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, 2003

                          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 [ ] No [X]


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 14, 2003, issuer had
16,500,000 shares of issued and outstanding common stock, par value $0.001.

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 September 30, 2003, and
           December 31, 2002 (unaudited).....................................3
         Statements of Operations for the Nine Months Ended
           September 30, 2003 and 2002 (unaudited)...........................4
         Statements of Operations for the Three Months Ended
          September 30, 2003 and 2002 (unaudited)............................5
         Statements of Cash Flows for the Nine Months Ended
           September 30, 2003 and 2002 (unaudited)...........................6
         Notes to Financial Statements.......................................7

Item 2.  Management's Discussion and Analysis or Plan of Operations..........9

Item 3.  Controls and Procedures............................................23

                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K...................................24

Signatures    ..............................................................25

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


MONTGOMERY REALTY GROUP, INC.

BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002 (Unaudited)
-------------------------------------------------------------------------------------------------------------------------

                                                                                        September 30,        December 31,
                                                                                             2003               2002
<S>                                                                                     <C>                 <C>
ASSETS

PROPERTY:
  Land                                                                                  $  5,644,000        $  2,614,000
  Building                                                                                 5,434,059           3,979,059
  Improvements                                                                             3,093,822           3,093,822
                                                                                        ------------        ------------
           Total                                                                          14,171,881           9,686,881

  Less accumulated depreciation                                                           (2,804,004)         (2,661,760)
                                                                                        ------------        ------------

           Property, net                                                                  11,367,877           7,025,121

ASSETS HELD FOR SALE--DISCONTINUED OPERATIONS                                                      -             929,578

CASH                                                                                          57,916             386,565

TENANT RECEIVABLES                                                                            49,733               6,872

PREPAID EXPENSES AND OTHER ASSETS                                                            299,160             145,093

DEFERRED LOAN COSTS, NET                                                                      82,486             101,759

DEFERRED TAX ASSET                                                                         1,352,770           1,679,091

TOTAL ASSETS                                                                            $ 13,209,942        $ 10,274,079
                                                                                        ============        ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES:
  Notes payable                                                                         $ 15,117,397        $ 11,890,160
  Accounts payable                                                                            29,437              31,303
  Accrued interest                                                                            71,128              61,984
  Note payable held for sale-discontinued operations                                               -             792,671
  Security deposits and prepaid rent                                                          49,539              25,546
                                                                                        ------------        ------------

TOTAL LIABILITIES                                                                         15,267,501          12,801,664
                                                                                        ------------        ------------

STOCKHOLDERS' DEFICIT:
  Common stock, $0.001 par value; authorized 80,000,000 shares;
    issued and outstanding, 16,500,000 shares at September 30, 2003
    and December 31, 2002                                                                     16,500              16,500
  Preferred stock, $0.001 par value; authorized 20,000,000 shares; no
    shares issued and outstanding at September 30, 2003 and
    December 31, 2002                                                                              -                   -
  Additional capital                                                                       1,692,742           1,692,742
  Accumulated deficit                                                                     (3,766,801)         (4,236,827)
                                                                                        ------------        ------------
TOTAL STOCKHOLDERS' DEFICIT                                                               (2,057,559)         (2,527,585)
                                                                                        ------------        ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                             $ 13,209,942        $ 10,274,079
                                                                                        ============        ============

See notes to the financial statements.

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

STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (Unaudited)
------------------------------------------------------------------------------------------------------------------------
                                                                                            2003               2002
<S>                                                                                    <C>                 <C>
REVENUES:
  Rent                                                                                 $   1,072,655       $   1,035,267
  Other                                                                                           -                1,334
                                                                                       -------------       -------------
           Total revenues                                                                  1,072,655           1,036,601
                                                                                       -------------       -------------
EXPENSES:
  Real estate taxes                                                                          183,012             171,672
  Utilities                                                                                    9,370               9,428
  Repairs and maintenance                                                                      2,334               1,780
  General building                                                                            16,823              10,213
  Administration                                                                              74,716              50,282
  Insurance                                                                                   17,729               7,880
  Management fee                                                                              84,699              84,699
  Depreciation                                                                               151,124             148,222
  Amortization                                                                                43,633              46,328
                                                                                       -------------       -------------
           Total expenses                                                                    583,440             530,503
                                                                                       -------------       -------------
INCOME BEFORE INTEREST EXPENSE,
  INCOME TAXES AND DISCONTINUED OPERATIONS                                                   489,215             506,097

INTEREST EXPENSE, NET                                                                       (599,874)           (612,602)
                                                                                       -------------       -------------

LOSS BEFORE INCOME TAXES AND
DISCONTINUED OPERATIONS                                                                     (110,659)           (106,504)

INCOME TAX BENEFIT                                                                            36,151              39,773
                                                                                       -------------       -------------

LOSS FROM CONTINUING OPERATIONS                                                              (74,508)            (66,731)

DISCONTINUED OPERATIONS:

   Income from discontinued operations, net of tax provision of $4,076                         6,941              13,841
      and $8,129, respectively

   Gain on Sale of Property (net of tax provision of $358,396)                               537,593                   -
                                                                                       -------------       -------------

NET INCOME (LOSS)                                                                      $     470,026       $     (52,890)
                                                                                       =============       =============

NET INCOME (LOSS) PER COMMON SHARE,
BASIC AND DILUTED                                                                      $       0.028       $      (0.003)
                                                                                       =============       =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES,
  BASIC AND DILUTED                                                                       16,500,000          16,500,000
                                                                                       =============       =============

See notes to the financial statements.

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

STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (Unaudited)
--------------------------------------------------------------------------------------------------------------------------

                                                                                           2003                2002
<S>                                                                                    <C>                 <C>
REVENUES:
  Rent                                                                                 $     378,784       $     344,343
  Other                                                                                            -                 800
                                                                                       -------------       -------------
           Total revenues                                                                   378,784              345,143
                                                                                       -------------       -------------

EXPENSES:
  Real estate taxes                                                                           67,923              57,544
  Utilities                                                                                    3,366               2,968
  Repairs and maintenance                                                                        670                 677
  General building                                                                             3,895               3,334
  Administration                                                                              15,315              21,386
  Insurance                                                                                    9,202               2,627
  Management fee                                                                              28,233              28,233
  Depreciation                                                                                52,187              49,468
  Amortization                                                                                14,262              14,686
                                                                                       -------------       -------------
           Total expenses                                                                    195,053             180,923
                                                                                       -------------       -------------

INCOME BEFORE INTEREST EXPENSE,
  INCOME TAXES AND DISCONTINUED OPERATIONS                                                   183,731             164,219

INTEREST EXPENSE, NET                                                                       (207,571)           (204,227)
                                                                                       -------------       -------------

LOSS BEFORE INCOME TAXES AND
DISCONTINUED OPERATIONS                                                                      (23,840)            (40,008)

INCOME TAX BENEFIT                                                                             6,032              12,990
                                                                                       -------------       -------------

LOSS FROM CONTINUING OPERATIONS                                                              (17,808)            (27,018)

DISCONTINUED OPERATIONS:
   Income from discontinued operations, net of tax provision of ($1,099)                      (1,869)              4,158
      and $2,344, respectively

   Gain on Sale of Property (net tax provision of $358,396)                                  537,593                   -
                                                                                       -------------       -------------

NET INCOME (LOSS)                                                                      $     517,916       $     (22,859)
                                                                                       =============       =============

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

WEIGHTED AVERAGE NUMBER OF COMMON SHARES,
  BASIC AND DILUTED                                                                       16,500,000          16,500,000
                                                                                       =============       =============
See notes to the financial statements.

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

STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------

                                                                                           2003                 2002
<S>                                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                                                   $      470,026      $      (52,890)
  Adjustments to reconcile net income (loss) to
    net cash (used in) provided by operating activities:
    Depreciation and amortization                                                            198,589             202,497
    Gain on sale of property                                                                (895,989)                  -
    Deferred rent receivable                                                                       -                 109
    Deferred taxes                                                                           326,321             (31,644)
    Changes in assets and liabilities:
      Tenant receivables                                                                     (42,861)                 34
      Prepaid expenses and other assets                                                     (154,067)             18,189
      Accounts payable                                                                        (1,866)             (1,318)
      Accrued interest                                                                         3,203              (1,388)
      Security deposits and prepaid rent                                                       8,947             (40,802)
                                                                                      --------------      --------------

           Net cash (used in) provided by operating activities                               (87,697)             92,787
                                                                                      --------------      --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property                                                                   (1,085,000)             (7,304)
  Proceeds from sale of property                                                           1,827,051                   -
                                                                                      --------------      --------------

           Net cash provided by (used in) investing activities                               742,051              (7,304)
                                                                                      --------------      --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable                                                                      2,500,000
  Payment of loan costs                                                                      (23,510)            (67,258)
  Payments on notes payable                                                                 (959,493)         (2,191,966)
                                                                                      --------------      --------------

           Net cash (used in) provided by financing activities                              (983,003)            240,776
                                                                                      --------------      --------------

INCREASE (DECREASE) IN CASH                                                                 (328,649)            326,259

CASH, BEGINNING OF PERIOD                                                                    386,565              81,328
                                                                                      --------------      --------------

CASH, END OF PERIOD                                                                   $       57,916      $      407,587
                                                                                      ==============      ==============

SUPPLEMENTAL CASH FLOWS INFORMATION:
  Acquisition of property through assumption of loan                                  $    3,400,000      $
                                                                                      ==============      ==============


See notes to the financial statements.

                                                               5
</TABLE>
<PAGE>

                          MONTGOMERY REALTY GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS

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, 2002,
including the financial statements and the notes thereto.

2. TRANSACTIONS WITH AFFILIATE

Property management fees of $90,000 were paid to an affiliate of the majority
shareholder for each of the nine months ended September 30, 2003 and 2002,
pursuant to a written management agreement.

In August 2003, Montgomery entered into a Development Consulting Agreement
related to the newly-acquired Front Street Office Building with Diversified
Investment & Management Corporation, or DIMC, an affiliate of the majority
shareholder, under which Montgomery agreed to pay DMIC a development consulting
fee of $25,000 per month for the months of August, September and October 2003,
when approval of the renovation entitlements were received. Under that
agreement, renovation fees of $50,000 were paid for the nine months ended
September 30, 2003, together with $62,000 of reimbursement for third-party
costs. In addition, Montgomery advanced the affiliate $10,000 for future
expenses that are being incurred.

See footnote 4 regarding the purchase of the Front Street Office Building from
an affiliate.

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 nine months
ended September 30, 2003 and 2002. Common stock shares from options granted were
not included in the calculation of diluted loss per share because they were
antidilutive for the nine months ended September 30, 2002. There were no
outstanding options for the nine months ended September 30, 2003.

4. SALE OF SAN RAMON RETAIL CENTER AND PURCHASE OF THE FRONT STREET OFFICE
   BUILDING

On July 25, 2003, Montgomery closed the sale of its San Ramon Retail Center in
San Ramon, California, to an unrelated party in an arm's-length transaction for
a total sales price of $1,891,625. The sale resulted in net proceeds to
Montgomery of $1,038,636, after payment of $789,387 for principal and interest
due on existing mortgages together with other sales and closing expenses.

                                       6
<PAGE>

The gain from the sale of the San Ramon Retail Center was $895,989 prior to the
provision for income taxes of $358,396. Income from discontinued operations
prior to the sale, net of tax provision, was the amount of $6,941. Therefore,
Montgomery's net income for the quarter ended September 30, 2003, is $470,026,
which consists of a loss from continuing operations (net of tax provision) of
$74,508 and a gain from the sale of the San Ramon Retail Center (net of tax
provision) in the amount of $544,534.

Montgomery purchased the Front Street Office Building on July 30, 2003, from Mr.
Maniar, the majority shareholder, at his capitalized cost of $4,533,346,
consisting of the $4,030,000 purchase price Mr. Maniar paid to an unaffiliated
party in an arm's-length transaction on September 18, 2002, $56,346 in closing
costs, and $447,000 in fees for architects and related capitalized carrying
costs. The architectural fees were incurred to develop plans to renovate and
expand the office and restaurant space. The renovation plans were included with
the purchase.

5. LOANS ENCUMBERING FRONT STREET OFFICE BUILDING

Montgomery acquired the Front Street Office Building on July 30, 2003, subject
to two existing mortgages that Montgomery neither paid off nor formally assumed.
The first mortgage is in the amount of $2,800,000 from a commercial lender,
payable interest only each month at the rate of 5% per annum, due August 25,
2004. Montgomery is currently negotiating with that lender to assume the loan.
The second mortgage loan is from a commercial lender and is in the amount of
$600,000, payable interest only each month at a rate of 13.75% interest per
annum, due December 1, 2003. Montgomery is currently negotiating with that
lender for both an extension of the maturity date and an assumption of the loan.

6. SUBSEQUENT EVENTS

Subsequent to September 30, 2003, the San Francisco Planning Department issued a
Site Permit letter for the renovation of the Front Street Office Building based
on the architectural plans that were submitted, which we sometimes refer to as
the "entitlements." Additional approvals from the San Francisco Fire Department
and other city agencies are also required. As approved, the entitlements include
architectural plans that involve the renovation of the building, so as to
provide a new wine tasting room, a renovated restaurant and lobby space, and new
office space. Final Planning Department approval is expected prior to December
31, 2003.

                                       7
<PAGE>

        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.

         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, renovation, 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, as discussed in more detail
in Montgomery's report on Form 10-KSB.

Basis of Presentation of Financial Information

         Montgomery accounts for its real estate assets using the historical
cost method consistent with generally accepted accounting principles. For those
real estate assets acquired from its principal shareholder, Dinesh Maniar, in
the 1999 "reverse acquisition," the historical cost as shown on the financial
statements is Mr. Maniar's original purchase cost, which in some instances may
be quite dated. 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 assets acquired
subsequent to the 1999 reverse acquisition, the historical cost shown is the
purchase price.

                                       8
<PAGE>

Results of Operations

         Nine Months Ended September 30, 2003, and September 30, 2002

         Montgomery's total continuing revenues increased from approximately
$1,037,000 for the period ended September 30, 2002, to approximately $1,073,000
for the period ended September 30, 2003, or 3.5%. This increase is primarily due
to the acquisition of the Front Street Office Building on July 30, 2003. While
substantially all of the Front Street Office Building interest expenses are
being capitalized due to the development status of said property, a portion of
the interest expense, together with all of the operating expenses and rental
income, is being reported as net operating income during the third quarter.
While the income from the San Ramon Retail Center (which was sold on July 25,
2003) generated $10,932 per month as base rent, the Front Street Office Building
generates $12,000 per month, resulting in a 9.8% net increase in rental income.

         Total continuing operating expenses increased from approximately
$531,000 for the period ended September 30, 2002, to $583,000 for the nine
months ended September 30, 2003, or 10%, which is primarily the result of an
aggregate honorarium of $25,000 paid to the board of directors in connection
with its special work imposed by the sale of the San Ramon Retain Center and the
acquisition of the Front Street Office Building, an increase in property taxes,
and an increase in property insurance related to the acquisition of the Front
Street Office Building.

         Montgomery also has an approximately $896,000 pretax gain from the sale
of the San Ramon Retail Center on July 25, 2003. The San Ramon Retail Center was
broken out from the rest of Montgomery's assets in the 10-QSB for the period
ended June 30, 2003, pursuant to FASB 144 in anticipation of the sale. The sale
provided Montgomery with cash of approximately $1,038,000 and reduced
Montgomery's overall debt by approximately $784,000.

         As discussed below in Investing Activities, Montgomery reinvested the
cash proceeds from the sale of the San Ramon Retail Center, together with
approximately another $50,000, in order to acquire the Front Street Office
Building.

         Net continuing interest expense decreased from approximately $613,000
for the nine months ended September 30, 2002, to approximately $600,000 for the
nine months ended September 30, 2003, or 2.1%. This decrease is due to a lower
interest rate on the prime-based loan that encumbered the Eccles Project and the
capitalization of a portion of interest expense of the Front Street Office
Building to renovation cost.

         Montgomery's net income for the nine months ended September 30, 2003,
was approximately $470,000, almost a ten-fold increase from the net loss of
approximately $53,000 for the nine months ended September 30, 2002. The decrease
in net loss is attributable to the gain on sale of the San Ramon Retail Center.

         Three Months Ended September 30, 2003, and September 30, 2002

         Montgomery's total continuing revenue increased from approximately
$345,000 for the three months ended September 30, 2002, to approximately
$379,000 for the three months ended September 30, 2003, or 9.8%. This increase
was due primarily to the purchase of the Front Street Office Building, which
increases net rental income by 9.8%.

         Montgomery's administrative expenses decreased from approximately
$21,000 for the three months ended September 30, 2002, to approximately $15,000
for the three months ended September 30, 2003, or 28.4%, primarily due to a
decrease in legal and accounting fees.

         Total continuing operating expenses for the three months ended
September 30, 2003, increased from approximately $181,000 at September 30, 2002,
to approximately $195,000 at September 30, 2003, or 7.8%, primarily due to the
increase in real estate taxes, insurance expense, and depreciation expense from
the purchase of the Front Street Office Building.

                                       9
<PAGE>

         General management fees remained constant at $10,000 per month, as
discussed above. However, with the acquisition of the Front Street Office
Building, Montgomery entered into a new management agreement, portions of which
provide for the payment to DIMC of costs incurred in obtaining renovation
entitlements, together with fees for assistance with the renovation.

         Net continuing interest expense increased from approximately $204,000
for the three-month period ended September 30, 2002, to approximately $208,000
for the three-month period ended September 30, 2003, or 1.5%. This increase is
due to the purchase of the Front Street Office Building.

         Income from discontinued operations for the three months ended
September 30, 2003 and 2002, represent the net operations of the San Ramon
Retail Center.

         Montgomery's net income for the three months ended September 30, 2003,
was approximately $518,000, a 2,365.7% increase from the net loss of
approximately $23,000 reported for the three months ended September 30, 2002.
The increase in net income is principally attributable to the gain on sale of
the San Ramon Retail Center.

Ongoing Rental Income

         As of September 30, 2003, the Orchard Supply Shopping Center and the
Keker & Van Nest Office Building were 100% leased under lease terms extending
beyond the end of 2003. The Front Street Office Building is partially leased to
a tenant for a term extending beyond the end of 2003, and the balance of the
Front Street Building is under renovation so as to permit its renovation and
leasing to office tenants within the next 24 months, such that no decrease in
Montgomery's rental revenues is anticipated, other than that caused by the sale
of the San Ramon Retail Center.

         The Keker & Van Nest Office Building is subject to a written lease with
the law firm of Keker & Van Nest expiring on December 1, 2004. Keker & Van Nest
has expressed an interest in renewing the lease, provided that a mutually
acceptable rental rate can be reached. Keker & Van Nest does have the right to
exercise a five-year lease extension option; however, the rental rate would be
the "fair market rate" as determined by an arbitration process. The Front Street
Office Building, which currently has one tenant, Schroeders' Restaurant, is
subject to a 10-year lease with rights of renewal. 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 95% of the
leasable space of the Orchard Supply Shopping Center, through 2016. The balance
of the Orchard Supply Shopping Center is leased to three small tenants, each of
which has a lease that extends through the end of 2003. 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 DIMC, which is owned by
Dinesh Maniar, the majority shareholder of Montgomery. These two agreements are:

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

                  (2) a Development Consulting Agreement executed August 2003
         and filed as Exhibit 10.01 to this quarterly report on Form 10-QSB.

                                       10
<PAGE>

         The property management agreement requires that Montgomery pay DIMC a
monthly fee for DIMC's services in managing Montgomery's real estate portfolio.
Montgomery has no employees, and therefore, except for the services rendered by
its officers, does not engage in the direct operation of the real estate assets.
Instead, Montgomery has delegated this task to DIMC for a monthly fee, and DIMC
handles all rent collection, repair, and tenant relation issues.

         As provided in the Purchase and Sale Agreement relating to the Front
Street Office Building as approved by Montgomery's board of directors,
Montgomery entered into the Development Consulting Agreement to engage DIMC,
with over 14 years of experience with property management, tenant relations, and
real estate development and renovation, to lead the effort in obtaining
entitlements and building permits, obtaining architectural plans and
specifications, bidding the construction project and otherwise overseeing the
planned renovation of the Front Street Office Building. Under the Development
Consulting Agreement, Montgomery agreed to pay DMIC a fee of $25,00 per month
for the months of August, September and October 2003, when the entitlements were
obtained, with a further fee to be negotiated upon the commencement of
construction. .

         DIMC, which is 100% owned by Dinesh Maniar, who also owns approximately
97.3% of Montgomery's common stock, acted as broker for Montgomery with respect
to the sale of the San Ramon Retail Center and received a commission of 2% of
the gross sales price. DIMC was prepaid $40,000 towards the commission; however,
the actual sale amount was less than anticipated and consequently DIMC owes
Montgomery the sum of $2,168 as a refund for excess commission prepaid, which
amount is reflected as a receivable on Montgomery's balance sheet. DIMC was not
paid any commission with respect to the purchase of the Front Street Office
Building. DIMC's role as broker and its commission amount were approved by
Montgomery's board of directors at a special meeting, with Dinesh Maniar
abstaining.

Liquidity and Capital Resources

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

         As set forth above, the sale of the San Ramon Retail Center provided
Montgomery with net cash of approximately $1,039,000. However, the purchase of
the Front Street Office Building used cash in the amount of $1,085,000, such
that the net effect upon cash of the sale and subsequent purchase was a decrease
of approximately $50,000.

         In addition, subsequent to the purchase and sale agreement between
Montgomery and the seller of the Front Street Office Building, Montgomery paid
DMIC $50,000 under the Development Consulting Agreement Montgomery has also paid
$62,000 under the Development Consulting Agreement for reimbursement and payment
of costs involved in the renovation of the Front Street Office Building and
$10,000 in advances for future costs that are being incurred.

         Therefore, the cash used in the acquisition of the Front Street Office
Building has led to a net reduction in liquidity of $122,000. Management, aware
of the need to continue the renovation of the Front Street Office Building and
to maintain adequate levels of working capital, is currently seeking a
construction lender to take over the renovation costs associated with the Front
Street Office Building, so that the diminution of working capital will not
continue. Historically, whenever Montgomery has had a diminution in its working
capital, its principal shareholder, Dinesh Maniar has made short-term loans to
Montgomery, however, Mr. Maniar is under no obligation to do so in the future
and has made no such commitments as of the date of this report.

                                       11
<PAGE>

         The expenditures for the acquisition and renovation of the Front Street
Office Building are being capitalized to building costs and therefore do not
impact operating revenue. However, the acquisition costs and the renovation
costs are reducing Montgomery's liquidity and will likely continue to do so
until such time as a construction loan or other financing can be obtained.
Historically, Mr. Maniar has provided short-term loans to Montgomery; however,
there is no agreement to do so in the future and we cannot assure that he will
do so in the future.

         However, at this time, Montgomery does not have a commitment for a
construction loan, nor have building permits and related approvals been issued.
Montgomery expects to receive all approvals by March 31, 2004. Therefore, there
are a number of risk factors that can affect Montgomery's long-term liquidity,
especially in view of Montgomery's plan to terminate its current mortgage loan
expenses as they relate to the Front Street Office Building.

         Operating expenses for the Front Street Office Building are minimal, as
the tenant is required to pay for its own utilities and related matters, and
with the absence of other tenants, the common area expenses are currently at
approximately $6,000 per annum.

         However, Montgomery is now no longer paying the mortgage debt on the
San Ramon Retail Center, which was $77,936 per annum, or $6,495 per month (that
mortgage was scheduled for a rate change effective August 1, 2003, and the debt
expense is based upon the historical mortgage expenses under the loan as paid
during the prior three-year period at a fixed rate of 9.03%).

         The net change in mortgage expense is therefore an increase of
approximately $144,000 per year, or $12,000 per month.

         Consequently, the net effect of the sale of the San Ramon Retail Center
and the acquisition of the Front Street Office Building is a net decrease in
annual operating cash flow of approximately $128,000 (before depreciation and
amortization), so that instead of Montgomery having a positive cash flow of
approximately $132,000 per annum (annualizing the net cash flow from operations
for the nine months ended September 30, 2003), Montgomery now has a positive net
cash flow of only $4,000, or $330 per month.

         The second mortgage loan in the amount of $600,000, on the Front Street
Office Building, is due December 1, 2003. The lender has agreed in principle to
extend the maturity date of the loan in consideration of Montgomery's assumption
of the loan. However, Montgomery and the lender are currently negotiating the
loan fees and extension period, as the lender has requested a fee of three
points for a six-month extension and six points for a one-year extension.
Management intends to conclude negotiation with the lender as to the extension
period and the fee structure no later than November 28, 2003. Until we finalize
the terms of the agreement, we cannot assure that the extension will be granted.
If the extension is not granted, we will need to obtain funds to repay the
second mortgage to avoid possible foreclosure, and we currently have no
agreement or arrangement in place to do so.

                                       12
<PAGE>

         Operating Activities

         Operating activities for the nine months ended September 30, 2003, used
net cash of approximately $88,000, compared to net cash of approximately $93,000
provided by operating activities for the nine months ended September 30, 2002, a
decrease of 194.5%.

         Cash at September 30, 2003, decreased to approximately $58,000 from the
balance on December 31, 2002, of approximately $387,000, a decrease of 85%. This
decrease is primarily attributable to the payment of the refundable prepaid
commission fee of $40,000 to DIMC for the sale of the San Ramon Retail Center,
the cash down payment of $1,085,000 to purchase the Front Street Office
Building, the $62,000 renovation reimbursements for the Front Street Office
Building, the $50,000 renovation consulting agreement between Montgomery and
DIMC for the Front Street Office Building, the $10,000 prepaid renovation costs
between Montgomery and DIMC, and the special one-time honorarium payment to the
board of directors of an aggregate of $25,000, or $5,000 per director.

         Investing Activities

         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, of approximately $1,039,000, while cash used to acquire
the Front Street Office Building used approximately $1,085,000. The net effect
of these two transactions is largely responsible for the decrease of
approximately $50,000. In addition, renovation activities involving the Front
Street Office Building have used a total of $122,000, as discussed in more
detail in the section on Liquidity above.

         In addition to cash, the seller of the Front Street Office Building
agreed to pay certain pro rata expenses outside of escrow, due to the time
constraints involved in the exchange. Because of time constraints, the title
company was unable to compute the figures prior to closing. Based upon the
figures now calculated by Montgomery, Montgomery believes that the seller of the
Front Street Office Building owes Montgomery the sum of approximately $27,000,
which is shown as a receivable on Montgomery's balance sheet.

         Further, DIMC was paid $40,000 as a prepaid commission for the sale of
the San Ramon Retail Center. However, the actual commission amount agreed to was
2% of the sale price, such that there is also a receivable to Montgomery from
DIMC in the amount of approximately $2,168.

         Financing Activities

         Montgomery's financing activities for the nine months ended September
30, 2003, included the discharge of all indebtedness associated with the San
Ramon Retail Center and scheduled repayments on existing debt. Montgomery
acquired the Front Street Office Building subject to existing first and second
mortgages of $2,800,000 and $600,000, respectively, however these financing
activities did not result in the exchange of cash. Both of these mortgages are
interest only mortgages, and that portion of the interest expense allocable to
the renovation of the office portion of the Front Street Office Building has
been capitalized during the three months ended September 30, 2003

Equity in Real Estate

         Montgomery has net cash flow from its current activities, which it
believes will continue on a long-term basis, providing sufficient cash to cover
activities, other than new acquisitions, renovations 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, Montgomery's principal methods
for obtaining acquisition and renovation capital come from either additional
financing activities, as discussed below, or the sale or exchange of existing
real estate assets, so as to realize a cash or trade value from the equity
generated by appreciation of real estate assets. Absent additional capital from
financing activities or the sale or exchange of real estate assets, Montgomery
may not have sufficient cash flow to fund expansions or acquisitions.

                                       13
<PAGE>

Capital Requirements

         Based upon independent appraisals performed between October 1998 and
July 2003, Montgomery's properties had a combined value of approximately
$30,105,000 at September 30, 2003, as compared to the historical cost, net of
depreciation of approximately $11,368,000, at which such properties are reported
in Montgomery's financial statements as of September 30, 2003. The related
indebtedness secured by such properties totaled approximately $15,117,000 as of
September 30, 2003.

         However, as a result of the exchange in July 2003, the cumulative
effect on assets and fair market values, based on independent third-party
evaluations obtained by Montgomery by qualified independent appraisers as shown
in Footnote 2 to the audited financial statements of Montgomery's 10-KSB for the
year ended December 31, 2002 (with the exception of the Front Street Office
Building, which is shown at the purchase price for all purposes), is shown as
follows:

                                          Historical Cost   Fair Market Values
                                          ---------------   ------------------
         Assets:

         Keker & Van Nest Building:        $  4,593,808        $  6,750,000
         Orchard Supply Shopping Center       4,185,104           6,500,000
         Eccles Project                         539,500          12,370,000
         Front Street Office Building.        4,485,000           4,485,000
                                           ------------        ------------
                  TOTAL                    $ 13,803,412        $ 30,105,000
                                           ============        ============

Therefore, Montgomery's properties have a combined fair market value of
approximately $30,105,000 based on the most recent appraisals available as of
September 30, 2003, as compared to the historical cost, net of depreciation at
September 30, 2003, of approximately $11,368,000, at which such properties will
be reported in Montgomery's financial statements in future periods. The
difference of approximately $14,988,000 represents an important financial
resource for Montgomery. The aggregate indebtedness of Montgomery's properties
totaled approximately $15,117,000 as of September 30, 2003.

         Montgomery's plans to expand its asset base have been realized in part
with its sale of the San Ramon Shopping Center and the acquisition of the Front
Street Office Building. The net proceeds from the sale of the San Ramon Retail
Center were approximately $1,039,000. Those proceeds were used by Montgomery to
expand its asset base and provide for both increased net worth and the potential
for increased cash flow and increased appreciation on a larger asset base.
Montgomery continues to seek expansion of its asset base. Although immediate
plans for expansion are focused upon the renovation of the Front Street Office
Building and bringing its value up to approximately $6,500,000, Montgomery
believes that the successful renovation, leasing and refinancing of the Front
Street Office Building will help Montgomery establish a successful track record
as a real estate development company. While long-term expansion remains focused
upon the development, sale or exchange of the Eccles Project, Montgomery has no
specific development or other plans as to that property at this time.

         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, refinancings through commercial loan sources, as well as
through the sale of debt or equity securities.

                                       14
<PAGE>

Exchange of San Ramon Retail Center for the Front Street Office Building

         On July 25, 2003, Montgomery closed the sale of its San Ramon Retail
Center in San Ramon, California, to an unrelated party in an arm's-length
transaction for approximately $1,892,000 in cash. The San Ramon Retail Center
consists of a 4,823 square foot building situated on 0.21 acres of land and is
contiguous with Montgomery's Orchard Supply Shopping Center. The sale resulted
in net proceeds to Montgomery of approximately $1,039,000, after payment of
approximately $789,000 for principal and interest due on existing mortgages and
other sales and closing expenses. The net proceeds were paid to an unrelated
exchange accommodator to be held and used to acquire a new property for
Montgomery in transactions intended to meet the requirements of Internal Revenue
Code Section 1031, which sets forth the conditions that must be met in order for
two parties to exchange like-kind real property without triggering taxation of
the amount by which the value of the consideration received exceeds the tax
basis of the property transferred.

         The buyer, which is owned by the former tenant at the property, has
advised Montgomery that the buyer intends to continue to operate its business at
the property and thus qualifies as an end-user purchaser under Section 1031. The
buyer and its affiliate have no contractual obligation to Montgomery to continue
in business for such period, and Montgomery cannot assure that the buyer will do
so. The buyer must hold the property as an end-user purchaser for at least two
years after the transaction in order for Montgomery's sale to qualify for
treatment under Section 1031.

         On July 16, 2003, Montgomery's board of directors elected to proceed
with the sale prior to any extension date Montgomery was otherwise entitled to
under its contract with the buyer in order to enable the buyer to complete its
acquisition loan before expiration of the loan commitment.

         The board also reviewed the options for an exchange property for
purposes of qualifying the transaction under Section 1031 and determined that,
given the current economic conditions in the San Francisco Bay area, it was in
the best interests of Montgomery to acquire from Dinesh Maniar, the president
and 97.3% shareholder of Montgomery, an office building commonly known as the
Front Street Office Building in the heart of downtown San Francisco at 234-240
Front Street.

         The Front Street Office Building was erected in 1927 and contains
approximately 17,176 net rentable square feet on approximately 0.14 acres of
land. The ground floor and basement of the Front Street Office Building have
been occupied for over 40 years by a single tenant, Schroeders' Restaurant.

         The Front Street Office Building was appraised on July 9, 2002, at a
stabilized value of $4,380,000 and with an as-is price of $4,030,000. These
figures do not take into account the capitalized costs incurred by Mr. Maniar
from September 18, 2002, to July 30, 2003.

         Montgomery purchased the Front Street Office Building from Mr. Maniar
for $4,485,000. This price was based upon Mr. Maniar's capitalized cost of
$4,533,346, consisting of the $4,030,000 purchase price Mr. Maniar paid to an
unaffiliated party in an arm's-length transaction on September 18, 2002; $56,346
in closing costs; and $447,000 in fees for architects and related capitalized
carrying costs. The architectural fees were incurred to develop plans to
renovate the office space and basement and expand the effective space for
Schroeders' Restaurant, while at the same time providing a wine tasting room at
the front of the building for another of Mr. Maniar's ventures, Diamond Oaks
Vineyards. The renovation plans were included with the purchase. Montgomery
closed the purchase and exchange and took possession of the Front Street Office
Building on July 30, 2003.

                                       15
<PAGE>

         Cumulative Effects on Montgomery's Earnings of the Exchange for the
         Front Street Office Building

         The San Ramon Shopping Center has generated net operating income of
approximately $40,000 per annum in recent years, before depreciation and
amortization. The Front Street Office Building has current annual debt expense
of approximately $222,000, while the income from Schroeders' Restaurant is
approximately $132,000 per annum, so that without a renovation, the Front Street
Office Building would be expected to generate a net operating loss (before
depreciation and amortization) of approximately $90,000 per annum. However,
after the renovation of the Front Street Office Building as discussed below,
Montgomery's net cash flow on the property should increase to approximately
$105,000 per annum.

         The board of directors agreed to acquire the property subject to the
existing loans of approximately $3,400,000 and use the net cash proceeds from
the San Ramon Retail Center sale of approximately $1,039,000 to finance the
purchase. The board of directors also reviewed and approved the purchase and
sale agreement, which provides for a development and consulting agreement with
DIMC.

         The purchase of the Front Street Office Building was unanimously
approved by the board of directors of Montgomery, with Mr. Maniar abstaining. In
approving the transaction, the board of directors considered in particular the
cost per square foot price of the Front Street Office Building as compared to
comparable properties; the proposal from affiliates of Mr. Maniar to lease the
top floor and a portion of the expanded basement for an aggregate of $16,000 per
month; the Schroeders' Restaurant lease, which pays over $11,000 per month; and
the potential for market appreciation.

Tax Matters

         The sale of the San Ramon Retail Center by Montgomery and Montgomery's
subsequent purchase of the Front Street Office Building were structured as a
tax-free exchange, using an "exchange accommodator" pursuant to the requirements
of the Internal Revenue Code. An "exchange accommodator" is an unrelated
third-party intermediary to whom all proceeds from the sale of the San Ramon
Retail Center were paid over, and it was the exchange accommodator that acted as
the purchaser of the Front Street Office Building. The use of an exchange
accommodator prevents the proceeds from a sale from being paid to the seller, so
that subsequent use of the sale proceeds to acquire a replacement like-kind
property will have been done solely by the exchange accommodator. This prevents
Montgomery from having been deemed to have received income from the sale of the
San Ramon Retail Center and shields Montgomery from income taxes based upon
Montgomery's receipt of the sale proceeds.

         Montgomery's board of directors acknowledged that the use of a
qualified exchange accommodator would be appropriate and authorized the
structuring of the transaction in that manner. Although the use of an exchange
accommodator normally ensures that a sale and purchase of like-kind property
will qualify for tax-free exchange treatment under Internal Revenue Code ss.
1031, it is not a guarantee of such a result. When, as here, the property
acquired in the exchange (i.e., the Front Street Office Building) is acquired
from a related party (i.e., Mr. Maniar), special rules apply. The exchange
transaction must meet the additional requirements of Internal Revenue Code ss.
1031(f) and the applicable regulations, which essentially require that the
property sold and the property purchased be held by the respective buyers for a
two-year period pursuant to ss.ss. 1031(f) and 1031(g). Although there is no
case law or other binding authority on this point, the Internal Revenue Service
in Revenue Ruling 2002-83 indicated that the IRS will take the position that any
transfer between related parties involving an exchange accommodator will violate
the two-year holding period requirement of Internal Revenue Code ss.ss. 1031(f)
and 1031(g). Consequently, the ultimate tax consequences of the exchange have
not yet been determined. All such tax matters involve a high degree of
uncertainty, additional investigations using outside accountants and tax
attorneys is still ongoing, and no decision needs to be made by Montgomery until
its 2003 tax return is filed in March 2004.

                                       16
<PAGE>

         Even if the exchange is ultimately deemed to be taxable, Montgomery has
a federal net operating loss carryforward, as of December 31, 2002, as shown on
its federal income tax return, in the amount of approximately $1,078,000, which
net operating loss (NOL) can be used to offset any tax liability otherwise
owing. That is, even if the gain from the sale of the San Ramon Retail Center in
the amount of approximately $896,000 would in and of itself entail federal
income tax of approximately $314,000 (i.e., $896,000 multiplied by 35%),
together with California income tax of approximately $45,000 (which amounts
combined form the tax provision for the discontinued operations), Montgomery
would not pay federal taxes. California has a limitation on the use of net
operating losses, and therefore the $45,000 may be payable in 2004 under
California law. Nevada, the state of Montgomery's incorporation, does not impose
a corporate income tax.

         In preparing the financial statements, two separate tax provisions were
computed, one for the effects of current operating losses and another for the
potential taxable gain based upon the sale of the San Ramon Retail Center.

         The tax provision based upon the current operating loss of Montgomery
is approximately $36,000 as shown in the financial statements and as discussed
in Footnote 5 thereto. This provision is a tax benefit that arises because
Montgomery's assets were acquired from Dinesh Maniar, the majority shareholder
from Montgomery, in June 1999. At the time of the transfer of assets, the assets
were received by Montgomery with a tax basis in the real estate assets that is
greater than their historical costs as reflected on the financial statements.
Thus, federal tax depreciation and related matters provide greater economic
effect, which creates the tax benefit shown. These same deductions give rise to
the net operating loss carryforward.

         The sale of the San Ramon Retail Center on July 25, 2003, resulted in
gain in the amount of approximately $896,000 as reflected on the financial
statements for the period ending September 30, 2003. This gain on sale, if
taxed, would result in federal and California income taxes in the combined
amount of approximately $396,000. This potential income tax liability is
reflected as a reduction in the net income, and shown in the Discontinued
Operations--Provision for Income Taxes. Again, this tax provision does not
necessarily reflect the actual amount of tax that will be paid, bur rather the
tax effect of the sale transaction taken in isolation.

Front Street Office Building Project

         Montgomery is in the process of 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. Such renovation is
based upon plans drawn by an outside architect that Montgomery purchased for
$14,000. Montgomery, with the assistance of 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, Montgomery anticipates renovating the top three floors
into first class office space in downtown San Francisco.

         Montgomery is also seeking to reacquire certain transferable
development rights, or TDRs, to erect office buildings in downtown San Francisco
in excess of that otherwise permitted by the City'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 from others the seller's TDRs, 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; 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.

                                       17
<PAGE>

         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 detailed
architectural plans and specifications (with a currently-estimated cost of
approximately $200,000) and building permits from the City of San Francisco are
actually issued, it is unlikely that a commitment will be made to Montgomery.
Additionally, given Montgomery's lack of history in real estate 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. No assurance that Mr. Maniar will do so can be made.

         A decision to go forward with such a renovation would subject
Montgomery to a number of risks that could keep Montgomery from realizing any
economic benefit from such a renovation, including:

         o        adverse changes in general economic conditions;

         o        adverse changes in local conditions, such as excessive
                  building, resulting in an oversupply of commercial units in an
                  area where Montgomery's properties are located;

         o        reduction in the appeal of particular types of properties;

         o        reduction in the cost of operating competing properties or
                  decreases in employment that reduce the demand for properties
                  in the area;

         o        the possible need for unanticipated renovations, particularly
                  in older structures;

         o        adverse changes in surrounding land values;

         o        adverse changes in zoning laws, other laws and regulations and
                  real property tax rates;

         o        damage from earthquakes or other natural disasters;

         o        the availability and expense of liability insurance; and

         o        the ability of the enterprise to provide for adequate
                  maintenance of its property.

         There can be no assurance that any property will be sufficiently
occupied at rents sufficient to ensure sustained operations or allow adequate
cash flows to Montgomery to secure take out financing to pay off the
construction loan. The success of Montgomery and any of Montgomery's investments
will depend upon factors that may be beyond the control of Montgomery,
Montgomery's directors, or any of its officers, and cannot be predicted at this
time.

                                       18
<PAGE>

         Montgomery's renovation of the Front Street Office Building will be
subject to construction and renovation risks. In the event Montgomery undertakes
renovation of the Front Street Office Building or any other property, such
construction and renovation activities will expose Montgomery to certain risks
such as cost overruns, carrying costs, availability and costs of materials and
labor, weather conditions and government regulation. Additionally, Montgomery
will incur costs in connection with the design and implementation of any
renovation and costs in connection with performing certain oversight and review
functions, including costs for reviewing construction design proposals,
negotiation and contracting for feasibility studies, and supervising compliance
with local, state and federal laws and regulations.

         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 Schroeders', 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 as set forth in the Purchase and Sale Agreement. Also, DIMC
has agreed to lease the renovated top floor of the Front Street Office Building
for $120,000 per annum 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.
Montgomery anticipates that it will be able to lease the space for approximately
$30 to $40 per square foot per year. See discussion of Liquidity and Capital
Resources above.

         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 up to $300,000 to $400,000
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.

         The San Francisco commercial lease market is very volatile, having seen
some of the highest prices for office space in the United States during the
height of the "dot-com boom" quickly followed by extremely low rental rates
following the downturn in the stock market in 2001, with rental rates falling as
much as 75%. Consequently, the actual rent will be determined by market
conditions at the time the renovation is completed, which cannot be fully
predicted. Further, demand for office space in downtown San Francisco may vary
due to other factors beyond the control of Montgomery ranging from adverse
economic conditions related to incidents such as the tragedy of the September
11, 2001 attack, to worldwide markets. San Francisco is a major port city, with
much of its business dealing with Pacific Rim businesses. These are merely
examples of the various conditions that could affect not only the rental rates,
but the cost of leasing, the amount of time to lease the property, and
ultimately whether or not a full lease does occur.

         As discussed above, Montgomery has entered into a written contract with
DIMC for DIMC to act as Montgomery's agent with respect to obtaining the
building permits, obtaining 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 broker to assist Montgomery in leasing the building once all
renovation is completed. Montgomery has no employees, while DIMC , which was
formed in 1991, has a professional staff with over 14 years of experience with
property management, tenant relations, and real estate development and
renovation.

                                       19
<PAGE>

         In addition to the foregoing risks of renovation of the Front Street
Office Building, there are further risks associated with the renovation of any
building initially erected in 1927. While Montgomery believes the Front Street
Office Building meets all material, current San Francisco City and County
building code requirements, including requirements regarding earthquake
structural integrity and related matters, any renovation of a building that is
now 75 years old may result in the discovery of matters that are not apparent in
the building's current condition. Accordingly, once alterations begin, certain
matters that may impact compliance with the San Francisco City and County
building codes or the structural integrity of the building may come to light.
Montgomery will be required to incur the costs necessary to bring the building
into compliance. Such additional costs and related delays, if any, could have a
significant impact upon the renovation and economic feasibility of the
renovation.

         Montgomery believes that the successful renovation of the Front Street
Office Building will help establish a record of successful real estate
renovation and development for Montgomery and wishes to employ DIMC because of
its experience in real estate development, financing and leasing. Fees for DIMC
personnel will range from $225 to $75 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. With a successful renovation in its history, Montgomery believes
that it is more likely to obtain a good price for its Eccles Project and
increase its chances of successful renovation of that site should the board of
directors choose such a course of action.

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 28 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.

                                       20
<PAGE>

Properties Listed for Sale

         In order to maximize its potential sources of operating capital,
Montgomery has 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 concerns the Keker &
Van Nest Office Building, which is listed at $9,200,000. The second exclusive
listing agreement concerns the Eccles Project, which is listed at $11,000,000.

         Montgomery's management has not made a final determination as to
whether or not to sell these properties and, therefore, a sale of either of
these assets within one year is not currently anticipated such that reporting
under FASB 144 would be required. However, Montgomery is interested in
ascertaining the level of interest in these properties, and should a bona fide
offer be made at a reasonable price, Montgomery's management will present the
offer to the board of directors for its review and direction.

         Montgomery's management deems the continued listing of its real estate
assets an important aspect of its business as the equity in these properties is
a primary source of long term financing, whether by sale, refinancing or
leasing. Hence, determining the market's valuation of these properties is an
important source of information for Montgomery's management.

Other Transactions

         DIMC, which is 100% owned by Dinesh Maniar, who also owns approximately
97.3% of Montgomery's common stock, acted as broker for Montgomery and received
a commission of 2% of the gross sales price. DIMC was not paid a commission for
the purchase of the Front Street Office Building. DIMC's role as broker and its
commission amount were approved by Montgomery's board of directors at a special
meeting, with Dinesh Maniar abstaining.

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.

                                       21
<PAGE>

                         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 officer and
chief financial officer concluded that its disclosure controls and procedures
are effective in alerting him 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.

                                       22
<PAGE>

                           PART II. OTHER INFORMATION


                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits. The following exhibits are included as part of this
report at the location indicated:
<TABLE>
<CAPTION>
                SEC
   Exhibit    Reference
   Number      Number        Title of Document                                              Location
-----------  ---------- ----------------------------------------------------------------- ------------
  <S>           <C>     <C>                                                                 <C>
   Item 10              Material Contracts
-----------  ---------- ----------------------------------------------------------------- ------------
    10.01        10     Development Consulting Agreement between Diversified Investment &   Attached
                        Management Corporation (as consultant) and Montgomery Realty
                        Group, Inc. (as owner), dated August 1, 2003
   Item 31              Rule 13a-14(a)/15d-14(a) Certifications
-----------  ---------- ----------------------------------------------------------------- ------------
    31.01        31     Certification of Chief Executive Officer Pursuant to Rule 13a-14    Attached
    31.02        31     Certification of Chief Financial Officer Pursuant to Rule 13a-14    Attached

   Item 32              Section 1350 Certifications
-----------  ---------- ----------------------------------------------------------------- ------------
    32.01        32     Certification of Chief Executive Officer Pursuant to 18 U.S.C.      Attached
                        Section 1350, as Adopted Pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002
    32.02        32     Certification of Chief Financial Officer Pursuant to 18 U.S.C.      Attached
                        Section 1350, as Adopted Pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002

</TABLE>

         (b) Reports on Form 8-K. During the quarter ended September 30, 2003,
Montgomery filed the following report on Form 8-K:

       Date of Event Reported                      Items Reported
      -----------------------       --------------------------------------------
           July 25, 2003            Item 2. Acquisition or Disposition of Assets
                                    Item 7. Financial Statements and Exhibits

                                       23
<PAGE>

                                   SIGNATURES

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

                                               MONTGOMERY REALTY GROUP, INC.
                                               (Registrant)



Date: November 19, 2003                        By:  /s/ Dinesh Maniar
                                                   -----------------------------
                                                   Dinesh Maniar, President
                                                   Principal Executive Officer



Date: November 19, 2003                        By:  /s/ O. Lee Barnett
                                                   -----------------------------
                                                   O. Lee Barnett
                                                   Principal Financial Officer

                                       24