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

                        --------------------------------
                                   FORM 10-QSB
                        --------------------------------

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For The Quarterly Period Ended December 31, 2005

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

             For The Transition Period from __________ To _________

                         Commission file number 0-27159


                       National Realty and Mortgage, Inc.
        ----------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


          Nevada                                               65-0439467
--------------------------------------------------------------------------------
(State or Other Jurisdiction                          (I.R.S. Employer Identifi-
       of Incorporation                                      cation Number)


6915 Red Road Suite 222, Coral Gables, Florida                33127
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (305) 666-6565
--------------------------------------------------------------------------------
                            Issuer's telephone number


                      National Residential Properties, Inc.
--------------------------------------------------------------------------------
   (Former Name, former address and former fiscal year, if changed since last
                                     report)

Check whether the Registrant (1) has filed all reports required 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 [ ]








<PAGE>
    APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required by Section
12, 13, or 15(d) of the Exchange Act after the distribution of securities under
a plan confirmed by a court
Yes [ ]  No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:

         As of February 14, 2006, there were 6,462,895 shares of the
Registrant's Common Stock, $0.0000001 par value per share, outstanding.

Transitional Small Business Disclosure Format   Yes [ ]  No [ ]










































                                       2
<PAGE>
                       National Realty and Mortgage, Inc.

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005

                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements. ..............................................  4

Item 2. Management's Discussion and Analysis or Plan of
Operation................................................................... 21

Item 3. Controls and Procedures............................................. 30

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings................................................... 31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......... 31

Item 3. Defaults upon Senior Securities..................................... 31

Item 4. Submission of Matters to a Vote of Securities Holders............... 32

Item 5. Other Information................................................... 32

Item 6. Exhibits and Reports on Form 8-K.................................... 33































                                        3
<PAGE>
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS,
ESTIMATES AND PROJECTIONS ABOUT THE COMPANY AND ITS INDUSTRY. FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS THAT MAY CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE,
ACHIEVEMENTS AND PROSPECTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION
TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON EVEN IF NEW
INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements













































                                        4
<PAGE>
























               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004






























                                        5
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSDIARIES)



       INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)





Balance Sheet as of December 31, 2005 (Unaudited)                            7

Statements of Operations for the Three Months
    Ended December 31, 2005 and 2004 (Unaudited)                             9

Statements of Cash Flows for the Three Months Ended
    December 31, 2005 and 2004 (Unaudited)                                  10

Notes to Condensed Consolidated Financial Statements (Unaudited)            11







































                                        6
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
                CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
                                DECEMBER 31, 2005


                                     ASSETS
                                     ------





  Cash and cash equivalents                               $             266,368
  Fixed assets, net of depreciation                                      13,537
  Loan origination fees, net                                              1,373
  Loan receivable - others                                              114,600
  Mortgages receivable and other                                          5,835
                                                         -----------------------

TOTAL ASSETS                                              $             401,713
                                                         =======================





































                                        7
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
           CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)(CONTINUED)
                                DECEMBER 31, 2005



                       LIABILITIES AND STOCKHOLDERS' (DEFICIT)
                       ---------------------------------------
<TABLE>
<CAPTION>
<S>                                                                              <C>
LIABILITIES
  Accounts payable and accrued expenses                                          $        341,890
  Debentures payable                                                                      199,202
  Notes and mortgages payable                                                              20,786
                                                                                ------------------

      TOTAL LIABILITIES                                                                   561,878
                                                                                ------------------


STOCKHOLDERS' (DEFICIT)
Preferred Stock, $.0000001 Par Value; 1,000,000,000                                             -
shares authorized and 0 shares issued and outstanding
  Common Stock, $.0000001 Par Value; 8,000,000,000 shares
    authorized and 6,462,895 shares issued and outstanding                                      1
  Common Stock  Class A Voting,  $.0000001  Par  Value;  1,000,000,000
    shares authorized and 666,667 shares issued and outstanding                                 -
  Additional Paid-in Capital                                                            8,225,517
  Accumulated Deficit                                                                  (8,385,683)
                                                                                ------------------

      TOTAL STOCKHOLDERS' (DEFICIT)                                                      (160,165)
                                                                                ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                    $        401,713
                                                                                ==================
</TABLE>




















                                        8
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                         2005                   2004
                                                  -------------------    --------------------
<S>                                                <C>                    <C>
OPERATING REVENUES
  Revenue                                           $              -       $           2,800

COST OF SALES                                                      -                       -
                                                  -------------------    --------------------

GROSS PROFIT                                                       -                   2,800
                                                  -------------------    --------------------

OPERATING EXPENSES
   Professional fees and compensation expenses               207,357                  44,233
   Bad debt                                                        -                   2,524
   Travel and automobile expenses                                  -                  15,368
   Telephone and utilities                                         -                     616
   Real estate taxes and property maintenance                    710                   2,198
   Office expenses                                            16,790                   1,700
   Miscellaneous                                               5,571                   8,531
   Depreciation and amortization                               8,893                   6,078
                                                  -------------------    --------------------
       TOTAL OPERATING EXPENSES                              239,321                  81,248
                                                  -------------------    --------------------

LOSS BEFORE OTHER INCOME (EXPENSE)                          (239,321)                (78,448)
                                                  -------------------    --------------------

OTHER INCOME (EXPENSE)
   Interest expense                                                -                 (21,900)
   Interest income                                                 -                   2,835
                                                  -------------------    --------------------
       TOTAL OTHER INCOME (EXPENSE)                                -                 (19,065)
                                                  -------------------    --------------------

NET LOSS BEFORE PROVISION FOR INCOME TAXES                  (239,321)                (97,513)
  Provision for Income Taxes                                       -                       -
                                                  -------------------    --------------------

NET LOSS APPLICABLE TO COMMON SHARES               $        (239,321)     $          (97,513)
                                                  ===================    ====================

NET LOSS PER BASIC AND DILUTED SHARES              $           (0.04)     $            (0.02)
                                                  ===================    ====================

WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                                     6,462,895               6,462,895
                                                  ===================    ====================
</TABLE>



                                        9
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
              FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                  2005                   2004
                                                            ------------------     ------------------
<S>                                                          <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (Loss)                                               $       (239,321)      $        (97,513)
                                                            ------------------     ------------------
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH
(USED IN) OPERATING ACTIVITIES:
     Depreciation and amortization                                      8,893                  6,077
     Common stock issued for compensation                             200,000                      -
  CHANGES IN ASSETS AND LIABILITIES:
     Increase in accounts payable and                                  23,901                      -
     and accrued expenses                                                   -                 (9,875)
                                                            ------------------     ------------------
     Total adjustments                                                232,794                 (3,798)
                                                            ------------------     ------------------

     NET CASH (USED IN) OPERATING ACTIVITIES                           (6,527)              (101,311)
                                                            ------------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Decrease in investment securities                                       -                  2,523
    Loans receivable to/from others                                         -                 90,572
    (Increase) decrease in mortgages and notes receivable              31,647                 (2,349)
                                                            ------------------     ------------------

     NET CASH PROVIDED BY INVESTING ACTIVITIES                         31,647                 90,746
                                                            ------------------     ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net change in notes and mortgages payable                               -                 (4,064)
                                                            ------------------     ------------------
        NET CASH (USED IN) FINANCING ACTIVITIES                             -                 (4,064)
                                                            ------------------     ------------------

NET INCREASE (DECREASE) IN
    CASH AND CASH EQUIVALENTS                                          25,120                (14,629)

CASH AND CASH EQUIVALENTS -
    BEGINNING OF PERIOD                                               241,248                 25,020
                                                            ------------------     ------------------

CASH AND CASH EQUIVALENTS - END OF PERIOD                    $        266,368       $         10,391
                                                            ==================     ==================

SUPPLEMENTAL DISCLOSURE OF NON-CASH
   INFORMATION:
Compensation expense to officer                              $        200,000       $              -
                                                            ==================     ==================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

CASH PAID DURING THE PERIOD FOR:
    Interest expense                                         $              -       $          5,475
                                                            ==================     ==================
</TABLE>

                                       10
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
         --------------------------------------

         The  condensed  consolidated  unaudited  interim  financial  statements
         included  herein have been  prepared,  without  audit,  pursuant to the
         rules and  regulations of the Securities and Exchange  Commission.  The
         condensed  consolidated  unaudited  financial  statements and notes are
         presented as  permitted  on Form 10-QSB and do not contain  information
         included in the Company's annual consolidated  unaudited statements and
         notes.  Certain information and footnote  disclosures normally included
         in  financial   statements   prepared  in  accordance  with  accounting
         principles generally accepted in the United States of America have been
         condensed or omitted pursuant to such rules and  regulations,  although
         the Company  believes  that the  disclosures  are  adequate to make the
         information  presented  not  misleading.  It is  suggested  that  these
         condensed  consolidated  unaudited  financial  statements  be  read  in
         conjunction with the September 30, 2005 audited consolidated  financial
         statements  and  the  accompanying  notes  thereto.   While  management
         believes  the  procedures   followed  in  preparing   these   condensed
         consolidated  financial statements are reasonable,  the accuracy of the
         amounts are in some respects  dependent upon the facts that will exist,
         and procedures  that will be  accomplished  by the Company later in the
         year.

         These condensed consolidated unaudited financial statements reflect all
         adjustments,  including  normal  recurring  adjustments  which,  in the
         opinion of management, are necessary to present fairly the consolidated
         operations, changes in permanent stockholders equity (deficit), changes
         in temporary equity and cash flows for the periods presented.

         National Residential  Properties,  Inc., was originally incorporated in
         the State of Nevada on  October  18,  1971 under the name of Mister Las
         Vegas,  Inc. On December 15, 1994,  the Company merged with a privately
         owned company,  National Rehab Properties,  Inc., a Florida corporation
         formed on October 1, 1993. The surviving Nevada corporation changed its
         name to  National  Rehab  Properties,  Inc.  and became  authorized  to
         conduct business in the State of Florida on August 17, 1995. On October
         10,  2000,  the  Company  changed  its  name  to  National  Residential
         Properties, Inc.

         The Company's  business was  residential  real estate  development  and
         building  construction  services.  From  1993  to  1999  the  Company's
         business  concentrated in investing in and  revitalizing  single-family
         homes in established  older  residential  neighborhoods in urban areas.
         The Company  bought  either  single unit  vacant  properties  and built
         single  family homes or it bought  abandoned  homes and  completed  all
         renovations  to the home  followed by a sale of the home.  During 1999,
         while  retaining its efforts in the  renovation of urban  single-family
         homes as one aspect of the business, the Company entered a second phase
         of business, the development, construction and ownership of multifamily
         housing projects.


                                       11
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)


NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

         Beginning in the fiscal year ending  September  30,  1999,  the Company
         initiated  a  program  of  acquisition   of  properties   suitable  for
         development  as  multifamily  housing or multiple  unit  single  family
         development  tracts.  Since 1999, the Company has purchased four tracts
         with the  intention of building  from 60 to 72 apartment  units on each
         tract  and  one  twenty  acre  citrus  grove  for  single  family  home
         development.  In April 2000, the Company acquired Encore Services, Inc.
         ("Encore Services").

         On May 4, 2001,  the  Company's  wholly-owned  subsidiary,  Connecticut
         Acquisition  Corp. No. 1,  ("Connecticut  Acquisition")  entered into a
         joint   venture  to  develop  a  parcel  of  land  located  in  Hebron,
         Connecticut, (the "Hebron Parcel") as a senior adult community pursuant
         to a land  development  agreement  with Mr.  Nathan  Kahn  and  various
         entities   controlled  by  Mr.  Nathan  Kahn.  The  objective  of  this
         development  was to either sell  developed  lots to builders,  or erect
         dwellings themselves.

         Mr. Kahn's entities had obtained  options to purchase and develop other
         properties,  and  the  Kahn  entities  advised  that  they  would  need
         additional  funding  to pay for the  expenses  in  connection  with the
         obtaining and maintenance of these options.

         The land development  agreement  called for Connecticut  Acquisition to
         fund the initial  costs of  acquisition  and  development,  and,  after
         deduction of expenses  from gross  revenues,  profits  would be divided
         50-50 between the parties.

         In contemplation  of the financing of this project,  on April 12, 2001,
         Connecticut  Acquisition,  obtained  a loan from  accredited  investors
         evidenced by its 8% Series A Senior Subordinated Convertible Redeemable
         Debentures   due  April  13,   2003   (the   "Connecticut   Acquisition
         Debentures"),  which were  convertible from time to time into shares of
         Connecticut  Acquisition's  Class  A  Common  Stock.  On May  8,  2001,
         following the acquisition of the Hebron Parcel, Connecticut Acquisition
         was merged into the Company. As a result, all rights and obligations of
         Connecticut  Acquisition  inured to the  benefit of and became  binding
         upon the Company.  Pursuant to the merger, the Connecticut  Acquisition
         Debentures were surrendered and canceled, and new debentures, identical
         to the Connecticut Acquisition  Debentures,  together with accompanying
         conversion  rights into authorized but unissued shares of the Company's
         common  stock,  par value $.001 per share ("NRMS Common  Stock"),  were
         issued by the  Company to the  holders of the  Connecticut  Acquisition
         Debentures.

                                       12
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
         --------------------------------------------------

         Pursuant to an agreement  executed on December 26, 2001, made effective
         as of October 31, 2001 and a Statutory  Warranty Deed dated October 31,
         2001,  the Company sold to Senior Adult  Lifestyle,  Inc ("Senior Adult
         Lifestyle") a related entity through common corporate officers,  all of
         the  rights,  title and  interest  in (i) the Hebron  Parcel;  and (ii)
         contracts to purchase  certain  parcels of real  property in Watertown,
         New  Milford,  Granby  and East  Windsor,  Connecticut.  As  additional
         consideration for the conveyance to Senior Adult Lifestyle, the Company
         received  on  February 1, 2002,  20 million  shares of common  stock of
         Genesis Capital Corporation of Nevada ("Genesis"), the parent of Senior
         Adult  Lifestyles.  These  shares  were  based on a value of $0.10  per
         share,  the value the stock was  trading  for in October  2001,  for an
         agreed consideration of $2 million.  Should the value at the earlier of
         (a) the time the Company  sells these shares or (b) the  expiration  of
         three  years from the date of the  conveyance  fall  below $2  million,
         Genesis  agreed to issue to the Company,  additional  shares of Genesis
         Common  Stock to make up the  difference  in  value.  The  value of the
         Genesis Common Stock was $.009 ($180,000) on February 1, 2002.  Genesis
         subsequently  defaulted on the  agreement to issue  additional  shares,
         following which the agreement was rescinded.

         On October 17, 2001, the Company's other  wholly-owned  subsidiary,  DC
         Power Products  Acquisition  Corp,  ("DC Power"),  obtained a loan from
         accredited  investors  evidenced by its 8% Series A Senior Subordinated
         Convertible  Redeemable  Debentures due October 17, 2003 (the "DC Power
         Debentures"),  which were  convertible from time to time into shares of
         DC  Power's  common  stock.  DC Power was  merged  into the  Company on
         November 1, 2001.

         As a result,  all rights and  obligations  inured to the benefit of and
         became binding upon the Company.  Pursuant to the merger,  the DC Power
         Debentures were surrendered and canceled, and new debentures, identical
         to the DC  Power  Debentures,  together  with  accompanying  conversion
         rights into authorized but unissued  shares of NRES Common Stock,  were
         issued by the Company to the holders of the DC Power Debentures.

         In October 2003,  the Company began lending money to individuals in the
         form of mortgage  notes.  The Company acts as a broker on some of these
         transactions and receives loan origination fees for its services.

         The Company  with its name  change in fiscal  2005  changed its trading
         symbol from NRES to NRMG.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         Principles of Consolidation

         The condensed consolidated financial statements include the accounts of
         the Company and all of its wholly owned  subsidiaries.  All significant
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation.

                                       13
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         ------------------------------------------------------

         Use of Estimates

         The  preparation  of condensed  consolidated  financial  statements  in
         conformity with accounting  principles generally accepted in the United
         States of America requires management to make estimates and assumptions
         that  affect  the  reported  amounts  of  assets  and  liabilities  and
         disclosures  of contingent  assets and  liabilities  at the date of the
         financial  statements and the reported amounts of revenues and expenses
         during the  reporting  period.  Actual  results could differ from those
         estimates.

         Revenue and Cost Recognition

         Sales of real estate are  generally  recognized  under the full accrual
         method.   Under  that  method,   gain  is  not  recognized   until  the
         collectibility  of the  sales  price  is  reasonably  assured  and  the
         earnings process is virtually  complete.  When a sale does not meet the
         requirements  for income  recognition  a gain is  deferred  until those
         requirements are met.

         The  Company   recorded  the  sale  of  property  to  Genesis   Capital
         Corporation of Nevada under the cost recovery method.  When this method
         is used,  no profit is recognized  on the sales  transaction  until the
         cost of the property sold is recovered (See Note 1).

         Acquisition and other direct costs,  interest, and other indirect costs
         related  to  acquisition  and  development  of  lots  are  capitalized.
         Capitalized  costs are allocated  based on the relative  sales value of
         each lot.  The  capitalized  costs are  charged  to  earnings  when the
         relative revenue is recognized.

         The Company follows SFAS 91, whereby loan origination fees are deferred
         and  recognized  over the life of the  loan as an  adjustment  of yield
         (interest income).

         Cash and Cash Equivalents

         The Company  considers  all highly  liquid debt  instruments  and other
         short-term investments with an initial maturity of three months or less
         to be cash equivalents.

         The  Company  maintains  cash and cash  equivalent  balances at several
         financial  institutions,  which  are  insured  by the  Federal  Deposit
         Insurance Corporation up to $100,000.



                                       14
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         ------------------------------------------------------

         Fixed Assets

         Fixed  assets are stated at cost.  Depreciation  is computed  primarily
         using the  straight-line  method over the estimated  useful life of the
         assets.

         Equipment and other                               5 to 7 Years
         Vehicles                                            5 Years

         Income Taxes

         The income  tax  benefit is  computed  on the pretax  loss based on the
         current  tax law.  Deferred  income  taxes are  recognized  for the tax
         consequences  in future years of  differences  between the tax basis of
         assets and liabilities and their  financial  reporting  amounts at each
         year-end based on enacted tax laws and statutory tax rates.

         Advertising

         Costs of advertising are expensed as incurred.  Advertising  costs were
         $0 and $2,130 for the three  months  ended  December 31, 2005 and 2004,
         respectively.

         Earnings (Loss) Per Share of Common Stock

         Historical  net income  (loss) per common  share is computed  using the
         weighted average number of common shares outstanding.  Diluted earnings
         per  share  (EPS)  include   additional   dilution  from  common  stock
         equivalents,  such as stock issuable  pursuant to the exercise of stock
         options and warrants. Common stock equivalents were not included in the
         computation of diluted  earnings per share when the Company  reported a
         loss because to do so would be antidilutive for periods presented.

















                                       15
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         ------------------------------------------------------

         The  following is a  reconciliation  of the  computation  for basic and
         diluted EPS:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,          DECEMBER 31,
                                                                        2005                  2004
                                                                 -------------------    ------------------
<S>                                                               <C>                    <C>
Net (Loss)                                                        $        (239,321)     $        (97,313)
                                                                 -------------------    ------------------

Weighted-average common shares outstanding (Basic)                        6,462,895             6,462,895

Weighted-average common stock equivalents:
  Stock options                                                                   -                     -
  Warrants                                                                        -                     -

                                                                 -------------------    ------------------
Weighted-average common shares outstanding (Diluted)                      6,462,895             6,462,895
                                                                 ===================    ==================
</TABLE>

         Options and warrants outstanding to purchase stock were not included in
         the  computation  of  diluted  EPS  because  inclusion  would have been
         antidilutive.

         There are no options and  warrants  outstanding  to  purchase  stock at
         December 31, 2005.

         Fair Value of Financial Instruments

         The carrying  amount  reported in the  condensed  consolidated  balance
         sheet for cash and cash  equivalents,  mortgages  receivable,  accounts
         payable  and accrued  expenses  approximate  fair value  because of the
         immediate or short-term  maturity of these financial  instruments.  The
         carrying amount reported for notes and mortgages  payable  approximates
         fair  value  because,  in  general,  the fair  value of the  notes  and
         mortgages  payable is estimated based on interest rates for the same or
         similar  debt  offered  to the  Company  having  the  same  or  similar
         remaining maturities and collateral requirements.

         Loan Origination Fees

         Represent fees in connection  with  obtaining  mortgages on the various
         properties. The loan origination fees are being amortized straight-line
         over a two-year period. Amortization expense for the three months ended
         December 31, 2005 and 2004 is $3,263 and $3,263, respectively.


                                       16
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         ------------------------------------------------------

         Recent Accounting Pronouncement

         In August  2001,  the FASB issued  Statement  of  Financial  Accounting
         Standards  No.  144,  "Accounting  for the  Impairment  or  Disposal of
         Long-Lived  Assets"  ("SFAS 144"),  that is applicable to the financial
         statements  issued for fiscal years  beginning after December 15, 2001.
         The  FASB'S  new  rules  on  asset  impairment   supersedes  SFAS  121,
         "Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
         Assets to Be Disposed Of," and portions of Accounting  Principles Board
         Opinion No. 30, "Reporting the Results of Operations".

         This standard  provides a single accounting model for long-lived assets
         to be disposed of and  significantly  changes the  criteria  that would
         have to be met to classify an asset as held-for-sale. Classification as
         held-for-sale  is an  important  distinction  since such assets are not
         depreciated  and are  stated  at the lower of fair  value and  carrying
         amount.  This Standard also requires  expected future  operating losses
         from discontinued  operations to be displayed in the period(s) in which
         the losses are  incurred,  rather  than as of the  measurement  date as
         presently  required.  The Company  tests its real estate  inventory for
         recoverability at each balance sheet date.

         Reclassifications

         Certain  amounts for the three months ended December 31, 2004 have been
         reclassified  to conform to the  presentation  of the December 31, 2005
         amounts. The reclassifications have no effect on the net (loss) for the
         three months ended December 31, 2005.

NOTE 3 - MORTGAGES RECEIVABLE AND OTHER
         ------------------------------

         Represents amounts due from individuals who purchased property from the
         Company  and other  various  amounts  due the  Company.  Amounts due at
         December 31, 2005 is $5,835.

NOTE 4 - FIXED ASSETS
         ------------

         Fixed assets consist of the following at December 31, 2005:

                                                                     2005
                                                               ----------------
         Office equipment and other                             $       30,968
         Vehicles                                                       31,508
                                                               ----------------
                                                                        62,476
         Less: Accumulated Depreciation                                (48,939)
                                                               ----------------

                                          Total                 $       13,537
                                                               ================

         Depreciation  expense was $5,630 and $2,815 for the three  months ended
         December 31, 2005 and 2004, respectively.

                                       17
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 5 - NOTES AND MORTGAGES PAYABLE
         ---------------------------

         Notes and  mortgages  payable  consist of the following at December 31,
         2005:

                                                                     2005
                                                                --------------

         Open credit line with a bank with interest at
         8.50% unsecured.                                        $        786

         Advance payable on demand to an officer at 6%
         interest per annum.  Interest waived.                         20,000
                                                                --------------

                     Total                                       $     20,786
                                                                ==============


NOTE 6 - CONVERTIBLE DEBENTURES PAYABLE
         ------------------------------

         The Company has convertible debentures outstanding at December 31, 2005
         in the amount of $199,202.  These debentures  accrue interest at 8% per
         annum.  These  debentures  mature  along with the  related  interest at
         November  2003.  The  debentures  are  convertible  at  the  investors'
         discretion  pursuant  to the  convertible  debenture  agreement.  As of
         December 31, 2005 these  debentures are in default.  The investors have
         not contacted the Company about the new payment terms.

NOTE 7 - ACQUISITIONS
         ------------

         On February 10, 2000, the Company  acquired MAS XV  Acquisitions  Corp.
         for  1,500,000  shares of its common  stock valued at $.19 per share or
         $285,000.  Additionally,  on April 1, 2000, the Company acquired 80% of
         the Encore Services, Inc. for 250,000 shares of its common stock valued
         at $33,750.  The Company  restated its September 30, 2000  consolidated
         financial   statements   and  expensed  the  entire  amounts  of  these
         acquisitions  because  they  were  determined  to have no  value.  Both
         companies had no assets or liabilities upon purchase.

         On May 8, 2001, the Company merged with  Connecticut  Acquisition  upon
         the   acquisition  of  the  Hebron  Parcel.   This  Hebron  parcel  was
         subsequently   conveyed  on  October   31,  2001  to  Genesis   Capital
         Corporation of Nevada,  an entity related to the Company through common
         officers and directors. (Upon the acquisition of the Hebron parcel)

         DC Power merged into the Company on November 1, 2001.

                                       18
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 8 - CONTINGENCY/UNCERTAINTY
         -----------------------

         The Company during the year ended  September 30, 2001 became aware that
         some or all of the  capital  changes  were not  validly  adopted by the
         Company's board of directors,  approved by the Company's  shareholders,
         or filed with the Secretary of State of the State of Nevada as required
         by the laws of the State of Nevada.  As a result,  it appears  that the
         Company never has been  authorized to issue more than 1,000,000  shares
         of its common stock. All shares of the Company's common stock issued in
         excess of 1,000,000  shares appear to have been issued in excess of the
         Company's  authorized  amount,   therefore,   these  shares  have  been
         reclassified to temporary equity (See Notes 9 and 11).

         Additionally,  the Company  issued  common  stock  above the  Company's
         authorized  amount and issued shares that at the time may not have been
         in  compliance  with the  registration  provisions  of Section 5 of the
         Securities Act of 1933, as amended.  The full impact of these items are
         unknown  at this  time.  As a  result,  the  Company  had  reclassified
         $3,927,047 to temporary equity as of September 30, 2001.  Subsequent to
         September 30, 2001, the Company issued  843,265,695  shares of stock in
         connection  with the conversion of debentures that have been classified
         as temporary  equity.  This resulted in an increase to temporary equity
         of $490,891 for the year ended September 30, 2002. This account acts as
         a reserve for capital that the Company may be required to repay.

         The Company has  reclassified  certain amounts from temporary equity to
         permanent  stockholders'  equity after curing the over issuances of its
         common stock  pursuant to Section 13 of the  Securities Act on November
         17, 2005.

NOTE 9 - TEMPORARY EQUITY
         ----------------

         The Company had  recorded  on its balance  sheet as a temporary  equity
         account for those securities  issued that may not be in compliance with
         the registration provisions of Section 5 of the Securities Act of 1933,
         as  amended  and for the  issuance  of common  stock  issued  above its
         authorized amount. All related amounts that were previously included in
         common  stock  and   additional   paid-in   capital  of  the  permanent
         stockholders'  equity (deficit)  section were reclassified to temporary
         equity as their  redemption may not be solely within the control of the
         issuer.  On November 17, 2005 the over issuance problems were cured and
         all temporary equity amounts were moved to permanent equity.

         Temporary equity at October 31, 2005 was $4,417,938.  Substantially all
         the shares issued in connection  with the conversion of debentures were
         reclassified as temporary equity.  The over issuances problem was cured
         November 17, 2005 and all temporary equity moved to permanent equity.

                                       19
<PAGE>
               NATIONAL REALTY AND MORTGAGE INC. AND SUBSIDIARIES
        (FORMERLY NATIONAL RESIDENTIAL PROPERTIES, INC. AND SUBSIDIARIES)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)


NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT)
          ------------------------------

         As of December 31, 2005, there were  8,000,000,000  shares  authorized,
         and 6,462,895  shares issued and  outstanding  of the Company's  common
         stock with a par value of $.0000001.

         The  Company  issued  843,265,695  shares of common  stock for the year
         ended  September  30,  2002.  These  shares were  recorded in temporary
         equity  along with  1,094,300,351  shares of common  stock from  fiscal
         2001,  which have been  reclassified to temporary  equity (See Note 9).
         All of the  843,265,695  shares of common  stock  issued were issued in
         excess of authorized limits.

         As of December 31, 2005, there were  1,000,000,000  shares  authorized,
         and 666,667  issued and  outstanding  of the  Company's  Class A Voting
         common stock with a par value of $.0000001.

         As of December 31, 2005, there were 1,000,000,000 shares authorized and
         0 shares issued and outstanding of the Company's preferred stock with a
         par value of $.0000001.

         On December 19, 2005, the Company effected a reverse stock split of the
         Company's capital stock, whereby every 300 shares of capital stock were
         combined  and  converted  into  one  share  of  capital  stock  and the
         Company's common stock began to trade on a split adjusted basis.

NOTE 11 - INCOME TAXES
          ------------

         The net deferred tax assets in the accompanying  condensed consolidated
         balance sheet include the following components at December 31, 2005:

                                                                     2005
                                                              -----------------

                Deferred tax assets                            $     2,515,705
                Deferred tax valuation allowance                    (2,515,705)
                                                              -----------------

                Net deferred tax assets                        $             -
                                                              =================



         Due to the  uncertainty  of utilizing  approximately  $8,385,683 in net
         operating   losses,   and  recognizing  the  deferred  tax  assets,  an
         offsetting valuation allowance has been established.



                                       20
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS REPORT.

                                   Background

         National Realty and Mortgage, Inc. (the "Company") f/k/a/ National
Residential Properties, Inc., was originally incorporated in the State of Nevada
on October 18, 1971 under the name of Mister Las Vegas, Inc. On December 15,
1994, the Company merged with a privately owned company, National Rehab
Properties, Inc., a Florida corporation formed on October 1, 1993. The surviving
Nevada corporation changed its name to National Rehab Properties, Inc. and
became authorized to conduct business in the State of Florida on August 17,
1995. On October 10, 2000, the Company changed its name to National Residential
Properties, Inc. And in November 2005 the Company changed its name to National
Realty and Mortgage, Inc.

         From 1993 until 1999, the Company's business concentrated on investing
in and revitalizing single family homes in established older residential
neighborhoods in urban areas. The Company either bought single unit vacant
properties and built single family homes on them, or bought abandoned homes
which the Company then renovated and sold. During 1999, while retaining its
efforts in the renovation of urban single family homes as one aspect of its
business, the Company entered a second phase of business - the development,
construction and ownership of multifamily housing projects. In its 2004 fiscal
year, the Company commenced operations as a mortgage lender.

                      Background Capitalization Information

         The Company's original Articles of Incorporation (the "ARTICLES")
authorized the Company to issue 1 million shares of the Company's common stock
("NRMG COMMON STOCK"). After its incorporation, the following events occurred:

         (i) in December 1994, the Company attempted to effect a 2 for 1 stock
split (the "1994 STOCK SPLIT");

         (ii) in January 1999, the Company attempted to effect a 1 for 10
reverse stock split (the "1999 REVERSE STOCK SPLIT");

         (iii) between the date of its incorporation and January 2001, the
Company believed it increased the number of shares it was authorized to issue
from 1 million to 40 million shares of NRMG Common Stock (the "40 MILLION SHARE
INCREASE");

         (iv) in October 2000, the Company attempted to increase the number of
shares the Company was authorized to issue from 40 million to 250 million shares
of NRMG Common Stock (the "250 MILLION SHARE INCREASE");

         (v) in January 2001, the Company attempted to increase the number of
shares it was authorized to issue from 250 million to 750 million shares of NRMG
Common Stock and effected a 3 for 1 stock split (the "750 MILLION SHARE
INCREASE"); and





                                       21
<PAGE>
         (vi) in June 2001, the Company attempted to increase the number of
shares it was authorized to issue from 750 million to 1.5 billion shares of NRMG
Common Stock (the "1.5 BILLION SHARE INCREASE", and together with the 1994 Stock
Split, the 1999 Reverse Stock Split, the 40 Million Share Increase, the 250
Million Share Increase and the 750 Million Share Increase, the "CAPITAL
CHANGES").

         The Company has since determined that some or all of the Capital
Changes were not validly adopted by the Company's board of directors, approved
by the Company's shareholders or filed with the Secretary of State of the State
of Nevada as required by the laws of the State of Nevada. As a result, it
appears the Company was never authorized to issue more than 1 million shares of
NRMG Common Stock. Until November 17, 2005, (as described in more detail below)
all shares of NRMG Common Stock issued in excess of 1 million shares appeared to
have been issued in excess of the authorized amount.

         Given the foregoing, the Company attempted to determine the majority
owners of the validly issued shares of NRMG Common Stock. The Company discovered
that Richard Astrom and Pamela Gay Astrom, tenants by the entireties, were
issued a substantial block of shares shortly after the Company merged with
National Rehab Properties, Inc. in 1995. These shares consisted of the majority
of the Company's validly issued outstanding shares. After their initial
issuance, approximately 22% of these shares were transferred by Mr. and Mrs.
Astrom to their family members, and were then resold into the public market.
While Mr. and Mrs. Astrom did transfer these shares, the Company's assumption is
that, because the shares are largely fungible, the shares transferred by Mr. and
Mrs. Astrom were those issued in excess of the Company's authorized amount. If
the Company was incorrect in this assumption, Mr. and Mrs. Astrom would not have
been the owners of a majority of the Company's validly issued shares. The
Company's former transfer agent's records show that the remainder of these
shares (including those shares the Company assumes were validly issued) were
still held by Richard and Pamela Astrom, as tenants by the entireties, when the
Company's former transfer agent and the Company severed relations. The Company's
current transfer agent's records confirm that these shares can be traced from
that time to the present, as they are still held by Richard and Pamela Astrom,
as tenants by the entireties, and have not been sold or otherwise transferred.
As such, Richard Astrom and Pamela Gay Astrom, as tenants by the entireties,
appeared to hold a majority of the validly issued shares of NRMG Common Stock.

         After making the aforementioned factual findings, the Company proceeded
to retain local counsel in the State of Nevada to determine the effect of the
invalidity of some or all of the Capital Changes and to confirm the foregoing
analysis under Nevada law. Based on the Company's discussions with Nevada
counsel and the assumption that the shares transferred to Mr. and Mrs. Astrom's
family members described above included only those shares that were issued in
excess of the Company's authorized amount, the Company determined that Richard
and Pamela Astrom could amend the Company's articles of incorporation to
increase the Company's authorized shares of common stock. The Company also
believed that the issuance of NRMG Common Stock in excess of the authorized
amount could be cured by the Company's board of directors.

         On September 20, 2005, the Company filed a revised information
statement on Schedule 14C with the Securities and Exchange Commission (the
"SEC") relating to shareholder approval of the following proposals:





                                       22
<PAGE>
         1. To amend the Company's articles of incorporation to increase the
number of authorized shares of common stock to 9 billion shares and accordingly
increase the total number of authorized shares of all classes of stock the
Company is authorized to issue.

         2. To amend the Company's articles of incorporation to create Class A
common stock and to issue Class A common stock to Christopher Astrom.

         3. To amend the Company's articles of incorporation to change the par
value of the Company's common stock to $.0000001 per share.

         4. To amend the Company's articles of incorporation to effect a 1 for
300 reverse split of the Company's capital stock.

         5. To ratify past changes of the Company's name and approve an
amendment to the Company's articles of incorporation to change the name of the
Company to "National Realty and Mortgage, Inc."

         6. To amend the Company's articles of incorporation to create a class
of preferred stock, and to adopt and approve amended and restated articles of
incorporation.

         The shareholders owning a majority of the validly issued and then
outstanding NRMG Common Stock then adopted and approved these proposals. On
October 17, 2005, the Company filed Amended and Restated Articles of
Incorporation incorporating the changes discussed in (1), (2), (3), (5) and (6)
above with the Nevada Secretary of State. On November 19, 2005, the Company's
board of directors ratified the Capital Changes.

         On November 15, 2005, the Company issued 200 million shares of its
newly authorized Class A common stock, par value $.0000001 per share, to
Christopher Astrom.

         On December 19, 2005, the Company effected a reverse stock split of the
shares of the Company's capital stock, whereby every 300 shares of capital stock
were combined and converted into one share of capital stock and the Company's
common stock began to trade on a split-adjusted basis (the "2005 REVERSE STOCK
SPLIT"). The record date for the 2005 Reverse Stock Split was December 6, 2005.
As of December 6, 2005, there were 1,938,566,046 shares of common stock issued
and outstanding and 200 million shares of Class A common stock issued and
outstanding. The number of shares of common stock and Class A common stock
issued and outstanding, or held as treasury shares was reduced to a number
approximately equal to the number of shares of common stock or Class A common
stock, respectively, issued and outstanding, or held as treasury shares,
immediately prior to the effectiveness of the reverse split, divided by 300
(except that the Company did not issue fractional shares in connection with the
2005 Reverse Stock Split and instead, any fractional share that resulted from
the 2005 Reverse Stock Split was rounded up to the next whole share). As of
January 6, 2006, there were 6,462,895 shares of common stock issued and
outstanding and 666,667 shares of Class A common stock issued and outstanding.

                               Current Operations

         From 1999 until 2002, the Company's business focused on residential
real estate development and building construction services, and in particular on
acquiring properties suitable for development as multifamily housing or multiple



                                       23
<PAGE>
unit single family development tracts. In its 2004 fiscal year, the Company
commenced operations as a mortgage lender. Although the Company has determined
to develop its mortgage lending business, it has not discontinued its real
estate development business. The Company plans to continue its real estate
development business in tandem with its mortgage lending business to the extent
appropriate development opportunities present themselves and become available to
the Company. The Company has not hired additional personnel to engage in its
mortgage lending business.

         In October 2003, the Company began lending money to individuals in the
form of mortgage notes. The Company acts as a broker on some of these
transactions and receives loan origination fees for its services.

         The Company has become licensed to extend credit as a mortgage lender,
implemented an online appraisal service and has begun active efforts to locate
potential borrowers, including increased advertising efforts and discussions
with mortgage brokers. Although the Company has determined to develop its
mortgage lending business, it has not discontinued its real estate development
business. The Company plans to continue its real estate development business in
tandem with its mortgage lending business to the extent appropriate development
opportunities present themselves and become available to the Company. The
Company has not hired additional personnel to engage in its mortgage lending
business.

         The Company's common stock is quoted on the OTC Bulletin Board. In
fiscal 2005 the Company changed its trading symbol from "NRES" to "NRMG".

         The following presentation of management's discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the Company's consolidated financial statements, the
accompanying notes thereto and other financial information appearing elsewhere
in this report. This section and other parts of this report contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements.

                              RESULTS OF OPERATIONS

                THREE MONTHS ENDED DECEMBER 31, 2005 COMPARED TO
                      THREE MONTHS ENDED DECEMBER 31, 2004

Revenues

Revenues were $0.00 for the three months ended December 31, 2005, as compared to
$2800.00 for the three months ended December 31, 2004.

Cost Of Revenues

Cost of revenues was $0.00 for the three months ended December 31, 2005, as
compared to $0.00 for the three months ended December 31.

Operating Expenses

Operating expenses for the three months ended December 31, 2005 were $239,321
compared to $81,248 for the three months ended December 31, 2004.




                                       24
<PAGE>
Loss From Operations

Loss from operations for the three months ended December 31, 2005 was $239,321
compared to $97,513 for the three months ended December 31, 2004.

Interest Expense

Interest expense was $0.00 and $21,900 for the three months ended December 31,
2005 and 2004, respectively.

Net Loss Applicable To Common Stock

Net loss per share applicable to Common Stock was $0.04 for the three months
ended December 31, 2005, compared to $0.02 for the three months ended December
31, 2004.

                         LIQUIDITY AND CAPITAL RESOURCES

         To date, the Company has financed its operations primarily through
mortgage debt and the issuance of the NRMG Debentures. At December 31, 2005, the
Company had $266,368 in cash and cash equivalents.

         The Company believes that through its operations as a mortgage lender
it has sufficient cash resources to maintain operations for a period of at least
12 months. The Company expects, however, to dramatically reduce operating
expenses going forward. Further, because the Company recently began its lending
operations there can be no assurance that such funds will actually be liquid and
available. See "Outlook", below for a discussion on possible limits on the
Company's ability to raise capital. Cash requirements will largely depend upon
the availability of real estate acquisition opportunities and costs related to
its lending operations.

         The Company's ability to rely on exemptions from the registration
requirements of Section 5 of the Securities Act relating to the issuance,
exchange and conversion of its debentures has been called into question. It
appears the Company may have violated Section 5. The ramifications of this may
entail a possible rescission offer to the shareholders affected within the past
year. Section 13 of the Securities Act provides that no action shall be
maintained for offering or selling securities in violation of Section 5 unless
that action is brought within one year of the date of the violation. One year
has passed from the initial placement of the NRMG Debentures and from the
conversion of the NRMG Debentures issued. As of the date of this report, there
have been no actions filed against the Company based upon a violation of Section
5. Because the statute of limitations has run, it is unlikely that these holders
of NRMG Common Stock will file an action against the Company. However, any such
action maintained against the Company could have a substantial impact on the
Company's liquidity. As such, the Company could not afford to offer rescission.
If a court were to determine that rescission rights existed, the Company might
be compelled to seek bankruptcy protection.

OUTLOOK

         The Company invested substantial funds in its previous projects, but
only realized material profits from these projects upon the sale of the real
estate. With the completion of the sale of the Bay Harbor Property on August 3,
2005, the Company has disposed of its last remaining property. The Company
estimates the general overhead costs necessary to sustain its existence
(excluding expenses related to its newly commenced mortgage business) to be
$10,000 per month.

                                       25
<PAGE>
         Currently, the Company is using its available cash on hand as the
primary resource to continue its mortgage business. Much of these funds were
derived from the Company's recent sales of its real property holdings. Now that
shareholder approval has been obtained and the changes to the Company's capital
structure have been effected, the Company intends to enter into a financing
agreement with an as of yet unidentified third party to generate cash to broaden
its mortgage lending business. The Company currently has no third party funding
source for loans it originates. The Company intends both to originate and
service loans.

         The Company's ability to meet its continuing operating expenses largely
depends on its ability to continue to raise capital (i) through the sale of debt
or equity, (ii) through construction and permanent mortgage financing, (iii)
through the sale of land purchased, but not developed, by the Company and (iv)
through operations as a mortgage lender. There can be no assurance the Company
will be able to raise additional capital on a debt or equity basis, or obtain
mortgage financing, complete any of its projects under development, or sell any
completed development projects (should they be completed) or land purchased for
resale or development at a profit.

                               RECENT DEVELOPMENTS

         It has come to the Company's attention that, as a result of the
conversion of the debentures issued by the Company into NRES Common Stock,
coupled with the decrease in the trading price of NRES Common Stock, investors
were entitled to more shares of NRES Common Stock than is authorized under the
Company's Articles of Incorporation. As a result, as of August 12, 2005, the
Company has 1,938,566,046 shares of NRES Common Stock issued, which exceeds the
number of shares authorized. As stated above, the Company believes the holders
of a majority of the Company's validly issued and outstanding shares and the
board of directors can cure and ratify the overissuances of stock. If this
cannot be accomplished, the Company may be liable to the holders of the NRES
Common Stock issued in excess of the authorized amount in an amount equal to
1,937,566,046 shares (the number of shares issued in excess of the amount
authorized) multiplied by the price each such share was issued for (which ranged
from approximately $.0001 to $5.4 per share). The overissuance, together with
the Company's inability to increase its authorized number of shares, has
eliminated the Company's ability to raise capital through issuances of publicly
registered securities. The Company believes it will not be able to continue
trading NRES Common Stock or increase its capital resources through selling
publicly registered securities until the overissuance is cured and the Company
increases the authorized number of shares of NRES Common Stock. The Company's
officers and directors may also have violated other provisions of Nevada law
with respect to the duties of officers and directors to the Company and by not
having sufficient shares available upon the conversion of debentures issued by
the Company.

         Section 5 of the Securities Act prohibits the public sale of securities
absent an effective registration statement being filed with the SEC, unless an
exemption from registration applies. All shares of NRES Common Stock issued upon
conversion of the NRES Debentures were sold by holders of the NRES Debentures
following conversion. This occurred during the period beginning on may 16, 2001
and ending on July 13, 2001 for the NRES Connecticut Debentures and beginning on
November 5, 2001 and ending on August 2, 2002 for the NRES DC Power Debentures.
In October 2000, the Company issued debentures pursuant to a merger with 2217
Acquisition Inc., a Nevada corporation. These debentures were also converted


                                       26
<PAGE>
into NRES Common Stock. These transactions were performed in a manner thought to
be exempt from the registration requirements of Section 5 of the Securities Act.
However, the requirements of the exemptions relied on do not appear to have been
satisfied.

         The Company may also have violated the federal proxy rules by either
(i) not obtaining the requisite shareholder approval to effect the changes in
capital structure described above or (ii) not providing shareholders with an
Information Statement on Schedule 14C. As such, it appears the Company has only
1 million shares of NRES Common Stock authorized. Until the Company's board of
directors and shareholders cure and ratify the overissuances of stock, the 40
Million Share Increase, the 250 Million Share Increase, the 750 Million Share
Increase and the 1.5 Billion Share Increase and comply with the federal proxy
rules in doing so by properly obtaining shareholder approval, the Company may be
liable to the holders of the NRES Common Stock issued in excess of the
authorized amount. These holders can demand the issuance of the shares in excess
of the Company's authorized amount be rescinded, causing the Company to purchase
the shares at the price at which they were sold. The Company still may be
subject to an enforcement action for possible violations of this and other
provisions of the federal securities laws.


OFF-BALANCE SHEET TRANSACTIONS

The Company has no off-balance sheet arrangements and has not entered into any
transactions involving unconsolidated, limited purpose entities.

                                  RISK FACTORS

IN ADDITION TO OTHER INFORMATION IN THIS REPORT, YOU SHOULD CONSIDER THE
FOLLOWING RISK FACTORS CAREFULLY. THESE RISKS MAY IMPAIR THE COMPANY'S OPERATING
RESULTS AND BUSINESS PROSPECTS AS WELL AS THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK.

                      RISKS RELATED TO LEGAL UNCERTAINTIES

            THE COMPANY BELIEVES IT HAS VIOLATED NEVADA CORPORATE LAW

         At the time of its incorporation, the Company had 1 million shares of
its common stock authorized. Since that time, the Company believed it had
effected the 1994 Stock Split, the 1999 Reverse Stock Split, the 40 Million
Share Increase, the 250 Million Share Increase, the 750 Million Share Increase
and the 1.5 Billion Share Increase. These changes in capital structure appear to
have not been validly adopted by the Company's board of directors, approved by
the Company's shareholders or filed with the Secretary of State of the State of
Nevada, as required by the laws of the State of Nevada.

         As such, as of December 31, 2005, it appeared that the Company had only
1 million shares of NRMG Common Stock authorized, and the majority of the
validly issued shares were held by Richard and Pamela Astrom as tenants by the
entireties. As of December 31, 2005, the Company believed a majority of the
Company's validly issued and then outstanding shares and the board of directors
could cure and ratify the overissuances of stock and the aforementioned changes
in capital structure. Until that time, the Company believed it could be liable
to the holders of the NRMG Common Stock issued in excess of the authorized
amount.



                                       27
<PAGE>
         As of December 31, 2005, the Company also believed the issuance of
Class A common stock to Christopher Astrom in 1999 was not authorized as an
amendment to the Company's articles of incorporation was never filed with the
Secretary of State of the State of Nevada. As of December 31, 2005, the Company
believed the recipient of the unauthorized shares, Christopher Astrom, could
have a claim against the Company for damages, but thought it was unlikely that
Christopher Astrom would file a claim against the Company as he is an officer,
director and principal shareholder of the Company. Also, as discussed below, as
of December 31, 2005, the Company's board of directors and the holders of a
majority of its validly issued and then outstanding shares intended to authorize
the creation of Class A common stock and issue shares to Christopher Astrom.

         It came to the Company's attention that, as a result of the conversion
of the debentures issued by the Company into NRMG Common Stock, coupled with the
decrease in the trading price of NRMG Common Stock, investors were entitled to
more shares of NRMG Common Stock than were authorized under the Articles. As a
result, as of September 30, 2005, the Company had 1,938,566,046 shares of NRMG
Common Stock issued, which exceeded the number of shares authorized. As stated
above, the Company believed the holders of a majority of the Company's validly
issued and then outstanding shares (Richard and Pamela Astrom) and the board of
directors could cure and ratify the overissuances of stock. If this could not be
accomplished, the Company could have been liable to the holders of the NRMG
Common Stock issued in excess of the authorized amount in an amount equal to
1,937,566,046 shares (the number of shares issued in excess of the amount
authorized) multiplied by the price each such share was issued for (which ranged
from approximately $.0001 to $5.4 per share). These holders could demand the
issuance of the shares in excess of the Company's authorized amount be
rescinded, causing the Company to purchase the shares at the price at which they
were sold. The overissuance, together with the Company's inability to increase
its authorized number of shares, eliminated the Company's ability to raise
capital through issuances of publicly registered securities. As of December 31,
2005, the Company believed it would be unable to continue trading NRMG Common
Stock or increase its capital resources through selling publicly registered
securities until the overissuance is cured and the Company increases the
authorized number of shares of NRMG Common Stock. The Company's officers and
directors may have also violated their fiduciary duties to the Company by
permitting the Company to issue shares in excess of its authorized amount and by
not having sufficient shares available upon the conversion of the debentures
issued by the Company.

         As of November 17, 2005, the Company's board of directors had cured and
ratified the overissuances of stock. While it is unlikely that a shareholder
would bring an action against the Company now that, as of November 17, 2005, the
Company has ratified the overissuances of NRMG Common Stock, any such action
maintained against the Company could have a substantial impact on the Company's
liquidity and capital resources.

THE COMPANY HAS VIOLATED SECTION 5 OF THE SECURITIES ACT.

         Section 5 of the Securities Act prohibits the public sale of securities
absent an effective registration statement being filed with the SEC, unless an
exemption from registration applies. All shares of NRMG Common Stock issued upon
conversion of the NRMG Debentures were sold by holders of the NRMG Debentures
following conversion. This occurred during the period beginning on May 16, 2001
and ending on July 13, 2001 for the NRMG Connecticut Debentures and beginning on
November 5, 2001 and ending on August 2, 2002 for the NRMG DC Power Debentures.
In October 2000, the Company issued debentures pursuant to a merger with 2217


                                       28
<PAGE>
Acquisition Inc., a Nevada corporation. These debentures were also converted
into NRMG Common Stock. These transactions were performed in a manner thought to
be exempt from the registration requirements of Section 5 of the Securities Act.
However, the requirements of the exemptions relied on do not appear to have been
satisfied.

THE COMPANY MAY HAVE VIOLATED THE FEDERAL PROXY RULES

         At the time of its incorporation, the Company had 1 million shares of
its common stock authorized. Since that time, the Company believed it had
effected the 1994 Stock Split, the 1999 Reverse Stock Split, the 40 Million
Share Increase, the 250 Million Share Increase, the 750 Million Share Increase
and the 1.5 Billion Share Increase. However these changes in capital structure
had not been validly adopted by the Company's board of directors, approved by
the Company's shareholders or filed with the Secretary of State of the State of
Nevada, as required by the laws of the State of Nevada. The Company may have
violated the federal proxy rules by either (i) not obtaining the requisite
shareholder approval to effect these changes or (ii) not providing shareholders
with an Information Statement on Schedule 14C. As of December 31, 2005 these
potential violations were cured. As of December 31, 2005 the Company has
obtained proper shareholder approval, provided proper notice to the shareholders
with an Information Statements on Schedule 14C and the changes to the capital
structure have been filed with the Secretary of State of the State of Nevada.

THE COMPANY MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL

         Though the Company was able to increase its authorized capital to 10
billion shares October 17, 2005, there can be no assurance that the Company will
be able to raise additional capital on a debt or equity basis.

THE COMPANY IS IN DEFAULT OF THE NRMG DEBENTURES

         The Company is in default under the terms of the NRMG Debentures
because, among other things, the Company has no plans to register additional
NRMG Common Stock to be issued upon conversion of the NRMG Debentures that are
currently outstanding and has no plans to complete the issuance of the NRMG
Debentures. Given the foregoing, the Company could face litigation by the
holders of the NRMG Debentures seeking to enforce the Company's obligations
thereunder. This would likely have a substantial negative effect on the
Company's capital resources and would also negatively affect the Company's
liquidity.

                                   OTHER RISKS

THE COMPANY'S STOCK PRICE HAS DECLINED SIGNIFICANTLY AND MAY NOT RECOVER

The trading price of NRMG Common Stock has declined significantly since
approximately October 2001. The market for NRMG Common Stock is essentially
non-existent and there can be no assurance of a change in the immediate future.

THE COMPANY MAY BE SUBJECT TO PENNY STOCK REGULATIONS AND REQUIREMENTS FOR LOW
PRICED STOCK

         The SEC adopted regulations which generally define a "penny stock" to
be any non-Nasdaq equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Based upon the price of the Company's
common stock as currently traded on the OTC Bulletin Board, the Company's common


                                       29
<PAGE>
stock is subject to Rule 15g-9 under the Exchange Act which imposes additional
sales practice requirements on broker-dealers which sell securities to persons
other than established customers and "accredited investors." For transactions
covered by this rule, a broker-dealer must make a special suitability
determination for the purchaser and have received a purchaser's written consent
to the transaction prior to sale. Consequently, this rule may have a negative
effect on the ability of stockholders to sell common shares of the Company in
the secondary market.

ADDITIONAL DEBT, CONVERTIBLE DEBT, OR EQUITY FINANCING MAY EFFECT ABILITY OF
INVESTORS TO SELL COMMON STOCK

         The Company's common stock currently trades on the OTC Bulletin Board.
Stocks trading on the OTC Bulletin Board generally attract a smaller number of
market makers and a less active public market and may be subject to significant
volatility. If the Company raises additional capital from the sale of the
Company's common stock, the market price could drop and the ability of investors
to sell the Company's common stock could be diminished.

RISKS RELATED TO REAL ESTATE AND RELATED INVESTMENTS

         The Company is subject to the risks associated with ownership,
operation and financing of real estate. These risks include, but are not limited
to, liability for environmental hazards, changes in general or local economic
conditions, changes in interest rates and the availability of construction and
permanent mortgage financing which may render the acquisition, sale or
refinancing of a property difficult or unattractive and which may make debt
service burdensome, changes in real estate and zoning laws, bonding
requirements, permitting requirements, changes in income taxes, real estate
taxes or federal or local economic or rent controls, floods, earthquakes and
other acts of nature and other factors beyond the Company's control. The
illiquidity of real estate investments generally may impair the Company's
ability to respond promptly to changing circumstances.

         Under federal, state and local environmental laws, ordinances and
regulations, the Company may be liable for removal or remediation costs, as well
as other costs (such as fines or injuries to persons and property) where its
employees may have arranged for removal, disposal or treatment of hazardous or
toxic substances. In addition, environmental laws impose liability for release
of asbestos-containing materials into the air, and third parties can seek
recovery from the Company for personal injury associated with those materials.

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Based on their evaluation of the Company's disclosure controls and
procedures conducted as of the end of the period covered by this report on Form
10-QSB, Richard Astrom, the Company's Chief Executive Officer, and Christopher
Astrom, the Company's Chief Financial Officer, have concluded that they are the
only individuals involved in the Company's disclosure process. The Company has
no formal procedures in place for processing and assembling information to be
disclosed in the Company's periodic reports. The Company's system is designed so
that information is retained by the Company and relayed to counsel and the
Company's accountants as it becomes available. Though the Company has had
difficulty implementing its disclosure controls and procedures in the past, the
Company's principal executive officer and principal financial officer believe


                                       30
<PAGE>
that as of the end of the period being reported, the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
are effective in ensuring that (i) information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and (ii) information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure. The Company also notes that while its disclosure controls and
procedures might not have been effective for a larger entity, the Company's
principal executive officer and principal financial officer came to the
aforementioned determination in part based on the fact that the Company only has
one asset. Further, the Company believes that, given its size, an extensive
disclosure controls and procedures system is not necessary.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         No changes in the Company's internal control over financial reporting
have come to management's attention during the Company's last fiscal quarter
that have materially affected, or are likely to materially affect, the Company's
internal control over financial reporting.

                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is not a party to any pending legal proceedings nor is any
of the Company's property the subject of any pending legal proceedings.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

         On November 15, 2005, the Company reported: (i) that it issued 200
million shares of the Company's Class A common stock, $0.0000001 par value per
share to Christopher Astrom. Each share of Class A Common Stock is convertible
at the option of the holder into 20 shares of common stock. The purpose of the
issuance was to remunerate Mr. Astrom for the 1 million shares of Class A common
stock the Company intended to issue him when the Company's stock was more
valuable and to compensate Mr. Astrom for services rendered to the Company as
chief financial officer for the past three fiscal years. The Company relied on
Section 4(2) of the Securities Act of 1933, as amended as an exemption from the
registration requirements of Section 5 of the Securities Act, in that this
issuance constitutes a transaction by the Company not involving any public
offering; (ii) that it approved and adopted Amended and Restated Bylaws of the
Company

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         See the discussion in "RISK FACTORS - RISKS RELATED TO LEGAL
UNCERTAINTIES"






                                       31
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         On September 20, 2005 the Company filed a revised information statement
on Schedule 14C with the SEC relating to shareholder approval of the following
items:

         1. To amend the Company's articles of incorporation to increase the
number of authorized shares of common stock to 9 billion shares and accordingly
increase the total number of authorized shares of all classes of stock the
Company is authorized to issue.

         2. To amend the Company's articles of incorporation to create Class A
common stock and to issue Class A common stock to Christopher Astrom.

         3. To amend the Company's articles of incorporation to change the par
value of the Company's common stock to $.0000001 per share.

         4. To amend the Company's articles of incorporation to effect a 1 for
300 reverse split of the Company's capital stock.

         5. To ratify past changes of the Company's name and approve an
amendment to the Company's articles of incorporation to change the name of the
Company to "National Realty and Mortgage, Inc."

         6. To amend the Company's articles of incorporation to create a class
of preferred stock, and to adopt and approve amended and restated articles of
incorporation.

         Shareholders owning a majority of the validly issued and then
outstanding NRMG Common Stock then adopted and approved these proposals. As a
result, these proposals were approved and adopted by the majority required by
law and no further votes were needed.

         The Company filed Amended and Restated Articles of Incorporation
incorporating the changes discussed in (1)-(3), (5) and (6) above with the
Nevada Secretary of State on October 17, 2005. The Company filed a Certificate
of Amendment to the Company's articles of incorporation incorporating the
changes discussed in (4) above with the Nevada Secretary of State on December
14, 2005, with an effective date of December 19, 2005. No other shareholders
voted for or against these actions.

ITEM 5. OTHER INFORMATION

         None















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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

EXHIBIT
NUMBER            DESCRIPTION
------- ------------------------------------------------------------------------

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Financial Officer pursuant to Sec tion 302 of
         the Sarbanes-Oxley Act of 2002.

32.1     Certification of Chief Executive Officer pursuant to Sec tion 906 of
         the Sarbanes-Oxley Act of 2002.

32.2     Certification of Chief Financial Officer pursuant to Sec tion 906 of
         the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

         1. On December 19, 2005 the Company filed Form 8-K reporting its
reverse stock split of its chares of common stock.

         2. On November 17, 2005, the Company reported the record date for a
reverse stock split of the shares of the Company's capital stock.

         3. On November 15, 2005, the Company reported: (i) that it issued 200
million shares of the Company's Class A common stock, $0.0000001 par value per
share to Christopher Astrom. Each share of Class A Common Stock is convertible
at the option of the holder into 20 shares of common stock. The purpose of the
issuance was to remunerate Mr. Astrom for the 1 million shares of Class A common
stock the Company intended to issue him when the Company's stock was more
valuable and to compensate Mr. Astrom for services rendered to the Company as
chief financial officer for the past three fiscal years. The Company relied on
Section 4(2) of the Securities Act of 1933, as amended as an exemption from the
registration requirements of Section 5 of the Securities Act, in that this
issuance constitutes a transaction by the Company not involving any public
offering; (ii) that it approved and adopted Amended and Restated Bylaws of the
Company.


SIGNATURES

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


National Realty and Mortgage, Inc.

Date: February 14, 2006

By: /s/ RICHARD ASTROM
-----------------------------
Richard Astrom
Chief Executive Officer


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