UNITED
STATES


SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q


(Mark
One)





x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For the
quarterly period ended: October 31, 2007


Or


o TRANSITION 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  ̈ No  ̈




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 October 31, 2007







Megola, Inc.




Table of
Contents





PART
      I –  FINANCIAL INFORMATIONItem
      1.
                Unaudited
      Financial Statements
                3Item
      2.
                Management's
      Discussion and Plan of Operation
                13Forward-Looking
      Statements
                13Item
      3.
                Controls
      and Procedures
                13PART
      II - OTHER INFORMATION
                15Item
      1.
                Legal
      Proceedings
                15Item
      2.
                Changes
      in Securities
                15Item
      3.
                Defaults
      upon Senior Securities.
                15Item
      4.
                Submission
      of Matters to a Vote of Security Holders.
                16Item
      5.
                Other Information.
                16Item
      6.
                Exhibits
                16


2




PART
I - FINANCIAL INFORMATION




Item 1.Megola, Inc. Interim Consolidated
Financial Statements – Unaudited


Three Months Ended October 31, 2007(Amounts expressed in US dollars)




MEGOLA,
INC.


CONSOLIDATED
BALANCE SHEETS


(Amounts expressed
in US dollars)





October 31,
                                              2007
                                            
                                            
                                            July 31, 2007(Unaudited)
                                            
                                            
                                            (Audited)ASSETSCash
                                            
                                            
                                            61,584
                                            
                                            
                                            
                                            32,660Inventory
      (note 4)
                                            
                                            
                                            47,147
                                            
                                            
                                            
                                            58,221Prepaid
      expenses
                                            
                                            
                                            5,355
                                            
                                            
                                            
                                            9,342114,086
                                            
                                            
                                            
                                            100,223Intangible
      asset (note 7)
                                            
                                            
                                            1,350,000
                                            
                                            
                                            
                                            1,350,000Loan
      receivable (note 11)
                                            
                                            
                                            117,832
                                            
                                            
                                            
                                            122,085Property
      and equipment
                                            
                                            
                                            7,574
                                            
                                            
                                            
                                            8,207$
                                            1,589,492
                                            
                                            
                                            $
                                            1,580,515LIABILITIESAdvances
      from stockholders (note 8)
                                            
                                            
                                            147,862
                                            
                                            
                                            
                                            290,689Note
      payable (note 12)
                                            
                                            
                                            533,410
                                            
                                            
                                            
                                            250,000Accounts
      payable and accrued liabilites
                                            
                                            
                                            66,771
                                            
                                            
                                            
                                            112,533Accrued
      interest
                                            
                                            
                                            25,821
                                            
                                            
                                            
                                            25,822773,864
                                            
                                            
                                            
                                            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
                                            
                                            
                                            (5,166,554
                                            )
                                            
                                            
                                            (5,078,725
                                            )Accumulated
      other comprehensive loss:Foreign
      currency translation adjustment
                                            
                                            
                                            (916
                                            )
                                            
                                            
                                            (2,902
                                            )815,628
                                            
                                            
                                            
                                            901,471$
                                            1,589,492
                                            
                                            
                                            $
                                            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 ENDEDOctober 31, 2007
                                                
                                                
                                                October 31, 2006Income -
      sales
                                                
                                                $
                                                4,319
                                                
                                                
                                                $
                                                1,514Cost
      of sales
                                                
                                                
                                                1,074
                                                
                                                
                                                
                                                1,893GROSS
      PROFIT (LOSS)
                                                
                                                
                                                3,245
                                                
                                                
                                                
                                                (379
                                                )Royalty
      income (note 3)
                                                
                                                
                                                0
                                                
                                                
                                                
                                                40,0003,245
                                                
                                                
                                                
                                                39,621General
      and administrative
                                                
                                                
                                                88,943
                                                
                                                
                                                
                                                489,117Depreciation
                                                
                                                
                                                671
                                                
                                                
                                                
                                                1,693Interest
                                                
                                                
                                                1,460
                                                
                                                
                                                
                                                3,467TOTAL
      EXPENSES
                                                
                                                
                                                91,074
                                                
                                                
                                                
                                                494,277NET
      LOSS
                                                
                                                
                                                (87,829
                                                )
                                                
                                                
                                                (454,656
                                                )Foreign
      currency translation adjustment
                                                
                                                
                                                1,986
                                                
                                                
                                                
                                                (3,902
                                                )COMPREHENSIVE
      LOSS
                                                
                                                
                                                (85,843
                                                )
                                                
                                                
                                                (458,558
                                                )Weighted
      average common shares outstanding
                                                
                                                
                                                73,594,700
                                                
                                                
                                                
                                                45,235,268Loss
      per share - basic and diluted
                                                
                                                $
                                                (0.001
                                                )
                                                
                                                $
                                                (0.010
                                                )Comprehensive
      loss per share - basic and diluted
                                                
                                                $
                                                (0.001
                                                )
                                                
                                                $
                                                (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 3 MONTHS ENDEDOctober 31,
                                  2007
                                
                                
                                October 31,
                                  2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss for the period
                                
                                
                                (87,829
                                )
                                
                                
                                (454,656
                                )Adjustments
      to reconcile net loss to net cash used in operating
    activities
                                
                                
                                (38,534
                                )
                                
                                
                                380,681(126,363
                                )
                                
                                
                                (73,975
                                )CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      from stockholders
                                
                                
                                (152,819
                                )
                                
                                
                                -Proceeds
      from issuance of investor loans - note payable
                                
                                
                                294,360
                                
                                
                                
                                77,918141,541
                                
                                
                                
                                77,918CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                                
                                
                                -
                                
                                
                                
                                (52
                                )-
                                
                                
                                
                                (52
                                )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                                
                                
                                13,746
                                
                                
                                
                                (23,837
                                )NET
      INCREASE (DECREASE) IN CASH FOR THE QUARTER
                                
                                
                                28,924
                                
                                
                                
                                (19,946
                                )NET
      CASH, beginning of period
                                
                                
                                32,660
                                
                                
                                
                                (43,983
                                )NET
      CASH, end of period
                                
                                
                                61,584
                                
                                
                                
                                (63,929
                                )NET
      CASH REPRESENTED BY:CASH
                                
                                
                                61,584
                                
                                
                                
                                43BANK
      INDEBTEDNESS
                                
                                
                                -
                                
                                
                                
                                (63,972
                                )NET
      CASH, end of period
                                
                                
                                61,584
                                
                                
                                
                                (63,929
                                )SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest
      paid
                                
                                
                                1,460
                                
                                
                                
                                3,467Income
      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)


October
31, 2007





Accumulated Other
                              
                              
                              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
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (87,829
                              )
                              
                              
                              (87,829
                              )Foreign
      CurrencyTranslation
      Adjustment
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,986
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,986Balances,
      October 31, 2007
                              
                              
                              78,486,029
                              
                              
                              $
                              78,486
                              
                              
                              $
                              (916
                              )
                              
                              
                              5,904,612
                              
                              
                              $
                              (5,166,554
                              )
                              
                              $
                              815,628





See
accompanying notes to unaudited interim consolidated financial
statements


6


MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2007


(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 $47,147 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 Three Months
ended October 31, 2007


(Amounts
expressed in US dollars)




5.
CASH FLOW INFORMATION





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





2007
                    
                    
                    2006Depreciation
                    
                    
                    671
                    
                    
                    
                    1,693Shares
      issued for consulting services
                    
                    
                    
                    
                    
                    
                    412,800(Increase)
      decrease in loan receivable
                    
                    
                    3,182
                    
                    
                    
                    (10
                    )(Increase)
      decrease in inventory
                    
                    
                    1,074
                    
                    
                    
                    670(Increase)
      decrease in prepaid expenses
                    
                    
                    4,189
                    
                    
                    
                    (5,616
                    )Decrease
      in accounts payable
                    
                    
                    (39,578
                    )
                    
                    
                    (32,590
                    )Increase
      (decrease) in accrued expenses and other
                    
                    
                    (6,998
                    )
                    
                    
                    100Increase
      (decrease) in distributor deposits
                    
                    
                    
                    
                    
                    
                    3,634(38,534
                    )
                    
                    
                    380,681





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
                    
                    
                    TotalThree
      months ended October 31, 2007Revenues
                    
                    $
                    4,319
                    
                    
                    $
                    0
                    
                    
                    $
                    4,319Net
      Loss
                    
                    $
                    87,829
                    
                    
                    
                    -
                    
                    
                    $
                    87,829Interest
      Expense
                    
                    $
                    
                    
                    
                    $
                    1,460
                    
                    
                    $
                    1,460Total
      Assets
                    
                    
                    
                    
                    
                    $
                    1,589,492
                    
                    
                    $
                    1,589,492





Three
      months ended October 31, 2006
                    
                    North America
                    
                    
                    International
                    
                    
                    TotalRevenues
                    
                    $
                    1,514
                    
                    
                    $
                    40,000
                    
                    
                    $
                    41,514Net
      Loss
                    
                    $
                    454,656
                    
                    
                    $
                    0
                    
                    
                    $
                    454,656Interest
      Expense
                    
                    $
                    
                    
                    
                    $
                    3,467
                    
                    
                    $
                    3,467Total
      Assets
                    
                    $
                    -
                    
                    
                    $
                    365,832
                    
                    
                    $
                    365,832





7.           
INTANGIBLE ASSET


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:


8


MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2007


(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 October 31, 2007 (see note 10(vi)), 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.


During
the three-month period ending October 31, 2007, Megola borrowed $52,759 from
several of its stockholders.





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 Three Months
ended October 31, 2007


(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
November 13, 2007 the Company entered into a non-binding letter of intent
with6841309
Canada Inc. ("6CI") under which 6CI will have exclusive use of the certain
Hartindofire safety
products for an initial period of five years with a five year option to renew at
thediscretion of
6CI.  Megola agreed to supply 6CI with the products covered by the
letter ofintent on an
exclusive basis for the purposes of use, application and
resale.  Megola furtheragreed to
maintain supply to meet market demands and to sell products at a reasonablewholesale
price.  The obligation to provide regulatory approvals under health,
safety and environmental laws is vested with Megola.




(ii)On November 15, 2007 Megola, together
with MSE Enviro-Tech Corp. ("MEVT"),an unrelated USCompany,entered into a non-binding memorandum of
understanding with Logistik Unicorp Inc. ("LUC") andCTT Group Inc. ("CTT"), both
Canadiancorporations, under which LUC is
granted exclusiveuse of the Hartindo fire safety
products for use in textile applications.  The exclusivity islimited to Canada, USA and
Mexico.  LUC is to provide marketing and industry expertise
andCTT is to provide technical and testing
support.  Megola and MVT agreed to maintain supplyto meet market demands and to sell
products at a reasonable wholesale price. The
obligationto provide regulatory approvals under
health, safety and environmental laws is vested withMegola.





(iii) On
November 21, 2007 Megola, together with MEVT , entered into an exclusive
marketingand
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
firesafety
product for residential markets in Canada and the United States.  The
initial term of theagreement is
5 years during which JPC will pay a royalty on sales.  The agreement
renewsautomatically
pending the satisfaction of certain minimum sales requirements.





(iv) 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.


10


MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2007


(Amounts
expressed in US dollars)





10.
Subsequent Events (continued)





The first
year begins 90 days after execution of the agreement.





(v) 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





(vi) 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.





(vii) 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





(viii)
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


11


MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2007


(Amounts
expressed in US dollars)





10.
Subsequent Events (continued)





(ix) 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.





(x) 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:





§
            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 $111,162.





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 Three Months
ended October 31, 2007


(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.




Item
2. Management's Discussion and Plan of Operation


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


For the
Quarter Ended October 31, 2007




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 three months ended October 31, 2007 vs. three months ended
October 31, 2006 decreased 80.68% from $454,656 to $87,829. The Company has an
accumulated deficit of $5,166,554 as of October 31, 2007. 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.


13


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.





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 one customer, Refrigeration Services for sales accounting for
approximately 77% of our revenues in the first 3 months of fiscal year 2008.
H203 Solutions accounted for 77% of cost of goods for the first 3 months of
fiscal year 2008. Sales of the ScaleGuard devices accounted for 77%, AirGuardian
units accounted for 17% and Hartindo products accounted for 6% of our total
gross revenues in the first 3 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 October 31, 2007 vs. three months ended October 31,
2006.





Our
revenues for the three months ended October 31, 2007 vs. three months ended
October 31, 2006 decreased 89.60% from $41,514 to $4,319 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 October 31, 2007 vs. three months ended
October 31, 2006 decreased 43.27% from $1,893 to $1,074. The overall decrease in
the cost of sales during this period is directly attributable to the decrease in
revenues.


14


Our
general and administrative expenses for the three months ended October 31, 2007
vs. three months ended October 31, 2006 decreased 81.82% from $489,117 to
$88,943 because of the combination of a decrease in costs of stock for services
and a decrease in payroll.





Our
interest expense for the three months ended October 31, 2007 vs. three months
ended October 31, 2006 decreased 57.89% from $3,467 to $1,460 because of the
Company's decreased interest owing towards payroll deductions.





Accordingly,
our net loss for the three months ended October 31, 2007 vs. three months ended
October 31, 2006 decreased 80.68% from $454,656 to $87,829.





LIQUIDITY
AND CAPITAL RESOURCES





The
financial statements as of and for the period ending October 31, 2007 have been
prepared assuming we continue as a going concern.





At
October 31, 2007, we had an accumulated deficit of $5,166,554.





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


15


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





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)Date:
      February18, 2009
              By:
              /s/ Joel
      GardnerJoel
      GardnerPresident, CEO, Principal FinancialOfficer
      and Principal Accounting Officer





16