<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

         [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2003

                         Commission File Number 1-14784

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                    -----------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

             NEVADA                                               75-2615944
-------------------------------                              -------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

  1800 Valley View Lane, Suite 300, Dallas, Texas,                   75234
--------------------------------------------------------------------------------
      (Address of Principal Executive Offices)                    (Zip Code)

                                 (469) 522-4200
                         -------------------------------
                         (Registrant's Telephone Number,
                              Including Area Code)

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

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 [ ]

Common Stock, $.01 par value                          1,438,945
----------------------------               ------------------------------
         (Class)                           (Outstanding at July 31, 2003)

                                       1

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements have not been audited by
independent certified public accountants, but in the opinion of the management
of Income Opportunity Realty Investors, Inc. ("IORI"), all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
IORI's consolidated financial position, consolidated results of operations and
consolidated cash flows at the dates and for the periods indicated, have been
included.

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 June 30,         December 31,
                                                                                  2003                2002
                                                                                 --------         ------------
                                                                                     (dollars in thousands,
                                                                                       except per share)
<S>                                                                              <C>              <C>
                                ASSETS

Real estate held for investment ..............................................   $ 75,722         $     82,252
Less - accumulated depreciation ..............................................     (7,191)              (7,502)
                                                                                 --------         ------------
                                                                                   68,531               74,750
Real estate held for sale ....................................................      5,000                    -
Investment in real estate partnerships .......................................        599                  609
Cash and cash equivalents ....................................................        274                   10
Other assets (including $10,511 in 2003 and $10,497 in 2002 from affiliates)..     14,986               14,816
                                                                                 --------         ------------
                                                                                 $ 89,390         $     90,185
                                                                                 ========         ============
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       2

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                     CONSOLIDATED BALANCE SHEETS - CONTINUED

<TABLE>
<CAPTION>
                                                                                         June 30,   December 31,
                                                                                           2003         2002
                                                                                         --------   -----------
                                                                                         (dollars in thousands,
                                                                                            except per share)
<S>                                                                                      <C>        <C>
                        LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Notes and interest payable...........................................................    $ 46,649   $    47,351
Liabilities related to assets held for sale .........................................       4,056         4,081
Other liabilities (including $32 in 2003 and $33 in 2002 to affiliates)..............       1,744         1,446
                                                                                         --------   -----------
                                                                                           52,449        52,878

Commitments and contingencies .......................................................           -             -

Stockholders' equity

Common Stock, $.01 par value;  authorized  10,000,000 shares;  issued and outstanding
1,438,945 shares in 2003 and 2002.....................................................         14            14
Paid-in capital ......................................................................     62,774        62,774
Accumulated deficit ..................................................................    (25,847)      (25,481)
                                                                                         --------   -----------
                                                                                           36,941        37,307
                                                                                         --------   -----------
                                                                                         $ 89,390   $    90,185
                                                                                         ========   ===========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       3

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                       For the Three Months      For the Six Months
                                           Ended June 30,           Ended June 30,
                                       --------------------      ------------------
                                         2003         2002        2003        2002
                                       -------      -------      -------     ------
                                          (dollars in thousands, except per share)
<S>                                    <C>          <C>          <C>        <C>
Property revenue
   Rents ..........................    $ 2,445      $ 2,302      $ 4,712    $ 4,644

Property expense
   Property operations(including
     $-0- in 2003 and $96 in 2002
     to affiliates and related
     parties) .....................      1,355        1,299        2,612      2,460
                                       -------      -------      -------     ------
   Operating income ...............      1,090        1,003        2,100      2,184

Other income
   Interest .......................        614          310          614        348
   Equity in income (loss) of
      equity partnerships .........          -           48          (15)        30
   Recovery of loss provision on
      receivable from related party      1,569            -        1,569          -
                                       -------      -------      -------     ------
                                         2,183          358        2,168        378

Other expense
   Interest .......................      1,185        1,252        2,341      2,146
   Depreciation ...................        490          425          849        860
   Advisory fee to affiliate ......        167          163          334        348
   Net income fee to affiliate ....          -            -            -        411
   Provision for loss .............          -            -            -        767
   Impairment loss on real estate
      held for sale                        653            -          653          -
   General and administrative
   (including $-0- in 2003 and
     $157 in 2002 to affiliates
     and related parties) .........        114          352          369        637
                                       -------      -------      -------     ------
                                         2,609        2,192        4,546      5,169
                                       -------      -------      -------     ------
Net income (loss) from continuing
operations ........................        664         (831)        (278)    (2,607)
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       4

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   For the Three Months          For the Six Months
                                                                      Ended June 30,               Ended June 30,
                                                                 ------------------------       -----------------------
                                                                   2003            2002            2003          2002
                                                                 ---------      ---------       ----------    ---------
                                                                      (dollars in thousands, except per share)
<S>                                                              <C>            <C>             <C>           <C>
Discontinued operations:
   Income (loss) from operations ..........................             (32)           (58)            (88)         (314)
   Gain on sale of operations .............................               -              -               -         7,105
                                                                 ----------     ----------      ----------    ----------
                                                                        (32)           (58)            (88)        6,791
                                                                 ----------     ----------      ----------    ----------
Net income (loss)..........................................      $      632     $     (889)     $     (366)   $    4,184
                                                                 ==========     ==========      ==========    ==========
Earnings (loss) per share
   Net income (loss) from continuing operations............      $      .46     $     (.58)     $     (.19)   $    (1.81)
   Discontinued operations ................................            (.02)          (.04)           (.06)         4.73
                                                                 ----------     ----------      ----------    ----------
      Net income (loss)....................................      $      .44     $     (.62)     $     (.25)   $     2.92
                                                                 ==========     ==========      ==========    ==========

Weighted average Common shares used in computing earnings
per share..................................................       1,438,945      1,438,945       1,438,945     1,438,945
                                                                 ==========     ==========      ==========    ==========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       5

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                     For the Six Months Ended June 30, 2003

<TABLE>
<CAPTION>
                                          COMMON STOCK             PAID-IN         ACCUMULATED     STOCKHOLDERS'
                                      SHARES        AMOUNT         CAPITAL           DEFICIT          EQUITY
                                    ---------      ---------      ----------       -----------     -------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                 <C>            <C>            <C>              <C>             <C>
BALANCE, JANUARY 1, 2003......      1,438,945      $      14      $   62,774       $   (25,481)     $   37,307
Net loss .....................              -              -               -              (366)           (366)
                                    ---------      ---------      ----------       -----------      ----------
BALANCE, JUNE 30, 2003........      1,438,945      $      14      $   62,774       $   (25,847)     $   36,941
                                    =========      =========      ==========       ===========      ==========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       6

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                For the Six Months
                                                                                   Ended June 30,
                                                                               --------------------
                                                                                 2003        2002
                                                                               --------    --------
                                                                               (dollars in thousands)
<S>                                                                            <C>         <C>
Net income (loss) ..........................................................   $   (366)   $  4,184
   Reconciliation of net income (loss) to net
         cash used in operating activities
   Adjustments to reconcile net income (loss)
         to net cash used in operating activities
         Depreciation ......................................................      1,187       1,290
         (Income) loss on impairment of fixed asset ........................        653      (7,105)
         (Income) loss of equity partnerships ..............................         15         (30)
         Distributions from equity partnerships' operating cash flow .......         --          42
         Provision for loss ................................................         --        (767)
         Change in interest receivable .....................................        (85)       (183)
         Change in other assets ............................................       (215)        884
         Change in interest payable ........................................       (369)         (4)
         Change in other liabilities .......................................        298         346
                                                                               --------    --------

         Net cash provided by (used in) operating activities ...............      1,118      (1,343)

Cash Flows from Investing Activities
   Collections on notes receivable .........................................         --         500
   Funding of notes receivable (including $5,109 in 2002 to related parties)                 (7,109)
   Funding of equity partnerships ..........................................         --          (5)
   Real estate improvements ................................................       (362)       (317)
   Proceeds from sale of real estate .......................................         --      14,575
                                                                               --------    --------

         Net cash provided by (used in) investing
            activities .....................................................       (362)      7,644
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       7

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
                                                                                        For the Six Months
                                                                                          Ended June 30,
                                                                                       ---------------------
                                                                                         2003         2002
                                                                                       --------    ---------
                                                                                       (dollars in thousands)
<S>                                                                                    <C>         <C>
Cash Flows from Financing Activities
   Payments on notes payable .......................................................   $   (358)   $ (23,134)
   Proceeds from notes payable .....................................................          -       23,152
   Payments to affiliate ...........................................................          -       (3,920)
   Payments to advisor .............................................................        (14)      (1,507)
   Deferred financing costs ........................................................       (120)        (889)
                                                                                       --------    ---------
         Net cash used in financing activities .....................................       (492)      (6,298)

Net increase in cash and cash equivalents ..........................................        264            3

Cash and cash equivalents, beginning of period .....................................         10           66
                                                                                       --------    ---------
Cash and cash equivalents, end of period............................................   $    274    $      69
                                                                                       ========    =========
Supplemental Disclosures of Cash Flow Information
   Cash paid for interest..........................................................    $  2,496    $     974
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       8

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
Operating results for the six month period ended June 30, 2003, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. For further information, refer to the Consolidated Financial
Statements and notes thereto included in IORI's Annual Report on Form 10-K for
the year ended December 31, 2002 (the "2002 Form 10-K"). Dollar amounts in
tables are in thousands, except per share amounts.

Certain balances for 2002 have been reclassified to conform to the 2003
presentation.

On January 1, 2002, IORI adopted Statement 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS No. 144"). The Statement superceded
Statement 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS No. 121") and Accounting Principles
Board Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" ("APB 30"), for business
segments that are to be disposed. SFAS 144 retains the requirements of SFAS No.
121 relating to the recognition and measurement of an impairment loss and
resolves certain implementation issues resulting from SFAS No. 121. The adoption
of SFAS No. 144 did not have a material impact on the consolidated financial
position or results of operations of IORI.

In April 2002, the FASB issued Statement 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Correction"
("SFAS No. 145"). Statement 4, "Reporting Gains and Losses from Extinguishment
of Debt" ("SFAS No. 4"), required that gains and losses from the extinguishment
of debt that were included in the determination of net income be aggregated and,
if material, classified as an extraordinary item. The provisions of SFAS No. 145
related to the rescission of SFAS No. 4 will require IORI to reclassify prior
period items that do not meet the extraordinary classification. The provisions
of SFAS No. 145 that related to the rescission of SFAS No. 4 became effective in
fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 is not
expected to have a material impact on the consolidated financial position or
results of operations of IORI.

                                       9

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 1. BASIS OF PRESENTATION (CONTINUED)

In June 2002, the FASB issued SFAS No. 146, "Accounting for costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force ("EITF") Issue No. 94-3. IORI has adopted
the provisions of SFAS No. 146 for restructuring activities initiated after
December 31, 2002. SFAS No. 146 requires that the liability for costs associated
with an exit or disposal activity be recognized when the liability is incurred.
Under EITF No. 94-3, a liability for an exit cost was recognized at the date of
a company's commitment to an exit plan. SFAS No. 146 also establishes that the
liability should initially be measured and recorded at fair value. Accordingly,
SFAS No. 146 may affect the timing of recognizing future restructuring costs as
well as the amount recognized.

Effective June 30, 2003 IORI terminated its Advisory Agreement with Basic
Capital Management, Inc. Basic Capital Management, Inc. had served as IORI's
advisor since 1989. On July 1, 2003 IORI entered into an Advisory Agreement with
Syntek West, Inc., the owner and holder of approximately 54.3% of IORI's common
stock. All of the issued and outstanding stock of Syntek West, Inc. is owned by
Gene Phillips. The new advisory agreement with Syntek West, Inc. contains the
same terms as the old one with Basic Capital Management, Inc.

NOTE 2. REAL ESTATE

In 2003, IORI sold the following property:

<TABLE>
<CAPTION>
                                                 SALES     NET CASH        DEBT        GAIN
    PROPERTY             LOCATION      SQ.FT.    PRICE     RECEIVED     DISCHARGED    ON SALE
---------------         ----------    -------    -----     --------     ----------    -------
<S>                     <C>           <C>        <C>       <C>          <C>           <C>
THIRD QUARTER
OFFICE BUILDING
5600 MOWRY              NEWARK, CA    56,120     $5,000    $  1,113      $   4,056     $  653
                                      SQ.FT.
</TABLE>

In 2002, IORI sold the following property:

<TABLE>
<CAPTION>
                                                  SALES     NET CASH        DEBT        GAIN
    PROPERTY              LOCATION      SQ.FT.    PRICE     RECEIVED     DISCHARGED    ON SALE
---------------           --------      ------    -----     --------     ----------    -------
<S>                    <C>             <C>       <C>        <C>          <C>           <C>
FIRST QUARTER
OFFICE BUILDING
DALEY CORPORATE        SAN DIEGO, CA   124,059   $15,500    $  7,820     $    6,618    $ 7,105
CENTER                                 SQ.FT.
</TABLE>

                                       10

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 3. NOTES AND INTEREST RECEIVABLE

There were no new notes funded in 2003.

In January 2002, IORI purchased 100% of the outstanding common shares of
Rosedale Corporation ("Rosedale"), a wholly-owned subsidiary of American Realty
Investors, Inc. ("ARI"), a related party, for $5.1 million cash. Rosedale owns
the 83,331 sq. ft. Rosedale Towers Office Building in Roseville, Minnesota.

ARI guaranteed that the asset would produce at least a 12% return annually of
the purchase price for a period of three years from the purchase date. If the
asset failed to produce the 12% return, ARI would pay IORI any shortfall. In
addition, if the asset failed to produce the 12% return for a calendar year,
IORI could require ARI to repurchase the shares of Rosedale for the purchase
price. Management classified this related party transaction as a note receivable
from ARI. In the first quarter of 2002, after reviewing the property's fair
value after costs to sell, even though ARI had guaranteed the 12% return, IORI
recognized a provision for loss on the note receivable of $767,000. In December
2002, the Rosedale Towers Office Building was sold for $7.2 million. ARI
received $3.5 million in proceeds after the payment of the first lien debt and
various closing costs and IORI recognized an additional loss of $801,000 on its
note. The $3.5 million received by ARI is included within other assets in the
accompanying December 31, 2002 Consolidated Balance Sheet. The remaining $1.5
million is included within other assets in the accompanying June 30, 2003
Consolidated Balance Sheet. In April 2003, IORI received a $2.0 million paydown
from ARI on the receivable.

In February 2002, IORI funded a $2.0 million mortgage loan as a participation
agreement with Transcontinental Realty Investors, Inc. ("TCI"), a related party.
The loan was secured by a second lien on a retail center in Montgomery County,
Texas. The note receivable bore interest at 16.0% per annum, required monthly
interest only payments of $47,000 and matured in February 2002. In February
2002, the loan was extended until April 2002. In April 2002, IORI extended the
loan until July 2002, receiving $8,500 as an extension fee. In July 2002, the
loan was extended until September 2002, with IORI receiving $8,500 as an
extension fee. Of the $2.0 million in principal payments, $1.5 million was
received by TCI and $500,000 was received by Basic Capital Management, Inc.
("BCM"), an affiliate and the advisor to IORI. These amounts are included within
receivable from affiliates in the accompanying Consolidated Balance Sheets.

                                       11

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 4. OTHER ASSETS

Related Party. From time-to-time, IORI and its affiliates and related parties
have made advances to each other to fund their respective operations, which
generally have not had specific repayment terms and have been reflected in
IORI's financial statements as other assets.

At June 30, 2003, IORI had receivables of $1,797,000, $3,454,000 and $5,260,000
from BCM, ARI and TCI, respectively.

NOTE 5. NOTES AND INTEREST PAYABLE

In April 2002, IORI sold all of its residential properties to partnerships
controlled by Metra Capital, LLC ("Metra"). These properties include: the 60
unit Brighton Court, the 92 unit Del Mar, the 68 unit Enclave, the 280 unit
Meridian, the 57 unit Signature, and the 114 unit Sinclair, located in Midland,
Texas, and the 106 unit Treehouse, located in San Antonio, Texas. Innovo Realty,
Inc., a subsidiary of Innovo Group, Inc. ("Innovo") is a limited partner in the
partnerships that purchased the properties. Joseph Mizrachi, a director until
July 2003 of ARI, a related party, controls approximately 11.67% of the
outstanding common stock of Innovo. The sale constituted 23.39% of the total
assets of IORI as of December 31, 2001. The sales price for the properties
totaled $26.2 million. IORI received $5.4 million in cash after the payoff of
$16.1 million in debt and various closing costs. Management has determined to
account for this sale as a refinancing transaction, in accordance with SFAS No.
66, "Accounting for Sales of Real Estate." IORI will continue to report the
assets and the new debt incurred by the Metra partnerships on the IORI financial
statements. The new debt on the properties totals $21.3 million, bears interest
at 7.57% per annum, requires monthly interest only payments of $135,000 and
matures in May 2012. IORI also received $5.2 million of 8% non-recourse,
non-convertible Series A Preferred Stock ("Preferred Shares") of Innovo.

The dividend on the Preferred Shares will be funded entirely and solely through
member distributions from cash flows generated by the operation and subsequent
sale of the sold properties. In the event the cash flows for the properties are
insufficient to cover the 8% annual dividend, Innovo will have no obligation to
cover any shortfall.

The Preferred Shares have a mandatory redemption feature, and are redeemable
from the cash proceeds received by Innovo from the operation and sale of the
properties. All member distributions that are in excess of current and accrued
8% dividends, must be used by Innovo to redeem the Preferred Shares. Since
redemption of these shares is subject to the above future events, management has
elected to record no basis in the Preferred Shares.

                                       12

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 6. RELATED PARTY TRANSACTIONS

On September 19, 2002, IORI's Board of Directors authorized the Chief Financial
Officer of the Company to advance funds either to or from the Company, through
BCM, in an amount up to $5.0 million on the condition that such advances shall
be repaid in cash or transfers of assets within 90 days.

The following table reconciles the beginning and ending balances of Accounts
Receivable from Affiliates as of June 30, 2003.

<TABLE>
<CAPTION>
                                                                       BCM        ARI        TCI
                                                                     -------    -------    -------
<S>                                                                  <C>        <C>        <C>
Balance, December 31, 2002........................................   $ 1,696    $ 3,541    $ 5,260
  Cash transfers .................................................     3,616         --         --
  Cash repayments ................................................    (3,277)    (2,000)        --
  Other additions ................................................       784      1,913         --
  Other repayments ...............................................    (1,022)        --         --
                                                                     -------    -------    -------
Balance, June 30, 2003............................................   $ 1,797    $ 3,454    $ 5,260
                                                                     =======    =======    =======
</TABLE>

Returns on Metra Properties. As described more fully in Note 5, IORI sold all of
its residential properties during 2002 to partnerships controlled by Metra. The
partnership agreement for each of these partnerships states that the Metra
Partners, as defined, receive cash flow distributions at least quarterly in an
amount sufficient to provide them with a fifteen percent cumulative compounded
annual rate of return on their invested capital, as well as a cumulative annual
amount of 0.50% of the average outstanding balance of the mortgage indebtedness
secured by any of these residential properties. These distributions to the Metra
Partners have priority over distributions to any of the other partners.

                                       13

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 7. OPERATING SEGMENTS

Significant differences among the accounting policies of the operating segments
as compared to the Consolidated Financial Statements principally involve the
calculation and allocation of general and administrative expenses. Management
evaluates the performance of each of the operating segments and allocates
resources to each of them based on their net operating income and cash flow.
Items of income that are not reflected in the segments are interest, income or
(loss) of equity partnerships, and recovery of loss provision on receivable from
related party which totaled $2.2 million and $2.2 million for the three and six
months ended June 30, 2003, and income of $358,000 and $378,000 for the three
and six months ended June 30, 2002. Expenses that are not reflected in the
segments are general and administrative expenses, advisory and net income fees,
provision for losses, impairment loss on real estate held for sale, and
discontinued operations which totaled $966,000 and $1.4 million for the three
and six months ended June 30, 2003, and $573,000 and $2.5 million for the three
and six months ended June 30, 2002.

Excluded from operating segment assets are assets of $15.9 million at June 30,
2003, and $16.5 million at June 30, 2002, which are not identifiable with an
operating segment. There are no intersegment revenues and expenses and all
business is conducted in the United States.

Presented below is the operating income of each operating segment for the three
and six months ended June 30, 2003 and 2002, and each segment's assets at June
30.

<TABLE>
<CAPTION>
                 Three Months Ended                      Commercial
                   June 30, 2003                         Properties    Apartments         Land         Total
                 ------------------                      ----------    ----------       -------       -------
<S>                                                      <C>           <C>              <C>           <C>
Rents...............................................     $    1,115    $    1,330       $    --       $ 2,445
Property operating expenses ........................            522           753            80         1,355
                                                         ----------    ----------       -------       -------
Operating income (loss).............................     $      593    $      577       $   (80)      $ 1,090
                                                         ==========    ==========       =======       =======
Interest............................................     $      307    $      500       $   378       $ 1,185
Depreciation .......................................            414            76             -           490
Real estate improvements ...........................            155            --            --           155
Assets .............................................         27,661        20,941        24,929        73,531
</TABLE>

                                       14

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 7. OPERATING SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                  Six Months Ended                      Commercial
                   June 30, 2003                        Properties        Apartments     Land        Total
              ------------------------                  ----------        ----------   --------    ---------
<S>                                                     <C>               <C>          <C>         <C>
Rents...............................................    $    2,047        $    2,665   $      -    $  4,712
Property operating expenses ........................           996             1,454        162       2,612
                                                        ----------        ----------   --------    --------

Operating income (loss).............................    $    1,051        $    1,211   $   (162)   $  2,100
                                                        ==========        ==========   ========    ========

Interest............................................    $      577        $    1,019   $    745    $  2,341
Depreciation .......................................           657               192          -         849
Real estate improvements ...........................           365                 -          -         365
Assets .............................................        27,661            20,941     24,929      73,531
</TABLE>

<TABLE>
<CAPTION>
                 Three Months Ended                     Commercial
                   June 30, 2002                        Properties        Apartments     Land        Total
              ------------------------                  ----------        ----------   --------    ---------
<S>                                                     <C>               <C>          <C>         <C>
Rents...............................................    $      962        $    1,340   $      -    $   2,302
Property operating expenses.........................           547               681         71        1,299
                                                        ----------        ----------   --------    ---------

Operating income (loss).............................    $      415        $      659   $    (71)   $   1,003
                                                        ==========        ==========   ========    =========

Interest............................................    $      328        $      550   $    374    $   1,252
Depreciation........................................           301               124                     425
Real estate improvements............................             -                 -         88           88
Assets..............................................        33,051            21,359     24,769       79,179
</TABLE>

                                       15

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 7. OPERATING SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                  Six Months Ended                      Commercial
                   June 30, 2002                        Properties   Apartments     Land     Total
            ----------------------------                ----------   ----------   -------   --------
<S>                                                     <C>          <C>          <C>       <C>
Rents...............................................    $    1,995   $    2,649   $    --   $  4,644
Property operating expenses ........................         1,095        1,230       135      2,460
                                                        ----------   ----------   -------   --------
Operating income (loss).............................    $      900   $    1,419   $  (135)  $  2,184
                                                        ==========   ==========   =======   ========

Interest............................................    $      681   $      809   $   656   $  2,146
Depreciation ........................................          608          252        --        860
Real estate improvements ............................           41           --       276        317
Assets ..............................................       33,051       21,359    24,769     79,179
</TABLE>

<TABLE>
<CAPTION>
                                                         Commercial
Property Sales:                                          Properties       Total
                                                        -----------      -------
<S>                                                     <C>              <C>
Sales prices........................................    $    15,500      $15,500
Cost of sales ......................................          8,395        8,395
                                                        -----------      -------
Gain on sale........................................    $     7,105      $ 7,105
                                                        ===========      =======
</TABLE>

NOTE 8. ADVISORY FEES, PROPERTY MANAGEMENT, ETC.

Revenue, fees and cost reimbursements to BCM and its affiliates for the six
months ended:

<TABLE>
<CAPTION>
                                                                                             For the Six Months
                                                                                               Ended June 30,
                                                                                             ------------------
                                                                                             2003         2002
                                                                                             -----        -----
<S>                                                                                          <C>          <C>
Fees
   Advisory.............................................................................     $ 334        $186
   Net income ..........................................................................        --         411
   Property and construction management and
     leasing commissions* ..............................................................       194          51
                                                                                             -----        ----
                                                                                             $ 528        $648
                                                                                             =====        ====
Cost reimbursements.....................................................................     $ 132        $ 81
                                                                                             =====        ====
</TABLE>

* Net of property management fees paid to subcontractors, other than GS Realty,
   Inc., which is owned by an affiliate of BCM.

                                       16

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 9. DISCONTINUED OPERATIONS

Effective January 1, 2002, IORI adopted Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
which established a single accounting model for the impairment or disposal of
long-lived assets including discontinued operations. This statement requires
that the operations related to properties that have been sold, or properties
that are intended to be sold, be presented as discontinued operations in the
statement of operations for all periods presented, and the properties intended
to be sold are to be designated as "held for sale" on the balance sheet. In the
event of a future asset sale, IORI is required to reclassify portions of
previously reported operations to discontinued operations within the Statements
of Operations.

For the three months and six months ended June 30, 2003 income from discontinued
operations relates to a property that IORI sold in 2003.

For the three months and six months ended June 30, 2002, income from
discontinued operations relates to two properties that IORI sold during 2002 and
a property that IORI sold in 2003. The following table summarizes revenue and
expense information for the properties sold.

<TABLE>
<CAPTION>
                                                                               FOR THE THREE                 FOR THE SIX
                                                                                  MONTHS                        MONTHS
                                                                               ENDED JUNE 30,               ENDED JUNE 30,
                                                                        ---------------------------   -------------------------
                                                                            2003           2002           2003          2002
                                                                        -------------   -----------   -----------   -----------
<S>                                                                     <C>             <C>           <C>           <C>
REVENUE

 RENTAL...............................................................  $         143   $       229   $       352   $       687
 PROPERTY OPERATIONS..................................................             80           133           201           613
                                                                        -------------   -----------   -----------   -----------
   OPERATING INCOME (LOSS)............................................             63            96           151            74

EXPENSES
 INTEREST.............................................................             63            97           159           265
 DEPRECIATION.........................................................             32            57            80           123
                                                                        -------------   -----------   -----------   -----------
   TOTAL EXPENSES.....................................................             95           154           239           388

NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
BEFORE GAINS ON SALE OF REAL ESTATE...................................            (32)          (58)          (88)         (314)

GAIN ON SALE OF OPERATIONS............................................             --            --            --         7,105
                                                                        -------------   -----------   -----------   -----------

NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS........................  $         (32)  $       (58)  $       (88)  $     6,791
                                                                        =============   ===========   ===========   ===========
</TABLE>

                                       17

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 9. DISCONTINUED OPERATIONS - CONTINUED

Discontinued operations have not been segregated in the consolidated statement
of cash flows. Therefore, amounts for certain captions will not agree with
respective consolidated statements of operations.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Liquidity. Although management anticipates that IORI will generate excess cash
from commercial operations in 2003 due to increased rental rates and occupancy
at its properties, such excess, however, will not be sufficient to discharge all
of IORI's debt obligations as they mature. IORI has $6.5 million in debt due
within one year. Management will need to refinance or sell real estate and incur
additional borrowings against real estate to meet IORI's cash requirements.

Litigation. IORI is involved in various lawsuits arising in the ordinary course
of business. Management is of the opinion that the outcome of these lawsuits
will have no material impact on IORI's financial condition, results of
operations or liquidity.

                                       18

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

INTRODUCTION

IORI invests in equity interests in real estate through acquisitions, leases and
partnerships and also invests in mortgage loans. IORI is the successor to a
California business trust organized on December 14, 1984, which commenced
operations on April 10, 1985.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both important to the
presentation of IORI's financial condition and results of operations and require
management's most difficult, complex or subjective judgments. IORI's critical
accounting policies relate to the evaluation of impairment of long-lived assets
and the evaluation of the collectibility of accounts and notes receivable.

If events or changes in circumstances indicate that the carrying value of a
rental property to be held and used or land held for development may be
impaired, management performs a recoverability analysis based on estimated
undiscounted cash flows to be generated from the property in the future. If the
analysis indicates that the carrying value is not recoverable from future cash
flows, the property is written down to estimated fair value and an impairment
loss is recognized. If management decides to sell rental properties or land held
for development, management evaluates the recoverability of the carrying amounts
of the assets. If the evaluation indicates that the carrying value is not
recoverable from estimated net sales proceeds, the property is written down to
estimated fair value less costs to sell and an impairment loss is recognized
within income from continuing operations. IORI's estimates of cash flow and fair
values of the properties are based on current market conditions and consider
matters such as rental rates and occupancies for comparable properties, recent
sales data for comparable properties and, where applicable, contracts or the
results of negotiations with purchasers or prospective purchasers. IORI's
estimates are subject to revision as market conditions and IORI's assessments of
them change.

                                       19

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

IORI's allowance for doubtful accounts receivable and notes receivable is
established based on analysis of the risk of loss on specific accounts. The
analysis places particular emphasis on past due accounts. Management considers
such information as the nature and age of the receivable, the payment history of
the tenant or other debtor, the financial condition of the tenant or other
debtor and IORI's assessment of its ability to meet its lease or interest
obligations. IORI's estimate of the required allowance, which is reviewed on a
quarterly basis, is subject to revision as these factors change and is sensitive
to the effects of economic and market conditions. Typically, IORI's notes
receivable are collateralized by income producing real estate. IORI had notes
receivable of $97,000 and $-0- at June 30, 2003 and December 31, 2002,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents at June 30, 2003, were $274,000, compared with $10,000
at December 31, 2002. IORI's principal sources of cash have been, and will
continue to be property operations, proceeds from property sales, financings and
refinancings and partnership distributions. Management anticipates that IORI
will generate excess cash from operations in 2003 due to increased rental
receipts at its properties, however, such excess will not be sufficient to
discharge all of IORI's debt obligations as they mature. Management intends to
selectively sell income producing real estate, refinance real estate and incur
additional borrowings against real estate to meet its cash requirements.

The Company reported a net loss of $366,000 for the six months ended June 30,
2003, which included the following non-cash charges: depreciation of $1.2
million, loss of equity partnerships of $15,000, impairment loss of $653,000 and
decrease in other assets of $300,000 and increase in other liabilities of
$71,000. Net cash provided by operating activities amounted to $1.1 million for
the six months ended June 30, 2003. During the six months ended June 30, 2003
the increase in other assets was due to an increase in accounts receivable from
affiliates and the increase in other liabilities was due to an increase in
accrued property taxes. Net cash used in investing activities of $362,000 was
comprised of real estate improvements of $362,000. Net cash used in financing
activities of $492,000 was comprised of payments on notes payable of $358,000
and deferred financing costs and other costs of $134,000.

                                       20

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

Management reviews the carrying values of IORI's properties at least annually
and whenever events or a change in circumstances indicate that impairment may
exist. Impairment is considered to exist if, in the case of a property, the
future cash flow from the property (undiscounted and without interest) is less
than the carrying amount of the property. If impairment is found to exist, a
provision for loss is recorded by a charge against earnings. The property review
generally includes selective property inspections, discussions with the manager
of the property, visits to selected properties in the area and a review of the
following: (1) the property's current rents compared to market rents, (2) the
property's expenses, (3) the property's maintenance requirements, and (4) the
property's cash flows.

RESULTS OF OPERATIONS

IORI had net income of $632,000 for the three months ended June 30, 2003, and a
net loss of $366,000 for the six months ended June 30, 2003, which included an
impairment on real estate held for sale of $653,000 and a recovery of a previous
impairment of an asset of $1.6 million, as compared to net loss of $889,000 and
net income of $4.2 million for the corresponding periods in 2002. Fluctuation in
components of revenue and expense between the 2003 and 2002 periods are
discussed below.

Rents in the three and six months ended June 30, 2003, were $2.4 million and
$4.7 million as compared to $2.3 million and $4.6 million in the corresponding
period in 2002. This slight overall increase was due to an overall increase in
occupancy in IORI's commercial and residential properties. Rental income for the
remaining quarters of 2003 are expected to decline when IORI selectively sells
properties.

Property operations expense in the three and six months ended June 30, 2003 were
$1.4 million and $2.6 million, as compared to $1.3 million and $2.5 million in
the corresponding periods in 2002. This slight increase was due to increased
repairs and personnel costs. Property operations expense for the remainder of
2003 is expected decline when IORI selectively sells properties.

Interest income in the three and six months ended June 30, 2003 were $614,000
and $614,000 as compared to $310,000 and $348,000 in the corresponding periods
in 2002. The increase reflects additional interest income earned on the
reinstated note receivable previously written off in 2002, but collected in
2003.

                                       21

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

For the three and six months ended June 30, 2003, IORI recorded a Recovery of
loss provision on receivable from related party in the amount of $1.5 million.
This represents the amounts received or to be received from a related party of
an amount that was written off in late 2002.

Interest expense in the three and six months ended June 30, 2003 were $1.2
million and $2.3 million, as compared to $1.3 million and $2.1 million in the
corresponding periods in 2002. The increase was due to refinancing IORI's
residential properties and a parcel of unimproved land, partially offset by a
decrease in variable interest rates at IORI's commercial properties. Interest
expense for the remaining quarters of 2003 may decrease due to lower variable
interest rates and the paydown of debt.

Depreciation expense in the three and six months ended June 30, 2003 were
$490,000 and $849,000, as compared to $425,000 and $860,000 in the corresponding
periods in 2002.

Advisory fee expense in the three and six months ended June 30,2003 were
$167,000, and $334,000 as compared to $163,000 and $348,000 in the corresponding
period in 2002. The advisory fee is based on IORI's gross assets. Advisory fees
for the remainder of 2003 are expected to decrease when IORI selectively sells
properties.

Net income fee was $411,000 in the first quarter of 2002. The net income fee is
payable to IORI's advisor based on 7.5% of IORI's net income.

For the three and six months ended June 30, 2003, IORI recorded an asset
impairment of $653,000 representing the writedown of the 5600 Mowry Building in
Newark, California to its estimated fair value. The property was sold in July
2003 for $5.0 million.

General and administrative expense in the three and six months ended June 30,
2003 were $114,000 and $369,000, as compared to $352,000 and $637,000 in the
corresponding periods in 2002. The decrease was primarily due to a decrease in
insurance premiums and investor relations expenses in 2003.

                                       22

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

RELATED PARTY TRANSACTIONS

Historically, IORI, ARI, BCM and TCI have each engaged in and may continue to
engage in business transactions, including real estate partnerships with related
parties. Management believes that all of the related party transactions
represented the best investments available at the time and were at least as
advantageous to IORI as could have been obtained from unrelated third parties.

PROPERTY TRANSACTIONS

In January 2002, IORI purchased 100% of the outstanding common shares of
Rosedale Corporation from ARI, for $5.1 million. See NOTE 3. "NOTES AND INTEREST
RECEIVABLE." The purchase price was determined based upon the market value of
the property exchanged, using a market rate multiple of net operating income
("cap rate") of 7.0%. The business purpose of the transaction was for IORI to
make an equity investment in Rosedale anticipating a profitable return.

In February 2002, IORI purchased a $2.0 million senior participation interest in
a loan from TCI. See NOTE 3. "NOTES AND INTEREST RECEIVABLE." Management
determined that IORI could benefit from the favorable interest rate payments on
the note.

TAX MATTERS

As more fully discussed in IORI's 2002 Form 10-K, for the year 2002 IORI elected
and qualified to be treated as a Real Estate Investment Trust ("REIT"), as
defined in Sections 856 and 860 of the Internal Revenue Code of 1986, as amended
(the "Code"), and as such was not taxed for federal income tax purposes on that
portion of its taxable income which is distributed to stockholders. Due to the
completion of the tender offer by ARI, an affiliate, and the resulting
concentration of ownership, IORI no longer met the requirements for tax
treatment as a REIT under the Code as of January 1, 2003, and is prohibited for
re-qualifying for REIT status for at least five years.

Financial statement income varies from taxable income principally due to the
accounting for income and losses of investees, gains and losses from asset
sales, depreciation on owned properties, amortization of discounts on notes
receivable and payable and the difference in the allowance for estimated losses.
IORI had a loss for federal income tax purposes in the first six months of 2003;
therefore, it recorded no provision for income taxes.

                                       23

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

TAX MATTERS - CONTINUED

At June 30, 2003, IORI had a net deferred tax asset of approximately $5.2
million due to tax deductions available to it in future years. However, as
management cannot determine that it is more likely than not that IORI will
realize the benefit of the deferred tax asset, a 100% valuation allowance has
been established.

INFLATION

The effects of inflation on IORI's operations are not quantifiable. Revenues
from apartment operations tend to fluctuate proportionately with inflationary
increases and decreases in housing costs. Fluctuations in the rate of inflation
also affect the sales value of properties and the ultimate gain to be realized
from property sales. To the extent that inflation affects interest rates,
earnings from short-term investments and the cost of new financings, as well as
the cost of variable interest rate debt, will be affected.

ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, ordinances and
regulations, IORI may be potentially liable for removal or remediation costs, as
well as certain other potential costs, relating to hazardous or toxic substances
(including governmental fines and injuries to persons and property) where
property-level managers have arranged for the removal, disposal or treatment of
hazardous or toxic substances. In addition, certain environmental laws impose
liability for release of asbestos-containing materials into the air and third
parties may seek recovery for personal injury associated with such materials.

Management is not aware of any environmental liability relating to the above
matters that would have a material adverse effect on IORI's business, assets or
results of operations.

                                       24

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

At June 30, 2003, IORI's exposure to a change in interest rates on its debt is
as follows:

<TABLE>
<CAPTION>
                                                   Weighted       Effect of 1%
                                                    Average        Increase In
                                      Balance    Interest Rate     Base Rates
                                      --------   -------------    ------------
<S>                                   <C>        <C>              <C>
Wholly-owned debt:
 Variable rate....................    $ 12,332       9.26%        $        123
                                      ========                    ============

Total decrease in IORI's annual
 net income.......................                                $        123
                                                                  ============

Per share.........................                                $        .09
                                                                  ============
</TABLE>

ITEM 4. CONTROLS AND PROCEDURES

(a)  Within the 90 days prior to the date of this report, IORI carried out an
     evaluation, under the supervision and with the participation of IORI's
     management, including IORI's Acting Principal Executive Officer and
     principal accounting officer, of the effectiveness of the design and
     operation of IORI's disclosure controls and procedures pursuant to Exchange
     Act Rule 13a-14. Based upon the evaluation, IORI's Acting Principal
     Executive Officer and principal accounting officer concluded that IORI's
     disclosure controls and procedures are effective in timely alerting him to
     material information relating to IORI (including its consolidated
     subsidiaries) required to be included in IORI's periodic SEC filings.

(b)  There have been no significant changes in IORI's internal controls or in
     other factors that could significantly affect IORI's internal controls
     subsequent to the date IORI carried out this evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

                                       25

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

OLIVE LITIGATION SETTLEMENT

On November 15, 2002, ARI commenced tender offers for shares of common stock of
IORI and TCI. The price per share to be paid was $19.00 for IORI shares and
$17.50 for TCI shares. The tender offers were made as an alternative under
settlement resulting from a failure of timely completion of the SEC review
process of a registration statement for proposed mergers among ARI subsidiaries
and IORI and TCI.

The tender offers were completed on March 19, 2003. Pursuant to the tender
offers, ARI acquired 265,036 IORI shares and 1,213,226 TCI shares. The
completion of the tender offers fulfilled the remaining obligations under the
Olive Settlement and the Olive Litigation has been dismissed with prejudice.

For further information refer to NOTE 17. "COMMITMENTS AND CONTINGENCIES AND
LIQUIDITY," included in IORI's Form 10-K for the year ended December 31, 2002.

                                       26

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

<TABLE>
<CAPTION>
Exhibit
 Number                              Description
 ------                              -----------
<S>         <C>
  31.1      Certification Pursuant to Rules 13a-14 and 15d-14 Under the
            Securities Exchange Act of 1934, as Adopted Pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002, filed herewith.

  32.1      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
            herewith.
</TABLE>

(b)  Reports on Form 8-K as follows:

     A Current Report on Form 8-K, dated June 2, 2003, was filed with respect to
     Item 1. "Changes in Control of Registrant", which reports the exchange of
     IORI stock between Syntek West, Inc. and Basic Capital Management, Inc.
     resulting in Syntek West, Inc. owning 54.3% of the outstanding stock of
     IORI and that Syntek West, Inc. is 100% owned by Gene E. Phillips.

     A Current Report on Form 8-K, dated July 1, 2003, was filed with respect to
     Item 4. "Changes in Registrant's Certifying Accountant" and Item 5. "Other
     Events and Regulation FD Disclosure" which reports the change of IORI's
     certifying accountant from BDO Seidman to Farmer, Fuqua & Huff, P.C. and
     the termination of IORI's advisory agreement with Basic Capital Management,
     Inc. and the establishment of IORI's advisory agreement with Syntek West,
     Inc.

     A Current Report on Form 8-K/A, dated July 1, 2003, was filed with respect
     to Item 4. "Changes in Registrant's Certifying Accountant" and Item 5.
     "Other Events and Regulation FD Disclosure" which reports the change of
     IORI's certifying accountant from BDO Seidman to Farmer, Fuqua & Huff, P.C.
     and the termination of IORI's advisory agreement with Basic Capital
     Management, Inc. and the establishment of IORI's advisory agreement with
     Syntek West, Inc. The Form 8-K/A was filed to include an additional exhibit
     related to the change in certifying accountants.

                                       27

<PAGE>

                                 SIGNATURE PAGE

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

                                          INCOME OPPORTUNITY REALTY INVESTORS,
                                          INC.

Date: August 14, 2003                     By:     /s/ Ronald E. Kimbrough
                                             ----------------------------------
                                           Ronald E. Kimbrough
                                           Executive Vice President and Chief
                                           Financial Officer (Principal
                                           Financial and Accounting Officer
                                           and Acting Principal Executive
                                           Officer)

                                       28

<PAGE>

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.

                                   EXHIBITS TO

                          QUARTERLY REPORT ON FORM 10-Q

                       For the Quarter ended June 30, 2003

<TABLE>
<CAPTION>
Exhibit
 Number                               Description
 ------                               -----------
<S>         <C>
  31.1      Certification Pursuant to Rules 13a-14 and 15d-14 Under the
            Securities Exchange Act of 1934, as Adopted Pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

  32.1      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

                                       29