UNITED
STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q


(Mark One)




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


EXCHANGE
ACT OF 1934




For the
quarterly period ended: April 30, 2007




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
              
              (IRS
      EMPLOYEROF
              
              INDENTIFICATION
      NO.)INCORPORATION
      OR ORGANIZATION)SEC
      File Number: 000-49815704
      Mara St. Suite 111Point Edward, ON
              
              N7V 1X4(Address
      of Principal
              
              (Zip
      Code)Executive
      Offices)




Registrant's
telephone number, including area code: Tel: (519) 336-0628







(Former
Name or Former Address, if Changed Since Last Report)


446
Lyndock St. Suite 102, Corunna, ON  N0N 1G0










(Address
of Principal Executive Offices) (Zip Code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




Yes  ̈ No
x




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




Yes   ̈    No  x




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS: Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes  ̈ No
 ̈




APPLICABLE
ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest practicable date:
48,486,029 at April 30, 2007









Megola,
Inc.




Table of ContentsPART
      I –  FINANCIAL INFORMATIONItem
      1. Unaudited Financial Statements
                  3Item
      2. Management's Discussion and Plan of OperationForward-Looking
      Statements
                  16Item
      3. Controls and Procedures
                  18PART
      II – OTHER INFORMATION
                  19Item
      1. Legal Proceedings
                  19Item
      2. Changes in Securities
                  19Item
      3. Defaults upon Senior Securities.
                  19Item
      4. Submission of Matters to a Vote of Security Holders.
                  19Item 5. Other Information.
                  19Item
      6. Exhibits
                  19


2


PART
I - FINANCIAL INFORMATION




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


Nine Months Ended April 30, 2007(Amounts expressed in US dollars)




MEGOLA,
INC.


CONSOLIDATED
INTERIM BALANCE SHEETS


(Amounts
expressed in US dollars)





April 30,
                                            2007
                                          
                                          
                                          July 31,
                                            2006(Unaudited)
                                          
                                          
                                          (Audited)ASSETSCash
                                          
                                          
                                          
                                          
                                          
                                          4,858Inventory
                                          
                                          
                                          65,721
                                          
                                          
                                          
                                          352,197Prepaid
      expenses
                                          
                                          
                                          12,697
                                          
                                          
                                          
                                          -78,418
                                          
                                          
                                          
                                          357,055Intangible
      asset (note 6)
                                          
                                          
                                          1,350,000Loan
      receivable (note 10)
                                          
                                          
                                          102,378
                                          
                                          
                                          
                                          -Property
      and equipment
                                          
                                          
                                          8,117
                                          
                                          
                                          
                                          12,2781,538,913
                                          
                                          
                                          
                                          369,333LIABILITIESBank
      overdraft
                                          
                                          
                                          27,158
                                          
                                          
                                          
                                          48,841Advances
      from stockholders (note 7)
                                          
                                          
                                          209,594
                                          
                                          
                                          
                                          86,857Note
      payable (note 11)
                                          
                                          
                                          250,000Accounts
      payable and accrued liabilities
                                          
                                          
                                          266,485
                                          
                                          
                                          
                                          376,378Distributor
      deposits
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,361Accrued
      interest
                                          
                                          
                                          15,418
                                          
                                          
                                          
                                          14,816768,655
                                          
                                          
                                          
                                          531,253Going
      concern - (note 2)Subsequent
      events - (note 9)STOCKHOLDERS'
      EQUITY (DEFICIENCY)Capital
      stock (note 8)
                                          
                                          
                                          48,486
                                          
                                          
                                          
                                          37,716Additional
      paid in capital (note 8)
                                          
                                          
                                          5,934,612
                                          
                                          
                                          
                                          4,157,582Accumulated
      deficit
                                          
                                          
                                          (5,223,818
                                          )
                                          
                                          
                                          (4,337,973
                                          )Accumulated
      other comprehensive income (loss):Foreign
      currency translation adjustment
                                          
                                          
                                          10,978
                                          
                                          
                                          
                                          (19,245
                                          )770,258
                                          
                                          
                                          
                                          (161,920
                                          )1,538,913
                                          
                                          
                                          
                                          369,333





See
accompanying notes to unaudited interim consolidated financial
statements


3





MEGOLA,
INC.


CONSOLIDATED
INTERIM STATEMENTS OF OPERATIONS (UNAUDITED)


(Amounts
expressed in US dollars)





FOR THE 3 MONTHS ENDED
                      
                      
                      FOR THE 9 MONTHS ENDEDApril 30,
                        2007
                      
                      
                      April 30,
                        2006
                      
                      
                      April 30,
                        2007
                      
                      
                      April 30,
                        2006Income
      - sales
                      
                      
                      6,315
                      
                      
                      
                      95,673
                      
                      
                      
                      22,147
                      
                      
                      
                      282,476Cost
      of sales
                      
                      
                      312,921
                      
                      
                      
                      11,112
                      
                      
                      
                      315,195
                      
                      
                      
                      135,784GROSS
      PROFIT (LOSS)
                      
                      
                      (306,606
                      )
                      
                      
                      84,561
                      
                      
                      
                      (293,048
                      )
                      
                      
                      146,692Royalty
      income (note 3)
                      
                      
                      58,000
                      
                      
                      
                      75,000
                      
                      
                      
                      140,000
                      
                      
                      
                      365,000(248,606
                      )
                      
                      
                      159,561
                      
                      
                      
                      (153,048
                      )
                      
                      
                      511,692General
      and administrative
                      
                      
                      79,562
                      
                      
                      
                      125,651
                      
                      
                      
                      280,928
                      
                      
                      
                      423,765Stock
      issued for services (note 8b)
                      
                      
                      25,000
                      
                      
                      
                      32,213
                      
                      
                      
                      437,800
                      
                      
                      
                      284,213Depreciation
                      
                      
                      1,954
                      
                      
                      
                      6,612
                      
                      
                      
                      5,183
                      
                      
                      
                      19,748Interest
                      
                      
                      3,064
                      
                      
                      
                      2,211
                      
                      
                      
                      8,886
                      
                      
                      
                      5,244TOTAL
      EXPENSES
                      
                      
                      109,580
                      
                      
                      
                      166,687
                      
                      
                      
                      732,797
                      
                      
                      
                      732,970NET
      LOSS
                      
                      
                      (358,186
                      )
                      
                      
                      (7,126
                      )
                      
                      
                      (885,845
                      )
                      
                      
                      (221,278
                      )Foreign
      currency translation adjustment
                      
                      
                      (16,097
                      )
                      
                      
                      (3,302
                      )
                      
                      
                      30,223
                      
                      
                      
                      48,511COMPREHENSIVE
      LOSS
                      
                      
                      (374,283
                      )
                      
                      
                      (10,428
                      )
                      
                      
                      (855,622
                      )
                      
                      
                      (172,767
                      )Weighted
      average common shares outstanding
                      
                      
                      48,447,140
                      
                      
                      
                      37,714,655
                      
                      
                      
                      48,138,044
                      
                      
                      
                      37,714,655Loss
      per share - basic and diluted
                      
                      
                      (0.01
                      )
                      
                      
                      (0.00
                      )
                      
                      
                      (0.02
                      )
                      
                      
                      (0.01
                      )Comprehensive
      loss per share - basic and diluted
                      
                      
                      (0.01
                      )
                      
                      
                      (0.00
                      )
                      
                      
                      (0.02
                      )
                      
                      
                      (0.00
                      )





See
accompanying notes to unaudited interim consolidated financial
statements


4





MEGOLA,
INC.


CONSOLIDATED
INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)





FOR THE 9 MONTHS ENDEDApril 30, 2007
                                  
                                  
                                  April 30, 2006OPERATING
      ACTIVITIESNet
      loss for the period
                                  
                                  
                                  (885,845
                                  )
                                  
                                  
                                  (221,278
                                  )Add
      items not involving cash:Amortization
      of property and equipment and intangible assets
                                  
                                  
                                  5,183
                                  
                                  
                                  
                                  19,748Increase
      in inventory reserve
                                  
                                  
                                  308,438Stock
      issued for services
                                  
                                  
                                  437,800
                                  
                                  
                                  
                                  284,213Cash
      flow from operations
                                  
                                  
                                  (134,424
                                  )
                                  
                                  
                                  82,683Cash
      effect of changes in:Loan
      receivable
                                  
                                  
                                  (102,338
                                  )
                                  
                                  
                                  (341,605
                                  )Inventory
                                  
                                  
                                  (25,260
                                  )
                                  
                                  
                                  (4,372
                                  )Prepaid
      expenses
                                  
                                  
                                  (12,481
                                  )
                                  
                                  
                                  5,109Accounts
      payable and accrued liabilities
                                  
                                  
                                  (137,377
                                  )
                                  
                                  
                                  105,443Accrued
      interest
                                  
                                  
                                  35,540
                                  
                                  
                                  
                                  -Deferred
      revenue
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,361Cash
      flows from operating activities
                                  
                                  
                                  (376,340
                                  )
                                  
                                  
                                  (148,381
                                  )INVESTING
      ACTIVITIESCash
      flows used in investing activities
                                  
                                  
                                  (1,086
                                  )
                                  
                                  
                                  -FINANCING
      ACTIVITIESBank
      indebtedness
                                  
                                  
                                  (38,600
                                  )
                                  
                                  
                                  21,699Advances
      from stockholders
                                  
                                  
                                  129,031
                                  
                                  
                                  
                                  57,472Proceeds
      from (repayment of) note payable
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  (1,302
                                  )Cash
      flows used in financing activities
                                  
                                  
                                  340,431
                                  
                                  
                                  
                                  77,869EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                                  
                                  
                                  80,978
                                  
                                  
                                  
                                  56,499NET
      INCREASE (DECREASE) IN CASH AND EQUIVALENTSDURING
      THE PERIOD
                                  
                                  
                                  43,983
                                  
                                  
                                  
                                  (14,013
                                  )CASH
      AND CASH EQUIVALENTS (BANK OVERDRAFT), BEGINNING OF PERIOD
                                  
                                  
                                  (43,983
                                  )
                                  
                                  
                                  17,183CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                  
                                  
                                  -
                                  
                                  
                                  
                                  3,170SUPPLEMENTAL
      DISCLOSURES:Cash
      paid for:Interest
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Income
      taxes
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Non-cash
      transactions:Offset
      of royalty income receivable with accounts payable
                                  
                                  
                                  
                                  
                                  
                                  
                                  290,050Debt
      exchanged for 1,123,600 shares of common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  112,360Hartindo
      product distribution rights acquired for 30,000,000 shares of common
      stock
                                  
                                  
                                  1,350,000





See
accompanying notes to unaudited interim consolidated financial
statements


5


MEGOLA,
INC.


CONSOLIDATED
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) - Unaudited


(Amounts
expressed in US dollars)


April
30, 2007





AccumulatedOther
                
                
                AdditionalCommon Stock
                
                
                Comprehensive
                
                
                Paid In
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Income (Loss)
                
                
                Capital
                
                
                Deficit
                
                
                TotalsBalances, 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
                
                
                
                -
                
                
                
                284,213Stock
      for Debt
                
                
                1,123,600
                
                
                
                1,124
                
                
                
                -
                
                
                
                111,236
                
                
                
                -
                
                
                
                112,360Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (859,715
                )
                
                
                (859,715
                )Foreign
      Currency Translation Adjustment
                
                
                -
                
                
                
                -
                
                
                
                52,328
                
                
                
                -
                
                
                
                -
                
                
                
                52,328Balances,
      July 31, 2006
                
                
                37,716,029
                
                
                $
                37,716
                
                
                $
                (19,245
                )
                
                $
                4,157,582
                
                
                $
                (4,337,973
                )
                
                
                (161,920
                )Stock
      Issued For Services
                
                
                10,770,000
                
                
                
                10,770
                
                
                
                -
                
                
                
                427,030
                
                
                
                -
                
                
                
                437,800Stock
      to be issued for Distribtuion Rights
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,350,000
                
                
                
                
                
                
                
                1,350,000Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (885,845
                )
                
                
                (885,845
                )Foreign
      Currency Translation Adjustment
                
                
                -
                
                
                
                -
                
                
                
                30,223
                
                
                
                -
                
                
                
                -
                
                
                
                30,223Balances,
      April 30, 2007
                
                
                48,486,029
                
                
                $
                48,486
                
                
                $
                10,978
                
                
                
                5,934,612
                
                
                $
                (5,223,818
                )
                
                $
                770,258





See
accompanying notes to unaudited interim consolidated financial
statements


6





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 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.           GOING
CONCERN


These
      unaudited interim consolidated financial statements have been prepared on
      a going concern basis which contemplates the realization of assets and the
      payment of liabilities in the ordinary course of business. At present, the
      Company does not have sufficient resources to fund its current working
      capital requirements. The Company has planned to obtain additional capital
      through various financing arrangements to service its current working
      capital requirements, any additional or unforeseen obligations or to
      implement any future opportunities. Should the Company be unable to
      continue as a going concern, it may be unable to realize the carrying
      value of its assets and to meet its liabilities as they become due. These
      unaudited interim consolidated financial statements do not include any
      adjustments for this uncertainty.





3.           ROYALTY
INCOME


One of
the Company's manufacturers also sells certain Megola products directly
throughout Asia. By agreement, Megola is entitled to a royalty payment for each
of these units. Megola recognizes royalty revenue upon fulfillment of its
contractual obligations and upon sale by the manufacturer of royalty-bearing
products.





4.
            INVENTORY


At
      April 30, 2007, the Company recorded a provision for 308,438 (2006-$nil)
      related to inventory impairment.  Some products have since been
      sold and are reflected in the $65,721 current inventory.  Future
      product sales of these slow moving items will have no corresponding cost
      of sales due to the provision described above. These products are in good
      condition and are expected to be
sold.





5.
            RECENTLY
      ISSUED UNITED STATES ACCOUNTING
STANDARDS


In
      February
      2006, the FASB issued Statement No.155, "Accounting for Certain
      HybridFinancial
      Instruments - Amendment to FASB No. 133 and 140" ("Statement 155").Statement
      155 resolves certain issues addressed in Statement 133 and (a) permits
      fairvalue
      remeasurement for any hybrid financial instrument that contains an
      embeddedderivative
      that would otherwise require bifurcation; (b) clarifies which interest
      only stripsand
      principal only strips are not subject to the requirements of Statement
      133; (c)establishes
      a requirement to evaluate interests in securitized financial assets to
      identifyinterests
      that are freestanding derivatives or that are hybrid financial instruments
      thatcontain
      an embedded derivative requiring bifurcation; (d) clarifies that
      concentrations ofcredit
      risk in the form of subordination are not embedded derivatives; and (e)
      amendsStatement
      140 to eliminate the prohibition on a qualifying special-purpose entity
      fromholding
      a derivative financial instrument that pertains to a beneficial interest
      other thananother
      derivative financial instrument. The Company does not anticipate that
      theapplication
      of Statement 155 will have an impact on the consolidated financial
      statementsof the
      Company.


7





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)





4.
Recently issued United States accounting standards (continued)





In March 2006, the FASB issued
Statement No.156, "Accounting for Servicing of FinancialAssets—an amendment of FASB Statement No. 140"
("Statement 156").  Statement 156requires an entity to recognize a
servicing asset or servicing liability each time it undertakesan obligation to service a financial
asset by entering into a servicing contract and requiresall separately recognized servicing
assets and servicing liabilities to be initially measured atfair value, if
practicable.  The statement permits the entity to choose either
theamortization method or the fair value
measurement method for each class of separatelyrecognized servicing assets and
servicing liabilities.  The statement further requires
separatepresentation of servicing assets and
servicing liabilities subsequently measured at fair valuein the statement of financial position
and additional disclosures for all separatelyrecognized servicing assets and
servicing liabilities. The Company does not anticipate thatthe application of Statement 156 will
have an impact on the consolidated financial statements of theCompany.





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.





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.


8





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)





4.
Recently issued United States accounting standards (continued)





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 or 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.




In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company’s fiscal year beginning on or after
December 15, 2008.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
changes the accounting for noncontrolling (minority) interests in consolidated
financial statements including the requirements to classify noncontrolling
interests as a component of consolidated stockholders’ equity, and the
elimination of “minority interest” accounting in results of operations with
earnings attributable to noncontrolling interests reported as part of
consolidated earnings. Additionally, SFAS 160 revises the accounting for both
increases and decreases in a parent’s controlling ownership interest. SFAS 160
is effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited.


9





MEGOLA,
INC.


Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)





4.
Recently issued United States accounting standards (continued)





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No.
133”.  This statement requires enhanced disclosures about an entity’s
derivative and hedging activities, thereby improving the transparency of
financial reporting.  The provisions of SFAS No. 161 are effective for
all entities where financial statements are issued for fiscal years and interim
periods beginning after November 15, 2008.  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 May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles".  This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of non-governmental entities that are
presented in conformity with US GAAP. The provisions of SFAS No. 162 become
effective 60 days following the SEC's approval of the amendment to AU Section
411, "The Meaning of Presents Fairly in Conformity with Generally Accepted
Accounting Principles" by the Public Company Accounting Oversight
Board.  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 May
2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No.
163, Accounting for Financial
Guarantee Insurance Contracts. The new standard clarifies how FASB
Statement No. 60, Accounting
and Reporting by Insurance Enterprises, applies to financial guarantee
insurance contracts issued by insurance enterprises, including the recognition
and measurement of premium revenue and claim liabilities. It also requires
expanded disclosures about financial guarantee insurance contracts. Statement
163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for disclosures about the insurance enterprise’s risk-management
activities, which are effective the first period (including interim periods)
beginning after May 23, 2008. Except for the required disclosures, earlier
application is not permitted. The standard is not applicable to this
Company.





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
                        
                        
                        TotalNine
      months ended April 30, 2007Revenues
                        
                        $
                        22,147
                        
                        
                        $
                        140,000
                        
                        
                        $
                        162,147Net
      loss
                        
                        $
                        885,845
                        
                        
                        $
                        0
                        
                        
                        $
                        885,845Nine
      months ended April 30, 2006Revenues
                        
                        $
                        282,476
                        
                        
                        $
                        365,000
                        
                        
                        $
                        647,476Net
      loss
                        
                        $
                        221,278
                        
                        
                        $
                        0
                        
                        
                        $
                        221,278


10


MEGOLA,
INC.
 Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)
 
 6.
              INTANGIBLE
      ASSET
 DISTRIBUTION RIGHTS
 
 In
January 2007, the Company acquired exclusive rights to establish a distribution
network for the Hartindo line of fire safety products (“Hartindo”) from Pacific
Channel Ltd. (“PCL”), an unrelated
party.  These rights were acquired for $1,350,000 to be paid by the
issuance of 30,000,000 common shares of the Company and are considered to have
an indefinite life.  As at July 31, 2007 the shares had not been
issued.  Consequently, the amount due is included in additional paid
in capital.
 These
shares were subsequently issued after year end (Note 9).
 
 Per terms of the distribution
agreement, for each contract the Company enters into, the following
applies:
 
 (a)
              50%
      of all up-front fees received by the Company and 50% of all other forms of
      consideration received by the Company as a one-time payment for the grant
      of the distribution license shall be paid to PCL and 50% shall be retained
      by Megola
 (b)
              50%
      of all other consideration received by the Company that is received by the
      Company other than as a percentage of Hartindo sales shall be paid to PCL
      with the balance of 50% to be retained by the
  Company
 (c)
              Where
      the Company receives revenue from Hartindo sales made by Sales Agents, as
      a percentage of such Hartindo sales, the first 3% of the percentage
      payable to the Company on such sales shall be paid to PCL with any
      remaining balance to be retained by the
Company
 
 All payments are to be made
quarterly within 30 days of the end each calendar quarter.
 
 This agreement, as amended subsequent
to year-end, shall remain in full force and effect so long as the Company and
its Hartindo dealers, sub-agents and/or sales representatives (the “Megola Group”) purchase
Hartindo products in the aggregate amounts specified below, namely:
 
 (a)
              If
      in the period up to January 2010, the Megola Group purchases, in the
      aggregate, a minimum of US $200,000 Hartindo Products, the distribution
      agreement shall be extended until January 31, 2011;
  and
 
 (b)
              If
      in the period up to January 31, 2011, the Megola Group purchases, in the
      aggregate, a minimum of US $300,000 Hartindo products, the distribution
      agreement shall be extended until January 31, 2012;
  and
 
 (c)
              If
      in the period up to January 31, 2012, the Megola Group purchases, in the
      aggregate, a minimum of US $400,000 Hartindo products, the distribution
      agreement shall be extended until January 31, 2013;
  and
 
 (d)
              If
      in the period up to January 31, 2013, the Megola Group purchases, in the
      aggregate, a minimum of US $500,000 Hartindo products, the distribution
      agreement shall be extended until January 31, 2014;
  and
 (e)  If
in the period up to January 31, 2014, the Megola Group purchases, in the
aggregate, a minimum of US $750,000 Hartindo products, the distribution
agreement shall be extended for 25 years from January 31, 2014, or for such
longer period as the Company retains the Hartindo product marketing rights for
Canada, without any further performance conditions to be met.
 
 The
Company shall deliver to PCL on or before the end of February in each and every
year, a statement showing the aggregate Hartindo purchases made by the Megola
Group in the 12 month period ended January 31 in the prior year.
 
 Failure
to meet any of the above conditions shall give PCL the right to terminate the
distribution agreement by a written notice to the Company with the agreement
remaining in force until all payments owing by one party to another have been
made.
  11
  MEGOLA,
INC.
 Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)
 
 7.
              ADVANCES FROM
      STOCKHOLDERS
 In the
normal course of operations, the Company borrows from its
stockholders.
 These
advances are unsecured, bearing interest at 6%, have no fixed terms of
repayment, and the stockholders    have waived their right
to demand repayment prior to August 1, 2008.
 During
the nine-month period ending April 30, 2007, Megola borrowed $122,737 from
several of its stockholders.
 
 8.
              CAPITAL
      STOCK AND ADDITIONAL PAID IN
CAPITAL
 (a) Capital Stock
 On
December 7, 2006, Megola issued 500,000 shares of its common stock for
professional fees valued at $25,000.
 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.
 (b)
Additional paid in capital
 Additional
paid in capital increased $1,350,000 due to Megola’s common stock being issued
for distribution rights.  These rights are contracted for before
year-end but the shares are issued after year-end. In addition it increased by
$427,030 due to the issuance of shares for professional services. The services
were recorded at fair market price of shares on transaction dates.
 
 9.
              SUBSEQUENT
      EVENTS
 
 In August
2007, the Company issued 30,000,000 shares to fulfill its obligation as
described in
 (Note
6).
 On
October 23, 2007, the Company amended the note payable agreement (note 11),
whereby the note payable to FireStop has been assigned to Pacific Channel
Limited (“PCL”) and the repayment date has been extended, interest free, until
March 31, 2008. As security for the loan, PCL holds the right to obtain the
equivalent value of any outstanding loan balance in restricted common shares of
the Company at the six-month average of market value.
 
 On
November 13, 2007 the Company entered into a non-binding letter of intent
with6841309
Canada Inc. ("6CI") under which 6CI will have exclusive use of the certain
Hartindofire safety
products for an initial period of five years with a five year option to renew at
thediscretion of
6CI.  Megola agreed to supply 6CI with the products covered by the
letter ofintent on an
exclusive basis for the purposes of use, application and
resale.  Megola furtheragreed to
maintain supply to meet market demands and to sell products at a reasonablewholesale
price.  The obligation to provide regulatory approvals under health,
safety andenvironmental
laws is vested with Megola.
 
 On
November 15, 2007 Megola, together with MSE Enviro-Tech Corp. ("MEVT"), an
unrelated US Company,  entered into a non-binding memorandum of
understanding with Logistik Unicorp Inc. ("LUC") and CTT Group Inc. ("CTT"),
both Canadian corporations, under which LUC is granted exclusive use of the
Hartindo fire safety products for use in textile applications.  The
exclusivity is limited to Canada, USA and Mexico.  LUC is to provide
marketing and industry expertise and CTT is to provide technical and testing
support.  Megola and MVT agreed to maintain supply to meet market
demands and to sell products at a reasonable wholesale price. The obligation to
provide regulatory approvals under health, safety and environmental laws is
vested with Megola.
  12
 
 MEGOLA,
INC.
 Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)
 
 9.
Subsequent Events (continued)
 
 On
November 21, 2007 Megola, together with MEVT , entered into an exclusive
marketingand
distribution agreement with Janus Products Corp. ("JPC"), an unrelated Canadian
corporation.Under the
agreement, JPC will have exclusive rights for the sale and distribution of a
firesafety
product for residential markets in Canada and the United States.  The
initial term of theagreement is
5 years during which JPC will pay a royalty on sales.  The agreement
renewsautomatically
pending the satisfaction of certain minimum sales requirements.
 
 On
October 5, 2008 the Company in cooperation with MSE Enviro-Tech Corp
entered into a Hartindo AF21 Product, Purchase, Sales, Distribution, Marketing,
and Service Agreement with WoodSmart Solutions, Inc. The basis terms and
conditions proposed are as follows:
  1) Megola
will provide WoodSmart:
 Hartindo AF21
Product
 Use of Hartindo AF21 Product
Technology
 The
option to obtain the exclusive use and rights of the Hartindo AF21 product for
use on or in any lumber, Oriented Strand Board (OSB), and plywood in North
America and:
 The
option to obtain exclusive use and rights for the Enhanced Product for use on or
in any wood based materials in North America
 
 2)
WoodSmart's Purchase Requirements include:
 
 Annual
Minimum 400,000 gallons within first 12 months
 Annual
Minimum 550,000 gallons within months 13-24
 Annual
Minimum 700,000 gallons within months 25-36
 
 WoodSmart retains exclusive use and
rights to the product as described in this agreement beginning the
37th monthand thereafter as long as they purchase
1,500,000 gallons in each of the following 12 month periods.
 The first year begins 90 days after
execution of the agreement.
 
 On
November 24, 2008 Megola entered into a Consulting Agreement with Regal Capital
Partners LLC (RCP) to assist and advise the Company in identifying
investor relations and/or public relations and/or market relations organizations
which are engaged by Megola.
  RCP was
to receive a commencement bonus of 1,500,000 restricted common shares of
Megola stock with Piggy Back registration rights.  The shares are in
lieu of a $400,000 payment and are based on $ .0266 per share. Upon the
effective date Megola was to issue to RCP a total of 3,000,000 restricted common
stock purchase warrants as follows:
  Vesting Date
                    
                    Exercise price
                    
                    
                    Warrants/Common SharesEffective Date
                    
                    $
                    0.15
                    
                    
                    
                    1,000,00090
      Days after effective date
                    
                    $
                    0.25
                    
                    
                    
                    1,000,000180
      Days after effective date
                    
                    $
                    0.40
                    
                    
                    
                    1,000,000
 
 On
December 8, 2008, the sales/performance quotas in the agreement with PCL dated
January 12, 2007, have been moved forward starting January 31,
2010.
  13
  MEGOLA,
INC.
 Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)
 
 9.
Subsequent Events (continued)
 
 The
Company also leased warehouse space and additional office space in Point Edward,
Ontario, Canada, commencing September of 2008.  Required minimum lease
payments are as follows:
 
 OfficeYear
      Ended
                    July
      31, 2009
                    
                    $
                    40,513Year
      Ended
                    July
      31, 2010
                    
                    $
                    44,196Year
      Ended
                    July
      31, 2011
                    
                    $
                    44,196Year
      Ended
                    July
      31, 2012
                    
                    $
                    44,196Year
      Ended
                    July
      31, 2013
                    
                    $
                    44,196Year
      Ended
                    July
      31, 2014
                    
                    $
                    3,683Total
                    
                    
                    $
                    220,980WarehouseYear
      Ended
                    July
      31, 2009
                    
                    $
                    16,500Year
      Ended
                    July
      31, 2010
                    
                    $
                    18,000Year
      Ended
                    July
      31, 2011
                    
                    $
                    18,000Year
      Ended
                    July
      31, 2012
                    
                    $
                    18,000Year
      Ended
                    July
      31, 2013
                    
                    $
                    18,000Year
      Ended
                    July
      31, 2014
                    
                    $
                    1,500Total
                    
                    
                    $
                    90,000
 
 The
Company has also leased 4 vehicles commencing in August of
2008.  Required minimum lease payments are as follows:
 
 Year
      Ended
                    July
      31, 2009
                    
                    $
                    34,340Year
      Ended
                    July
      31, 2010
                    
                    $
                    41,208Year
      Ended
                    July
      31, 2011
                    
                    $
                    41,208Year
      Ended
                    July
      31, 2012
                    
                    $
                    6,868Total
                    
                    
                    $
                    123,624
 
 The
Company entered into a consulting agreement with Matthew Sacco on August 1,
2008.  He is to assist with establishing a distribution network of
Megola’s Hartindo product lines.  The compensation in lieu of a cash
payment of $30,000 was 1,000,000 shares of Company stock.
 
 10.
LOAN RECEIVABLE
 
 The loan
receivable balance represents an amount owing by a supplier and will be offset
against the Company’s future purchases of inventory. Since the amount will not
be collected in the next 12 months, the balance has been classified as long-term
loan receivable. The fair value of the loan receivable has been estimated by
discounting future cash flows using an estimated rate of 6%.  The fair
value of loan receivable is $96,583.
 
 11.  NOTE
PAYBALE
 
 Megola,
FireStop USA, LLC ("FSU"), an unrelated party, and Pacific Channel Ltd.
("PCL")have agreed
that FSU will loan $250,000 to Megola under a note payable and securityagreement.  FSU
specified that no interest on the loan will be due if the loan is repaid in
fullwithin six
months.  Any amounts owing after six months will be subject to
interest at 15% perannum.  As
security for the loan, Megola pledged a first priority interest in the U.S.manufacturing
rights for the Hartindo line of products. Subsequent to the year-end, FSU
assigned the loan to PCL with modifications as follows: the security pledge to
FSU was voided; the due date was extended to March 31, 2008 per agreement; PCL
reserved the right to further extend the due date and interest-free period at
their sole discretion.
  14
  MEGOLA,
INC.
 Notes
to Unaudited Interim Consolidated Financial Statements for the Nine Months ended
April 30, 2007 (Amounts expressed in US dollars)
 
 11.
              COMPARATIVE
      BALANCES
 Certain
amounts presented at July 31, 2006 have been reclassified to conform to
presentation at April 30, 2007.
  15
  Item
2. Management's Discussion and Plan of Operation
 Management’s
Discussion and Analysis of Financial Condition and Operating
Results
 For the nine months ended April 30,
2007(Amounts expressed in US dollars)
 
 MANAGEMENT'S
DISCUSSION AND PLAN OF OPERATION FORWARD-LOOKING STATEMENTS
 
 This
Quarterly Report contains forward-looking statements about Megola, Inc.'s (the
Company” or “Megola”) business, financial condition and prospects that reflect
management's assumptions and beliefs based on information currently available.
We can give no assurance that the expectations indicated by such forward-looking
statements will be realized. If any of our management's assumptions should prove
incorrect, or if any of the risks and uncertainties underlying such expectations
should materialize, Megola's actual results may differ materially from those
indicated by the forward-looking statements.
 
 The key
factors that are not within our control and that may have a direct bearing on
operating results include, but are not limited to, acceptance of our services,
our ability to expand our customer base, management’s ability to raise capital
in the future, the retention of key employees and changes in the regulation of
our industry.
 
 There may
be other risks and circumstances that management may be unable to predict. When
used in this Quarterly Report, words such as, "believes," "expects," "intends,"
"plans," "anticipates," "estimates" and similar expressions are intended to
identify forward-looking statements, as defined in Section 21E of the Securities
Exchange Act of 1934, although there may be certain forward-looking statements
not accompanied by such expressions.
 
 The safe
harbors of forward-looking statements provided by Section 21E of the Exchange
Act are unavailable to issuers of penny stock. As we issued securities at a
price below $5.00 per share, our shares are considered penny stock and such safe
harbors set forth under the Reform Act are unavailable to us.
 
 GOING
CONCERN
 Megola's
net loss for the nine months ended April 30, 2007 vs. nine months ended April
30, 2006 increased 300.33% from $221,278 to $885,845. The Company has an
accumulated deficit of $5,223,818 as of April 30, 2007. These conditions create
an uncertainty as to Megola's ability to continue as a going concern. Management
is attempting to raise additional capital through various funding arrangements.
It is not certain if Megola will raise this additional capital. The financial
statements did not include any adjustments that might be necessary if Megola
were 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 92% of our revenues in the first 9 months of fiscal year 2007. The
same vendor accounted for 100 % of cost of goods for the first 9 months of
fiscal year 2007. Sales of the ScaleGuard devices accounted for 99% and the
AirGuardian units accounted for 1% of our total gross revenues in the first 9
months of fiscal year 2007.
  16
  RESULTS
OF OPERATIONS
 
 Three
months ended April 30, 2007 vs. three months ended April 30, 2006.
 
 Our
revenues for the three months ended April 30, 2007 vs. three months ended April
30, 2006 decreased 62.32% from $170,673 to $64,315 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, the Company intends to increase sales staff in the
future.
 
 Our cost
of sales for the three months ended April 30, 2007 vs. three months ended April
30, 2006 increased 2,716.06% from $11,112 to $312,921. The overall increase in
the cost of sales during this periodis
directly attributable to the provision for slow-moving inventory and the
increase in revenues. We do not incure any cost of sales on the royalty
payments. Total royalties were 90.18% and 43.94% of total revenues for the
three-month periods ended April 30, 2007 and April 30, 2006
respectively.
 
 Our
general and administrative expenses for the three months ended April 30, 2007
vs. three months ended April 30, 2006 decreased 36.68% from $125,651 to $79,562
because of the a decrease in sales staff payroll.
 
 Our
interest expense for the three months ended April 30, 2007 vs. three months
ended April 30, 2006 increased 38.58% from $2,211 to $3,064 because of the
Company's increased interest owing towards payroll deductions.
 
 Nine
months ended April 30, 2007 vs. Nine months ended April 30, 2006.
 
 Our
revenues for the nine months ended April 30, 2007 vs. nine months ended April
30, 2006 decreased 74.96% from $647,476 to $162,147 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, the Company intends to increase sales staff in the
future.
 
 Our cost
of sales for the nine months ended April 30, 2007 vs. nine months ended April
30, 2006 increased 132.13% from $135,784 to $315,195. The overall increase in
the cost of sales during this period is
directly attributable to the provision for slow-moving inventory and the
increase in revenues. We do not incure any cost of sales on the royalty
payments. Total royalties were 86.34% and 56.37% of total revenues for the
nine-month periods ended April 30, 2007 and April 30, 2006
respectively.
 
 Our
general and administrative expenses for the nine months ended April 30, 2007 vs.
nine months ended April 30, 2006 decreased 33.71% from $423,765 to $280,928
because of a decrease in sales staff payroll.
 
 Our
interest expense for the nine months ended April 30, 2007 vs. nine months ended
April 30, 2006 increased 69.45% from $5,244 to $8,886 because of the Company's
increased interest owing towards payroll deductions.
 
 Accordingly,
our net loss for the nine months ended April 30, 2007 vs. nine months ended
April 30, 2006 increased 300.33% from $221,278 to $885,845.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 The
financial statements as of and for the period ending April 30, 2007 have been
prepared assuming we continue as a going concern.
 
 At April
30, 2007, we had an accumulated deficit of $5,223,818 and a bank overdraft of
$27,158.
  17
  In order
to become profitable, we will still need to secure additional debt or equity
funding. We hope to be able to raise additional funds from an offering of our
stock in the future. However, this offering may not occur, or if it occurs, may
not raise the required funding. There are no preliminary or definitive
agreements or understandings with any party for such financing. We cannot
predict when, if ever, that will happen.
 
 Item 3.CONTROLS AND
PROCEDURES
 
 Based on
our management's evaluation (with the participation of our chief executive
officer and chief financial officer), as of the end of the period covered by
this report, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,
(the "Exchange Act")) are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms and are also designed to
ensure that information required to be disclosed in the reports that we file or
submit under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, to allow
timely decisions regarding required disclosure. Based on the evaluation, which
disclosed deficiencies with respect to the Company's internal control procedures
over financial reporting, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are ineffective as of the end of the period covered by this report
due to limited resources and personnel. With additional funding the Company
intends to hire additional resources to assist with financial reporting
disclosures controls and procedures.
 
 There
were no changes in the Company's internal control over financial reporting that
occurred during the Company's most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
  18
  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
  Exhibit
Name and/or Identification of Exhibit Number
 
 31 Certification
 32 Certification
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
 
 MEGOLA,
      INC.(Registrant)By:
                  /s/ Joel GardnerJoel
      GardnerPresident,
      CEO, Principal FinancialOfficer
      and Principal Accounting
Officer
 
 Date:
January 26, 2009
  19