##### 



U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, 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 May 31, 2001

|      |  |                                                                                   
|----- |  | ----------------------------------------------------------------------------------
|(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                                                      |  |     
|                                                           
|                                                           
|                                                           
|                                                           
|Financial Information                                       |  |     
|                                                           
|                                                           
|                                                           
|                                                           
|Item 1. Financial Statements                                |  | 2   
|                                                           
|                                                           
|                                                           
|                                                           
|Item 2. Managements Discussion and Analysis                |  | 9   
|                                                           
|                                                           
|                                                           
|                                                           
|Part II                                                     |  |     
|                                                           
|                                                           
|                                                           
|                                                           
|Other Information                                           |  |     
|                                                           
|                                                           
|                                                           
|                                                           
|Item 1. Legal Proceedings                                   |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Item 2. Changes in Securities and Use of Proceeds           |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Item 3. Defaults Upon Senior Securities                     |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Item 4. Submission of Matters to a Vote of Security Holders |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Item 5. Other Information                                   |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Item 6. Exhibits and Reports on Form 8-K                    |  | 12  
|                                                           
|                                                           
|                                                           
|                                                           
|Signatures                                                  |  | 13  

1



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##### 



PART I FINANCIAL INFORMATION

Item 1.Financial Statements

1ST REALTY INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS

|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |   |         |        | 
|---------------------------------------------- | ------------------------------------ | --------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------- | ----------- | --------- | ---------- | - | ------- | ------ | 
|                                               |                                      |                                                                             |                                                                                           |         | May 31,     |           | August 31,
|                                               |                                      |                                                                             |                                                                                           |         | 2001        |           | 2000      
|                                               |                                      |                                                                             |                                                                                           |         |             |           |           
|                                               |                                      |                                                                             |                                                                                           |         | (Unaudited) |           |            |   |        
|ASSETS                                         |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents            |                                                                             | $                                                                                         | 5,744   |             |           | $          |  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Notes receivable, net                |                                                                             |                                                                                           | 69,242  |             |           |            |  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Property and equipment, net          |                                                                             |                                                                                           | 907     |             |           |            |  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Investment in unconsolidated company |                                                                             |                                                                                           | 826,668 |             |           |            |  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other assets                         |                                                                             |                                                                                           | 14,267  |             |           |            |  |        
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                               |                                      | $                                                                           | 916,828                                                                                   |         |             | $         |           |  
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                              
|                                              
|                                              
|                                              
|                                               | Liabilities                          |                                                                             |                                                                                           |         |             |           |            |   |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Payable to related entities                                                 |                                                                                           | $       | 1,075,301   |           |            | $ | 17,841  |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accounts payable and other accrued liabilities                              |                                                                                           |         | 15,646      |           |            |   |        |       
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                               |                                      |                                                                             | Total liabilities                                                                         |         |             | 1,090,947 |            |   |         | 17,841 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Stockholders equity (deficit)       |                                                                             |                                                                                           |         |             |           |            |   |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Common stock, $0.001 par value; 25,000,000 shares authorized;               |                                                                                           |         |             |           |            |   |         |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                                                                             | 17,518,525 and 16,018,525 shares issued at
May 31, 2001 and August 31, 2000, respectively |         |             | 17,519    |            |   |         | 16,019 | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Additional paid-in capital                                                  |                                                                                           |         | 45,401      |           |            |   | 16,901  |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accumulated deficit                                                         |                                                                                           |         | (237,039    | )         |            |   | (50,761 | )     
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Treasury stock, at cost, 651,972 shares at May 31, 2001
and August 31, 2000 |                                                                                           |         |            |           |            |   |        |       
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                               |                                      | Total stockholders equity (deficit)                                        |                                                                                           |         | (174,119    | )         |            |   | (17,841 | )     
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  
|                                               |                                      | $                                                                           | 916,828                                                                                   |         |             | $         |           |  
|                                               |                                      |                                                                             |                                                                                           |         |             |           |            |  

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 May 31, |            | Nine months ended May 31,
|                                                                 |                                            |                |         |                       |            |                          
|                                                                 |                                            |                |         | 2001                  |            | 2000                      |     | 2001 |            | 2000
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |     
|Interest income                                                  |                                            | $              | 2,479   |                       |            | $                         |    |      |            | $    | 16,298   |         |            | $ |       |  
|                                                                
|                                                                
|                                                                
|                                                                
|General and administrative expense                               |                                            |                | 4,320   |                       |            |                           | 83  |      |            |      | 120,661  |         |            |   | 4,040  |  
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                 |                                            | Operating
loss |         |                       | (1,841     | )                         |     |      | (83        | )    |          |         | (104,363   | ) |        |   | (4,040     | )
|                                                                
|                                                                
|                                                                
|                                                                
|Other expense                                                    |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest expense                           |                |         | (19,650               | )          |                           |     |     |            |      |          | (32,251 | )          |   |        |  |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Equity in losses of unconsolidated
company |                |         | (31,590               | )          |                           |     |     |            |      |          | (49,664 | )          |   |        |  |           
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                 |                                            |                | (51,240 | )                     |            |                           |    |      |            |      | (81,915  | )       |            |   |       |  
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|Net loss                                                         |                                            | $              | (53,081 | )                     |            | $                         | (83 | )    |            | $    | (186,278 | )       |            | $ | (4,040 | )
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|Net loss per common and common
equivalent share                  |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                                            | Basic          |         | $                     |           |                           |     | $    |           |      |          | $       | (0.01      | ) |        | $ |           |  
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                 |                                            | Diluted        |         | $                     |           |                           |     | $    |           |      |          | $       | (0.01      | ) |        | $ |           |  
|                                                                 |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|Weighted average common and common
equivalent shares outstanding |                                            |                |         |                       |            |                           |     |      |            |      |          |         |            |   |        |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                                            | Basic          |         |                       | 17,518,525 |                           |     |      | 16,018,525 |      |          |         | 17,031,346 |   |        |   | 16,018,525 |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                                            | Diluted        |         |                       | 17,518,525 |                           |     |      | 16,018,525 |      |          |         | 17,031,346 |   |        |   | 16,018,525 |  

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)

|                                                                           |                                                                                                     |   |                          |         |      |   |        |       | 
|-------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | - | ------------------------ | ------- | ---- | - | ------ | ----- | 
|                                                                           |                                                                                                     |   | Nine months ended May 31
|                                                                           |                                                                                                     |   |                         
|                                                                           |                                                                                                     |   | 2001                     |         | 2000
|                                                                           |                                                                                                     |   |                          |         |     
|Cash flows from operating activities                                       |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Net loss                                                                   |                                                                                                     | $ | (186,278                 | )       |      | $ | (4,040 | )    
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Adjustments to reconcile net loss to net
cash used in operating activities |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Bad debt expense                                                                                    |   |                          | 110,301 |      |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Depreciation and amortization                                                                       |   |                          | 1,015   |      |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Undistributed losses of unconsolidated company                                                      |   |                          | 49,664  |      |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Accretion of interest income                                                                        |   |                          | (11,081 | )    |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Issuance of common stock in payment of expenses                                                     |   |                          |        |      |   |        | 3,440 | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Change in assets and liabilities (net of businesses acquired):             |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Other assets                                                                                        |   |                          | (1,018  | )    |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Accounts payable and other accrued liabilities                                                      |   |                          | (17,434 | )    |   |        |      | 
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|Net cash used in operating activities                                      |                                                                                                     |   | (54,831                  | )       |      |   | (600   | )    
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Cash flows from investing activities                                       |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Collection of notes receivable                                                                      |   |                          | 45,199  |      |   |        |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Cash acquired through purchase of investments in
businesses                                         |   |                          | 18,632  |      |   |        |      | 
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|Net cash provided by investing activities                                  |                                                                                                     |   | 63,831                   |         |      |   |       |      
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Cash flows from financing activities                                       |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Increase (decrease) in advances from related parties                                                |   |                          | (3,256  | )    |   |        | 600   | 
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|Net increase in cash and cash equivalents                                  |                                                                                                     |   | 5,744                    |         |      |   |       |      
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Cash and cash equivalents at beginning of period                           |                                                                                                     |   |                         |         |      |   |       |      
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|Cash and cash equivalents at end of period                                 |                                                                                                     | $ | 5,744                    |         |      | $ |       |      
|                                                                           |                                                                                                     |   |                          |         |      |   |        |      
|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 |      |   | $      |      | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Issuance of common stock in payment of expenses                                                     |   | $                        |        |      |   | $      | 3,440 | 

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 nine month periods ended May 31, 2001 and 2000 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.

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
nine month periods ended May 31, 2001 and 2000, 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 May 31, 2001. 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 May 31, 2001:

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Great Western (1)        |  | $ | 1,061,455 | 
|                        
|                        
|                        
|                        
|JPMH Ltd Partnership (2) |  |   | 13,846    | 
|                         |  |   |           | 
|                         |  | $ | 1,075,301 | 
|                         |  |   |           | 



---

|    |  |                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 May 31, 2001 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 May 31, 2001, advances from Great Western
totaled $1,061,455, 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 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 May 31, 2001 (third quarter of fiscal 2001) compared to the
quarter ended May 31, 2000 (third quarter of fiscal 2000)

Interest
income. Interest income was $2,479 in the third quarter of fiscal
2001 compared to zero in the third quarter of fiscal 2000. 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.

General and administrative expense. General and administrative expense
increased $4,237 to $4,320 in the third quarter of fiscal 2001 from $83 in the
third quarter of fiscal 2000. General and administrative expense in the third
quarter of fiscal 2001 consisted of management, legal and accounting fees,
primarily related to Firebird Financial. General and administrative expense in
the third quarter of fiscal 2000 consisted of legal and other expenses.

Interest Expense. Interest expense was $19,650 in the third quarter of
fiscal 2001 compared to zero in the third quarter of fiscal 2000. 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 $31,590 in the third quarter of fiscal 2001
compared to zero in the third quarter of fiscal 2000. Laguna was purchased in
December 2000.

Nine months ended May 31, 2001 (first nine months of fiscal 2001) compared to
the nine months ended May 31, 2000 (first nine months of fiscal 2000)

Interest
income. Interest income was $16,298 in the first nine months of
fiscal 2001 compared to zero in the first nine months of fiscal 2000. 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.

General and administrative expense. General and administrative expense
increased $116,621 to $120,661 in the first nine months of fiscal 2001 from
$4,040 in the first nine months of fiscal 2000. General and administrative
expense in the first nine months of fiscal 2001 consisted of $110,301 in charge-
offs of uncollectible notes receivable carried by Firebird Financial and $10,360
of management, legal and accounting fees, primarily related to Firebird
Financial. General and administrative expense in the first nine months of fiscal
2000 consisted of legal and other expenses.

Interest Expense. Interest expense was $32,251 in the first nine months of
fiscal 2001 compared to zero in the first nine months of fiscal 2000. The
interest expense is related to the advances we received

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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 $49,664 in the first nine months of fiscal
2001 compared to zero in the first nine months of fiscal 2000. Laguna was
purchased in December 2000.

Liquidity and Capital Resources

Cash
used in operating activities was $54,831 in the first nine months of
fiscal 2001 compared to $600 in the first nine months of fiscal 2000. Cash used
in operations in the first nine months of fiscal 2001 consisted of our net loss
of $186,278, an increase in other assets of $1,018 and a decrease in accounts
payable and other accrued liabilities of $17,434 offset by net non-cash expenses of $149,899. Net non-cash
expenses consisted of $110,301 in bad debt expense, $49,664 in undistributed
losses related to our equity investment in Laguna and $1,015 in depreciation and
amortization expense offset by $11,081 of accretion of interest income.

Cash
provided by investing activities was $63,831 in the first nine months
of fiscal 2001 compared to $-0- in the first nine months of fiscal 2000. Cash
provided by investing activities in the first nine months of fiscal 2001
consisted of cash acquired through purchase of investments in businesses of
$18,632 and collections of notes
receivable of $45,199. 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 our common stock.

Cash
used in financing activities was $3,256 in the first nine months of
fiscal 2001 compared to cash provided of $600 in the first nine months of fiscal 2000. Cash used in the first nine months of fiscal 2001 consisted of a net decrease in advances from related parties (primarily Great Western).

Our cash balance at May 31, 2001 was $5,744. 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.

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-

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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

On
September 22, 2000, we issued 500,000 shares of common stock to Great
Western in exchange for a $20,000 note receivable issued by an unrelated company
in connection with a sale of real estate, bearing interest at 9%. The shares
issued are subject to an exemption from registration pursuant to Section 4 (2)
of the Securities Act of 1933.

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 our common stock. The shares issued are subject to an exemption from
registration pursuant to Section 4 (2) of the Securities Act of 1933.

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



| | (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) |  | 

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