UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-Q/A
 Amendment No.
1
 (Mark
One)
  xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 For the
quarterly period ended: January 31, 2008
 Or
 oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 For the
transition period from ____________ to _____________
  MEGOLA,
INC.
  (EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
  Nevada
                    
                    88-0492605(STATE
      OR OTHER JURISDICTION
                    
                    (IRS
      EMPLOYEROF
                    
                    INDENTIFICATION
      NO.)INCORPORATION
      OR ORGANIZATION)
 
 SEC File
Number: 000-49815
 
 704
      Mara Street, Suite 111Point Edward, ON
                  
                  N7V 1X4(Address
      of Principal
                  
                  (Zip
      Code)Executive
      Offices)
  Registrant's
telephone number, including area code: Tel: (519) 336-0628
  (Former
Name or Former Address, if Changed Since Last Report)
 
 (Address
of Principal Executive Offices) (Zip Code)
  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.
  Yes  ̈ No
x
  Indicate
by check mark whether the registrant is a shell Company (as defined in Rule
12b-2 of the Exchange Act).
  Yes   ̈
    No  x
  APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS: Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes oNo o
  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:
78,486,029 at January 31, 2008
  
  Megola,
Inc.
  Table of
Contents
 
 PART
      I– FINANCIAL INFORMATIONItem
      1.    Unaudited Interim Consolidated Financial
      Statements
                3Item
      2.    Management's Discussion and Plan of
      Operation
                14Forward-Looking
      Statements
                14Item
      3.    Controls and Procedures
                16PART
      II - OTHER INFORMATION
                17Item
      1.    Legal Proceedings
                17Item
      2.    Changes in Securities
                17Item
      3.    Defaults upon Senior Securities.
                17Item
      4.    Submission of Matters to a Vote of Security
      Holders.
                17Item
      5.    Other Information.
                17Item
      6.    Exhibits and Reports on S-8
                17
  2
  PART
I - FINANCIAL INFORMATION
  Item 1. Megola, Inc. Interim Consolidated
Financial Statements – Unaudited
 Six Months Ended January 31, 2008(Amounts expressed in US dollars)
  MEGOLA,
INC.
 CONSOLIDATED
BALANCE SHEETS
 (Amounts
expressed in US dollars)
 
 
 January 31,
                        2008
                      
                      
                      July 31,
                        2007(Unaudited)
                      
                      
                      (Audited)ASSETSCash
                      
                      
                      -
                      
                      
                      
                      32,660Inventory
      (note 4)
                      
                      
                      56,817
                      
                      
                      
                      58,221Prepaid expenses
                      
                      
                      5,355
                      
                      
                      
                      9,34262,172
                      
                      
                      
                      100,223Intangible
      asset (note 7)
                      
                      
                      1,350,000
                      
                      
                      
                      1,350,000Loan
      receivable (note 11)
                      
                      
                      120,848
                      
                      
                      
                      122,085Deposits
                      
                      
                      5,000Property
      and equipment
                      
                      
                      6,912
                      
                      
                      
                      8,207$
                      1,544,932
                      
                      
                      $
                      1,580,515LIABILITIESBank
      overdraft
                      
                      
                      9,174
                      
                      
                      
                      -Advances
      from stockholders (note 8)
                      
                      
                      178,725
                      
                      
                      
                      290,689Note
      payable (note 12)
                      
                      
                      548,860
                      
                      
                      
                      250,000Customer
      Deposits
                      
                      
                      44,000
                      
                      
                      
                      -Accounts
      payable and accrued liabilites
                      
                      
                      102,860
                      
                      
                      
                      112,533Accrued
      interest
                      
                      
                      25,822
                      
                      
                      
                      25,822909,441
                      
                      
                      
                      679,044Going
      concern - (note 2)Subsequent
      events - (note 10)STOCKHOLDERS'
      EQUITYCapital
      stock (note 9)
                      
                      
                      78,486
                      
                      
                      
                      48,486Additional
      paid in capital (note 9)
                      
                      
                      5,904,612
                      
                      
                      
                      5,934,612Accumulated
      deficit
                      
                      
                      (5,347,992
                      )
                      
                      
                      (5,078,725
                      )Accumulated
      other comprehensive loss:Foreign
      currency translation adjustment
                      
                      
                      385
                      
                      
                      
                      (2,902
                      )635,491
                      
                      
                      
                      901,471$
                      1,544,932
                      
                      
                      $
                      1,580,515
 
 See
accompanying notes to unaudited interim consolidated financial
statements
  3
 
 MEGOLA,
INC.
 CONSOLIDATED
INTERIM STATEMENTS OF OPERATIONS (UNAUDITED)
 (Amounts expressed in US dollars)
 FOR THE 3 MONTHS ENDED
                      
                      
                      FOR THE 6 MONTHS ENDEDJanuary 31,
                        2008
                      
                      
                      January 31,
                        2007
                      
                      
                      January 31,
                        2008
                      
                      
                      January 31,
                        2007Income
      - sales
                      
                      $
                      8,372
                      
                      
                      $
                      14,317
                      
                      
                      $
                      12,691
                      
                      
                      $
                      15,831Cost
      of sales
                      
                      
                      330
                      
                      
                      
                      382
                      
                      
                      
                      1,404
                      
                      
                      
                      2,275GROSS
      PROFIT (LOSS)
                      
                      
                      8,042
                      
                      
                      
                      13,935
                      
                      
                      
                      11,287
                      
                      
                      
                      13,556Royalty
      income (note 3)
                      
                      
                      0
                      
                      
                      
                      42,000
                      
                      
                      
                      0
                      
                      
                      
                      82,0008,042
                      
                      
                      
                      55,935
                      
                      
                      
                      11,287
                      
                      
                      
                      95,556General
      and administrative
                      
                      
                      187,768
                      
                      
                      
                      124,488
                      
                      
                      
                      277,366
                      
                      
                      
                      614,039Depreciation
                      
                      
                      674
                      
                      
                      
                      1,661
                      
                      
                      
                      1,346
                      
                      
                      
                      3,354Interest
                      
                      
                      224
                      
                      
                      
                      2,355
                      
                      
                      
                      1,842
                      
                      
                      
                      5,822TOTAL
      EXPENSES
                      
                      
                      188,666
                      
                      
                      
                      128,504
                      
                      
                      
                      280,554
                      
                      
                      
                      623,215NET
      LOSS
                      
                      
                      (180,624
                      )
                      
                      
                      (72,569
                      )
                      
                      
                      (269,267
                      )
                      
                      
                      (527,659
                      )Foreign
      currency translation adjustment
                      
                      
                      1,301
                      
                      
                      
                      50,222
                      
                      
                      
                      3,287
                      
                      
                      
                      46,320COMPREHENSIVE
      LOSS
                      
                      
                      (179,323
                      )
                      
                      
                      (22,347
                      )
                      
                      
                      (265,980
                      )
                      
                      
                      (481,339
                      )Weighted
      average common shares outstanding
                      
                      
                      78,486,029
                      
                      
                      
                      47,986,029
                      
                      
                      
                      76,040,377
                      
                      
                      
                      46,610,649Loss
      per share - basic and diluted
                      
                      $
                      (0.002
                      )
                      
                      $
                      (0.002
                      )
                      
                      $
                      (0.004
                      )
                      
                      $
                      (0.011
                      )Comprehensive
      loss per share - basic and diluted
                      
                      $
                      (0.002
                      )
                      
                      $
                      (0.000
                      )
                      
                      $
                      (0.003
                      )
                      
                      $
                      (0.010
                      )
 
 See
accompanying notes to unaudited interim consolidated financial
statements
  4
 
 MEGOLA,
INC.
 CONSOLIDATED
INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)
 (Amounts expressed in US dollars)


FOR THE 6 MONTHS ENDEDJanuary 31,
                      2008
                    
                    
                    January 31,
                      2007CASH
      FLOWS FROM OPERATING ACTIVITESNet
      loss for the period
                    
                    
                    (269,267
                    )
                    
                    
                    (527,659
                    )Adjustments
      to reconcile net loss to net cash used in operating
    activites
                    
                    
                    22,042
                    
                    
                    
                    338,605(247,225
                    )
                    
                    
                    (189,054
                    )CASH
      FLOWS FROM FINANCING ACTIVITESAdvances
      from stockholders
                    
                    
                    (92,450
                    )
                    
                    
                    -Proceeds
      from issuance of investor loans
                    
                    
                    297,990
                    
                    
                    
                    -Proceeds
      from notes payable
                    
                    
                    -
                    
                    
                    
                    177,493205,540
                    
                    
                    
                    177,493CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                    
                    
                    -
                    
                    
                    
                    --
                    
                    
                    
                    -EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                    
                    
                    (149
                    )
                    
                    
                    28,900NET
      INCREASE (DECREASE) IN CASH FOR THE QUARTER
                    
                    
                    (41,834
                    )
                    
                    
                    17,339NET
      CASH, beginning of period
                    
                    
                    32,660
                    
                    
                    
                    (43,983
                    )NET
      CASH, end of period
                    
                    
                    (9,174
                    )
                    
                    
                    (26,644
                    )SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest
      paid
                    
                    
                    0
                    
                    
                    
                    0Income
      taxes paid
                    
                    
                    0
                    
                    
                    
                    0





See
accompanying notes to unaudited interim consolidated financial
statements





5





Megola,
Inc.


CONSOLIDATED
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) - unaudited


(Amounts
expressed in US dollars)


January
31, 2008





AccumulatedOther
                      
                      
                      AdditionalCommon Stock
                      
                      
                      Comprehensive
                      
                      
                      Paid In
                      
                      
                      AccumulatedShares
                      
                      
                      Amount
                      
                      
                      Loss
                      
                      
                      Capital
                      
                      
                      Deficit
                      
                      
                      TotalsBalances, July 31, 2006
                      
                      
                      37,716,029
                      
                      
                      $
                      37,716
                      
                      
                      $
                      (19,245
                      )
                      
                      $
                      4,157,582
                      
                      
                      $
                      (4,337,973
                      )
                      
                      
                      (161,920
                      )Stock
      Issued For Services
                      
                      
                      10,770,000
                      
                      
                      
                      10,770
                      
                      
                      
                      -
                      
                      
                      
                      427,030
                      
                      
                      
                      -
                      
                      
                      
                      437,800Stock
      to be issued
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      -for
      Distribution Rights
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      1,350,000
                      
                      
                      
                      
                      
                      
                      
                      1,350,000Net
      Loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (740,752
                      )
                      
                      
                      (740,752
                      )Foreign
      CurrencyTranslation
      Adjustment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      16,343
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      16,343Balances,
      July 31, 2007
                      
                      
                      48,486,029
                      
                      
                      $
                      48,486
                      
                      
                      $
                      (2,902
                      )
                      
                      
                      5,934,612
                      
                      
                      $
                      (5,078,725
                      )
                      
                      $
                      901,471Stock
      Issued for Distribution Rights
                      
                      
                      30,000,000
                      
                      
                      
                      30,000
                      
                      
                      
                      -
                      
                      
                      
                      (30,000
                      )
                      
                      
                      -
                      
                      
                      
                      -Net
      Loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (269,267
                      )
                      
                      
                      (269,267
                      )Foreign
      CurrencyTranslation
      Adjustment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,287
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,287Balances,
      January 31, 2008
                      
                      
                      78,486,029
                      
                      
                      $
                      78,486
                      
                      
                      $
                      385
                      
                      
                      
                      5,904,612
                      
                      
                      $
                      (5,347,992
                      )
                      
                      $
                      635,491





See
accompanying notes to unaudited interim consolidated financial
statements





6





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008  (Amounts expressed in US dollars)





1.
            NATURE
      OF BUSINESS


The
      accompanying unaudited interim consolidated financial statements of
      Megola, Inc. (the "Company" or “Megola”) have been prepared in accordance
      with accounting principles generally accepted in the United States of
      America and the rules of the Securities and Exchange Commission ("SEC"),
      and should be read in conjunction with the audited consolidated financial
      statements and notes thereto contained in Megola's Annual Report filed
      with the SEC on Form 10-KSB. In the opinion of management, all
      adjustments, consisting of normal recurring adjustments, necessary for a
      fair presentation of financial position and the results of operations for
      the interim periods presented have been reflected herein. The results of
      operations for interim periods are not necessarily indicative of the
      results to be expected for the full year. Notes to the unaudited interim
      consolidated financial statements which would substantially duplicate the
      disclosure contained in the audited consolidated financial statements for
      fiscal 2007 as reported in the 10-KSB have been
  omitted.





2.
            GOING
      CONCERN





These
      unaudited interim consolidated financial statements have been prepared on
      a going concern basis which contemplates the realization of assets and the
      payment of liabilities in the ordinary course of business. At present, the
      Company does not have sufficient resources to fund its current working
      capital requirements. The Company has planned to obtain additional capital
      through various financing arrangements to service its current working
      capital requirements, any additional or unforeseen obligations or to
      implement any future opportunities. Should the Company be unable to
      continue as a going concern, it may be unable to realize the carrying
      value of its assets and to meet its liabilities as they become due. These
      unaudited interim consolidated financial statements do not include any
      adjustments for this uncertainty.





3.
            ROYALTY
      INCOME


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. There was no royalty income received during the period due to the
manufacturer moving its facilities to a new location in Southeast Asia, thereby
not producing or selling any additional units.





4.
            INVENTORY


During
the last fiscal year ended July 31, 2007, the Company recorded a provision for
245,032 (2006-$nil) related to inventory impairment.  The inventory
amount of $56,817 reflects the cost of sales of these products
sold.  Future product sales of these slow moving items will have no
corresponding cost of sales due to the provision described above. These products
are in good condition and are expected to be sold.





7





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008  (Amounts expressed in US dollars)





5.
CASH FLOW INFORMATION





ADJUSTMENTS
TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES





2008
                    
                    
                    2007Depreciation
                    
                    
                    1,346
                    
                    
                    
                    3,354Shares
      issued for consulting services
                    
                    
                    0
                    
                    
                    
                    412,800(Increase)
      decrease in loan receivable
                    
                    
                    226
                    
                    
                    
                    0(Increase)
      decrease in inventory
                    
                    
                    (8,595
                    )
                    
                    
                    (2,823
                    )(Increase)
      decrease in prepaid expenses
                    
                    
                    (725
                    )
                    
                    
                    (13,541
                    )Decrease
      in accounts payable
                    
                    
                    (12,783
                    )
                    
                    
                    (14,248
                    )Increase
      (decrease) in accrued expenses and other
                    
                    
                    (1,427
                    )
                    
                    
                    (7,150
                    )Increase
      (decrease) in distributor deposits
                    
                    
                    0
                    
                    
                    
                    1,399Increase
      (decrease) in customer deposits
                    
                    
                    44,000
                    
                    
                    
                    0Decrease
      in other receivables
                    
                    
                    0
                    
                    
                    
                    (41,388
                    )Increase
      (decrease) in accrued interest
                    
                    
                    0
                    
                    
                    
                    20222,042
                    
                    
                    
                    338,605





6.
            SEGMENT
      REPORTING





Megola
sells in the U.S. and China as well as in Canada and has two reportable
geographic segments, with
summary information as follows:





North America
                  
                  
                  International
                  
                  
                  TotalSix
      months ended January 31, 2008Revenues
                  
                  $
                  12,691
                  
                  
                  $
                  0
                  
                  
                  $
                  12,691Net
      Loss
                  
                  $
                  269,267
                  
                  
                  
                  -
                  
                  
                  $
                  269,267Interest
      Expense
                  
                  $
                  
                  
                  
                  $
                  1,842
                  
                  
                  $
                  1,842Total
      Assets
                  
                  
                  
                  
                  
                  $
                  1,544,932
                  
                  
                  $
                  1,544,932





North America
                  
                  
                  International
                  
                  
                  TotalSix
      months ended January 31, 2007Revenues
                  
                  $
                  15,831
                  
                  
                  $
                  82,000
                  
                  
                  $
                  97,831Net
      Loss
                  
                  $
                  527,659
                  
                  
                  $
                  0
                  
                  
                  $
                  527,659Interest
      Expense
                  
                  $
                  
                  
                  
                  $
                  5,822
                  
                  
                  $
                  5,822Total
      Assets
                  
                  $
                  -
                  
                  
                  $
                  415,277
                  
                  
                  $
                  415,277





7.
            INTANGIBLE
      ASSETDISTRIBUTION
      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:





8





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008 (Amounts expressed in US dollars)





7.
Intangible assets (continued)





(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 January 31, 2008 (see note 10(iii)), 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.





8.
            ADVANCES FROMSTOCKHOLDERS


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.





9.
            CAPITAL
      STOCK AND ADDITIONAL PAID IN
CAPITAL


(a) Capital Stock


On August
15, 2007, Megola Issued 30,000,000 shares for Distribution Rights valued at
$1,350,000.


(b)
Additional paid in capital





9





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008 (Amounts expressed in US dollars)





9.
Capital Stock and Additional Paid in Capital (continued)





Additional
paid in capital decreased $30,000 due to Megola’s common stock being
reclassified for the acquisition of distribution rights at year ended July 31,
2007.  These rights were contracted for before year-end but the shares
were issued after year-end.





10.
            SUBSEQUENT
      EVENTS





(i) 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 basic 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 monthand 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.





(ii) 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 SharesEffective
      Date
                  
                  $
                  0.15
                  
                  
                  
                  1,000,00090
      Days after effective date
                  
                  $
                  0.25
                  
                  
                  
                  1,000,000180
      Days after effective date
                  
                  $
                  0.40
                  
                  
                  
                  1,000,000





10





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008 (Amounts expressed in US dollars)





10. Subsequent
Events (continued)





(iii) 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.





(iv) 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:





OfficeYear
      Ended
                        July
      31, 2009
                        
                        $
                        40,513Year
      Ended
                        July
      31, 2010
                        
                        $
                        44,196Year
      Ended
                        July
      31, 2011
                        
                        $
                        44,196Year
      Ended
                        July
      31, 2012
                        
                        $
                        44,196Year
      Ended
                        July
      31, 2013
                        
                        $
                        44,196Year
      Ended
                        July
      31, 2014
                        
                        $
                        3,683Total
                        
                        
                        $
                        220,980WarehouseYear
      Ended
                        July
      31, 2009
                        
                        $
                        16,500Year
      Ended
                        July
      31, 2010
                        
                        $
                        18,000Year
      Ended
                        July
      31, 2011
                        
                        $
                        18,000Year
      Ended
                        July
      31, 2012
                        
                        $
                        18,000Year
      Ended
                        July
      31, 2013
                        
                        $
                        18,000Year
      Ended
                        July
      31, 2014
                        
                        $
                        1,500Total
                        
                        
                        $
                        90,000





(v) The
Company has also leased 4 vehicles commencing in August of
2008.  Required minimum lease payments are as follows:





Year
      Ended
                    July
      31, 2009
                    
                    $
                    34,340Year
      Ended
                    July
      31, 2010
                    
                    $
                    41,208Year
      Ended
                    July
      31, 2011
                    
                    $
                    41,208Year
      Ended
                    July
      31, 2012
                    
                    $
                    6,868Total
                    
                    
                    $
                    123,624





(vi)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 issued on
August 14, 2008.





(vii) On
January 19, 2009 the Company entered into a Distributorship and Sales Agency and
Royalty Agreement with Vulcan Technologies, LLC for the Hartindo line of
Anti-Fire Products (Product) which will include, but not be limited to, the
following:





11





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008 (Amounts expressed in US dollars)





10.
Subsequent Events (continued)





§
            Vulcan is granted exclusive
      distribution/sales representative rights for the Product in the countries
      of Canada and Mexico to the railroad industry (the “Railroad Industry”)
      for a ten (10) year term.





§
            Vulcan
      is granted co-exclusive distribution/sales representative rights in the
      United States of America (the “U.S.”), to the railroad industry (the
      “Railroad Industry”) for a ten (10) year
term.





§
            In
      consideration of its appointments set forth in the Agreement, Vulcan
      agrees to pay Megola the sum of Seven Hundred Fifty Thousand ($750,000.00)
      USD dollars, as follows:





o
            a
      partial payment of $400,000 to Megola due five (5) business days after the
      execution and delivery of this  Agreement by all parties,
      and;


o
              a payment of $350,000 ninety (90)
      days following the date of this Agreement, provided, however, that such
      payment shall only be due and owing at that time if Woodsmart, under the
      Woodsmart Contract, and Janus, under the Janus Contract and any other
      distribution means by Megola has purchased no less than 100,000 gallons of
      Hartindo AF21, in its fully diluted
form.





§
            Vulcan
      shall pay to Megola a commission payment equal to twenty-five (25%)
      percent of Vulcan’s profit on Products purchased (the “Vulcan Commission”)
      by any party in the Railroad
Industry.





§
            Vulcan hereby commits to generate
      aggregate gross sales of the Hartindo Products in the Railroad Industry of
      no less than $3 Million USD on or before the second anniversary of this
      Agreement, and, thereafter, agrees to increase such aggregate gross sales
      by fifteen (15%) percent for each year thereafter, commencing with the
      third year of the term.





11.
            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
      $114,008.





12.
            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 July 31, 2007, 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.





12





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Six Months ended
January 31, 2008 (Amounts expressed in US dollars)





12.
Note Payable (continued)





On October 22, 2007,Megola signed a note and security
agreement with PCL to obtain additional funding in the amount of $300,000 (CAD).
Megola, upon receipt of the loan, will incur no interest should the loan be
repaid after specified time period. Any amounts still owing after the period,
unless such date is extended by PCL, will be subject to a 15% rate of interest.PCL shall extend the
January 25, 2008 due date of an existing loan of $250,000 (USD) to coincide with
the due date of this new agreement.


The due
date on the entire amounts loaned will be March 31, 2008.


As
security for the loan, Megola has pledged to PCL the right to revoke Megola’s
Licensing Agreement to the Hartindo line of products.





13




Item
2. Management's Discussion and Plan of Operation


Management’s
Discussion and Analysis of Financial Condition and Operating
Results


For the
Quarter Ended January 31, 2008




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 six months ended January 31, 2008 vs. six months ended January
31, 2007 decreased 48.97% from $527,659 to $269,267. The Company has an
accumulated deficit of $5,347,992 as of January 31, 2008. These conditions
create an uncertainty as to Megola's ability to continue as a going concern.
Management is trying to raise additional capital through various funding
arrangements. It is not certain as to whether Megola will raise this additional
capital. The financial statements did not include any adjustment that might be
necessary if Megola is 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 environmentally conscious solutions in the areas of physical water
treatment, air purification and fire protection.





Megola’s
ScaleGuard product units are a cost-effective and environmentally friendly
alternative to salt softeners and chemical water treatments.  ScaleGuard
utilizes 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. ScaleGuard prolongs the life of equipment, appliances, hot water
tanks, and distribution systems in residential, commercial, agricultural and
industrial applications.




14





Megola’s
AirGuardian indoor air quality product units are uniquely engineered, integrated
ultraviolet light systems 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.  The
duct-mounted units are ideal for improving indoor air quality in homes, cottages
and business areas while the portable units are effective in deodorizing
automobiles, change rooms and sporting equipment.





Megola’s
Hartindo anti-fire product line represents a one of a kind environmentally
friendly fire inhibitor and suppression technology.  These water-based,
non-toxic and non-corrosive products include AF21, an inhibitor that renders all
water absorbent and many synthetic materials non-flammable; AF31, a
suppression agent that stops fire and prevents fire spread and is able to
extinguish A, B, C, D and F/K class fires; AF11E, the world’s only proven 1:1
direct replacement for both Halon 1301 and 1211; and Dectan, a water-based rust
inhibitor and converter that exhibits the heat refraction properties of
AF21.





Megola
was dependent on three customers, Refrigeration Services, morEnergy and Ralph
Goddard for sales accounting for approximately 71% of our revenues in the first
6 months of fiscal year 2008. H203 Solutions accounted for 81% of cost of goods
for the first 6 months of fiscal year 2008. Sales of the ScaleGuard devices
accounted for 93%, AirGuardian units accounted for 5% and Hartindo products
accounted for 2% of our total gross revenues in the first 6 months of fiscal
year 2008.





Commencing
in our fiscal year 2006, we entered into an agreement with H2O3 Solutions, one
of the Company's manufacturers, to allow them to sell a residential and small
commercial ScaleGuard system directly throughout Asia. By agreement, Megola is
entitled to a royalty payment from the sales of these two products. There was no
royalty income received during the period due to the manufacturer moving its
facilities to a new location in Southeast Asia, thereby not producing or selling
any additional units.





RESULTS
OF OPERATIONS





Three
months ended January 31, 2008 vs. three months ended January 31,
2007.





Our
revenues for the three months ended January 31, 2008 vs. three months ended
January 31, 2007 decreased 85.13% from $56,317 to $8,372 due to a reduction in
royalty payments and 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 January 31, 2008 vs. three months ended
January 31, 2007 decreased 13.61% from $382 to $330. The overall decrease in the
cost of sales during this period is directly attributable to the decrease in
revenues.





Our
general and administrative expenses for the three months ended January 31, 2008
vs. three months ended January 31, 2007 increased 50.83% from $124,488 to
$187,765 because of an increase in payroll.





Our
interest expense for the three months ended January 31, 2008 vs. three months
ended January 31, 2007 decreased 90.49% from $2,355 to $224 because of the
Company's decreased interest owing towards payroll deductions.





Accordingly,
our net loss for the three months ended January 31, 2008 vs. three months ended
January 31, 2007 increased 148.90% from $72,569 to $180,624.





Six
months ended January 31, 2008 vs. Six months ended January 31,
2007.





Our
revenues for the six months ended January 31, 2008 vs. six months ended January
31, 2007 decreased 87.03% from $97,831 to $12,691 due to a reduction in royalty
payments and 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.




15





Our cost
of sales for the six months ended January 31, 2008 vs. six months ended January
31, 2007 decreased 38.29% from $2,275 to $1,404. The overall decrease in the
cost of sales during this period is directly attributable to the decrease in
revenues.





Our
general and administrative expenses for the six months ended January 31, 2008
vs. six months ended January 31, 2007 decreased 54.83% from $614,039 to $277,366
because of the decrease in costs of stock for services.





Our
interest expense for the six months ended January 31, 2008 vs. six months ended
January 31, 2007 decreased 68.36% from $5,822 to $1,842 because of the company's
decreased interest owing towards payroll deductions.





Accordingly,
our net loss for the six months ended January 31, 2008 vs. six months ended
January 31, 2007 decreased 48.97% from $527,659 to $269,267.





LIQUIDITY
AND CAPITAL RESOURCES





The
financial statements as of and for the period ending January 31, 2008 have been
prepared assuming we continue as a going concern.





At
January 31, 2008, we had an accumulated deficit of $5,347,992.





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.





16





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:
8-K Filing Date
October 31, 2007





Form:
8-K Filing Date
November 16, 2007





Form:
8-K Filing Date
November 26, 2007





Form:
8-K Filing Date
December 3, 2007





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 GardnerJoel
      GardnerPresident, CEO, Principal FinancialOfficer
      and Principal Accounting
Officer




Date:
March 27, 2009




17