SOURCE: Megola Inc.

Megola Inc.

April 21, 2009 09:00 ET

Megola Inc. Provides Questions & Answers Regarding Recent Announcement of Exchange Offer to Shareholders

POINT EDWARD, ON--(Marketwire - April 21, 2009) - Megola Inc. (PINKSHEETS: MGOA) recently announced that the Company's Board of Directors has approved an offer to exchange Company Common Stock at a price of $0.20 for every common share exchanged for shares of the Company's Series A Convertible Preferred Stock.

More detailed information on the company's exchange program will be made available on Megola's website at http://www.megola.com after 4 p.m. EDT, April 24, 2009.

QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER

What is being offered under the Exchange Offer?

The Exchange Offer consists of an offer to exchange Common Stock for shares of a newly created Series A Convertible Preferred Stock, priced at five dollars ($5.00) per share (the "Series A Preferred Stock"). The company will be completing the exchange based upon the Common Stock value of $0.20 per share. For every twenty-five (25) common shares exchanged a shareholder will receive one (1) preferred share.

Illustrations of conversion rights:

(a) Assume that you hold 10,000 common shares of Megola Inc. (minimum amount needed to be tendered in offering). You can exchange your Common Stock based on a price of $0.20 per Common Stock held, therefore 10,000 common shares will be exchanged for a value of $2,000 of Series A Convertible Preferred Stock priced at $5.00 per share; or 10,000 common shares can be exchanged for 400 Series A Convertible Preferred Stock; 1 Series A Convertible Preferred Stock for every 25 Common Shares exchanged.

(b) After the twelve (12) months holding period, and assuming you hold 400 shares of Series A Convertible Preferred Stock, assume further that the market bid price of the Common Stock is $0.40 per share. Because you have the right to convert back to common shares at $0.20 or market price; whichever is less; your conversion cost is $0.20 per share. The number of shares of Common Stock which you can receive upon conversion will be 10,000 ($2,000 divided by $0.20 per share). Your potential market value of your Common Stock after conversion would then be 10,000 shares at the assumed current market bid price of $0.40 a share or, $4,000.

(c) After the twelve (12) months holding period, and assuming you hold the same 400 shares of the Series A Convertible Preferred Stock, assume further that the market bid price of the Common Stock is $0.05 per share. Because you have the right to convert back to common shares at $0.20 or market price; whichever is less; your conversion cost is $0.05 per share. The number of shares of Common Stock which you can receive upon conversion will be 40,000 ($2,000 divided by $0.05 per shares). Your potential market value of your Common Stock would then be 40,000 shares at the assumed current market bid price of $0.05 a share or, $2,000.

(d) That value of the Common Stock market bid price at the time of conversion will be based on the average closing bid price of the Common Stock for each of the ten (10) consecutive trading days immediately prior to the date of conversion.

SO, after the initial exchange offer of common shares to preferred shares and after the holding period has expired, the shareholder will always maintain that dollar value of the original exchange amount upon the conversion back from preferred to common shares. After conversion back, the shareholder's common shares value will fluctuate with that of the market bid price.

What rights will I have as a holder of Series A Convertible Preferred Stock?

The holders of Series A Convertible Preferred Stock shall have one-hundred (100) votes for each full share Series A Convertible Preferred Stock. In addition, you will have the right to convert the Series A Convertible Preferred Stock into Common Stock at a later time subject to certain conditions. Lastly, the Series A Convertible Preferred Stock will receive the same dividends as the Common Stock, if and when declared by the Board of Directors.

As a holder of the Series A Convertible Preferred Stock, you will be given Warrants, whereby a Preferred Shareholder may purchase up to ten (10) common shares for every one (1) Series A Convertible Preferred Stock they hold at a price of forty-five cents ($0.45) per share. These Warrants can be exercised within a twenty-four (24) month period ending on May 29, 2011. These Warrants can only be exercised if the shareholder is still a holder of the Series A Convertible Preferred Stock.

What are the terms and conditions of the conversion rights of the Series A Convertible Preferred Stock?

No conversion of Series A Convertible Preferred Stock to Common Stock can occur until after a holding period of twelve (12) months from May 29, 2009. Thereafter, at your option, you may convert the Series A Convertible Preferred Stock into Common Stock. For purposes of conversion, the value of each share of Series A Convertible Preferred Stock will be deemed to be $5.00. The number of shares of Common Stock to be received upon a conversion will be based on a value of $0.20 per share or the value of the Common Stock at the time of conversion, whichever is less. That value will be based on the average closing bid price of the Common Stock for each of the ten (10) consecutive trading days immediately prior to the date of conversion.

Will the Series A Convertible Preferred Stock be transferable or trade on a stock exchange or other public market?

No. The Preferred Stock will not trade on any stock exchange or other public market.

Will the price of the Series A Convertible Preferred Stock change or fluctuate and depend on the current Common Stock price?

No. The Preferred Stock will not trade on any stock exchange or other public market, therefore the price of the Series A Preferred Shares will not change, hence the stated value of your Series A Convertible Preferred Shares will not change.

What do I have to do to accept the Exchange Offer?

In order to accept the Exchange Offer, you must tender no less than ten thousand (10,000) shares of Common Stock to the Company's Transfer Agent, Pacific Stock Transfer, at 500 E. Warm Springs Rd., Suite 240, Las Vegas, NV 89119, and the certificate must be signed, delivered and with all required paperwork on or before May 29, 2009. Eligible shareholders will receive via mail an offering circular or can obtain information and down load documents from Megola's website to facilitate offering.

How many shares of Series A Preferred Stock will I receive in the Exchange Offer?

You will receive one (1) share of the Series A Convertible Preferred Stock for every twenty-five (25) shares of Common Stock delivered for exchange. Minimum of ten thousand (10,000) shares must be tendered by a shareholder.

What happens to my Common Stock if I do not choose to accept the Exchange Offer or if I do not deliver all of my Common Stock for exchange?

Nothing. You will still own the Common Stock that you did not deliver for exchange and still be able to trade your Common Stock on the open market

May I tender only a portion of the Common Stock that I hold?

Yes. You do not have to tender all of Common Stock to participate in the exchange offer. You may choose to tender in the exchange offer all or any portion of the Common Stock that you hold providing that you tender a minimum of ten thousand (10,000) common shares for exchange. Exchange increments will be for every twenty-five (25) common shares tendered a shareholder will receive one (1) preferred share.

When does the exchange offer expire?

Unless earlier terminated by us, the exchange offer will expire at 4 p.m., New York City time, on May 29, 2009, or at such other time if this date is extended by us. Common stock tendered may be validly withdrawn at any time before the expiration date, but not thereafter. If a broker, dealer, commercial bank, trust company or other nominee holds your Common Stock, such nominee may have an earlier deadline for accepting the exchange offer. You should promptly contact the broker, dealer, commercial bank, trust company or other nominee that holds your Common Stock to determine its deadline.

What are the conditions to the exchange offer?

Exchange offer is for those shareholders of record at market close on Friday, April 24, 2009. The exchange offer is only conditional in that there must be a minimum of ten thousand (10,000) Common Shares tendered. Those shareholders that meet the minimum exchange requirement will be mailed an offering circular or can get documents and further information on company's web site after market close, April 24, 2009. We may waive certain conditions of this exchange offer. If any of the conditions are not satisfied or waived, we will not complete the exchange offer.

What if not enough Common Stock is tendered by all shareholders?

The exchange offer is not conditioned upon any minimum amount of Common Stock being tendered. If less than all of the Company's Common Stock presently issued are validly tendered, all Common Stock tendered will be accepted provided that each individual holder participating tenders a minimum of ten thousand (10,000) Common Stock.

Is Megola making a recommendation regarding whether I should participate in the exchange offer?

We are not making any recommendation regarding whether you should tender or refrain from tendering your Common Stock for exchange in the exchange offer. Accordingly, you must make your own determination as to whether to tender your Common Stock for exchange in the exchange offer and, if so, the amount of Common Stock to tender. Before making your decision, we urge you to read the offering circular carefully in its entirety and the other documents incorporated by reference in this offering circular. We also urge you to consult your financial and tax advisors in making your own decisions on what action, if any, to take in light of your own particular circumstances.

Under what circumstances can the exchange offer be extended, amended or terminated?

We reserve the right to extend the exchange offer for any reason or no reason at all. We also expressly reserve the right, at any time or from time to time, to amend the terms of the exchange offer in any respect prior to the expiration date of the exchange offer. Further, we may be required by law to extend the exchange offer if we make a material change in the terms of the exchange offer or in the information contained in this offering circular or waive a material condition to the exchange offer. During any extension of the exchange offer, Common Stock that were previously tendered and not validly withdrawn will remain subject to the exchange offer. We reserve the right, in our sole and absolute discretion, but subject to applicable law, to terminate the exchange offer at any time prior to the expiration date, including if any condition to the exchange offer is not met. If the exchange offer is terminated, no Common Stock will be accepted for purchase, and any Common Stock that have been tendered will be returned to the holder.

How will I be notified if the exchange offer is extended, amended or terminated?

If the exchange offer is extended, amended or terminated, we will promptly make a public announcement thereof.

How do I tender Common Stock in the exchange offer?

The Common Stock that are represented by a global certificate registered in the name of Depository Trust Company (DTC) or its nominee (which we refer to in this offering circular as the "depository," or DTC). DTC is the only registered holder of the Common Stock. DTC facilitates the clearance and settlement of transactions in the Common Stock through electronic book-entry changes in accounts of DTC participants. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations.

A beneficial owner whose Common Stock are held by a broker, dealer, commercial bank, trust company or other nominee and who desires to tender such Common Stock in this exchange must contact its nominee and instruct the nominee to tender its Common Stock on its behalf.

To participate in the exchange offer, a DTC participant must electronically submit its acceptance through DTC's Automated Tender Offer Program (ATOP) system or complete, sign and mail or transmit the letter of transmittal to the transfer agent prior to the expiration date.

To properly tender Common Stock, the transfer agent must receive, prior to the expiration date, either:

  1.  a timely confirmation of book-entry transfer of such Common Stock and
      a properly completed letter of transmittal according to the procedure
      for book-entry transfer described in this offering circular; or
  2.  an agent's message through ATOP of DTC.
  3.  If you hold the Common Stock in "Street Name" (you physically hold
      the Common Stock certificate in your name), then tender your
      certificate(s) by sending directly to the transfer agent. You much
      include a return postage payment (US Check or Money Order) made out
      to Pacific Stock Transfer in USD for $30 for USA residents, $45 for
      Canadian residents and $65 for other internationals.  In lieu of a
      check or money order you may provide a Courier Account Number for the
      return shipping costs.

If I change my mind, can I withdraw my tender of Common Stock?

You may withdraw previously tendered Common stock at any time until the exchange offer has expired at 4 p.m., New York City time, on May 29, 2009, unless extended by us.

Will I have to pay any fees or commissions if I tender my Common Stock?

Tendering holders are not obligated to pay brokerage fees or commissions to us or to the transfer agent. If your Common Stock are held through a broker or other nominee who tenders the Common Stock on your behalf, your broker may charge you and you may have to pay a commission for doing so. You should consult with your broker or nominee to determine whether any charges will apply.

If you hold the Common Stock in "Street Name" (you physically hold the Common Stock certificate in your name), then tender your certificate(s) by sending directly to the transfer agent. You much include a return postage payment (US Check or Money Order) made out to Pacific Stock Transfer in USD for $30 for USA residents, $45 for Canadian residents and $65 for other internationals. In lieu of a check or money order you may provide a Courier Account Number for the return shipping costs.

Will Management be participating in this Exchange Offer?

All 100% of shares of Common Stock currently held by our officers and directors and their Affiliates will be tendered.

With whom may I talk if I have questions about the exchange offer?

If you have questions regarding the procedures for tendering in the exchange offer or require assistance in tendering your Common Stock, please contact:

Contact Information

  • Daniel Gardner
    Megola Inc.
    704 Mara St., Suite 111
    Point Edward, ON, Canada N7V 1X4
    (TF) 888-558-6389 ext 25 (M-F 9am to 4 pm EDT)
    (T) 519-336-0628 ext 25 (M-F 9am to 4 pm EDT)
    (F) 519-336-0625
    (E) IRInfo@megola.com