for the Purchase of Film Assets | |
| 500,000 | | |
| - | |
Note Payable Assumed by Third Party | |
| 19,000 | | |
| - | |
Common Stock Issued for Related Party Debts | |
| - | | |
| 195,719 | |
Common Stock Issued for Settlement of Payroll Liability | |
| - | | |
| 86,000 | |
Write Off of Derivative Liability into Additional Paid-In Capital | |
| 1,590,210 | | |
| 358,490 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
FONU2,
INC. and Subsidiary
Notes
to the Consolidated Financial Statements
March
31, 2015
(unaudited)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and
cash flows at March 31, 2015 and for all periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September
30, 2014 audited financial statements. The results of operations for the periods ended March 31, 2015 are not necessarily
indicative of the operating results for the full year.
NOTE
2 - GOING CONCERN
The
Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern. During the three months ended March 31, 2015 the Company realized a net loss of $2,824,765. It used
$492,258 in cash from operating activities and had a working capital deficit of $2,771,773 for the six months ended March 31,
2015. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to
fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to
cease operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan
is to obtain such resources for the Company by obtaining capital from high net worth and institutional investors sufficient to
meet its minimal operating expenses and seeking equity and/or debt financing for specific project financing. However management
cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – CONVERTIBLE NOTES PAYABLE
As
of March 31, 2015 and September 30, 2014, the Company had total of $862,758 and $328,050 in outstanding Convertible Notes Payable
respectively. As of March 31, 2015 and September 30, 2014, the Company had a total of $721,974 and $132,730 of Unamortized Debt
Discount.
| |
| |
| |
March 31, 2015 | | |
September 30 2014 | |
| |
| |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Note Payable Current | |
Note Date | |
Maturity Date | |
Face Value Or O/S Amount | | |
Principle Converted | | |
Forgiveness of debt | | |
Net | | |
Face Value Or O/S Amount | | |
Principle Converted | | |
Ending Face value balance | |
| |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Loan #1 | |
11/6/2013 | |
8/8/2014 | |
| 51,560 | | |
| (51,560 | ) | |
| - | | |
| - | | |
| 128,500 | | |
| (76,940 | ) | |
| 51,560 | |
Loan #2 | |
11/13/2013 | |
11/12/2015 | |
| 94,990 | | |
| (94,990 | ) | |
| - | | |
| - | | |
| 94,990 | | |
| - | | |
| 94,990 | |
Loan #3 | |
1/24/2014 | |
10/28/2014 | |
| 78,500 | | |
| (67,066 | ) | |
| (11,434 | ) | |
| - | | |
| 78,500 | | |
| - | | |
| 78,500 | |
Loan #4 | |
4/11/2014 | |
4/11/2015 | |
| 103,000 | | |
| (103,000 | ) | |
| - | | |
| - | | |
| 103,000 | | |
| - | | |
| 103,000 | |
Loan #5 | |
12/19/2014 | |
12/19/2015 | |
| 26,000 | | |
| - | | |
| - | | |
| 26,000 | | |
| - | | |
| - | | |
| - | |
Loan #6 | |
12/31/2014 | |
12/31/2015 | |
| 20,000 | | |
| (20,000 | ) | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
Loan #7 | |
2/5/2015 | |
2/5/2016 | |
| 100,000 | | |
| - | | |
| - | | |
| 100,000 | | |
| - | | |
| - | | |
| - | |
Loan #8 | |
2/5/2015 | |
2/5/2016 | |
| 450,000 | | |
| (221,300 | ) | |
| - | | |
| 228,700 | | |
| - | | |
| - | | |
| - | |
Loan #9 | |
2/6/2015 | |
2/6/2016 | |
| 25,000 | | |
| (25,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Loan #10 | |
2/17/2015 | |
2/17/2016 | |
| 35,000 | | |
| - | | |
| - | | |
| 35,000 | | |
| - | | |
| - | | |
| - | |
Loan #11 | |
3/9/2015 | |
3/9/2016 | |
| 53,880 | | |
| (43,500 | ) | |
| - | | |
| 10,380 | | |
| - | | |
| - | | |
| - | |
Loan #12 | |
3/9/2015 | |
3/9/2016 | |
| 50,000 | | |
| - | | |
| - | | |
| 50,000 | | |
| - | | |
| - | | |
| - | |
Loan #13 | |
2/19/2015 | |
11/23/2015 | |
| 43,000 | | |
| - | | |
| - | | |
| 43,000 | | |
| - | | |
| - | | |
| - | |
Loan #14 | |
3/10/2015 | |
3/10/2016 | |
| 75,000 | | |
| - | | |
| - | | |
| 75,000 | | |
| - | | |
| - | | |
| - | |
Loan #15 | |
3/12/2015 | |
3/12/2016 | |
| 75,000 | | |
| - | | |
| - | | |
| 75,000 | | |
| - | | |
| - | | |
| - | |
Loan #16 | |
3/24/2015 | |
3/24/2016 | |
| 116,678 | | |
| - | | |
| - | | |
| 116,678 | | |
| - | | |
| - | | |
| - | |
Loan #17 | |
3/24/2015 | |
3/24/2016 | |
| 50,000 | | |
| - | | |
| - | | |
| 50,000 | | |
| - | | |
| - | | |
| - | |
Loan #18 | |
3/27/2017 | |
12/27/2015 | |
| 53,000 | | |
| - | | |
| - | | |
| 53,000 | | |
| - | | |
| - | | |
| - | |
TOTAL | |
| |
| |
| 1,500,608 | | |
| (626,416 | ) | |
| (11,434 | ) | |
| 862,758 | | |
| 404,990 | | |
| (76,940 | ) | |
| 328,050 | |
Loan
#1 Asher Enterprises, Inc.
On November 6, 2013 the Company entered
into a Securities Purchase Agreement with an unrelated third-party entity in connection with a convertible note whereby the Company
borrowed $128,500. The note principal bears interest at a rate of eight percent per annum and will accrue interest at
a rate of 22 percent per annum should the Company default. The note principal and any unpaid accrued interest is due
in full on or before August 8, 2014. The note is convertible at the option of the holder at any point at least 180 days
from the note date at a 42 percent discount to the average of the three lowest closing prices during the ten day period prior to
conversion. During the year September 30, 2014, the holder converted $76,940 of the principal into common stock. The ending
balance at September 30, 2014 was $51,560. During the six months ended March 31, 2015, the lender converted $51,560 in note principal
into common stock. As of March 31, 2015, the remaining principal balance of the note was $0.
Loan
#2 JMJ Financial
On November 13, 2013 the Company entered
into a promissory note with an unrelated third party whereby the Company agreed to borrow a maximum of $300,000. Each
borrowing under the terms of the note, along with specific accrued interest is due two years from the date the specific funds are
received by the Company. All borrowings under the terms of this note are subject to a 10% original issue discount such that the
consideration due back to the lender is equal to cash proceeds actually received plus ten percent of the amount borrowed. Through
September 30, 2014, the Company had borrowed $137,500, with initial debt discount of $12,500 pursuant to this promissory note.
The note is exempt from interest for the 90 days after the note date; after 90 days the unpaid principal balance shall accrue interest
at a rate of 12 percent per annum. The note became convertible into shares of the Company’s common stock on May
12, 2014 at 60 percent of the lowest trade price in the 25 trading days previous to the conversion. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the derivative
instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit limit
to the number of shares to be delivered upon settlement of the above conversion options. During the year ended September
30, 2014 the lender converted $42,510 of the note principal into 24,250 shares of the Company’s common stock. As
of September 30, 2014 the remaining principal balance on this note was $94,990. During the three months ended December 31, 2014
the lender converted $45,042 of note principal into 464,250 shares of the Company’s common stock. As of December 31, 2014
the remaining principal balance of the note was $49,948, with $10,661 in accrued interest. During the three months ended March
31, 2015, the lender converted $49,948 in note principal into 3,428,000 of the Company’s common stock. As of March 31, 2015,
the remaining principal balance of the note was $0.
Loan #3 Asher Enterprises, Inc.
On January 24, 2014 the Company entered into a Securities Purchase Agreement with an unrelated third-party
entity in connection with a convertible note whereby the Company borrowed $78,500. The note principal bears interest
at a rate of eight percent per annum and will accrue interest at a rate of 22 percent per annum should the Company default. The
note principal and any unpaid accrued interest is due in full on or before October 28, 2014. The note is convertible
at the option of the holder at any point at least 180 days from the note date at a 42 percent discount to the average of the three
lowest closing prices during the ten day period prior to conversion. As of September 30, 2014 the full principal balance
$78,500, along with accrued interest of $4,284, remained outstanding. During the three months ended December 31, 2014, the lender
converted $62,235 in note principal into 854,563 shares of common stock. As of December 31, 2014, the remaining principal balance
of the note was $16,365, with $5,240 in accrued interest. During the three months ended March 31, 2015, the lender converted $4,931
in note principal into common stock. The remaining balance of $11,434 was written off by the lender. The Company accounted for
this as gain on forgiveness of debt. As of March 31, 2015, the remaining principal balance of the note was $0.
Loan
#4 Hanover Holdings, LLC
On April 11, 2014 the Company entered
into a convertible promissory note with an unrelated third party, wherein the Company borrowed $103,000. The principal accrues
interest at a rate of eight percent per annum and is due in full on April 11, 2015. The note is convertible at the option
of the holder at any point after the note date at a 40 percent discount to the average of the three lowest closing prices during
the ten day period prior to conversion. The note will accrue interest at a rate of 22 percent per annum should the Company
default. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives
and Hedging” and determined that the derivative instrument should be classified as a liability when the conversion option
became effective after the note date due to there being no explicit limit to the number of shares to be delivered upon settlement
of the above conversion options. As of September 30, 2014 the principal balance on this note remained at $103,000. During
the three months ended December 31, 2014, the lender converted $83,000 in note principal into 816,778 shares of common stock. As
of December 31, 2014 the remaining principal balance on the note was $20,000, with $1,336 in accrued interest. During the three
months ended March 31, 2015, the lender converted $20,000 in note principal into 1,092,242 of the Company’s common stock.
As of March 31, 2015, the remaining principal balance of the note was $0.
Loan
#5 Union Capital, LLC
On
December 19, 2014 the Company entered into a convertible note with an unrelated third party whereby the Company assumed $26,000
of debt. The principal accrues interest at a rate of eight percent per annum and is due in full on December 19, 2015. The
Company did not assume the debt until February 5, 2015 and as such the note was not convertible until this date. The note
is immediately convertible at a 45 percent discount to the lowest closing bid price in the 10 trading days prior to conversion
notice. The note will accrue interest at a rate of 24 percent per annum should the Company default. The note was drawn in
the three months ended March 31, 2015. The Company analyzed the conversion option for derivative accounting consideration under
ASC 815-15 “Derivatives and Hedging” and determined that the derivative instrument should be classified as a liability
once the conversion option becomes effective due to there being no explicit limit to the number of shares to be delivered upon
settlement of the above conversion options. During the period ended March 31, 2015 the lender converted $0 of the note
principal into the Company’s common stock. As of March 31, 2015 the remaining principal balance on this note was
$26,000.
Loan
#6 Dr. Yusuf Hameed
On
December 31, 2014 the Company entered into a Convertible Redeemable Note Agreement with an unrelated third party. Pursuant to the
terms of the note, the Company borrowed $20,000 from the lender, which accrues interest at a rate of eight percent per annum, and
is due on December 31, 2015. The note is convertible 6 months from the date of the agreement at a conversion price of $0.0001 -
The note shall immediately convert upon the earlier of (a) a reverse split being effective or (b) an increase in authorized shares.
Prior to six months from the date of the agreement, the Company has a reverse split which caused the note to become convertible.
On the February 8, 2015, the Company recognized $27,085 as derivative liability and reclassed the convertible note to derivative
as this note is tainted due to the other derivative convertible instruments. During the period ended March 31, 2015 the lender
converted $20,000 of the note principal into the Company’s 500,000 shares of common stock. The Company and lender negotiated
an early settlement on February 14, 2015 on the conversion terms. The Company evaluated the note for debt extinguishment and concluded
that this note does not qualify as it is considered to be a derivative under ASC 815-15. As of March 31, 2015 the remaining
principal balance on this note was $0.
Loan
#7 Coventry Enterprises, LLC
On
February 5, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $100,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on February 5, 2016. The note
is immediately convertible at a 45 percent discount to the lowest closing bid price in the 20 trading days prior to conversion
notice. The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed
the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined
that the derivative instrument should be classified as a liability once the conversion option becomes effective due to there being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. During the
period ended March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As
of March 31, 2015 the remaining principal balance on this note was $100,000.
Loan
#8 Coventry Enterprises, LLC
On
February 5, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company assumed $450,000
of debt The principal accrues interest at a rate of eight percent per annum and is due in full on February 5, 2016. The
note is immediately convertible at a 45 percent discount to the lowest closing bid price in the 20 trading days prior to conversion
notice. The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed
the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined
that the derivative instrument should be classified as a liability once the conversion option becomes effective due to there being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. During the
period ended March 31, 2015 the lender converted $221,300 of the note principal into 12,900,000 of the Company’s common stock. As
of March 31, 2015 the remaining principal balance on this note was $228,700.
Loan
#9 Union Capital, LLC
On
February 6, 2015 the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $25,000
which was used to settle the Olweean demand note (see below). The principal accrues interest at a rate of eight percent per annum
and is due in full on February 6, 2016. The note is immediately convertible at a 45 percent discount to the lowest closing
bid price in the 10 trading days prior to conversion notice. The note will accrue interest at a rate of 24 percent per annum
should the Company default. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15
“Derivatives and Hedging” and determined that the derivative instrument should be classified as a liability once the
conversion option becomes effective due to there being no explicit limit to the number of shares to be delivered upon settlement
of the above conversion options. During the period ended March 31, 2015 the lender converted $25,000 of the note principal
into 1,618,559 of the Company’s common stock. As of March 31, 2015 the remaining principal balance on this note
was $0.
Loan
#10 Magna Securities, LLC
On
February 17, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $35,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on February 17, 2016. The note
is immediately convertible at a 40 percent discount to the lowest trading price in the five trading days prior to conversion notice.
The note will accrue interest at a rate of 22 percent per annum should the Company default. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the
derivative instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit
limit to the number of shares to be delivered upon settlement of the above conversion options. During the period ended
March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As of March 31,
2015 the remaining principal balance on this note was $35,000.
Loan
#11 Union Capital, LLC
On
March 9, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company assumed $53,880 of
debt. The principal accrues interest at a rate of eight percent per annum and is due in full on March 9, 2016. The note
is immediately convertible at a 39 percent discount to the lowest trading price in the 5 trading days prior to conversion notice.
The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the derivative
instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit limit
to the number of shares to be delivered upon settlement of the above conversion options. During the period ended March
31, 2015 the lender converted $43,500 of the note principal into 2,598,808 the Company’s common stock. As of March
31, 2015 the remaining principal balance on this note was $10,380.
Loan
#12 Union Capital, LLC
On
March 9, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $50,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on March 9, 2016. The note is
immediately convertible at a 39 percent discount to the lowest trading price in the 5 trading days prior to conversion notice.
The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the
derivative instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit
limit to the number of shares to be delivered upon settlement of the above conversion options. During the period ended
March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As of March 31,
2015 the remaining principal balance on this note was $50,000.
Loan
#13 Vis Vires Group, Inc.
On
February 19, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $43,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on November 23, 2015. The note
is convertible after 180 days at a 50 percent discount to the average of the three lowest trading prices in the 30 trading days
prior to conversion notice. The note will accrue interest at a rate of 22 percent per annum should the Company default.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging”
and determined that the derivative instrument should be classified as a liability once the conversion option becomes effective
due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. During
the period ended March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As
of March 31, 2015 the remaining principal balance on this note was $43,000.
Loan
#14 Coventry Enterprises, LLC
On
March 10, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $75,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on March 10, 2016. The note
is immediately convertible at a 45 percent discount to the lowest closing bid price in the 20 trading days prior to conversion
notice. The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed
the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined
that the derivative instrument should be classified as a liability once the conversion option becomes effective due to there being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. During the
period ended March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As
of March 31, 2015 the remaining principal balance on this note was $75,000.
Loan
#15 LG Capital Funding, LLC
On
March 12, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $75,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on March 12, 2016. The note
is immediately convertible at a 39 percent discount to the lowest trading price in the 15 trading days prior to conversion notice.
The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the
derivative instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit
limit to the number of shares to be delivered upon settlement of the above conversion options. During the period ended
March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As of March 31,
2015 the remaining principal balance on this note was $75,000.
Loan
#16 Union Capital, LLC
On
March 24, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company assumed $116,678
of debt. The principal accrues interest at a rate of eight percent per annum and is due in full on March 24, 2016. The
note is immediately convertible at a 39 percent discount to the lowest trading price in the five trading days prior to conversion
notice. The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed
the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined
that the derivative instrument should be classified as a liability once the conversion option becomes effective due to there being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. As of March
31, 2015 the remaining principal balance on this note was $116,678.
Loan
#17 Union Capital, LLC
On
March 24, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $50,000.
The principal accrues interest at a rate of eight percent per annum and is due in full on March 24, 2016. The note
is immediately convertible at a 39 percent discount to the lowest trading price in the five trading days prior to conversion notice.
The note will accrue interest at a rate of 24 percent per annum should the Company default. The Company analyzed the conversion
option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the
derivative instrument should be classified as a liability once the conversion option becomes effective due to there being no explicit
limit to the number of shares to be delivered upon settlement of the above conversion options. As of March 31, 2015
the remaining principal balance on this note was $50,000
Loan
#18 Carebourn Capital, LP
On
March 27, 2015, the Company entered into a convertible note with an unrelated third party whereby the Company borrowed $53,000.
The principal accrues interest at a rate of 12 percent per annum and is due in full on December 27, 2015. The note
is convertible after 90 days at a 40 percent discount to the average of the lowest three days trading price in the 10 trading
days prior to conversion date. The note will accrue interest at a rate of 22 percent per annum should the Company default.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging”
and determined that the derivative instrument should be classified as a liability once the conversion option becomes effective
due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. During
the period ended March 31, 2015 the lender converted $0 of the note principal into the Company’s common stock. As
of March 31, 2015 the remaining principal balance on this note was $53,000.
During the period ended March 31, 2015, the Company recorded 1,171,558
new debt discounts and amortized a total $582,314 to interest expense, leaving total unamortized debt discounts of $721,974 as
of March 31, 2015.
NOTE
4 – NOTES PAYABLE
As
of March 31, 2015 and September 30, 2014, the Company had total of $30,000 and $19,000 in outstanding Notes Payable respectively.
Note Payable | |
| |
Maturity | |
March 31, | | |
September 30, | |
Current | |
Note Date | |
Date | |
2015 | | |
2014 | |
| |
| |
| |
$ | | |
$ | |
| |
| |
| |
| | |
| |
Loan #1 | |
5/1/2012 | |
Demand | |
| - | | |
| 19,000 | |
Loan #2 | |
12/22/2014 | |
12/22/2015 | |
| - | | |
| - | |
Loan #3 | |
2/10/2015 | |
9/5/2015 | |
| - | | |
| - | |
Loan #4 | |
01/19/2015 | |
9/23/2015 | |
| 30,000 | | |
| - | |
TOTAL | |
| |
| |
| 30,000 | | |
| 19,000 | |
Loan
#1 Jeffrey Olweean
On
May 1, 2012 the Company entered into a loan agreement with an unrelated third party. The note principal bears interest at a rate
of 10 percent per annum and due on demand. At September 30, 2014 the entire $19,000 principal balance remained outstanding, along
with $3,800 in accrued interest. As of December 31, 2014 accrued interest on the note totaled $4,758. On February 5,, 2015
this note was settled for $25,000. As of March 31, 2015 the remaining principal balance on this note was $0.
Loan
#2 Dr. Yusuf Hameed
On December 22, 2014 the Company entered
into a Convertible Redeemable Note Agreement with an unrelated third party. Pursuant to the terms of the note, the Company borrowed
$50,000 from the lender, which accrues interest at a rate of eight percent per annum, and is due on December 22, 2015. The note
is convertible at the option of the lender at any time after 6 months from the date of the agreement. The note shall immediately
convert upon the earlier of (a) a reverse split being effective or (b) an increase in authorized shares, at the lower of 70 percent
of the thirty-day volume weighted average trading price of the Company’s common stock, or $0.0003 per share (on a pre-reverse
split basis). During the period ended March 31, 2015 the lender converted $50,000 of the note principal into 1,550,000 shares of
the Company’s common stock. The Company and lender negotiated an early settlement on February 14, 2015 of the
conversion terms. The Company fair valued the shares issued using the market price on date of settlement which was $0.046 or $71,300
and recorded a loss on settlement of debt of $21,300. As of March 31, 2015 the remaining principal balance on this note was
$0.
Loan #3 Dr.
Yusuf Hameed
On February 10, 2015 the Company acquired a Convertible Redeemable Note with an unrelated
third party. Pursuant to the terms of the note, the Company borrowed $90,000 from the lender, which accrues interest at a rate
of eight percent per annum, and is due on September 5, 2015. The note is convertible 30 days from the date of the note at price
of the lower of (a) 30 day VWAP for 30 days subsequent to reverse stock split or $0.000175. During the period ended March 31,
2015 the lender converted $90,000 of the note principal into 2,250,000 shares of the Company’s common stock. The Company
and lender negotiated an early settlement on February 14, 2015 of conversion terms. The
Company evaluated the note for debt extinguishment and concluded that this note does not qualify as it is considered to be a derivative
under ASC 815-15. As of March 31, 2015 the remaining principal balance on this note was $0.
Loan
#4 Ultimate Impressions, LLC dba ULT Consulting
On
January 19, 2015, the Company entered into a promissory note with an unrelated third party whereby the Company issued a Note to
a supplier in settlement of outstanding invoices in a reduced amount of borrowed $30,000. The principal accrues interest at a
rate of 0 percent per annum and is due in full on September 23, 2015. During the period ended March 31, 2015 the lender converted
$0 of the note principal into the Company’s common stock. As of March 31, 2015 the remaining principal balance
on this note was $30,000.
NOTE
5 – NOTES PAYABLE - LONG TERM
As
of March 31, 2015 and September 30, 2014, the Company had total of $65,517 and $25,000 in outstanding Notes Payable – Long
Term respectively.
Note Payable | |
| |
Maturity | |
March 31, | | |
September 30, | |
Current | |
Note Date | |
Date | |
2015 | | |
2014 | |
| |
| |
| |
$ | | |
$ | |
| |
| |
| |
| | |
| |
Loan #1 | |
8/26/2014 | |
8/27/2017 | |
| 25,000 | | |
| 25,000 | |
Loan #2 | |
2/25/2015 | |
2/25/2018 | |
| 40,517 | | |
| - | |
TOTAL | |
| |
| |
| 65,517 | | |
| 25,000 | |
Loan #1 Ira Williams- long term convertible
note
On
August 26, 2014 the Company entered into a $25,000 convertible debenture note agreement with an unrelated third party. The
note accrues interest at a rate of 12 percent per annum and is due on August 25, 2017. Pursuant to the terms of the note,
the principal can be converted into shares of the Company’s common stock, at the option of the lender, at any time after
six months and up to one year from the note date at a 20 percent discount to the market price of the shares. The discount
will be 25 percent if converted between one and two years, and will be 30 percent if converted after two years. The maximum
conversion price will be $0.50 per share. As of March 31, 2015, the entire principal balance remained outstanding and
accrued interest on the note totaled $379.
Loan
#2 Robinson Belaustegui Sharp & Low
On
February 17, 2015 the Company entered into a $40,517 promissory note with an unrelated third party. The promissory note
bears no interest per annum. As of March 31, 2015, the entire principal balance remained outstanding and accrued interest on the
promissory note totaled $40,517.
On
April 29, 2015 the Company entered into a $78,000 promissory note with an unrelated third party that replaced the $40,517 promissory
note. The promissory note bears no interest per annum and is due no later than February 25, 2018.
NOTE
6 – RELATED PARTY NOTES PAYABLE
Loan
#1 Robert Lees
On August 5, 2014 the Company borrowed
$18,000 from a former related party in the form of a note payable. The note accrues interest at a rate of 12 percent per
annum, is unsecured, and is due on demand.
As
of March 31, 2015 and September 30, 2014, the Company had total of $18,000 and $18,000 in outstanding Related Party Notes Payable
respectively.
NOTE
7 – FAIR VALUE MEASUREMENTS
As
defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of
similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including
assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those
inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy
gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement)
and lowest priority to unobservable inputs (level 3 measurement).
The
three levels of the fair value hierarchy are as follows:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities
as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency
and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as
exchange-traded derivatives, marketable securities and listed equities. |
Level
2 – Pricing inputs are other than quoted
prices in active markets included in level 1, which are either directly or indirectly
observable as of the reported date.
|
Level
3 – Pricing inputs include significant inputs that are generally less observable
from objective sources. These inputs may be used with internally developed methodologies that result in management’s
best estimate of fair value. |
The
following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that
were accounted for at fair value as March 31, 2015.
September 30, 2014 | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
Recurring Fair Value Measures | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | |
| | |
| | |
| |
LIABILITIES: | |
| | |
| | |
| | |
| |
Derivative liability | |
| -- | | |
| -- | | |
| 247,880 | | |
| 247,880 | |
| |
| | | |
| | | |
| | | |
| | |
March 31, 2015 | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Recurring Fair Value Measures | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
LIABILITIES: | |
| | | |
| | | |
| | | |
| | |
Derivative liability | |
| -- | | |
| -- | | |
| 1,609,539 | | |
| 1,609,539 | |
NOTE
8 – DERIVATIVE INSTRUMENTS
During
2013, the Company issued debt instruments that were convertible into common stock at a 42 percent discount to the average of the
three lowest closing prices during the ten day period prior to conversion. During the year ended September 30, 2014 the Company
issued additional debt instruments under the same terms, as well as additional debt instruments convertible into common stock
at a 40% discount to the lowest trading price in the 25 trading days previous to conversion, 60% discount to the average of the
three lowest closing prices during the ten day period prior to conversion. The conversion options embedded in these instruments
contain no explicit limit to the number of shares to be issued upon settlement and as a result are classified as liabilities under
ASC 815. Additionally, because the number of shares to be issued upon settlement is indeterminate, all other share settle-able
instruments must also be classified as liabilities. A debt discount of $1,171,558 was recorded as a result of these derivative
liabilities, $582,314 of which was amortized into interest expense for the six months ended March 31, 2015.
During
the period ended March 31, 2015, certain notes payable were converted resulting in settlement of the related derivative liabilities.
The Company re-measured the embedded conversion options at fair value on the date of settlement and recorded these amounts
to additional paid-in capital.
The following table summarizes the changes
in the derivative liabilities during the period ended March 31, 2015:
Ending balance as of September 30, 2014 | |
$ | 247,880 | |
Debt discount | |
| 1,171,558 | |
Reclassification of derivative liabilities to additional paid-in capital due to conversion of debt | |
| (1,562,032 | ) |
Loss on change in fair value | |
| 1,752,133 | |
Ending balance as of March 31, 2015 | |
$ | 1,609,539 | |
The
Company uses the Black Scholes Option Pricing Model to value its derivatives based upon the following assumptions: dividend yield
of -0-%, volatility of 294-1,271%, risk free rate of 0.11-0.18% and an expected term of 0.10 to 2.53 years.
NOTE
9 – EQUITY ACTIVITY
Common
Stock
During
the six months ended March 31, 2015, the Company issued and aggregate of 26,960,608 of common stock upon the conversion and partial
conversion of $722,968 in convertible debts and notes payable. In addition, the Company issued an aggregate of 373,500 of common
stock for $18,675 in services rendered, an aggregate of 10,000,000 of common stock for $500,000 for part consideration of the
acquisition of the economic interest in the lease of 1560 acres of property in Effingham, GA, and various intellectual property
rights. The Company issued a further 8,333,333 of common stock for $500,000 in part consideration for the directing services of
Penny Marshall re the motion picture Effa and a second motion picture to be determined. The Company issued a further
166,666,667 of common stock in consideration of part financing the motion picture Effa. The Company also
cancelled 1,816 of common stock.
Preferred
Stock
On
December 7, 2014 the Company authorized the creation of Series B preferred stock. The Series B preferred stock has liquidation
preference, and each share of Series B preferred stock carries voting rights equivalent to that of five hundred shares of common
stock. In addition, the Series B preferred stock is convertible into shares of common stock at the option of the shareholder at
a rate of ten common shares for every share of Series B preferred stock.
On
December 7, 2014 the Company issued 6,250 shares of Series B preferred stock in order to complete the acquisition of Studioplex
City, LLC. The shares were valued at $400.00 per share. The sole asset of Studioplex City, LLC was a two picture deal with the
director Penny Marshall.
These
preferred shares carried super voting rights of 500 per share i.e. 1,250,000,000 votes. At the date of the transaction 659,608,217
(pre-split) common stock was issued, trading at $0.0006. Therefore the Company had a market capitalization of $395,765 and the
Preferred Stock Series B had 65% of voting rights in the Company.
Accordingly,
the value of the film asset has been recorded at $259,062, being 65% of the then market capitalization of the Company".
Reverse
Stock-Split
On
December 22, 2014 the Company authorized a reverse-split of its outstanding common stock on a one-share-for-400-shares basis.
All references to common stock in these financial statements have been retroactively restated so as to account for the effects
of this reverse-split.
NOTE
10 - CAPITAL LEASE
On
February 10, 2015 the Company entered into a Lease Purchase and Assignment Agreement with Moon River Studios, Inc., (“Moon
River”) formerly known as Medient Studios, Inc. (“Medient”) whereby the Company purchased a land lease (“Lease”)
relating to property predominantly in Effingham County, GA, along with various other assets of Moon River, including the name
“Moon River Studios” As consideration for this purchase, the Company agreed to the issuance of ten million shares
of the Company’s common stock, payment for registering the shares, plus the Company’s assumption of $10,000,000 of
Medient liabilities under the terms of the Lease.
The
Company has accounted for the value of the lease as the net present value of $4,996,787 of the capital lease obligation.
The
Lease Agreement was entered on August 21, 2013, with the Effingham County Industrial Development Authority (the “IDA”).
Under the Lease, approximately 1,560 acres of land located primarily within Effingham County, Georgia was leased. The Lease is
effective from August 21, 2013 through July 1, 2033. No interest is payable and no payments are due for the first two years, with
the total rent of $10 million being paid in 18 equal annual installments, commencing February 28, 2016. The Company is obligated
to pay additional rent if it does not achieve the specified goals of $90 million in investment and 527 jobs on or before the end
of year 5 (five). At the end of the Lease, the Company has the option to purchase the Property for $100. The Lease has been accounted
for as a capital lease and the net present value of the minimum lease payments under the Lease is $4,996,787 million as at March
31, 2015.
The
discount rate used in calculating the net present value of the minimum lease payments was The Company’s weighted average
cost of capital of 8.6%.
The
Company incurred approximately $159,575 and $0 of site development costs on the land in the three months ended March 31, 2015
and 2014 respectively.
NOTE
11 – FILM ASSETS
On
February 12, 2015, the Company acquired the worldwide distribution rights for the movie Yellow. Under terms of the agreement,
the Company will receive, in addition to a profit share, a 10% (ten percent) distribution fee, and a 20% (twenty percent) return
on all funds expended associated with the acquisition of the rights, print and advertising, marketing, and other expenses associated
with the release of the movie. As consideration, the Company has committed to provide these costs and fees, along with the assumption
of various costs and liabilities costs associated with the movie. Costs assumed to March 31, 2015 totaled $780,763. The Company
will, from time to time, advance miscellaneous funds on behalf of Moon River Studios’ expenses, and will recoup such funds
from the exploitation of the movie.
Under
an option agreement with the writers of the script for the movie Effa the Company has paid $8,000 for an 18-month option
to finance, produce and exploit the rights in the movie. The Company has the right to extend the option at the end of the initial
18 months for a further 12 months for a further payment of $8,000.
NOTE
12 - SITE DEVELOPMENT COSTS
On
February 10, 2015 the Company entered into a Lease Purchase and Assignment Agreement with Moon River Studios, Inc., (“Moon
River”) formerly known as Medient Studios, Inc. (“Medient”) whereby the Company purchased a land lease (“Lease”)
relating to property predominantly in Effingham County, GA, along with various other assets of Moon River, including the name
“Moon River Studios” As consideration for this purchase, the Company agreed to the issuance of ten million shares
of the Company’s common stock, payment for registering the shares, plus the Company’s assumption of $10,000,000 of
Medient liabilities under the terms of the Lease.
The
Company is developing this property with a view to building a motion picture studio. During the three months ended March 31, 2015
the Company has expended $159,575 on site development costs, including but not limited architects, and civil engineers etc.
NOTE
13 – DISCONTINUED OPERATIONS
On
March 1, 2015, the Company sold ownership of Zaldiva Comics and Collectibles (“Zaldiva”) to Ms. Nicole Leigh, a former
director of the Company, for $10,100. The assets sold consist of Zaldiva.com, Zaldiva.com Comics & Collectibles, Zaldiva
Comics & Collectibles, and all of Zaldiva’s inventory and intellectual property.
As such, all assets, liabilities, revenues
and expenses of the business have been presented as discontinued operations in the consolidated financial statements. A summary
of the assets and liabilities as of March 31, 2015 and September 30, 2014 and revenues and expenses for the three and six months
ended March 31, 2015 and March 31, 2014
| |
March 31, 2015 | | |
September 30, 2014 | |
| |
$ | | |
$ | |
| |
| | |
| |
Assets from Discontinued Operations |
Bank Account | |
| - | | |
| 10,500 | |
Deposits | |
| - | | |
| 2,285 | |
Fixed Assets | |
| - | | |
| 14,157 | |
Inventory | |
| - | | |
| 9,007 | |
Total Assets | |
| - | | |
| 35,949 | |
| |
| | | |
| | |
Liabilities from Discontinued Operations | |
| - | | |
| - | |
Total Liabilities | |
| - | | |
| - | |
| |
For the three months | | |
For the six months | |
| |
ended March 31 | | |
ended March 31 | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Net Revenues | |
| 68,521 | | |
| 68,240 | | |
| 185,806 | | |
| 153,336 | |
Cost of Sales | |
| 38,817 | | |
| 32,957 | | |
| 81,772 | | |
| 65,821 | |
Gross Margin | |
| 29,704 | | |
| 35,283 | | |
| 104,034 | | |
| 87,515 | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Compensation | |
| 21,618 | | |
| - | | |
| 53,971 | | |
| - | |
Depreciation | |
| - | | |
| - | | |
| 1,128 | | |
| - | |
General & Administrative | |
| 20,222 | | |
| - | | |
| 54,107 | | |
| - | |
Total Expenses | |
| 41,840 | | |
| - | | |
| 109,206
| | |
| - | |
Net Income (Loss) from | |
| | | |
| | | |
| | | |
| | |
Discontinued Operations | |
| (12,136 | ) | |
| 35,283 | | |
| (5,172 | ) | |
| 87,515 | |
Loss on disposal | |
| (7,123 | ) | |
| - | | |
| (31,395 | ) | |
| - | |
Total discontinued operations | |
| (19,259 | ) | |
| 35,283 | | |
| (36,567 | ) | |
| 87,515 | |
The
Company was forgiven a $10,000 debt to Ms. Leigh as proceeds from the sale of Zaldiva.
As
at December 31, 2014, the Company consolidated $41,395 of net assets of Zaldiva. This was increased to $58,703 from trading profits
in the three months to December 31, 2014 of $17,308. Trading losses of $12,136 incurred during the two months ended March 1, 2015
reduce the write off to $46,567. The Company received $10,000 as proceeds from the sale establishing a Loss on Zaldiva of $36,567
for the six months ended March 31, 2015.
NOTE
14 – MAKE WHOLE PROVISION LIABILITY
Pursuant to the agreement entered between the Company and Nutmeg Productions,
Inc. (“Nutmeg”) for the directing services of Penny Marshall, the Company has guaranteed that the value of the number
of shares of stock so issued shall at all times be equal to the sum of $425,000. Such Guarantee shall be in place for a period
of six (6) months from the date of the issuing of the stock (February 18, 2015) (said date of availability for sale is termed
“Sale Date”), whereupon Nutmeg is able thereafter to sell the stock. Should the net proceeds of the stock as at Sale
Date be less than US$425,000 (“Shortfall”) the Company shall be liable to pay to Nutmeg any Shortfall by either:
a)
Paying Nutmeg the difference, or
b)
Issuing further stock (“Further Stock”) to Nutmeg. Further Stock shall be issued as tacked stock to enable its immediate
sale.
Pursuant
to the agreement entered between the Company and Nutmeg Productions, Inc. for the directing services of Penny Marshall, the Company
has guaranteed that the value of the number of shares of stock issued to Michal Mann (“Mann”) as Ms. Marshall’s
manager, that shall at all times be equal to the sum of $75,000. Such Guarantee shall be in place for a period of six (6) months
from the date of the issuing of the stock (February 18, 2015) (said date of availability for sale is termed “Sale Date”),
whereupon Mann is able thereafter to sell the stock. Should the net proceeds of the stock as at Sale Date be less than US$75,000
(“Shortfall”) the Company shall be liable to pay to Mann any Shortfall by either:
a)
Paying Mann the difference, or
b)
Issuing further stock (“Further Stock”) to Mann. Further Stock shall be issued as tacked stock to enable its immediate
sale.
As
at March 31, 2015, the amount of the Shortfall was $250,000, which has been accounted for as Make Whole Provision Liability.
NOTE
15 – CONTINGENT LIABILITIES
The
Company has guaranteed a loan to Moon River Studios in relation to the movie Yellow. The loan is intended to be repaid
by Moon River Studios, Inc. from the proceeds derived from the exploitation of the movie. As at March 31, 2015, the amount outstanding
was $328,860 and accrues interest at 12% per annum.
The
Company has also guaranteed other costs in relation to the movie Yellow and estimates these to total approximately $540,000
NOTE
16– EAGLE PRODUCTIONS
On February 27, 2015, the Company entered
into a Rights Acquisition and Investment Agreement with Eagle Productions, LLC (“Eagle”) with a view toward the Company
investing in, co-producing and exploiting the motion picture currently titled Effa to be produced by Eagle. Under this agreement,
the Company will acquire the worldwide distribution rights and will invest in the movie. The Company will be the sole and
exclusive beneficiary of the worldwide exploitation rights of the picture for all purposes, in perpetuity. The Company will
advance a portion of the budget of the picture, consisting of 166,666,667 in restricted common. The Company is in the process of
filing a Registration statement for these shares.
While Eagle was formed by the Company’s Chairman, Mr. Shapiro, under the
terms of the Rights Acquisition Agreement, Mr. Shapiro has assigned 99% of the distribution revenues to the benefit of the
Company. Film producer Wendi Laski has been appointed as managing director of Eagle.
As
per the Rights Acquisition Agreement Eagle has pledged its shares to the Board of Directors of the Company. If the Board of Directors
cannot reach a majority, the chairman of the Board of Directors of the Company shall have the casting vote.
Given
that Eagle and the Company share common control, the consideration has been accounted for through Additional Paid
In Capital.
NOTE 17 – CORRECTION OF PRIOR
QUARTER INFORMATION
During the quarter ended March 31, 2015 the
Company identified an error in the December 31, 2014 previous period which included a film asset in the amount of $2,500,000.
The asset was acquired as part of the
acquisition by the Company of Studioplex City, LLC on December 7, 2014 where under the Company issued 6,250 shares of Series B
preferred stock in order to complete the acquisition. The shares were valued at $400.00 per share. The sole asset of Studioplex
City, LLC was a two picture deal with the director Penny Marshall. At the time of the acquisition the Company had a market valuation
of $359,765. Upon closing of the transaction the Series B preferred stock had 65% voting control of the Company. Accordingly the
Company, during the quarter ended March 31, has recognized a correction of the value of the film assert to 65% of the value of
the Company i.e. $259,062. Additional Paid In Capital has similarly been reduced by $2,240,938 being the amount of the write down.
In
accordance with the SEC’s Staff Accounting Bulletin Nos. 99 and 108 (SAB 99 and SAB 108), The Company evaluated this error
and, based on an analysis of quantitative and qualitative factors, determined that the error was immaterial to the prior reporting
period affected. However, if the adjustments to correct the cumulative effect of the above error had been recorded, the Company
believes the impact would have been significant and would impact comparisons to prior periods. Therefore, as permitted by SAB
108, the Company corrected, in the current filing, previously reported results for December 31, 2014 financial statements.
NOTE 18 – SUBSEQUENT EVENTS
On
April 9, 2015 the Company issued 1,250,000 shares of common stock to Alex Warner in exchange for acquiring entertainment and potential
consulting services. As at the date of issue the stock so issued had a value of $50,000.
On
April 9, 2015, the Company issued to Union Enterprises, Inc. (“Union”), an aggregate total of 762,629 post-split shares
of common stock in consideration of Union’s partial conversion of the Company’s outstanding Eight Percent (8%) Convertible
Note dated March 09, 2015 in the original principal amount of $53,879. The total principal converted during the period
was $11,451.
On
April 14, 2015, the Company issued to Coventry Enterprises, LLC. (“Coventry”), an aggregate total of 8,000,000 post-split
shares of common stock in consideration of Coventry’s partial conversion of the Company’s outstanding Eight Percent
(8%) Convertible Note dated February 05, 2015 in the original principal amount of $450,000. The total principal converted
during the period was $100,800.
On
April 15, 2015, the Company issued to JMJ Financial (“JMJ”), an aggregate total of 1,529,169 post-split shares of
common stock in consideration of JMJ’s partial conversions of the Company’s outstanding $300,000 Promissory Note dated
November 13, 2013, as amended. The total principal converted during the period was $22,937.54.
On April 17, 2015, The Company acquired
100% of the share capital of Studioplex, City Rentals, LLC (“SCR”). The shares were purchased from Jake Shapiro for
a purchase price of $100. As at the date of the acquisition of the shares, SCR had not generated revenues. SCR, on March 26, 2015,
had entered a Purchase and Sale Agreement with Applebox Productions, Inc. under which it is to purchase various film equipment,
intended for rental, for $1,000,000, with the seller providing financing for $700,000 of the purchase price. As at the date of
this filing the terms and conditions for closing the transaction had not been met.
On
April 29, 2015, the Company issued to Coventry Enterprises, LLC. (“Coventry”), an aggregate total of 8,000,000 post-split
shares of common stock in consideration of Coventry’s partial conversion of the Company’s outstanding Eight Percent
(8%) Convertible Note dated February 05, 2015 in the original principal amount of $450,000. The total principal converted
during the period was $80,000.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In
addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide
oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject
to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The forward-looking statements are not historical
facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs
and assumptions, and include, but are not limited to, statements under the headings “Management's Discussion and Analysis
of Financial Condition and Results of Operations” and Outlook. Words such as “anticipate,” “believe,”
“estimate,” “expects,” “intend,” “plan,” “will” and variations of
these words and similar expressions identify forward-looking statements. These statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and
could cause actual results to differ materially (both favorable and unfavorably) from those expressed or forecasted in the forward-looking
statements. These risks and uncertainties include, but are not limited to, those described in “Risk Factors” and elsewhere
in this report, and those described from time to time in our past and future reports filed with the Securities and Exchange Commission,
including in our Annual Report on Form 10-K for the year ended September 30, 2014. Forward-looking statements that were believed
to be true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to revise or publicly release
the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements.
Overview
FONU2
Inc. is a film studio, production and social commerce company actively developing a 1,560 acre film studio
complex (“Studioplex”) in Effingham County, Georgia. Pre-construction and engineering has begun on the site with the
initial warehouses and sound stages following. In addition to building the Film Studio, the Company is in negotiations to
purchase various film equipment packages. Both the facility space and the equipment will be used by the Company for its
own productions and made available for rental to third parties. In addition, the Company acquired certain intellectual property
rights, including the name “Moon River Studios.”
The
Company has also acquired the worldwide distribution rights to Nick Cassavetes film, Yellow. The Company has also
acquired a two picture directing contract with Penny Marshall, the option on the screenplay Effa and the worldwide distribution
rights for Eagle Productions. The Company’s social media division has invested in the development of a precision sales
and marketing platform that integrates into the social media networks.
The
Company still believes that its Social Commerce website offers potential for future income. However, this application requires
significant further investment to commercialize this operation. The Company is reviewing a number of potential synergistic acquisitions
that could benefit from the social marketing platform.
Having
acquired Studioplex City, LLC (“Studioplex City”), the worldwide distribution rights to Yellow, and the Lease
to the 1,560 acre property in Effingham County, Georgia (see “Recent Developments” below) the Company has established
a film division to build and operate a large scale full service movie studio and produce major motion pictures. For its first
in house project the Company has hired Penny Marshall to direct and Wendy Laski to co-produce the movie project.
Recent
Developments
On
February 10, 2015, the Company acquired the lease of a 1,560 acre property located in Effingham County, Georgia from Moon River.
The purchase price was the assumption of $10,000,000 in debt and 10,000,000 shares of FONU2 common stock. Terms of the purchase
agreement require that the FONU2 shares be registered and distributed to all Moon River shareholders as of record date February
10, 2015. In addition to the lease, the Company has acquired certain intellectual property and trademarks associated with the
project. The property has an appraised value of $22,100,000. Included under terms of the original lease, Memorandum of Understanding
and supplemental agreement (i) the Company is responsible for an agreed amount of job creation and capital investment in the property,
(ii) All property taxes for the property have been waived for the term of the lease, (iii) the property may be purchased at any
time with no prepayment penalties, (iv) at the end of the lease, the property may be purchased for $100. FONU2 has assumed the
$10,000,000 note secured by the property. The note has an interest rate of zero percent with a 20-year term.
On
February 12, 2015, the Company acquired the worldwide distribution rights for the movie Yellow. The movie is written and
directed by Nick Cassavetes (The Notebook, The Other Woman…), and stars Heather Wahlquist (Alphadog, The Notebook…),
Sienna Miller (American Sniper, Foxcatcher…), Melanie Griffith (Working Girl, Bonfire of the Vanities…),
Ray Liotta (Goodfellas, Terminator 2…) and others.
Under
terms of the agreement, the Company will receive, in addition to a profit share, a 10% (ten percent) distribution fee, and a 20%
(twenty percent) return on all funds expended associated with the acquisition of the rights, print and advertising, marketing,
and other expenses associated with the release of the movie. As consideration, the Company has committed to provide these costs
and fees, along with the assumption of approximately $540,000 of costs associated with the movie.
On
February 15, 2015, the Company issued 4,300,000 common shares to Dr. Yusuf Hameed upon his conversion of his three
outstanding convertible notes. These notes consist of a $90,000 convertible note with an 8% per annum interest dated 9/5/2014,
a $50,000 convertible note with an 8% per annum interest rate dated 12/22/2014, and a $20,000 convertible note with an 8% per
annum interest rate dated 12/31/2014. These notes were settled at a conversion price of $0.04 per share, resulting in the
issuance of 4,000,000 common shares. An additional 300,000 shares were issued as a negotiated settlement for the interest
due on the notes.
These
shares are exempt under Section 4(a)(2) of the Securities Act. Dr. Hameed is a sophisticated investor, has access to the
type of information normally provided in a prospectus for a registered securities offering, and has agreed not to resell or distribute
the securities to the public.
Dr.
Hameed has agreed a 12 month voluntary lockup provision on these shares.
On
February 18, 2015, the Company issued 7,083,333 common shares to Penny Marshall in payment of the equity portion of her director’s
fee re the movie Effa, which totaled $425,000. The shares were issued at a price of $0.06 per share.
On
February 18, 2015, the Company issued 1,250,000 common shares to Michael Mann in payment of the equity portion of
his management fee re the movie Effa, which totaled $75,000. The shares were issued at a price of $0.06 per share.
These
shares are exempt under Section 4(a)(2) of the Securities Act.
On February 27, 2015, the Company entered
into a Rights Acquisition and Investment Agreement with Eagle Productions, LLC with to enable the Company to invest in, co-produce
and exploit the motion picture currently titled Effa to be produced by Eagle Productions. Under this agreement, the
Company has acquired the worldwide distribution rights and the right to invest in the movie. The Company is the sole and
exclusive beneficiary of the worldwide exploitation rights of the picture for all purposes, in perpetuity. The Company intends
to advance a portion of the budget of the picture, consisting of 166,666,667 in restricted common shares. The Company is in the
process of filing a Registration statement for these shares.
Once
the Company has recouped its advance in full, the Company and Eagle Productions will share in the net profits of the movie, with
the Company to receive 99% and Eagle Productions to receive 1%. All fees and costs of the Company are to be included in
and payable from the budget of the picture. The Company is not liable for any loss should the transaction not proceed for
any reason. However, the Company will bear the loss (if any) arising from the initial payment of $75,000 in regards to the
director services of Penny Marshall, the issuance of stock in the value of $425,000 for the services of the director, the initial
payment of $75,000 to Wendi Laski under the terms of her producing agreement, and the initial payment of $8,000 made to the writers
of the screenplay.
On February 27, 2015, the Company issued
166,666,667 common shares to Eagle Productions to acquire the worldwide distribution rights for the film Effa, as described
above. These shares are exempt under Section 4(a)(2) of the Securities Act. Eagle Productions is knowledgeable enough
to be considered a sophisticated investor, has access to the type of information normally provided in a prospectus
for a registered securities offering, and has agreed not to resell or distribute the securities to the public until the registration
statement has become effective.
On March 1, 2015, the Company sold ownership
of Zaldiva Comics and Collectibles (“Zaldiva”) to Ms. Nicole Leigh, a former director of the Company, for $10,000.
The assets sold consist of Zaldiva.com, Zaldiva.com Comics & Collectibles, Zaldiva Comics & Collectibles, and all
of Zaldiva’s inventory and intellectual property. The company was deemed by Management to no longer be a strategic
fit for the Company.
On
March 1, 2015, Nicole Leigh resigned as a director.
On
March 1, 2015, the Company elected Joseph Giamichael as a director, and he serves as the chairman of the audit committee.
Mr. Giamichael was formerly a director of Medient Studios, Inc. (“Medient”) (now Moon River Studios, Inc.).
Other than his previous experience in serving as a director of Medient, there are no material transactions between Mr. Giamichael
and any related party, nor any material plans, contracts, or arrangements to which Mr. Giamichael is a party.
On
March 1, 2015, the Company appointed Graham Bradstreet, age 63, as Chief Financial Officer. His position will last for one
year, and is renewable at the yearly shareholder meeting. There is no family relationship between Mr. Bradstreet and any
other member of the Company, nor any material plans, contracts, or arrangements to which Mr. Bradstreet is a party.
From
2000 through today, Mr. Bradstreet has worked as a consultant to various entities and was the executive producer for the
movies Carmen and 360. From August 2012 through February 27, 2015, he worked as a financial consultant
for Medient. From 1997 through 2001, he was the founder and director of ICE Media Limited, which managed
insurance-backed film financing. Mr. Bradstreet qualified as a chartered accountant in New Zealand in 1974.
On
March 1, 2015, the Company approved the change of its offices to 135 Goshen Rd. Ext., Suite 205, Rincon, GA 31326.
On
March 10, 2015 the Company announced that Ms. Alice P. Neuhauser had been appointed as Chief Operating Officer of the Company.
Ms. Neuhauser has a broad range of operational entertainment experience in financial management, establishment and oversight of
corporate, legal and accounting procedures, and business development and strategic planning. Ms. Neuhauser's career includes financing
some of the largest independently financed pictures including Terminator 2 (starring Arnold Schwarzenegger) and Cliffhanger
(starring Sylvester Stallone). Ms. Neuhauser also managed two $100 million revolving film production credit facilities with
two separate syndicates of banks, which helped finance such movies as Basic Instinct (starring Michael Douglas and Sharon
Stone) and Total Recall (starring Arnold Schwarzenegger and Sharon Stone). Ms. Neuhauser developed a $100 million motion
picture and television production facility from concept through 100% utilization. This 22-1/2 acre studio lot includes 14 state-of-the-art
sound states, eight production buildings, a commissary, a four-story office building, and a parking garage.
Ms.
Neuhauser is an honors graduate of Harvard College earned her MBA from the Anderson School of Management at UCLA.
On
March 31, 2015 the Company announced that it had signed definitive agreements to acquire the assets of Applebox Productions. The
acquisition is structured as an asset purchase consisting of lights, cameras, grip equipment, electrics, production vehicles,
etc. The purchase price of One Million Dollars ($1,000,000) is being financed by a combination of traditional equipment loans
and seller financing. The seller-financing note is both corporately guaranteed and personally guaranteed by Mr. Jake Shapiro,
Chairman of the Board of the Company. Closing is expected to take place by end of May, 2015.
Mr.
Jake Shapiro, Mr. Graham Bradstreet and Ms. Alice Neuhauser, as officers and/or Directors of the Company, each receive annual
compensation of $90,000.
Mr.
Roger Miguel, as an officer of the Company, receives annual compensation of $48,000.
On
March 6, 2015 the Company entered a twelve-month lease agreement for a property in Savannah, GA at a monthly rental of $3,250.
The property is to provide accommodation for officers and Directors of the Company, film producers, film directors, screenwriters,
movie production artists and crew, and other executives when visiting the Company in Georgia.
Results
of Operations
Three
months ended March 31, 2015 compared to the three months ended March 31, 2014
For the three months ended March 31,
2015, we did not earn any revenues. We paid depreciation expenses of $728 and product development expenses of $30,000 and compensation
of $9,699. We paid professional fees of $278,094 and general and administrative expenses of $172,436. We paid interest expenses
of $542,376, had a gain on the settlement of debt of $11,434, had a loss on extinguishment of debt of $21,300 and had a loss on
derivative liability of $1,512,307. We made a loss on make whole provision of $250,000. As a result, we had net loss from continuing
operations of $2,805,506. We incurred a loss from discontinued operations of $19,259. As a result we had a net loss of $2,824,765
for the three months ended March 31, 2015.
Comparatively,
for the three months ended March 31, 2014, we did not earn any revenues. We paid depreciation expenses of $1,104, professional
fees of $109,253, and general and administrative expenses of $200,893. We had a gain on interest of $14,641, and a gain on derivative
liability of $9,650. As a result, we had a net loss from continuing operations of $335,541 for the three months ended March 31,
2014. We had a profit from discontinued operations of $35,283. As a result we made a net loss of $300,258. The increase in net
loss between the three months ended March 31, 2015 and 2014 is primarily due to increased professional fees, increased interest
expense, increased make whole provision and the increased loss on derivative liability.
Six
months ended March 31, 2015 compared to the six months ended March 31, 2014
For
the six months ended March 31, 2015, we did not earn any revenues. We paid depreciation expenses of $728, product development
expenses of $34,124, compensation of $9,699, professional fees of $337,311, and general and administrative expenses of $180,390.
We paid interest expenses of $646,991, had and a gain on the settlement of debt of $13,524, had a loss on extinguishment of debt
of $21,300, and a loss on derivative liability of $1,752,133. We made a loss on make whole provision of $250,000. As a result,
we had net loss from continuing operations of $3,219,152. We incurred a loss from discontinued operations of $36,567. As a result
we made a net loss of $3,255,719 for the six months ended March 31, 2015.
Comparatively,
for the six months ended March 31, 2014, we did not earn any revenues. We recorded depreciation expense of $2,232 and $217,637
on professional fees. We incurred general and administrative expenses of $502,411. We had a gain on interest of $127,264, a loss
on the settlement of debt of $5,719 and a gain on derivative liability of $664,185. As a result, we had a net loss from continuing
operations of $179,640 for the six months ended March 31, 2014. We had a profit from discontinued operations of $87,515. As a
result we made a net loss of $92,125. The increase in net loss between the six months ended March 31, 2015 and 2014 is primarily
due to increased professional fees, increased interest expense, increased make whole provision and the increased loss on derivative
liability, partially offset by a decrease in general and administrative expenses.
Capital
Resources and Liquidity
The
Company currently finances its operations through investment capital from a number of accredited investors. The primary use of
the funds is funding the Company’s operations. Over the next twelve months, the Company’s cash requirement for operations
is expected to be in excess of $7,000,000. This requirement is expected to be funded by institutional investor capital. The Company
has had a number of high level discussions for these financing needs, however, there can be no assurance that we will be able
to raise capital, if at all, upon terms acceptable to the Company. The Company currently has no written agreements, arrangements
or understandings with respect to obtaining the necessary capital and there can be no assurance that the Company will be able
to raise the required funds.
The
Company’s current and future sources of capital are from investors, along with the distribution fees earned from the film
Yellow. If the Company was unsuccessful at raising additional capital this could lead to the Company’s termination
of operations.
We
currently have no firm commitments for capital expenditures within the next year.
For
the six months ended March 31, 2015, we had a net loss of 3,255,719. We had the following adjustments to reconcile loss from cash
flows from operating activities: an increase of $728 due to depreciation, an increase of $582,314 due to the amortization of debt
discount, and an increase of $1,752,133 due to loss on derivative liability. We had a decrease due to the make whole provision
of $250,000 and a gain on settlement of debt and interest of $13,524. We had stock based compensation of $18,675, a loss on settlement
of debt of $21,300 and an original discount of $3,000.
We
had the following changes in operating assets and liabilities: an increase of $9,007 due to inventory, a decrease of $762 in accrued
expenses an increase of $25,676 due to prepaid expenses, and an increase of $114,914 due to account payable and accrued liabilities.
As a result, we had net cash used in operating activities of $492,258 for the six months ended March 31, 2015.
For
the six months ended March 31, 2014, we had a net loss of $92,125. We had the following adjustments to reconcile loss from cash
flows from operating activities: an increase of $2,232 due to depreciation, an increase of $97,298 due to the amortization of
debt discount, a decrease of $664,185 due to gain on derivative liability, a decrease of $5,917 due to loss on default note payable,
and an increase of $24,600 due to stock based compensation. We had the following changes in operating assets and liabilities:
an increase of $124,951 due to prepaid expenses and an increase of $8,491 due to accounts payable and accrued liabilities. As
a result, we had net cash used in operating activities of $504,457 for the six months ended March 31, 2014.
For the six months
ended March 31, 2015, we purchased $158,502 of property and equipment. As a result, we had net cash used in investing activities
of $158, 502.
For
the six months ended March 31, 2014, we paid $4,919 for the purchase of property and equipment. As a result, we had net cash used
in investing activities of $4,919 for the period.
For
the six months ended March 31, 2015, we received $30,000 as proceeds from notes payable. We received $40,517 as proceeds from
long term notes payable and $574,000 as net proceeds from convertible notes. As a result, we had net cash provided by financing
activities of $644,517 for the six months ended March 31, 2015.
For
the six months ended March 31, 2014, we spent $53,000 on notes payable. We received $313,500 as net proceeds from convertible
notes, $90,000 from common stock issued in exercise of options, and $130,000 from common and preferred stock issued for cash.
As a result, we had net cash provided by financing activities of $480,500 for the six months ended March 31, 2014.
Off
- Balance Sheet Arrangements
The
Company had no material off-balance sheet arrangements as of March 31, 2015 or September 30, 2014.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable for smaller reporting companies.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures:
Based
on Our evaluation as of the end of the period covered by this Form 10-Q, Our principal executive officer and Our principal financial
officer concluded that Our disclosure controls and procedures as of the end of the period covered by this Form 10-Q were not effective
such that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated
to Our management, including Our principal executive officer and Our principal financial officer, as appropriate to allow timely
decisions regarding disclosure. This material deficiency is due to a lack of adequate internal controls and the lack of an audit
committee.
Management’s
Annual Report on Internal Control over Financial Reporting:
The
Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes of accounting principles generally accepted in the United States.
The
Company’s management, with the participation of the principal executive officer and the principal financial officer, evaluated
the effectiveness of the Company’s internal control over financial reporting as of March 31, 2015. In making this
assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control – Integrated Framework. Based on this evaluation, Our management,
with the participation of the principal executive officer and principal financial officer, concluded that, as of March 31, 2015,
Our internal control over financial reporting was not effective, due primarily to lack of adequate internal controls and the lack
of an audit committee. The most significant material weaknesses that led management to this conclusion are the lack of segregation
of duties, and failure in the operation of controls over stock based compensation and derivative liabilities.
This
Form 10-Q does not include an attestation report of the Company’s registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm pursuant to rules of the Commission that permit the Company to provide only management’s report in this
Form 10-Q
Evaluation
of Changes in Internal Control over Financial Reporting:
There
have been no changes in internal control over financial reporting during the second quarter of the fiscal year covered by this
Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control
over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
1A. RISK FACTORS
Not
applicable for smaller reporting companies.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except
as indicated below, during the quarterly period ended March 31, 2015, we have not issued any unregistered securities that have
not already been disclosed in a Current Report on Form 8-K.
During
the three months ended March 31, 2015, the Company issued to Asher Enterprises, Inc., a Delaware corporation (“Asher”),
an aggregate total of 205,458 shares of common stock (in consideration of Asher’s multiple conversions and partial conversion
of the Company’s outstanding Convertible Notes. The total principal converted during the period was $49,318.
These shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1) of the Securities Act of 1933,
as amended, and Rule 144 of the Securities and Exchange Commission. Asher has no remaining debt with the Company.
During the three months ended March
31, 2015, the Company issued to JMJ Financial (“JMJ”), an aggregate total of 3,590,000 post-split shares of common
stock in consideration of JMJ’s partial conversions of the Company’s outstanding $300,000 Promissory Note dated November
13, 2013, as amended and $40,000 Eight Percent (8%) Convertible Note dated February 10, 2014. The total principal converted
during the period was $94,990. These shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1)
of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
During the three months ended March
31, 2015, the Company issued to Magna Equities II, LLC (“Magna”), an aggregate total of 1,092,242 post-split shares
of common stock in consideration of Magna’s partial conversion of the Company’s outstanding Eight Percent (8%) Convertible
Note dated April 11, 2014 (initially entered into between the Company and Hanover House), in the original principal amount of $103,000. The
total principal converted during the period was $20,000. These shares were issued in reliance on the exemption from registration
provided by Rule 4(a)(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
During the three months ended March 31, 2015, the Company issued to Union Enterprises, Inc. (“Union”),
an aggregate total of 4,217,367 post-split shares of common stock in consideration of Union’s partial conversion of the Company’s
outstanding Eight Percent (8%) Convertible Notes dated February 5, 2015 and March 9, 2015 in the original principal amount of $25,000
and $53,879 respectively. The total principal converted during the period was $67,660. These shares were issued in reliance
on the exemption from registration provided by Rule 4(a)(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities
and Exchange Commission.
During
the three months ended March 31, 2015, the Company issued to Coventry Enterprises, LLC. (“Coventry”), an aggregate
total of 12,900,000 post-split shares of common stock in consideration of Coventry’s partial conversion of the Company’s
outstanding Eight Percent (8%) Convertible Note dated February 5, 2015 in the original principal amount of $450,000. The
total principal converted during the period was $221,300. These shares were issued in reliance on the exemption from registration
provided by Rule 4(a)(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
During
the three months ended March 31, 2015, the Company issued to Dr. Yusuf Hameed (“Hameed”), an aggregate total of 4,300,000
post-split shares of common stock in consideration of Hameed’s conversion of the Company’s outstanding Eight Percent
(8%) Convertible Notes dated December 22, 2014 (for $50,000), December 31, 2014 (for $20,000) and February 10, 2015 (for $90,000)
in the original principal amount totaling $160,000. The total principal converted during the period was $160,000. These
shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1) of the Securities Act of 1933, as amended,
and Rule 144 of the Securities and Exchange Commission.
Post
March 31, 2015
On
April 9, 2015, the Company issued to Union Enterprises, Inc. (“Union”), an aggregate total of 762,629 post-split shares
of common stock in consideration of Union’s partial conversion of the Company’s outstanding Eight Percent (8%) Convertible
Note dated March 9, 2015 in the original principal amount of $53,879. The total principal converted during the period
was $11,451. These shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1) of the Securities
Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
On
April 14, 2015, the Company issued to Coventry Enterprises, LLC. (“Coventry”), an aggregate total of 8,000,000 post-split
shares of common stock in consideration of Coventry’s partial conversion of the Company’s outstanding Eight Percent
(8%) Convertible Note dated February 05, 2015 in the original principal amount of $450,000. The total principal converted
during the period was $100,800. These shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1)
of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
On
April 15, 2015, the Company issued to JMJ Financial (“JMJ”), an aggregate total of 1,529,169 post-split shares of
common stock in consideration of JMJ’s partial conversions of the Company’s outstanding $300,000 Promissory Note dated
November 13, 2013, as amended. The total principal converted during the period was $22,937.54. These shares were issued
in reliance on the exemption from registration provided by Rule 4(a)(1) of the Securities Act of 1933, as amended, and Rule 144
of the Securities and Exchange Commission.
On
April 29, 2015, the Company issued to Coventry Enterprises, LLC. (“Coventry”), an aggregate total of 8,000,000 post-split
shares of common stock in consideration of Coventry’s partial conversion of the Company’s outstanding Eight Percent
(8%) Convertible Note dated February 05, 2015 in the original principal amount of $450,000. The total principal converted
during the period was $80,000. These shares were issued in reliance on the exemption from registration provided by Rule 4(a)(1)
of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.
During
the three months ended March 31, 2015, on the dates indicated below, the Company issued the following “unregistered”
and “restricted” shares as indicated (all share figures are post-split).
Name | |
No. of Shares | | |
Issuance Date | |
Consideration |
| |
| | | |
| |
|
Jeff Olweean | |
| 73,500 | | |
2-12-15 | |
(1) |
Roger Miguel | |
| 300,000 | | |
2-12-15 | |
(2) |
Moon River Studios, Inc. | |
| 10,000,000 | | |
2-12-15 | |
(3) |
Cede & Co | |
| 250 | | |
2-13-15 | |
(4) |
Nutmeg Productions, Inc. | |
| 7,083,333 | | |
2-18-15 | |
(5) |
Michael Mann | |
| 1,250,000 | | |
2-18-15 | |
(6) |
Eagle Productions, LLC | |
| 166,666,667 | | |
2-27-15 | |
(7) |
| (1) | These
shares were issued in consideration of services related to the Company’s acquisition
of Studioplex City, LLC. |
| (2) | These
shares were issued as consideration for management services. |
| (3) | These
shares were issued as part consideration for the acquisition of the economic interest
in the lease of 1560 acres of property in Effingham, GA, and various intellectual property
rights |
| (4) | These
shares were issued in consideration for general expenses. |
| (5) | These
shares were issued in part consideration for the directing services of Penny Marshall
re the motion picture Effa and a second motion picture yet to be determined. |
| (6) | These
shares were issued in part consideration for management fees re Penny Marshall directing
the motion picture Effa. |
| (7) | These
share were issued in consideration of part financing the motion picture Effa. |
Subsequent
to the three months ended March 31, 2015, on the dates indicated below, the Company issued the following “unregistered”
and “restricted” shares as indicated (all share figures are post-split).
Alex
Warner |
1,250,000 |
4-9-15 |
(8) |
NFC Corp |
1,000,000
|
5-11-15 |
(9) |
Steven Bahlmann |
458,716
|
6-01-15 |
(10) |
|
(8) |
These shares were issued in exchange
for acquiring entertainment and potential consulting services. |
|
(9) |
These shares were issued for consulting services performed. |
|
(10) |
These shares were issued in settlement of a $10,000 debt for services performed. |
These
shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. MINE SAFETY DISCLOSURES
Not
Applicable
ITEM
5. OTHER INFORMATION
During
the quarterly period ended March 31, 2015, there were no material changes to the procedures by which security holders may recommend
nominees to the Company’s Board of Directors.
The
Company is delinquent in meeting its payroll tax obligations and is working to correct this as soon as possible.
ITEM
6. EXHIBITS
Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
101.INS** |
XBRL Instance Document |
|
101.SCH** |
XBRL Taxonomy Extension Schema Document |
|
101.CAL** |
XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF**. |
XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB** |
XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE** |
XBRL Taxonomy Extension Presentation Linkbase Document |
*
Filed herewith
**XBRL
(Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated:
June 2, 2015
FONU2,
Inc.
/s/
Roger Miguel |
|
June
2, 2015 |
|
Roger
Miguel |
|
Chief
Executive Officer |
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
/s/
Roger Miguel |
|
June
2, 2015 |
|
Roger
Miguel |
|
Chief
Executive Officer |
|
/s/
Graham Bradstreet |
|
June
2, 2015 |
|
Graham
Bradstreet |
|
Chief
Financial Office |
|
31
Exhibit 31.1
CERTIFICATION
I, Roger Miguel, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of FONU2 Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a. Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures, to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by
others within those entities, particularly during the period in which this report is being prepared;
b. Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d. Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated:
June 2, 2015
FONU2,
Inc.
/s/
Roger Miguel |
|
June
2, 2015 |
|
Roger
Miguel |
|
Chief
Executive Officer
Chief Financial Officer |
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
The undersigned officer of FONU2 Inc. (the "Company"),
hereby certifies, to such officer's knowledge, that the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2015 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated:
June 2, 2015
FONU2,
Inc.
/s/
Roger Miguel |
|
June
2, 2015 |
|
Roger
Miguel |
|
Chief
Executive Officer
Chief Financial Officer |
|
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