Fonon Corp. (fka FNON)

[pitboss22]

At this point the company is on life support and could be nearering "End Stage".

They already have a rather large ($105,778) UNPAID OVERDRAFT on their Cash Account.

They only had $13,990 in their Cash Account and they have MORE THAN $1.5 MILLION in Current Liabilities due and payable NOW!

If even ONE of their creditors, say the farmer whom they STILL HAVE NOT PAID.... If even ONE of their creditors takes them to court to sue for payment, the company would be DONE!

Then there's the parent company, RRHI. If even ONE of THEIR creditors demands payment, the only real asset RRHI has is MBMI stock. What would happen to the price if RRHI is forced to sell to pay off a creditor?

The barite they have stockpiled is LOW GRADE!

The company has ADMITTED that the barite they have stockpiled is WORTHLESS!

...the grade of mineral that we currently have stockpiled is not the desired grade of Steinbock, our master distributer[sic] ..... we neither have the current capacity to further refine the mineral to an acceptable grade nor the ability to find another buyer for the material

...the incremental expense of either hiring an additional staff member or contracting with an outside party to have our lots certified and qualified in lots and specific grades of materials would be significant and cost prohibitive.

...the Company is NOT in the position to bring on a staff member or incur the expense of routinely contracting with a qualified geologist or an otherwise expert in the field of classification and certification of barite as related to certain grades of qualities.

I think some people have a basic misunderstanding of "Risk and Reward". "High risk" does NOT mean "high reward". Risks and possible rewards ARE TWO SEPARATE THINGS completely independent of each other.

To determine a "Risk/Reward" ratio, one should first evaluate the possible reward. So far, it cost the company almost $200/ton to extract the small amount of barite that they have stockpiled. Add to that the (conservative) shipping and handling expenses and you get about $250/ton total cost.

Steinbock will only pay them $105/ton for barite that MEETS their specs. Remember, the company has already SAID that the barite stockpiled does NOT even meet Steinbock's specs!

So how much reward should we expect? Probably pretty low in the best of cases.

Now look at the risk of an INSOLVENT company with an UNPAID OVERDRAFT they cannot cover and NO source of income other than stock sales for the foreseeable future!

Now add to that the risk of RRHI because if one goes under, the other MUST as well! It really doesn't get much riskier!

NOW we have a truer Risk/Reward ratio!

EXTREMELY HIGH RISK for VERY LITTLE POSSIBLE REWARD.