##### 



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-QSB

(Mark One)

|       |  |                                                                                        
|------ |  | ---------------------------------------------------------------------------------------
|(XBOX) |  | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended February 28, 2002

|      |  |                                                                                   
|----- |  | ----------------------------------------------------------------------------------
|(BOX) |  | Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to ______________.

Commission file number 0-18808

1st Realty Investments, Inc.

(Name of small business issuer as specified in its charter)


|                                  |  |                                  
|--------------------------------- |  | ---------------------------------
|Nevada                            |  | 13-3530765                       
|                                 
|                                 
|                                 
|                                 
|(State or other jurisdiction      |  | (IRS Employer Identification No.)
|                                 
|                                 
|                                 
|                                 
|of incorporation or organization) |  |                                  

5115 N. Scottsdale Road, Suite 101
Scottsdale, AZ 85250
(480) 949-6007
(Address and telephone number of principal executive offices)

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

Yes (BOX) No (XBOX)

The number of shares of the registrants
Common Stock outstanding at June 15,
2002 was 17,518,525.





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##### 



1ST REALTY INVESTMENTS, INC.

CONTENTS

| |            |                                                             |  |      |    | 
| | ---------- | ----------------------------------------------------------- |  | ---- | -- | 
| |            |                                                             |  | PAGE
| |            |                                                             |  |     
| | Part I     |                                                             |  |      |   
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| |            | Financial Information                                       |  |      |    | 
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| |            | Item 1. Financial Statements                                |  |      | 2  | 
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| |            | Item 2. Managements Discussion and Analysis                |  |      | 9  | 
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| | Part II    |                                                             |  |      |   
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| |            | Other Information                                           |  |      |    | 
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| |            | Item 1. Legal Proceedings                                   |  |      | 12 | 
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| |            | Item 2. Changes in Securities and Use of Proceeds           |  |      | 12 | 
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| |            | Item 3. Defaults Upon Senior Securities                     |  |      | 12 | 
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| |            | Item 4. Submission of Matters to a Vote of Security Holders |  |      | 12 | 
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| |            | Item 5. Other Information                                   |  |      | 12 | 
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| |            | Item 6. Exhibits and Reports on Form 8-K                    |  |      | 12 | 
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| |            |                                                             |  |     
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| | Signatures |                                                             |  | 14   |   

1



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##### 



PART I FINANCIAL INFORMATION

Item 1.Financial Statements

1ST REALTY INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS

|                                               |                                      |                                                               |                                                   |          |              |           |            |          |           |           | 
|---------------------------------------------- | ------------------------------------ | ------------------------------------------------------------- | ------------------------------------------------- | -------- | ------------ | --------- | ---------- | -------- | --------- | --------- | 
|                                               |                                      |                                                               |                                                   |          | February 28, |           | August 31,
|                                               |                                      |                                                               |                                                   |          | 2002         |           | 2001      
|                                               |                                      |                                                               |                                                   |          |              |           |           
|                                               |                                      |                                                               |                                                   |          | (Unaudited)  |           |            |          |          
|ASSETS                                         |                                      |                                                               |                                                   |          |              |           |            |         
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents            |                                                               | $                                                 | 8,459    |              |           | $          | 5,799    |          
|                                              
|                                              
|                                              
|                                              
|                                               | Notes receivable, net                |                                                               |                                                   | 67,240   |              |           |            | 68,322   |          
|                                              
|                                              
|                                              
|                                              
|                                               | Property and equipment, net          |                                                               |                                                   | 279      |              |           |            | 698      |          
|                                              
|                                              
|                                              
|                                              
|                                               | Investment in unconsolidated company |                                                               |                                                   | 696,958  |              |           |            | 760,987  |          
|                                              
|                                              
|                                              
|                                              
|                                               | Other assets                         |                                                               |                                                   | 14,319   |              |           |            | 14,436   |          
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          
|                                               |                                      | $                                                             | 787,255                                           |          |              | $         | 850,242    |         
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                      |                                                               |                                                   |          |              |           |            |         
|                                              
|                                              
|                                              
|                                              
|                                               | Liabilities                          |                                                               |                                                   |          |              |           |            |          |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Payable to related entities                                   |                                                   | $        | 1,108,535    |           |            | $        | 1,065,534 |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accounts payable and other accrued liabilities                |                                                   |          | 17,737       |           |            |          | 15,628    |          
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          
|                                               |                                      |                                                               | Total liabilities                                 |          |              | 1,126,272 |            |          |           | 1,081,162 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Stockholders equity (deficit)       |                                                               |                                                   |          |              |           |            |          |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Common stock, $0.001 par value; 25,000,000 shares authorized; |                                                   |          |              |           |            |          |           |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                                                               | 17,518,525 shares issued at February 28, 2002 and |          |              |           |            |          |           |           | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                                                               | and August 31, 2001                               |          |              | 17,519    |            |          |           | 17,519    | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Additional paid-in capital                                    |                                                   |          | 45,401       |           |            |          | 45,401    |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accumulated deficit                                           |                                                   |          | (401,937     | )         |            |          | (293,840  | )        
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Treasury stock, at cost, 651,972 shares at February 28, 2002  |                                                   |          |              |           |            |          |           |          
|                                               |                                      |                                                               | and August 31, 2001                               |          |              |          |            |          |           |          | 
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          
|                                               | Total stockholders equity (deficit) |                                                               |                                                   | (339,017 | )            |           |            | (230,920 | )        
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          
|                                               |                                      | $                                                             | 787,255                                           |          |              | $         | 850,242    |         
|                                               |                                      |                                                               |                                                   |          |              |           |            |          |          

The accompanying notes are an integral part of these consolidated financial statements.

2



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##### 



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|------------------------------------------ |  | -------------------------- | ---------- | ----------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                           |  | Quarter ended February 28, |            | Six months ended February 28,
|                                           |  |                            |            |                              
|                                           |  | 2002                       |            | 2001                          |  | 2002 |            | 2001
|                                           |  |                            |            |                               |  |      |            |     
|Interest income                            |  | $                          | 1,557      |                               |  | $    | 13,479     |      |  | $ | 3,125      |   |  | $ | 13,819     |  
|                                          
|                                          
|                                          
|                                          
|General and administrative expense         |  |                            | 5,956      |                               |  |      | 111,341    |      |  |   | 9,593      |   |  |   | 116,341    |  
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|Operating
loss                             |  |                            | (4,399     | )                             |  |      | (97,862    | )    |  |   | (6,468     | ) |  |   | (102,522   | )
|                                          
|                                          
|                                          
|                                          
|Other income (expense)                     |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|                                          
|                                          
|                                          
|                                          
|Interest expense                           |  |                            | (18,800    | )                             |  |      | (12,601    | )    |  |   | (37,600    | ) |  |   | (12,601    | )
|                                          
|                                          
|                                          
|                                          
|Equity in losses of unconsolidated company |  |                            | (37,341    | )                             |  |      | (18,074    | )    |  |   | (64,029    | ) |  |   | (18,074    | )
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|                                           |  |                            | (56,141    | )                             |  |      | (30,675    | )    |  |   | (101,629   | ) |  |   | (30,675    | )
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|Net loss                                   |  | $                          | (60,540    | )                             |  | $    | (128,537   | )    |  | $ | (108,097   | ) |  | $ | (133,197   | )
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|Net loss per common and common             |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|equivalent share                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|                                          
|                                          
|                                          
|                                          
|Basic                                      |  | $                          |           |                               |  | $    | (0.01      | )    |  | $ | (0.01      | ) |  | $ | (0.01      | )
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|Diluted                                    |  | $                          |           |                               |  | $    | (0.01      | )    |  | $ | (0.01      | ) |  | $ | (0.01      | )
|                                           |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|Weighted average common and common         |  |                            |            |                               |  |      |            |      |  |   |            |   |  |   |            |  
|                                          
|                                          
|                                          
|                                          
|equivalent shares outstanding             
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|Basic                                      |  |                            | 17,518,525 |                               |  |      | 17,174,081 |      |  |   | 17,518,525 |   |  |   | 16,783,718 |  
|                                          
|                                          
|                                          
|                                          
|Diluted                                    |  |                            | 17,518,525 |                               |  |      | 17,174,081 |      |  |   | 17,518,525 |   |  |   | 16,783,718 |  

The accompanying notes are an integral part of these consolidated financial statements.

3



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##### 



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |         |         |  
|------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------- | -------- | ----------------------------- | ------- | ------ | -------- | ------- | ------- | -
|                                                  |                                                                |                                                |                                       |          | Six months ended February 28,
|                                                  |                                                                |                                                |                                       |          |                              
|                                                  |                                                                |                                                |                                       |          | 2002                          |         | 2001  
|                                                  |                                                                |                                                |                                       |          |                               |         |       
|Cash flows from operating activities              |                                                                |                                                |                                       |          |                               |         |        |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net loss                                                       |                                                | $                                     | (108,097 | )                             |         | $      | (133,197 | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Adjustments to reconcile net loss to net                       |                                                |                                       |          |                               |         |        |          |        
|                                                  |                                                                | cash used in operating activities              |                                       |          |                               |         |        |          |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Bad debt expense                               |                                       |          |                              |         |        |          | 110,301 |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Depreciation and amortization                  |                                       |          | 1,218                         |         |        |          | 406     |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Undistributed losses of unconsolidated company |                                       |          | 64,029                        |         |        |          | 18,074  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Accretion of interest income                   |                                       |          |                              |         |        |          | (11,081 | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Change in assets and liabilities (net of businesses acquired): |                                                |                                       |          |                               |         |        |          |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Other assets                                   |                                       |          | (682                          | )       |        |          | (889    | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                | Accounts payable and other accrued liabilities |                                       |          | 2,109                         |         |        |          | (14,545 | )      
|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |        
|                                                  |                                                                |                                                | Net cash used in operating activities |          |                               | (41,423 | )      |          |         | (30,931 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Cash flows from investing activities              |                                                                |                                                |                                       |          |                               |         |        |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Collection of notes receivable                                 |                                                |                                       | 1,082    |                               |         |        | 44,367   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash acquired through purchase of investments in               |                                                |                                       |          |                               |         |        |          |        
|                                                  | businesses                                                     |                                                |                                       |         |                               |         |        | 18,632   |        
|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |        
|Net cash provided by investing activities         |                                                                |                                                | 1,082                                 |          |                               |         | 62,999 |         
|                                                 
|                                                 
|                                                 
|                                                 
|Cash
flows from financing activities              |                                                                |                                                |                                       |          |                               |         |        |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Increase (decrease) in advances from related parties           |                                                |                                       | 43,001   |                               |         |        | (25,706  | )      
|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |        
|Net increase in cash and cash equivalents         |                                                                |                                                | 2,660                                 |          |                               |         | 6,362  |         
|                                                 
|                                                 
|                                                 
|                                                 
|Cash and cash equivalents at beginning of period  |                                                                |                                                | 5,799                                 |          |                               |         |       |         
|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |        
|Cash and cash equivalents at end of period        |                                                                | $                                              | 8,459                                 |          |                               | $       | 6,362  |         
|                                                  |                                                                |                                                |                                       |          |                               |         |        |          |        
|Supplemental disclosure of cash flow information: |                                                                |                                                |                                       |          |                               |         |        |         
|                                                 
|                                                 
|                                                 
|                                                 
|Cash paid during the year for interest            |                                                                | $                                              |                                      |          |                               | $       |       |         
|                                                 
|                                                 
|                                                 
|                                                 
|Noncash investing and financing activities        |                                                                |                                                |                                       |          |                               |         |        |         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock to acquire a note receivable          |                                                | $                                     |         |                               |         | $      | 20,000   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock and a note payable to a related       |                                                |                                       |          |                               |         |        |          |        
|                                                  |                                                                | party to acquire investments in businesses     |                                       | $        |                              |         |        | $        | 961,629 |        

The accompanying notes are an integral part of these consolidated financial statements.

4



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##### 



1ST REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE A  BACKGROUND AND BASIS OF PRESENTATION

The accompanying consolidated financial statements as of and for the three
month and six month periods ended February 28, 2002 and 2001 include the
accounts of 1st Realty Investments, Inc. (formerly First National Realty
Associates, Inc.) and its wholly- and majority-owned subsidiaries
(collectively, the Company). Investments in companies that represent 20% to
50% of the ownership interest are accounted for on the equity method.
Investments in companies that represent less than a 20% ownership interest are
accounted for on the cost basis. All material intercompany accounts and
transactions have been eliminated.

The accompanying unaudited financial information reflects all adjustments,
consisting only of normal recurring adjustments, that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. Such financial information should be read in
conjunction with the consolidated financial statements and related
notes thereto included in the Companys Form 10-KSB for the year
ended August 31, 2001.

In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is responsible
for making estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

The Company is an Arizona-based company that was formed in Georgia in October
1988, and became a publicly-held Nevada company through a merger into Emphatic
Mergers, Inc. a publicly-held corporation on April 11, 1990. The name of the
corporation was changed from First National Realty Associates, Inc. to 1st
Realty Investments, Inc. on July 13, 2000.

The Company was founded with the intended purpose of becoming primarily a
national residential real estate brokerage company, focusing on relatively
affluent markets in geographically diverse market areas. Between 1988 and
1991, the Company grew primarily through the acquisition of other real estate
brokerage companies in multiple states. However, principally due to the
downturn in the real estate industry in the early 1990s, the Company was
unable to generate profitable operations. On April 6, 1992, the Company filed a
voluntary petition in the United States Bankruptcy Court for the District of
Georgia to reorganize under Chapter 11 of the United States Bankruptcy Code
(the Bankruptcy Code). On January 21, 1993, the Companys Chapter 11 case
was voluntarily converted to a case under Chapter 7 of the Bankruptcy Code.
All of the Companys assets were subsequently liquidated and the proceeds
distributed, and the bankruptcy was dismissed on September 27, 1994. From that
date through the end of fiscal 2000, the Company had no operations. It did,
however, incur approximately $51,000 in administrative and legal expenses
during that time. The Company paid for these costs either by issuing common
stock or through advances it received from Great Western Land and Recreation,
Inc. (Great Western), formerly Amortibanc Management, L.C.

On September 22, 2000, the Company purchased a $20,000 note receivable issued
by an unrelated company in connection with a sale of real estate, bearing
interest at 9%. This note receivable was purchased from Great Western in
exchange for 500,000 shares of common stock. On December 29, 2000, the
Company purchased ownership interests in nine entities from Great Western in
exchange for a $951,629 note payable and 1,000,000 shares of common stock. The
most significant of these interests were a 25.52% ownership in Laguna at
Arrowhead Apartments L.L.C. (Laguna), which owns an apartment complex in
Phoenix, Arizona, and a 51% interest in Firebird Financial L.L.C. (Firebird
Financial), an entity that was formed to provide second mortgage financing in
the Houston, Texas area. Firebird Financial has not funded any new loans since
1998, and does not have any current plans to fund additional loans in the
future. The acquisitions of the ownership interests in the nine
entities from Great Western are accounted for by the purchase method
of accounting. The 25.52% interest in Laguna is being accounted for
on the equity method since acquisition and the accounts of Firebird
Financial are consolidated in these financial statements. The excess
cost over the Companys interest in the net equity of Laguna is
included in the investments in unconsolidated company on
the balance sheet and is being amortized over the life of the Laguna
apartment complex.

Great Western is a related company that owns 14.3% of the Companys common
stock as of June 15, 2002.

5



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##### 



1ST REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

NOTE A  BACKGROUND AND BASIS OF PRESENTATION  CONTINUED

The Company filed its last annual report on Form 10-K for the year ended August
31, 1991, and its last quarterly report on Form 10-Q for the quarter ended
November 30, 1991, on or about December 13, 1991 and January 21, 1992,
respectively. It has not filed annual reports for the years ended August 31,
1992 through 2000, or quarterly reports for the quarters ended February 28,
1992 through May 31, 2000. Quarterly reports for the quarters ended November
30, 2000 through February 28, 2002 and an annual report on Form 10-KSB for the
fiscal year ended August 31, 2001 are being filed concurrently with this
quarterly report on Form 10-QSB. Due to changes in personnel and the lack of
availability of records kept by such personnel prior to 2000, the Company has
determined that certain of its records for the fiscal years 1992 through 2000
are not available and therefore not able to be audited and the cost of
recreating and auditing such records, if such recreation were possible, would
not be justified in light of the age of the information and its relevancy to
the Companys current operations. Therefore, the Company does not intend to
prepare or file annual or quarterly reports for the periods set forth above
through the year ended August 31, 2000.

NOTE B  LOSS PER COMMON SHARE

Basic loss per share is computed by dividing net loss by the weighted average
number of commons shares outstanding during the period. Diluted loss per share
incorporates the incremental shares issuable upon the assumed exercise of stock
options. The number of incremental shares from the assumed exercise of stock
options is calculated by applying the treasury stock method. For the three and
six month periods ended February 28, 2002 and 2001, the shares issuable upon the exercise of the stock options which
were not included in the calculation because they were antidilutive
were 750,000.

NOTE C  NOTES RECEIVABLE

Notes receivable consist primarily of second mortgage loans made to
individuals, which are reported net of unamortized discount of $42,311 and an
allowance for doubtful accounts of $110,301 at February 28, 2002. The notes
have original maturities of 3 to 5 years and bear interest at effective rates
of 19.0% to 33.6%. Principal and interest are payable monthly based on 15-year
amortization schedules with the remaining balances due at maturity.

Notes receivable also includes a $20,000 note issued by an unrelated company in
connection with a sale of real estate, bearing interest at 9%, principal and
interest payable as lots are sold and released, with any outstanding balance
due in September 2003. This note receivable was purchased from Great Western
in September 2000 in exchange for 500,000 shares of the Companys common stock.

6



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##### 



1ST REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

NOTE D  PAYABLES TO RELATED ENTITIES

Related entity payables are as follows at February 28, 2002:

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Great Western (1)        |  | $ | 1,094,689 | 
|                        
|                        
|                        
|                        
|JPMH Ltd Partnership (2) |  |   | 13,846    | 
|                         |  |   |           | 
|                         |  | $ | 1,108,535 | 
|                         |  |   |           | 



---

|(1) |  | The advances from Great Western were made primarily to finance the
purchase of the Companys ownership interests in Laguna and Firebird
Financial from Great Western on December 29, 2000. These advances bear
interest at 8% per annum beginning in 2001, and are payable on demand.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | JPMH Ltd. Partnership holds a 49% ownership interest in Firebird
Financial.                                                                                                                                                                                                          

NOTE E  COMMITMENTS AND CONTINGENCIES

From time to time the Company is involved in litigation arising in the normal
course of business. The Company is not a party to any outstanding litigation
as of February 28, 2002 or as of the filing date of this report, other than as
discussed in Note G.

NOTE F  RELATED PARTY TRANSACTIONS

On September 22, 2000, the Company purchased a $20,000 note receivable, issued
by an unrelated company in connection with a sale of real estate, bearing
interest at 9%. This note receivable was purchased from Great Western in
exchange for 500,000 shares of the Companys common stock. On December 29,
2000, the Company purchased ownership interests in nine entities from Great
Western in exchange for a $951,629 note payable and 1,000,000 shares of the
Companys common stock. These interests included a 25.52% ownership in Laguna
at Arrowhead Apartments L.L.C. (Laguna), which owns an apartment complex in
Phoenix, Arizona, and a 51% interest in Firebird Financial L.L.C. (Firebird
Financial), an entity that was formed to provide second mortgage financing in
the Houston, Texas area. Firebird Financial has not funded any new loans since
1998, and does not have any current plans to fund additional loans in the
future. In addition, Great Western charges the Company $900 per month for
management services provided to Firebird Financial. At February 28, 2002,
advances from Great Western totaled $1,094,689, primarily to finance the
purchase of the Companys ownership interests in Laguna and Firebird Financial
from Great Western. The Company has pledged its interest in Laguna as
collateral for a $500,000 loan Great Western received from a third party (see
Note G).

Jay Torok, the Chairman of the board of directors, is also the Chairman,
President and Chief Executive Officer of Great Western. William Szilagyi, a
member of the board of directors is also the Senior Vice President of Great
Western.

The Company utilizes office space at the office of Great Western. The Company
is using this space free of charge.

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1ST REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

NOTE G  SUBSEQUENT EVENTS

Great Western entered into a merger agreement with quepasa.com as of August 6,
2001. In October 2001, in order to induce Great Western to amend and extend
the original merger agreement, quepasa.com loaned Great Western $500,000 (the
loan). This loan was secured by 1st Realtys investment in Laguna. In
February 2002, the merger agreement was terminated. The merger agreement
provided for a termination fee of $500,000 as liquidated damages under certain
circumstances. Great Western believes that it is entitled to this termination
fee, which would result in the loan being deemed paid in full, and has filed a
declaratory judgment action against quepasa.com on that issue. quepasa.com has
filed a counterclaim, alleging that it is entitled to the termination fee and
seeking to foreclose on the loan. quepasa.com has named 1st Realty as a
third-party defendant to its counterclaim because 1st Realtys investment in
Laguna was pledged as collateral for the loan. Management does not believe
that the ultimate resolution of this matter will have a material adverse effect
on 1st Realtys financial condition, results of operations or cash flows.

NOTE H  RECENT ACCOUNTING PROUNOUNCEMENTS

In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets: (SFAS 144). SFAS 144 requires that all
long-lived assets (including discontinued operations) that are to be disposed
of by sale be measured at the lower of book value or fair value less cost to
sell. Additionally, SFAS 144 expands the scope of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity and will be eliminated from the ongoing operations
of the entity in a disposal transaction. SFAS 144 is effective for the Company
as of January 1, 2002. The Company does not expect the implementation of SFAS
144 to have a material effect on its financial condition or results of
operations.

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Item 2.Managements Discussion and Analysis

The following discussion includes forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to certain
factors, including those discussed below, elsewhere in this Form 10-QSB and in
the Companys other filings with the SEC

Overview

1st Realty Investments, Inc. is incorporated in the state of Nevada. We
are an Arizona-based company that was formed in Georgia in October 1988, and
became a publicly-held company through a merger into Emphatic Mergers, Inc. a
publicly-held Nevada corporation on April 11, 1990. We changed our name from First
National Realty Associates, Inc. to 1st Realty Investments, Inc. on July 13,
2000.

We were founded with the intended purpose of becoming primarily a national
residential real estate brokerage company, focusing on relatively affluent
markets in geographically diverse market areas. Between 1988 and 1991, we grew
primarily through the acquisition of other real estate brokerage companies in
multiple states. However, principally due to the downturn in the real estate
industry in the early 1990s, we were unable to generate profitable operations.
On April 6, 1992, we filed a voluntary petition in the United States Bankruptcy
Court for the District of Georgia to reorganize under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). On January 21, 1993, we
voluntarily converted our petition to a case under Chapter 7 of the Bankruptcy
Code. All of our assets were subsequently liquidated and the proceeds
distributed, and the bankruptcy was dismissed on September 27, 1994. From that
date through the end of fiscal 2000, we had no operations. We did, however,
incur approximately $51,000 in administrative and legal expenses during that
time. We paid for these costs either by issuing common stock or through
advances we received from Great Western Land and Recreation, Inc. (Great
Western), formerly Amortibanc Management L.C.

On
September 22, 2000, we purchased a $20,000 note receivable issued by an
unrelated company in connection with a sale of real estate, bearing interest at
9%. This note receivable was purchased from Great Western in exchange for
500,000 shares of our common stock. On December 29, 2000, we purchased
ownership interests in nine entities from Great Western in exchange for a
$951,629 note payable and 1,000,000 shares of common stock. The most
significant of these interest were a 25.52% ownership in Laguna at Arrowhead
Apartments L.L.C. (Laguna), which owns an apartment complex in Phoenix,
Arizona, and a 51% interest in Firebird Financial L.L.C. (Firebird
Financial), an entity that was formed to provide second mortgage financing in
the Houston, Texas area. Firebird Financial has not funded any new loans since
1998, and does not have any current plans to fund additional loans in the
future.

Great Western is a related company that owns 14.3% of the Companys common
stock as of June 15, 2002.

We filed our last annual report on Form 10-K for the year ended August 31,
1991, and our last quarterly report on Form 10-Q for the quarter ended November
30, 1991, on or about December 13, 1991 and January 21, 1992, respectively. We
have not filed annual reports for the years ended August 31, 1992 through 2000,
or quarterly reports for the quarters ended February 28, 1992 through May 31,
2000. Quarterly reports for the quarters ended November 30, 2000 through
February 28, 2002 and an annual report on Form 10-KSB for the fiscal year ended
August 31, 2001 are being filed concurrently with this quarterly report on Form
10-QSB. Due to changes in personnel and the lack of availability of records
kept by such personnel prior to 2000, we have determined that certain of our
records for the fiscal years 1992 through 2000 are not available and therefore
not able to be audited and the cost of recreating and auditing such records, if
such recreation were possible, would not be justified in light of the age of
the information and its relevancy to our current operations. Therefore, we do
not intend to prepare or file annual or quarterly reports for the periods set
forth above through the year ended August 31, 2000.

Our
business plan is to use our limited resources to search for,
investigate and acquire or participate in a business opportunity.

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Results of Operations

Quarter ended February 28, 2002 (second quarter of fiscal 2002) compared to the quarter ended February 28, 2001 (second quarter of fiscal 2001)

Interest income.Interest income was $1,557 in the second quarter of
fiscal 2002 compared to $13,479 in the second quarter of fiscal 2001. Interest
income is related to the second mortgage notes receivable carried by Firebird
Financial and to the $20,000 note receivable we purchased from Great Western.
Firebird Financial was acquired in December 2000 and the note receivable was
purchased in September 2000. Interest income in the second quarter of fiscal
2001 was unusually high because of two loans that were paid off during the
quarter. The remaining unamortized discount on these two loans, which totaled
$10,413, was included in interest income during the quarter.

General and administrative expense.General and administrative expense
decreased $105,385 to $5,956 in the second quarter of fiscal 2002 from $111,341
in the second quarter of fiscal 2001. General and administrative expense
consisted of management, legal and accounting fees, primarily related to
Firebird Financial. General and administrative expense in the second quarter
of fiscal 2001 also included $110,301 in charge offs of uncollectible notes
receivable carried by Firebird Financial.

Interest Expense. Interest expense was $18,800 in the second quarter of
fiscal 2002 compared to $12,601 in the second quarter of fiscal 2001. The
interest expense is related to the advances we received from Great Western.
Beginning in January 2001, interest at 8% per annum began to accrue on these
advances.

Equity in losses of unconsolidated company.Equity in losses of
unconsolidated company (Laguna) was $37,341 in the second quarter of fiscal
2002 compared to $18,074 in the second quarter of fiscal 2001. Laguna was
purchased in December 2000.

Six months ended February 28, 2002 (first six months of fiscal 2002) compared to the six months ended February 28, 2001 (first six months of fiscal 2001)

Interest income.Interest income was $3,125 in the first six months of
fiscal 2002 compared to $13,819 in the first six months of fiscal 2001.
Interest income is related to the second mortgage notes receivable carried by
Firebird Financial and to the $20,000 note receivable we purchased from Great
Western. Firebird Financial was acquired in December 2000 and the note
receivable was purchased in September 2000. Interest income in the first six
months of fiscal 2001 was unusually high because of two loans that were paid
off during the period. The remaining unamortized discount on these two loans,
which totaled $10,413, was included in interest income during the period.

General and administrative expense.General and administrative expense
decreased $106,748 to $9,593 in the first six months of fiscal 2002 from
$116,341 in the first six months of fiscal 2001. General and administrative
expense consisted of management, legal and accounting fees, primarily related
to

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Firebird Financial. General and administrative expense in the first six
months of fiscal 2001 also included $110,301 in charge-offs of uncollectible
notes receivable carried by Firebird Financial.

Interest Expense. Interest expense was $37,600 in the first six months of
fiscal 2002 compared to $12,601 in the first six months of fiscal 2001. The
interest expense is related to the advances we received from Great Western.
Beginning in January 2001, interest at 8% per annum began to accrue on these
advances.

Equity in losses of unconsolidated company.Equity in losses of
unconsolidated company (Laguna) was $64,029 in the first six months of fiscal
2002 compared to $18,074 in the first six months of fiscal 2001. Laguna was
purchased in December 2000.

Liquidity and Capital Resources

Cash
used in operating activities was $41,423 in the first six months of
fiscal 2002 compared to $30,931 in the first six months of
fiscal 2001. Cash used in operations in the first six months of fiscal 2002
consisted of our net loss of $108,097 and an increase in other assets of $682
offset by net non-cash expenses
of $65,247 and an increase in accounts payable and other accrued liabilities of
$2,109. Net non-cash expenses consisted of $64,029 in undistributed losses
related to our equity investment in Laguna and $1,218 in depreciation and
amortization expense.

Cash
provided by investing activities was $1,082 in the first six months
of fiscal 2002 compared to $62,999 in the first six months of
fiscal 2001. Cash provided by operating activities in the first six months of
fiscal 2002 consisted of collections of notes
receivable of $1,082. Cash provided by investing activities in the first six
months of fiscal 2001 consisted of cash acquired
through purchase of investments in businesses of $18,632 and
collections of notes receivable of $44,367. The investments in
businesses were financed by a $951,629 advance from Great Western and by the
issuance to Great Western of 1,000,000 shares of common stock.

Cash
provided by financing activities was $43,001 in the first six months
of fiscal 2002 compared to cash used of $25,706 in the first six
months of fiscal 2001. Cash provided  by financing activities in the
first six months of fiscal 2002 consisted of a net increase in
advances from related parties (primarily Great Western).

Our cash balance at February 28, 2002 was $8,459. Our limited cash
requirements have been funded primarily by advances from Great
Western. We cannot presently foresee the cash requirements of any
business opportunities that we may ultimately acquire. However, since
it is likely that any business we acquire will be involved in active
business operations, we anticipate that an acquisition will result in
increased cash requirements as well as increases in the number of
employees.

Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets: (SFAS 144). SFAS 144 requires that all
long-lived assets (including discontinued operations) that are to be disposed
of by sale be measured at the lower of book value or fair value less cost to
sell. Additionally, SFAS 144 expands the scope of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity and will be eliminated from the ongoing operations
of the entity in a disposal transaction. SFAS 144 is effective for us as of
January 1, 2002. We do not expect the implementation of SFAS 144 to have a
material effect on our financial condition or results of operations.

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Business Risks and Forward-Looking Statements

This Quarterly Report on Form 10-QSB includes forward-looking statements
as that term is defined in Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are often characterized by the use of words such as
may, believes, plans, will, anticipates, estimates, expects, or
intends or by discussions of strategy, plans or intentions. All
forward-looking statements in this Form 10-QSB are made based on our current
expectations and estimates, which involve risks, uncertainties and other
factors that could cause results to differ materially from those expressed in
forward-looking statements. You are cautioned not to place undue reliance on
any such forward-looking statements. We have no obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect anticipated or unanticipated events or circumstances
occurring after the date of such statements. Forward-looking statements
involve a number of risks and uncertainties including, but not limited to,
general economic conditions, our ability to find a suitable company to effect a
business opportunity, and competitive factors.

PART II: OTHER INFORMATION

Item 1.Legal Proceedings

We are not a party to any pending legal proceedings and, to the best of
our knowledge, no litigation by or against us has been threatened other than as
discussed below.

Great Western entered into a merger agreement with quepasa.com as of
August 6, 2001. In October 2001, in order to induce Great Western to amend and
extend the original merger agreement, quepasa.com loaned Great Western
$500,000. This loan was secured by 1st Realtys investment in Laguna. In
February 2002, the merger agreement was terminated. The merger agreement
provided for a termination fee of $500,000 as liquidated damages under certain
circumstances. Great Western believes that it is entitled to this termination
fee, which would result in the loan being deemed paid in full, and has filed a
declaratory judgment action against quepasa.com on that issue. quepasa.com has
filed a counterclaim, alleging that it is entitled to the termination fee and
seeking to foreclose on the loan. quepasa.com has named 1st Realty as a
third-party defendant to its counterclaim because 1st Realtys investment in
Laguna was pledged as collateral for the loan. Management does not believe
that the ultimate resolution of this matter will have a material adverse effect
on 1st Realtys financial condition, results of operations or cash flows.

Item 2.Changes in Securities and Use of Proceeds

Not Applicable.

Item 3.Defaults Upon Senior Securities

Not Applicable.

Item 4.Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5.Other Information

Not Applicable

Item 6.Exhibits and Reports on Form 8-K

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| | (a) |  | Exhibits           
| | --- |  | -------------------
|
| |     |  | None               
|
| | (b) |  | Reports on Form 8-K
|
| |     |  | None               

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                    |  |                                           |  |                                                                                                          
|------------------- |  | ----------------------------------------- |  | ---------------------------------------------------------------------------------------------------------
|                    |  | 1ST REALTY INVESTMENTS, INC.
(Registrant)
|                   
|                   
|                   
|                   
|                    |  |                                           |  |                                                                                                          
|                   
|                   
|                   
|                   
|Date: June 24, 2002 |  | By                                        |  | /s/ William Szilagyi
William Szilagyi
President (Duly Authorized Officer and
Principal Financial Officer)

14