UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended September 30, 2014

Or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from _________ to _____________

FONU2 INC.

 (Exact name of registrant as specified in its charter)

331 East Commercial Blvd., Ft. Lauderdale, FL 33334

 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(954) 938 4133

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock

(Title of Class)

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X|

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |_|

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 |X_| No ||

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 |X_| No |_

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|

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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One).

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal year. The market value of the Registrant’s voting $.001 par value common stock held by non-affiliates of the Registrant was approximately $2,248,993 (shares outstanding as of September 30, 2014 was 124,913,633).

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.   The number of shares outstanding of the Registrant’s only class of common stock, as of January 12, 2015 was 1,067,615,769 shares of its $0.001 par value common stock.

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TABLE OF CONTENTS

PART I

PART II

PART III

PART IV

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FORWARD LOOKING STATEMENTS

This document includes forward-looking statements, including, without limitation, statements relating to FONU2, Inc. ("FONU2") plans, strategies, objectives, expectations, intentions and adequacy of resources.

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PART I

ITEM 1. BUSINESS

The following is a summary of some of the information contained in this document. Unless the context requires otherwise, references in this document to the “Registrant” "We," Us," “Our” “FONU2” or the "Company" are to FONU2, Inc.

About FONU2, Inc.

FONU2 is currently developing a social commerce web-site and mobile applications bringing sellers and buyers of services and products together in real time. The Company is focused on completing the development of Our mobile service to establish Our platform as the “go to” destination for sellers and buyers to list and search for services/products, schedule appointments, and make payments, all in a real time mobile environment.  Management believes that FONU2 will also be the only prepaid card to fully integrate Facebook relationships into the transaction experience. In the future, We may also acquire other companies, and similar products and services to those We currently offer, or will offer in the future.

The Company continues to operate its legacy business of selling comic books, toys and collectible items at its retail location at 331 East Commercial Blvd., Ft. Lauderdale, Florida, and on eBay.  

FONU2 was incorporated on October 25, 2011 in the state of Nevada. The Company operates on a September 30 fiscal year-end.

Events For the Year Ended September 30, 2014

On October 14, 2013 the Company converted the $188,300 note payable due to its former CEO, along with accrued interest of $7,419 and accrued wages payable totaling $86,000, into 2,400,000 shares of the Company’s common stock.  Pursuant to this transaction, the Company recognized a $5,719 gain on settlement of debts.  As of December 31, 2013, all payables to the former CEO had been satisfied in full.

On November 6, 2013, the Company agreed to sell, an 8% convertible note in the aggregate principal amount of $128,500 to Asher.

On November 13, 2013, the Company executed a $300,000 Promissory Note in favor of JMJ Financial (“JMJ”).  Under the terms of the Note, JMJ will pay $85,000 to the Company at closing and JMJ will have the right to pay additional consideration, up to and additional $185,000, to the Company in JMJ’s sole discretion.  The Note includes a $30,000 original issue discount

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On December 16^, 2014, the Company authorized the issue of 4,000,000 shares to raise $160,000 through a private placement memorandum

On January 30, 2014, the Company entered into an agreement with Maximum Performance Advisors, Inc. (“MPAI”). MPAI will provide client public relations, communications, advisory and consulting services to the Company for a period of six months.  500,000 unregistered and restricted shares were issued as payment for these services.

On January 24, 2014, the Company agreed to sell, an 8% convertible note in the aggregate principal amount of $78,500 to Asher.

On March 7, 2014 the Company issued 84,580 shares of free trading shares to an investor who had made an investment on May 7, 2012 but as a result of a company oversight had not been issued shares.

On April 4, 2014 the Company issued a stock bonus to eight key contributors after completing and launching a beta version of its social commerce website.  The stock bonus consisted of 6,600,000 “unregistered” and “restricted” shares issued immediately as well as 385,000 to be paid quarterly thereafter.  

On April 11, 2014 the Company agreed to sell, an 8% convertible note in the aggregate principal amount of $103,000 to Magna.

On April 15, 2014 the Company entered an engagement letter with Wellington Shields & Co (“WS”) in respect of a proposed public offering of $30 Million consisting of the Company’s common shares intended to be listed on the MKT or NASDAQ exchange, including an intention by WS to underwrite the offering.

Fees payable to WS include:

7% of the amount received from the public offering

Non – refundable $50,000 of restricted common stock (823,723 “unregistered” and “restricted” shares were issued)

Warrants in favor of WS and/or its designees to purchase an aggregate of common shares amounting to 4% of the total shares sold pursuant to the public offering. Said warrants shall be exercisable at a price of 120% of the public offering price.

A non – accountable expense allowance of 2% of the gross proceeds of the public offering.

The engagement expires three (3) months after SEC provides a Notice of Effectiveness on the S-1 registration form.

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On April 15, 2014 the Company entered an engagement letter with Wellington Shields & Co (“WS”) as exclusive financial advisor to the Company as it relates to a proposed raise of acquisition financing of up to $20Million.

Fees payable to WS include:

A placement fee of 8% of the gross proceeds of the placement

A success fee of 3% of the fully diluted shares outstanding post merger

The term of the engagement is 12 months expiring on April 15, 2015.

On April 22, 2014 the Company issued 226,152 S-8 registered shares in exchange for $14,338 in certain non-capital raising legal services.

On April 22, 2014 the company issued 732,314 S-8 registered shares in exchange for $51,262 of outstanding invoices for website development services.

On April 28, 2014 the company issued 75,643 S-8 registered shares in exchange for $5,000 of outstanding invoices for certain non-capital raising accounting services.

On May 2, 2014, the Company issued 700,000 shares of “unregistered” and “restricted common shares to Maximum Performance Advisors, Inc., to provide certain public relations and communications services to the company.  On August 25, 2014 an additional 4,000,000 shares were issued as the service was extended for an additional 6 months.

On July 7^, 2014 the company entered into a Security Purchase Agreement in the amount of $73,500

On July 17, 2014 the Company issued 89,273 S-8 registered shares in exchange for $5,659.96 in certain non-capital raising legal services.

On August 19, 2014 the company authorized the issuance of a $1,500,000 in Convertible Debenture at 12% simple annual interest with a minimum investment of $25,000.  This offering expired August 31, 2014.  On September 1, 2014 this offering was extended until November 30, 2014.

On August 21, 2014 the company issued a $25,000 convertible debenture to Ira Williams, a long time Company investor

On October 1, 2014 Robert Lees resigned as President and CEO and Roger Miguel who had served as Chief Operating Officer was appointed President and CEO.  Robert Lees remained in the company and on the Board of Directors.

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On October 3, 2014 Robert Lees resigned as CFO and as Director.  Roger Miguel assumed the role of Interim CFO.  The Board of Director position was left vacant.

On December 3, 2014 the Company issued an aggregate of 770,000 shares of common stock to various individuals as compensation for services rendered. This payment was for the first two quarters.  Subsequently this program was terminated.

Basis of Presentation

The Company prepares its financial statements on the accrual basis of accounting.  All intercompany balances and transactions are eliminated.   Management believes that all adjustments necessary for a fair presentation of the results of the twelve (12) months ended September 30, 2014 and 2013 respectively have been made. The Company does not have any subsidiaries.

Employees

As of September 30, 2014, FONU2 had five full-time employees. They are not part of any union, and we believe that our relationships with them are good.  

STRATEGY

Strategy

The Company’s management team has identified the following strategies to drive the growth and potential success of the Company. Subject to financing, due diligence, and approval by the Board of Directors, the Company plans to continue regular operations of its Comic Book and Collectibles business.  The retail operation continues to operate at close to the break-even point. The Company plans to focus more efforts into expanding its market by selling increased amounts of inventory through eBay.

The Company still believes that its Social Commerce website offers tremendous potential for future income.  However, the Company requires approximately $50,000 per month to sustain this operation.   The Company needs to raise approximately $600,000, or acquire a company with sufficient cash flow to provide this funding.  The Company is currently looking at several acquisition and strategic partnership opportunities that would fulfill this objective

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Traditional Marketing.

FONU2’s comics and collectibles business continues to combine the traditional brick and mortar retail sales at Our current location with marketing on the internet through published discounts, etc. The Company is a Silver level power seller on eBay with a 99.7% positive feedback level. Monthly specials on Our website feature items regularly created to increase return traffic. Local advertisements are used for selling Our estate purchases, which are becoming a larger part of Our revenue stream.

Internet and Social Media Marketing.

FONU2’s web-site and mobile application will be utilizing proven viral search engine techniques coupled with social media management to bring in new clients to its social commerce platform. FONU2’s primary marketing focus will be in the following areas: Press releases and launch announcement, informational video clips, affiliate marketing, click-thru advertising, member referral programs, and strategic partnership.

Principal Products or Services and Their Markets

Our website and future mobile app will offer a social commerce marketing platform where people can promote themselves locally and through their social networks and make extra money.  Services will include post and list services, buy and sell listings, jobs classified, lost and found as well as social networking and games.  Our target market is the local internet advertising business by consumers who are focused on social media networking and smartphone technology.

Over the past year We have made the following improvements to Our planned product offering: 

In Our legacy retail business, Our principal products are the comic books, toys, collectibles and estate sale items that We sell from Our store in the Ft. Lauderdale, Florida area, on eBay. Experience and a very low overhead are FONU2's principal advantages in this area.  

Distribution Methods of the Products or Services

Upon release, our social commerce web-site and mobile application will be available and accessible through the internet and will be available through mobile app channels for iPhone and Android App distribution,

Sales Summary

The Company continues to operate its legacy business of selling comic books, toys and collectible items at its retail location at 331 East Commercial Blvd., Ft. Lauderdale, Florida, and through its web site Zaldiva.com and on eBay.  

COMPETITION, MARKETS AND REGULATION

Competition

The comic book and collectible retailing industry is no more or less competitive than any other mainstream retail business.  Our competitors include other brick-and-mortar and online retailers of comics, toys and collectibles.

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In terms of FONU2’s social media platform ad applications, if and when launched, will have significant competition.  Due to the nature of the internet, and e-commerce, We will be competing against companies ranging from start ups to well financed multi national conglomerates.  The e-commerce and social media industries are extremely competitive, with no assurances for success.

Markets

The Company’s target market is domestic users of e-commerce and social media.

Current Operational Status

The Company has made substantial progress over the last year in completing the social media e-commerce platform.  The Company’s comic business, Zaldiva Comics & Collectables, remains operational through its retail location.

The Company is actively engaged in the identification and acquisition of additional products, services, and/or companies.

Investment Company Act 1940

Although the Company will be subject to regulation under the Securities Act of 1933, as amended, and the 1934 Act, it believes that it will not be subject to regulation under the Investment Company Act of 1940 (the "1940 Act") insofar as it will not be engaged in the business of investing or trading in securities. The Company has obtained no formal determination from the SEC as to its status under the 1940 Act and, consequently, any violation of the 1940 Act would subject it to material adverse consequences. The Company believes that, currently, it is exempt under Regulation 3a-2 of the 1940 Act.

ITEM 1A. RISK FACTORS

Not applicable for smaller reporting companies.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Effective as of March 1, 2013, We executed a lease on Our retail location at 331 E. Commercial Blvd. in Ft. Lauderdale, Florida.  The lease is on a month-to-month basis, with monthly rent in the amount of $1,000.  

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ITEM 3. LEGAL PROCEEDINGS

FONU2 anticipates that it (including any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and FONU2 cannot assure that their ultimate disposition will not have a materially adverse effect on FONU2's business, financial condition, cash flows or results of operations. As of the filing of this document, except as indicated below, We are not a party to any pending legal proceedings, nor are We aware of any civil proceeding or government authority contemplating any legal proceeding.

On or about October 18, 2013, which is subsequent to the end of the period covered by this Report, Summit Trading, a Bahamian company (“Summit”) filed a Demand for Arbitration with the American Arbitration Association (the “Demand”) in the State of Florida.  The Demand relates to a Consulting Agreement entered into by Summit and Cygnus Internet, Inc. (“Cygnus”) effective as of February 1, 2011, prior to the date of the Agreement and Plan of Reorganization by which the Company acquired the material assets of Cygnus.  In the Demand, Summit demanded the value of 10 percent of the issued and outstanding shares of FONU2, as well as punitive damages, interest and any other appropriate relief.  On September 26, 2014, all claims by Summit were denied under binding arbitration in favor of the Company.

ITEM 4. MINING SAFETY DISCLOSURE

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is a limited public trading market for the common stock. Our common stock is quoted on the OTC Bulletin Board under the symbol "FONU", with quotations that commenced in April 2003; however, the market for shares of Our common stock is extremely limited.  No assurance can be given that the present limited market for Our common stock will continue or will be maintained.

For any market that is maintained for Our common stock, the resale of “restricted securities” pursuant to Rule 144 of the Commission by members of management or other persons may have a substantial adverse impact on any such public market. Present members of management have already satisfied the six month holding period of Rule 144 for public sales of a large portion of their holdings in our Company thereunder.

A minimum holding period of six months is required for resales under Rule 144. In addition, affiliates of the Company must comply with certain other requirements, including publicly available information concerning Our Company; limitations on the volume of “restricted securities” which can be sold in any 90-day period; the requirement of unsolicited broker’s transactions; and the filing of a Notice of Sale on Form 144.

Holders

As of December 10, 2014, We have approximately 923 shareholders of record of Our common stock.

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Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about Us. Under Rule 144(k), a person who has not been one of Our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least six months, is entitled to sell shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144.

Dividend Policy

As of the filing of this Annual Report, We have not paid any dividends to shareholders. There are no restrictions which would limit Our ability to pay dividends on common equity or that are likely to do so in the future. The Nevada Revised Statutes, however, do prohibit Us from declaring dividends where, after giving effect to the distribution of the dividend; We would not be able to pay Our debts as they become due in the usual course of business; or Our total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution

Recent Sales of Unregistered Securities

An aggregate of 499,887,998 shares were issued upon conversion of Notes in the aggregate amount of $95,220 at an average conversion price of $0.00019 per share. The convertible debt was purchased by non-affiliated third parties who effected the foregoing conversions.

An aggregate of 90,600,000 shares were issued upon conversion of Notes in the aggregate amount of $23,064 at an average conversion price of $0.00025 per share. The convertible debt was purchased by non-affiliated third parties who effected the foregoing conversions.

An aggregate of 326,711,235 shares were issued upon conversion of Notes in the aggregate amount of $83,000 at an average conversion price of $0.00025 per share. The convertible debt was purchased by non-affiliated third parties who effected the foregoing conversions.

These shares were issued pursuant to the exemption from registration provided by Section 4(a)(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities and Exchange Commission.  Pursuant to certain covenants contained in their convertible notes, exclusive of Magna Equities II, LLC (“Magna”) at no time did the investors own more than 4.99% of the Company’s issued and outstanding common stock following any of the above-referenced conversions by such entities.  On October 21, 2014, Magna filed with the Securities and Exchange Commission a Schedule 13G disclosing its ownership of approximately 9.99% of the Company’s issued and outstanding common stock resulting from the above-referenced conversions by Magna.

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Issuer Purchases of Equity Securities

FONU2 did not repurchase any shares of its common stock during the years ended September 30, 2014 or 2013.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Our audited financial statements and notes thereto included herein and “Forward Looking Statements” above.

PLAN OF OPERATIONS

Plan of Operations

The Company plans to continue regular operations of its Comic Book and Collectibles business.  The retail operation continues to operate at close to the break-even point. The Company plans to focus more efforts into expanding its market buy selling increased amounts of inventory through eBay.

The Company still believes that its Social Commerce website offers tremendous potential for future income.  However, the Company requires approximately $50,000 per month to sustain this operation.   The Company needs to raise approximately $600,000 or acquire a company with sufficient cash flow to provide this funding.

RESULTS OF OPERATIONS

For the year ended September 30, 2014, We earned revenues of $343,453. We spent $158,370 on cost of sales, earning a gross margin of $185,083. We had depreciation expense of $4,476, general and product development expenses of $431,993. We incurred $141,170 in compensation and $982,594 on professional fees, investment banking fees and the other professional services. We incurred general and administrative expenses of $113,614. We incurred an interest expense of $462,959, a gain on settlement of debt of $12,602 and a gain on derivative liability of $583,615. As a result, We had a net loss of $1,355,506 for the year ended September 30, 2014.

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Comparatively, for the year ended September 30, 2013, We earned revenues of $282,009.  We spent $117,283 on cost of sales, earning a gross margin of $164,726. We recorded depreciation expense of $2,141 and product development expenses of $278,050. We incurred $551,648 on compensation and $494,318 on professional fees. We incurred general and administrative expenses of $164,234. We incurred interest expense of $191,853, a gain on settlement of debt of $118,551 and a loss on derivative liability of $303,973. As a result, We had a net loss of $1,702,940 for the year ended September 30, 2013.  The decrease in net loss between the year ended September 30, 2014 and 2013 is primarily due to reduced compensation and the gain on derivative liability.

As a result, We had net cash used by operating activities of $610,556, net cash used in investing activities of $4,919 and net cash provided by financing activities of $576,921 for the year ended September 30, 2014.

Comparatively, We had net cash used by operating activities of $489,141, net cash used in investing activities of $3,000 and net cash provided by financing activities of $543,300 for the year ended September 30, 2013.

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 approximately $750,000. This requirement is expected to be funded by investor capital.  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 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. If the Company was unsuccessful at raising additional capital this could lead to the Company’s termination of operations.

For the year ended September 30, 2014, We used cash in operations of $610,556, consisting primarily of our net loss partially offset by a gain on derivative liability.  A further $4,919 was spent on fixed assets resulting in Our net cash used in investing activities of $4,919.

We received $369,000 on convertible notes, $25,000 on notes payable, $18,000 from related party and $220,000 from common and preferred stock issued for cash. We repaid $53,000 of convertible notes and repaid related party $2,079. As a result We had cash provided by financing activities of $576,921.

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For the year ended September 30, 2013, We had cash used in operations of $489,141 and cash used in investing activities from the purchase of fixed assets of $3,000.

We received $105,000 from notes payable, $201,300 from related party, and $250,000 from common and preferred stock issued for cash. We repaid $13,000 to related party. As a result We had cash provided from financing activities of $543,300.  

Off - Balance Sheet Arrangements

Capital Resources

We have common stock and preferred stock as Our capital resources.

We currently have no material commitments for capital expenditures within the next year; however We do require additional expenditure to complete Our social media e-commerce platform, and the marketing of such products. We intend funding these contracts with vendor financing, third party financing and internally generated cash flow.

In 2014 We had no material commitments for capital expenditures within the next year, however, We intended to incur significant expenses and capital expenditures as part of Our business plan.

Need for Additional Financing

During the past 12 months the comic bookstore business was able to operate at a break even point.  We expect this business to generate a small profit in the coming year and do not require additional financing.  

The social commerce business currently has an incomplete web-site that requires between $400,000 to $1,000,000 in financing to complete the application and re-launch services. This business unit is actively looking for merger and acquisition opportunities and financial needs are directly related to merger / acquisition outcome.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FONU2's operations do not employ financial instruments or derivatives that are market sensitive. Short-term funds are held in non-interest bearing accounts and funds held for longer periods are placed in interest bearing accounts. Large amounts of funds, if available, will be distributed among multiple financial institutions to reduce risk of loss. Our cash holdings do not generate any significant interest income.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FONU2, Inc.

Index to

Financial Statements

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Report of Independent Registered Public Accounting Firm

To the Board of Directors

FONU2, INC.

Ft Lauderdale

We have audited the accompanying balance sheet of Fonu2, Inc. (the “Company”) as of September 30, 2014 and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fonu2, Inc. as of September 30, 2014, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements for September 30, 2014 have been prepares assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has negative operating cash flow through September 30, 2014 and has a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We were not engaged to examine management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2014, included in the Form 10-K and, accordingly, we do not express an opinion thereon.

The Hall Group, CPAs

Dallas, Texas

January 13, 2015

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FONU2, INC.

Balance Sheets

7.

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 $168,902 was recorded as a result of these derivative liabilities, $136,841 of which was amortized into interest expense for the year ended September 30, 2013.  During the period ended September 30, 2014, debt discount of $516,794 was recorded as a result of new derivative liabilities, $416,125 of which was amortized into interest expense for the period ending September 30, 2014.  

During 2013, 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 September 30, 2014:

The Company uses the Black Scholes Option Pricing Model to value its derivatives based upon the following assumptions: dividend yield of -0-%, volatility of 86-693%, risk free rate of 0.11-0.18% and an expected term of 0.25 to one year.

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 8.           COMMON STOCK

During the year ended September 30, 2013 the Company issued 10,581,515 shares of common stock for services valued at $474,301.

On February 27, 2013, Jeff Pollitt, the Company’s CEO, resigned his position with the Company.  Pursuant to this resignation, Mr. Pollitt returned 15,000,000 of his 22,796,962 shares of the Company’s common back to the Company.  The 15,000,000 shares were cancelled by the Company immediately upon receipt.

During the year ended September 30, 2013 the Company issued 10,003,111 for the conversion of notes payable and other debts in the amount of $214,259.

During the year ended September 30, 2013 the Company issued 6,250,000 shares of common stock for cash proceeds of $250,000. 6,250,000 warrants were issued with the common shares, which can be exercised at a price of $0.04 per share. These warrants qualify for derivative accounting, see note 7.

During the year ended September 30, 2013 the Company issued 1,500,000 shares of common stock for prepaid services valued at fair market value of $255,000. The consulting services will be provided for one year commencing 8/1/2013.

During the year ended September 30, 2014 the Company issued 3,250,000 shares of common stock for cash proceeds of $130,000.  The Company issued an additional 2,250,000 shares of common stock upon the exercise of warrants at $0.04 per share, resulting in cash proceeds in the amount of $90,000.

During the year ended September 30, 2014 the Company issued an aggregate of 38,293,299 shares of common stock for the conversion of notes payable and other debts totaling $501,965.

On January 30, 2014 the Company entered into an agreement with an unrelated public relations firm.  Pursuant to the agreement, the firm will provide public relations services for the Company for a term of six months.  As payment for these services, the Company issued 500,000 shares of common stock valued at fair market value of $24,600 on the agreement date, and issued an additional 700,000 shares on May 2, 2014 at fair market value of $41,930 at the beginning of month four of the agreement term.

On April 4, 2014 the Company issued 6,625,000 shares of common stock to various individuals as consideration for services rendered.  In addition, the Company agreed to issue an aggregate of 385,000 shares of common stock per quarter to various individuals as compensation for services to be rendered.

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On April 15, 2014 the Company executed an engagement letter with a non-related third party entity to provide certain services in relation to a public offering of the Company’s common stock.  Pursuant to the agreement, the firm will provide services for the Company for a term of one year.  As payment for these services, the Company issued 823,723 shares of common stock valued at fair market value of $50,000 on the agreement date.

On April 22, 2014 the Company issued 226,152 shares of common stock as payment for legal and professional services rendered.  

On April 22, 2014 the Company issued 732,314 shares of common stock for consulting services rendered.

On April 25, 2014 the Company issued 75,643 shares of common stock as payment for professional fees.

On August 25, 2014 the Company issued 4,000,000 shares of common stock to a third party consulting entity as payment for a one-year consulting services contract.  The shares were valued at $0.0033 per share, being the market value of the shares on the date of issuance.

On September 30, 2014 the Company issued an aggregate of 385,000 shares of common stock to various third parties as payment for consulting and administrative services rendered.

 9.           INCOME TAXES

The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The Company’s predecessor operated as entity exempt from Federal and State income taxes.

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 39% to net the loss before provision for income taxes for the following reasons:

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Net deferred tax assets consist of the following components as of:

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $2,860,619 for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years.

10.          SUBSEQUENT EVENTS

On November 10, 2014 the Company entered into an Independent Contractor Agreement with a third party, pursuant to which the Company issued 17,500,000 shares of common stock as an initial payment.

Subsequent to September 30, 2014 the Company issued an aggregate of 161,360,664 shares of common stock upon conversion of debts in the amount of $67,240.

 The following resolution was duly adopted by the Board of Directors of the Company effective as of December 5, 2014: pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation, as amended, of the Company, which authorizes the issuance of up to twenty million (20,000,000) shares of preferred stock, par value $0.001 per share, and by the bylaws of the Company.

It was resolved that pursuant to authority expressly granted to and vested in the Board of Directors of the Company by the Company's Articles of Incorporation, the Board of Directors hereby creates a series of preferred stock, herein designated and authorized as the Series B Convertible Preferred Stock, par value $0.01 per share, which shall consist of Two Million Five Hundred Thousand (2,500,000) of the twenty million (20,000,000) shares of preferred stock which the Company now has authority to issue, and the Board

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of Directors hereby fixes the powers, designations and preferences and the relative, participating, optional and other special rights of the shares of each such class and series, and the qualifications, limitations and restrictions thereof .

On December 8, 2014, the Company entered into a purchase agreement with Studioplex City, LLC, (”SC”) a Georgia based limited liability company and Jake Shapiro (“Shapiro”), the owner of all membership interests of SC. Pursuant to this agreement, the Company paid  Shapiro $2.5 Million in the form of 2,500,000 Series B convertible preferred shares, which were issued to him on December 12, 2014. In return, the Company received 100% of the membership interests of SC.

As part of the purchase agreement The Company has formed Studioplex City Acquisition Corp., as a wholly owned subsidiary of the Company. The closing shall take place through this subsidiary.

As a result of this transaction Shapiro directly owns 67% of the voting securities of the Company, causing a change of control of the Registrant.

On December 8, 2014 the Company elected Shapiro as a director and Chairman of the Board of Directors of the Company.

NOTE 11 – EMPLOYEE BENEFIT PLANS

During the years ended September 30, 2014 and 2013, there were no qualified or non-qualified employee pension, profit sharing, stock option, or other plans authorized for any class of employees.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

As at September 30, 2014, We had no material commitments and contingencies.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On December 12, 2014 the Company discontinued audit services with Malone Bailey, LLP, (“MB”) its independent registered public accounting firm, and appointed The Hall Group CPAs as its independent registered public accounting firm.

During the term of engagement of MB there were no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope and procedure which, if not resolved to the satisfaction of MB, would have caused MB to make reference to the subject matter of the disagreement(s) in connection with any report.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

Based on Our evaluation as of the end of the period covered by this Annual Report, 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 Annual Report 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 September 30, 2014.  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

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September 30, 2014, 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 Annual Report 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 Annual Report.

Evaluation of Changes in Internal Control over Financial Reporting:

There have been no changes in internal control over financial reporting during the fourth quarter of the fiscal year covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

The Company is delinquent in meeting its payroll tax obligations and is working to correct this as soon as possible.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors and Executive Officers

The following table sets forth the names of all current directors and executive officers of the Company. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.

* These persons presently serve in the capacities indicated.

Business Experience

Robert B. Lees.  Mr. Lees, age 66, is a graduate of the U.S. Naval Academy. He served as an Officer in the Marine Corps, both overseas and domestically.  After transferring to the active Reserves, he joined the DuPont Company, where he managed the Southeastern Region.  He took the region from last to first in the acrylic sheet division for sales and service.  He then became part owner and general manager of a wood laminating operation in Orlando, Florida.  Upon the sale of the business, he joined Merrill Lynch in the Private Client Group and became an assistant Vice President.  He has since consulted to a Florida-based investor relations firm, and served as President and Chief Operating Officer of two start-up companies, as well as his current position.

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Ms. Leigh is 42 years of age.  She is a 1989 graduate of Washington High School in Phoenix, Arizona.  For the past six years, she has been significantly involved in the Company’s operations, including web site design and maintenance, inventory and shipping, online sales fulfillment and general operations.  

On October 1, 2014, Robert B. Lees, Nicole Leigh and Roger Miguel, acting as the sole directors of FONU2 resolved to accept the resignation of Mr. Lees as the Company’s President and Chief Executive Officer and to appoint Mr. Miguel to serve in such capacities.  Mr. Lees will continue to serve as the Chief Financial Officer and as a director of the Company.  

On October 3, 2014, Robert B. Lees resigned as a director and as the Chief Financial Officer of FONU2 for personal reasons.  On the same date, the Company’s Board of Directors unanimously resolved to appoint Roger Miguel, the Company’s Chief Executive Officer and one of its two remaining directors, to serve as interim Chief Financial Officer.  

Mr. Miguel is 58 years old.  Mr. Miguel graduated from The University of Toronto in 1979 with an Honors BA in Commerce and Economics and has over 30 years experience in the Information Technology Industry.  He currently is serving as Chief Operating Officer at the Company’s wholly-owned subsidiary, FONU2 CCN, Inc. which includes responsibility for all corporate and administrative functions, sales, marketing, contract negotiations and strategic partnerships.  Previously Roger held Senior Management Positions with some of the worlds largest Computer Services Outsourcing Companies (EDS/HP, Computer Sciences Corp, Xerox Business Services).  He managed application services outsourcing across wide variety of industries and provided large account management with major clients such as General Motors, Sears and the Government of Ontario, Canada. Served as Regional Applications Services Manager for CSC in the U.S. Midwest region, Application Service Center Director (900 FTEs) for South East US, and Services Director of Global Process Management for the Americas and the Zurich Financial Services global account.  Successfully managed all aspects of the business including participating in several successful CMMI Level 3, ISO 9K, ISO 20K certifications, large program and product management, business process re-engineering, and business process outsourcing.

There are no family relationships between Mr. Miguel and any other director, executive officer or person nominated or chosen by the Company to become a director or executive officer.

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Significant Employees

Other than Jeffrey Pollitt, who is responsible for the development of our prepaid card service program, FONU2 has no significant employees who are not executive officers.  Jeffrey Pollitt is no longer with the Company, he apparently resigned without notice in July 2014 and the Company has been unable to contact him since.

Family Relationships

None; not applicable.

Directorships

None of the Company’s directors holds a directorship in any other company with a class of securities registered pursuant to Section12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

Involvement in Certain Legal Proceedings

During the past ten years, no director, promoter or control person:

·

has filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

·

was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

·

was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting the following activities:

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

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Engaging in any type of business practice; or

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

  was the subject of any order, judgment or decree, not subsequently reverse, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in the preceding bullet point, or to be associated with persons engaged in any such activity;

  was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;

  was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

  was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

any Federal or State securities or commodities law or regulation; or

any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

any law or regulation prohibiting mail or wire fraud in connection with any business activity; or

      was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, or any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

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Promoters and control person.

Not applicable.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of Forms 3, 4 and 5, and amendment thereto, filed during the most recently completed fiscal year, and since then, the Company has determined that the following persons failed to file the following Section 16(a) forms on a timely basis:

Jeffrey M. Pollitt, Form 4 re disposition of 15,000,000 shares of common stock on February 27, 2013.

Robert B. Lees, Form 5 re various transactions during the 2013 fiscal year.

Nicole Leigh, Form 5 re various transactions during the 2013 fiscal year.

J & S Funding Group, LLC, Form 3 re acquisition of a number of shares of common stock triggering the Form 3 filing requirement on November 19, 2013.

Jeffrey M. Pollitt, Form 4 re various transactions beginning on July 3, 2013.

J & S Funding Group re various transactions during the 2014 fiscal year.

Code of Ethics

The Company adopted a Code of Ethics that was filed as Exhibit 14 to our Annual Report on Form 10-KSB-A1 for the year ended September 30, 2012.  The Company undertakes to provide to any person, without charge, upon request, a copy of such Code of Ethics.  Requests may be made by contacting the Company at 954-938-4133.

Corporate Governance

Nominating Committee

During the annual period ended September 30, 2014, there were no changes in the procedures by which security holders may recommend nominees to FONU2’s Board of Directors, and FONU2 does not presently have a Nominating Committee for members of its Board of Directors.  Nominations are considered by the entire Board.

Committees of the Board of Directors

FONU2 is managed under the direction of its Board of Directors.

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Compensation Committee

The members of the Board of Directors serve as its compensation committee, with the serving Chairman as Chairman of the committee.

Audit Committee

The members of the Board of Directors serve as its audit committee, with Mr. Miguel serving as its chairman.

Previous "Blank Check" or "Shell" Company Involvement

Management of FONU2 has not been involved in prior private "blank-check" or "shell" companies.

Annual Meeting

The annual meeting of Medient stockholders is expected to be held at a future date as soon as practicable. This will be an annual meeting of stockholders for the election of directors. The annual meeting will be held at FONU2s principal office or at such other place as permitted by the laws of the State of Nevada and on such date as may be fixed from time to time by resolution of FONU2’s Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid to officers and Board of Directors members during the fiscal years ended September 30, 2014 and 2013. The table sets forth this information for salary, bonus, and certain other compensation to the Board of Directors members and named executive officers for the past three fiscal years and includes all Board of Directors members and officers as of September 30, 2014.

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SUMMARY COMPENSATION TABLE

(1) Under the terms of their Executive Employment Agreements, our President/Chief Executive Officer and Chief Financial Officer, Robert B. Lees, and our Secretary and Chief Marketing Officer, Nicole Leigh, each was entitled to receive a salary of $36,400 per year and 12,500 “unregistered” and “restricted” shares of common stock per month. Due to unavailability of funds, the Company was unable to pay any cash compensation to Mr. Lees or Ms. Leigh during our 2013 fiscal year.  On July 3, 2013, the Board of Directors resolved to compensate Mr. Lees and Ms. Leigh in the amount of 2,000,000 “unregistered” and “restricted” shares each for services rendered, valued at $0.013 per share.  The parties agreed to terminate both of the Executive Employment Agreements on August 27, 2013, and in consideration of the issuance of 500,000 “unregistered” and “restricted” shares each, Mr. Lees and Ms. Leigh released all claims against the Company for accrued but unpaid compensation under their respective Executive Employment Agreements.  

The Company paid both Messrs. Lees and Miguel cash compensation of $4,000 per month in the months of August, September and November, 2013. Except for such compensation and as indicated above, no cash compensation, deferred compensation, pension benefits or long-term incentive plan awards were issued or granted to FONU2's management during the fiscal years indicated above.  Further, no member of management has been granted any option or stock appreciation rights except as indicated above; accordingly, no tables relating to such items have been included within this Item.

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OPTION/SAR GRANTS IN THE LAST FISCAL YEAR

FONU2 does not have a stock option plan as of the date of this filing. There was no grant of stock options to the Chief Executive Officer and other named executive officers during the fiscal years ended September 31, 2014 and 2013.

Employment Contracts and Termination of Employment and Change-in-Control arrangements.

There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company, with respect to any of Our directors or executive officers which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of employment with Us, any change in control of Us, or a change in the person's responsibilities following such a change in control.

Compensation Committee Interlocks and Insider Participation

The FONU2 Board of Directors in its entirety acts as the compensation committee for FONU2, with the serving Chairman as Chairman of the committee.

Stock Option Plan

None; not applicable.

Compensation of Directors

None; not applicable.

Limitation on Liability and Indemnification

FONU2 is a Nevada corporation. The Nevada Revised Statutes (“NRS”) provides that the Articles of Incorporation of a Nevada corporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except that any such provision may not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) acts specified in Section 78 (concerning unlawful distributions), or (iv) any transaction from which a director directly or indirectly derived an improper personal benefit. FONU2’s Articles of Incorporation contain a provision eliminating the personal liability of directors to FONU2 or FONU2 shareholders for monetary damages to the fullest extent provided by the NRS.

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The NRS provides that a Nevada corporation must indemnify a person who was wholly successful, on the merits or otherwise, in defense of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal (a "Proceeding"), in which he or she was a party because the person is or was a director, against reasonable expenses incurred by him or her in connection with the Proceeding, unless such indemnity is limited by the corporation's articles of incorporation. FONU2’s Articles of Incorporation do not contain any such limitation.

The NRS provides that a Nevada corporation may indemnify a person made a party to a Proceeding because the person is or was a director against any obligation incurred with respect to a Proceeding to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or reasonable expenses incurred in the Proceeding if the person conducted himself or herself in good faith and the person reasonably believed, in the case of conduct in an official capacity with the corporation, that the person's conduct was in the corporation's best interests and, in all other cases, his or her conduct was at least not opposed to the corporation's best interests and, with respect to any criminal proceedings, the person had no reasonable cause to believe that his or her conduct was unlawful. The Company's Articles of Incorporation and bylaws allow for such indemnification. A corporation may not indemnify a director in connection with any Proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or, in connection with any other Proceeding charging that the director derived an improper personal benefit, whether or not involving actions in an official capacity, in which Proceeding the director was judged liable on the basis that he or she derived an improper personal benefit. Any indemnification permitted in connection with a Proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with such Proceeding.

The NRS, unless otherwise provided in the articles of incorporation, a Nevada corporation may indemnify an officer, employee, fiduciary, or agent of the corporation to the same extent as a director and may indemnify such a person who is not a director to a greater extent, if not inconsistent with public policy and if provided for by its bylaws, general or specific action of its board of directors or shareholders, or contract. FONU’s Articles of Incorporation provide for indemnification of directors, officers, employees, fiduciaries and agents of FONU2 to the full extent permitted by Nevada law.

FONU2’s Articles of Incorporation also provide that FONU2 may purchase and maintain insurance on behalf of any person who is or was a director or officer of FONU2 or who is or was serving at the request of FONU2 as a director, officer or agent of another enterprise against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not FONU2 would have the power to indemnify him or her against such liability.

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EQUITY COMPENSATION PLAN INFORMATION

The Company has not established an equity compensation plan or Incentive Stock Option Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of September 30, 2014, the number and percentage of Our outstanding shares of common stock owned by (i) each person known to Us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer and significant employee, and (iv) all officers and directors as a group.

Security Ownership of Management

The following table sets forth the share holdings of the Company’s directors and executive officers as of the date of this Report:

(1)  This figure includes 250,000 shares of common stock that may be issued upon exercise of options having an exercise price of $0.50, and which may currently be deemed to be “out-of-the-money.”