Summary of MEGOLA INC - Yahoo! Finance

Item 2. Management's Discussion and Plan of Operation
Management's Discussion and Analysis of Financial Condition and Operating Results
For the Quarter Ended April 30, 2009

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 nine months ended April 30, 2009 vs. nine months ended April 30, 2008 decreased 79.73% from $398,019 to $80,664. The Company has an accumulated deficit of $5,696,264 as of April 30, 2009. 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, Vulcan Technologies, LLC for sales accounting for approximately 98% of our revenues in the first 9 months of fiscal year 2009. Holly Oak Chemical, Inc. accounted for 100% of cost of goods for the first 9 months of fiscal year 2009. Sales of the ScaleGuard devices accounted for 1%, and Hartindo products accounted for 99% of our total gross revenues in the first 9 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.

RESULTS OF OPERATIONS

Three months ended April 30, 2009 vs. three months ended April 30, 2008.

Our revenues for the three months ended April 30, 2009 vs. three months ended April 30, 2008 increased 1,484.52% from $659 to $10,442 due to a royalty payment based on a North American Distribution Agreement.

Our cost of sales for the three months ended April 30, 2009 vs. three months ended April 30, 2008 increased 1,778% from $100 to $1,878. 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 April 30, 2009 vs. three months ended April 30, 2008 decreased 7.62% from $144,633 to $133,619 because of a decrease in travel expenses.

Our interest expense for the three months ended April 30, 2009 vs. three months ended April 30, 2008 increased 5773.66% from $224 to $13,157 because of the Company's increased interest owing towards payroll deductions and stockholder loans.

Accordingly, our net loss for the three months ended April 30, 2009 vs. three months ended April 30, 2008 decreased 4.30% from $145,612 to $139,348.

Nine months ended April 30, 2009 vs. Nine months ended April 30, 2008.

Our revenues for the nine months ended April 30, 2009 vs. nine months ended April 30, 2008 increased 3,101.64% from $13,265 to $424,698 due to a royalty payment based on a North American Distribution Agreement. 95% of our 9 month revenues were royalties.

Our cost of sales for the nine months ended April 30, 2009 vs. nine months ended April 30, 2008 increased 468.95% from $1,504 to $8,557. 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 nine months ended April 30, 2009 vs. nine months ended April 30, 2008 decreased 2.42% from $405,348 to $395,553 because of the decrease in travel expenses.

Our interest expense for the nine months ended April 30, 2009 vs. nine months ended April 30, 2008 increased 844.74% from $2,432 to $22,976 because of the company's increased interest owing towards payroll deductions and stockholder loans.

Accordingly, our net loss for the nine months ended April 30, 2009 vs. nine months ended April 30, 2008 decreased 79.73% from $398,019 to $80,664.

LIQUIDITY AND CAPITAL RESOURCES

The financial statements as of and for the period ending April 30, 2009 have been prepared assuming we continue as a going concern.

At April 30, 2009, we had an accumulated deficit of $5,696,264.

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.