**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      D.C. 20549 **

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**FORM      1O-QSB **

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| [X] |   | **QUARTERLY                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES                EXCHANGE****ACT                OF 1934**  |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended June 30, 2006**

| [   ] |   | **TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT**  |
|----------------------|--------|------------------------------------------------------------------------------------------|

**For      the transition period from **
**                    **
**      to **
**                        **
** **

**Commission      file number: 000-17510 **

**MEGA      GROUP, INC. **

**(Exact      name of small business issuer as specified in its charter)**

| NEW                YORK                                                       |   | 14-1653446                                       |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (IRS                Employer Identification No.) |

**1730      Rhode Island Ave., N.W. Suite 415, Washington, DC 20036 **

**(Address      of principal executive offices) **

**(202)      296-9594 **

**(Issuer’s      telephone number) **

**N/A      **

**(Former      name, former address and former fiscal year, if changed since last report)      **

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**Table      of Contents**

**Mega      Group, Inc. and Subsidiary**

**Index**

| **Part                I.**  | **Financial                Information**                                                                                                 |   |
|-----------------------------|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                        |                                                                                                                                     |   |
| **Item                1.**  | Financial                Statements                                                                                                      |   |
|                        |                                                                                                                                     |   |
|                        | Consolidated                Balance Sheets- June 30, 2006 (Unaudited) and December 31,                2005                               | **1**  |
|                        |                                                                                                                                     |   |
|                        | Consolidated                Statements of Operations (Unaudited) Three Months ended June 30,                2006 and                2005 | **2**  |
|                        |                                                                                                                                     |   |
|                        | Consolidated                Statements of Operations (Unaudited) Six Months ended June 30, 2006                and                2005   | **3**  |
|                        |                                                                                                                                     |   |
|                        | Consolidated                Statements of Cash Flows (Unaudited) Six Months ended June 30, 2006                and                2005   | **4**  |
|                        |                                                                                                                                     |   |
|                        | Notes                to Unaudited Consolidated Financial Statements                                                                      | **5**  |
|                        |                                                                                                                                     |   |
| **Item                2.**  | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                | **8**  |
|                        |                                                                                                                                     |   |
| **Item                3.**  | Controls                and Procedures                                                                                                   | **8**  |
|                        |                                                                                                                                     |   |
| **Part                II.** | **Other                Information**                                                                                                     | **9**  |
|                        |                                                                                                                                     |   |
| **Signatures**              |                                                                                                                                     | **11** |

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**Mega              Group Inc. and Subsidiary**

**Consolidated              Balance Sheets**

**As              of June 30, 2006 and December 31,              2005**

|                                                                                                          |   | **June                30, 2006 (Unaudited)** |       |  **December                31, 2005** |   |
|---------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|--------------------------------------------|--------|
| **Assets**                                                                                                    |   |                                         |       |                                  |   |
| Cash                and cash equivalents                                                                      |   | **$**                                        | **18,554** |                                       | **$**  | 136,634 |   |
| Other                assets                                                                                   |   |                                         | **2,285**  |                                       |   | 2,285 |   |
| Total                current assets                                                                           |   |                                         | **20,839** |                                       |   | 138,919 |   |
| Equipment,                net of accumulated depreciation of $25,126 and $21,377,                respectively |   |                                         | **538**    |                                       |   | 1,632 |   |
| **Total                assets**                                                                               |   | **$**                                        | **21,377** |                                       | **$**  | 140,551 |   |

| **Liabilities                and Stockholders’ Deficit**                                                                                          |   |   |          |    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------------|--------|
| **Liabilities**                                                                                                                                         |   |   |          |    |   |
| Accounts                payable and accrued liabilities                                                                                                 |   | **$**  | **1,778,798** |         | **$**  | 1,615,797 |   |
| Accrued                interest                                                                                                                         |   |   | **539,174**   |         |   | 458,379 |   |
| Due                to shareholders and officers, including convertible notes payable                of                $56,602 and $59,002, respectively |   |   | **418,279**   |         |   | 465,779 |   |
| Notes                payable, including convertible notes of $80,000 and $0,                respectively                                                |   |   | **850,000**   |         |   | 850,000 |   |
| **Total                current liabilities**                                                                                                            |   |   | **3,586,251** |         |   | 3,389,955 |   |

| **Stockholders’                Deficit**                                                                                                                                                                                     |   |            |       |         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|------------|-------------------|--------|
| Preferred                stock, cumulative 8%, $1 par value per share, 400,000 shares authorized,                10,000 shares issued and outstanding with a liquidation preference                of $1                per share. |   | **10,000**      |       |  10,000      |   |
| Common                stock, $0.016 par value per share, 25,000,000 shares authorized,                9,516,959                shares issued and outstanding                                                                       |   | **152,271**     |       |  152,271     |   |
| Additional                paid-in capital                                                                                                                                                                                          |   | **320,416**     |       |  320,416     |   |
| Accumulated                deficit                                                                                                                                                                                                 |   | **(4,047,561)** |       |  (3,732,091) |   |
| Total                stockholders’ deficit                                                                                                                                                                                   |   | **(3,564,874)** |       |  (3,249,404) |   |
| **Total                liabilities and stockholders’ deficit**                                                                                                                                                               |   | **$**           | **21,377** |              | **$**  | 140,551 |   |

**The            accompanying notes are an integral part of these consolidated balance            sheets.**

**1**

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**Mega              Group Inc. and Subsidiary**

**Consolidated              Statements of Operations**

**For              the Three Month Periods ended June 30, 2006 and              2005**

|                                                            |   | **2006                (Unaudited)** |          |  **2005                (Unaudited)** |   |
|-----------------------------------------------------------------|--------|-------------------------------------|---------------|-------------------------------------------|--------|
| **Revenue**                                                     |   | **$**                               | -             |                                      | $      | - |   |
| **Operating                expenses**                           |   |                                |          |                                      |   |   |   |
| Compensation                and benefits                        |   |                                | **86,250**    |                                      |   | 86,250 |   |
| Other                selling, general and administrative        |   |                                | **23,849**    |                                      |   | 42,809 |   |
| Depreciation                                                    |   |                                | **547**       |                                      |   | 547 |   |
| **Total                operating expenses**                     |   |                                | **110,646**   |                                      |   | 129,606 |   |
| **Loss                from operations**                         |   |                                | **(110,646**  | **)**                                     |   | (129,606 | ) |
| **Other                expense**                                |   |                                |          |                                      |   |   |   |
| Interest                expense to stockholders and officers    |   |                                | **9,888**     |                                      |   | 11,600 |   |
| Interest                expense                                 |   |                                | **30,150**    |                                      |   | 27,055 |   |
| **Total                other expense**                          |   |                                | **40,038**    |                                      |   | 38,655 |   |
| **Loss                before provision for income taxes**       |   |                                | **(150,684**  | **)**                                     |   | (168,261 | ) |
| **Provision                for income taxes**                   |   |                                | **-**         |                                      |   | - |   |
| Net                loss                                         |   | **$**                               | **(150,684**  | **)**                                     | $      | (168,261 | ) |
| **Basic                and diluted net loss per common share:** |   |                                |          |                                      |   |   |   |
| Basic                and diluted net loss per common share      |   | **$**                               | **(0.02**     | **)**                                     | $      | (0.02 | ) |
| Basic                and diluted weighted average common shares |   |                                | **9,516,959** |                                      |   | **9,516,959** |   |

**The            accompanying notes are an integral part of these consolidated balance            sheets.**

**2**

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**Mega            Group Inc. and Subsidiary**

**Consolidated            Statements of Operations**

**For            the Six Month Periods ended June 30, 2006 and            2005**

|                                                            |   | **2005                (Unaudited)** |          |  **2004                (Unaudited)** |   |
|-----------------------------------------------------------------|--------|-------------------------------------|---------------|-------------------------------------------|--------|
| **Revenue**                                                     |   | $                                   | **5,175**     |                                      | $      | - |   |
| **Operating                expenses**                           |   |                                |          |                                      |   |   |   |
| Compensation                and benefits                        |   |                                | **172,500**   |                                      |   | 172,500 |   |
| Other                selling, general and administrative        |   |                                | **66,256**    |                                      |   | 77,056 |   |
| Depreciation                                                    |   |                                | **1,094**     |                                      |   | 1,094 |   |
| **Total                operating expenses**                     |   |                                | **239,850**   |                                      |   | 250,650 |   |
| **Loss                from operations**                         |   |                                | **(234,675**  | **)**                                     |   | (250,650 | ) |
| **Other                expense**                                |   |                                |          |                                      |   |   |   |
| Interest                expense to stockholders and officers    |   |                                | **21,247**    |                                      |   | 23,260 |   |
| Interest                expense                                 |   |                                | **59,548**    |                                      |   | 54,050 |   |
| **Total                other expense**                          |   |                                | **80,795**    |                                      |   | 77,310 |   |
| **Loss                before provision for income taxes**       |   |                                | **(315,470**  | **)**                                     |   | (327,960 | ) |
| **Provision                for income taxes**                   |   |                                | **-**         |                                      |   | - |   |
| Net                loss                                         |   | $                                   | **(315,470**  | **)**                                     | $      | (327,960 | ) |
| **Basic                and diluted net loss per common share:** |   |                                |          |                                      |   |   |   |
| Basic                and diluted net loss per common share      |   | $                                   | **(0.03**     | **)**                                     | $      | (0.03 | ) |
| Basic                and diluted weighted average common shares |   |                                | **9,516,959** |                                      |   | 9,516,959 |   |

**The            accompanying notes are an integral part of these consolidated balance            sheets.**

**3**

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**Mega            Group Inc. and Subsidiary**

**Consolidated            Statements of Cash Flows**

**For            the Six Month Periods ended June 30, 2006 and            2005**

|                                                                                                                       |   | **2006                (Unaudited)** |         |  **2005                (Unaudited)** |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------------|-------------------------------------------|--------|
| **Cash                flow from operating activities**                                                                     |   |                                |         |                                 |   |
| Net                Loss                                                                                                    |   | **$**                               | **(315,470** | **)**                                     | $      | (327,960 | ) |
| **Adjustment                to reconcile changes in net assets to net cash flow from operating                activities** |   |                                |         |                                      |   |   |   |
| Depreciation                                                                                                               |   |                                | **1,094**    |                                      |   | 1,094 |   |
| Accretion                of discount and other                                                                             |   |                                | **-**        |                                      |   | 4,166 |   |
| **Effect                of changes in non-cash working capital balances**                                                  |   |                                |         |                                      |   |   |   |
| Accounts                payable and accrues liabilities                                                                    |   |                                | **163,001**  |                                      |   | 215,223 |   |
| Accrued                interest                                                                                            |   |                                | **80,795**   |                                      |   | 73,144 |   |
| Net                cash flow used in operating activities                                                                  |   |                                | **(70,580**  | **)**                                     |   | (34,333 | ) |
| **Cash                flow from financing activities**                                                                     |   |                                |         |                                      |   |   |   |
| Common                stock issued                                                                                         |   |                                | **-**        |                                      |   | 1,333 |   |
| Debt                proceeds                                                                                               |   |                                | **-**        |                                      |   | 80,000 |   |
| Payments                on debt to stockholders and officers                                                               |   |                                | **(47,500**  | **)**                                     |   | (47,000 | ) |
| **Net                cash flow provided by financing activities**                                                          |   |                                | **(47,500**  | **)**                                     |   | 34,333 |   |
| Change                in cash and cash equivalents                                                                         |   |                                | **(118,080** | **)**                                     |   | - |   |
| **Cash                and cash equivalents, beginning of period**                                                          |   |                                | **136,634**  |                                      |   | - |   |
| **Cash                and cash equivalents, end period**                                                                   |   | **$**                               | **18,554**   |                                      | $      | - |   |
| **Cash                Paid for Interest**                                                                                  |   | **$**                               | -            |                                      | $      | - |   |
| **Cash                Paid for Taxes**                                                                                     |   | **$**                               | -            |                                      | $      | - |   |

**The            accompanying notes are an integral part of these consolidated balance            sheets.**

**4**

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**Mega              Group Inc. and Subsidiary**

**Notes              to Unaudited Consolidated Financial Statements**

**For              the Three and Six Months Ended June 30,              2006**

| **1.** **Nature                of Business**             | The                consolidated financial statements include the accounts of the Mega                Group,                Inc., a New York corporation and its wholly owned subsidiary, Small                Business Investment Corporation of America, Inc. (SBICOA), an Oregon                corporation (collectively, the Company). All significant inter-company                transactions and accounts have been eliminated in the consolidated                financial statements. The Company’s current business plan is to provide                diversified financial services to ethnic communities and faith-based                entities in the United States and to operate as a specialized financial                institution providing loans and investments for businesses in low                and                moderate income communities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|---------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **2.** **Interim                Financial Presentation** | The                accompanying unaudited consolidated financial statements of the Company                have been prepared in accordance with accounting principles generally                accepted in the United States of America for interim financial information                and with the instructions to From 10-QSB. Accordingly, they do not                include                all the information required for complete financial statements. In                the                opinion of management, all adjustments and reclassifications considered                necessary for a fair presentation have been included. All such adjustments                are of a normal recurring nature. Operating results for the three                and six                month periods ended June 30, 2006 are not necessarily indicative                of the                results that may be expected for the year ending December 31, 2006                or any                other period. The enclosed unaudited consolidated financial statements                should be read in conjunction with the consolidated financial statements                and footnotes thereto incorporated by reference in the Company’s Annual                Report on Form 10-KSB for the year ended December 31, 2005. |
|                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Net                Loss per Common Share**        | Basic                net loss per common share is calculated by dividing the net loss                attributable to common stockholders by the weighted average number                of                common shares outstanding during the year. Diluted earnings per share                is                calculated using the weighted average number of common shares plus                dilutive common stocks equivalents outstanding during the period.                Anti-dilutive common stock equivalents are excluded. Common stock                equivalents are stock options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Stock                Option Accounting**                    | The                Company adopted the fair-value recognition provision of SFAS No.                123 (as                revised in 2004 and referred to as “SFAS No. 123R”) Accounting for                Stock-based Compensation. SFAS 123R generally eliminates variable                accounting and requires companies to recognize in the income statement                over the vesting period of the options an estimate of expense based                on the                fair value of those options, typically as of the date of                grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

**5**

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**Mega            Group Inc. and Subsidiary**

**Notes            to Unaudited Consolidated Financial Statements**

**For            the Three and Six Months Ended June 30,            2006**

| **3.** **Financial                Condition** | As                of June 30, 2006, the Company has a deficiency in stockholders’ equity and                a working capital deficit of approximately $3,565,000. The Company                has not                been successful to date in executing its business plan and there                are no                guarantees that it will be successful in implementing it in the future.                The Company has not generated significant revenue from its business                plan                and has primarily relied upon contributions and loans from shareholders                to                fund operations. The Company will require significant new capital                funding                to implement the business plan and to satisfy the Company’s cash                requirements for the next twelve months. There are no guarantees                the                Company’s shareholders will continue to fund operations or that there is                a                viable market for the Company to raise the required capital. The                Company                is in default on the majority of its debt and is significantly delinquent                on amounts owed to vendors and employees. The Company will require                capital                funding in order to fund the capital deficit. The Company is delinquent                in                all required tax filings for the years ending December 31, 2003,                2004, and                2005. The                intent of the Company’s management is to direct it into new business lines                providing financial services to currently underserved ethnic minorities                through alliances with churches and other organizations serving those                groups. The Company intends in the near term to obtain additional                equity                funding and to obtain additional debt financing to pursue these new                lines                of business and to provide the funds to satisfy its current obligations.                The extent to which the Company can raise additional equity and financing                and achieve profitable operations from new business activities will                determine if the Company can continue as a going concern. Management                believes it will be successful in obtaining additional equity and                debt                financing, but no assurances can be given in this                regard. |
|----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**6**

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**Mega            Group Inc. and Subsidiary**

**Notes            to Unaudited Consolidated Financial Statements**

**For            the Three and Six Months Ended June 30,            2006**

| **4.** **Related                Party Transactions** | The                Company owes certain of our stockholders $418,279 and $465,779 as                of June                30, 2006 and December 31, 2005, respectively of which $278,741 and                $326,241 are notes payable and $139,538 was for expenses paid by                the                stockholder on the Company’s behalf. The Company is in default on all                notes payable. The Company originally owed a stockholder $139,538                (Stockholder Obligation) for expenses paid on the Company’s behalf. The                Stockholder Obligations has no specified terms for interest or repayment.                The Stockholder Obligation was discounted by $25,000 based on a 6%                discount rate during the year ending December 31, 2003 based on the                Company repaying the stockholder in the year ending December 31,                2006. The                Stockholder Obligation is being amortized into the liability through                interest expense. For each of the periods ending June 30, 2006 and                2005,                the Stockholder Obligation accreted by $0 and $4,166,                respectively. |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**7**

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**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**General-      Six Months Ended June 30, 2006 and 2005**

**Financial      Condition**

**ITEM      3. CONTROLS AND PROCEDURES**

**8**

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**PART      II. OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**ITEM      2. CHANGES IN SECURITIES**

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

| Note                payable to a stockholder and officer, unsecured, convertible into                common                shares of stock of Mega group at a conversion price of $0.333 per                share,                bearing interest at 7.25% due February 2006. The Company is delinquent                in                payments and accordingly is in default on this note. |   | **$**  | **100,000**   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable to a stockholder and officer, unsecured, bearing interest                at 15%,                due December 2003. The Company is delinquent in payments and accordingly                is in default on this note.                                                                                                                                                |   |   | **95,025**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable to a stockholder and officer, unsecured, bearing interest                at 5%,                due May 2004. The Company is in default on this note, and accordingly,                it                is classified as a current liability.                                                                                                                       |   |   | **2,500**     |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable to a stockholder and officer of the Company, unsecured,                convertible into common shares at a conversion price of $ 0.3333                per share                due on December 2003, bearing interest at 15%. The Company is delinquent                in payments and accordingly is in default on this note.                                    |   |   | **56,602**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Total amount payable to officers                                                                                                                                                                                                                                                                                                                             |   |   | **254,627**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable to a stockholder of the Company for redemption of the Company’s                common shares, unsecured, bearing interest at 6%, due June 15, 2000.                The                Company is delinquent in payments and accordingly is in default on                this                note.                                                            |   |   | **24,114**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Total                amount payable to stockholders and officers                                                                                                                                                                                                                                                                                                                               |   |   | **278,741**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable to an individual for a cash loan, unsecured, bearing interest                at                12%. The Company is delinquent in payments and accordingly is in                default                on this note.                                                                                                                                                |   |   | **100,000**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable, unsecured, bearing interest at 12.5%, due June 2003. The                Company                is delinquent in payments and accordingly is in default on this                note.                                                                                                                                                                               |   |   | **60,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Working                capital notes payable to Matah Holding, LLC, bearing interest at                12%, due                April 14, 2003. The Company is delinquent in payments and accordingly                is                in default on this note.                                                                                                                                 |   |   | **485,000**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable, unsecured, convertible into common shares of stock of Mega                Group                at a conversion price of $0.3333 per share, bearing interest at 10%,                due                Jan 2006. The Company is delinquent in payments and accordingly is                in                default on this note.                                   |   |   | **10,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable, unsecured, convertible into common shares of stock of Mega                Group                at a conversion price of $0.3333 per share, bearing interest at 10%,                due                Jan 2006. The Company is delinquent in payments and accordingly is                in                default on this note.                                   |   |   | **20,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
| Note                payable, unsecured, convertible into common shares of stock of Mega                group                at a conversion price of $0.3333 per share, bearing interest at a                10%, due                Jan 2006. The Company is delinquent in payments and accordingly is                in                default on this note.                                 |   |   | **50,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Note payable, unsecured, bearing interest at 10% Due January 2006.                The                Company is delinquent in payments and accordingly is in default on                this                note.                                                                                                                                             |   |   | **25,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Note payable, unsecured, bearing interest at 10% Due January 2006.                The                Company is delinquent in payments and accordingly is in default on                this                note.                                                                                                                                             |   |   | **25,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Note payable, unsecured, bearing interest at 10% Due January 2006.                The                Company is delinquent in payments and accordingly is in default on                this                note.                                                                                                                                             |   |   | **25,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Note payable, unsecured, bearing interest at 10% Due January 2006.                The                Company is delinquent in payments and accordingly is in default on                this                note.                                                                                                                                             |   |   | **25,000**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |   |   |          |   |
|                    Note payable, unsecured, convertible into common shares of stock                of Mega                group at a conversion price of $0.3333 per share, bearing interest                at 10%,                due Jan 2006. The Company is delinquent in payments and accordingly                is in                default on this note.                |   |   | **25,000**    |   |
| **Total**                                                                                                                                                                                                                                                                                                                                                                                      |   | **$**  | **1,128,741** |   |

**9**

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**ITEM      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5. OTHER INFORMATION**

**ITEM      6. EXHIBITS AND REPORTS ON FORM 8-K**

**EXHIBITS**

**REPORTS      ON FORM 8-K.**

**10**

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**SIGNATURES      **

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

| Date:                August 10, 2006 |   |   |   |   |   | MEGA                GROUP, INC.                                                                                                                         |
|--------------------------------------|--------|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |   |   |   |   |   |                                                                                                                                                    |   |   |
|                                 |   |   |   | By:    |   | /s/    JOHN                H. BROWN                 **John                H. Brown****Chief                Executive Officer** |

|                                      |   |   |   |   |   |                                                                                                                                                                                    |
|-------------------------------------------|--------|--------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      |   |   |   |   |   |                                                                                                                                                                                    |   |   |
| Date: August                10, 2006 |   |   |   | By:    |   | /s/    JOYCE                L. BROWN        **Joyce                  L. Brown****Chief                  Financial Officer** |

**11**

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