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, 2008


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:
80,986,029 at October 31, 2008.








Megola, Inc.





TABLE
OF CONTENTS





PART
      IItem
      1.
                        Unaudited
      Interim Consolidated Financial Statements
                        3Item
      2.
                        Management’s
      Discussion and Analysis or Plan of Operations
                        13Item
      3.
                        Controls
      and Procedures
                        15PART
      IIItem
      1.
                        Legal
      Proceedings
                        16Item
      2.
                        Change
      in Securities
                        16Item
      3.
                        Defaults
      upon Senior Securities
                        16Item
      4.
                        Submission
      of Matters to a Vote of Security Holders
                        16Item
      5.
                        Other
      Information
                        16Item
      6.
                        Exhibits
      and Reports on S-8
                        16


Signatures
            
            16






2





PART
I - FINANCIAL INFORMATION


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


Three Months Ended October 31, 2008(Amounts expressed in US dollars)




MEGOLA,
INC.


CONSOLIDATED
BALANCE SHEETS


(Amounts expressed in US
dollars)





October 31, 2008
                    
                    
                    July 31, 2008(unaudited)
                    
                    
                    (Audited)ASSETSCash
                    
                    
                    97,313
                    
                    
                    
                    -Inventory
                    
                    
                    253,963
                    
                    
                    
                    51,429Prepaid
      expenses
                    
                    
                    113
                    
                    
                    
                    113351,389
                    
                    
                    
                    51,542Long-term
      receivable - net of allowance for bad debts of nil; (nil in 2007) (Note
      5)
                    
                    
                    125,726
                    
                    
                    
                    116,872Intangible
      Asset (note 9)
                    
                    
                    1,350,000
                    
                    
                    
                    1,350,000Property
      and equipment, net of accumulated depreciation of $46,563
      (2007-$27,732)
                    
                    
                    10,369
                    
                    
                    
                    5,5581,837,484
                    
                    
                    
                    1,523,972LIABILITIESBank
      overdraft
                    
                    
                    -
                    
                    
                    
                    1,291Accrued
      expenses
                    
                    
                    113,493
                    
                    
                    
                    99,356Accounts
      payable
                    
                    
                    52,863
                    
                    
                    
                    57,577Accrued
      interest
                    
                    
                    28,067
                    
                    
                    
                    25,821Advances
      from stockholders - (note 10)
                    
                    
                    759,834
                    
                    
                    
                    386,284954,257
                    
                    
                    
                    570,329Note
      payable - (note 8)
                    
                    
                    541,750
                    
                    
                    
                    585,6701,496,007
                    
                    
                    
                    1,155,999Going
      concern - (note 2)Commitments
      - (note 12)Subsequent
      Events - (note 13)STOCKHOLDERS'
      EQUITYCapital
      stock - (note 11)
                    
                    
                    80,986
                    
                    
                    
                    78,486Additional
      paid in capital - (note 11)
                    
                    
                    5,977,112
                    
                    
                    
                    5,904,612Accumulated
      deficit
                    
                    
                    (5,837,982
                    )
                    
                    
                    (5,615,600
                    )Accumulated
      other comprehensive income (loss):
                    
                    
                    -
                    
                    
                    
                    -Foreign
      currency translation adjustment
                    
                    
                    121,361
                    
                    
                    
                    475341,477
                    
                    
                    
                    367,9731,837,484
                    
                    
                    
                    1,523,972





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,
                  
                  
                  October 31,2008
                  
                  
                  2007Income
      - sales
                  
                  
                  11,411
                  
                  
                  
                  4,319Cost
      of sales
                  
                  
                  5,349
                  
                  
                  
                  1,074GROSS
      PROFIT (LOSS)
                  
                  
                  6,062
                  
                  
                  
                  3,245Income
      - royalties - (note 3)
                  
                  
                  -
                  
                  
                  
                  -6,062
                  
                  
                  
                  3,245General
      and administrative
                  
                  
                  146,939
                  
                  
                  
                  88,943Depreciation
                  
                  
                  983
                  
                  
                  
                  671Interest
                  
                  
                  5,521
                  
                  
                  
                  1,460Consulting
      fees
                  
                  
                  75,000
                  
                  
                  
                  -TOTAL
      EXPENSES
                  
                  
                  228,444
                  
                  
                  
                  91,074NET
      LOSS
                  
                  
                  (222,382
                  )
                  
                  
                  (87,829
                  )Foreign
      currency translation adjustment
                  
                  
                  120,886
                  
                  
                  
                  1,986COMPREHENSIVE
      LOSS
                  
                  
                  (101,496
                  )
                  
                  
                  (85,843
                  )Weighted
      average common shares outstanding
                  
                  
                  79,763,279
                  
                  
                  
                  73,594,700Loss
      per share - basic and diluted
                  
                  
                  (0.003
                  )
                  
                  
                  (0.001
                  )





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 MONTHSENDEDOctober 31,
                
                
                October 31,2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss for the period
                
                
                (222,382
                )
                
                
                (87,829
                )Adjustments
      to reconcile net loss to net cash used in operating
    activities
                
                
                (93,040
                )
                
                
                (38,534
                )(315,422
                )
                
                
                (126,363
                )CASH
      FLOWS FROM FINANCING ACTIVITESAdvances
      from stockholders
                
                
                215,413
                
                
                
                (152,819
                )Proceeds
      from issuance of investor loans - note payable
                
                
                200,000
                
                
                
                294,360Cash
      flows from financing activities
                
                
                415,413
                
                
                
                141,541CASH
      FLOWS FROM INVESTING ACTIVITESPurchase
      of property and equipment
                
                
                (5,818
                )
                
                
                -Cash
      flows from investing activities
                
                
                (5,818
                )
                
                
                0EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                
                
                4,431
                
                
                
                13,746NET
      INCREASE IN CASH FOR THE QUARTER
                
                
                98,604
                
                
                
                28,924NET
      CASH, beginning of year
                
                
                (1,291
                )
                
                
                32,660NET
      CASH, end of quarter
                
                
                97,313
                
                
                
                61,584NET
      CASH REPRESENTED BY:CASH
                
                
                97,313
                
                
                
                32,660BANK
      INDEBTEDNESS
                
                
                -
                
                
                
                -NET
      CASH, end of period
                
                
                97,313
                
                
                
                32,660





See
accompanying notes to unaudited interim consolidated financial
statements


5





Megola, Inc.


CONSOLIDATED
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY - unaudited


(Amounts
expressed in US dollars)


October
31, 2008





AccumulatedOther
                
                
                AdditionalCommon Stock
                
                
                Comprehensive
                
                
                Paid In
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Income (Loss)
                
                
                Capital
                
                
                Deficit
                
                
                TotalsBalances, July 31, 2007
                
                
                48,486,029
                
                
                $
                48,486
                
                
                $
                (2,902
                )
                
                
                5,934,612
                
                
                $
                (5,078,725
                )
                
                $
                901,471Stock
      for Distribution Rights
                
                
                30,000,000
                
                
                
                30,000
                
                
                
                -
                
                
                
                (30,000
                )
                
                
                -
                
                
                
                -Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (536,875
                )
                
                
                (536,875
                )Foreign
      Currency Translation Adjustment
                
                
                -
                
                
                
                -
                
                
                
                3,377
                
                
                
                -
                
                
                
                -
                
                
                
                3,377Balances,
      July 31, 2008
                
                
                78,486,029
                
                
                $
                78,486
                
                
                $
                475
                
                
                
                5,904,612
                
                
                $
                (5,615,600
                )
                
                $
                367,973Stock
      for Services
                
                
                2,500,000
                
                
                
                2,500
                
                
                
                -
                
                
                
                72,500
                
                
                
                -
                
                
                
                75,000Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (222,382
                )
                
                
                (222,382
                )Foreign
      Currency Translation Adjustment
                
                
                -
                
                
                
                -
                
                
                
                120,886
                
                
                
                -
                
                
                
                -
                
                
                
                120,886Balances,
      October 31, 2008
                
                
                80,986,029
                
                
                $
                80,986
                
                
                $
                121,361
                
                
                
                5,977,112
                
                
                $
                (5,837,982
                )
                
                $
                341,477





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, 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.


Management’s
Discussion and Analysis of Financial Condition and Results of Operation,
management has undertaken the following initiatives that it believes will be
instrumental in leading to better management of cash flows and more profitable
operations:


•  Outsourcing of much of the manufacturing activities has
been established along with appropriate analysis ensuring cost competitiveness
to minimize capital outlay and provide for rapid potential growth in production
levels


•  Establishment of policies and procedures for production
processes to ensure timely delivery of product to distribution groups and
customers


•  Established relationships with Distribution groups that can
provide the necessary expertise in commercialization of our entire product line
to ensure maximum market penetration


•  Signing of Definitive Sales and Agency Agreements,
pertaining to the distribution rights, that have purchase/sale order
requirements expected to generate substantial sales in the next five
years


•  Requirement for cash deposit with sales orders to minimize
drain on working capital





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





In the
fiscal year ended July 31, 2007, the Company recorded a provision of $245,032,
related to inventory impairment. 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, 2008


(Amounts
expressed in US dollars)





5.  LONG-TERM
RECEIVABLE





The
long-term 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 long-term
receivable has been estimated by discounting future cash flows using an
estimated rate of 6%.  The fair value of long-term receivable is
$118,609.




6.  CASH
FLOW INFORMATION





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





2008
                        
                        
                        2007Depreciation
                        
                        
                        983
                        
                        
                        
                        671Shares
      issued for consulting services
                        
                        
                        75,000
                        
                        
                        
                        -(Increase)
      decrease in loan receivable
                        
                        
                        (8,853
                        )
                        
                        
                        3,183(Increase)
      decrease in inventory
                        
                        
                        (202,534
                        )
                        
                        
                        1,074Decrease
      in prepaid expenses
                        
                        
                        -
                        
                        
                        
                        4,189Increase
      (decrease) in accounts payable
                        
                        
                        6,883
                        
                        
                        
                        (39,578
                        )Increase
      (decrease)  in accrued expenses
                        
                        
                        33,235
                        
                        
                        
                        (6,998
                        )Increase
      in accrued interest
                        
                        
                        2,246
                        
                        
                        
                        -(93,040
                        )
                        
                        
                        (38,534
                        )





7.  SEGMENT
REPORTING





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


North America
                        
                        
                        Asia
                        
                        
                        TotalThree
      months ended October 31, 2008Revenues
                        
                        $
                        11,411
                        
                        
                        $
                        -
                        
                        
                        $
                        11,411Net
      Loss
                        
                        $
                        222,382
                        
                        
                        
                        -
                        
                        
                        $
                        222,382Interest
      Expense
                        
                        $
                        5,521
                        
                        
                        $
                        -
                        
                        
                        $
                        5,521Total
      Assets
                        
                        $
                        1,837,484
                        
                        
                        $
                        -
                        
                        
                        $
                        1,837,484





Three
      months ended October 31, 2007
                      
                      North America
                      
                      
                      Asia
                      
                      
                      TotalRevenues
                      
                      $
                      4,319
                      
                      
                      $
                      -
                      
                      
                      $
                      4,319Net
      Loss
                      
                      $
                      87,829
                      
                      
                      $
                      -
                      
                      
                      $
                      87,829Interest
      Expense
                      
                      $
                      -
                      
                      
                      $
                      1,460
                      
                      
                      $
                      1,460Total
      Assets
                      
                      $
                      -
                      
                      
                      $
                      1,589,492
                      
                      
                      $
                      1,589,492




8. 
NOTE PAYABLE





Effective
July 25, 2007 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.


8





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2008


(Amounts
expressed in US dollars)





8.
NOTE PAYABLE (con’t)





On March
1, 2008, FSU assigned the loan to PCL with modifications as follows: the
security pledge to FSU was voided; the due date was extended to December 31,
2009 per agreement; PCL reserved the right to further extend the due date and
interest-free period at their sole discretion.





On October 22, 2007,Megola signed a note and security
agreement with PCL to obtain additional funding in the amount of $249,060.
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.


The due
date on the entire amounts loaned will be December 31, 2009.


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





During
the year-ended July 31, 2008, PCL assumed several vendor invoices on behalf of
the company in the amount of $42,690.  The amount is non-interest
bearing and PCL waived their right to demand payment before January 1,
2010.  PCL reserved the right to further extend the due date and
interest-free period at their sole discretion.





9.
            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.




Per terms
of the distribution agreement, for each contract the Company enters into, the
following applies:





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





All
payments are to be made quarterly within 30 days of the end each calendar
quarter.





This
agreement, as amended subsequent to October 31, 2008 (see note 13(ii)), 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


9





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2008


(Amounts
expressed in US dollars)





10.
            INTANGIBLE
      ASSET


DISTRIBUTION RIGHTS (con’t)





(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. In December 2008, the sales/performance quota in the agreement with PCL
has been moved forward starting January 31, 2010.





10.
            ADVANCES
      FROM STOCKHOLDERS


Included
in the balance are advances in the amount of $499,644 unsecured, bearing
interest at 6% and are due on demand.


Also
included in the balance is an advance from a company related by common ownership
in the amount $60,190.  The loan bears interest at 7.75% per annum and
is due on demand.


Also
included in the balance are advances in the amount of $200,000 unsecured,
bearing interest at 6% and are due on demand.





11.
            CAPITAL STOCK AND ADDITIONAL
      PAID IN CAPITAL





(a)
Capital Stock


On August
14, 2008, Megola issued 1,000,000 restricted shares of its common stock, for
consulting fees, to Matthew Sacco, valued at $30,000.


On August
14, 2008, Megola issued 1,500,000 restricted shares of its common stock, for
consulting fees, to Regal Capital Partners LLC (RCP), valued at
$45,000.





(b)
Additional paid in capital


Additional
paid in capital increased $72,500 due to Megola issuing restricted shares of its
common stock for consulting fees.





(c) The
Company has a Stock Incentive Plan for employees and
consultants.  There were no shares issued under the plan during the
quarter ending October 31, 2008.  In the year ending July 31, 2007,
the Company issued 10,270,000 restricted common stock for consulting fees valued
at $412,800.





12.
            LEASE
      COMMITMENTS





(i) The
Company is committed under a lease for office premises which expires on January
31, 2011.
Minimum lease payments are due as follows:





Year
      Ended
                    
                    July
      31, 2009
                    
                    $
                    21,087Year
      Ended
                    
                    July
      31, 2010
                    
                    $
                    21,087Year
      Ended
                    
                    July
      31, 2011
                    
                    $
                    10,544Total
                    
                    
                    
                    $
                    52,718


10


MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2008


(Amounts
expressed in US dollars)





12.
            LEASE
      COMMITMENTS (con’t)





(ii) The
Company leased warehouse space and additional office space in Point Edward,
Ontario, and Canada that commenced September of 2008.  Required
minimum lease payments are as follows:





OfficeYear
      Ended
                    
                    July
      31, 2009
                    
                    $
                    33,634Year
      Ended
                    
                    July
      31, 2010
                    
                    $
                    36,692Year
      Ended
                    
                    July
      31, 2011
                    
                    $
                    36,692Year
      Ended
                    
                    July
      31, 2012
                    
                    $
                    36,692Year
      Ended
                    
                    July
      31, 2013
                    
                    $
                    36,692Year
      Ended
                    
                    July
      31, 2014
                    
                    $
                    3,058Total
                    
                    
                    
                    $
                    183,458WarehouseYear
      Ended
                    
                    July
      31, 2009
                    
                    $
                    13,698Year
      Ended
                    
                    July
      31, 2010
                    
                    $
                    14,944Year
      Ended
                    
                    July
      31, 2011
                    
                    $
                    14,944Year
      Ended
                    
                    July
      31, 2012
                    
                    $
                    14,944Year
      Ended
                    
                    July
      31, 2013
                    
                    $
                    14,944Year
      Ended
                    
                    July
      31, 2014
                    
                    $
                    1,245Total
                    
                    
                    
                    $
                    74,718





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





Year
      Ended
                  
                  July
      31, 2009
                  
                  $
                  28,509Year
      Ended
                  
                  July
      31, 2010
                  
                  $
                  34,211Year
      Ended
                  
                  July
      31, 2011
                  
                  $
                  34,211Year
      Ended
                  
                  July
      31, 2012
                  
                  $
                  5,702Total
                  
                  
                  
                  $
                  102,633





13.
            SUBSEQUENT
      EVENTS





(i) 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
received a commencement bonus of 1,500,000 restricted common shares of
Megola stock with Piggy Back registration rights.  The shares
certificate was issued on August 14, 2008 from treasury; however the certificate
was not delivered to RCP until November 24, 2008. The shares are in lieu of a
$400,000 payment and are based on $ 0.266 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


These
warrants have not been exercised and have since lapsed.


11





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2008


(Amounts
expressed in US dollars)





13.
            SUBSEQUENT
      EVENTS (con’t)





(ii) On
December 8, 2008, the sales/performance quotas in the agreement with PCL dated
January 12, 2007 (see note 9), have been moved forward starting January 31,
2010.





(iii) 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.





(iv)An additional
vehicle was leased in April of 2009. Required minimum lease payments are as
follows:





Year
      Ended
                  
                  July
      31, 2009
                  
                  $
                  2,003Year
      Ended
                  
                  July
      31, 2010
                  
                  $
                  8,014Year
      Ended
                  
                  July
      31, 2011
                  
                  $
                  8,014Year
      Ended
                  
                  July
      31, 2012
                  
                  $
                  6,011Total
                  
                  
                  
                  $
                  28,959


12





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Three Months
ended October 31, 2008


(Amounts
expressed in US dollars)





13.   SUBSEQUENT
EVENTS (con’t)




(v) On
April 20, 2009, Megola extended an offer to shareholders to exchange twenty five
(25) common shares of the Company's Common Stock for one (1) share of the
Company's newly created Series 'A' Convertible Preferred Stock, valued at $5.00
per share. Holders of Series A Convertible Preferred Stock shall have
one-hundred (100) votes for each full share Series A Convertible Preferred
Stock. No conversion of Series A Convertible Preferred Stock to Common Stock can
occur until after a holding period of twelve (12) months from May 29, 2009. The
Company also announced that each Preferred Shareholder shall also be granted
Warrants to purchase up to ten (10) common shares of Megola, Inc. stock at a
price of $0.45 for every one (1) Series A Convertible Preferred Stock
held.




(vi)On April 23, 2009, Megola announced an offer to
the Company's Creditors to exchange any or all of the company's outstanding debt
for Megola Series B Convertible Preferred Stock. Creditors will receive one (1)
share of the Company's Series B Convertible Preferred Stock for every ten
dollars ($10) of debt exchanged. The purpose of this exchange offer is to
replace the company's long-term debt with long-term equity investment in Megola
through our Series B Convertible Preferred Stock.  The holders of
Series B Convertible Preferred Stock shall have no voting rights. No conversion
of Series B Convertible Preferred Stock to Common Stock can occur until after a
holding period of twelve (12) months from time of debt conversion. Thereafter,
Creditor has the option to convert the Series B Convertible Preferred Stock into
Common Stock.




(vii) On
April 30, 2009, $22,000 of customer deposits included in accounts payable has
been settled in stock.




(viii)On May 1, 2009, Megola announced the signing
of a Distribution and Sales Agency Agreement with Innovative Composites Inc.
(ICI) for the Hartindo line of Anti-Fire Products. ICI will provide Megola with
purchase orders and/or contracts for Hartindo products sales of not less than
200,000 gallons or USD $2 Million on annual basis in the first 18 months. ICI
will also increase the total orders of Hartindo products by no less than 15%
annually thereafter for a period of 5 years. ICI will become an Agent for
commercialization of the Hartindo anti-fire product line on behalf of MEGOLA and
will manage the entire commercialization process. ICI will provide Megola with a
$100,000 (CAD) deposit upon execution of this Agreement which will be used to
secure Hartindo product. ICI acknowledges that MEGOLA has entered into
Agreements and Discussions with various Customers and Sales, Marketing and
Distribution groups prior to entering into this Agreement and those entities
shall be exempt from this agreement.





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, 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.


13





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, 2008 vs. three months ended
October 31, 2007 increased 153.20% from $87,829 to $222,382. The Company has an
accumulated deficit of $5,837,982 as of October 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.





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, Woodsmart Solutions Inc. for sales accounting for
approximately 74% of our revenues in the first 3 months of fiscal year 2009.
Holly Oak Chemical Inc. accounted for 74% of cost of goods for the first 3
months of fiscal year 2009. Sales of the ScaleGuard devices accounted for 26%
and Hartindo products accounted for 74% of our total gross revenues in the first
3 months of fiscal year 2009.





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.


14





RESULTS
OF OPERATIONS





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





Our
revenues for the three months ended October 31, 2008 vs. three months ended
October 31, 2007 increased 164.21% from $4,319 to $11,411 due to the sales of
new product initiatives.





Our cost
of sales for the three months ended October 31, 2008 vs. three months ended
October 31, 2007 increased 398.06% from $1,074 to $5,349. The overall increase
in the cost of sales during this period is directly attributable to the increase
in revenues.





Our
general and administrative expenses for the three months ended October 31, 2008
vs. three months ended October 31, 2007 increased 65.21% from $88,943 to
$146,939 because of an increase in rent due to relocation, vehicle lease
commitments and the addition of a full time Logistics Manager.





Our
interest expense for the three months ended October 31, 2008 vs. three months
ended October 31, 2007 increased 278.15% from $1,460 to $5,521 because of the
Company's increased interest owing towards stockholder loans.





Accordingly,
our net loss for the three months ended October 31, 2008 vs. three months ended
October 31, 2007 decreased 153.20% from $87,829 to $222,382.





LIQUIDITY
AND CAPITAL RESOURCES





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





At
October 31, 2008, we had an accumulated deficit of $5,837,982.





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.


15





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 5, 2008





Form:





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:
      September 18, 2009
                      By:
                      /s/ Joel
      GardnerJoel
      GardnerPresident,
      CEO, Principal FinancialOfficer
      and Principal Accounting Officer


16