U.S. SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                   FORM 10-QSB

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2000

                          MONTGOMERY REALTY GROUP, INC.

                NEVADA                                     88-0377199
    (State or other jurisdiction of                      (IRS Employer
     incorporation or organization)                    Identification No.)


                        400 Oyster Point Blvd., Suite 415
                          South San Francisco, CA 94080
                    (Address of principal executive offices)

                                 (650) 266-8080
                         (Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 __ No X

The number of shares outstanding of the registrant's  common stock as of May 16,
2000: 16,500,000

<PAGE>

                          MONTGOMERY REALTY GROUP, INC.
                                   FORM 10-QSB

                                TABLE OF CONTENTS

   Item                   Description                                      Page
----------  -------------------------------------------------------------- -----
                      Part I. Financial Information

    1.      Consolidated Balance Sheets...................................   3
    1.      Consolidated Statements of Income.............................   4
    1.      Consolidated Statements of Cash Flows.........................   5
            Notes to Consolidated Financial Statements....................   6
    2.      Management's Discussion and Analysis or Plan of Operation.....   7

                       Part II. Other Information

    6.      Exhibits and Reports on Items in Form 8-K.....................  13
            Signatures....................................................  14

                                       2
<PAGE>
<TABLE>

                                     PART I.
                          ITEM 1. FINANCIAL STATEMENTS
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

BALANCE SHEETS  (UNAUDITED)
MARCH 31, 2000 AND DECEMBER 31, 1999
---------------------------------------------------------------------------------------------------------------------
                                                                                         March 31,     December 31,
                                                                                           2000            1999
                                                                                           ----            ----
ASSETS

PROPERTY:
<S>                                                                                     <C>             <C>
  Land                                                                                  $  2,699,500    $   2,699,500
  Building                                                                                 5,040,000        5,040,000
  Improvements                                                                             3,279,384        3,279,384
                                                                                        ------------    -------------
           Total                                                                          11,018,884       11,018,884

  Less accumulated depreciation                                                           (2,561,004)      (2,505,378)
                                                                                        ------------    -------------

           Property, net                                                                   8,457,880        8,513,506

CASH                                                                                          48,491          134,361

TENANT RECEIVABLES                                                                            19,477           31,137

PREPAID EXPENSES AND OTHER ASSETS                                                            166,120           36,949

DEFERRED LEASE COMMISSIONS                                                                    13,448           13,995

DEFERRED LOAN COSTS                                                                          126,060          134,906

DEFERRED RENT RECEIVABLE                                                                      25,175           40,425

DEFERRED TAX ASSET                                                                         1,516,830        1,492,435
                                                                                        ------------    -------------
TOTAL ASSETS                                                                            $ 10,373,481    $  10,397,714
                                                                                        ============    =============

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES:
  Notes payable                                                                         $ 12,312,805    $  12,338,166
  Loan from stockholder                                                                      100,000               --
  Accounts payable                                                                            33,732           67,292
  Accrued interest                                                                            67,192           68,112
  Security deposits and prepaid rent                                                          62,348          103,150
                                                                                        ------------    -------------
TOTAL LIABILITIES                                                                         12,576,077       12,576,720
                                                                                        ------------    -------------

STOCKHOLDERS' DEFICIT:

  Common stock, $0.001 par value;  authorized  80,000,000 shares;
    issued and outstanding,  16,500,000  shares at March 31, 2000
    and, December 31, 1999                                                                    16,500           16,500
  Preferred  stock,  $0.001  par  value;   authorized  20,000,000
    shares;  no shares issued and  outstanding  at March 31, 2000
    and December 31, 1999                                                                          -                -
  Additional capital                                                                       1,692,742        1,692,742
  Accumulated deficit                                                                     (3,911,838)      (3,888,248)
                                                                                        ------------    -------------
TOTAL STOCKHOLDERS' DEFICIT                                                               (2,202,596)      (2,179,006)
                                                                                        ------------    -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                             $ 10,373,481    $  10,397,714
                                                                                        ============    =============
</TABLE>
See notes to the financial statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

STATEMENTS OF OPERATIONS  (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------

                                                                                          2000              1999
                                                                                          ----              ----
REVENUES:
<S>                                                                                     <C>             <C>
  Rent                                                                                  $    355,991    $     337,947
  Other                                                                                          145              498
                                                                                        ------------    -------------
      Total revenues                                                                         356,136          338,445
                                                                                        ------------    -------------
EXPENSES:
  Real estate taxes                                                                           24,931           26,466
  Utilities                                                                                    3,254            2,964
  Repairs and maintenance                                                                      2,608            2,107
  General building                                                                             5,531            4,435
  Administration                                                                              29,070           18,767
  Insurance                                                                                    5,576            4,912
  Management fee                                                                              22,500           20,599
  Depreciation                                                                                55,626           55,087
  Amortization (Note 1)                                                                       23,411           14,042
                                                                                        ------------    -------------
           Total expenses                                                                    172,507          149,379
                                                                                        ------------    -------------

INCOME BEFORE INTEREST EXPENSE
  AND INCOME TAXES                                                                           183,629          189,066

INTEREST EXPENSE, NET                                                                       (231,614)        (227,973)
                                                                                        ------------    -------------
LOSS BEFORE INCOME TAXES                                                                     (47,985)         (38,907)

INCOME TAX BENEFIT                                                                            24,395               --
                                                                                        ------------    -------------

NET LOSS                                                                                $    (23,590)   $     (38,907)
                                                                                        ============    =============
NET LOSS PER COMMON SHARE,
  BASIC AND DILUTED                                                                     $     (0.001)   $      (0.002)
                                                                                        ============    =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES,
  BASIC AND DILUTED                                                                       16,500,000       16,000,000
                                                                                        ============    =============
</TABLE>
See notes to the financial statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

STATEMENTS OF CASH FLOWS  (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------
                                                                                             2000            1999
                                                                                             ----            ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                         <C>              <C>
  Net loss                                                                                  $  (23,590)      $ (38,907)
  Depreciation and amortization                                                                 79,037          69,129
  Deferred rent receivable                                                                      15,250          33,087
  Deferred taxes                                                                               (24,395)             --
  Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
    Tenant receivables                                                                          11,660          (1,062)
    Prepaid expenses and other assets                                                          (15,684)          5,884
    Accounts payable                                                                           (33,560)          3,242
    Accrued interest                                                                              (920)          5,621
    Security deposits and prepaid rent                                                         (40,802)         18,902
    Other                                                                                            --          8,784
                                                                                            ----------       ---------
           Net cash (used in) provided by operating activities                                 (33,004)        104,680
                                                                                            ----------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Payment of loan costs                                                                        (14,018)             --
                                                                                            ----------       ---------
           Net cash used in investing activities                                               (14,018)             --
                                                                                            ----------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable                                                      100,000              --
  Escrow deposit for note payment                                                             (113,487)             --
  Payments on notes payable                                                                    (25,361)         (9,540)
  Distributions                                                                                     --         (95,000)
                                                                                            ----------       ---------
           Net cash used in financing activities                                               (38,848)       (104,540)
                                                                                            ----------       ---------
(DECREASE) INCREASE IN CASH                                                                    (85,870)            140

CASH, BEGINNING OF PERIOD                                                                      134,361             130
                                                                                            ----------       ---------
CASH, END OF PERIOD                                                                         $   48,491       $     270
                                                                                            ==========       =========
</TABLE>
See notes to the financial statements.

                                        5
<PAGE>

                          MONTGOMERY REALTY GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1:       BASIS OF PRESENTATION

      The  interim  financial  data is  unaudited;  however,  in the  opinion of
      management, the interim data includes all adjustments,  consisting only of
      normal  recurring  adjustments,  necessary  for  a  fair  presentation  of
      Montgomery's  financial position and results of operations for the interim
      period.  Such statements have been prepared from  Montgomery's  accounting
      records in accordance with the instructions to Form 10-QSB,  and should be
      used in  conjunction  with  Montgomery's  Registration  Statement  on Form
      10-SB, as amended, including the financial statements and notes thereto.

NOTE 2:       TRANSACTIONS WITH AFFILIATE

      Property  management fees of $22,500 and $20,599 were paid to an affiliate
      of the majority  stockholder for the three months ended March 31, 2000 and
      1999, respectively.

NOTE 3:       BASIC AND DILUTED INCOME (LOSS) PER SHARE OF BENEFICIAL INTEREST

      Basic and diluted  income  (loss) per share are  computed by dividing  net
      income  (loss) by the weighted  average  number of shares  outstanding  of
      16,500,000  and  16,000,000  for the three months ended March 31, 2000 and
      1999, respectively.

NOTE 4:       LOAN FROM STOCKHOLDER

      On  March  27,  2000,  Montgomery  borrowed  $100,000  from  its  majority
      stockholder.  The loan bears interest at 10% and is due on March 31, 2001.
      The  proceeds  from the loan  were  used to reduce  the  principal  of the
      Redwood Bank mortgage (Note 5).

NOTE 5:       SUBSEQUENT EVENTS

      On March 23, 2000, the $1,999,000  mortgage on the Eccles Project matured.
      The lender, Redwood Bank, had already made a commitment to extend the term
      of the loan and on April 4, 2000, loan extension  documents were recorded.
      The new  maturity  date on the  loan is  March  31,  2001.  As part of the
      extension, principal was reduced by $100,000.

      On May 2, 2000,  Montgomery  entered  into a written  contract to sell the
      Eccles  Project  land to Sand  Hill  Property  Company  for  approximately
      $14,500,000. The contract calls for a closing on or about January 2, 2001,
      subject to various conditions,  including the satisfaction by the buyer of
      certain due diligence  contingencies and Montgomery obtaining  appropriate
      planning  department  permits so as to allow the construction of a 200,000
      square foot office building at the site.

      The $545,000 mortgage on the San Ramon Retail Center matures June 1, 2000.
      The lender,  Gross Mortgage Company, has indicated a willingness to extend
      the term of the loan for up to one  additional  year.  Montgomery  is also
      pursuing alternate financing. (See Financing Activities).

                                     ******

                                        6
<PAGE>

                                     PART I.
        ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Information May Prove Inaccurate

         This report contains statements about the future, sometimes referred to
as  "forward-looking"  statements.   Forward-looking  statements  are  typically
identified by the use of the words "believe," "may," "will," "should," "expect,"
"anticipate,"  "estimate,"  "project,"  "propose,"  "plan," "intend" and similar
words and expressions. Statements that describe future strategic plans, goals or
objectives  of   Montgomery   Realty  Group,   Inc.   ("Montgomery")   are  also
forward-looking statements. Montgomery intends the forward-looking statements to
be  covered  by  the  safe  harbor  provisions  for  forward-looking  statements
contained in Section 27A of the  Securities  Act and Section 21E of the Exchange
Act.

         Readers  of  this  report  are  cautioned   that  any   forward-looking
statements,  including those regarding  Montgomery or its  management's  current
beliefs, expectations, anticipations, estimations, projections, proposals, plans
or intentions, are not guarantees of future performance or results of events and
involve risks and  uncertainties.  The  forward-looking  information is based on
present  circumstances  and on Montgomery's  predictions  respecting events that
have not  occurred,  which  may not  occur or which  may  occur  with  different
consequences from those now assumed or anticipated. Actual events or results may
differ  materially from those discussed in the  forward-looking  statements as a
result of various  factors.  The  forward-looking  statements  included  in this
report are made only as of the date of this report.  Montgomery is not obligated
to update  such  forward-looking  statements  to  reflect  subsequent  events or
circumstances.

         The  following  discussion  should  be read  in  conjunction  with  the
Financial Statements of Montgomery and the Notes thereto.

Overview

         Montgomery is a real estate company that emphasizes  investment in both
development  real  estate  assets  and  income-producing   real  estate  assets.
Montgomery  is  engaged  in  the  ownership,  leasing,  management,   operation,
development,  redevelopment,  acquisition, and sale of real estate assets in the
Greater San  Francisco  Bay Area.  Montgomery  currently  owns  retail  shopping
centers and an office  building.  The lease space is  currently  100%  occupied.
Montgomery  also owns an  undeveloped  parcel of land referred to as the "Eccles
Project" in South San Francisco.  As discussed in more detail below,  Montgomery
has  recently  entered  into a binding  contract to sell the Eccles  Project for
approximately  $14,500,000.   Montgomery  conducts  all  of  its  real  property
management and brokerage  activities  through a written agreement with a related
corporation,  Diversified Investment & Management Corporation ("DIMC"), which is
100%  owned  by  Montgomery's  majority  stockholder,  Mr.  Maniar.  Mr.  Maniar
currently owns in excess of 96% of the stock of Montgomery.

Basis of Presentation of Financial Information

         Montgomery's   financial  condition  and  results  of  operations  were
substantially  changed by the  acquisition of its four (4)  properties  from Mr.
Maniar in June 1999. The acquisition of the four properties was accounted for as
a  "reverse  acquisition"  whereby,  for  accounting  purposes,  the  properties
acquired Montgomery under the purchase method of accounting and, due to the lack
of  significant  business  operations  by  Montgomery  prior to the June 8, 1999
acquisition, the transaction was reported as a recapitalization. Consistent with
reverse  acquisition  accounting:  (i) the comparative results of operations for
the periods ended March 31, 2000 and March 31, 1999  therefore  show revenue and
expense from the properties,  with the March 31, 2000 operations also reflecting
Montgomery's  additional  expenses of

                                        7
<PAGE>

conducting  business  as  a  public  company;   (ii)  all  properties,   assets,
liabilities  and accumulated  deficit are reflected at the properties'  combined
historical  cost  (as  the  accounting  acquiror);   and  (ii)  the  preexisting
outstanding  shares of  Montgomery  (the  accounting  acquiree) are reflected at
their net cash value as if issued on June 8, 1999.  In addition,  the benefit of
deferred tax asset generated by the contribution of the properties to Montgomery
by Mr. Maniar with a tax basis in excess of book basis has been recorded both as
an  asset  and  as  additional  paid  in  capital.  Distributions  shown  in the
accompanying  statement of stockholders'  deficit represent the properties' cash
flows  and the  refinancing  proceeds  distributed  to Mr.  Maniar  prior to the
reverse  acquisition  on June 8, 1999.  No  distributions  have been made to Mr.
Maniar or other  shareholders  subsequent to the June 8, 1999  transfer,  and no
special  distributions  to Mr. Maniar or other  shareholders are planned for the
future.

Results of Operations

         Montgomery's  net loss for the first quarter  decreased from $38,907 to
$23,590 for the period ended March 31, 2000,  or 39.4%,  as compared to the same
quarter in 1999.

         Montgomery's  total  revenues  for the  first  quarter  increased  from
$338,445  to  $356,136,  or 5.2%,  from 1999 to 2000,  primarily  because of two
factors:  (a) rental  payments  commencing  November 1999 under a new lease with
AlphaGraphics 503 at the San Ramon Retail Center;  and (b) rental increases that
took effect  December 1, 1999, in the base rent paid by Keker and Van Nest,  the
sole tenant.

         Total operating  expenses for the first quarter increased from $149,379
to $172,507,  or 15.5%, from 1999 to 2000. While most operating  expenses showed
expected variations due to variable costs,  administrative  costs increased from
$18,767 in 1999 to $29,070 in 2000, or 54.8%. This increase was due primarily to
the increased costs of outside accounting and legal services associated with the
public  company  status of  Montgomery.  Management  fees for the first  quarter
increased from $20,599 in 1999 to $22,500 in 2000, or 9.2%. This increase is due
primarily to Montgomery  paying the fixed minimum  property  management  fees of
$7,500 per month,  as required  by the June 1999  management  agreement  between
Montgomery  and DIMC in 2000,  rather  than the 3% of gross  receipts  otherwise
charged.  The  contract  between  Montgomery  and DIMC calls for  payment of the
greater of the minimum monthly amount (which increases  annually) or 3% of gross
receipts.

         Net interest  expense for the first quarter  increased from $227,973 to
$231,614,  or 1.6%,  from 1999 to 2000,  due primarily to increases in the prime
interest rate on the Eccles Project loan with Redwood Bank.

Liquidity and Capital Resources

         Montgomery has met its requirements for liquidity and capital resources
principally  from cash provided by operations,  refinancing  and  realization of
equity.

         Operating Activities

         Operating activities for the first quarter of 1999 provided net cash of
$104,680 compared to net cash used in operating activities for the first quarter
of 2000 of $33,004, a decrease of $137,684,  or 131.5%. A significant portion of
this  decrease  consists  in part of a  decrease  in prepaid  expenses.  Prepaid
expenses  were  $166,120  for the period  ended March 31,  2000,  as compared to
prepaid  expenses of only $36,949 for the period ended  December 31, 1999.  This
difference  consists of: (a) $113,487 shown as a prepaid expense as of March 31,
2000,  which sum represents both the principal  reduction and the loan extension
cost associated with the mortgage extension (which closed April 4, 2000) for the
Eccles  Project;  (b)  increase  in tax impound  accounts  of  $34,260;  and (c)
variations  in the amount of prepaid

                                        8
<PAGE>

insurance  and real estate taxes of only $18,373 at March 31, 2000,  as compared
to $36,949 at December 31, 1999.  Additional  major uses of cash were the use of
prepaid rent existing at December 31, 1999, of $103,150, leaving only $62,348 of
prepaid rent at March 31, 2000, a difference  of $40,802.  Other  variations  in
balance  sheet  accounts  constitute  the balance of the cash used in  operating
activities.  Noncash  expenses  related to depreciation  and  amortization  were
$69,129 and $79,037 for 1999 and 2000, respectively.

         Investing Activities

         Cash flow  used in  investing  activities  in the  first  quarter  used
$14,018 in 2000, while none was used in the first quarter of 1999, a decrease in
cash flow of  $14,018.  This  decrease  in cash flow from  investing  activities
arises from the loan costs incurred in connection with the previous  refinancing
of the San Ramon Retail Center.

         Financing Activities

         Montgomery's  financing  activities reflect the results of its debt and
equity transactions. During the first quarter of 2000, financing activities used
net cash of  $38,848,  due to  three  factors:  (a)  Montgomery's  borrowing  of
$100,000 from its principal  stockholder,  Mr. Maniar;  (b) the  amortization of
principal  of  $25,361  in  connection  with the loans on the Keker and Van Nest
Office Building and the Orchard Supply  Shopping  Center;  and (c)  Montgomery's
funding  $113,487 into escrow for the Eccles  Project  mortgage loan  extension.
During the first quarter of 1999,  financing activities used $104,540 associated
with loan costs  connected  with the  refinancing  of  Montgomery's  properties,
particularly  the Keker and Van Nest  Office  Building  and the  Orchard  Supply
Shopping Center.

         In the first quarter of 1999, distributions of $95,000 were made to Mr.
Maniar,  who directly owned the properties at that time. This  distribution  was
made from the  proceeds  of the  refinancing  of the  Keker and Van Nest  Office
Building in December 1998. No distributions of cash from  refinancings have been
made to Mr. Maniar for any period after Mr. Maniar transferred the properties to
Montgomery  on June 8,  1999,  nor are any such  distributions  planned  for the
future.

         The mortgage  loan on the Eccles  Project was renewed on April 4, 2000.
The loan,  which was originally due March 23, 2000, was extended until March 31,
2001. As part of the extension,  Montgomery reduced the principal balance on the
loan by $100,000 such that the outstanding  balance is now $1,899,000.  The loan
from  Redwood  Bank  bears  interest  at the prime  rate plus 1% and is  payable
monthly, interest only. Mr. Maniar has personally guaranteed the loan.

         Montgomery borrowed from its principal stockholder, Mr. Maniar, the sum
of $100,000 so that the principal  reduction of the Eccles Project mortgage loan
could be made without reducing  Montgomery's  working capital. The loan from Mr.
Maniar is for a one-year term, maturing March 31, 2001, with interest thereon at
10% per annum. The loan from Mr. Maniar is not secured.

         The loan on the San Ramon Retail  Center is currently due June 1, 2000.
Gross  Mortgage  Company has agreed to extend the term of the loan for up to one
year. At the same time,  however, a loan application has been made with Affinity
Bank for an $800,000  mortgage loan to replace the Gross  Mortgage  Company loan
(the  "Affinity  Loan").  The  Affinity  Loan  would  be a  ten-year  loan  with
thirty-year amortization at an interest rate lower than the Gross Mortgage loan.
By  restructuring  the existing debt on the San Ramon Retail Center,  Montgomery
believes that it can maintain  substantially equal monthly loan payments,  while
pulling out approximately  $250,000 of equity in the form of cash. Affinity Bank
is currently processing Montgomery's loan application. An appraisal is currently
being  performed  and  Montgomery  expects  that  Affinity  will likely  issue a
commitment by June 1, 2000.

                                        9
<PAGE>

         Montgomery's  policy  is to  structure  its  real  estate  refinancing,
whenever  practical,  so that the property will  continue to provide  sufficient
cash flow to meet or exceed  requirements for related mortgage  amortization and
operating  expenses.  Montgomery's goal in refinancing  properties is to convert
equity to cash,  provided the current cash flow from a property is  sufficiently
positive so as to permit adequate debt service  coverage,  coupled with positive
cash flow.  This  strategy  allows  Montgomery  to obtain cash  capital from the
increases in real estate equity that arises by reason of the appreciation in the
value of the underlying properties.  Montgomery's policy of refinancing "equity"
so as to provide  additional cash is based upon  management's  policy that total
debt service costs should remain relatively constant.

         Equity in Real Estate

         Montgomery  has net cash flow  from its  current  activities,  which it
believes it will be able to continue on a long term basis,  providing sufficient
cash to cover  activities  other than new  acquisitions  or  developments  while
sheltering  cash flow from income tax by reason of the net taxable  loss that is
generated by depreciation and amortization.  While Montgomery is able to realize
cash flow from  refinancing  of  existing  assets  such as the San Ramon  Retail
Center  as  discussed  above,   Montgomery's  principal  methods  for  obtaining
acquisition and development  capital come from either: (a) additional  financing
activities  as  discussed  above;  or (b) the sale or exchange of existing  real
estate  assets so as to realize a cash or trade value from the equity  generated
by appreciation of real estate assets.  Absent additional capital from financing
activities  or the sale or exchange of real estate  assets,  Montgomery  may not
have sufficient cash flow to fund expansions or acquisitions.

         Based upon independent  appraisals  performed  between October 1998 and
November 1999, Montgomery's properties had a value of approximately $23,340,000,
as compared to the historical cost, net of depreciation of $8,513,506 with which
such properties are reported in Montgomery's financial statements as of December
31,  1999.  The  related   indebtedness   secured  by  such  properties  totaled
$12,338,166 as of December 31, 1999. The difference of $14,826,494 represents an
important financial resource for the Company.  Montgomery is able to profit from
this  important  resource in two ways:  (a) by pulling out equity in the form of
cash through  favorable  refinancings such as the pending Affinity Loan; and (b)
the sale or exchange of properties which have appreciated in value.

         The Eccles  Project was appraised at $8,950,000 in November 1999 and in
May  2000 a  contract  for the  sale of the  Eccles  Project  land to Sand  Hill
Property  Company was entered into with an aggregate sale price of approximately
$14,500,000  (as discussed  below).  Management  believes that the excess of the
contract price  represents  both: (a) a conservatism in real estate  appraisals;
and (b) favorable market conditions in the South San Francisco,  California area
due to its location  between San Francisco and the Silicon  Valley.  The sale of
the Eccles Project land represents Montgomery's primary method of realizing cash
from the equity in appreciated properties.

         Montgomery  intends  to use the  proceeds  from the sale of the  Eccles
Project land for  acquisition of additional  real estate.  Said  acquisitions of
additional  properties  may  be  accomplished  either  directly  or  indirectly.
Montgomery may directly reinvest the proceeds in one or more new properties that
currently produce income, have potential for substantial appreciation,  or both.
Consistent  with its policy of investing in real  properties  in the Greater San
Francisco  Bay area,  management  has already  commenced a search for new office
buildings,   shopping  centers  and  other  real  estate   investments.   Timely
identification of a direct  reinvestment in new real estate may allow Montgomery
to structure the sale of the Eccles  Project land as a tax-free  exchange  under
Internal Revenue Code Section 1031.

                                       10
<PAGE>

         Montgomery may indirectly  reinvest the proceeds by entering into joint
ventures or other  business  relationships  whereby the real estate  assets of a
Real Estate Investment Trust (REIT) may be acquired.

         Capital Requirements

         Montgomery  plans to expand its asset base in the future.  Expansion is
currently focused upon the sale of the Eccles Project land to Sand Hill Property
Company. As discussed below,  Montgomery currently anticipates net proceeds from
the  sale  of the  Eccles  Project  of  $12,000,000.  Through  direct  tax  free
exchanges,   Montgomery  anticipates  that  approximately   $48,000,000  of  new
properties  can be  acquired,  depending  upon various  factors,  such as market
capitalization  rates,  commercial loan interest rates and loan to value ratios,
credit worthiness of tenants, length of leases, and similar matters.

         The Eccles Project  currently  generates a net loss due to its carrying
costs, which costs are not offset by an income generating tenant. The successful
sale of the Eccles Project and the  acquisition of new  properties,  would allow
Montgomery to increase its net income substantially. Although no specific assets
have been  identified  at this time,  management  believes  that the Greater San
Francisco  Bay Area  provides  a 9% return on  investment  with  respect to real
estate  acquisitions,  such that $48,000,000 of new income producing  properties
would  generate net  operating  income  (before debt  service) of  approximately
$4,320,000.  Subject to  changes  in the real  estate  debt  market,  commercial
mortgages are generally  running about 9.3%  interest,  such that aggregate debt
service  on  $48,000,000  of new real  estate,  encumbered  by 75% loan to value
mortgage debt,  would generate  interest  expense of  approximately  $3,348,000.
Montgomery's  management  believes  that net  income  (before  depreciation)  of
approximately  $972,000  per year could be  obtained by  reinvesting  the Eccles
Project capital in new income producing properties.

         Montgomery  believes that  diversification is the key to long term real
estate industry viability and success. Therefore,  Montgomery plans to diversify
it current  portfolio with future  acquisitions of income  producing real estate
and/or real estate with development potential.  Montgomery will seek the capital
for such  growth and  diversification  through a  combination  of asset sales or
exchanges,  refinancings through commercial loan sources, as well as through the
sale of debt or equity  securities.  With the  exceptions of the Eccles  Project
sale and the  Affinity  Loan  there  are no  current  plans to raise  additional
capital at this time.

         Eccles Sale

         On May 2, 2000, Montgomery entered into a binding contract for the sale
by Montgomery of its Eccles Project land to Sand Hill Property Company ("Buyer")
for  an  aggregate  sale  price  of  approximately   $14,500,000.   Montgomery's
historical  cost basis is $539,500.  The Eccles Land is encumbered by a mortgage
in the principal  amount of  approximately  $1,899,000 in favor of Redwood Bank.
Montgomery is responsible for sales commissions and closing costs,  estimated at
$550,000.  After payment of the mortgage and closing costs,  Montgomery will net
approximately $12,050,000.

         The final  sales  price is  adjustable  and is based upon  delivery  by
Montgomery  of the Eccles  Project  land with  development  rights for a 200,000
square foot office building.  These additional  development rights,  which are a
contingency to the sale, call for Montgomery to obtain  approvals from the South
San Francisco  Planning  Department of plans and specifications for the proposed
building (the "Entitlements").  The final sales price of the Eccles Project land
will  be  calculated  based  upon  a  formula  of  $72.50  per  square  foot  of
Entitlements.   Montgomery   must  deliver  at  least  175,000  square  feet  of
Entitlements  and  will  not be  paid  for  more  than  250,000  square  feet of
Entitlements.   Therefore,   the  final

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<PAGE>

price can vary from  $12,687,500 to  $18,125,000.  Management  believes that the
Entitlement contingency will be satisfied.

         The Buyer  has the  option  to  purchase  the  Eccles  Project  land at
$14,500,000  until July 2, 2000,  regardless of the status of the  Entitlements.
Hence, the Buyer has the ability to avoid paying for Entitlements over and above
the 200,000 square feet estimated,  but only if the Buyer elects to purchase the
Eccles  Project land within the next 45 days.  The contract calls for Montgomery
to obtain  Entitlements  not later than October 2, 2000. If Montgomery  does not
obtain the  Entitlements  by that date,  the Buyer is permitted to terminate the
contract but Montgomery is not subject to any penalty.

         Montgomery has agreed to incur ordinary  Entitlement costs,  subject to
reimbursement of up to $75,000 by Buyer at the closing.  Buyer has agreed to pay
for  any  extraordinary  Entitlement  costs.  Buyer  is to  perform  its own due
diligence   investigation   of  the  Eccles   Project   land  for   suitability,
environmental  conditions,  soil conditions and other related matters.  Said due
diligence contingencies must be paid for by the Buyer and removed to the Buyer's
satisfaction.  Failure of any of these due diligence  contingencies  permits the
Buyer to terminate the contract.

         The contract  calls for and the Buyer has deposited  $100,000 as a good
faith deposit. After the satisfaction of the due diligence conditions, the Buyer
must  increase its deposit to $500,000.  Upon  satisfaction  of the  Entitlement
contingency, the Buyer's deposit must be increased to $1,000,000.

         Montgomery has the right, but not the obligation,  to delay the closing
beyond the  contract's  January 2, 2001 closing date,  for up to a maximum of 90
additional days, to assist  Montgomery in identifying one or more new properties
for  purposes of  structuring  the sale as a tax-free  exchange  under  Internal
Revenue  Code  Section  1031.  Other  requirements  must  be  met in  order  for
Montgomery to qualify under the tax-free exchange provisions.  Montgomery cannot
assure that it will be able to identify properties or meet the requirements that
would enable  Montgomery  to  structure  the sale as a tax-free  exchange  under
Section 1031.

         Montgomery's  structuring  of the  sale  of  the  Eccles  Project  as a
tax-free  exchange for Internal Revenue purposes would not,  however,  avoid the
recognition  of an income tax expense for  financial  statement  purposes  under
GAAP,  although the  existing  deferred  tax asset of  $1,478,242  would be used
first. Estimated tax expense for financial statement purposes would be in excess
of $5,000,000.

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<PAGE>

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

(a)      Exhibits

         The following exhibits are included as part of this report:

                 SEC
   Exhibit    Reference
   Number      Number                    Title of Document
-----------  -----------   -----------------------------------------------------
   Item 10                 Material Contracts
-----------  -----------   -----------------------------------------------------
    10.01        10        Purchase and Sale Agreement between Montgomery Realty
                           Group, Inc. and San Hill Property Company effective
                           May 2, 2000.

   Item 27                 Financial Data Schedule
-----------  -----------   -----------------------------------------------------
    27.01        27        Financial Data Schedule

(b)      Reports on Form 8-K

         During the quarter ended March 31, 2000, Montgomery filed no reports on
Form 8-K.

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<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned,  who has been duly authorized to execute this Form 10-QSB on behalf
of Montgomery.

                                                 MONTGOMERY REALTY GROUP, INC.
                                                 (Registrant)



Date:  May 22, 2000                              By: /s/ Dinesh Maniar
                                                     -----------------------
                                                     President

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