MEGOLA INC - FORM 10-K - November 15, 2010

Attached files

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EX-31.2 - MEGOLA INC	v202798_ex31-2.htm
EX-32.1 - MEGOLA INC	v202798_ex32-1.htm
EX-32.2 - MEGOLA INC	v202798_ex32-2.htm
EX-31.1 - MEGOLA INC	v202798_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: July 31, 2010

¨ 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 EMPLOYER
OF		INDENTIFICATION NO. )
INCORPORATION OR ORGANIZATION)

SEC File Number: 000-49815

704 Mara Street, Suite 111
Point Edward, ON		N7V 1X4
(Address of Principal		(Zip Code)
Executive Offices)

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

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

(Address of Principal Executive Offices) (Zip Code)

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

Yes x No ¨

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: 33,570,455 at July 31, 2010.

TABLE OF CONTENTS

PART I

Item 1.	Description of Business	4
Item 2.	Description of Property	10
Item 3.	Legal Proceedings	10
Item 4.	Submission of Matters to a Vote of Security Holders	10

PART II

Item 5.	Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	11
Item 6.	Selected Consolidated Financial Data	13
Item 7.	Management’s Discussion and Analysis or Plan of Operations	13
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	15
Item 8	Financial Statements and Supplementary Data	16
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	35
Item 9A(T).	Controls and Procedures	35
Item 9B.	Other Information	36

PART III

Item 10.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act	36
Item 11.	Executive Compensation	37
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
Item 13.	Certain Relationships and Related Transactions, and Director Independence	40
Item 14.	Principal Accounting Fees and Services	40

	PART IV

Item 15.	Exhibits	40

Signatures		41

The statements contained in this Report that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business, which can be identified by the use of forward-looking terminology, such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that such statements, which are contained in this Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employee, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors discussed in our other filings with the Securities and Exchange Commission, and that these statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing us, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause our actual results, performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include, without limitation:

The availability of additional funds to successfully pursue our business plan;

The cooperation of industry service partners that have signed agreements with us;

Our ability to market our services to current and new customers and generate customer demand for our products and services in the geographical areas in which we operate;

The ability to comply with provisions of our financing agreements;

The highly competitive nature of our industry;

Our ability to retain key personnel;

Our ability to maintain adequate customer care and manage our churn rate;

Our ability to maintain, attract and integrate internal management, technical information and management information systems;

Our ability to manage rapid growth while maintaining adequate controls and procedures;

The availability and maintenance of suitable vendor relationships, in a timely manner, at reasonable cost;

General economic conditions.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements.

These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward looking statements made in connection with this Report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Further, the information about our intentions contained in this document is a statement of our intention as of the date of this document and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and our assumptions as of such date. We may change our intentions, at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

PART I

Item 1. BUSINESS DEVELOPMENT

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 residential, commercial, industrial and agricultural 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.

On November 26, 2003, Megola was acquired by SuperiorClean, Inc. in a transaction accounted for as a reverse acquisition. Megola’s stockholders were issued 13,389,591 SuperiorClean shares in exchange for 100% of the outstanding common and preferred stock of Megola, plus $250,000 in cash and $200,000 in notes payable. Two major stockholders of SuperiorClean and two other persons then signed consulting contracts for 1,250,000 common shares. Prior to the merger, SuperiorClean had no assets or operations. SuperiorClean’s name was later changed to Megola, Inc.

Our ScaleGuard Systems products are sold under a license granted by the German manufacturer, Megola GmbH. Under the terms of our agreement with Megola GmbH, we are the exclusive distributor of ScaleGuard devices in North America, Mexico, and Asia excluding India. We may not sell competing devices without the permission of Megola GmbH. Prices we pay are established by Megola GmbH and may be changed from time to time at the discretion of Megola GmbH. The agreement has no termination date, but may be terminated for cause as defined in the agreement. As of June 30, 2006 we have now independently acquired certain additional patents used in our products directly from the owners of Megola GmbH.

For fiscal year ended July 31, 2010 2% of our revenues were generated from sales of ScaleGuard products under our agreement with Megola GmbH (Germany).

Business

Our principal executive offices are located at 704 Mara Street, Suite 111, Point Edward, Ontario N7V 1X4. Our telephone number is (519) 336-0628.

ScaleGuard units are a one-time capital cost as there are no ongoing chemical additives required and since the units have no moving parts they are essentially maintenance free. Cost savings on chemical treatments and the associated labor make ScaleGuard cost effective. ScaleGuard units use electromagnetic technology to condition and soften water, both preventing the ongoing build-up of scale and eliminating historical scale build-up in water delivery systems and machinery. Rather than attempting to prevent - by removing or adding chemicals - the natural tendency of hard water to form scale, ScaleGuard treatment actually assists and encourages scale formation by electronic means. The coils that are wrapped on the exterior of the water pipe introduce variable, high frequency magnetic impulses that alter the properties of the water in such a manner that the scale remains suspended in the water rather than forming on surfaces within the water system. These suspended crystals of scale will also carry away - slowly but surely - any scale that already exists in the system.

Due to excessive scale build-up pipes, showers, bathtubs, water heaters, spas, boilers, nozzles, valves, heat exchange compressors and other equipment need to be prematurely replaced. Scale can also reduce water flow and pressure and negatively impact the ability of heating elements. The advantage of ScaleGuard is that it can be installed on any pipe material in any home or building and does not require chemical agents and their associated costs and dangers.

We also sell air purification, microbiological control and waste water treatment products.

Air issues: Airborne germs that result in asthma, flu and colds

Water (Microbiological) Issues:

Unsanitary water may be dangerous due to bacteria, viruses, pathogens such as e-coli, giardia, cryptosporidium.

At July 31, 2010 we had an accumulated deficit of $7,830,207. We had a net loss of $1,956,432 in fiscal year 2010. Our independent auditors have indicated that there is substantial doubt about our ability to continue as a going concern over the next twelve months.

During the year ending July 31, 2010 our revenues decreased from $516,968 for 2009 to $336,822 for the year ended July 31, 2010.

PRINCIPAL PRODUCTS AND SERVICES

Our principal product is our ScaleGuard Systems. Megola’s ScaleGuard technology cost effectively conditions hard water while also eliminating the historical build-up of scale caused by hard water in residential, commercial and industrial applications. ScaleGuard units use a revolutionary electromagnetic technology to condition the soften water, both preventing the ongoing build-up of scale and eliminating historical scale build-up in water delivery systems and machinery.

Megola, Inc. is a leading solution provider in physical water treatment, microbiological control, wastewater treatment and air purification. Our environmentally friendly, technologically advanced product lines have us positioned at the forefront of environmental air and water treatment. Our experience in these fields allows us to provide tailor-made solutions to our clients using the technology available to us. For more information on Megola products, please go to www.megola.com.

THE SCALEGUARD SYSTEM

Description of ScaleGuard:

Traditionally, hard water problems - the underlying cause of scale - have been solved with ion-exchange (salt) water softeners or chemical treatments. These solutions are often environmentally unfriendly, time-consuming and expensive.

Megola’s scientists have invented a deceptively simple-looking box containing a computer-programmable chip that delivers low-voltage, high-frequency magnetic impulses that can alter the scale-forming properties of water. The company’s revolutionary solution prevents new scale formation, while eliminating previous scale build-up.

ScaleGuard is a non-invasive, physical water treatment device. That is, it does not make any direct contact with the water, and it neither adds chemicals to nor removes chemicals from the water.

Due to the high technological nature of our systems and limited knowledge of the technical functions by our consumers, Megola, at times, installs systems on trial basis with prospective industrial customers in an effort to collect data and prove ScaleGuard’s reliability and success. Megola is confident these trial installation situations will convert to sales, while increasing product exposure.

We no longer offer residential trials. We encourage our dealers to install systems for their personal use. For commercial and industrial installations we may install as part of a pilot project with a predetermined time schedule. See following example:

A Southwestern Ontario refinery (Suncor) was having a scaling issue with a four bank tube and shell exchanger. This exchanger was undersized when designed and needed cleaning every 8-10 weeks as after 10 weeks there was no heat exchange taking place at all. Megola offered a trial of its ScaleGuard electronic conditioner for 3 months. The exchanger was cleaned as per its regular maintenance and the ScaleGuard system was installed. The operators said they would know within 4 weeks if the ScaleGuard system was keeping the exchanger from fouling as the performance of the exchanger to cool the product was well documented. After 4 weeks there was no loss of cooling. Normally after an 8 week period this exchanger would lose almost all of its ability to cool. However with the ScaleGuard system installed in this exchanger never needed descaling and had only lost one degree of cooling over the next 21 months (90 weeks). It was approximated that the refinery saved $60,000 in costs during the time that the ScaleGuard was in use. The client purchased the systems.

We have no retail suggested price, as our dealers offer their own rebates, incentives, and volume discounts. It is our intention never to undercut our own dealers.

We are currently developing a revised business plan to deploy our ScaleGuard devices through our distribution network throughout the world. We believe that the increasing data that we have been collecting, and continue to collect on our systems, and the increasing market exposure we have been getting through our satisfied customers, can be used as sales tools for our distributors.

ScaleGuard Models:

We currently have eight models of ScaleGuard devices, all of which have been used in trials and sold to customers that have hard water or scale problems. Over the years, Megola has sold these units all over the world, ranging from residential applications to large industrial applications. The principal differences between the eight models, other than cost, are that they are designed to work with different water flows and pipe sizes.

The final cost of the individual units may vary, as they may be designed for certain customers to perform differently based on their specific needs. Also, depending on the geographic region, some distributors may sell the ScaleGuard products for more than Megola’s suggested retail price.

ScaleGuard Models:

TFK

SG100

SG200

SG300

SG400

SG500

SG1000

Manufacturing:

The ScaleGuard devices were designed and custom manufactured in Germany under the direction of Megola GmbH. The technology of the product is owned by Megola GmbH and is protected under intellectual/ software property rights. The units are pre-assembled in Germany and are then shipped to China where the final assembly is completed and packaged.

Notable Installations of our ScaleGuard Systems:

Our systems have been in operation with various customers with some in operation for over 6 years. Some of our more notable installations include:

LanXess	Tim Horton’s
Nova Chemicals	Kentucky Fried Chicken
The Great Hall of the People (the national assembly of China)	Zurn Industries
Mengniu Dairy Group	Royal Plastics
Runan Mu Gong Shan Group	TRW Automotive
Zhoushan Gang Ming Foodstuff Industries	Parmalat
Zhong Mei Coal Mining Company	FritoLay
Zhujiang Brewery	Honeywell
Country Fresh Dairy	DuPont Canada
	Colgate University

For fiscal year ended July 31, 2010 2% of our revenues were generated from sales of ScaleGuard products under our agreement with Megola GmbH (Germany).

AIR PURFICIATION

AirGuardian System

The AirGuardian 1000 is a uniquely engineered, integrated UVC & UVV system designed to dramatically reduce/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. This product is duct-mounted on the central Heating, Ventilation, Air Conditioning (HVAC) system and, to enhance system effectiveness, is designed to run continuously with the HVAC system fan in the "on' position. This product is certified by the American Institute of Toxicology to produce only safe levels of UVV (ozone) and is available with a UVC only bulb. There are 3 different AirGuardian models.

(manufactured in China)

AirGuardian Power Filter

The AirGuardian Power Filter uses an active electromagnetic field to magnetize both airborne particles and the fibers of the disposable filter pad. This creates a virtual "force field" within the ductwork, capturing many of the smallest, most dangerous to breathe submicron particles. This 1" filter is a very cost effective and easy to maintain electronic air cleaner and is an essential component of any air purification system. Under normal operating conditions, each disposable filter pad remains at peak operating efficiency for about four months before needing to be replaced.

(manufactured in USA)

We did not have any sales for AirGuardian for fiscal year 2010.

Portable Ozone Systems

Equipment Master - Sports equipment Deodorizing unit

Room Blaster - Room Deodorizing unit

Air Care - Room Air Treatment unit

(all units manufactured in China)

We did not have any sales for Ozone Systems for fiscal year 2010.

Microbiological Control and Waste Water Treatment

Ozone Treatment Systems

Megola, Inc. is a North American distributor of ozone treatment systems manufactured by Dalian Bingshan H203 Solutions Co., Ltd. Utilizing the powerful biocidal properties of ozone, these systems are an alternative to chemical treatments for microbiological control.

Applications include:

Cooling towers

HVAC systems

Drinking water (agriculture)

Surface disinfection water

Bioguard UltraViolet (UV) Water Treatment Systems

Ultraviolet treatment is the disinfection process of passing water by a special light source. Immersed in the water in a protective transparent sleeve, the special light source emits UV waves that can inactivate harmful microorganisms.

Applications include:

Disinfection of fresh, process, wash, and cooling water

Disinfection and biodegradability improvement of wastewater

Drinking water - POE and POU systems

Swimming pools and ponds

Medical and pharmaceutical industries

Quality control measures

Vending machines (manufactured in China)

We did not have any sales for Micro-Bio and Waste Water Treatment Systems for fiscal year 2010.

IonClear - Copper Ionization Systems

The IonClear System is an electronic, non-chemical means to disinfect and treat dirty water. The system is used for killing bacteria, viruses, pathogens & other coli forms together with the treatment of algae, typically found and/or associated with the following:

Swimming Pools

Hydrotherapy, heated pool & spas

Ornamental water gardens, fountains & ponds

Water storage tanks

Water cooling towers, water cooled heat exchangers, & evaporators(manufactured in China)

HARTINDO LINE OF ANTI-FIRE PRODUCTS

HARTINDO AF11E

1:1 direct drop-in replacement for both Halon 1301 and 1211

Belonging to the Halocarbon group of vaporizing liquid fire extinguishing chemicals AF11E is similar in action to Halon but without any of the environmental or toxicity problems associated with Halons.

Of all the Halocarbon alternatives to Halon, AF11E has the lowest overall environmental impact.

In common with other Halocarbons Hartindo AF11E is:

• Multi Purpose, effective on A, B, and C class fires

• a Clean Agent, leaving no residue

• Non Electrically conductive

Unique qualities of Hartindo AF11E

•

Only replacement to Halon that can be used as both a total flooding gas as well as a streaming agent for use in Portable fire extinguishers.

•

The world’s first, and so far only proven, 1:1 direct drop-in replacement for HALON 1301.

HARTINDO AF21

a water-based, non-toxic, non-corrosive, fire inhibitor

Hartindo AF21 is a colorless water based solution that is:

• Non-toxic

• Non-corrosive

• Biodegradable

• Environment friendly

Features:

• Prevents the spread of fire

• Eliminates afterglow

• Treated materials classified Class 0 non-flammable

• Ease of application (spraying, padding, dipping, brushing or fogging)

• Does not affect the look, feel, smell or color of the treated items

• Offers permanent protection from fire once applied

Uses: Suitable for use on all water absorbent as well as many synthetic fiber materials including:

• Curtains

• Carpets and rugs

• Upholstery fabrics

• Mattresses

• Porous wall coverings / Partitions

• Exposed wood surfaces prior to all decorative surface treatments

• Corks

• Dried flowers

• Soft toys

• Polypropylene backed carpets

• 100% polyester

• Paper / Cardboard

Standards and Approvals:

Hartindo AF21 meets all international standards including British Standards (BTTG WIRA & LPC tested to Civil Aviation Authority CAA, UK); US Regulations (tested to Federal Aviation Administration - FAA, USA); SISIR (Singapore); SIRIM (Malaysia) and BPPT (Indonesia).

Testing/Certifications;

ASTM E84 (CLASS A) – surface burning characteristics of building materials

ASTM E84 (with Bluwood) (CLASS A) – various types of wood products – Douglas Fir, Southern Yellow Pine (SYP), SPF, plywood, etc…

16 CFR 1633 – open flame mattress flammability test

ASTM D 3201 – Hygroscopicity Test(compared to Dricon (pressure-treated wood))

NFPA 701- vertical burn test; flame propagation of textiles

NFPA 2112 – flame resistance for protection of industrial personnel against flash fires

HARTINDO AF31

a multi-purpose, water-based, non-toxic, non-corrosive and environmentally friendly fire extinguishing and inhibiting agent

Hartindo AF31 is

• an "Environment Friendly" non Ozone Depleting Substance.

• Water based, biodegradable and non toxic.

• Clean, requires no specialized clean up procedures.

• Effective in portable form on all classes of fire (Class A, B, C, D and F/K)

• Easy to use with it's fast knockdown.

• Able to render objects non-flammable, preventing re-ignition.

• Able to be delivered by conventional water or foam dispersal systems.

• Suitable for use in all water or foam tenders without modification.

• Able to provide rapid extinction of fire with no reignition creating a safe escape route for rescue.

• Most effective media for creating fire breaks when fighting forest fire.

• Suitable for training purposes

Hartindo AF31 eliminates all worries and dangers when fighting reactive fires such as metal, coal, car tire dumps and deep pan oil fires.

Testing/Certifications;

ASTM E84 (CLASS A) – Surface burning characteristics of building materials (to show inhibition of reignition on Class A fires and potential as a fire inhibitor

Aquatic toxicity

Standard toxicity (mammalian) – oral, dermal, eye irritation (prerequisites for NFPA approvals)

Titan 21 Fire Blanket

100% cotton blanket that protects from flash fires as well as direct fire attack

The Titan 21 Fire Blanket can protect people from fire and can also be used to blanket, and extinguish, the fire source. It is ideal for houses, offices, hospitals, hotels, buses, ships, nightclubs, etc. Unlike synthetic fire blankets, that are designed to only withstand flash fire, the 100% cotton Titan 21 Fire Blanket protects from flash fires as well as DIRECT FIRE attack over 1000°C.

Testing/Certifications;

NFPA 701 – flame propagation of textiles

NFPA 2112 – flame resistant garments for protection of industrial personnel against flash fire

International Standard BS 476 Part 6 & Part 7: Class 0 (LPC BRE UK, SIRIM Malaysia and BOMBA Malaysia)

DECTAN

a water-based, environmentally friendly rust converter and priming agent

DECTAN is a complex mixture of a Vinyl Acrylic Copolymer and Tannic Acid. When used to treat corroded steel and iron surfaces, it neutralizes the corrosion process by converting the rust into a blueblack metallo-organic complex which passivates the surfaces. It has been tested and certified as fit for use for the carriage of grain and can also be used in sensitive foodstuff areas.

DECTAN can also be applied to non-finished wooden structures as a priming agent and may be coated when cured with any conventional paint using brush, roller or spray.

DECTAN resists spillage to a wide range of corrosive chemicals including strong acids, alkalis, aliphatic solvents, alcohols, glycols, petrol, crude oil and diesel oil. It is designed for application by spray and brush and dries to the touch in as little as 10 minutes to two hours depending on temperature, humidity and air movement.

Testing/Certifications;

ASTM B117 – continuous salt-spray test

For fiscal year ended July 31, 2010 98% of our revenues were generated from sales of Hartindo Fire Products.

Employees

We currently have 5 full-time employees and 1 part-time employee.

Item 2. DESCRIPTION OF PROPERTY

Our principal executive offices are located at 704 Mara Street, Suite 111, Point Edward, Ontario N7V 1X4. We lease this 2,600 square foot facility at a rental of $3,867 per month for a five-year term ending August 1, 2013. This facility consists of an office and administration area. To the extent that we require additional space in the near future, we believe that we will be able to secure additional leased facilities at commercially reasonable rates.

Our telephone number at the above location is 519-336-0628.

We do not intend to renovate, improve, or develop properties. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.

Item 3. LEGAL PROCEEDINGS

We are not currently involved in any legal proceedings nor do we have knowledge of any threatened litigation.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

Market for Securities

Our common stock currently trades on The Pink Sheets under the symbol MGOA. The high and low closing price for each quarterly period of our last two fiscal years is listed below:

	High		Low
Fiscal 2009
1st Quarter	$	0.05	$	0.02
2nd Quarter		0.05		0.02
3rd Quarter		0.05		0.01
4th Quarter		0.05		0.02

Fiscal 2010
1st Quarter	$	0.04	$	0.01
2nd Quarter		0.69		0.13
3rd Quarter		0.61		0.26
4th Quarter		0.51		0.08

*	The quotations reflect inter-dealer prices, without mark-up, mark-down or commission and may not represent actual transactions.

Unregistered sales of common stock

Not applicable

Reclassification

Certain amounts presented at July 31, 2009 have been reclassified to conform to presentation at July 31, 2010.

Penny Stock Considerations

Our shares will be "penny stocks" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

*	Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commissions relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

*	Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

*	Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

*	Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our stockholders will, in all likelihood, find it difficult to sell their securities.

Holders

As of July 31, 2010, we had 157 holders of record of our common stock, 82 holders of record of our Preferred Series A, and 3 holders of our Preferred Series B stock. As of July 31, 2010, we had 1,008 NOBO’s on record.

Dividends

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the board of directors deems relevant.

Reports to Stockholders

We have become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will file periodic reports, proxy statements and other information with the Securities and Exchange Commission. We intend to voluntarily send an annual report with audited consolidated financial statements to our security holders.

Where You Can Find Additional Information

For further information about us and the shares of common stock registered hereunder, please refer to the registration statement and the exhibits and schedules thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the SEC's Public Reference Room at 100F. St., N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The registration statement and other information filed with the SEC are also available at a web site maintained by the SEC at http://www.sec.gov.

Item 6. Selected Consolidated Financial Data

Not required.

Item 7. Management's Discussion and Analysis or Plan of Operation.

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

This Annual 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 Annual 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.

Special Information Regarding Forward Looking Statements

Some of the statements in this report are “forward-looking statements.” These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth above under “Risk Factors.” The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a penny stock issuer and thus we may not rely on the statutory safe harbor from liability for forward-looking statements.

Overview

Megola, Inc. is committed to solving environmental problems without the use of harsh chemicals that, in the long run, can have deleterious effects on company budgets and our environment. Megola, Inc. is the exclusive worldwide distributor for Megola GmbH, a German company that designs and manufactures the ScaleGuard series of physical water treatment equipment. Megola, Inc. has created a distribution network throughout the world.

Since the introduction of the ScaleGuard line of physical water treatment products, Megola has identified the need for a more comprehensive approach to environmentally-friendly water treatment. Now, five years later, Megola has obtained rights to market and distribute technologically advanced products for the industrial, commercial, residential and agricultural markets.

Current Results of Operations and Financial Status

Results of Operations:

Our revenues are difficult to forecast and may vary significantly from quarter to quarter and year to year. In addition, our expense levels for each quarter are, to a significant extent, fixed in advance based upon our expectation as to the net revenues to be generated during that quarter. We therefore are generally unable to adjust spending in a timely manner to compensate for any unexpected shortfall in net revenues. Further, as a result of these factors, any delay in product introductions, whether due to internal delays or delays caused by third party difficulties, or any significant shortfall in demand in relation to our expectations, would have an almost immediate adverse impact on our operating results and on ability to maintain profitability in a quarter.

Comparison of the year ended July 31, 2010 with the year ended July 31, 2009.

During the year ending July 31, 2010 our revenues decreased from $516,968 for 2009 to $336,822 for the year ended July 31, 2010, a decrease of 34.85% over the prior year. Our revenues for the year ended July 31, 2010 vs. year ended July 31, 2009 decreased due to a royalty payment based on a North American Distribution Agreement from 2009.

Cost of sales consists of direct manufacturing costs and applied overhead expenses for our cost of raw materials to manufacture the ScaleGuard, Hartindo and other systems. Cost of sales increased to $99,254 and, as a percentage of revenues, increased to 327.52% in the year ended July 31, 2010, as compared to $23,216 and 19.84% of revenue for the year ended July 31, 2009. The overall increase in the cost of sales during 2010 is due to the increase of actual sales with no royalty payments collected in which royalty payments do not incur any costs of sales. In note 3(k) we indicated a reduction to inventory during the year-end July 31, 2007. Even though these items have been slow to move, they are still salable and there is little concern with obsolescence. Future product sales of these slow moving items will have no corresponding cost of sales due to the reduction entered above. During the year ended July 31, 2010, $nil (2009-$400,000) of our revenues were generated from royalties based on a North American Distribution Agreement. When royalty payments are received, we do not incur any cost of sales.

General and administrative (operating) expenses increased 21.41% to $878,425 during 2010 from $723,502 in 2009. The overall increase in general and administrative (operating) expenses is due to consulting fees that aided in our product expansion and sales.

Interest expense decreased 77.12% in 2010 to $5,481 from $23,960 in 2009, because of the Company's decreased interest on stockholder loans during the year.

It is the opinion of the management that the Intangible Asset – Distribution Rights acquired at May 2007 through the issuance of 30,000,000 common shares is fully impaired and that the fair market value of the asset should be written off due to the low level of sales attributed to the asset. Our sales forecast for year ended July 31, 2010 based on contractually binding agreements entered into was $5.2 million while actual sales were $ 336,822. The considerable underperformance by our distribution groups relative to their committed obligations under Agency Agreements and the subsequent expiry of these agreements leaves the fair market value of the Intangible Asset in question and as a result viewed as fully impaired.

Accumulated other comprehensive loss decreased 71.52% in 2010 to $26,428 from $92,802, which is directly attributable to the foreign currency translation adjustment.

Net Income (Loss)

For the reasons outlined above, we realized a net loss of $1,956,432 for the year ended July 31, 2010 as compared to a net loss of $258,175 for the year ended July 31, 2009, an increase of 657.79%.

	2010			2009
REVENUE
Sales	$	336,822		$	116,968
Royalty		-			400,000
Total Revenue		336,822			516,968

COST OF SALES		99,254			23,216

SELLING and GENERAL ADMINISTRATIVE		878,425			723,502
IMPAIRMENT of INTANGIBLE ASSET		1,350,000			-
DEPRECIATION and AMORTIZATION		5,427			4,465
INTEREST		5,481			23,960
Total Expenses		2,239,333			751,927

Other income		(45,333	)		-
NET LOSS	$	(1,956,432	)	$	(258,175	)

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.

On January 19, 2009 the Company entered into a Distributorship, Sales Agency and Royalty Agreement with Vulcan Technologies LLC. Vulcan is granted exclusive distribution and sales rights for the Hartindo line of anti-fire products in Canada and Mexico as well as co-exclusive rights similarly in the United States for the Railroad Industry for a ten year term. Megola receives payments as follows. A payment of $400,000 within five days of the execution of the Agreement (funds have been received) and an additional $350,000 due 90 days following the date of this Agreement, provided that, under various existing contracts, Megola has purchased no less than 100,000 gallons of Hartindo AF21 in its fully diluted form.

Vulcan will also pay a commission payment of 25% of Vulcan’s profits on products sold by any party in the Railroad Industry. They also commit to generating no less than $3 million on or before the second anniversary of the Agreement. They also commit to a 15% increase in gross sales for each year thereafter.

Liquidity and Capital Resources

The consolidated financial statements as of and for the year ending July 31, 2010 have been prepared assuming we continue as a going concern.

At July 31, 2010, we had an accumulated deficit of $7,830,207.

Cash and cash equivalents at July 31, 2010 were $nil and $nil at July 31, 2009. Our inventory decreased for the same period from $241,023 to $209,334 or 13.15%;

Megola is also pursuing other financial resources to augment its cash requirements for retirement of debt, expansion of operations and acquisition of suitable companies and products.

Our success and ongoing financial viability is contingent upon its selling of our products and the related generation of cash flows. We evaluate our liquidity and capital needs on a continuous basis and based on our requirements and capital market conditions may, from time to time, raise working capital through additional debt or equity financing. There is no assurance that such financing will be available in the future to meet our additional capital needs, or that any such terms or conditions of any such financing would be favorable to us. Both our current growth and expanded business involve significant financial risk and require significant capital investment.

During 2010, three customers accounted for 96% of sales respectively (2009 – one customer accounted for 70%) and two vendors accounted for 97% of purchases (2009 - 99%).

Our ability to continue as a going concern is dependent on our ability to raise funds to implement our planned development; however we may not be able to raise sufficient funds to do so. Our independent auditors have indicated that here is substantial doubt about our ability to continue as a going concern over the next twelve months. Our poor financial condition could inhibit our ability to achieve our business plan. Because we are currently operating at a substantial loss, an investor cannot determine if we will ever become profitable.

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 7A. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Megola, Inc.

We have audited the accompanying consolidated balance sheets of Megola, Inc as of July 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficiency), and cash flows for each of the years then ended. Megola, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Megola, Inc. as of July 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the continuance of the Company is dependent on its future profitability and the ongoing support of its stockholders, affiliates and creditors. Management’s plans as to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

Jewett, Schwartz, Wolfe & Associates

/s/Jewett, Schwartz, Wolfe & Associates

Hollywood, Florida

November 15, 2010

MEGOLA, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts expressed in US dollars)

	July 31,			July 31,
	2010			2009
	(Audited)			(Audited)
ASSETS
Inventory	$	209,334		$	241,023
Prepaid expenses		13,595			41,482
Accounts receivable		7,855			-
Total Current Assets		230,784			282,504

Long-term receivable		-			128,754
Intangible asset		-			1,350,000
Property and equipment, net		7,389			12,424
TOTAL ASSETS	$	238,173		$	1,773,682

LIABILITIES
Bank overdraft	$	20,729		$	74,737
Accrued expenses		168,992			76,393
Accounts payable		64,231			45,822
Accrued interest		-			25,821
Loans payable		1,134			-
Advances from stockholders		115,437			-
Total Current Liabilities		370,523			222,773

Convertible Debenture		20,000			-
Total Liabilities		390,523			222,773

Commitments and Contingencies		-			-

STOCKHOLDERS' EQUITY
Capital stock: (note 8)
Common, $0.001 par value; 200,000,000 shares authorized, 33,570,455 and 33,187,419 issued and outstanding in 2010 and 2009 respectively		33,570			33,187
Preferred "A", $0.001 par value; 3,500,000 shares authorized, 1,092,225 and $1,911,940 issued and outstanding in 2010 and 2009 respectively		1,092			1,912
Preferred "B", $0.001 par value; 1,500,000 shares authorized, 47,561 and 137,885 issued and outstanding in 2010 and 2009 respectively		47			138
Additional paid in capital (note 8)		7,761,917			7,481,774
Deficit		(7,830,207	)		(5,873,775	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(118,769	)		(92,327	)
Total Stockholders' Equity		(152,350	)		1,550,909
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		238,173			1,773,682

See accompanying notes to audited consolidated financial statements

MEGOLA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts expressed in US dollars)

	Year Ended			Year Ended
	July 31,			July 31,
	2010			2009

Income - sales	$	336,822		$	116,968
Cost of sales		99,254			23,216
GROSS PROFIT (LOSS)		237,568			93,752

Income - royalties (note 12)		-			400,000
		237,568			493,752

General and administrative		878,425			723,502
Impairment of intangible asset		1,350,000			-
Depreciation		5,427			4,465
Interest		5,481			23,960
TOTAL EXPENSES		2,239,333			751,927

Other income		(45,333	)		-
TOTAL OTHER INCOME		(45,333	)		-

NET LOSS		(1,956,432	)		(258,175	)

Foreign currency translation adjustment		(26,442	)		(92,802	)

COMPREHENSIVE LOSS	$	(1,982,874	)	$	(350,977	)

Weighted average common shares outstanding		7,245,347			1,497,325

Loss per share - basic and diluted		(0.270	)		(0.172	)

See accompanying notes to audited consolidated financial statements

MEGOLA, INC.

CONSOLIDATED STATEMENTS OF CASHFLOWS

(Amounts expressed in US dollars)

	YEAR ENDED
	July 31, 2010			July 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period		(1,956,432	)		(258,175	)
Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash operationg transactions
Depreciation		5,035			4,465
Impairment of intangible asset		1,350,000			-
Shares issued for rent		27,887			48,802
Shares issued for services		114,000			75,000
Write off of receivable		120,899			-
Write off accrued interest		(25,821	)		-
Cash used by operating activities
Long term receivable		-			(11,881	)
Inventory		31,689			(189,594	)
Prepaid expenses		-			(41,369	)
Accounts payable		18,406			16,737
Accrued expenses		92,599			(22,963	)
Distributor deposit		-			22,000
Cash flows from operating activites		(221,738	)		(356,978	)

CASH FLOWS FROM FINANCING ACTIVITES
Increase in bank indebtedness		(54,008	)		73,446
Advances from stockholders		282,189			336,112
Convertible deventure		20,000			-
Principal payments on notes payable		-			(134,051	)
Cash flows from financing activities		248,181			275,507

CASH FLOWS FROM INVESTING ACTIVITES
Purchase of property and equipment		-			(11,331	)
Cash flows from investing activities		-			(11,331	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(26,443	)		92,802
NET INCREASE (DECREASE) IN CASH FOR THE YEAR		26,443			-
NET CASH, beginning of year		-			-
NET CASH, end of year		-			-

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid		5,481			23,960
Income taxes paid		-	#		-

NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of debt into preferred stock		165,617	#		1,378,850
Issuance of stock for services rendered		114,000	#		75,000

See accompanying notes to audited interim consolidated financial statements

Megola, Inc.

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

(Amounts expressed in US dollars)

	Common Stock						Preferred Stock Series "A"						Preferred Stock Series "B"
	Shares			Amount			Shares			Amount			Shares			Amount
Balances, July 31, 2008		1,569,721		$	1,570			-		$	-			-		$	-

Stock for services		50,000			50			-			-			-			-
Common converted to Preferred "A"		(955,972	)		(956	)		1,911,940			1,912
Debt converted to Preferred "B"								-			-			137,885			138
Stock Warrants
Net Loss		-			-			-			-			-			-
Foreign Currency
Translation Adjustment		-			-			-			-			-			-

Balances, July 31, 2009		663,749		$	664			1,911,940		$	1,912			137,885		$	138
Stock for services		64,000			64									5,000			5
Common converted to Preferred "A"		(23,668	)		(24	)		47,400			47
Debt converted to Preferred "B"								-			-			16,561			16
Preferred "A" converted to common		21,677,875			21,678			(867,115	)		(867	)
Preferred "B" converted to common		11,188,500			11,188									(111,885	)		(112	)
Net Loss		-			-			-			-			-			-
Foreign Currency
Translation Adjustment		-			-			-			-			-			-

Balances, July 31, 2010		33,570,455		$	33,570			1,092,225		$	1,092			47,561		$	47
	Comprehensive			Paid In			Accumulated
	Income (Loss)			Capital			Deficit			Totals
Balances, July 31, 2008		475		$	5,981,528		$	(5,615,600	)	$	367,973

Stock for services		-			74,950			-			75,000
Common converted to Preferred "A"					(956	)					-
Debt converted to Preferred "B"					1,378,712						1,378,850
Stock Warrants					80,063						80,063
Net Loss		-			-			(258,174	)		(258,174	)
Foreign Currency
Translation Adjustment		(92,802	)		-			-			(92,802	)

Balances, July 31, 2009		(92,327	)	$	7,514,297		$	(5,873,774	)	$	1,550,910
Stock for services					113,931						114,000
Common converted to Preferred "A"					(24	)					(1	)
Debt converted to Preferred "B"					165,584						165,600
Preferred "A" converted to common					(20,811	)					-
Preferred "B" converted to common					(11,076	)					-
Stock Warrants					-						-
Net Loss		-			-			(1,956,432	)		(1,956,432	)
Foreign Currency
Translation Adjustment		(26,428	)		-			-			(26,428	)

Balances, July 31, 2010		(118,755	)	$	7,761,901		$	(7,830,206	)	$	(152,350	)

See accompanying notes to audited interim consolidated financial statements

MEGOLA, INC.

Notes to Consolidated Financial Statements for the Years ended July 31, 2010 and 2009

(Amounts expressed in US dollars)

1.	NATURE OF BUSINESS

Megola, Inc. ("Megola" or "the Company") was incorporated in Ontario, Canada on August 28, 2000. Megola was formed to sell physical water treatment devices to a wide range of end-users in the United States, Canada and internationally under a license granted by Megola GmbH in Germany.

The Company presently distributes the following product lines: physical water treatment; water filtration; air purification; microbiological control; waste water treatment and fire safety.

2.	GOING CONCERN

These 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. As shown in the accompanying consolidated financial statements, Megola incurred recurring net losses of $1,956,432 and $258,175 in the 2010 and 2009 fiscal years respectively, and negative cash flows from operations and a deficit of $7,830,207 as at July 31, 2010. These conditions create an uncertainty as to Megola's ability to continue as a going concern. At present, the Company does not have sufficient resources to fund its current working capital requirements. The Company's financing plans include obtaining additional capital through various debt and/or equity financing arrangements to service its current working capital requirements; any additional or unforeseen obligations and to fund the implementation of 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 consolidated financial statements do not include any adjustments for this uncertainty.

Management has undertaken the following initiatives that it believes will be instrumental in leading to better management of cash flows and more profitable operations:

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

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

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

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

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

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

These consolidated financial statements are presented in U.S. dollars and have been prepared by management in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and the rules of the Securities Exchange Commission ("SEC").

(b) Principles of consolidation

The Company's consolidated financial statements include the accounts of Megola and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated on consolidation.

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates are comprised of depreciation, accrued expenses, impairment of intangible asset, and recoverability of deferred tax asset. These consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized in these consolidated financial statements.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Foreign currency translation

Megola determined that its functional currency is the Canadian Dollar as substantially all of its operations are in Canada. Megola’s reporting currency is U.S. dollars. Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation, and are included in determining net income or loss. For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the local currencies into U.S. dollars at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements. Translation adjustments resulting from the process of translating the local currency consolidated financial statements into U.S. dollars are included in determining comprehensive loss. As of July 31, 2010, the exchange rate for the Canadian Dollar was $1.00 U.S. for $.9725 Canadian (2009 - $1.00 U.S. for $.9281). The annual average exchange rate for the 2010 fiscal year was $1.00 U.S. for $.9532 (2009 - $1.00 U.S. for $.8508). The Canadian economy strengthened considerably in relation to the U.S. during the fiscal year of 2010, and as a result currency fluctuations have affected Megola's operations. In the future, inflation rates and the devaluation or valuation of the Canadian Dollar in relation to the U.S. dollar may have significant effects on Megola's consolidated financial statements. During the year-ended July 31, 2010 the company incurred an aggregated foreign currency translation loss of $118,769.

(e) Cash equivalents

For the purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents.

(f) Revenue recognition

Revenue is recognized when it is realized or realizable and earned. Megola considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, services have been provided, and collectability is reasonably assured. In the case of exclusive agreements with distributors, finished goods are shipped directly FOB manufacturer/point of assembly. Megola offers no independent warranty and refers any warranty claims to the manufacturer for products it sells. Therefore, Megola recognizes revenue under these agreements when the goods are shipped. Megola recognizes royalty revenue as the Company is informed that such payments are due.

(g) Shipping and Handling

Megola provides all customers the option of having product delivered or making their own shipping arrangements. All shipping and handling costs are disclosed in the pricing estimate. Megola contacts its primary shipping facility for shipping costs at the time orders are received and provides to customer in the pricing estimate.

(h) Intangible assets

Intangible assets include distribution rights acquired from an independent party. Intangible assets with an indefinite life are not amortized. Indefinite-lived intangible assets are tested for impairment annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair value of the asset. At year end the management has performed an impairment analysis and determined that an impairment allowance is not required. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.

It is the opinion of the management that the Intangible Asset – Distribution Rights acquired at May 2007 through the issuance of 30,000,000 common shares is fully impaired and that the fair market value of the asset should be written off due to the low level of sales attributed to the asset. Our sales forecast for year ended July 31, 2010 based on contractually binding agreements entered into was $5.2 million while actual sales were $ 336,822. The considerable underperformance by our distribution groups relative to their committed obligations under Agency Agreements and the subsequent expiration of these agreements leaves the fair market value of the Intangible Asset in question and as a result viewed as fully impaired.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Financial Instruments

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash, accounts receivable and payable approximate fair value based on the short-term maturity of these instruments.

Fair value of certain of the Company’s financial instruments including cash and cash equivalents, inventory, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3

Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Currency Risk

The company is exposed to currency risks due to potential variation of the currencies in which it operates.

Principal currencies include the United States dollar and Canadian Dollar. The company monitors the foreign currency exposure regularly to minimize the foreign currency risk exposure.

Liquidity Risk

The company is exposed to liquidity risk as its continued operations are dependant upon obtaining additional capital to satisfy its liabilities as they come due.

(j) Allowance for doubtful accounts

Megola does not require collateral from its customers with respect to accounts receivable but performs periodic credit evaluations of such customers’ financial conditions. Megola determines any required allowance by considering a number of factors including lengths of time accounts receivable are past due and Megola’s previous loss history. Megola provides reserves for accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Megola requires payment in full for most orders, which minimizes collection requirements. Certain customers are able to provide us with a deposit of 50% up front with the balance due on shipping. Our standard procedures related to any delayed payments are to follow up within 10 days with a friendly reminder phone call and a letter in 30 days. After 60 days, we will have a letter drafted by our lawyer go out demanding payment in full along with any outstanding interest charges. Failure to make payment in the next 15 days will result in the account being forwarded to a collection agency for recovery. Receivables will be classified as doubtful after 120 days and written off as Bad Debt. Interest charges will start to accumulate on the 30th day following the Invoice for any unpaid balances at a rate of 18% per annum calculated daily.

As of July 31, 2010 and 2009, Megola had $120,022 and $nil respectively as an allowance for doubtful accounts.

(k) Inventory

Inventory is valued at the lower of cost (determined on a first -in, first-out method) and net realizable value. Megola records provisions to write down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between cost of the inventory and its estimated net realizable value based on assumptions about future market demand and market conditions. If future demand or market conditions are less favorable than currently expected, additional inventory provisions may be required. During the fiscal years ended July 31, 2010 and 2009 impairment expense was $nil and $nil, respectively related to inventory impairments. In the year ending July 31, 2007, included in the impairment expense is $245,032 for slow moving products. These products are in good condition and are still expected to be sold.

(l) Property and equipment

Property and equipment are stated on the basis of historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which range from 3 to 7 years. Depreciation expense for the years ended July 31, 2010 and 2009 was $5,427 and $4,465, respectively. Depreciation of property and equipment acquired and disposed of during the year is recorded at one half of the indicated rates.

(m) Impairment of long-lived assets

Long-lived assets other than intangible assets require the recognition of an impairment loss whenever it is indicated that an asset may be impaired and the future cash flows from that asset are less than the asset’s carrying value.

(n) Comprehensive income (loss)

The Company has adopted SFAS No. 130 Reporting Comprehensive Income. This standard requires companies to disclose comprehensive income (loss) in their consolidated financial statements. In addition to items included in net income, comprehensive income (loss) includes items currently charged or credited directly to stockholders’ deficiency, such as foreign currency translation adjustments.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Concentration of credit risk

SFAS No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration.

(p) Income taxes

Megola accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes.". Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. There was no current or deferred income tax expense or benefits for the period ending July 31, 2010 and 2009.

(q) Net earnings (loss) per common share

Basic loss per share is calculated by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted loss per share is computed using the treasury stock method. Under this method, the diluted weighted average number of shares is calculated assuming the proceeds that arise from the exercise of stock options and other dilutive instruments are used to repurchase the Company’s shares at their weighted average market price for the period.

(r) Share-based compensation

The Company has adopted the requirements of FASB Statement of Financial Accounting Standards No. 123(R), “Share-Based Payments", and Staff Accounting Bulletin No. 107, or SAB 107, "Share-Based Payments". These pronouncements require that the fair value method of accounting be applied to all share-based compensation payments to both employees and non-employees respectively.

The fair value method of accounting is used to account for share based payments granted to directors, officers, employees and others whereby the fair value of share based payments granted is recorded as an expense in the consolidated financial statements. The expense is based on the estimated fair value at the time of the grant and recognized over any vesting period.

The fair value of share based payments granted to employees and non-employees is determined using the Black-Scholes option pricing model.

(s) Recent accounting pronouncements

Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

In May 2010, the FASB issued Accounting Standard Update No. 2010-19 “Foreign Currency”. (“ASU No. 2010-19”). ASU 2010-19, codifies the SEC staff announcement made at the March 18, 2010, EITF meeting. The ASU “provides the SEC staff’s views on certain foreign currency issues related to investments in Venezuela.” These issues relate to Venezuela’s highly inflationary status. The ASU became effective on March 18, 2010. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In April 2010, the FASB issued Accounting Standard Update No. 2010-18. “Receivables” (Topic 310). ASU No.2010-18 provides guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition. Paragraph 310-30-15-6 allows acquired assets with common risk characteristics to be accounted for in the aggregated as a pool. Upon establishment of the pool, the pool becomes the unit of accounting. When loans are accounted for as a pool, the purchase discount is not allocated to individual loans; thus all of the loans in the pool accrete at a single pool rate (based on cash flow projections for the pool). Under subtopic 310-30, the impairment analysis also is performed on the pool as a whole as opposed to each individual loan. Paragraphs 310-40-15-4 through 15-12 establish the criteria for evaluating whether a loan modification should be classified as a troubled debt restructuring. Specifically paragraph 310-40-15-5 states that “a restructuring of a debt constitutes a troubled debt restructuring for purposes of this subtopic if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.” The ASU is effective for modification of loans accounted for within pools under subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued Accounting Standard Update No. 2010-17. “Revenue Recognition-Milestone Method” (Topic 605) ASU No.2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. An entity often recognizes these milestone payments as revenue in their entirety upon achieving a specific result from the research or development efforts. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. Determining whether a milestone is substantive is a matter of judgment made at the inception of the arrangement. The ASU is effective for fiscal years and interim periods within those fiscal years beginning on or after June 15, 2010. Early application is permitted. Entities can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued Accounting Standard Update No. 2010-13 “Stock Compensation” (Topic 718). ASU No.2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The amendments in this Update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. The cumulative-effect adjustment should be presented separately. Earlier application is permitted. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued Accounting Standard Update No. 2010-12. “Income Taxes” (Topic 740). ASU No.2010-12 amends FASB Accounting Standard Codification subtopic 740-10 Income Taxes to include paragraph 740-10-S99-4. On March 30, 2010 The President signed the Health Care & Education Affordable Care Act reconciliation bill that amends its previous Act signed on March 23, 2010. FASB Codification topic 740, Income Taxes, requires the measurement of current and deferred tax liabilities and assets to be based on provisions of enacted tax law. The effects of future changes in tax laws are not anticipated.” Therefore, the different enactment dates of the Act and reconciliation measure may affect registrants with a period-end that falls between March 23, 2010 (enactment date of the Act), and March 30, 2010 (enactment date of the reconciliation measure). However, the announcement states that the SEC would not object if such registrants were to account for the enactment of both the Act and the reconciliation measure in a period ending on or after March 23, 2010, but notes that the SEC staff “does not believe that it would be appropriate for registrants to analogize to this view in any other fact patterns.” The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

4.	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 were paid by the issuance of 30,000,000 common shares of the Company and are considered to have an indefinite life.

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

50% of all up-front fees received by the Company and 50% of all other forms of consideration received by the Company as a one-time payment for the grant of the distribution license shall be paid to PCL and 50% shall be retained by Megola

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

This agreement, as amended subsequent to 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. In December 2008, the sales/performance quotas in the agreement with PCL have been moved forward starting January 31, 2010.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

5.	PROPERTY AND EQUIPMENT

	2010				2009
	Cost		Accumulated Depreciation		Net		Net
	$		$		$		$
Sports Ozone Machines		16,000		15,406		594		2,874
Office Furniture and Equipment		31,846		25,051		6,795		9,550
	$	47,846	$	40,457	$	7,389	$	12,424

Depreciation expense for the years ended July 31, 2010 and 2009 was $5,427 and $4,465, respectively.

Difference between the change in accumulated depreciation from 2009 to 2010 and depreciation expense recorded is due to the effects of foreign currency translation.

6.	NOTE PAYABLE

Megola, FireStop USA, LLC ("FSU"), an unrelated party, and Pacific Channel Ltd. ("PCL") have agreed that FSU will loan $250,000 to Megola under a note payable and security agreement. FSU specified that no interest on the loan will be due if the loan is repaid in full within six months. Any amounts owing after six months will be subject to interest at 15% per annum. As security for the loan, Megola pledged a first priority interest in the U.S. manufacturing rights for the Hartindo line of products. No interest has been accrued or paid on the loan for the year ended July 31, 2008.

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

On October 22, 2007, Megola signed a note and security agreement with PCL to obtain additional funding in the amount of $292,980. Megola, upon receipt of the loan, will incur no interest should the loan be repaid after specified time period. Any amounts still owing after the period, unless such date is extended by PCL, will be subject to a 15% rate of interest.

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

As security for the loan, Megola has pledged to PCL the right to revoke Megola’s Licensing Agreement to the Hartindo line of products. No interest has been accrued or paid on the loan for the year ended July 31, 2008.

During the year, PCL assumed several vendor invoices on behalf of the company in the amount of $42,690. The amount is non-interest bearing and PCL waived their right to demand payment before January 1, 2010. PCL reserved the right to further extend the due date and interest-free period at their sole discretion. The amount of imputed interest for the year ended July 31, 2008 is not material.

On April 30, 2009, Megola satisfied this entire note by issuing Preferred B stock in exchange for the debt.

7.	ACCRUED EXPENSES

The composition of accrued expenses is as follows:

	2010		2009

Accrued Payroll Liabilities		144,369		50,393
Other		24,623		26,000

Total accrued liabilities	$	168,992	$	76,393

8.	CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL

(a) Common stock

Common stock ($.001 par value per share): 200,000,000 shares are authorized, with 33,570,455 shares issued and outstanding at July 31, 2010 and 33,187,419 at July 31, 2009.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

8.	CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (continued)

On August 5, 2009, Megola issued 3,200,000 shares of its common stock, for consulting services, under an agreement valued at $64,000. These shares were affected by the 1:50 reverse split that took place on November 25, 2009 and were converted into 64,000 shares.

On September 28, 2009, Megola’s common stock decreased by 41,500 shares, due to a tender offer to the company’s Series A Convertible Preferred stock. These shares were submitted for tender prior to the deadline of June 15, 2009; however, an error was made in the transmittal of the request and subsequently was not processed until this time. These shares were affected by the 1:50 reverse split that took place on November 25, 2009 and were converted into 830 shares.

On November 25, 2009 Megola approved a corporate action of a reverse 1:50 stock split. The Management and Board of Directors of Megola Inc. have reviewed the recent activity and events of the company and feel that the company's common stock is vastly undervalued. Megola has therefore initiated a comprehensive plan to increase the share value of the common stock.

On January 21, 2010, Megola’s common stock decreased by 1,143,500 shares, due to a tender offer to the company’s Series A Convertible Preferred stock. These shares were submitted late due to a late conversion instruction provided to the transfer agent. These shares were affected by the 1:50 reverse split that took place on November 25, 2009 and were converted into 22,838 shares.

On May 29, 2010, all Preferred series A stock were eligible for conversion back to common stock. During the period of May 29, 2010 to July 31, 2010, 867 shares of Preferred series A stock were converted into 21,678 shares of common stock. One share of Series A Convertible Preferred Stock was received for each 25 shares of common tendered.

During the period of May 1, 2010 to July 31, 2010, all Preferred series B stock were eligible for conversion back to common stock. 111,885 shares of Preferred series B stock were converted into 11,188,500 shares of common stock.

The shareholder of each common share is entitled to one vote. Megola’s common stock currently has no additional rights or privileges.

b) Preferred “A”

On April 24, 2009, the company offered all common shareholders of record the opportunity to tender their shares in exchange for the company’s Series A Convertible Preferred stock. As of the offer expiration date, June 15, 2009, 47,798,610 common shares had been tendered. One share of Series A Convertible Preferred Stock was received for each 25 shares of common tendered. There is a mandatory holding period for the Series A Convertible that expires May 29, 2010, before shareholders can then convert back to common shares. The stated value of the Series A Convertible is $5. per share or $.20 per common share. On May 29, 2010 Preferred A shareholders may convert their shares back to common at $.20 per common share or market, whichever is less. Each Preferred Series A still represents 25 shares of common. The holders of Series A Convertible Preferred Stock have 100 votes for each full share Series A Convertible Preferred Stock.

Each Series A Preferred also has a warrant attached which allows the owner to purchase 10 common shares at $.45 per share. The warrant applies only to shareholders that have not yet converted their Preferred A shares back to common on the date they exercise their warrants. These warrants expire on May 29, 2011.

On September 28, 2009, the company’s Series A Convertible Preferred stock increased by 1,660 shares and common stock decreased by 41,500 shares, due to a tender offer for the company’s Series A Convertible Preferred stock. These shares were submitted for tender prior to the deadline of June 15, 2009; however, an error was made in the transmittal of the request and subsequently was not processed until this time.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

8.	CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (continued)

On January 21, 2010, the company’s Series A Convertible Preferred stock increased by 45,740 shares and common stock decreased by 22,838 shares, due to a tender offer to the company’s Series A Convertible Preferred stock. These shares were submitted late due to a late conversion instruction provided to the transfer agent.

On May 29, 2010, all Preferred series A stock were eligible for conversion back to common stock. During the period of May 29, 2010 to July 31, 2010, 867,115 shares of Preferred series A stock were converted into 21,677,875 shares of common stock. One share of Series A Convertible Preferred Stock was received for each 25 shares of common tendered.

On April 24 2009, Megola offered to exchange selected Debt for shares of a newly created Series B Convertible Preferred Stock, priced at $10.00 per share. The holders of Series B Convertible Preferred Stock shall have the right to convert the Series B Convertible Preferred Stock into Debt at a later time subject to certain conditions. No conversion of Series B Convertible Preferred Stock to Debt can occur until after a holding period of twelve (12) months from date of conversion. Thereafter, at your option, you may convert the Series B Convertible Preferred Stock into common stock. For purposes of conversion, the value of each share of Series B Convertible Preferred Stock will be deemed to be $10.00. The number of shares of common shares to be received upon a conversion will be based on a value of $0.10 per share or the value of the market bid price at the time of conversion, whichever is less. That value will be based on the average closing bid price of the common stock for each of the ten (10) consecutive trading days immediately prior to the date of conversion.

On January 29, 2010, Megola issued 16,561 shares of its Preferred B stock. The stock was issued in return for stockholder loan.

During the period of May 1, 2010 to July 31, 2010, all Preferred series B stock were eligible for conversion back common stock. 111,885 shares of Preferred series B stock were converted into 11,188,500 shares of common stock.

On June 1, 2010, Megola issued 5,000 shares of its Preferred B stock, for professional fees, under an agreement, valued at $50,000.

(d) Additional paid in capital

From the year ended July 31, 2010 additional paid in capital increased by $280,143 due to the company issuing common stock for services, common stock being converted to Preferred “A”, debt converted to Preferred “B”, issuing Preferred “B” stock for services, and common stock being decreased due to the reverse 1:50 stock split.

(e)

The Company has a Stock Incentive Plan for employees and consultants. There were no shares issued under the plan during the year ended July 31, 2010.

9.	SEGMENT REPORTING

The Company sells products in North America and Asia and has two reportable geographic segments and three reportable product segments summarized as follows:

	North America			Asia		Total

Year ended July 31, 2010
Sales and Royalties	$	336,822		$	-	$	336,822
Net loss	$	(1,956,432	)	$	-	$	(1,956,432	)
Depreciation	$	5,427		$	-	$	5,427
Interest Expense	$	5,481		$	-	$	5,481
Total Assets	$	238,173		$	-	$	238,173

Year ended July 31, 2009
Sales and Royalties	$	516,968		$		$	516,968
Net loss	$	(258,174	)	$		$	(258,174	)
Depreciation	$	4,465		$	-	$	4,465
Interest Expense	$	23,960		$	-	$	23,960
Total Assets	$	1,773,682		$		$	1,773,682

Breakdown of sales and royalties by product line

	Physical Water
	Treatment		Fire Safety		Total
Year Ended July 31, 2010	$	7,349	$	329,473	$	336,822
Year Ended July 31, 2009	$	2,826	$	514,142	$	516,968

There were no sales for air purification, water filtration, microbiological control and waste water treatment.

10.	COMMITMENTS

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

Office
Year Ended	July 31, 2011	$	42,981
Year Ended	July 31, 2012	$	42,981
Year Ended	July 31, 2013	$	42,981
Year Ended	July 31, 2014	$	3,582
Total		$	132,525

Warehouse
Year Ended	July 31, 2011	$	17,505
Year Ended	July 31, 2012	$	17,505
Year Ended	July 31, 2013	$	17,505
Year Ended	July 31, 2014	$	1,459
Total		$	53,974

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

Year Ended	July 31, 2011	$	40,075
Year Ended	July 31, 2012	$	6,679
Total		$	46,754

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

Year Ended	July 31, 2011	$	9,388
Year Ended	July 31, 2012	$	7,041
Total		$	16,429

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

11.	CONTINGENCIES

On March 30, 2010, the Company entered in a Master Distributor agreement with CY Holding Company. Through this agreement the Company acquired exclusive rights to sell the equipment of CY Holding Company in North America. This agreement is contingent on the minimum annual sales of 10,000 – 20,000 units during any calendar twelve month period. As of July 31, 2010, the Company had not sale any units related to CY Holding’s equipment.

12.	CONVERTIBLE NOTES PAYABLE

On July 16, 2010, a third party loaned the Company $20,000. The loan bears a rate of interest of 9% per annum and is payable on April 6, 2011 or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 9% per annum, payable on the Maturity Date, unless the Debenture is converted to shares of common stock in accordance with the terms and conditions herein.. The holder of the note has the right to convert the note into common stock of the Company at a price of $0.01 per share of common stock or a price of seventy percent (70%) of the average of the two lowest volume weighted average prices (“VWAPs”), determined on the then current trading market for the Company’s common stock, for ten (10) trading days prior to conversion (the “Set Price”), at the option of the Holder, in whole at any time and from time to time.

13.	ROYALTY INCOME

One of the Company's manufacturers also sells certain Megola products directly throughout Asia. By agreement, Megola is entitled to a royalty payment for each of these units. Megola recognizes royalty revenue upon fulfillment of its contractual obligations and upon sale by the manufacturer of royalty-bearing products. There was no royalty income received during the fiscal year due to the manufacturer moving its facilities to a new location in Southeast Asia, thereby not producing or selling any additional units.

On January 19, 2009 the Company entered into a Distributorship, Sales Agency and Royalty Agreement with Vulcan Technologies LLC. Vulcan is granted exclusive distribution and sales rights for the Hartindo line of anti-fire products in Canada and Mexico as well as co-exclusive rights similarly in the United States for the Railroad Industry for a ten year term. Megola receives payments as follows. A payment of $400,000 within five days of the execution of the Agreement (funds have been received) and an additional $350,000 due 90 days following the date of this Agreement provided that, under various existing contracts, Megola has purchased no less than 100,000 gallons of Hartindo AF21 in its fully diluted form.

14.	RESEARCH AND DEVELOPMENT

In 2009, Megola had $12,527 in research and development related expenditures. Much work had been completed in furthering the potential marketability of the Hartindo product line. In 2010, expenses were significantly reduced to $7,369 due to such initiatives being directly undertaken by our distribution groups.

15.	CONCENTRATIONS

During 2010, three customers accounted for 96% of sales respectively (2009 – one customer accounted for 70%) and two vendors accounted for 97% of purchases (2009 - 99%).

During 2010, 36% of the recognized sales were related to the Hartindo product line, and 27% were related to technical and administrative revenue. As of July 31, 2010, the Company only had one main supplier of the Hartindo raw materials needs for the Hartindo product line.

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

16.	INCOME TAXES

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be realized. A valuation allowance of 100% of the deferred tax assets was made; there are no deferred taxes as of July 31, 2010. There was no income tax expense for the years ended July 31, 2010 and 2009 due to the Company’s net losses.

The Company’s tax benefit differs from the “expected” tax benefit for the years ended July 31, 2010 and 2009, which is computed by applying the Federal Corporate tax rate of 35% to loss before taxes), as follows:

	Through July 31, 2010		Through July 31, 2009
Computed “expected” tax benefit	$	2,740,572		2,055,821
Less; benefit of operating loss carryforwards		2,740,572		2,055,821

	$	-		-

17.	EARNING PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock or conversion of notes into shares of the Company’s common stock that could increase the number of shares outstanding and lower the earnings per share of the Company’s common stock. This calculation is not done for periods in a loss position as this would be antidilutive. As of July 31, 2010, there were no stock options or stock awards that would have been included in the computation of diluted earnings per share that could potentially dilute basic earnings per share in the future. The information related to basic and diluted earnings per share is as follows:

	Ended July 31,
	2010			2009

Numerator:
Continuing operations:
Income from continuing operations	$	(1,956,432	)	$	( 258,175	)
Effect of dilutive convertible debt		—			—
Total	$	(1,956,832	)	$	( 258,175	)

Discontinued operations
Loss from discontinued operations		—			—

Net income (loss)	$	(1,956,432	)	$	( 258,175	)

Denominator:
Weighted average number of shares outstanding – basic and diluted		7,245,347			1,497,325

EPS:
Basic:
Continuing operations	$	( .270	)	$	( .17	)
Discontinued operations		0.00			0.00
Net income/(loss)	$	(1,956,432	)	$	( 258,175	)

Diluted
Continuing operations	$	( .270	)	$	( .17	)
Discontinued operations		0.00			0.00
Net income/(loss)	$	(1,956,432	)	$	( 258,175	)

MEGOLA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2010 and 2009

(AMOUNTS EXPRESSED IN U.S. DOLLARS)

18.	LONG TERM RECEIVABLE

The accounts 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 accounts receivable. The fair value of the long-term receivable has been estimated by discounting future cash flows using an estimated rate of 6%. The fair value of long-term receivable is $121,466.

On April 9, 2010, the Board of Directors of Pacific Channel Limited and majority of shareholders have passed resolution to dissolve the company effectively immediately, therefore the outstanding receivable is deemed uncollectible and a corresponding adjusting entry to bad debt expense has been entered.

19.	RELATED PARTY TRANSACTIONS

During the year ended July 31, 2010, the Company had the following material related party transactions:

Joel Gardner, the Company’s Chief Executive officer, lend the Company $282,189, and converted $165,617 into 16,561 shares of preferred B stock during the year ended July 31, 2010. As of July 31, 2010, the Company owed Joel Gardner $116,572.

New Fire Solutions, Inc., is a company owned by one of the Company’s directors, and it accounted for 42% of the Megola’s annual sales during the year ended July 31, 2010.

20.	SUBSEQUENT EVENTS

On August 31, 2010, Megola (“Company”) entered into a Securities Purchase Agreement with Asher Enterprises, Inc. (“Buyer”).

The basic parameters of the Agreement with Asher Enterprises, Inc. will include, but not be limited to, the following:

The Company and the Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $45,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto

On September 3, 2010, the corporation approved the conversion, thru RBC Dominion Securities, of 7,031,800 restricted common shares of Megola Inc. (MGON) to 70,318 shares of Megola Inc Series B Preferred Stock.

On September 8, 2010, Megola announced that the company had opened a brokerage account with Glendale Securities for the purpose of initiating a stock buyback plan.

On September 9, 2010, Megola received a request from TD AMERITRADE Clearing Inc. to reverse a conversion and transfer that was done per their request by the transfer agent. As the conversion and transfer from Megola Series ‘A’ Preferred stock to Megola Common stock was done without the authorization of their client TD AMERITRADE Clearing Inc. asked for consent to reverse the transaction and revert the Common Shares back to Preferred Series A Shares. Megola has given consent for 1,000,000 Common Shares to be reverted back to the original 40,000 shares of Series ‘A’ Preferred stock into the name of their client.

As of September 17, 2010 Megola has purchased 143,000 of common stock of Megola Inc. (MGON) and will return shares to treasury.

21.	COMPARATIVE FIGURES

Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to the current year presentation.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None—Not Applicable

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at July 31, 2010. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at July 31, 2010, our disclosure controls and procedures are effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

The Company has established disclosure controls and procedures to ensure that information disclosed in this annual report on Form 10-K was properly recorded, processed, summarized and reported to the Company’s Board of Directors. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 31, 2010 and for the fiscal year ending July 31, 2010 covered by this Annual Report on Form 10-K. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that, as of July 31, 2010 and for the fiscal year ending July 31, 2010, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after July 31, 2010.

This annual report does not include an attestation report of the Company s registered public accounting firm regarding internal control over financial reporting. Management s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

No change in the Company s internal control over financial reporting occurred during the year ended July 31, 2010, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III - OTHER INFORMATION

Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act

Each of our directors’ serves for a term of one year or until the successor is elected at our annual shareholders' meeting and is qualified, subject to removal by our shareholders. Each officer serves, at the pleasure of our board of directors, for a term of one year and until the successor is elected at the annual meeting of the board of directors and is qualified.

The names, ages and positions of the Company's directors and executive officers are as follows:

Name	Age	Position

Joel Gardner	43	Chief Executive Officer/President/Director

Craig Wagenschutz	52	Chief Financial Officer

Daniel Gardner	39	Treasurer

Sufan Siauw	42	Director

Willard Brown	53	Director

Joel Gardner joined Megola as president, CEO and Director in August 2000. From November 13, 1998 to July 2000, he was vice president of Aqua-Cristall Limited. From September 1990 to August 1998, he played professional hockey. In 1990 he received a BA, education major, minor in geology from Colgate University, NY.

Craig Wagenschutz joined Megola as CFO in January 2009. He is responsible for the development and implementation of company financial systems and processes as well as business plans and strategies, revenue models and budgeting. Mr. Wagenschutz will also work directly with the company's SEC Auditing firm to ensure financial compliancy of quarterly and year-end filings. A graduate of Adrian College with a BA in accounting, Mr. Wagenschutz became a licensed CPA in 1984 and founded Wagenschutz & Associates CPA Firm in 1988. He is a current member of the Michigan Association of CPAs and the American Institute of CPAs.

Daniel Gardner joined Megola in January 2005 in the role of General Manager and was appointed Treasurer in September 2006. He is responsible for daily business operations as well as working to implement business plans, marketing strategies, and product development. He is also a key figure in the area of investor relations on the public side of the company.

Willard "Buzz'' Brown joined Megola as director in October 2000. He brings over 20 years of business management knowledge to Megola. Currently, he is President and Owner of J&C Ice Technologies, Inc., a distributor for Zamboni in the mid-Atlantic region. In addition, Buzz also owns and operates Island Style Construction Company in Nantucket, a custom home-building construction company. Mr. Brown is a graduate of St. Lawrence University.

Sufan Siauw is currently the Chief Technology Officer of Dalian Bingshan H2O3 Environmental Solutions Co. Ltd., a Chinese ozone water treatment system manufacturer that is part of the Bingshan Group, one of China's largest diversified conglomerates, consisting of 46 different companies.

Family Relationships

Joel Gardner, CEO/President and Daniel Gardner, Treasurer, are brothers.

Legal Proceedings

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last five years in any of the following:



Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;



Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);



Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and



Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Code of Ethics

We do not currently have a Code of Ethics applicable to our principal executive, financial or accounting officer.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of beneficial ownership and changes in beneficial ownership of our securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Directors, executive officers and beneficial owners of more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file. Based solely on review of the copies of such forms furnished to us, or written representations that no reports were required, we believe that for the fiscal year ended July 31 2009 beneficial owners complied with Section 16(a) filing requirements applicable to them.

Item 11. Executive Compensation

The following table sets forth the compensation paid to our executive officers during fiscal year ended July 31, 2009 and 2010 (collectively, the “Named Executive Officers”):

Summary Compensation Table

										Non-Equity		Non-Qualified
Name and										Incentive		Deferred		All
Principal						Stock		Option		Plan		Compensation		Other
Position	Year	Salary		Bonus		Awards		Awards		Compensation		Earnings		Compensation		Total
		($)		($)		($)		($)		($)		($)		($)		($)
Joel Gardner	2009		1		0		0		0		0		0		0		1
President/CEO	2010		1		0		0		0		0		0		0		1

Compensation Agreements

We have the no compensation agreements with our executive officers.

Summary Equity Awards Table

The following table sets forth certain information for our executive officers concerning unexercised options, stock that has not vested, and equity incentive plan awards as of July 31, 2010.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)				Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Joel Gardner			0				0				0				0				0				0				0				0				0

Director Compensation Table

									Change in
									Pension
									Value and
							Non-Equity		Non-Qualified
	Fees Earned						Incentive		Deferred
	or Paid		Stock		Option		Plan		Compensation		All Other
Name	in Cash		Awards		Awards		Compensation		Earnings		Compensation		Total
	($)		($)		($)		($)		($)		($)		($)
Sufan Siauw	$	0		0		0		0		0		0		0
Joel Gardner	$	0		0		0		0		0		0		0
Willard Brown	$	0		0		0		0		0		0		0

Advisory Board

Megola Inc. has formed an Advisory Board that consist of individuals that it believes to be an important group of people that will play an integral role in assisting Megola in the overall growth of the company. The Company will turn, from time to time, to its Advisory Board for direction and advice on certain business matters of the company. Nothing has been compensated to these individuals but maybe figured into the future.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

As of the date of this Annual Report, the following table sets forth certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. As of the date of this Annual Report, there are 33,570,455 shares of common stock issued and outstanding.

The following tables set forth the ownership, as of the date of this prospectus, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The business address of the shareholders is 704 Mara Street, Suite 111, Point Edward, ON N7V 1X4.

Holder of Preferred Series A

	Amount and Nature of
Name of Beneficial Owner	Beneficial Ownership		Percentage of Class(A)
Joel Gardner and affiliates		604,054		55	%
Craig Wagenschutz and affiliates		12,402		0.01	%
Willard Brown		29,780		0.02	%
Dan Gardner and affiliates		2,133		0.00	%
All officers and directors as a group [4 persons]		648,369		55.03	%

The above is based on 1,092,225 shares of Preferred Series A Stock issued and outstanding as of July 31, 2010. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the Preferred Series A Stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.

Holder of Preferred Series B

	Amount and Nature of
Name of Beneficial Owner	Beneficial Ownership		Percentage of Class(B)
Joel Gardner and affiliates		16,561		34	%

The above is based on 47,561 shares of Preferred Series B Stock issued and outstanding as of July 31, 2010. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Preferred Series B Stock does not include voting power with respect to securities.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Director Independence

We are not subject to the listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” Currently, we have only one director and we believe that such directors currently does not meet the definition of "independent" as promulgated by the rules and regulations of Nasdaq.

Item 14. Principal Accountant Fees and Services.

The aggregate fees billed by our principal accountant for each of the last two fiscal years for Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees are as follows:

	Fiscal Year Ended July 31,
	2010		2009

Audit Fees	$	26,000	$	26,000
Audit-Related Fees	$	6,000	$	6,000
Tax Fees	$	-	$	-
All Other Fees	$	-	$	-

PART IV - Item 15. Exhibits

Form: 8-K File Date December 15, 2009

Form: 8-K File Date April 5, 2010

Form: 8-K File Date April 13, 2010

Form: 8-K File Date July 2, 2010

Form: 8-K File Date July 21, 2010

The following exhibits are filed with this Annual Report on Form 10-K:

Exhibit No.		Description of Exhibit
31.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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 Gardner
		Joel Gardner
		President, CEO

Date: Dated: November 15, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date

/s/ Joel Gardner		November 15, 2010
Joel Gardner	Chief Executive Officer, and Director (Principal Executive Officer and Principal Accounting Officer)

/s/ Craig Wagenschutz		November 15, 2010
Craig Wagenschutz	Chief Financial Officer

/s/ Daniel Gardner		November 15, 2010
Daniel Gardner	Treasurer and Director

/s/ Sufan Siauw		November 15, 2010
Sufan Siauw	Director

/s/ Willard Brown		November 15, 2010
Willard Brown	Director

Attached files

MEGOLA INC Reports

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