UNITED STATES 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 September 30, 2004

                          Commission File No. 000-30724


                          MONTGOMERY REALTY GROUP, INC.
         ----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                                     Nevada
         (State or other jurisdiction of incorporation or organization)

                                   88-0377199
                        --------------------------------
                        (IRS Employer 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)

                                       N/A
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 15, 2004, issuer had
16,500,000 shares of issued and outstanding common stock, par value $0.001.

Transitional Small Business Disclosure Format:  Yes [ ] No [X]

                                       1
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                          MONTGOMERY REALTY GROUP, INC.


                              INDEX TO FORM 10-QSB


                          PART I--FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Condensed Balance Sheets as of September 30, 2004,
           and December 31, 2003...........................................3
         Condensed Statements of Operations for the
           Three Months Ended September 30, 2004 and 2003..................4
         Condensed Statements of Operations for the
           Nine Months Ended September 30, 2004 and 2003...................5
         Condensed Statements of Cash Flows for the
           Nine Months Ended September 30, 2004 and 2003...................6
         Notes to Condensed Financial Statements...........................7

Item 2.  Management's Discussion and Analysis or Plan of Operations........8

Item 3.  Controls and Procedures..........................................17

                           PART II--OTHER INFORMATION

Item 6.  Exhibits.........................................................18

         Signatures.......................................................18


                                       2
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<TABLE>
<CAPTION>
                          PART I--FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

MONTGOMERY REALTY GROUP, INC.

CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003 (Unaudited)
                                                                              September 30,           December 31,
                                                                                   2004                   2003
                                                                               -----------             -----------
<S>                                                                            <C>                     <C>
ASSETS
PROPERTY:
  Land                                                                         $ 4,019,500             $ 4,019,500
  Building                                                                       2,505,000               2,505,000
  Improvements                                                                   3,093,088               3,093,088
                                                                               -----------             -----------
         Total                                                                   9,617,588               9,617,588
  Less accumulated depreciation                                                 (2,074,974)             (1,979,600)
                                                                               -----------             -----------
         Property, net                                                           7,542,614               7,637,988

ASSETS HELD FOR SALE--DISCONTINUED OPERATIONS                                    3,631,668               3,700,601

CASH                                                                                37,218                  71,818
TENANT RECEIVABLES                                                                  27,721                  16,796
PREPAID EXPENSES AND OTHER ASSETS                                                  472,421                 369,863
DEFERRED LOAN COSTS, net                                                            66,852                  72,622
DEFERRED RENT RECEIVABLE                                                            16,861                   6,583
DEFERRED TAX ASSET                                                               1,464,404               1,423,624
                                                                               -----------             -----------
TOTAL ASSETS                                                                   $13,259,759             $13,299,895

LIABILITIES AND STOCKHOLDERS' DEFICIT LIABILITIES:
  Notes payable                                                                $10,481,365             $10,347,183
  Accounts payable and accrued expenses                                             35,290                  93,395
  Accrued interest                                                                  46,661                  37,002
  Notes payable held for sale--discontinued operations                           4,791,711               4,841,850
  Security deposits and prepaid rent                                                49,539                  49,539
                                                                               -----------             -----------
TOTAL LIABILITIES                                                               15,404,566              15,368,969
                                                                               -----------             -----------

STOCKHOLDERS' DEFICIT
  Common stock, $0.001 par value; authorized 80,000,000 shares;
    issued and outstanding, 16,500,000 shares at September 30, 2004,
    and December 31, 2003                                                           16,500                  16,500
  Preferred stock, $0.001 par value; authorized 20,000,000 shares;
    no shares issued and outstanding at September 30, 2004, and
    December 31, 2003                                                                   --                      --
  Additional capital                                                             1,692,742               1,692,742
  Accumulated deficit                                                           (3,854,049)             (3,778,316)
                                                                               -----------             -----------
TOTAL STOCKHOLDERS' DEFICIT                                                     (2,144,807)             (2,069,074)
                                                                               -----------             -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                    $13,259,759             $13,299,895
                                                                               ===========             ===========

See notes to the condensed financial statements.

                                                                3
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<CAPTION>
MONTGOMERY REALTY GROUP, INC.

CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (Unaudited)

                                                                                       2004                 2003
                                                                                   -----------          -----------
<S>                                                                                <C>                  <C>
REVENUES:
  Rent                                                                             $   226,675          $   208,661
  Other                                                                                     --                   --
                                                                                   -----------          -----------
         Total revenues                                                                226,675              208,661
                                                                                   -----------          -----------

EXPENSES:
  Real estate taxes                                                                     57,426               53,485
  Utilities                                                                                344                  122
  Repairs and maintenance                                                                  158                  271
  General building                                                                       1,825                  727
  Administration                                                                         4,606                4,394
  Insurance                                                                              9,707                7,057
  Management fee                                                                         8,100                8,100
  Depreciation                                                                          35,125               32,296
  Amortization                                                                          12,764               12,943
                                                                                   -----------          -----------
         Total expenses                                                                130,055              119,395
                                                                                   -----------          -----------

INCOME BEFORE INTEREST EXPENSE, INCOME
  TAXES AND DISCONTINUED OPERATIONS                                                     96,620               89,266

INTEREST EXPENSE, NET                                                                 (142,336)            (120,483)
                                                                                   -----------          -----------

LOSS BEFORE INCOME TAXES AND
  DISCONTINUED OPERATIONS                                                              (45,716)             (31,217)

INCOME TAX BENEFIT                                                                      16,002                8,762
                                                                                   -----------          -----------

LOSS FROM CONTINUING OPERATIONS                                                        (29,714)             (22,455)

  Income from discontinued operations, net of tax provision
    of $5,620 and $1,630, respectively                                                  10,435                2,778

  Gain on sale of property (net of tax provision of $358,396)                               --              537,593
                                                                                   -----------          -----------
NET (LOSS) INCOME                                                                  $   (19,279)         $   517,916
                                                                                   ===========          ===========

NET (LOSS) INCOME PER COMMON SHARE,
BASIC AND DILUTED                                                                  $    (0.001)         $     0.031
                                                                                   ===========          ===========


WEIGHTED AVERAGE NUMBER OF COMMON SHARES, BASIC AND DILUTED                         16,500,000           16,500,000
                                                                                   ===========          ===========

See notes to the condensed financial statements.

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

CONDENSED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004, AND 2003 (Unaudited)

                                                                                   2004                  2003
                                                                               -----------            -----------
<S>                                                                            <C>                    <C>
REVENUES:
  Rent                                                                         $   680,024            $   563,801
  Other                                                                                533                     --
                                                                               -----------            -----------
         Total revenues                                                            680,557                563,801
                                                                               -----------            -----------

EXPENSES:
  Real estate taxes                                                                167,942                140,402
  Utilities                                                                          2,663                    253
  Repairs and maintenance                                                            9,764                  1,502
  General building                                                                   3,784                  3,273
  Administration                                                                    15,122                 21,436
  Insurance                                                                         29,092                 11,294
  Management fee                                                                    24,300                 24,300
  Depreciation                                                                     105,376                 84,359
  Amortization                                                                      52,156                 38,829
                                                                               -----------            -----------
         Total expenses                                                            410,199                325,648
                                                                               -----------            -----------

INCOME BEFORE INTEREST EXPENSE, INCOME
  TAXES AND DISCONTINUED OPERATIONS                                                270,358                238,153

INTEREST EXPENSE, NET                                                             (415,633)              (340,619)
                                                                               -----------            -----------
LOSS BEFORE INCOME TAXES AND
  DISCONTINUED OPERATIONS                                                         (145,275)              (102,466)

INCOME TAX BENEFIT                                                                  56,847                 33,120
                                                                               -----------            -----------
LOSS FROM CONTINUING OPERATIONS                                                    (94,428)               (69,346)

   Income from discontinued operations, net of tax provision
     of $10,066 and 1,044, respectively                                             18,695                  1,779
   Gain on sale of property (net of tax provision of $358,396)                          --                537,593

NET (LOSS) INCOME                                                              $   (75,733)           $   470,026
                                                                               ===========            ===========

NET (LOSS) INCOME PER COMMON SHARE,
BASIC AND DILUTED                                                              $    (0.005)           $     0.028
                                                                               ===========            ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES, BASIC AND DILUTED                     16,500,000             16,500,000
                                                                               ===========            ===========

See notes to the condensed financial statements.

                                                               5
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<TABLE>
<CAPTION>
MONTGOMERY REALTY GROUP, INC.

CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004, AND 2003 (Unaudited)

                                                                              2004                      2003
                                                                          ------------               -----------
<S>                                                                       <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                                       $    (75,733)              $   470,026
  Adjustments to reconcile net income (loss) to net cash
   (used in) provided by operating activities:
  Depreciation and amortization                                                216,463                   198,589
  Gain on sale of property                                                          --                  (895,989)
  Deferred rent receivable                                                     (10,278)                       --
  Deferred taxes                                                               (40,780)                  326,321
  Changes in assets and liabilities:
   Tenant receivables                                                          (10,925)                  (42,861)
   Prepaid expenses and other assets                                          (102,558)                 (154,067)
   Accounts payable                                                            (58,105)                   (1,866)
   Accrued interest                                                              8,430                     3,203
   Security deposits and prepaid rent                                               --                     8,947
                                                                          ------------               -----------
         Net cash used in operating activities                                 (73,486)                  (87,697)
                                                                          ------------               -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property                                                             --                (1,085,000)
  Proceeds from sale of property                                                    --                 1,827,051
                                                                          ------------               -----------

       Net cash (used in) provided by investing activities                          --                   742,051
                                                                          ------------               -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable                                      350,000                        --
  Payment of loan costs                                                        (46,386)                  (23,510)
  Payments on notes payable                                                   (264,727)                 (959,493)
                                                                          ------------               -----------

       Net cash provided by (used in) financing activities                      38,886                  (983,003)
                                                                          ------------               -----------

DECREASE IN CASH                                                               (34,600)                 (328,649)

CASH, BEGINNING OF PERIOD                                                       71,818                   386,565
                                                                          ------------               -----------

CASH, END OF PERIOD                                                       $     37,218               $    57,916
                                                                          ============               ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest                                                  $    753,146               $   687,214

  Cash paid for income taxes                                              $     50,000               $        --



See notes to the condensed financial statements.

                                                                6
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MONTGOMERY REALTY GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 (Unaudited)

1.       BASIS OF PRESENTATION

         The accompanying unaudited financial statements have been prepared from
         Montgomery's accounting records in accordance with the rules and
         regulations of the Securities and Exchange Commission. Accordingly,
         they do not include all of the information and footnotes required by
         generally accepted accounting principles for complete financial
         statements. Such statements include all adjustments, consisting only of
         normal recurring adjustments, that are, in the opinion of management,
         necessary for a fair presentation of Montgomery's financial position
         and results of operations for the interim period reported upon. The
         interim financial statements should be read in conjunction with
         Montgomery's annual report on Form 10-KSB for the year ended December
         31, 2003, including the financial statements and the notes thereto.

2.       TRANSACTIONS WITH AFFILIATE

         Property management fees of $30,000 and $90,000 were paid to an
         affiliate of the pricipal shareholder for the three and nine months,
         respectively, ended September 30, 2004.

         On July 13, 2004, Montgomery repaid its March 31, 2004, note of
         $100,000, plus accrued interest of $3,069, to Dinesh Maniar, its
         principal shareholder.

         On June 29, 2004, Dinesh Maniar made a loan of $50,000 to Montgomery on
         an unsecured basis. The loan bore interest at the rate of 10% per
         annum, payable monthly, with all principal and interest due on June 30,
         2005. During October 2004, Montgomery repaid the balance of the loan
         plus interest of $1,392.

         On October 21, 2004, Dinesh Maniar made a loan of $40,000 to Montgomery
         on an unsecured basis. The loan bears interest at the rate of 10% per
         annum and is payable monthly, with all principal and interest due on
         October 21, 2005.

3.       BASIC AND DILUTED LOSS PER SHARE OF BENEFICIAL INTEREST

         Basic and diluted loss per share is computed by dividing net loss by
         the weighted average number of shares outstanding of 16,500,000 for the
         three months ended September 30, 2004 and 2003.

4.       MORTGAGE DEBT

         On July 19, 2004, Montgomery amended its second mortgage loan on the
         Front Street Office Building to increase the principal amount by
         $200,000 to $900,000 and extend the maturity date to February 1, 2005.

         On September 3, 2004, Montgomery amended the first mortgage loan on the
         Front Street Office Building to extend the maturity date to February
         26, 2005. At September 30, 2004, the loan had a principal balance of
         $2,800,000.

         On September 27, 2004, Montgomery amended the first mortgage on the
         Eccles Project to extend the maturity date of the loan to September 15,
         2005. The loan had an outstanding balance at September 30, 2004, of
         $2,246,054.

                                       7
<PAGE>

5.       SALE OF ORCHARD SUPPLY SHOPPING CENTER

         On September 8, 2004, Montgomery entered into a binding purchase and
         sale agreement for the sale of the Orchard Supply Shopping Center for
         $7,950,000. The Orchard Supply Shopping Center has a book value of
         $3,611,463 as of September 30, 2004, such that assuming the sale
         closes, Montgomery's gain on sale would be approximately $4,300,000,
         less standard prorations and closing costs. Montgomery intends to treat
         the transaction as a tax-free exchange under Internal Revenue Code
         Section 1031 and reinvest substantially all of the sale proceeds in
         another income-producing property. The sale is currently expected to
         close in December 2004.

6.       SUBSEQUENT EVENTS

         On November 5, 2004, Montgomery entered into a line of credit agreement
         with Dynamic Sciences International, Inc., a Nevada corporation
         ("Dynamic"). Under the terms of the line of credit agreement,
         Montgomery will loan Dynamic up to $120,000 to be used for hiring an
         independent auditor to audit Dynamic's financial statements, employing
         attorneys, obtaining a third-party evaluation of Dynamic's fair market
         value, and for such other matters as Montgomery and Dynamic may agree
         upon in connection with a potential business combination or acquisition
         involving the companies. Dynamic is in the defense contracting
         business.

         Any amounts advanced under the line of credit shall bear interest at
         the rate of 7% per year and be payable one year from the date of the
         loan. At Montgomery's sole discretion, all amounts due under the line
         of credit may be converted into common stock of Dynamic at the price of
         $0.07 per share at any time.

         There is no material relationship between Dynamic and Montgomery or any
         of Montgomery's affiliates.



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," "could," "should,"
"expect," "anticipate," "estimate," "project," "propose," "plan," "intend" and
similar words and expressions. Statements that describe future strategic plans,
goals or objectives of 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 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 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, that may not occur, or that 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.

                                       8
<PAGE>

         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
developmental 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 a retail shopping
center in Contra Costa County, California, two office buildings in the City and
County of San Francisco, California, and an undeveloped parcel of land referred
to as the "Eccles Project" in South San Francisco, California, as discussed in
more detail in Montgomery's report on Form 10-KSB.

         Montgomery's management believes the most significant challenge facing
Montgomery is the negative cash flow generated by the Front Street Office
Building. Coupled with the anticipated renovation costs of that property, the
continued ownership of the Front Street Office Building may have an adverse
effect on Montgomery's results of operations until at least such time as the
anticipated renovation is completed or a sale of the Front Street Office
Building may occur.

Basis of Presentation of Financial Information

         Montgomery accounts for its real estate assets using the historical
cost method consistent with accounting principles generally accepted in the
United States of America. Montgomery acquired the majority of its real estate
assets from its principal shareholder, Dinesh Maniar, in a "reverse acquisition"
in 1999. The historical cost, as shown on the financial statements, for those
assets is Mr. Maniar's original purchase cost, which in most cases is
significantly below the estimated current market value. For example, the
historical cost of the Eccles Project is $539,500 dating back to 1980. The
appraised value of the Eccles Project as of February 2002 was $12,370,000. While
the Eccles Project is the most extreme example of such a disparity between
historical cost and appraised value, other disparities are identified under
Capital Requirements below. For the Front Street Office Building, which was
acquired in 2003, the historical cost as shown on the financial statements is
the July 2003 purchase price.

Results of Operations

         Three Months Ended September 30, 2004, and September 30, 2003

         Montgomery had a net loss of $19,279 for the three months ended
September 30, 2004, as compared to net income of $517,916 for the same period
ended September 30, 2003, a decrease of 103.7%. This significant change is
primarily the result of the $537,593 gain reported in the three-month period
ended September 30, 2003, when Montgomery sold the San Ramon Retail Center,
which was a one-time event. Montgomery's loss for the three-month period ended
September 30, 2003, from continuing operations was $22,455, compared to a loss
from continuing operations of $29,714 for the three-month period ended September
30, 2004, which represents a 32.3% increase. This change is primarily the result
of increases in operating expenses from the acquisition of the Front Street
Office Building.

         Montgomery's total revenue from continuing operations increased to
$226,675 for the three months ended September 30, 2004, as compared to $208,661
for the three months ended September 30, 2003, or 8.6%. This change is primarily
the result of increases in base rent from the acquisition of the Front Street
Office Building in July 2003.

                                       9
<PAGE>

         Total operating expenses from continuing operations increased to
$130,055 for the three months ended September 30, 2004, from $119,395 for the
same period ended September 30, 2003, or 8.9%. This change is primarily the
result of the increase in related operating expenses resulting from the
operation of the Front Street Office Building.

         Net interest expense from continuing operations increased to $142,336
for the three months ended September 30, 2004, from $120,483 for the three
months ended September 30, 2003, or 18.2%. This change is primarily the result
of the increase in notes payable due to the increased mortgage debt on the Front
Street Office Building and the unsecured loans from Dinesh Maniar.

         Nine Months Ended September 30, 2004, and September 30, 2003

         Montgomery had a net loss of $75,733 for the nine months ended
September 30, 2004, as compared to net income of $470,026 for the same period
ended September 30, 2003. The sale of the San Ramon Retail Center in the
nine-month period ended September 30, 2003, generated income of $537,593. But
for the sale of the San Ramon Retail Center, the results of continuing
operations for the nine-month period ended September 30, 2003, were a net loss
of $69,346, compared to the net loss for the nine-month period ended September
30, 2004, of $94,428, which represents a 36.2% increase. This change is
primarily the result of increases in operating expenses from the acquisition of
the Front Street Office Building.

         Montgomery's total revenue from continuing operations increased to
$680,557 for the nine months ended September 30, 2004, from $563,801 for the
nine months ended September 30, 2003, or 20.7%. This change is primarily the
result of increases in base rent from the operation of the Front Street Office
Building.

         Total operating expenses from continuing operations increased to
$410,199 for the nine months ended September 30, 2004, from $325,648 for the
same period ended September 30, 2003, or 26.0%. This change is primarily the
result of the increase in real estate taxes and other related operating expenses
from the operation of the Front Street Office Building.

         Net interest expense from continuing operations increased to $415,633
for the nine months ended September 30, 2004, from $340,619 for the nine months
ended September 30, 2003, or 22.0%. This increase is primarily the result of
increases in notes payable due to the increased mortgage debt on the Front
Street Office Building and the loans from Dinesh Maniar.

Liquidity and Capital Resources

         Montgomery has met its requirements for liquidity and capital resources
principally from cash provided by operations and through short-term loans from
its principal shareholder. Montgomery also obtains liquidity through refinancing
its real estate assets to convert the equity into cash, and further realizes the
equity of the real estate assets by means of sales and/or tax-free exchanges.

         Montgomery's liquidity consists of cash on hand at September 30, 2004,
of $37,218.

         Operating activities used $73,486 net cash for the nine months ended
September 30, 2004, as compared with $87,697 of net cash used by operating
activities for the nine-month period ended September 30, 2003. This change is
primarily the result of a decrease in development activities for the Front
Street Office Building.

                                       10
<PAGE>

         Interest and principal payments on Montgomery's various mortgages
totaled $914,805 for the nine months ended September 30, 2004, as compared to
$863,764 for the same nine-month period in the prior fiscal year.

         The maturity date on the second mortgage loan in the amount of $700,000
on the Front Street Office Building, previously extended to June 1, 2004, has
now been extended to February 1, 2005. In addition, as of July 19, 2004, the
principal amount of the mortgage loan was increased to $900,000.

         On September 3, 2004, Montgomery renegotiated the first mortgage loan
on the Front Street Office Building to extend the maturity date to February 26,
2005. At September 30, 2004, the loan had a principal balance of $2,800,000.

         On September 27, 2004, Montgomery renegotiated the first mortgage loan
on the Eccles Project to extend the maturity date to September 15, 2005. The
loan had an outstanding balance at September 30, 2004, of $2,246,054.

Investing Activities

         Montgomery did not use cash for investing activities for the period
ended September 30, 2004, but $742,051 in cash was provided by investing
activities for the period ended September 30, 2003. Montgomery's investing
activities for the period ended September 30, 2003, involved a net increase in
cash from the sale of the San Ramon Retail Center on July 25, 2003, which
provided cash of $1,827,051, while cash of $1,085,000 was used to acquire the
Front Street Office Building. In addition, renovation activities involving the
Front Street Office Building have used a total of $289,646 as of September 30,
2004.

Financing Activities

         During the nine months ended September 30, 2004, financing activities
provided cash of $85,272, as compared to cash used of $983,003 by financing
activities for the nine months ended September 30, 2003. The primary reason for
this cash provided from financing activities was unsecured loans in the amount
of $150,000 from Montgomery's principal shareholder, Mr. Maniar. The first note
for $100,000 was issued on March 31, 2004, bore interest at the rate of 10% per
annum, payable monthly, and was due in full by April 1, 2005. That note was paid
in full on July 13, 2004. The second note of $50,000 was issued on June 29,
2004, bears interest at the rate of 10% per annum, payable monthly, and is due
in full by June 30, 2005. In addition, Montgomery renegotiated its second
mortgage loan on the Front Street Office Building increasing the principal
amount of $200,000. The cash used in financing activities for the nine months
ended September 30, 2003, was primarily due to the repayment of the loan on the
San Ramon Retail Center.

Capital Requirements

         Although Montgomery does not have net cash flow from its current
activities, it believes that its ability to obtain short-term loans from related
parties; refinance existing assets to convert equity to cash; and sell or
exchange its real estate assets to realize the benefit of its strong equity
position, will permit Montgomery to continue to operate on a long-term basis, so
as to provide sufficient cash to cover activities, other than new acquisitions
or redevelopment activities.

         Montgomery's principal methods for obtaining acquisition and
development capital come from either additional financing activities, as
discussed below, or the sale or exchange of existing real estate assets 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 its ongoing operations or expansion, acquisition, or redevelopment
activities.

                                       11
<PAGE>

         Montgomery anticipates that its principal means of finalizing its
redevelopment of the Front Street Office Building will be to obtain a
construction loan to cover the redevelopment costs. Any such construction loan
will likely require the personal guaranty of Montgomery's principal shareholder,
Dinesh Maniar. There can be no assurance that a construction loan will be
forthcoming or that, if offered, Mr. Maniar would be willing to personally
guarantee the construction loan.

         When the capitalized expenses related to the Front Street Office
Building and the operating expenses related to the Front Street Office Building
are combined, ownership of the Front Street Office Building by Montgomery uses
cash each year in the amount of approximately $166,000. Because of this negative
cash flow and the subsequent need for the principal shareholder to fund the cash
shortfall with loans, management is considering a sale of the Front Street
Office Building prior to redevelopment and releasing. Montgomery may make such a
sale to its principal shareholder, subject to the approval of the audit
committee, or to an independent third party; however, no specific buyer has been
identified, no sales efforts have been initiated, and no written offers have
been received.

Equity in Real Estate

         Based upon independent appraisals performed between September 1998 and
July 2003, Montgomery's properties had a combined value of approximately
$31,100,000 at September 30, 2004, as compared to the historical cost, net of
depreciation of $11,154,077, at which such properties are reported in
Montgomery's financial statements as of September 30, 2004. The related
indebtedness secured by such properties totaled $15,245,089 as of September 30,
2004, such that Montgomery has equity of approximately $14,404,911 in its real
estate assets as of September 30, 2004.

         Montgomery's real estate assets are a valuable source of equity and the
difference between their historical cost (net) and fair market value is shown as
follows (see Footnote 2 to Montgomery's audited financial statements for the
year ended December 31, 2003):

Assets:                             Historical Cost (Net)    Fair Market Values
-------                             ---------------------    ------------------

 Keker & Van Nest Building              $ 2,560,753              $ 6,750,000
 Orchard Supply Shopping Center(1)        3,611,463                7,950,000
 Eccles Project                             539,500               12,370,000
 Front Street Office Building             4,442,361                4,030,000
                                        -----------              -----------
          Total                         $11,154,077              $31,100,000
                                        ===========              ===========
----------------
(1) Updated to reflect the purchase and sale agreement described in Note 8 to
    the September 30, 2004, unaudited financial statements.


Montgomery believes that diversification is the key to long-term real estate
industry viability and success. Therefore, Montgomery plans to continue to
diversify its current portfolio with future acquisitions of income-producing
real estate and/or real estate with development potential. Montgomery may seek
the capital for such growth and diversification through a combination of asset
sales or exchanges, refinancing through commercial loan sources, as well as
through the sale of debt or equity securities.

Sale of Orchard Supply Shopping Center

         On September 8, 2004, Montgomery entered into a binding Purchase and
Sale Agreement for the sale of the Orchard Supply Shopping Center with an
unrelated third party for a purchase price of $7,950,000. The Orchard Supply
Shopping Center has a book value of $3,611,463 as of September 30, 2004, such
that Montgomery's gain on the sale would be approximately $4,300,000, less
standard prorations and closing costs. The Orchard Supply Shopping Center is
encumbered by a first mortgage loan in the amount of $4,763,725 as of September
30, 2004, which the buyer has agreed to assume. Therefore, at the closing,

                                       12
<PAGE>

Montgomery will have cash proceeds of approximately $3,180,000. Montgomery
intends to reinvest theses proceeds and may structure the transaction to
qualify, in whole or in part, as a tax-free exchange so as to acquire new
income-producing property.

         The Purchase and Sale Agreement provided for a 30-day due diligence
period for the buyer to determine if title was acceptable to him and a 45-day
due diligence period for the buyer to determine if the condition of the property
was acceptable to him. Buyer waived these contingencies.

         The Purchase and Sale Agreement also provides for a 75-day period for
the buyer to assume the existing first mortgage loan on the property. To date,
the first mortgage lender has forwarded the loan assumption application to
buyer, and buyer is in the process of assuming the existing loan. Montgomery and
the buyer have extended the date for waiver of this contingency until such time
as buyer is actually able to assume the existing first mortgage loan. The loan
assumption is an important aspect to the sale transaction. If the buyer is not
able to assume the loan and Montgomery instead accepts all cash, Montgomery will
be required to prepay the existing loan. A prepayment of the existing $5,100,000
first mortgage loan would cause Montgomery to pay a substantial prepayment
penalty of approximately $160,000. Montgomery has extended the waiver date for
this contingency because of the financial impact upon Montgomery of a failure of
the loan assumption by the buyer.

         The closing date for the sale is currently set for December 27, 2004,
and Montgomery anticipates that the sale will close on the scheduled closing
date.

Lease Status of Real Estate Assets

         The Keker & Van Nest lease is due to expire on November 18, 2004.
However, on March 9, 2004, the tenant exercised its option to extend the term of
the lease for an additional five-year period. The lease requires that
Montgomery, the landlord, and the tenant either agree to a "fair market value"
rental rate or submit the matter to arbitration in which both Montgomery and the
tenant each select an arbitrator with these two arbitrators choosing a third
arbitrator. Although Montgomery and the tenant continue to negotiate in an
informal manner, each party has selected its own arbitrator. The two arbitrators
plan to meet mid-November 2004 to select the third arbitrator. No date has been
set for the final arbitration.

         Montgomery's counsel has retained the services of a national brokerage
firm to compile the raw data on fair market value rental rates in San Francisco,
California. Keker & Van Nest is currently paying monthly rent of $59,190 and
Montgomery anticipates that the future rental rate will be between $40,000 and
$60,000 per month, although no assurances can be given that such rental rates
will be received.

         The Front Street Office Building, which currently has one tenant,
Schroeders' Restaurant, is subject to a lease expiring in 2012, with rights of
renewal. Management is currently negotiating with a new tenant to take over the
space currently occupied by Schroeders' Restaurant (at a higher lease rate) and
Schroeders' has indicated its willingness to sell its lease rights to
Montgomery.

         The Orchard Supply Shopping Center has as its major tenant Orchard
Supply Hardware, a division of Sears Roebuck & Co., and has possession of over
50,000 square feet, or approximately 95% of the leasable space through 2016. The
remaining space of the Orchard Supply Shopping Center is leased to three small
tenants occupying approximately 4,804 square feet. Although each tenant pays a
slightly different rental rate (together with reimbursements for taxes,
insurance and common area expenses), the average rent paid by these tenants
exceeds $2.00 per square foot. None of the leases is scheduled to terminate in
2004.

                                       13
<PAGE>

         The only real estate asset owned by Montgomery that is not
income-producing is the Eccles Project, which consists of approximately 7.4
acres of land suitable for sale, development or other disposition.

Operating Agreements with Affiliated Corporations

         Montgomery has two separate agreements with a corporation owned by
Dinesh Maniar, the majority shareholder of Montgomery. These two agreements are:

                  (1) a property management agreement executed June 1999 and
         filed as an exhibit to Montgomery's registration statement on Form
         10-SB; and

                  (2) a Development and Consulting Agreement executed August
         2003 and filed as an exhibit to Montgomery's quarterly report on Form
         10-QSB for the quarter ended September 30, 2003.

Montgomery's audit committee has reviewed the transactions and believes that
they are fair and in the best interests of Montgomery. Montgomery's board of
directors has imposed a current moratorium on any increases in the management
fees paid by Montgomery to Diversified Investment & Management Corporation, or
DIMC, and those fees therefore remain at $10,000 per month until such time as
the board of directors of Montgomery may authorize a fee increase. No payments
were made from Montgomery to DIMC under the Development and Consulting Agreement
during the nine months ended September 30, 2004.

Loans from Shareholders

         On July 13, 2004, Montgomery repaid its March 31, 2004, note of
$100,000, plus accrued interest of $3,069, to Dinesh Maniar.

         On June 29, 2004, Dinesh Maniar made a loan of $50,000 to Montgomery on
an unsecured basis. The loan bore interest at the rate of 10% per annum, payable
monthly, with all principal and interest due on June 30, 2005. During October
2004, Montgomery repaid the balance of the loan plus interest of $1,392.

         On October 21, 2004, Dinesh Maniar, the principal shareholder of
Montgomery, made a loan of $40,000 to Montgomery on an unsecured basis. The loan
bears interest at the rate of 10% per annum and is payable monthly, with all
principal and interest due on October 21, 2005.

Front Street Office Building Renovation

         Montgomery is considering renovating the Front Street Office Building
property to increase leasable space to approximately 18,000 square feet above
ground and another 5,000 square feet of basement space. Montgomery, with the
assistance of Diversified Investment & Management Corporation, or DIMC, as its
agent, has obtained the initial entitlements and is in the process of filing the
plans with the San Francisco Planning Department to obtain building permits. If
permits are issued, as Montgomery expects, and Montgomery retains ownership of
the property, Montgomery anticipates renovating the top three floors into
first-class office space in downtown San Francisco when and if Montgomery is
able to obtain the necessary funding.

         Montgomery currently estimates that renovation pursuant to the plans to
be filed with the City of San Francisco Planning Department would entail a
construction cost of approximately $2,000,000. With the assistance of DIMC,
Montgomery has begun to look for a construction lender; however, until building
permits are actually issued, it is unlikely that a commitment will be obtained
by Montgomery. Additionally, given Montgomery's lack of history in real estate

                                       14
<PAGE>

development and the successful record of Montgomery's president, Dinesh Maniar,
any construction lender may well require that Mr. Maniar personally guarantee
the construction loan. There can be no assurance that a construction loan will
be forthcoming or that, if offered, Mr. Maniar would be willing to personally
guarantee the construction loan.

         Montgomery is also seeking to reacquire certain transferable
development rights, or TDRs. TDRs are purchased and sold in San Francisco to
erect office buildings in downtown San Francisco in excess of the height
restrictions otherwise controlled by San Francisco's master plan. TDRs were
commonly purchased and sold in San Francisco in the 1980s, when a great deal of
construction was going on, and developers that wished to erect large buildings
were forced to acquire TDRs from others, so that the initial development space
could be expanded. Owners with no intent to expand often sold their TDRs to good
economic advantage. The TDRs associated with the Front Street Office Building
were sold prior to Mr. Maniar's acquisition of the property in 2002; however,
local counsel has indicated that the TDRs may be recaptured, subject to payment
of a fair market price, so that the current building can be expanded, providing
even more space for offices and/or other amenities.

         The renovated building is pre-leased in part. Schroeders' Restaurant
has orally agreed to restructure its leasehold premises to take a remodeled
basement that will provide more effective storage space for it, while at the
same time leaving the portion of the basement facing the entry and street
available for a lease to Diamond Oaks Vineyard as a wine tasting room, at a rent
of $72,000 per annum ($44 per square foot) as set forth in the Purchase and Sale
Agreement. The prospective new tenant, another affiliate of our majority
stockholder Dinesh Maniar, has also agreed to this arrangement. Also, DIMC has
agreed to lease the renovated top floor of the Front Street Office Building for
$120,000 per annum ($26 per square foot) as set forth in the Purchase and Sale
Agreement. The renovation will leave two floors vacant, with each floor having
approximately 5,000 square feet of leasable space. Current San Francisco rents
vary from a low of $25 per square foot per year to a high of $60 per square foot
per year. No assurance can be given such activities will be completed or rents
will be achieved.

         While Montgomery currently anticipates being able to lease the
remaining office space in the Front Street Office Building, consisting of
approximately 10,000 square feet, and while it is currently anticipated that the
lease rate will be approximately $30 to $40 per square foot per year, such that
post-renovation lease income would be increased by $300,000 to $400,000 per
annum over and above the Schroeders' lease income and the pre-leased space, no
assurance can be given that such additional rents will materialize, nor can any
assurance be given as to the length of time required to lease the property, the
costs for leasing commissions, or similar matters.

         In August 2003, Montgomery entered into a development agreement with
DIMC for DIMC to act as Montgomery's agent with respect to obtaining the
building and other necessary permits and planning department approvals,
obtaining TDRs, assisting in the construction bid process, and supervising and
monitoring the construction. DIMC will also offer its services to assist
Montgomery in obtaining a construction loan for the renovation and will act as a
real estate broker to assist Montgomery in leasing the building once all
renovation is underway. Fees for DIMC personnel will range from $75 to $225 per
hour. Additionally, Montgomery has paid $14,000 for plans and will incur
approximately another $500,000 in soft costs for additional professional
services and carrying costs as part of the renovation.

                                       15
<PAGE>

         Due to the uncertainty in obtaining financing and the need for the
principal shareholder to fund current cash shortfalls, management is also
considering a sale of the Front Street Office Building prior to redevelopment
and releasing. The Front Street Office Building currently uses cash of
approximately $13,000 per month. Montgomery may make such a sale to its
principal shareholder, subject to the approval of the audit committee, or to an
independent third party; however, no specific buyer has been identified, no
sales efforts have been initiated, and no written offers have been received.

Eccles Project

         The Eccles Project area consists of approximately 7.4 acres of
unimproved land located at Eccles Avenue and Gull Road in South San Francisco,
California. This area, known as Oyster Point, is approximately four miles from
the downtown central business district of South San Francisco, California.

         Management has evaluated three alternatives with respect to the Eccles
Project land: (1) development by Montgomery, either alone or through a joint
venture with third parties; (2) sale or exchange of the property; or (3) a
long-term ground lease. Montgomery has placed its development efforts for the
Eccles Project on indefinite hold due to the downturn in the real estate market
and the national recession.

         Dinesh Maniar, the majority shareholder of Montgomery (and its
president and chairman of the board), has more than 30 years experience in real
estate development. With such a background and the assistance of DIMC,
Montgomery believes it is capable of developing the project once economic
conditions again warrant such development.

         In addition to the potential development of the Eccles Project as noted
above, management has also considered the possibility of selling or exchanging
the Eccles Project land. A tax-free exchange would allow Montgomery to exchange
the Eccles Project for another property that would provide additional
opportunities to Montgomery consistent with its strategies while deferring the
realization of a taxable gain that would result from a sale of the Eccles
Project.

         Management has also considered the possibility of entering into a
long-term ground lease. This would provide cash flow to Montgomery while
eliminating any tax liability associated with the sale of the Eccles Project.

         Management will continue to evaluate the available options to determine
how to proceed with the Eccles Project in a manner that provides the greatest
return and cash flow to Montgomery while minimizing risk and advancing
Montgomery's strategy. There can be no assurance that management will indeed be
successful in identifying and pursuing the best possible financial return to
Montgomery for the Eccles Project.

Properties Listed or Held for Sale

         In order to maximize its potential sources of operating capital,
Montgomery had executed two exclusive listing agreements with CB Richard Ellis,
a commercial brokerage firm located in San Francisco, California.

         The first of these exclusive listing agreements concerned the Keker &
Van Nest Office Building, which was listed at $8,750,000. The second exclusive
listing agreement concerned the Eccles Project, which was listed at $11,000,000.
Both of these listing agreements have formally expired; however, the brokerage
firm is continuing to seek potential buyers on a good faith basis.

                                       16
<PAGE>

         Montgomery's management has not made a final determination as to
whether or not to sell any of these properties, and therefore, a sale of either
of these assets within one year is not currently anticipated, such that
reporting under Financial Accounting Standard Board Statement No. 144 would not
be required.

         Montgomery's management deems the exploration of the sale of real
estate assets, to determine the market's valuation of its properties, an
important aspect of its business because the equity in these properties is a
primary source of long-term financing, whether by sale, refinancing or by
leasing.

Other Matters

         Montgomery has reviewed all recently issued, but not yet effective,
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 or future earnings or operations.


                         ITEM 3. CONTROLS AND PROCEDURES

         Montgomery maintains a system of internal controls and procedures
designed to provide reasonable assurance as to the reliability of its financial
statements and other disclosures included in this report. Montgomery's board of
directors, operating through its audit committee, provides oversight to its
financial reporting process.

         Within the 90-day period prior to the date of this report, Montgomery
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act
of 1934. Based upon that evaluation, Montgomery's Chief Executive and Financial
Officer concluded that its disclosure controls and procedures are effective in
alerting them in a timely manner to material information relating to Montgomery
required to be included in this quarterly report on Form 10-QSB.

         There have been no significant changes in Montgomery's internal
controls or in other factors that could significantly affect internal controls
subsequent to the date that it carried out its evaluation and there were no
corrective actions regarding significant deficiencies or material weaknesses.

                                       17
<PAGE>

                           PART II. OTHER INFORMATION

                                ITEM 6. EXHIBITS

         The following exhibits are included as part of this report at the
location indicated:
<TABLE>
<CAPTION>
   Exhibit
   Number*                 Title of Document                                         Location
-------------- ------------------------------------------------------------------- ----------------
   <S>         <C>                                                                 <C>
   Item 31     Rule 13a-14(a)/15d-14(a) Certifications
----------------------------------------------------------------------------------
    31.01      Certification of Chief Executive Officer Pursuant to                This filing.
               Rule 13a-14

    31.02      Certification of Chief Financial Officer Pursuant to                This filing.
               Rule 13a-14

   Item 32     Section 1350 Certifications
----------------------------------------------------------------------------------
    32.01      Certification of Chief Executive Officer and Chief Financial        This filing.
               Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>
--------------
*    All exhibits are numbered with the number preceding the decimal indicating
     the applicable SEC reference number in Item 601 and the number following
     the decimal indicating the sequence of the particular document.


                                   SIGNATURES

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

                                        MONTGOMERY REALTY GROUP, INC.
                                        (Registrant)


Date: November 15, 2004                 By: /s/ Dinesh Maniar
                                           -------------------------------------
                                           Dinesh Maniar, President
                                           Chief Executive and Financial Officer

                                       18