**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


**FORM
      10-QSB**


(Mark
      One)




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


**EXCHANGE
      ACT OF 1934**


For
      the
      quarterly period ended: January 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: 000-49815446
                Lyndock St., Suite 102Corunna,
                ON
            
            N0N
                1G0(Address
                of Principal
            
            (Zip
                Code)Executive
                Offices)




Registrant's
      telephone number, including area code: Tel: (519) 481-0628







(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
o 
No
x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o 
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 o No
o




APPLICABLE
      ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each
      of
      the issuer's classes of common stock, as of the latest practicable date:
      47,986,029 at January 31, 2007.









**Megola,
      Inc.**




Table
                of ContentsPART
                I – FINANCIAL INFORMATIONItem
                1. Unaudited Financial Statements
            3Item
                2. Management's Discussion and Plan of Operation
            10Forward-Looking
                Statements
            10Item
                3. Controls and Procedures
            12PART
                II – OTHER INFORMATION
            13Item
                1. Legal Proceedings
            13Item
                2. Changes in Securities
            13Item
                3. Defaults upon Senior Securities.
            13Item
                4. Submission of Matters to a Vote of Security Holders.
            13Item
                5. Other Information.
            13Item
                6. Exhibits
            13





2




**PART
      I - FINANCIAL INFORMATION**




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


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




**MEGOLA,
                INC.****CONSOLIDATED
                INTERIM BALANCE SHEET****(Amounts
                expressed in US dollars)**


**January
                31,**
              **2007**
            
            **July
                31,**
              **2006****(Unaudited)**
            
            **(Audited)****ASSETS**Cash
            
            
            
            
            
            4,858Accounts
                receivable
            
            
            41,315
            
            
            -Inventory
            
            
            351,722
            
            
            352,197Prepaid
                expenses
            
            
            13,254
            
            
            -Deposits
            
            
            -
            
            
            -Loan
                receivable - related party
            
            
            -
            
            
            -406,291
            
            
            357,055Property
                and equipment
            
            
            8,986
            
            
            12,278Intangible
                assets
            
            
            -
            
            
            -**415,277**
            
            
            **369,333****LIABILITIES**Bank
                overdraft
            
            
            26,644
            
            
            48,841Notes
                payable - related parties
            
            
            264,350
            
            
            86,857Accounts
                payable and accrued liabilities
            
            
            337,963
            
            
            376,378Distributor
                deposits
            
            
            1,361
            
            
            4,361Accrued
                interest
            
            
            15,418
            
            
            14,816645,736
            
            
            531,253**STOCKHOLDERS'
                EQUITY**Capital
                stock
            
            
            47,986
            
            
            37,716Paid
                in capital
            
            
            4,560,112
            
            
            4,157,582Accumulated
                deficit
            
            
            (4,865,632
            )
            
            (4,337,973
            )Accumulated
                other comprehensive income (loss):Foreign
                currency translation adjustment
            
            
            27,075
            
            
            (19,245
            )(230,459
            )
            
            (161,920
            )**415,277**
            
            
            **369,333**




*See
      accompanying notes to unaudited interim consolidated financial
      statements*


3




**MEGOLA,
                INC.****CONSOLIDATED
                INTERIM STATEMENT OF OPERATIONS (UNAUDITED)****(Amounts
                expressed in US dollars)**


**FOR THE 3 MONTHS ENDED**
            
            **FOR THE 6 MONTHS ENDED****January 31, 2007**
            
            **January 31,**
              **2006**
            
            **January 31, 2007**
            
            **January 31,**
              **2006**Income
                - sales
            
            
            14,317
            
            
            24,616
            
            
            15,831
            
            
            186,803Income
                - royalties
            
            
            42,000
            
            
            250,000
            
            
            82,000
            
            
            290,000**TOTAL
                REVENUE**
            
            
            56,317
            
            
            274,616
            
            
            97,831
            
            
            476,803Cost
                of sales
            
            
            382
            
            
            14,994
            
            
            2,275
            
            
            124,672Selling
            
            
            10,606
            
            
            -
            
            
            22,316
            
            
            -General
                and administrative
            
            
            113,882
            
            
            128,669
            
            
            591,723
            
            
            550,114Depreciation
            
            
            1,661
            
            
            (348
            )
            
            3,354
            
            
            13,136Interest
            
            
            2,355
            
            
            2,570
            
            
            5,822
            
            
            3,033**TOTAL
                EXPENSES**
            
            
            128,886
            
            
            145,885
            
            
            625,490
            
            
            690,955**NET
                INCOME (LOSS)**
            
            
            (72,569
            )
            
            128,731
            
            
            (527,659
            )
            
            (214,152
            )Foreign
                currency translation adjustment
            
            
            50,222
            
            
            (447
            )
            
            46,320
            
            
            51,813**COMPREHENSIVE
                INCOME (LOSS)**
            
            
            (22,347
            )
            
            128,284
            
            
            (481,339
            )
            
            (162,339
            )**Weighted
                average common shares outstanding**
            
            
            **47,986,029**
            
            
            **37,341,029**
            
            
            **46,610,649**
            
            
            **36,883,090****Basic
                and fully diluted loss per share**
            
            
            **(0.00**
            **)**
            
            **0.00**
            
            
            **(0.01**
            **)**
            
            **(0.01**
            **)****Basic
                and fully diluted comprehensive loss per share**
            
            
            **(0.00**
            **)**
            
            **0.00**
            
            
            **(0.01**
            **)**
            
            **(0.00**
            **)**


*See
      accompanying notes to unaudited interim consolidated financial
      statements*




4




**MEGOLA,
                  INC.****CONSOLIDATED
                  INTERIM STATEMENT OF CASH FLOWS
                  (UNAUDITED)**


**FOR THE 6 MONTHS ENDED****January 31, 2007**
            
            **January 31, 2006****OPERATING
                ACTIVITIES**Net
                loss for the period
            
            
            (527,659
            )
            
            (214,152
            )Add
                (subtract) items not involving cash:Amortization
                of property and equipment and intangible assets
            
            
            3,354
            
            
            9,186Cash
                flow from operations
            
            
            (524,305
            )
            
            (204,966
            )Cash
                effect of changes in:Accounts
                receivable
            
            
            (41,388
            )
            
            (267,123
            )Inventory
            
            
            (2,823
            )
            
            7,769Prepaid
                expenses
            
            
            (13,541
            )
            
            5,109Loan
                receivable
            
            
            -
            
            
            856Accounts
                payable and accrued liabilities
            
            
            (21,398
            )
            
            43,174Distributor
                deposits
            
            
            1,399
            
            
            -Accrued
                interest
            
            
            202
            
            
            -Deferred
                revenue
            
            
            -
            
            
            4,361Shares
                issued for service
            
            
            412,800
            
            
            252,000Cash
                flows from operating activities
            
            
            (189,054
            )
            
            (158,820
            )**INVESTING
                ACTIVITIES**Cash
                flows used in investing activities
            
            
            -
            
            
            -**FINANCING
                ACTIVITIES**Proceeds
                from notes payable
            
            
            177,493
            
            
            67,836Repayment
                of notes payable
            
            
            -
            
            
            (1,302
            )Proceeds
                from issuance of common stock
            
            
            -
            
            
            2,324Cash
                flows used in financing activities
            
            
            177,493
            
            
            68,858EFFECT
                OF EXCHANGE RATE CHANGES ON CASH
            
            
            28,900
            
            
            61,849**NET
                  INCREASE (DECREASE) IN CASH AND EQUIVALENTS **DURING THE
                  PERIOD****
            
            
            17,339
            
            
            (28,113
            )CASH
                AND CASH EQUIVALENTS (BANK OVERDRAFT), BEGINNING OF PERIOD
            
            
            (43,983
            )
            
            (17,191
            )**CASH
                AND CASH EQUIVALENTS (BANK OVERDRAFT), END OF
                PERIOD**
            
            
            **(26,644**
            **)**
            
            **(45,304**
            **)****Cash
                and Equivalents consists of:**Cash
            
            
            **-**
            
            
            -Bank
                Overdraft
            
            
            (26,644
            )
            
            (45,304
            )**(26,644**
            **)**
            
            **(45,304**
            **)****SUPPLEMENTAL
                DISCLOSURES:**Cash
                paid for:Interest
            
            
            -
            
            
            -Income
                taxes
            
            
            -
            
            
            -Non-cash
                transactions:Offset
                of royalty income receivable with accounts payable
            
            
            
            
            
            290,500Debt
                exchange for 1,123,600 shares of common stock
            
            
            -
            
            
            112,360




*See
      accompanying notes to financial statements*




5





**MEGOLA,
      INC.**


**CONSOLIDATED
      INTERIM STATEMENT OF STOCKHOLDERS' DEFICIT**


**(Amounts
      expressed in US dollars)**


**January
      31, 2007**





**Other**
            
            **Additional****Common Stock**
            
            **Comprehensive**
            
            **Paid In**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Income (Loss)**
            
            **Capital**
            
            **Deficit**
            
            **Totals****Balances,
                July 31, 2004**
            
            
            27,814,550
            
            
            27,814
            
            
            37,995
            
            
            2,236,045
            
            
            (2,510,137
            )
            
            (208,283
            )Stock
                Issued for Services
            
            
            1,500,000
            
            
            1,500
            
            
            -
            
            
            555,900
            
            
            
            
            
            557,400Discount
                on Notes Payable
            
            
            -
            
            
            -
            
            
            -
            
            
            112,500
            
            
            -
            
            
            112,500Stock
                for Debt
            
            
            5,052,879
            
            
            5,053
            
            
            -
            
            
            398,913
            
            
            -
            
            
            403,966Stock
                for Intangible Assets
            
            
            300,000
            
            
            300
            
            
            -
            
            
            110,700
            
            
            -
            
            
            111,000Stock
                for Cash
            
            
            350,000
            
            
            350
            
            
            -
            
            
            349,650
            
            
            -
            
            
            350,000Net
                Loss Applicable toCommon
                Shareholders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (968,121
            )
            
            (968,121
            )Foreign
                Currency
            
            
            -
            
            
            -
            
            
            (109,568
            )
            
            -
            
            
            -
            
            
            (109,568
            )**Balances,
                July 31, 2005**
            
            
            35,017,429
            
            
            35,017
            
            
            (71,573
            )
            
            3,763,708
            
            
            (3,478,258
            )
            
            248,894Stock
                Issued for Services
            
            
            1,575,000
            
            
            1,575
            
            
            -
            
            
            282,638
            
            
            -
            
            
            284,213Discount
                on Notes Payable
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            -Stock
                for Debt
            
            
            1,123,600
            
            
            1,124
            
            
            -
            
            
            111,236
            
            
            -
            
            
            112,360Net
                Loss Applicable toCommon
                Shareholders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (859,715
            )
            
            (859,715
            )Foreign
                Currency
            
            
            -
            
            
            -
            
            
            52,328
            
            
            -
            
            
            -
            
            
            52,328**Balances,
                July 31, 2006**
            
            
            37,716,029
            
            $
            37,716
            
            $
            (19,245
            )
            $
            4,157,582
            
            $
            (4,337,973
            )
            
            (161,920
            )Stock
                for Cash
            
            
            -
            
            $
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                for Intangible Assests
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                for Debt
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                Issued For Services
            
            
            10,270,000
            
            
            10,270
            
            
            -
            
            
            402,530
            
            
            -
            
            
            412,800Discount
                on Notes Payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            0Net
                Loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (527,659
            )
            
            (527,659
            )Foreign
                Currency Translation Adjustment
            
            
            -
            
            
            -
            
            
            46,320
            
            
            -
            
            
            -
            
            
            46,320**Balances,
                January 31, 2007**
            
            
            47,986,029
            
            $
            47,986
            
            $
            27,075
            
            
            4,560,112
            
            $
            (4,865,632
            )
            $
            (230,459
            )




6




**MEGOLA
      INC.**


**Notes
      to Unaudited Interim Consolidated Financial Statements for the 6 Months ended
      January 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 2006 as reported in the 10-KSB have been
      omitted.





**2.**
            **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.





**3.**
            **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.





**4.**
            **RECENTLY
                ISSUED UNITED STATES ACCOUNTING
                STANDARDS**





In
      July
      2006, the Financial Accounting Standards Board ("FASB") has published FASB
      Interpretation No. 48 ("FIN No.48), Accounting for Uncertainty in Income Taxes,
      to address the non-comparability in reporting tax assets and liabilities
      resulting from a lack of specific guidance in FASB Statement of Financial
      Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, on the
      uncertainty in income taxes recognized in an enterprise's financial statements.
      FIN No. 48 will apply to fiscal years beginning after December 15, 2006, with
      earlier adoption permitted. The adoption of FIN 48 is not expected to have
      a
      material effect on the Company's financial condition or results of
      operations.





In
      September 2006, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements."
      SFAS
      No. 157 clarifies the principle that fair value should be based on the
      assumptions market participants would use when pricing an asset or liability
      and
      establishes a fair value hierarchy that prioritizes the information used to
      develop those assumptions. Under the standard, fair value measurements would
      be
      separately disclosed by level within the fair value hierarchy. SFAS No. 157
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 and interim periods within those fiscal years, with early
      adoption permitted. The Company does not expect the adoption of SFAS No. 157
      to
      materially impact its financial statements.




7




In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
      overfunded or underfunded status of a defined benefit postretirement plan (other
      than a multiemployer plan) as an asset or liability in its statement of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. The provisions of SFAS No. 158 are effective for employers with
      publicly traded equity securities as of the end of the fiscal year ending after
      December 15, 2006. The adoption of this statement is not expected to have a
      material effect on the Company’s future reported financial position or results
      of operations.




In
      September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108 (Topic 1N), “Quantifying Misstatements in Current
      Year Financial Statements” (“SAB No. 108”). SAB No.108 addresses how the effect
      of prior year uncorrected misstatements should be considered when quantifying
      misstatements in current year financial statements. SAB No. 108 requires SEC
      registrants (i) to quantify misstatements using a combined approach which
      considers both the balance sheet and income statement approaches; (ii) to
      evaluate whether either approach results in quantifying an error that is
      material in light of relevant quantitative and qualitative factors; and (iii)
      to
      adjust their financial statements if the new combined approach results in a
      conclusion that an error is material. SAB No. 108 addresses the mechanics of
      correcting misstatements that include effects from prior years. It indicates
      that the current year correction of a material error that includes prior year
      effects may result in the need to correct prior year financial statements even
      if the misstatement in the prior year of years is considered immaterial. Any
      prior year financial statements found to be materially misstated in years
      subsequent to the issuance of SAB No. 108 would be restated in accordance with
      SFAS No. 154, “Accounting Changes and Error Corrections”. Because the combined
      approach represents a change in practice, the SEC staff will not require
      registrants that followed an acceptable approach in the past to restate prior
      years’ historical financial statements. Rather, these registrants can report the
      cumulative effect of adopting the new approach as an adjustment to the current
      year’s beginning balance of retained earnings. If the new approach is adopted in
      a quarter other than the first quarter, financial statements for prior interim
      periods within the year of adoption may need to be restated. SAB No. 108 is
      effective for fiscal years ending after November 15, 2006, which for the Company
      would be its fiscal year beginning April 1, 2007. The implementation of SAB
      No.
      108 is not expected to have a material impact on the Company’s results of
      operations and financial condition.





In
      February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) – the fair value
      option for financial assets and liabilities including an amendment of SFAS
      115.
      This Statement permits entities to choose to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting provisions. This statement
      is
      expected to expand the use of fair value measurement objectives for accounting
      for financial instruments. This statement is effective as of the beginning
      of an
      entity’s first fiscal year that begins after November 15, 2007, and interim
      periods within those fiscal years. Early adoption is permitted as of the
      beginning of a fiscal year that begins on or before November 15, 2007, provided
      the entity also elects to apply the provisions of FASB Statement No. 157, “Fair
      Value Measures”. The company is currently evaluating the impact of SFAS No. 159
      on its consolidated financial statements.




8




**5.**
            **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
            
            China
            
            Total6
                months ended January 31, 2007Revenues
            
            $
            15,831
            
            $
            82,000
            
            $
            97,831Net
                loss
            
            $
            527,659
            
            $
            0
            
            $
            527,6596
                months ended January 31, 2006Revenues
            
            $
            186,803
            
            $
            290,000
            
            $
            476,803Net
                loss
            
            $
            214,152
            
            $
            0
            
            $
            214,152




**6.**
            **CAPITAL
                STOCK**





On
      August
      22, 2006, Megola issued 200,000 shares of its common stock for professional
      fees, under its Stock Incentive Program for Employees and Consultants, valued
      at
      $10,000.


On
      August
      22, 2006, Megola issued 8,200,000 restricted shares of its common stock, for
      consulting fees under its Stock Incentive Program for Employees and Consultants,
      valued at $328,000.


On
      September 11, 2006, Megola issued 1,870,000 restricted shares of its common
      stock, for consulting fees under its Stock Incentive Program for Employees
      and
      Consultants, valued at $74,800.





**7.**
            **RELATED
                PARTY TRANSACTIONS**





During
      the six-month period ending January 31, 2007,Megola borrowed $177,493 from
      several of its shareholders. The loans are unsecured, non-interest bearing
      and
      are payable on demand.





**8.**
            **COMPARATIVE
                BALANCES**





Certain
      amounts presented at July 31, 2006 have been reclassified to conform to
      presentation at January 31, 2007.




9




**Item
      2. Management's Discussion and Plan of Operation**


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


For
      the
      Quarter Ended January 31, 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, managements' 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.





**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 products used in physical water treatment, microbiological
      control, wastewater treatment and air purification. Megola's ScaleGuard product
      units use 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. Megola's
      AirGuardian indoor air quality product unit is a uniquely engineered, integrated
      ultraviolet light system 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.





Megola
      was dependent on one customer, H203 Solutions for sales accounting for
      approximately 87.6% of our revenues in the first 6 months of fiscal year 2007.
      The same vendor accounted for 100% of cost of goods for the first 6 months
      of
      fiscal year 2007. Sales of the ScaleGuard devices accounted for 99% and the
      AirGuardian units accounted for 0% of our total gross revenues in the first
      6
      months of fiscal year 2007.





Commencing
      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 a royalty payment from the sales of these two products




10




**RESULTS
      OF OPERATIONS**





Three
      months ended January 31, 2007 vs. three months ended January 31,
      2006.





Our
      revenues for the three months ended January 31, 2007 vs. three months ended
      January 31, 2006 decreased 79.49% from $274,616 to $56,317 due to a reduction
      in
      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 it is intended to increase sales staff in the
      future.





Our
      cost
      of sales for the three months ended January 31, 2007 vs. three months ended
      January 31, 2006 decreased 97.45% from $14,994 to $382. The overall decrease
      in
      the cost of sales during this period is directly attributable to the decrease
      in
      revenues and receiving royalty payments to which we do not incur any cost of
      sales. 75% of our 3 month revenues were royalties.





Our
      general and administrative expenses for the three months ended January 31,
      2007
      vs. three months ended January 31, 2006 decreased 11.49% from $128,669 to
      $113,882 because of the decrease in costs of stock for services which are shown
      in our G&A.





Our
      interest expense for the three months ended January 31, 2007 vs. three months
      ended January 31, 2006 decreased 8.37% from $2,570 to $2,355 because of the
      company's decreased interest owing towards payroll deductions.





Accordingly,
      our net income for the three months ended January 31, 2007 vs. three months
      ended January 31, 2006 decreased from $128,731 to a loss of
      $72,569.





**Six
      months ended January 31, 2007 vs. Six months ended January 31,
      2006.**





Our
      revenues for the six months ended January 31, 2007 vs. six months ended January
      31, 2006 decreased 79.48% from $476,803 to $97,831 due to a reduction in 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 it is intended to increase sales staff in the
      future.





Our
      cost
      of sales for the six months ended January 31, 2007 vs. six months ended January
      31, 2006 decreased 98.18% from $124,672 to $2,275. The overall decrease in
      the
      cost of sales during this period is directly attributable to the decrease in
      revenues and receiving royalty payments to which we do not incur any cost of
      sales. 84% of our 6 month revenues were royalties.





Our
      general and administrative expenses for the six months ended January 31, 2007
      vs. six months ended January 31, 2006 increased 7.56% from $550,114 to $591,723
      because of the increase in costs of stock for services which are shown in our
      G&A.





Our
      interest expense for the six months ended January 31, 2007 vs. six months ended
      January 31, 2006 increased 91.96% from $3,033 to $5,822 because of the company's
      increased interest owing towards payroll deductions.





Accordingly,
      our net loss for the six months ended January 31, 2007 vs. six months ended
      January 31, 2006 increased 146.39% from $214,152 to $527,659.





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      financial statement as of and for the period ending January 31, 2007 has been
      prepared assuming we continue as a going concern.





At
      January 31, 2007, we had an accumulated deficit of $4,865,632 and a bank
      overdraft of $26,644.





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.




11




**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 Corporation's Chief Executive Officer and Chief
      Financial Officer concluded that the Corporation'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 Corporation's internal control over financial reporting
      that occurred during the Corporation's most recent fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, the
      Corporation's internal control over financial reporting.





A
      review
      of the financial statements was conducted by the Company's independent
      accounting firm and significant reporting deficiencies have been addressed
      in
      this report.




12


**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: November 17, 2006Form:
                8-K
            
            Filing
                Date: December 14, 2006Form:
                8-K
            
            Filing
                Date: January 16, 2007





Exhibit
      Name and/or Identification of Exhibit Number





31
      Certification


32
      Certification




13





**SIGNATURES**





Pursuant
      to the requirements of the Securities and Exchange Act of 1934, the registrant
      has duly caused this Report to be signed on its behalf by the undersigned
      hereunto duly authorized.





MEGOLA,
                INC.(Registrant)By:
                /s/ Joel GardnerJoel
                GardnerPresident,
                CEO, Principal FinancialOfficer
                and Principal Accounting Officer





Date:
      February 08, 2008




14