FONU2 Inc (OTCMKTS:FONU) Starting to Smell Like Moon River Studios Inc (OTCMKTS:MDNT)

Back in January, FONU2 Inc (OTCMKTS:FONU) got pumped and Penny Stocks Master tried to imply that this was investors’ “last chance” to jump in. The dismal volumes during the next few sessions suggest that only a few people listened to them. Still, where do they stand today?

Eleven months ago, the ticker was hovering between $0.05 and $0.06 per share. Right now, it’s sitting at $0.0007.

As for the company, the pumpers tried to draw parallels between FONU and social gaming giants like King Digital Entertainment PLC (NYSE:KING), but a quick look at the latest 10-Q reveals that such comparisons were a bit premature. And that’s putting it very mildly.

Here’s what FONU had on June 30:

• cash: $24 thousand
• current assets: $106 thousand
• current liabilities: $724 thousand
• quarterly revenues: $90 thousand
• quarterly net loss: $1.2 million

In light of the dismal figures above, the fact that FONU was barely traded about a week ago is hardly shocking. Yet, yesterday, nearly 362 million shares changed hands which resulted in a dollar volume of around $277 thousand. “What caused the sudden spike?”, you might be wondering.

It was a press release which hit the wire about fifteen minutes before the opening bell. FONU announced that it has signed a definitive agreement for the acquisition of a Georgia-based film production company called Studioplex City LLC.

On the face of it, this sounds like good news, but despite the announcement, the stock failed to impress. FONU did hit an intraday high of more than $0.001 per share for the first time in over a month, but it then slipped and fell down to $0.0007 which is about 12% below Tuesday’s close. So, why is the ticker so reluctant to move?

Red lights are probably flashing for the more experienced investors among you. Not that long ago a penny stock called Medient Studios, Inc (now known as Moon River Studios Inc (OTCMKTS:MDNT)) was saying that it’s in the middle of developing a huge construction project in Georgia called… the Studioplex. Yesterday, Jake Shapiro, MDNT‘s CEO, took his seat as the Chairman of the FONU‘s Board, which means that there definitely is a connection between the two OTC enterprises. Some people around the message boards are saying that this is a good thing, but we’re not entirely convinced.

Mr. Shapiro was once involved with a company called Seven Arts Entertainment Inc (OTCMKTS:SAPX). We last wrote about it back in March 2013 when the stock was hovering around the $0.009 mark. Since then, it has gone through three reverse splits, but despite this, it’s now sitting at $0.0004. As for MDNT, shortly after Mr. Shapiro took over (an action that was disputed by the previous CEO), his company was sent to the Grey Market due to “questions regarding the accuracy and adequacy of publicly available information”.

Of course, this doesn’t necessarily mean that FONU is about to go down just like MDNT and SAPX did, but we can’t fail to mention the fact that in some aspects, the resemblance between the three companies is remarkable.

If you’ve seen our articles on MDNT, you know how bad the dilution was. And you don’t even need to open the financial statements to see that SAPX‘s share structure is completely ruined. The reverse splits and the price action prove the point pretty well.

Unfortunately, FONU‘s shareholders have also fallen victim to dilution. The company has been burdened with toxic debt for a while, and an 8-K from Tuesday shows that the effects have now become absolutely catastrophic. Between June 30 and December 4, the company printed a truly ridiculous 566,025,114 shares of common stock in order to satisfy just $143,360 worth of notes (the average conversion rate stands at just $0.00025 per share).

This means that FONU‘s O/S count now amounts to around 617 million. Twelve months ago, it was sitting at just over 75 million.