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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 September 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 November 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

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

                                                        September 30,           December 31,
                                                            2001                   2000
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
Assets

CURRENT ASSETS
  Cash                                                   $     21,197           $     26,383
  Restricted cash                                                -                     9,345
  Marketable securities                                         1,752                 80,000
  Accrued interest                                              1,544                    819
  Note receivable                                              16,113                 16,113
  Loans receivable - affiliates                                64,063                 44,668
------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                          104,669                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            (13,372)               (10,372)
------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT                                     11,006                 14,006
------------------------------------------------------------------------------------------------


TOTAL ASSETS                                            $    115,675            $    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

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

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

CURRENT LIABILITIES
  Current portion of long-term debt                      $    708,534           $    677,371
  Accounts payable and accrued expenses                       858,944                711,223
  Accrued interest                                            125,632                 48,013
  Loans payable - stockholder                                  45,241                   -
  Loans payable - affiliates                                    3,683                  3,403
------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                   1,742,034              1,440,010
------------------------------------------------------------------------------------------------

LONG-TERM DEBT, NET OF CURRENT PORTION                         59,097                 87,594
------------------------------------------------------------------------------------------------

TOTAL LIABILITIES                                           1,801,131              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                                      (5,286,245)            (4,877,444)
  Accumulated other comprehensive income (loss)                (1,135)               (60,750)
------------------------------------------------------------------------------------------------

TOTAL DEFICIENCY IN STOCKHOLDERS' EQUITY                   (1,685,456)            (1,336,270)
------------------------------------------------------------------------------------------------


TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY $    115,675           $    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 STATEMENTS OF OPERATIONS

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

                                                          Nine Months           Three Months
                                                             Ended                 Ended
                                                           September            September 30,
                                                            30, 2001                2001
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
REVENUE                                                  $      2,858           $          -
------------------------------------------------------------------------------------------------

OPERATING EXPENSES
  Compensation and benefits                                    88,474                 10,991
  Other selling, general and administrative expenses          196,883                 54,146
  Depreciation and amortization                                 3,000                  1,000
------------------------------------------------------------------------------------------------

TOTAL OPERATING EXPENSES                                      288,357                 66,137
------------------------------------------------------------------------------------------------

(LOSS) FROM OPERATIONS                                       (285,499)               (66,137)
------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)
  Interest income                                                 941                     57
  Interest (expense)                                          (77,620)               (26,199)
  Realized (loss) on sale of marketable securities            (85,567)                (6,541)
------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE)                                 (162,246)               (32,683)
------------------------------------------------------------------------------------------------

(LOSS) BEFORE BENEFIT FOR INCOME TAXES                       (447,745)               (98,820)

BENEFIT FOR INCOME TAXES                                       39,544                 20,144
------------------------------------------------------------------------------------------------

NET (LOSS)                                               $   (408,201)          $    (78,676)
------------------------------------------------------------------------------------------------

NET LOSS PER COMMON SHARE - BASIC AND DILUTED:

  Net loss per common share - basic and diluted          $       (.05)          $       (.01)

  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 STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

                                                          Nine Months           Three Months
                                                        Ended September       Ended September
                                                           30, 2001              30, 2001
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
NET (LOSS)                                               $   (408,201)          $    (78,676)
------------------------------------------------------------------------------------------------

UNREALIZED GAIN ON MARKETABLE SECURITIES                       13,792                 16,818
RECLASSIFICATION OF PREVIOUSLY UNREALIZED
 LOSS ON MARKETABLE SECURITIES TO REALIZED                    85,567                  6,541
TAX PROVISION                                                 (39,744)               (19,744)
------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME                                     59,615                  3,615
------------------------------------------------------------------------------------------------

COMPREHENSIVE (LOSS)                                     $   (348,586)          $    (75,061)
------------------------------------------------------------------------------------------------
</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

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

Nine Months Ended September 30, 2001
------------------------------------------------------------------------------------------------
<S>                                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net (loss)                                                                    $   (408,201)
  ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY
    OPERATING ACTIVITIES
    Realized loss on sale of marketable securities                                    85,567
    Depreciation and amortization                                                      3,000
    Benefit for income taxes                                                         (39,744)
    Court judgment increasing long-term debt                                           5,817
    Seizure of cash in litigation                                                      9,345
    (INCREASE) DECREASE IN
      Accrued interest                                                                  (725)
    INCREASE (DECREASE) IN
      Accounts payable and accrued expenses                                          147,721
      Accrued interest                                                                77,619
------------------------------------------------------------------------------------------------

NET CASH USED BY OPERATING ACTIVITIES                                               (119,601)
------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of marketable securities                                                 (45,307)
  Proceeds from sale of marketable securities                                        137,347
  Loans made to affiliates, net                                                      (19,395)
------------------------------------------------------------------------------------------------

NET CASH USED BY INVESTING ACTIVITIES                                                 72,645
------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Debt proceeds                                                                       30,000
  Principal payments of debt                                                         (33,151)
  Loans from stockholder                                                              45,241
  Loans from affiliate                                                                   280
  Preferred dividends                                                                   (600)
------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                             41,770
------------------------------------------------------------------------------------------------

NET DECREASE IN CASH                                                                  (5,186)
CASH - BEGINNING OF PERIOD                                                            26,383
------------------------------------------------------------------------------------------------

CASH - END OF PERIOD                                                            $     21,197
------------------------------------------------------------------------------------------------
</TABLE>


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

                                   -6-
<PAGE>
<TABLE>
<CAPTION>

                                                              MEGA GROUP, INC. AND SUBSIDIARY
                                             CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)



Nine Months Ended September 30, 2001
------------------------------------------------------------------------------------------------
<S>                                                                             <C>
SUPPLEMENTAL CASH FLOW INFORMATION
  Actual cash payments for:
    Income taxes                                                                $        200
------------------------------------------------------------------------------------------------

    Interest                                                                    $         --
------------------------------------------------------------------------------------------------
</TABLE>










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

                                   -7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

1.  INTERIM FINANCIAL         The financial statements have been prepared
    PRESENTATION              by the Company without audit and are subject
                              to year-end 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-KSB 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 nine months
                              ended September 30, 2001 and three months
                              ended September 30, 2001 are not necessarily
                              indicative of results to be achieved for the
                              full fiscal year.

2.  RECENT                    In June 2001, the Financial Accounting
    ACCOUNTING                Standards Board issued Statements of
    PRONOUNCEMENTS            Financial Accounting Standards (SFAS) as
                              follows:

                                   No. 141, BUSINESS COMBINATIONS
                                   No. 142, GOODWILL AND OTHER INTANGIBLE
                                            ASSETS
                                   No. 143, ACCOUNTING FOR ASSET
                                            RETIREMENT OBLIGATIONS

                              SFAS No. 141 eliminates the use of the
                              pooling-of-interests method of accounting
                              for business combinations and requires that
                              all such transactions be accounted for by
                              the purchase method.  In addition, SFAS No.
                              141 requires that intangible assets be
                              recognized as assets apart from goodwill and
                              that they meet specific criteria described
                              in the Standard.  This Standard is
                              applicable to all business combinations
                              initiated after June 30, 2001 and all
                              business combinations accounted for using
                              the purchase method for which the date of
                              acquisition is July 1, 2001 or later.
                              Management will follow the Standard in
                              accounting for all future business
                              combinations and does not believe that
                              adoption will have any significant impact on
                              the Company's financial statements.

                              SFAS No. 142 eliminates the requirement to
                              amortize goodwill and requires that other
                              intangible assets be separated into assets
                              that have a finite useful life and those
                              with an indefinite useful life.  Intangible
                              assets with a finite useful life are to be
                              amortized over that useful life. Intangible
                              assets with an indefinite life are to be
                              measured for impairment annually, or more
                              frequently if circumstances indicate
                              impairment may have occurred.  With respect
                              to goodwill, the Standard

                                   -8-
<PAGE>
                              requires that it be measured annually for
                              impairment under a defined two-step process
                              that begins with an estimation of the fair
                              value of a "reporting unit," which is
                              defined in the Standard.  The first step in
                              the process is a screening for impairment
                              and the second step measures the amount of
                              impairment, if any.  Upon initial adoption
                              of SFAS No. 142, the change is to be
                              reported on the financial statements as a
                              change in accounting principle with the
                              cumulative effect reported in the statement
                              of income in the period of adoption.  The
                              Standard is required to be applied starting
                              with fiscal years beginning after December
                              15, 2001, with early application permitted
                              for entities with fiscal years beginning
                              after March 15, 2001.  The Company expects
                              to adopt this new Standard with its fiscal
                              year beginning January 1, 2002.  The Company
                              has no goodwill or other intangible assets
                              and does not believe that adoption of the
                              Standard will have any impact on its
                              financial statements.

                              SFAS No. 143 requires that asset retirement
                              obligations be recognized as a liability in
                              the period in which it is incurred at its
                              fair value if a reasonable estimate can be
                              made.  The associated asset retirement costs
                              are capitalized as part of the carrying
                              amount of the long-lived asset.  The
                              Standard requires that the liability be
                              discounted and accretion expense be
                              recognized. SFAS No. 143 is effective for
                              financial statements issued for fiscal years
                              beginning after June 15, 2001, with earlier
                              application permitted.  The Company does not
                              have any asset retirement obligations as of
                              September 30, 2001, and does not believe
                              that this new Standard will have any impact
                              upon its financial statements when adopted.

                              In August 2001, the Financial Accounting
                              Standards Board issued SFAS No. 144,
                              ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
                              LONG-LIVED ASSETS.  This Standard
                              establishes a single accounting model for
                              long-lived assets to be disposed of by sale
                              and resolves other implementation issues
                              involving long-lived assets that are
                              impaired or are to be disposed of.  The
                              Standard is effective for fiscal years
                              beginning after December 15, 2001, with
                              early application permitted.  The Company is
                              considering the effects of this new standard
                              and does not believe that it will have any
                              significant effect on its financial
                              statements when adopted.

3.  CONSULTING                On February 7, 2001, the Company entered
    AGREEMENT                 into a 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 September 30, 2001.

                                   -9-
<PAGE>
4.  LONG-TERM DEBT            The Company is obligated to a bank under a
                              term note for $14,620 as of December 31,
                              2000 and September 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
                              November 9, 2001, the bank has successfully
                              enforced guaranties against certain of the
                              guarantors.

                              The Company entered into promissory notes
                              for $20,000 and $10,000 dated July 17, 2001
                              and August 6, 2001, respectively.  The notes
                              are unsecured, bear interest at 12.5%, and
                              are due on September 15, 2001 and October 5,
                              2001, respectively.  Principal on each of
                              the notes was paid in full on October 16,
                              2001.

                              On October 6, 2001 the Company received the
                              proceeds from a $60,000 promissory note.
                              The note is unsecured, bears interest at
                              12.5%, and is due on October 6, 2002.


5.  STOCK PURCHASE            During the second quarter of 2001, the
    OPTIONS                   Company granted 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.
                              During the third quarter of 2001, the
                              Company granted a promissory note holder
                              options to purchase 60,000 shares of the
                              Company's common stock for $.50 per share,
                              of which options to purchase 40,000 and
                              20,000 shares are exercisable until July 17,
                              2003 and August 6, 2003, respectively.
                              Subsequent to September 30, 2001, the
                              Company granted a promissory note holder
                              options, exercisable until October 6, 2003,
                              to purchase 120,000 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.



                                  -10-
<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 nine months ended September 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 nine months ended September 30, 2001, our cash position
decreased from $26,383 at December 31, 2000 to $21,197 at September 30,
2001.  During the same nine months, we realized a net loss of $408,201
after revenues of $2,858, ongoing expenses in the total amount of $325,492,
and a realized loss from the sale of marketable securities in the amount of
$85,567.

     During the three months ended September 30, 2001, we realized a net
loss of $78,676 after generating no revenues, but incurring ongoing
expenses in the total amount of $72,135 and the realized loss on the
sale of marketable securities in the amount of $6,541.

     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.



                                  -11-
<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.



                                  -12-
<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: November 14, 2001       /s/ John H. Brown
                                   ---------------------------------------
                                   John H. Brown, Chief Executive Officer

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









                                  -13-