Megola, Inc. (OTCMKTS:MGON) Runs Higher

Back in April Megola, Inc. (OTCMKTS:MGON) announced that they had entered the rapidly growing medical marijuana industry. At the same time their stock reached its 52-week high of 19 cents per share. The excitement quickly disappeared though and just six months later the ticker found itself once again deep into the double-zero price ranges. Interest in the stock also subsided dramatically and MGON often saw sessions with less than 100 thousand traded shares.

On October 22 investors’ sentiment suddenly changed and since then the company has been jumping up the chart by leaps and bounds and managed to reach $0.009 at the end of last week. During the weekend the positive momentum picked up even more speed and yesterday they gained another 100% and closed at $0.018 per share. In just four sessions MGON have experienced an increase of nearly 720 %. The number of traded shares is equally as impressive. Both on October 23 and yesterday the company saw over 21 million of its shares changing hands.

There is only one problem though – there is no reason for the sudden appreciation. It is true that their subsidiary MedCan Marijuana Inc. has signed an agreement to provide venture capital to Green Relief Inc. but this news was already revealed back in April. Since then MGON haven’t made a single PR statement about their current operations. The fundamentals of the company are also rather depressing. They finished the quarter ending April 30 with:

• $1163 cash and current assets!!
• $205 thousand total liabilities
• ZERO revenues
• $30 thousand net loss

The report shows that the amount of assets and liabilities hasn’t undergone any changes for quite some time because as of July, last year MGON still had exactly $1163 in cash and current assets. Back in December, 2011 the company run out of resources and as a result they were unable to launch any commercial activities. With still limited financials MGON might be force to look for debt financing and this could lead to severe dilution. In the past the company had already dealt with one of the most notorious toxic funders – Asher Enterprises, Inc.

The number of outstanding shares has already swollen dramatically and as of April stood at nearly 89 million shares compared to 59 million at the end of July, 2013. Some investors claim that at the moment there are over 113 million outstanding shares. Soon we will know if that is the truth because MGON should file their annual report by the end of the month.

Green Relief may indeed have a lot going for them but they are a private company and investors cannot but their stock. MGON on the other hand are simply riddled with red flags and any investment in them should be preceded by extensive due diligence. Keep in mind that yesterday Best Damn Pennies sent out an email alert touting the stock and although they didn’t receive any compensation the email helped fuel the artificial hype.