U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                  Quarterly Report under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                        Commission file number 000-30724

                          MONTGOMERY REALTY GROUP, INC.

             Nevada                                            88-0377199
 (State or other jurisdiction of                            (I.R.S. 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

                            Issuer's telephone number

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

State the number of shares outstanding of the issuer's classes of common equity,
as of the latest practicable date.  Montgomery Realty Group, Inc. had 16,500,000
issued and outstanding shares of common stock as of May 15, 2001.

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

<PAGE>

                           Forward-Looking Statements

         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 the Company are also  forward-looking  statements.  The Company
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 of 1933 and Section 21E of the Securities Exchange Act of 1934.

         Readers  of  this  report  are  cautioned   that  any   forward-looking
statements,  including those regarding the Company or its  management's  current
beliefs,  expectations,   anticipations,  estimations,  projections,  proposals,
plans, or intentions,  particularly those related to future activities involving
the Eccles Project,  future occupancy rates, or changes in rental rates, 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 the Company'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.  The  Company  is not  obligated  to  update  such
forward-looking statements to reflect subsequent events or circumstances.

                                       2
<PAGE>

                          PART I--FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

MONTGOMERY REALTY GROUP, iNC.

TABLE OF CONTENTS
--------------------------------------------------------------------------------

                                                                        Page

FINANCIAL STATEMENTS:

   Balance Sheets as of March 31, 2001 and December 31, 2000             F-1

   Statements of Operations for the Three Months Ended

   March 31, 2001 and 2000                                               F-2

   Statements of Cash Flows for the Three Months Ended
   March 31, 2001 and 2000                                               F-3

   Notes to Financial Statements                                         F-4

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

BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
-----------------------------------------------------------------------------------------------------------------------

                                                                                          March 31,       December 31,
                                                                                            2001              2000
                                                                                         -----------       -----------
ASSETS
<S>                                                                                      <C>               <C>
PROPERTY:
  Land                                                                                   $ 2,699,500       $ 2,699,500
  Building                                                                                 5,040,000         5,040,000
  Improvements                                                                             3,107,384         3,107,384
                                                                                         -----------       -----------
           Total                                                                          10,846,884        10,846,884

  Less accumulated depreciation                                                           (2,595,740)       (2,544,414)
                                                                                         -----------       -----------

           Property, net                                                                   8,251,144         8,302,470

CASH                                                                                         129,108            54,823

TENANT RECEIVABLES                                                                            13,431            17,602

PREPAID EXPENSES AND OTHER ASSETS                                                            120,422           103,149

DEFERRED LEASE COMMISSIONS                                                                    11,264            11,810

DEFERRED LOAN COSTS                                                                          105,987           113,012

DEFERRED RENT RECEIVABLE                                                                      32,762            30,957

DEFERRED TAX ASSET                                                                         1,597,756         1,583,735
                                                                                         -----------       -----------

TOTAL ASSETS                                                                             $10,261,874       $10,217,558
                                                                                         ===========       ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES:
  Notes payable                                                                          $12,361,853       $12,391,841
  Accounts payable                                                                           127,653            89,046
  Accrued interest                                                                            77,284            68,818
  Security deposits and prepaid rent                                                          71,932            23,669
                                                                                         -----------       -----------
TOTAL LIABILITIES                                                                         12,638,722        12,573,374
                                                                                         -----------       -----------

STOCKHOLDERS' DEFICIT:
  Common stock, $0.001 par value; authorized 80,000,000
    shares; issued and outstanding, 16,500,000 shares at March 31, 2001
    and, December 31, 2000                                                                    16,500            16,500
  Preferred stock, $0.001 par value; authorized 20,000,000 shares; no
    shares issued and outstanding at March 31, 2001 and December 31, 2000                          -                 -
  Additional capital                                                                       1,692,742         1,692,742
  Accumulated deficit                                                                     (4,086,090)       (4,065,058)
                                                                                         -----------       -----------
TOTAL STOCKHOLDERS' DEFICIT                                                               (2,376,848)       (2,355,816)
                                                                                         -----------       -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                              $10,261,874       $10,217,558
                                                                                         ===========       ===========
</TABLE>

See notes to the financial statements.

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
--------------------------------------------------------------------------------------------------------------------------

                                                                                              2001                2000
                                                                                            ---------           ---------
<S>                                                                                         <C>                 <C>
REVENUES:
  Rent                                                                                      $ 389,886           $ 355,991
  Other                                                                                        16,412                 145
                                                                                            ---------           ---------
           Total revenues                                                                     406,298             356,136
                                                                                            ---------           ---------

EXPENSES:
  Real estate taxes                                                                            90,642              24,931
  Utilities                                                                                     3,644               3,254
  Repairs and maintenance                                                                         343               2,608
  General building                                                                              6,129               5,531
  Administration                                                                               18,603              29,070
  Insurance                                                                                     7,524               5,576
  Management fee                                                                               30,000              22,500
  Depreciation                                                                                 51,326              55,626
  Amortization                                                                                  7,571              23,411
                                                                                            ---------           ---------
           Total expenses                                                                     215,782             172,507
                                                                                            ---------           ---------

INCOME BEFORE INTEREST EXPENSE
  AND INCOME TAXES                                                                            190,516             183,629

INTEREST EXPENSE, NET                                                                        (225,569)           (231,614)
                                                                                            ---------           ---------

LOSS BEFORE INCOME TAXES                                                                      (35,053)            (47,985)

INCOME TAX BENEFIT                                                                             14,021              24,395
                                                                                            ---------           ---------
NET LOSS                                                                                    $ (21,032)          $ (23,590)
                                                                                            =========           =========

NET LOSS PER COMMON SHARE,
  BASIC AND DILUTED                                                                         $  (0.001)          $  (0.001)
                                                                                            =========           =========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES,
  BASIC AND DILUTED                                                                        16,500,000          16,500,000
                                                                                           ==========          ==========
</TABLE>

See notes to the financial statements.

                                      F-2
<PAGE>
<TABLE>
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
--------------------------------------------------------------------------------------------------------------------------

                                                                                                   2001             2000
                                                                                                 --------         --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                              <C>             <C>
  Net loss                                                                                       $(21,032)       $(23,590)
  Depreciation and amortization                                                                    58,897          79,037
  Deferred rent receivable                                                                         (1,805)         15,250
  Deferred taxes                                                                                  (14,021)        (24,395)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    Tenant receivables                                                                              4,171          11,660
    Prepaid expenses and other assets                                                             (17,273)        (15,684)
    Accounts payable                                                                               38,607         (33,560)
    Accrued interest                                                                                8,466            (920)
    Security deposits and prepaid rent                                                             48,263         (40,802)
                                                                                                 --------         --------
           Net cash provided by (used in) operating activities                                    104,273          (33,004)
                                                                                                 --------         --------

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                                                                       (29,988)        (25,361)
                                                                                                 --------         --------
           Net cash used in financing activities                                                  (29,988)        (38,848)
                                                                                                 --------         --------

INCREASE (DECREASE) IN CASH                                                                        74,285         (85,870)

CASH, BEGINNING OF PERIOD                                                                          54,823         134,361
                                                                                                 --------         --------

CASH, END OF PERIOD                                                                              $129,108        $ 48,491
                                                                                                 ========        ========
</TABLE>

See notes to the financial statements.

                                      F-3
<PAGE>

MONTGOMERY REALTY GROUP, iNC.

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.    BASIS OF PRESENTATION

      The interim financial data are unaudited;  however,  in the opinion of the
      management  of  Montgomery  Realty  Group,   Inc.   ("Montgomery"  or  the
      "Company"), the interim data includes all adjustments,  consisting only of
      normal  recurring  adjustments,  necessary for a fair  presentation of the
      results for the interim periods.  The interim financial  statements should
      be read in conjunction with the Company's annual report on Form 10-KSB for
      the year ended December 31, 2000,  including the financial  statements and
      notes thereto.

2.    TRANSACTIONS WITH AFFILIATE

      Property  management fees of $30,000 and $22,500 were paid to an affiliate
      of the majority  stockholder for the three months ended March 31, 2001 and
      2000, respectively.

3.    BASIC AND DILUTED LOSS PER SHARE OF BENEFICIAL INTEREST

      Basic and diluted  loss per share are computed by dividing net loss by the
      weighted average number of shares  outstanding of 16,500,000 for the three
      months ended March 31, 2001 and 2000.

4.    SUBSEQUENT EVENTS

      On March 1, 2001,  the  $1,898,727  mortgage  loan on the  Eccles  Project
      matured.  Pursuant to an arrangement agreed to by the lender, the loan was
      extended an additional year,  subject to a principal  paydown of $100,000.
      The lender,  Redwood Bank, was acquired by First Bank & Trust during early
      2001,  and final loan  documents  were not available  until April 2001. At
      that time a Loan Modification was signed and a $100,000  principal payment
      was made such that the new principal balance is $1,798,727.

      To assist  Montgomery  with the capital  necessary  to make the  principal
      payment, Mr. Maniar, the principal  stockholder of Montgomery,  loaned the
      Company $100,000, at 10% interest, as previously approved by the Company's
      board of directors.  To assist  Montgomery with its other cash needs,  Mr.
      Maniar made a second  $100,000 loan to Montgomery,  again at 10% interest,
      as approved by the Company's  board of directors.  Mr. Maniar's loans were
      made on April 9, 2001 and April 17, 2001, respectively.

      On April 9, 2001, a loan in the principal  amount of $250,000 was approved
      by California Mortgage & Realty. The proceeds of this loan will be used to
      retire Mr. Maniar's loans to Montgomery and to provide  additional working
      capital for the Company.  The California Mortgage & Realty loan is secured
      by a second deed of trust (mortgage) on the Eccles Project, matures on May
      1, 2003,  and bears  interest  at the rate of 13.75%  per  annum,  payable
      monthly.

                                      F-4
<PAGE>

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                               PLAN OF OPERATIONS

Analysis of Results of Operations

         The  following  discussion  should  be read  in  conjunction  with  the
Financial  Statements of Montgomery  and the Notes  thereto.  All figures are in
dollar amounts.

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.  Montgomery also owns an undeveloped  parcel of
land referred to as the "Eccles Project" in South San Francisco.  The Company is
currently  seeking  entitlements  of up to  325,000  square  feet for the Eccles
Project.  "Entitlements"  are local  planning  department  approvals  that are a
necessary  precondition to actual  development and building and consist of local
planning department  approvals and related matters. If the Company is successful
in obtaining the entitlements, the Company could then develop the Eccles Project
itself,  or sell or exchange the Eccles Project and invest the proceeds in other
real estate. Management has not determined what course of action is best for the
Company at this point.  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.

Results of Operations

         Montgomery  reported  a net loss of  $21,032  for the first  quarter of
2001,  as compared to a net loss of $23,590 for the period ended March 31, 2000,
a reduction of net loss by 10.8%.

         Montgomery's  total  revenues  for the  first  quarter  increased  from
$356,136 to $406,298,  or 14.1%,  from 2000 to 2001,  primarily because of three
factors:  (a) increases in base rents from small  tenants at the Orchard  Supply
Shopping Center and the San Ramon Retail Center; (b) a one-time charge paid by a
former  tenant in exchange for an early  termination  of its lease;  and (c) the
releasing  of  another  space at the San Ramon  Retail  Center at a higher  base
rental rate.

         Additionally,  the Company  passed  through  Consumer Price Index (CPI)
rent increases to all tenants other than  OSH/Sears and Keker & Van Nest.  Thus,
rental rates from the Orchard  Supply  Shopping  Center and the San Ramon Retail
Center have increased from the prior year.  All of  Montgomery's  properties are
100% leased under lease terms extending  beyond the end of 2001, so that no rent
reductions  due to  vacancies  are  expected for the balance of the year nor are
significant rent increases likely, absent early termination of an existing lease
and a  releasing.  Revenues  will vary  slightly due to changes in the amount of
expenses reimbursable under net leases.

         Total operating  expenses for the first quarter increased from $172,507
to $215,782,  or 25.1%, from 2000 to 2001. While most operating  expenses showed
expected variations due to variable costs, such as utilities and insurance, real
estate tax expense more than doubled, going from $24,931 in the first quarter of
2000 to  $90,642 in the first  quarter  of 2001,  an  increase  of 263.6%.  This
increase  is due to  reassessments  of the value of the  Company's  real  estate
assets by local counties,  an increase  permitted under California law by reason
of the  change  in  ownership  that  occurred  in  June  1999  when  Mr.  Maniar

                                       4
<PAGE>

transferred the real estate assets to Montgomery.  To date, no reassessment  has
been made against  either the Orchard  Supply  Shopping  Center or the San Ramon
Retail  Center,  both of which are located in Contra Costa  County,  California.
However,   the  Company  is  anticipating  that  such   reassessments   will  be
forthcoming.  The Company's  administrative costs decreased from $29,070 in 2000
to $18,603 in 2001, or 36.0%,  due to the  standardization  of the Company's SEC
compliance procedures.

         Management  fees for the first quarter in 2001 were $30,000 and $22,500
at the end of the first quarter in 2000, an increase of 33.4%.  This increase is
due primarily to Montgomery paying the fixed minimum property management fees of
$10,000  per month,  as required by the  written  management  agreement  between
Montgomery and DIMC,  during the period June 2000 and May 2001,  rather than the
lower fee of $7,500 per month that was in effect from June 1999 to May 2000. The
management   agreement  between  Montgomery  and  DIMC  calls  for  the  monthly
management fees to increase to $15,000 per month for the period June 2001 to May
2002;  however,  DIMC has agreed to forebear from imposing any such fee increase
at this time, due to Montgomery's  increased  operating  expenses,  as discussed
above.

         Net interest  expense for the first quarter  decreased from $231,614 to
$225,569,  or 2.6%, from 2000 to 2001, due primarily to more favorable  interest
rates on Montgomery's  mortgage loans,  especially the decrease from 11% to 9.1%
in the  interest  rate  on the  mortgage  loan on the San  Ramon  Retail  Center
property.  The mortgage loan on the Eccles Project remains at prime plus 1%; the
mortgage loan on the Keker & Van Nest Office Building  remains at 6.67%; and the
loan on the Orchard  Supply  Shopping  Center also remains at 7.05%.  All of the
mortgages,  other than the mortgage on the Eccles Project,  have remaining terms
in excess of seven years.  See  Footnote 3 to the  December  31, 2000  financial
statements (as filed with the Company's Form 10-KSB).

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.

         Noncash  expenses  related to depreciation  and amortization of $51,326
and $7,571, respectively,  more than offset the net loss reported for the period
ended March 31, 2001,  such that  Montgomery  continues to operate on a positive
cash flow basis.

         When  Montgomery  was  called  upon to reduce  principal  on its Eccles
Project   mortgage  or  when  other  expenses  arose  that  placed  stress  upon
Montgomery's working capital,  Montgomery's principal  stockholder,  Mr. Maniar,
has loaned  money to the Company to cover the cash flow  needs,  with said loans
being repaid again when  Montgomery  was able to rearrange  its  long-term  real
estate  financing.  However,  there can be no  assurance  that Mr.  Maniar  will
continue to advance money to Montgomery to meet its liquidity needs.

     Operating Activities

         Operating activities for the first quarter of 2001 provided net cash of
$104,273,  as compared to net cash used by  operating  activities  for the first
quarter of 2000 of $33,004,  an increase of $137,277.  Changes to balance  sheet
items such as prepaid rent and security  deposits,  together with an increase in
accounts payable, account for substantially all of the change.

                                       5
<PAGE>

     Investing Activities

         No cash flow was used or provided by investing  activities in the first
quarter of 2001, compared to cash used in investing activities of $14,018 in the
first quarter of 2000.

     Financing Activities

         Montgomery's  financing  activities reflect the results of its debt and
equity transactions. During the first quarter of 2001, financing activities used
net cash of $29,988,  as compared to net cash used in  financing  activities  of
$38,848 during the first quarter of 2000, a decrease of 22.8%.  This decrease is
due to the absence of new loan fees or costs  expensed  during the first quarter
of 2001 and the  absence of any loan  transactions  during the first  quarter of
2001.

         The  mortgage  loan on the Eccles  Project was  modified  and  extended
effective March 1, 2001. The loan, which had a principal  balance of $1,898,727,
was extended for another year and Montgomery  reduced the outstanding  principal
on the loan by $100,000 on April 23, 2001. A loan extension and modification fee
of $8,995 was also paid by Montgomery on April 23, 2001, as the modification and
extension  was not fully  documented  until that date. As modified and extended,
the loan now has a principal balance of $1,798,727, bears interest at prime plus
1%, and matures March 1, 2002.

         Montgomery has agreed with First Bank & Trust that the loan will not be
extended  further,  and  Montgomery is currently  seeking an interim lender that
will  loan  not only  the  amount  due to  First  Bank &  Trust,  but an  amount
sufficient to discharge the California  Mortgage & Realty loan (discussed below)
and provide  Montgomery  with  approximately  $500,000 of funds to continue with
seeking the Eccles Project entitlements.

         Montgomery borrowed from its principal stockholder, Mr. Maniar, the sum
of $100,000 on April 9, 2001, so that the principal  reduction of the First Bank
& Trust loan could be made without reducing  Montgomery's  working capital.  The
loan from Mr. Maniar was authorized by the Company's board of directors, was for
a one-year term,  and bore interest at the rate of 10% per annum.  The loan from
Mr. Maniar was paid in full on May 1, 2001,  with proceeds  Montgomery  obtained
from its new loan with California Mortgage & Realty, as discussed below.

         Montgomery  borrowed another  $100,000 from its principal  stockholder,
Mr. Maniar,  on April 17, 2001, so as to provide  Montgomery with needed working
capital  to  discharge  its real  estate  tax  liabilities  in a timely  manner.
Montgomery  encountered large cash flow demands in connection with its April 10,
2001,  real estate tax payments (as discussed  above).  The loan from Mr. Maniar
was authorized by the Company's board of directors,  is for a one-year term, and
bears interest at the rate of 10% per annum. The loan is currently  outstanding,
although  as  soon  as the  California  Mortgage  &  Realty  loan  fully  funds,
Montgomery intends to retire the loan from Mr. Maniar.

         In  anticipation  of the cash flow  demands of early  2001,  Montgomery
arranged to borrow $250,000 from California Mortgage & Realty. The loan was made
effective April 9, 2001, although escrow did not close until April 30, 2001. The
loan is secured by a second deed of trust (mortgage) on the Eccles Project.  The
loan  matures May 1, 2003,  and bears  interest at the rate of 13.75% per annum,
payable  monthly.  The loan has only funded $125,000 to date, and the balance of
the loan funds is expected prior to May 30, 2001.

         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

                                       6
<PAGE>

convert  equity  to  cash,  when  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  arise  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  additional  financing
activities  as discussed  above or 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
October 2000,  Montgomery's  properties  had a combined  value of  approximately
$27,410,000,  as  compared  to  the  historical  cost,  net of  depreciation  of
$8,302,470,  with which such properties are reported in  Montgomery's  financial
statements  as of December 31, 2000.  The related  indebtedness  secured by such
properties  totaled  $12,391,841  as of December 31,  2000.  The  difference  of
$15,018,159   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 Affinity  Bank Loan;  and (b) the sale or exchange of  properties  that have
appreciated in value.

     Capital Requirements

         Montgomery  plans to expand its asset base in the future.  Expansion is
currently focused upon the development, sale, or exchange of the Eccles Project.

         Montgomery  believes that  diversification is the key to long-term real
estate industry viability and success. Therefore,  Montgomery plans to diversify
its 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
possible sale of debt or equity securities.

     Eccles Entitlements

         Montgomery's expansion is currently focused upon the development of the
Eccles Project land, and either  construction of the project by the Company or a
sale or exchange of the entitled  land to an unrelated  third party.  Management
currently  estimates,  based upon comparable  construction  completed in the San
Francisco Bay Area, that building a 325,000 square foot office complex will cost
approximately  $200 per square foot,  or  $65,000,000.  Management  has not made
arrangements  for a  construction  loan,  nor can any  assurance  be given  that
construction financing will be available after entitlements are obtained, if the
Company is successful in obtaining the entitlements.

                                       7
<PAGE>

         The  Company  is  working  to obtain  the  entitlements  for the Eccles
Project. "Loading access easements" in favor of an adjacent landowner that would
have  restricted the development at the site have been  terminated.  The Company
has completed a Phase I  Environmental  Report,  and no toxic waste or hazardous
materials were found. The Company has also completed a Seismic  Refraction Study
that indicates  general  bedrock ground  contours via sonic feedback  equipment.
Based on the Seismic  Refraction Study, the Company retained an engineering firm
to perform the  Geotechnical  Analysis of the site.  Phase I of the Geotechnical
Analysis has been  completed  and a draft soils report has issued.  Such a soils
report allows the architect and structural engineers to determine, based on soil
samples, where to situate the proposed building, where pylons should be drilled,
and the depth and other characteristics of the soils at the site.

         The project architect has completed conceptual designs and is currently
working on detailed layouts of the proposed office complex. The Company needs to
perform a traffic  study  and other  investigations  to allow it to apply to the
City of South San  Francisco for  development  permits.  Although  Management is
confident  that these  studies can be completed  in a timely and cost  effective
manner, so as to yield development  approval,  no assurance of such a result can
be given,  and the final decision as to entitlements  will rest with the City of
South San Francisco, California.

     Other Sales

         Montgomery is entertaining offers it has received to purchase its other
properties,  but  no  letter  of  intent  or  contract  has  been  agreed  to by
Montgomery.

Other Matters

         Montgomery  has  reviewed all recently  issued,  but not yet  accepted,
accounting   standards  in  order  to  determine  their  effects,   if  any,  on
Montgomery's financial condition or results of operations. Based on that review,
Montgomery  believes that none of these  pronouncements  will have a significant
effect on current of future earnings or operations.

                                       8
<PAGE>

                           PART II--OTHER INFORMATION

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

         The  following  exhibits  are  included  as part of this  report at the
location indicated:
<TABLE>
<CAPTION>
                          SEC
    Exhibit            Reference
     Number              Number                            Title of Document                             Location
-----------------    ---------------    ---------------------------------------------------------    -----------------

Item 10                                 Material Contracts
-----------------    ---------------    ---------------------------------------------------------
<S>                        <C>          <C>                                                          <C>
10.01                      10           $100,000 Promissory Note due to Dinesh Maniar dated          This filing
                                        April 9, 2001
10.02                      10           $100,000 Promissory Note due to Dinesh Maniar dated          This filing
                                        April 17, 2001
</TABLE>

         (b) Reports on Form 8-K.  During the quarter ended March 31, 2001,  the
Company did not file any reports on Form 8-K.

                                   SIGNATURES

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

                                          MONTGOMERY REALTY GROUP, INC.
                                          (Registrant)



Dated:   May 21, 2001                     By   /s/ Dinesh Maniar
                                               -----------------
                                               Dinesh Maniar, President and
                                               Principal Executive and
                                               Financial Officer

                                       9