**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: October 31, 2006




Or




**|_|
      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 OFINCORPORATION
                OR ORGANIZATION)
            
            (IRS
                EMPLOYERINDENTIFICATION
                NO.)SEC
                File Number: 000-49815446
                Lyndock St., Suite 102Corunna,
                ON
            
            N0N
                1G0(Address
                of PrincipalExecutive
                Offices)
            
            (Zip
                Code)




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
      |_| 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|




1


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:
      47,986,029 at October 31, 2006




**Megola,
      Inc.**




Table
      of Contents




PART I - FINANCIAL INFORMATIONItem 1. Unaudited Financial
                Statements
              
              3Item 2. Management's Discussion and
                Plan of
                Operation
              
              10Forward-Looking Statements
              
              10Item 3. Controls and Procedures
              
              11PART II - OTHER INFORMATIONItem 1. Legal Proceedings
              
              12Item 2. Changes in Securities
              
              12Item 3. Defaults upon Senior
                Securities
              
              12Item 4. Submission of Matters to a
                Vote of
                Security Holders
              
              12Item 5. Other Information
              
              12Item 6. Exhibits
              
              12




2


**PART
      I - FINANCIAL INFORMATION**




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


*Three
      Months Ended October 31, 2006* (Amounts
      expressed in US dollars)




**MEGOLA,
                INC.**
              **CONSOLIDATED
                BALANCE SHEET**
              **(Amounts
                expressed in US dollars)****October
                31, 2006**
            
            **July
                31, 2006**
            
            **October
                31, 2005****(Unaudited)**
            
            **(Audited)**
            
            **(Unaudited)****ASSETS**Cash
            
            $
            0
            
            $
            4,858
            
            $
            5,498Accounts
                receivable
            
            
            10
            
            
            0
            
            
            426,004Inventory
            
            
            349,569
            
            
            352,197
            
            
            69,056Prepaid
                expenses
            
            
            5,616
            
            
            0
            
            
            0Deposits
            
            
            0
            
            
            0
            
            
            143,492Loan
                receivable - related party
            
            
            0
            
            
            0
            
            
            6,653355,195
            
            
            357,055
            
            
            650,703Property
                and equipment
            
            
            10,637
            
            
            12,278
            
            
            22,532Intangible
                assets
            
            
            0
            
            
            0
            
            
            94,350**$**
            **365,832**
            
            **$**
            **369,333**
            
            **$**
            **767,585****LIABILITIES**Bank
                overdraft
            
            $
            63,929
            
            $
            48,841
            
            $
            48,952Notes
                payable - related parties
            
            
            155,927
            
            
            86,857
            
            
            0Accounts
                payable
            
            
            155,945
            
            
            290,930
            
            
            358,661Distributor
                deposits
            
            
            4,012
            
            
            4,361
            
            
            0Accrued
                interest
            
            
            15,317
            
            
            14,816
            
            
            6,338Accrued
                expenses
            
            
            178,380
            
            
            85,448
            
            
            16,003Loans
                from investors
            
            
            0
            
            
            0
            
            
            15,000573,510
            
            
            531,253
            
            
            444,954**STOCKHOLDERS'
                EQUITY**Capital
                stock
            
            
            47,986
            
            
            37,716
            
            
            37,341Additional
                paid in capital
            
            
            4,560,112
            
            
            4,157,582
            
            
            4,125,744Accumulated
                deficit
            
            
            (4,792,629
            )
            
            (4,337,973
            )
            
            (3,821,141
            )Other
                comprehensive income:Foreign
                currency translation
            
            
            (23,147
            )
            
            (19,245
            )
            
            (19,313
            )(207,678
            )
            
            (161,920
            )
            
            322,631**$**
            **365,832**
            
            **$**
            **369,333**
            
            **$**
            **767,585**




*See
        accompanying notes to unaudited interim consolidated financial
        statements*





3





**MEGOLA,
                    INC.**
                **CONSOLIDATED
                    STATEMENT OF OPERATIONS (UNAUDITED)****(Amounts
                    expressed in US dollars)**
              
              **FOR
                  THE 3 MONTHS ENDED****October
                  31, 2006**
              
              **October
                  31, 2005**Income
                  - sales
              
              $
              1,514
              
              $
              162,187Income
                  - royalties
              
              
              40,000
              
              
              40,000**TOTAL
                  REVENUE**
              
              
              41,514
              
              
              202,187Cost
                  of sales
              
              
              1,893
              
              
              109,678Selling
              
              
              11,710
              
              
              8,555General
                  and administrative
              
              
              490,905
              
              
              412,890Depreciation
              
              
              1,693
              
              
              7,934Interest
              
              
              3,467
              
              
              463Amortization
              
              
              0
              
              
              5,550**TOTAL
                  EXPENSES**
              
              
              509,668
              
              
              545,070**NET
                  LOSS**
              
              
              (468,154
              )
              
              (342,883
              )Foreign
                  currency translation adjustment
              
              
              13,498
              
              
              52,260**COMPREHENSIVE
                  LOSS**
              
              
              (454,656
              )
              
              (290,623
              )Deficit,
                  beginning of period
              
              
              (4,337,973
              )
              
              (3,530,518
              )**DEFICIT,
                  END OF THE PERIOD**
              
              **$**
              **(4,792,629**
              **)**
              **$**
              **(3,821,141**
              **)****Weighted
                  average common shares outstanding**
              
              
              **45,235,268**
              
              
              **36,425,151****Basic
                  and fully diluted loss per share**
              
              **$**
              **(0.010**
              **)**
              **$**
              **(0.009**
              **)****Basic
                  and fully diluted comprehensive loss per share**
              
              **$**
              **(0.010**
              **)**
              **$**
              **(0.008**
              **)**


*See
          accompanying notes to unaudited interim consolidated financial
          statements*
 
 4
 **MEGOLA,
                    INC.****CONSOLIDATED
                    STATEMENT OF CASH FLOWS (UNAUDITED)****(Amounts
                    expressed in US dollars)**
                
                **FOR
                    THE 3 MONTHS ENDED****October
                    31, 2006**
                
                **October
                    31, 2005****OPERATING
                    ACTIVITIES**Net
                    loss for the period
                
                $
                (468,154
                )
                $
                (342,883
                )Add
                    (subtract) items not involving cash:Amortization
                    of property and equipment
                
                
                1,693
                
                
                7,934Amortization
                    of intangible assets
                
                
                0
                
                
                5,550Cash
                    flow from operations
                
                
                (466,461
                )
                
                (329,399
                )Cash
                    effect of changes in:Accounts
                    receivable
                
                
                (10
                )
                
                (28,574
                )Inventory
                
                
                2,628
                
                
                13,147Prepaid
                    expenses
                
                
                (5,616
                )
                
                0Loans
                    receivable
                
                
                0
                
                
                (6,653
                )Other
                    assets
                
                
                
                
                
                11,762Bank
                    overdraft
                
                
                
                
                
                14,578Notes
                    payable - related parties
                
                
                
                
                
                (1,302
                )Accounts
                    payable
                
                
                (134,985
                )
                
                14,205Accrued
                    expenses
                
                
                92,932
                
                
                (18,004
                )Accrued
                    interest
                
                
                501
                
                
                (11,910
                )Distributor
                    deposits
                
                
                (349
                )Shares
                    issued for service
                
                
                412,800
                
                
                364,360Cash
                    flows from operating activities
                
                
                (98,560
                )
                
                22,210**INVESTING
                    ACTIVITIES**Acquisition
                    of property and equipment
                
                
                (52
                )
                
                (1,155
                )Cash
                    flows from investing activities
                
                
                (52
                )
                
                (1,155
                )**FINANCING
                    ACTIVITIES**Notes
                    payable-related parties
                
                
                69,070
                
                
                0Loans
                    from investors
                
                
                0
                
                
                (85,000
                )Cash
                    flows used in financing activities
                
                
                69,070
                
                
                (85,000
                )EFFECT
                    OF EXCHANGE RATE CHANGES ON CASH
                
                
                9,596
                
                
                52,260**NET
                    DECREASE IN CASH AND EQUIVALENTS DURING****THE
                    PERIOD**
                
                
                (19,946
                )
                
                (11,685
                )CASH
                    AND EQUIVALENTS, BEGINNING OF PERIOD
                
                
                (43,983
                )
                
                17,183**CASH
                    AND EQUIVALENTS, END OF PERIOD**
                
                **$**
                **(63,929**
                **)**
                $
                5,498**SUPPLEMENTAL
                    DISCLOSURES:**Interest
                
                $
                3,467
                
                $
                463Non-cash
                    transactions:Debt
                    exchange for 1,123,600 shares of common stock
                
                $
                0
                
                $
                112,360




*See
        accompanying notes to unaudited interim consolidated financial
        statements*
 
 5


**Megola
        Inc.**


**CONSOLIDATED
        STATEMENT OF STOCKHOLDERS' DEFICIT**
 **October
        31, 2006**
  **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
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (454,656
              )
              
              (454,656
              )Foreign
                  Currency
              
              
              -
              
              
              -
              
              
              (3,902
              )
              
              -
              
              
              -
              
              
              (3,902
              )**Balances,
                  October 31, 2006**
              
              
              47,986,029
              
              $
              47,986
              
              $
              (23,147
              )
              
              4,560,112
              
              $
              (4,792,629
              )
              $
              (207,678
              )Stock
                  Issued for Services
              
              
              -
              
              $
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -Discount
                  on Notes Payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  for Debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  for Intangible Assests
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  for Cash
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (24,484
              )
              
              (24,484
              )Foreign
                  Currency
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Balances,
                  January 31, 2007**
              
              
              47,986,029
              
              $
              47,986
              
              $
              (23,147
              )
              
              4,560,112
              
              $
              (4,817,113
              )
              $
              (232,162
              )




*See
          accompanying notes to unaudited interim consolidated financial
          statements*
 
 6
 **Notes
        to Unaudited Interim Consolidated Financial Statements for the 3 Months ended
        October 31, 2006 -(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 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 consolidated financial statements.





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.





7


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 unaudited interim 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**
              
              **International**
              
              **Total**Three
                  months ended October 31, 2006Revenues
              
              $
              1,514
              
              $
              40,000
              
              $
              41,514Net
                  Loss
              
              $
              468,154
              
              $
              -
              
              $
              468,154Depreciation
              
              $
              -
              
              $
              -
              
              $
              -Interest
                  Expense
              
              $
              -
              
              $
              3,467
              
              $
              3,467Total
                  Assets
              
              $
              -
              
              $
              365,832
              
              $
              365,832**North
                  America**
              
              **International**
              
              **Total**Three
                  months ended October 31, 2005Revenues
              
              $
              153,153
              
              $
              49,034
              
              $
              202,187Net
                  Loss
              
              $
              235,784
              
              $
              107,099
              
              $
              342,883Depreciation
              
              $
              -
              
              $
              -
              
              $
              -Interest
                  Expense
              
              $
              -
              
              $
              463
              
              $
              463Total
                  Assets
              
              $
              -
              
              $
              767,585
              
              $
              767,585




**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 quarter ending October 31, 2006, Megola borrowed $69,070 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 October 31, 2006.





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 October 31, 2006





**MANAGEMENT'S
      DISCUSSION AND PLAN OF OPERATION FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report contains forward-looking statements about Megola, Inc.'s (the
      Company” or “Megola”) business, financial condition and prospects that reflect
      management's assumptions and beliefs based on information currently available.
      We can give no assurance that the expectations indicated by such forward-looking
      statements will be realized. If any of our management's assumptions should
      prove
      incorrect, or if any of the risks and uncertainties underlying such expectations
      should materialize, Megola's actual results may differ materially from those
      indicated by the forward-looking statements.





The
      key
      factors that are not within our control and that may have a direct bearing
      on
      operating results include, but are not limited to, acceptance of our services,
      our ability to expand our customer base, management’s ability to raise capital
      in the future, the retention of key employees and changes in the regulation
      of
      our industry.





There
      may
      be other risks and circumstances that management may be unable to predict.
      When
      used in this Quarterly Report, words such as, "believes," "expects," "intends,"
      "plans," "anticipates," "estimates" and similar expressions are intended to
      identify forward-looking statements, as defined in Section 21E of the Securities
      Exchange Act of 1934, although there may be certain forward-looking statements
      not accompanied by such expressions.





The
      safe
      harbors of forward-looking statements provided by Section 21E of the Exchange
      Act are unavailable to issuers of penny stock. As we issued securities at a
      price below $5.00 per share, our shares are considered penny stock and such
      safe
      harbors set forth under the Reform Act are unavailable to us.





**GOING
      CONCERN**


Megola's
      net loss for the three months ended October 31, 2006 vs. three months ended
      October 31, 2005 increased 36.5% from $342,883 to $468,154 and has accumulated
      deficits of $ 4,792,629 as of October 31, 2006. 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 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 93% of our revenues in the first 3 months of fiscal year 2007.
      The
      same vendor accounted for 100 % of cost of goods for the first 3 months of
      fiscal year 2007. Sales of the ScaleGuard devices accounted for 97% and the
      AirGuardian units accounted for 3 % of our total gross revenues in the first
      3
      months of fiscal year 2007.





10


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.





**RESULTS
      OF OPERATIONS**





Three
      months ended October 31, 2006 vs. three months ended October 31,
      2005.





Our
      revenues for the three months ended October 31, 2006 vs. three months ended
      October 31, 2005 decreased 79.47% from $202,187 to $41,514 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 October 31, 2006 vs. three months ended
      October 31, 2005 decreased 98.27% from $109,678 to $1,893. 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. 94% of our 3 month revenues were royalties.





Our
      general and administrative expenses for the three months ended October 31,
      2006
      vs. three months ended October 31, 2005 increased 18.89% from $412,890 to
      $490,905 because of the combination of an increase in costs of stock for
      services and a decrease in payroll. 84.09% or $412,800 was the percentage and
      amount respectively for stock for services attributed to our G&A.





Our
      interest expense for the three months ended October 31, 2006 vs. three months
      ended October 31, 2005 increased 648.81% from $463 to $3,467 because of the
      Company's increased interest owing towards payroll deductions.





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      financial statements as of and for the period ending October 31, 2006 have
      been
      prepared assuming we continue as a going concern.





At
      October 31, 2006, we had an accumulated deficit of $ 4,792,629. We had a bank
      overdraft of $63,929 at October 31, 2006.





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.





11


There
      were no changes in the Company's internal control over financial reporting
      that
      occurred during the Company's most recent fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, the Company's internal
      control over financial reporting.





**PART
      II -** **** **OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





None





**ITEM
      2. CHANGES IN SECURITIES**





None





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.**





None





**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:
              S-8
            Filing
                Date: August 21, 2006




Form:
              PRE 14A
            Filing
                Date: August 29, 2006




Form:
              DEF 14A
            Filing
                Date: September 8, 2006




Form:
              8-K
            Filing
                Date: September 27, 2006




Exhibit
      Name and/or Identification of Exhibit Number





31
            Certification


32
            Certification





12


**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 Financial Officerand
              Principal Accounting OfficerDate: January 15, 2008




13