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

                                   FORM 10-QSB


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

                  For the quarterly period ended June 30, 2001


                          MONTGOMERY REALTY GROUP, INC.



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


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

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

The number of shares outstanding of the registrant's common stock as of June 30,
2001: 16,500,000

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

<PAGE>

                          MONTGOMERY REALTY GROUP, INC.


                              INDEX TO FORM 10-QSB


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

         Balance Sheets as of June 30, 2001 and December 31, 2000..........3

         Statements of Operations for the six months ended
           June 30, 2001 and 2000..........................................4

         Statements of Operations for the three months ended
           June 30, 2001 and 2000..........................................5

         Statements of Cash Flows for the six months ended
           June 30, 2001 and 2000..........................................6

         Notes to Financial Statements.....................................7

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

                           Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K.................................14

Signature.................................................................14

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

BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
---------------------------------------------------------------------------------------------------------------------------

                                                                            June 30,       December 31,
ASSETS                                                                        2001             2000
                                                                           -----------     -----------
<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                                             (2,647,066)     (2,544,414)
                                                                           -----------     -----------
           Property, net                                                     8,199,818       8,302,470


CASH                                                                           119,627          54,823

TENANT RECEIVABLES                                                              27,005          17,602

PREPAID EXPENSES AND OTHER ASSETS                                              122,879         103,149

DEFERRED LEASE COMMISSIONS                                                      10,717          11,810

DEFERRED LOAN COSTS                                                            119,455         113,012

DEFERRED RENT RECEIVABLE                                                        34,128          30,957

DEFERRED TAX ASSET                                                           1,611,777       1,583,735
                                                                           -----------     -----------
TOTAL ASSETS                                                               $10,245,406     $10,217,558
                                                                           ===========     ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES:
  Notes payable                                                            $12,485,052     $12,391,841
  Accounts payable and accrued expenses                                         59,324          89,046
  Accrued interest                                                              75,886          68,818
  Security deposits and prepaid rent                                            71,932          23,669
                                                                           -----------     -----------
TOTAL LIABILITIES                                                           12,692,194      12,573,374
                                                                           -----------     -----------

STOCKHOLDERS' DEFICIT:
  Common stock, $0.001 par value;  authorized  80,000,000 shares;
    issued and  outstanding,  16,500,000  shares at June 30, 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 June 30, 2001 and December 31, 2000             -               -
  Additional capital                                                         1,692,742       1,692,742
  Accumulated deficit                                                       (4,156,030)     (4,065,058)
                                                                           -----------     -----------
TOTAL STOCKHOLDERS' DEFICIT                                                 (2,446,788)     (2,355,816)
                                                                           -----------     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                $10,245,406     $10,217,558
                                                                           ===========     ===========
</TABLE>

See notes to the financial statements.

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

STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
-------------------------------------------------------------------------------------------------------

                                                                             2001               2000
                                                                          ----------        ----------
<S>                                                                       <C>               <C>
REVENUES:
  Rent                                                                    $  760,164        $  712,832
  Other                                                                       16,622               304
                                                                          ----------        ----------
           Total revenues                                                    776,786           713,136
                                                                          ----------        ----------
EXPENSES:
  Real estate taxes                                                          181,284            52,586
  Utilities                                                                    7,709             7,641
  Repairs and maintenance                                                      4,796            15,276
  General building                                                            11,217            10,055
  Administration                                                              44,898            61,186
  Insurance                                                                   15,048            11,318
  Management fee                                                              60,000            47,500
  Depreciation                                                               102,652           107,430
  Amortization                                                                13,714            30,513
                                                                          ----------        ----------
           Total expenses                                                    441,318           343,505
                                                                          ----------        ----------

INCOME BEFORE INTEREST EXPENSE, EXTRAORDINARY
  ITEM AND INCOME TAXES                                                      335,468           369,631

INTEREST EXPENSE, NET                                                       (454,482)         (471,369)
                                                                          ----------        ----------

LOSS BEFORE INCOME TAXES                                                    (119,014)         (101,738)

INCOME TAX BENEFIT                                                            28,042            48,765
                                                                          ----------        ----------

NET LOSS                                                                  $  (90,972)       $  (52,973)
                                                                          ==========        ==========
NET LOSS PER COMMON SHARE,
  BASIC AND DILUTED                                                       $   (0.006)       $   (0.006)
                                                                          ==========        ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES,
  BASIC AND DILUTED                                                       16,500,000        16,500,000
                                                                          ==========        ==========
</TABLE>

See notes to the financial statements.

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

STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
-------------------------------------------------------------------------------------------------------

                                                                             2001               2000
                                                                          ----------        ----------
<S>                                                                       <C>               <C>
REVENUES:
  Rent                                                                    $  370,278        $  356,841
  Other                                                                          210               159
                                                                          ----------        ----------
           Total revenues                                                    370,488           357,000
                                                                          ----------        ----------

EXPENSES:
  Real estate taxes                                                           90,642            27,655
  Utilities                                                                    4,065             4,387
  Repairs and maintenance                                                      4,453            12,668
  General building                                                             5,088             4,524
  Administration                                                              26,296            32,116
  Insurance                                                                    7,524             5,742
  Management fee                                                              30,000            25,000
  Depreciation                                                                51,326            51,804
  Amortization                                                                 6,142             7,102
                                                                          ----------        ----------
           Total expenses                                                    225,536           170,998
                                                                          ----------        ----------

INCOME BEFORE INTEREST EXPENSE
  AND INCOME TAXES                                                           144,952           186,002

INTEREST EXPENSE, NET                                                       (228,913)         (239,755)
                                                                          ----------        ----------

LOSS BEFORE INCOME TAXES                                                     (83,961)          (53,753)

INCOME TAX BENEFIT                                                            14,021            24,370
                                                                          ----------        ----------

NET LOSS                                                                  $  (69,940)       $  (29,383)
                                                                          ==========        ==========

NET LOSS PER COMMON SHARE,
  BASIC AND DILUTED                                                       $   (0.004)       $   (0.001)
                                                                          ==========        ==========

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

See notes to the financial statements.

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

STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
-------------------------------------------------------------------------------------------------------

                                                                               2001            2000
                                                                            ----------      ----------
<S>                                                                         <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                  $  (90,972)     $  (52,973)
  Depreciation and amortization                                                116,366         137,943
  Deferred rent receivable                                                      (3,171)         13,245
  Deferred taxes                                                               (28,042)        (48,765)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Tenant receivables                                                          (9,403)         21,847
    Prepaid expenses and other assets                                          (19,730)        (14,718)
    Accounts payable                                                           (29,722)        (21,094)
    Accrued interest                                                             7,068          (1,095)
    Security deposits and prepaid rent                                          48,263         (35,948)
                                                                            ----------      ----------
           Net cash used in operating activities                                (9,343)         (1,558)
                                                                            ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Payment of loan costs                                                        (19,064)        (16,520)
                                                                            ----------      ----------
          Net cash used in investing activities                                (19,064)        (16,520)
                                                                            ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable                                      450,000         100,000
  Payment of loan costs                                                       (356,789)       (149,034)
                                                                            ----------      ----------
           Net cash used in financing activities                                93,211         (49,034)
                                                                            ----------      ----------

INCREASE (DECREASE) IN CASH                                                     64,804         (67,112)

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

CASH, END OF PERIOD                                                         $  119,627      $   67,249
                                                                            ==========      ==========
</TABLE>

See notes to the financial statements.

                                       6
<PAGE>

MONTGOMERY REALTY GROUP, INC.

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

1.       BASIS OF PRESENTATION

         The interim financial  statements are unaudited.  In the opinion of the
         management  of  Montgomery  Realty Group,  Inc.  (the  "Company"),  the
         interim financial  statements include all adjustments,  consisting only
         of normal recurring  adjustments,  necessary for a fair presentation of
         the results for the presented  interim periods.  The interim  financial
         statements  should be read in conjunction with the Company's  quarterly
         report on Form 10-QSB for the three months  ended March 31,  2001,  and
         the 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  $25,000  were  paid to an
         affiliate of the majority  stockholder  for the three months ended June
         30, 2001 and 2000, respectively.

3.       BASIC AND DILUTED LOSS PER SHARE OF BENEFICIAL INTEREST

         Basis and diluted loss per share are calculated by dividing net loss by
         the weighted average number of shares outstanding of 16,500,000 for the
         three months ended June 30, 2001 and 2000.

                                       7
<PAGE>

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

Forward-Looking Information May Prove Inaccurate

         This report contains statements about the future, sometimes referred to
as  "forward-looking"  statements.   Forward-looking  statements  are  typically
identified by the use of the words "believe," "may," "will," "should," "expect,"
"anticipate,"  "estimate,"  "project,"  "propose,"  "plan," "intend" and similar
words and expressions. Statements that describe future strategic plans, goals or
objectives  of 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 and Section 21E of the Exchange Act.

         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 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.

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

Overview

         Montgomery is a real estate company that emphasizes  investment in both
development  real  estate  assets  and  income  producing  real  estate  assets.
Montgomery  is  engaged  in  the  ownership,  leasing,  management,   operation,
development,  redevelopment,  acquisition, and sale of real estate assets in the
Greater San  Francisco  Bay Area.  Montgomery  currently  owns  retail  shopping
centers and an office  building.  Montgomery also owns an undeveloped  parcel of
land referred to as the "Eccles Project" in South San Francisco, as discussed in
more detail in the  Company's  report on Form 10-KSB and below under the heading
"Eccles Entitlements."

         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.

         Montgomery's   financial  condition  and  results  of  operations  were
substantially  changed by the acquisition of its four properties from Mr. Maniar
in June 1999. These four properties are described in detail in Montgomery's Form
10-SB. The four properties are:

                  (1)      the  Keker  &  Van  Nest   Office   Building  in  San
                           Francisco;

                  (2)      the  Orchard  Supply  Shopping  Center in San  Ramon,
                           California;

                                       8
<PAGE>

                  (3)      the San Ramon Retail Center in San Ramon, California;
                           and

                  (4)      the  Eccles   Project   land  located  in  South  San
                           Francisco, California.

         These  assets  had a value  of  approximately  $27,410,000  based  upon
independent  appraisals performed between October 1998 and October 2000 and were
sold to Montgomery by Mr. Maniar in June 1999, in exchange for 16,000,000 shares
of  Montgomery's  stock  and  the  assumption  by  Montgomery  of  approximately
$12,400,000  of  debt  in  the  form  of  first  mortgage  debt  secured  by the
properties. The sale by Mr. Maniar to Montgomery closed on June 8, 1999.

         With the  acquisition of these assets,  Montgomery  became an operating
real estate company with approximately  80,000 square feet of leasable property.
The lease space is currently 100% occupied.  Montgomery also acquired the Eccles
Project,  which is reported in the financial  statements at its historical  cost
value of $539,500 and which is now in the process of obtaining  entitlements for
future development,  which, if granted, would permit the property to accommodate
office buildings of approximately  325,000 square feet. The Eccles Project alone
with such entitlements would be valued at approximately $24,000,000, pursuant to
independent third party appraisers..

Basis of Presentation of Financial Information

         The  acquisition of the four properties was accounted for as a "reverse
acquisition"   whereby,  for  accounting   purposes,   the  properties  acquired
Montgomery  under the  purchase  method of  accounting  and,  due to the lack of
significant  business  operations  by  Montgomery  prior  to the  June  8,  1999
acquisition,  the transaction was reported as a  recapitalization.  Accordingly,
the historical  financial statements were prepared to give retroactive effect to
the reverse acquisition completed June 8, 1999.

Results of Operations

         Six Months Ended June 30, 2000 and June 30, 2001

         Montgomery's net loss for the six months ended June 30, 2001, increased
from $52,973 at June 30, 2000,  to $90,972 for the period ended June 30,  20,01,
or 71.7%.  Noncash  depreciation  and  amortization  expenses for the six months
ended June 30, 2001 aggregated $116,386.

         Montgomery's  total revenues  increased from $713,136 at June 30, 2000,
to $776,786 at June 30, 2001,  or 8.9%.  This  increase is due  primarily to two
factors:

                  (1) base rent  increases  that took  effect in early 2000 when
         two new small tenants (less than 2,500 sq. ft. users) replaced existing
         tenants at the Orchard Supply Shopping Center; and

                  (2) Consumer Price Index  adjustments that took effect in 2001
         to the base rents for tenants at the Orchard Supply Shopping Center and
         the San Ramon Retail Center.

         With  the  exception  of  the  Eccles  Project,   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 and changes in base rents
which are keyed to the Consumer Price Index (CPI).

                                       9
<PAGE>

         Total  operating  expenses  for the six  months  ended  June 30,  2001,
increased  from  $343,505 at June 30,  2000,  to $441,318 at June 30,  2001,  or
28.5%. While most operating expenses showed expected  variations due to variable
costs,  such as utilities and  insurance,  real  property tax expense  increased
344.7% due to  reassessments  resulting  from the transfer from Dinesh Maniar to
Montgomery  in June  1999.  Under  California  law,  the  county  assessors  are
permitted to increase the valuation of real estate for tax roll  purposes,  upon
the transfer of a property from one owner to another. The current tax expense is
approximately  $362,568 and reflects the increased tax burden on the Keker & Van
Nest Office  Building and the Eccles  Project.  Adjustments to the tax roll have
not yet been made for the Orchard Supply Shopping Center or the San Ramon Retail
Center and are not determinable at this time.

         Management  fees also  increased  from  $7,500 per month to $10,000 per
month commencing June 1, 2000,  pursuant to the terms of the written  management
fee  agreement.  The  management  fees were set to increase to $15,000 per month
July 1, 2001; however, management has elected to forbear on said increase.

         Net interest expense for the six months ended June 30, 2001,  decreased
from  $471,369 at June 30, 2000, to $454,482,  or 3.6%.  This decrease is due to
the following:

                  (1) decreases in the prime interest  rate,  which is the index
         for the first  mortgage  loan on the Eccles  Project,  together  with a
         reduction of its principal balance from $1,898,334 to $1,798,334; and

                  (2)  refinancing  of the first  mortgage loan on the San Ramon
         Retail Center with Affinity Bank at 9.1% interest per annum, as opposed
         to its former rate of 11% with Gross Mortgage Company.

         Montgomery  obtained a junior mortgage loan of $250,000  secured by the
Eccles Project,  which was funded near the close of the second quarter. The loan
calls for interest to be paid monthly at the rate of 13.75%. The proceeds of the
new loan were used to reduce the principal balance on the first mortgage loan on
the Eccles  Project by $100,000  (with First Bank & Trust - successor to Redwood
Bank) and to provide the company with  operating  cash, in view of the increased
cash demands presented by the increased real estate tax expense.

         Quarter Ended June 30, 2001 and 2000

         Montgomery's net loss increased from $29,383 for the three-month period
ended June 30, 2000, as compared to the three-month  period ended June 30, 2001,
in which the net loss was  $69,940,  an increase of 138.0%.  Again this shift is
primarily based upon the increased real estate tax expense. Noncash depreciation
and amortization  expenses for the three months ended June 30, 2001,  aggregated
$57,468 so as to permit  Montgomery to continue its day-to-day  operations  with
substantially break-even cash flow.

         Montgomery's  total  revenues for the three months ended June 30, 2001,
increased from $357,000 at June 30, 2000, to $370,488 at June 30, 2001, or 3.8%.
This increase is due primarily to the factors set forth above in the  discussion
of the six-month operating results.

         Total  operating  expenses  for the three  months  ended June 30, 2001,
increased  from  $170,998 at June 30,  2000,  to $225,536 at June 30,  2001,  or
31.9%.  Again,  most of this  increase is due to the  increased  real estate tax
expense discussed above.

                                       10
<PAGE>

         Net  interest  expense  for the  three  months  ended  June  30,  2001,
decreased from $239,755 at June 30, 2000, to $228,913 at June 30, 2001, or 4.5%.
This  decrease is again due  primarily to the decrease in the interest rate paid
on the Eccles  Project first  mortgage and to the lower  interest rate affecting
the first mortgage on the San Ramon Retail Center.

Liquidity and Capital Resources

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

         Operating Activities

         Operating  activities for the six months ended June 30, 2001,  used net
cash of $9,343,  compared to net cash used in operating  activities  for the six
months ended June 30, 2000,  of $1,558,  an increase of $7,755,  or 488.4%.  Net
income  for the six  months  remained  fairly  constant,  with a net  loss  from
operations  for the six months  ended June 30, 2000,  and June 30,  2001,  being
$52,973 and $90,972,  respectively.  Depreciation and amortization  expenses for
the six  months  ended  June 30,  2000,  and June 30,  2001,  was  $137,943  and
$116,366,  respectively.   Hence,  absent  expected  changes  in  balance  sheet
accounts,  such as prepaids and payables,  Montgomery's net cash from operations
has remained generally  constant.  While real estate tax expenses have increased
significantly,  revenue has also increased significantly,  while non tax-related
operating  expenses,  including  administrative  expenses,  have  generally been
reduced, so as to maintain a positive cash flow.

         Further, the majority stockholder,  Mr. Dinesh Maniar, has historically
shown  willingness  to loan money of up to  $200,000  to the  Company  for short
periods  of time,  such that  temporary  cash flow  demands  have not  generated
operating  difficulties.  Additionally,  the  Company's  long-term  abilities to
refinance its appreciated real estate assets have provided  operating capital to
the Company.

         Investing Activities

         Cash flow from  investing  activities  in the six months ended June 30,
2001,  used $19,604,  as compared to $16,250 for the period ended June 30, 2000.
These items  reflect loan fees  incurred for  corporate  refinancing  and remain
fairly constant from year to year. The loan fees paid in 2000 were for the Gross
Mortgage  Company  while  the fees paid in the 2001  represent  the fees paid to
California Mortgage & Realty, the new junior lender on the Eccles Project.

         Financing Activities

         Montgomery's  financing  activities for the period ended June 30, 2001,
reflect receipt of $450,000 as follows:

                  (1) $200,000,  which represent two loans made by Mr. Maniar to
         the corporation,  each in the amount of $100,000, one on April 9, 2001,
         and another April 17, 2001; and

                  (2) $250,000,  which  represents  the gross loan proceeds from
         California  Mortgage & Realty which made a junior  mortgage loan on the
         company's Eccles Project.

                                       11
<PAGE>

         Montgomery's outgoing funds include:

                  (1)  repayment  of the  $200,000  stockholder  loans  from Mr.
         Maniar, which loans were repaid during the second quarter of 2001;

                  (2)  reduction  of the  principal in the amount of $100,000 on
         the First Bank & Trust (formerly Redwood Bank) loan which is secured by
         a first mortgage loan on the Eccles Project; and

                  (3) reduction of other amortized loans of $56,789.

         These results compare to the single refinancing  transaction during the
first six months of 2000, which involved the principal  reduction of the Redwood
Bank loan on the Eccles Project.

         The maturity date on the First Bank & Trust Loan is March 1, 2002.  The
maturity  date of the  California  Mortgage & Realty loan is April 9, 2003.  The
maturity dates of all other loans are more than two years away.

         Equity in Real Estate

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

         Based upon independent  appraisals  performed  between October 1998 and
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   $12,485,052  as  of  June  30,  2001.  The  difference  of
$14,924,948   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  California  Mortgage  &  Realty  Loan;  and (b) the  sale  or  exchange  of
properties which 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
it current  portfolio with future  acquisitions of income  producing real estate
and/or real estate with development potential.  Montgomery will seek the capital

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for such  growth and  diversification  through a  combination  of asset sales or
exchanges,  refinancings through commercial loan sources, as well as through the
sale of debt or equity  securities.  With the  exceptions of the Eccles  Project
development,  there are no  current  plans to raise  additional  capital at this
time.

         Eccles Entitlements

         Management  currently  plans to expand  its asset  base in the  future.
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.

         The Company is working  diligently to obtain the  entitlements  for the
Eccles  Project.  Loading  access  easements in favor of an adjacent  landowner,
which 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 suitable for the
proposed  expansion.  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 affirming that bedrock and similar
matters are suitable to the Company's proposed  development.  Also, 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 other 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.

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                           PART II. OTHER INFORMATION

                    Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits

         There are no exhibits included as part of this report.

(b)      Reports on Form 8-K

         During the quarter  ended June 30,  2001,  the Company did not file any
reports on Form 8-K.


                                    Signature

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                             MONTGOMERY REALTY GROUP, INC.
                                             (Registrant)



Date: August 15, 2001                        By: /s/ Dinesh Maniar
                                                 ---------------------------
                                                 Dinesh Maniar
                                                 President


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