UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
March 29, 2012
Date of Report
(Date of Earliest Event Reported)
FONU2 INC.
(Exact name of registrant as specified in its charter)
| | |
NEVADA | 000-49652 | 65-0773383 |
(State or other jurisdiction of incorporation( | (Commission File No.) | (IRS Employer I.D. No.) |
331 East Commercial Blvd.
Ft. Lauderdale, Florida 33334
(Address of principal executive offices)
(954) 938-4133
Registrant's telephone number
N/A
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 9.01 Financial Statements and Exhibits.
(a)
Financial statements of businesses acquired.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
FonU2, Inc.
Ft. Lauderdale. Florida
We have audited the accompanying balance sheets of FonU2, Inc. (the “Company”) as of December 31, 2011 and 2010 and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years 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 audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 December 31, 2011 and 2010 and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that FonU2, Inc. will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered net losses and has a working capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
February 22, 2013
The accompanying notes are an integral part of these financial statements.
FonU2, Inc.
(Formerly Cygnus Internet, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011 and 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
FonU2, Inc. (“the Company”) was organized on August 26, 2009, under the laws of the State of Florida, as Cygnus Internet, Inc. The Company is a development stage company and has not commenced principle operations as of the balance sheet date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Basic (Loss) per Common Share
Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2011 and 2010.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
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:
| | | |
| December 31, 2011 | | December 31, 2010 |
Income tax expense at statutory rate | $ (521,530) | | $ (301,228) |
Stock-based compensation and contributed salary | 378,320 | | 236,486 |
Change in valuation allowance | 143,210 | | 64,742 |
Income tax expense per books | $ - | | $ - |
FonU2, Inc.
(Formerly Cygnus Internet, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011 and 2010
Net deferred tax assets consist of the following components as of:
| | | |
| December 31, 2011 | | December 31,2010 |
NOL carryover | $ (608,771) | | $ (69,860) |
Valuation allowance | 608,771 | | 69,860 |
Net deferred tax asset | $ - | | $ - |
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $608,771 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.
Accounting Basis
The basis is accounting principles generally accepted in the United States of America. The Company has adopted a December 31 fiscal year end.
Stock-Based Compensation.
The Company accounts for share-based compensation in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation (“ASC 718-10”). This requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had nor is not expected to have a material impact on the Company’s financial position or statements.
2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has accumulated deficit of $2,447,857 as of December 31, 2011. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
3. NOTE PAYABLE
During 2011, the Company entered into two debt agreements for a total of $75,000. The proceeds from the notes were to be held in escrow until completion of a merger with a public entity. The notes carry interest at 10% and are convertible into shares of the potential merged entity at a discount of 30% to the market price of the potential merged entity’s common stock, however the conversion price can be no lower than $0.10 or higher than $0.50. If the merger did not occur, the Company must repay the note plus 10% interest. As of December 31, 2011, $25,000
FonU2, Inc.
(Formerly Cygnus Internet, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011 and 2010
of the funds were released from escrow for working capital purposes but are not considered convertible until closing of the merger.
4. EQUITY TRANSACTIONS
During the year ended December 31, 2009, the Company issued 6,221,800 shares of common stock for cash, resulting in total cash proceeds of $22,000. In addition, the Company issued 50,000 shares of common stock for services rendered. The Company realized a total expense in the amount of $20,000 relating to this issuance. These shares were valued at the share price of the most recent sale of common stock for cash.
During the year ended December 31, 2010, the Company issued 3,560,499 shares of common stock for cash, resulting in total cash proceeds of $153,326. In addition, the Company issued 5,638,732 shares of common stock for services rendered. The Company realized a total expense in the amount of $179,883 relating to these issuances. These shares were valued at the respective share prices of the most recent sales of common stock for cash.
During the year ended December 31, 2010, the Company issued 500,000 shares of preferred stock series B for cash, resulting in total cash proceeds of $12,000. In addition, the Company issued 1,139,638 shares of preferred stock series B for services rendered. The Company realized a total expense in the amount of $68,290 relating to these issuances. These shares were valued at the respective share prices of the most recent sales of common stock for cash. Holders of preferred series B receive non-cumulative dividends with common shareholders and the equivalent of one vote for each share held.
During the year ended December 31, 2011, the Company issued 532,144 shares of common stock for cash, resulting in total cash proceeds of $190,991.
During the year ended December 31, 2011, the Company issued 168,239 shares of preferred stock series A for cash, resulting in total cash proceeds of $139,980. In addition, the Company issued 700,000 shares of preferred stock series B for services rendered. The Company realized a total expense in the amount of $580,913 relating to these issuances. These shares were valued at the respective share prices of the most recent sales of common stock for cash. Holders of preferred series A receive non-cumulative dividends with common shareholders and the equivalent of one vote for each share held.
In September of 2009, the Company entered into an employment agreement with Jeffrey Pollitt. The agreement called for a base salary of $250,000 per year. In March of 2010, the Company entered into an employment agreement with William LaVenia. The agreement called for a base salary of $250,000 per year. All amounts under these agreements have been forgiven by these officers, resulting in contributed salary of $62,500, $437,500 and $500,000 during the years ended December 31, 2009, 2010 and 2011, respectively.
5. SUBSEQUENT EVENTS
In March of 2012, the Company amended its articles of incorporation to make its preferred stock series A and B convertible into common stock at a ratio of 1:1. In conjunction with the share exchange described below, all shares of preferred stock were converted to common stock.
Subsequent to December 31, 2011, the Company issued 89,125 shares of common stock for cash, resulting in total cash proceeds of $85,400. In addition, the Company issued 34,711,355 shares of common stock for services rendered. The Company realized a total expense in the amount of $34,009,083 relating to these issuances.
FonU2, Inc.
(Formerly Cygnus Internet, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011 and 2010
On March 6, 2012, the Company and its Chief Executive Officer, Jeffrey M. Pollitt entered into an agreement with Zaldiva, Inc., a Nevada corporation, whereby the Company executed an Agreement and Plan of Reorganization.
Under the Agreement, Zaldiva agreed to purchase all of the material assets of the Company in exchange for 53,411,262 “unregistered” and “restricted” shares of Zaldiva’s common stock, which would represent approximately 85% of Zaldiva’s issued and outstanding common stock upon issuance. The Agreement and Plan of Reorganization was finalized on March 29, 2012. The transaction was accounted for as a reverse merger. Pursuant to this transaction, Zaldiva changed its corporate name to FonU2, Inc.
Subsequent to the merger transaction, the Company issued 2,350,000 shares for services. In addition, the Company issued 2,250,000 shares for prepaid services valued at $427,500, 50,000 shares for interest on notes payable valued at $13,500, and 40,000 shares for cash of $10,000. 100,000 shares were cancelled and 8,102,736 shares were purchased back by the Company for a total aggregate consideration of one dollar.
(b)
Pro forma financial information.
FONU2, Inc. (fka. Cygnus Internat, Inc.)
Unaudited Proforma Consolidated Balance Sheet
December 31, 2011
Notes to Unaudited Pro Forma Consolidated Financial Statements
On March 6, 2012, Zaldiva, Inc., a Nevada corporation (“Zaldiva”); Cygnus Internet, Inc., a Florida corporation (the “Company” or “Cygnus”); and Jeffrey Pollitt, who is the beneficial owner of approximately 37% of Cygnus’ outstanding shares, executed an Agreement and Plan of Reorganization (the “Agreement”) by which Zaldiva will acquire all of the material assets of Cygnus (the “Assets”) used directly or indirectly in the operation of Cygnus’ business, including but not limited to Cygnus’ operations that are currently conducted under the names “FONU2,” “FONUS.COM,” “CANDYFONE” and “CANDYFONE.COM,” together with all intellectual property, computer hardware and software associated with such business (the “FONU2 Business”). Following the completion of the asset acquisition (the “Acquisition”), Zaldiva will continue the operation of the FONU2 Business. The Company’s stockholders will not be surrendering any of their Company shares in connection with the Acquisition; each Company stockholder will continue to hold the same number of Company shares that he/she/it held immediately prior to the closing. The accompanying unaudited pro forma financial statements present the financial position of Zaldiva and Cygnus as of December 31, 2011 and the operations for the years ended September 30, 2011 and December 31, 2011, respectively.
Following the closing of the Acquisition, Zaldiva will issue to the Company’s common stockholders, on a pro rata basis, a total of 53,411,262 “unregistered” and “restricted” shares of its common stock (the “Acquisition Shares”) in exchange for the conveyance of all of the Assets to Zaldiva. After the issuance of these shares, there will be approximately 62,786,188 outstanding shares of Zaldiva common stock. Current Zaldiva stockholders will own approximately 9,374,926 shares, or approximately 15% of its outstanding shares, and current Company stockholders will collectively own 53,411,262 such shares, or approximately 85% of Zaldiva’s outstanding voting securities. See the following Capitalization Tables for information about the holdings of: (i) all of the Company’s stockholders holding at least five percent (5%) of its outstanding voting securities immediately prior to the closing of the Acquisition; (ii) all of Zaldiva’s stockholders holding at least five percent (5%) of its outstanding voting securities immediately prior to the closing of the Acquisition; and (iii) all of the stockholders holding at least five percent (5%) of Zaldiva’s shares immediately after the closing of the Acquisition, taking into account the issuance of the 53,411,262 Acquisition Shares to the Company’s stockholders. The shareholders of Cygnus control the combined entity after the acquisition accordingly the transaction is accounted for as a recapitalization of Cygnus with no adjustment to the carrying values of the assets or liabilities of Cygnus.
Pro forma adjustment [1] reflects the issuance of 53,411,262 shares of Zaldiva common stock to the shareholders of Cygnus in exchange for the net assets of Cygnus. Pro forma adjustment [2] reflects the elimination of the accumulated deficit of Zaldiva.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
FONU2 INC., a Nevada corporation
Date: February 22, 2013
/s/ Jeffrey M. Pollitt
Jeffrey M. Pollitt, Chief Executive Officer
