MEGOLA, INC.
446 Lyndock St. Suite 102, Corunna, ON N0N 1G0
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.
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 48,486,029 at April 30, 2007
Megola, Inc.
MEGOLA, INC.
MEGOLA, INC.
MEGOLA, INC.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
One of the Company's manufacturers also sells certain Megola products directly throughout Asia. By agreement, Megola is entitled to a royalty payment for each of these units. Megola recognizes royalty revenue upon fulfillment of its contractual obligations and upon sale by the manufacturer of royalty-bearing products.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
4. Recently issued United States accounting standards (continued)
In July 2006, the Financial Accounting Standards Board ("FASB") has published FASB Interpretation No. 48 ("FIN No.48), Accounting for Uncertainty in Income Taxes, to address the non-comparability in reporting tax assets and liabilities resulting from a lack of specific guidance in FASB Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, on the uncertainty in income taxes recognized in an enterprise's financial statements. FIN No. 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted. The adoption of FIN 48 is not expected to have a material effect on the Company's financial condition or results of operations.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements." SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of SFAS No. 157 to materially impact its financial statements.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
4. Recently issued United States accounting standards (continued)
In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) – the fair value option for financial assets and liabilities including an amendment of SFAS 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, “Fair Value Measures”. The Company is currently evaluating the impact of SFAS No. 159 on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
4. Recently issued United States accounting standards (continued)
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133”. This statement requires enhanced disclosures about an entity’s derivative and hedging activities, thereby improving the transparency of financial reporting. The provisions of SFAS No. 161 are effective for all entities where financial statements are issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles". This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with US GAAP. The provisions of SFAS No. 162 become effective 60 days following the SEC's approval of the amendment to AU Section 411, "The Meaning of Presents Fairly in Conformity with Generally Accepted Accounting Principles" by the Public Company Accounting Oversight Board. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
Megola sells in the U.S. and China as well as in Canada and has two reportable geographic segments, with summary information as follows
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
DISTRIBUTION RIGHTS
In January 2007, the Company acquired exclusive rights to establish a distribution network for the Hartindo line of fire safety products (“Hartindo”) from Pacific Channel Ltd. (“PCL”), an unrelated party. These rights were acquired for $1,350,000 to be paid by the issuance of 30,000,000 common shares of the Company and are considered to have an indefinite life. As at July 31, 2007 the shares had not been issued. Consequently, the amount due is included in additional paid in capital.
These shares were subsequently issued after year end (Note 9).
Per terms of the distribution agreement, for each contract the Company enters into, the following applies:
| | (a) | 50% of all up-front fees received by the Company and 50% of all other forms of consideration received by the Company as a one-time payment for the grant of the distribution license shall be paid to PCL and 50% shall be retained by Megola |
| | (b) | 50% of all other consideration received by the Company that is received by the Company other than as a percentage of Hartindo sales shall be paid to PCL with the balance of 50% to be retained by the Company |
| | (c) | Where the Company receives revenue from Hartindo sales made by Sales Agents, as a percentage of such Hartindo sales, the first 3% of the percentage payable to the Company on such sales shall be paid to PCL with any remaining balance to be retained by the Company |
All payments are to be made quarterly within 30 days of the end each calendar quarter.
This agreement, as amended subsequent to year-end, shall remain in full force and effect so long as the Company and its Hartindo dealers, sub-agents and/or sales representatives (the “Megola Group”) purchase Hartindo products in the aggregate amounts specified below, namely:
| | (a) | If in the period up to January 2010, the Megola Group purchases, in the aggregate, a minimum of US $200,000 Hartindo Products, the distribution agreement shall be extended until January 31, 2011; and |
| | (b) | If in the period up to January 31, 2011, the Megola Group purchases, in the aggregate, a minimum of US $300,000 Hartindo products, the distribution agreement shall be extended until January 31, 2012; and |
| | (c) | If in the period up to January 31, 2012, the Megola Group purchases, in the aggregate, a minimum of US $400,000 Hartindo products, the distribution agreement shall be extended until January 31, 2013; and |
| | (d) | If in the period up to January 31, 2013, the Megola Group purchases, in the aggregate, a minimum of US $500,000 Hartindo products, the distribution agreement shall be extended until January 31, 2014; and |
(e) If in the period up to January 31, 2014, the Megola Group purchases, in the aggregate, a minimum of US $750,000 Hartindo products, the distribution agreement shall be extended for 25 years from January 31, 2014, or for such longer period as the Company retains the Hartindo product marketing rights for Canada, without any further performance conditions to be met.
The Company shall deliver to PCL on or before the end of February in each and every year, a statement showing the aggregate Hartindo purchases made by the Megola Group in the 12 month period ended January 31 in the prior year.
Failure to meet any of the above conditions shall give PCL the right to terminate the distribution agreement by a written notice to the Company with the agreement remaining in force until all payments owing by one party to another have been made.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
| 7. | ADVANCES FROM STOCKHOLDERS |
In the normal course of operations, the Company borrows from its stockholders.
These advances are unsecured, bearing interest at 6%, have no fixed terms of repayment, and the stockholders have waived their right to demand repayment prior to August 1, 2008.
During the nine-month period ending April 30, 2007, Megola borrowed $122,737 from several of its stockholders.
| 8. | CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL |
(a) Capital Stock
On December 7, 2006, Megola issued 500,000 shares of its common stock for professional fees valued at $25,000.
On August 22, 2006, Megola issued 200,000 shares of its common stock for professional fees, under its Stock Incentive Program for Employees and Consultants, valued at $10,000.
On August 22, 2006, Megola issued 8,200,000 restricted shares of its common stock, for consulting fees under its Stock Incentive Program for Employees and Consultants, valued at $328,000.
On September 11, 2006, Megola issued 1,870,000 restricted shares of its common stock, for consulting fees under its Stock Incentive Program for Employees and Consultants, valued at $74,800.
(b) Additional paid in capital
Additional paid in capital increased $1,350,000 due to Megola’s common stock being issued for distribution rights. These rights are contracted for before year-end but the shares are issued after year-end. In addition it increased by $427,030 due to the issuance of shares for professional services. The services were recorded at fair market price of shares on transaction dates.
In August 2007, the Company issued 30,000,000 shares to fulfill its obligation as described in
(Note 6).
On October 23, 2007, the Company amended the note payable agreement (note 11), whereby the note payable to FireStop has been assigned to Pacific Channel Limited (“PCL”) and the repayment date has been extended, interest free, until March 31, 2008. As security for the loan, PCL holds the right to obtain the equivalent value of any outstanding loan balance in restricted common shares of the Company at the six-month average of market value.
On November 13, 2007 the Company entered into a non-binding letter of intent with 6841309 Canada Inc. ("6CI") under which 6CI will have exclusive use of the certain Hartindo fire safety products for an initial period of five years with a five year option to renew at the discretion of 6CI. Megola agreed to supply 6CI with the products covered by the letter of intent on an exclusive basis for the purposes of use, application and resale. Megola further agreed to maintain supply to meet market demands and to sell products at a reasonable wholesale price. The obligation to provide regulatory approvals under health, safety and environmental laws is vested with Megola.
On November 15, 2007 Megola, together with MSE Enviro-Tech Corp. ("MEVT"), an unrelated US Company, entered into a non-binding memorandum of understanding with Logistik Unicorp Inc. ("LUC") and CTT Group Inc. ("CTT"), both Canadian corporations, under which LUC is granted exclusive use of the Hartindo fire safety products for use in textile applications. The exclusivity is limited to Canada, USA and Mexico. LUC is to provide marketing and industry expertise and CTT is to provide technical and testing support. Megola and MVT agreed to maintain supply to meet market demands and to sell products at a reasonable wholesale price. The obligation to provide regulatory approvals under health, safety and environmental laws is vested with Megola.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
9. Subsequent Events (continued)
On November 21, 2007 Megola, together with MEVT , entered into an exclusive marketing and distribution agreement with Janus Products Corp. ("JPC"), an unrelated Canadian corporation. Under the agreement, JPC will have exclusive rights for the sale and distribution of a fire safety product for residential markets in Canada and the United States. The initial term of the agreement is 5 years during which JPC will pay a royalty on sales. The agreement renews automatically pending the satisfaction of certain minimum sales requirements.
On October 5, 2008 the Company in cooperation with MSE Enviro-Tech Corp entered into a Hartindo AF21 Product, Purchase, Sales, Distribution, Marketing, and Service Agreement with WoodSmart Solutions, Inc. The basis terms and conditions proposed are as follows:
1) Megola will provide WoodSmart:
Hartindo AF21 Product
Use of Hartindo AF21 Product Technology
The option to obtain the exclusive use and rights of the Hartindo AF21 product for use on or in any lumber, Oriented Strand Board (OSB), and plywood in North America and:
The option to obtain exclusive use and rights for the Enhanced Product for use on or in any wood based materials in North America
2) WoodSmart's Purchase Requirements include:
Annual Minimum 400,000 gallons within first 12 months
Annual Minimum 550,000 gallons within months 13-24
Annual Minimum 700,000 gallons within months 25-36
WoodSmart retains exclusive use and rights to the product as described in this agreement beginning the 37th month and thereafter as long as they purchase 1,500,000 gallons in each of the following 12 month periods.
The first year begins 90 days after execution of the agreement.
On November 24, 2008 Megola entered into a Consulting Agreement with Regal Capital Partners LLC (RCP) to assist and advise the Company in identifying investor relations and/or public relations and/or market relations organizations which are engaged by Megola.
RCP was to receive a commencement bonus of 1,500,000 restricted common shares of Megola stock with Piggy Back registration rights. The shares are in lieu of a $400,000 payment and are based on $ .0266 per share. Upon the effective date Megola was to issue to RCP a total of 3,000,000 restricted common stock purchase warrants as follows:
| Vesting Date | | Exercise price | | | Warrants/Common Shares | |
| Effective Date | | $ | 0.15 | | | | 1,000,000 | |
| | | | | | | | | |
| 90 Days after effective date | | $ | 0.25 | | | | 1,000,000 | |
| | | | | | | | | |
| 180 Days after effective date | | $ | 0.40 | | | | 1,000,000 | |
On December 8, 2008, the sales/performance quotas in the agreement with PCL dated January 12, 2007, have been moved forward starting January 31, 2010.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
9. Subsequent Events (continued)
The Company also leased warehouse space and additional office space in Point Edward, Ontario, Canada, commencing September of 2008. Required minimum lease payments are as follows:
| Office | | | | |
| Year Ended | July 31, 2009 | | $ | 40,513 | |
| Year Ended | July 31, 2010 | | $ | 44,196 | |
| Year Ended | July 31, 2011 | | $ | 44,196 | |
| Year Ended | July 31, 2012 | | $ | 44,196 | |
| Year Ended | July 31, 2013 | | $ | 44,196 | |
| Year Ended | July 31, 2014 | | $ | 3,683 | |
| Total | | | $ | 220,980 | |
| | | | | | |
| Warehouse | | | | | |
| Year Ended | July 31, 2009 | | $ | 16,500 | |
| Year Ended | July 31, 2010 | | $ | 18,000 | |
| Year Ended | July 31, 2011 | | $ | 18,000 | |
| Year Ended | July 31, 2012 | | $ | 18,000 | |
| Year Ended | July 31, 2013 | | $ | 18,000 | |
| Year Ended | July 31, 2014 | | $ | 1,500 | |
| Total | | | $ | 90,000 | |
The Company has also leased 4 vehicles commencing in August of 2008. Required minimum lease payments are as follows:
| Year Ended | July 31, 2009 | | $ | 34,340 | |
| Year Ended | July 31, 2010 | | $ | 41,208 | |
| Year Ended | July 31, 2011 | | $ | 41,208 | |
| Year Ended | July 31, 2012 | | $ | 6,868 | |
| Total | | | $ | 123,624 | |
The Company entered into a consulting agreement with Matthew Sacco on August 1, 2008. He is to assist with establishing a distribution network of Megola’s Hartindo product lines. The compensation in lieu of a cash payment of $30,000 was 1,000,000 shares of Company stock.
10. LOAN RECEIVABLE
The loan receivable balance represents an amount owing by a supplier and will be offset against the Company’s future purchases of inventory. Since the amount will not be collected in the next 12 months, the balance has been classified as long-term loan receivable. The fair value of the loan receivable has been estimated by discounting future cash flows using an estimated rate of 6%. The fair value of loan receivable is $96,583.
11. NOTE PAYBALE
Megola, FireStop USA, LLC ("FSU"), an unrelated party, and Pacific Channel Ltd. ("PCL") have agreed that FSU will loan $250,000 to Megola under a note payable and security agreement. FSU specified that no interest on the loan will be due if the loan is repaid in full within six months. Any amounts owing after six months will be subject to interest at 15% per annum. As security for the loan, Megola pledged a first priority interest in the U.S. manufacturing rights for the Hartindo line of products. Subsequent to the year-end, FSU assigned the loan to PCL with modifications as follows: the security pledge to FSU was voided; the due date was extended to March 31, 2008 per agreement; PCL reserved the right to further extend the due date and interest-free period at their sole discretion.
MEGOLA, INC.
Notes to Unaudited Interim Consolidated Financial Statements for the Nine Months ended April 30, 2007 (Amounts expressed in US dollars)
Certain amounts presented at July 31, 2006 have been reclassified to conform to presentation at April 30, 2007.
Item 2. Management's Discussion and Plan of Operation
Management’s Discussion and Analysis of Financial Condition and Operating Results
For the nine months ended April 30, 2007 (Amounts expressed in US dollars)
MANAGEMENT'S DISCUSSION AND PLAN OF OPERATION FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements about Megola, Inc.'s (the Company” or “Megola”) business, financial condition and prospects that reflect management's assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, Megola's actual results may differ materially from those indicated by the forward-looking statements.
The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, management’s ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.
There may be other risks and circumstances that management may be unable to predict. When used in this Quarterly Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, although there may be certain forward-looking statements not accompanied by such expressions.
The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Reform Act are unavailable to us.
GOING CONCERN
Megola's net loss for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 increased 300.33% from $221,278 to $885,845. The Company has an accumulated deficit of $5,223,818 as of April 30, 2007. These conditions create an uncertainty as to Megola's ability to continue as a going concern. Management is attempting to raise additional capital through various funding arrangements. It is not certain if Megola will raise this additional capital. The financial statements did not include any adjustments that might be necessary if Megola were unable to continue as a going concern.
GENERAL
Megola, Inc. was incorporated in Ontario, Canada on August 28, 2000 as Corporation No. 1375595. It was renamed Megola, Inc. on December 21, 2001. Megola was formed to sell physical water treatment devices to commercial end-users in the United States, Canada and other international locations under a license granted by the German manufacturer, Megola GmbH. Initial operations and sales began in October 2000.
Megola, Inc. provides products used in physical water treatment, microbiological control, wastewater treatment and air purification. Megola's ScaleGuard product units use electromagnetic technology rather than chemicals or other methods to condition water, both preventing the ongoing build-up of scale and eliminating historical scale build-up in water delivery systems and machinery. Megola's AirGuardian indoor air quality product unit is a uniquely engineered, integrated ultraviolet light system designed to dramatically reduce and control airborne allergens and toxic compounds, such as mold, fungus, formaldehyde, xylene gases and tobacco smoke along with infectious agents, such as bacteria, influenza, hemolytic streptococci and many others in an indoor environment.
Megola was dependent on one customer, H203 Solutions for sales accounting for approximately 92% of our revenues in the first 9 months of fiscal year 2007. The same vendor accounted for 100 % of cost of goods for the first 9 months of fiscal year 2007. Sales of the ScaleGuard devices accounted for 99% and the AirGuardian units accounted for 1% of our total gross revenues in the first 9 months of fiscal year 2007.
RESULTS OF OPERATIONS
Three months ended April 30, 2007 vs. three months ended April 30, 2006.
Our revenues for the three months ended April 30, 2007 vs. three months ended April 30, 2006 decreased 62.32% from $170,673 to $64,315 due to a reduction in sales initiatives owing to a restructuring of product offerings and staffing. Staff focus during this period was allocated to new product acquisitions and reconfiguring of existing product lines. In order to accommodate potential new product initiatives, the Company intends to increase sales staff in the future.
Our cost of sales for the three months ended April 30, 2007 vs. three months ended April 30, 2006 increased 2,716.06% from $11,112 to $312,921. The overall increase in the cost of sales during this period is directly attributable to the provision for slow-moving inventory and the increase in revenues. We do not incure any cost of sales on the royalty payments. Total royalties were 90.18% and 43.94% of total revenues for the three-month periods ended April 30, 2007 and April 30, 2006 respectively.
Our general and administrative expenses for the three months ended April 30, 2007 vs. three months ended April 30, 2006 decreased 36.68% from $125,651 to $79,562 because of the a decrease in sales staff payroll.
Our interest expense for the three months ended April 30, 2007 vs. three months ended April 30, 2006 increased 38.58% from $2,211 to $3,064 because of the Company's increased interest owing towards payroll deductions.
Nine months ended April 30, 2007 vs. Nine months ended April 30, 2006.
Our revenues for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 decreased 74.96% from $647,476 to $162,147 due to a reduction in sales initiatives owing to a restructuring of product offerings and staffing. Staff focus during this period was allocated to new product acquisitions and reconfiguring of existing product lines. In order to accommodate potential new product initiatives, the Company intends to increase sales staff in the future.
Our cost of sales for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 increased 132.13% from $135,784 to $315,195. The overall increase in the cost of sales during this period is directly attributable to the provision for slow-moving inventory and the increase in revenues. We do not incure any cost of sales on the royalty payments. Total royalties were 86.34% and 56.37% of total revenues for the nine-month periods ended April 30, 2007 and April 30, 2006 respectively.
Our general and administrative expenses for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 decreased 33.71% from $423,765 to $280,928 because of a decrease in sales staff payroll.
Our interest expense for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 increased 69.45% from $5,244 to $8,886 because of the Company's increased interest owing towards payroll deductions.
Accordingly, our net loss for the nine months ended April 30, 2007 vs. nine months ended April 30, 2006 increased 300.33% from $221,278 to $885,845.
LIQUIDITY AND CAPITAL RESOURCES
The financial statements as of and for the period ending April 30, 2007 have been prepared assuming we continue as a going concern.
At April 30, 2007, we had an accumulated deficit of $5,223,818 and a bank overdraft of $27,158.
In order to become profitable, we will still need to secure additional debt or equity funding. We hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, may not raise the required funding. There are no preliminary or definitive agreements or understandings with any party for such financing. We cannot predict when, if ever, that will happen.
Item 3. CONTROLS AND PROCEDURES
Based on our management's evaluation (with the participation of our chief executive officer and chief financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on the evaluation, which disclosed deficiencies with respect to the Company's internal control procedures over financial reporting, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are ineffective as of the end of the period covered by this report due to limited resources and personnel. With additional funding the Company intends to hire additional resources to assist with financial reporting disclosures controls and procedures.
There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON S-8
Form: S-8 Filing Date: August 21, 2006
Exhibit Name and/or Identification of Exhibit Number
31 Certification
32 Certification
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| MEGOLA, INC. |
| (Registrant) |
| |
| By: | /s/ Joel Gardner |
| Joel Gardner |
| President, CEO, Principal Financial |
| Officer and Principal Accounting Officer |
Date: January 26, 2009
