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                              UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549
                               FORM 1O-QSB

(Mark One)
[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
              For the quarterly period ended June 30, 2001
                                             ------------------------------

[ ]  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         (IRS Employer Identification No.)
incorporation or organization)

      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)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requires for the past 90 days.
  Yes [ ] No [X]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:  8,833,605 shares of
common stock, as of August 14, 2001.


Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

<PAGE>
                      PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY

                                                                  CONSOLIDATED BALANCE SHEETS

================================================================================================

                                                         June 30, 2001          December 31,
                                                                                    2000
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
ASSETS

CURRENT ASSETS
  Cash                                                   $       5,705          $     26,383
  Restricted cash                                                 -                    9,345
  Marketable securities                                         32,887                80,000
  Accrued interest                                               1,303                   819
  Note receivable                                               16,113                16,113
  Loans receivable - affiliates                                 49,103                44,668
------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                           105,111               177,328
------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT
  Computer equipment                                            10,683                10,683
  Office furniture and equipment                                13,695                13,695
------------------------------------------------------------------------------------------------
TOTAL                                                           24,378                24,378
  Less:  Accumulated depreciation and amortization             (12,372)              (10,372)
------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT                                      12,006                14,006
------------------------------------------------------------------------------------------------











TOTAL ASSETS                                              $    117,117          $    191,334
------------------------------------------------------------------------------------------------
</TABLE>


 The accompanying Notes to Financial Statements are an integral part of
                       these financial statements.

                                    2
<PAGE>
<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY

                                                                  CONSOLIDATED BALANCE SHEETS

================================================================================================

                                                         June 30, 2001          December 31,
                                                                                    2000
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current portion of long-term debt                      $    678,238           $    677,371
  Accounts payable and accrued expenses                       839,452                711,223
  Accrued interest                                             96,515                 48,013
  Loans payable - stockholder                                  34,126                   -
  Loans payable - affiliates                                    3,683                  3,403
------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                   1,652,014              1,440,010
------------------------------------------------------------------------------------------------

LONG-TERM DEBT, NET OF CURRENT PORTION                         75,298                 87,594
------------------------------------------------------------------------------------------------

TOTAL LIABILITIES                                           1,727,312              1,527,604
------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES

DEFICIENCY IN STOCKHOLDERS' EQUITY
  Preferred stock, cumulative 8%, $1 par value per share,
    400,000 shares authorized, 10,000 shares issued and
    outstanding                                                10,000                 10,000
  Common stock, $0.016 par value per share, 25,000,000
    shares authorized, 8,056,912 shares issued and
    outstanding                                               128,911                128,911
  Additional paid-in capital                                3,463,013              3,463,013
  Accumulated deficit                                      (5,207,369)            (4,877,444)
  Accumulated other comprehensive income (loss)                (4,750)               (60,750)
------------------------------------------------------------------------------------------------

TOTAL DEFICIENCY IN STOCKHOLDERS' EQUITY                   (1,610,195)            (1,336,270)
------------------------------------------------------------------------------------------------


TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY $    117,117           $    191,334
------------------------------------------------------------------------------------------------
</TABLE>



 The accompanying Notes to Financial Statements are an integral part of
                       these financial statements.

                                    3
<PAGE>
<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY

                                                         CONSOLIDATED STATEMENT OF OPERATIONS

================================================================================================

                                                           SIX MONTHS           THREE MONTHS
                                                           ENDED JUNE            ENDED JUNE
                                                            30, 2001              30, 2001
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
REVENUE                                                  $      2,858           $        400
------------------------------------------------------------------------------------------------

OPERATING EXPENSES
  Compensation and benefits                                    77,483                 41,416
  Other selling, general and administrative expenses          142,737                 97,926
  Depreciation and amortization                                 2,000                  1,000
------------------------------------------------------------------------------------------------

TOTAL OPERATING EXPENSES                                      222,220                140,342
------------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                         (219,362)              (139,942)
------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)
  Interest income                                                 884                    642
  Interest expense                                            (51,421)               (25,733)
  Realized loss on sale of marketable securities              (79,026)               (79,026)
------------------------------------------------------------------------------------------------
TOTAL                                                        (129,563)              (104,117)
------------------------------------------------------------------------------------------------

LOSS BEFORE BENEFIT FOR INCOME TAXES                         (348,925)              (244,059)

BENEFIT FOR INCOME TAXES                                       19,400                 13,600
------------------------------------------------------------------------------------------------

NET LOSS                                                 $   (329,525)          $   (230,459)
------------------------------------------------------------------------------------------------

NET (LOSS) PER COMMON SHARE - BASIC AND DILUTED:

  Net (loss) per common share - basic and diluted        $       (.04)          $       (.03)

  Weighted average common shares - basic and diluted        8,056,912              8,056,912
------------------------------------------------------------------------------------------------
</TABLE>



 The accompanying Notes to Financial Statements are an integral part of
                       these financial statements.

                                    4
<PAGE>
<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY

                                         CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

================================================================================================

                                                           SIX MONTHS           THREE MONTHS
                                                         ENDED JUNE 30,         ENDED JUNE 30,
                                                             2001                   2001
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
NET LOSS                                                 $   (329,525)          $   (230,459)
------------------------------------------------------------------------------------------------

UNREALIZED LOSS ON MARKETABLE SECURITIES                       (3,026)               (18,026)
REALIZED LOSS ON MARKETABLE SECURITIES                         79,026                 79,026
TAX PROVISION                                                 (20,000)               (14,000)
------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME                                     56,000                 47,000
------------------------------------------------------------------------------------------------

COMPREHENSIVE (LOSS)                                     $   (273,525)          $   (183,459)
------------------------------------------------------------------------------------------------
</TABLE>









 The accompanying Notes to Financial Statements are an integral part of
                       these financial statements.

                                    5
<PAGE>
<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY

                                                         CONSOLIDATED STATEMENT OF CASH FLOWS

================================================================================================

SIX MONTHS ENDED JUNE 30, 2001
------------------------------------------------------------------------------------------------
<S>                                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                      $   (329,525)
  ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES
    Loss on sale of marketable securities                                             79,026
    Depreciation and amortization                                                      2,000
    Benefit for income taxes                                                         (19,400)
    Court judgment increasing long-term debt                                           5,817
    Seizure of cash in litigation                                                      9,345
    (INCREASE) DECREASE IN
      Accrued interest                                                                  (484)
    INCREASE (DECREASE) IN
      Accounts payable and accrued expenses                                          128,229
      Accrued interest                                                                48,502
------------------------------------------------------------------------------------------------

NET CASH USED BY OPERATING ACTIVITIES                                                (76,490)
------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Sale of Investments                                                                 34,559
  Loans made to affiliates, net                                                       (1,044)
------------------------------------------------------------------------------------------------

NET CASH USED BY INVESTING ACTIVITIES                                                 33,515
------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Principal payments of debt                                                         (11,429)
  Loans to affiliates                                                                 34,126
  Preferred dividends                                                                   (400)
------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                             22,297
------------------------------------------------------------------------------------------------

NET DECREASE IN CASH                                                                 (20,678)
CASH - BEGINNING OF PERIOD                                                            26,383
------------------------------------------------------------------------------------------------

CASH - END OF PERIOD                                                            $      5,705
------------------------------------------------------------------------------------------------

SUPPLEMENTAL CASH FLOW INFORMATION
  Actual cash payments for:
    Income taxes                                                                $        200
------------------------------------------------------------------------------------------------

    Interest                                                                    $     10,800
------------------------------------------------------------------------------------------------
</TABLE>
 The accompanying Notes to Financial Statements are an integral part of
                       these financial statements.
                                    6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

1. INTERIM          The financial statements have been prepared by the
   FINANCIAL        Company without audit and are subject to year-end
   PRESENTATION     adjustment. Certain information and footnote
                    disclosures normally included in financial statements
                    prepared in accordance with generally accepted
                    accounting principles have been condensed or omitted
                    pursuant to the rules and regulations of the Securities
                    and Exchange Commission.   These interim statements
                    should be read in conjunction with the most recent
                    audited financial statements filed by the Company on
                    Form 10-K with the Securities and Exchange Commission.
                    The financial statements reflect all adjustments (which
                    include only normal recurring adjustments) which, in
                    the opinion of management are necessary to present
                    fairly the Company's financial position, results of
                    operations and cash flows.

                    Results of operations for the six months ended June 30,
                    2001 and three months ended March 31, 2001 are not
                    necessarily indicative of results to be achieved for
                    the full fiscal year.

2. CONSULTING       On February 7, 2001, the Company entered into a
   AGREEMENT        consulting agreement with the Emmanuel Temple Church
                    and Emmanuel Community Services Corporation (Emmanuel)
                    whereby, among other things, the Company will assist
                    Emmanuel in restructuring its debt.  Compensation under
                    the agreement is contingent on the completion of the
                    debt restructuring.  The total compensation under the
                    agreement is $96,000, none of which has been recognized
                    as of June 30, 2001.

3. LONG-TERM        The Company is obligated to a bank under a term note
   DEBT             for $14,620 as of December 31, 2000 and June 30, 2001,
                    which is included in the current portion of long-term
                    debt on the accompanying balance sheets.  Due to the
                    Company's failure to make all scheduled payments under
                    the note and financial covenant violations, the
                    obligation is callable by the bank on demand.  On March
                    29, 2001, the bank demanded immediate and full payment
                    of the indebtedness and notified the guarantors of its
                    intent to enforce the guaranties.  As of August 13,
                    2001, the bank has successfully enforced guaranties
                    against certain of the guarantors.

4. STOCK            During the second quarter of 2001, the Company granted
   PURCHASE OPTIONS two of its directors options, exercisable until June
                    30, 2006, to purchase a total of 200,000 shares of the
                    Company's common stock for $.50 per share.  Because the
                    exercise price under these stock purchase options is
                    higher than the grant date fair market value of a share
                    of the Company's common stock, the options are non-
                    compensatory.

                                    7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

   SOME OF THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE IN THIS
REPORT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934.  STATEMENTS ABOUT OUR EXPECTATIONS, BELIEFS, PLANS,
OBJECTIVES, ASSUMPTIONS, OR FUTURE EVENTS OR PERFORMANCE ARE NOT HISTORICAL
FACTS AND MAY BE FORWARD-LOOKING.  FORWARD-LOOKING STATEMENTS ARE OFTEN,
BUT NOT ALWAYS, MADE THROUGH THE USE OF WORDS OR PHRASES LIKE "ANTICIPATE,"
"ESTIMATE," "PLANS," "PROJECTS," "CONTINUING," "ONGOING," "EXPECTS,"
"MANAGEMENT BELIEVES," "WE BELIEVE," "WE INTEND," AND SIMILAR WORDS OR
PHRASES. ACCORDINGLY, THESE STATEMENTS INVOLVE ESTIMATES, ASSUMPTIONS, AND
UNCERTAINTIES. ANY FORWARD-LOOKING STATEMENTS ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO THE FACTORS, INCLUDING RISK FACTORS, DISCUSSED IN
THIS REPORT OR INCORPORATED BY REFERENCE.  BECAUSE THE FACTORS DISCUSSED IN
THIS REPORT OR INCORPORATED BY REFERENCE COULD CAUSE ACTUAL RESULTS OR
OUTCOMES TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN FORWARD-LOOKING
STATEMENTS, YOU SHOULD NOT OVER-RELY ON FORWARD-LOOKING STATEMENTS.
FURTHER, EACH FORWARD-LOOKING STATEMENT SPEAKS ONLY AS OF THE DATE ON WHICH
IT IS MADE, AND WE UNDERTAKE NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENT TO REFLECT LATER EVENTS OR CIRCUMSTANCES AS THEY OCCUR.

   We believe that our financial condition and results of operations
included in this report are not indicative of our future prospects.  During
the six months ended June 30, 2001 and the year ended December 31, 2000, we
have been in transition.  During these periods, we discontinued our
insurance agency business, acquired the Small Business Investment Company
of America, Inc. and commenced the implementation of a new business plan
and operation.

   During the six months ended June 30, 2001, our cash position decreased
from $26,383 at December 31, 2000 to $5,705 at June 30, 2001.  During the
same six months, we realized a net loss of $329,525 after revenues of
$2,858, ongoing expenses  in the total amount of $253,357, and a realized
loss fm the sale of marketable securities in the amount of $79,026.

   During the three months ended June 30, 2001, we realized a net loss of
$230,459 after revenues of $400, ongoing expenses in the total amount of
$151,833 and the realized loss on the sale of marketable securities in the
amount of $79,026.

   Our business plan referred to above calls for a capitalization of at
least $30,000,000.  Accordingly, we are now undercapitalized.  We intend to
satisfy any liquidity needs during the foreseeable future by engaging in
one or more public or non-public equity financings.  The nature of our
business and proposed business does not require any significant product
research and development, purchase or sale of plant and equipment, or
changes in the number of employees.  In the event that we are unable to
raise significant funds, we may be unable to make required payments as they
become due and may be unable to fully execute our business plan.



                                    8
<PAGE>
                       PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There were no material developments in any litigation to which we were a
party.  Please refer to our 10-KSB filed March 27, 2001 for current
litigation matters.

ITEM 2. CHANGES IN SECURITIES.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

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

     (a)  EXHIBITS.

          None.

     (b)  REPORTS ON FORM 8-K.

          We did not file any reports on Form 8-K during the period covered
          by this report.









                                   9
<PAGE>
                               SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                   MEGA GROUP, INC.

Date: August 14, 2001              /s/ John H. Brown
                                   --------------------------------------
                                   John H. Brown, Chief Executive Officer

Date: August 14, 2001              /s/ Nelson H. Beebe
                                   --------------------------------------
                                   Nelson H. Beebe, Chief Financial
                                   Officer and Treasurer









                                   10