U.S.
Securities and Exchange Commission


Washington, D.C.
20549
 
 FORM
10-Q
  
 [X]           QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
1934
  For
the Quarterly Period Ended September 30, 2008
 
 [  ]            TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
1934
  For
the Transition Period From ____to _____
  
 MONTGOMERY
REAL ESTATE SERVICE, INC.
 (Exact
name of small business issuer as specified in its charter)
  
 Nevada
              88-0450667(State
      or other jurisdiction of
              (IRS
      Employer identification No.)incorporation
      or organization)
  191 Chestnut Street,
Springfield, MA. 01103
 (Address
of principal executive offices)
 
 (413)
734-3116
 (Issuer's
telephone number)
  
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [x] No [ ]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ] No [X]
 
 Number of
shares of common stock outstanding as of November 13, 2008:
9,736,200
 Number of
shares of preferred stock outstanding as of November 13, 2008:
3,600,000
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
              Non-accelerated
      filer
              (Do
      not check if a smaller reporting company)Accelerated
      filer
              Smaller
      reporting company
              x
  
  
 
 INDEX
      TO FORM 10-QPART
      I
              PageItem
      1.  Consolidated Financial Statements
              3Item
      2.  Management's Discussion and Analysis of Financial Condition And
      Results of Operations
              9Item
      3.  Quantitative and Qualitative Disclosures on Market
      Risk
              13Item
      4. Controls and Procedures
              13PART
      IIItem
      1.  Legal Proceedings
              13Item
      1A. Risk Factors
              13Item 2.  Unregistered Sales
      of Equity Securities and Use of Proceeds
              13Item 3.Defaults Upon Senior Securities
              13Item
      4.  Submission of Matters to a Vote of Security
    Holders
              13Item 5.Other Information
              13Item 6.Exhibitsand Reports on Form
      8-K
              13Signatures
              14
 
 2
 Table of Contents
 
 ITEM 1.
CONSOLIDATED FINANCIALS
  
 INDEX TO
MONTGOMERY REAL ESTATE SERVICE, INC. CONSOLIDATED FINANCIAL
STATEMENTS
 
 MONTGOMERY REAL ESTATE
SERVICE, INC.PAGE
 
 Consolidated Balance Sheet4
 
 Consolidated
Statement of Operations  5
 
 Consolidated
Statement of Stockholders’ Equity  6
 
 Consolidated
Statement of Cash Flows  7
 
 Notes to
Consolidated Financial Statements  8
  3
 Table of Contents
  MONTGOMERY
      REAL ESTATE SERVICE, INC.FKA
      MEDIA GROUP SOUTH, INC.Consolidated
      Balance SheetAt
      September 30, 2008Unaudited
                
                
                AuditedAssets:
                
                9/30/2008
                
                
                12/31/2007Current
      assetsCash
      - unrestricted
                
                $
                678
                
                
                $
                1,093Restricted
      cash - security deposits
                
                
                4,586
                
                
                
                -Due
      from affiliate
                
                
                29,024
                
                
                
                29,024Other
      assets
                
                
                -
                
                
                
                4,415Accounts
      receivable
                
                
                3,086
                
                
                
                876Total
      current assets
                
                
                37,374
                
                
                
                35,408Fixed
      assetsProperty
      and equipment
                
                
                288,371
                
                
                
                288,371Accumulated
      depreciation
                
                
                (36,732
                )
                
                
                (28,893
                )Total
      fixed assets
                
                
                251,639
                
                
                
                259,478Total
      assets
                
                $
                289,013
                
                
                $
                294,886Liabilities
      and Stockholders' EquityCurrent
      liabilitiesAccounts
      payable and other current liabilities
                
                $
                1,697
                
                
                $
                7,506Security
      deposits
                
                
                4,586
                
                
                
                -Current
      portion of mortgage payable
                
                
                12,189
                
                
                
                12,189Total
      current liabilities
                
                
                18,472
                
                
                
                19,695Long-term
      mortgage payable
                
                
                176,542
                
                
                
                185,683Total
      liabilities
                
                
                195,014
                
                
                
                205,378Stockholders'
      EquityCommon
      stock, (175,000,000 shares authorized, 9,736,200 shares
    issuedand
      outstanding, par value $.001 per share)
                
                
                9,736
                
                
                
                30,356Preferred
      stock, (25,000,000 shares authorized, 3,600,000 shares issuedand
      outstanding, par value $.001 per share)
                
                
                3,600
                
                
                
                -Additional
      paid-in capital
                
                
                153,803
                
                
                
                81,583Retained
      deficit
                
                
                (73,140
                )
                
                
                (22,431
                )Total
      stockholders' equity
                
                
                93,999
                
                
                
                89,508Total
      liabilities and stockholders' equity
                
                $
                289,013
                
                
                $
                294,886
  4
 Table of Contents
   MONTGOMERY
      REAL ESTATE SERVICE, INC.FKA
      MEDIA GROUP SOUTH, INC.Consolidated
      Statements of OperationsFor
      the Three and Nine Months Ended September 30, 2008 and
  20073
      Months Ended
                
                
                9
      Months Ended9/30/2008
                
                
                9/30/2007
                
                
                9/30/2008
                
                
                9/30/2007Rental
      income
                
                $
                13,839
                
                
                $
                13,552
                
                
                $
                41,246
                
                
                $
                38,989Total
      revenue
                
                
                13,839
                
                
                
                13,552
                
                
                
                41,246
                
                
                
                38,989Selling,
      general and administrative expenses
                
                
                62,847
                
                
                
                8,698
                
                
                
                81,872
                
                
                
                25,726Net
      ordinary income
                
                
                (49,008
                )
                
                
                4,854
                
                
                
                (40,626
                )
                
                
                13,263Interest
      expense
                
                
                (3,361
                )
                
                
                (3,647
                )
                
                
                (10,083
                )
                
                
                (10,825
                )Net
      income (loss)
                
                $
                (52,369
                )
                
                $
                1,207
                
                
                $
                (50,709
                )
                
                $
                2,438Net
      income (loss) per share, basic and fully diluted
                
                $
                *
                
                
                $
                *
                
                
                $
                *
                
                
                $
                *Weighted
      Average Common Shares Outstanding
                
                
                30,356,200
                
                
                
                30,356,200
                
                
                
                30,356,200
                
                
                
                30,356,200* =
      Less than $.01 per share.The
      accompanying notes are an integral part of these consolidated financial
      statements
  5
 Table of Contents
 
 MONTGOMERY
      REAL ESTATE SERVICE, INC.FKA
      MEDIA GROUP SOUTH, INC.Consolidated
      Statement of Stockholders' EquityFor
      the Nine Months Ended September 30, 2008Common
                
                
                
                
                
                PreferredStock
                
                
                
                
                
                Stock
                
                
                
                
                
                Additional(Par
      Value
                
                
                Common
                
                
                (Par
      Value
                
                
                Preferred
                
                
                Paid
      in
                
                
                Retained$
                .001
                )
                
                Shares
                
                
                $
                .001
                )
                
                Shares
                
                
                Capital
                
                
                (Deficit)Balances,
      January 1, 2008
                
                $
                30,356
                
                
                
                30,356,200
                
                
                $
                -
                
                
                
                -
                
                
                $
                81,583
                
                
                $
                (22,431
                )Conversion
      of common into preferred shares
                
                $
                (22,000
                )
                
                
                (22,000,000
                )
                
                $
                3,600
                
                
                
                3,600,000
                
                
                $
                18,400
                
                
                $
                -Issuance
      of common shares for services received
                
                $
                1,380
                
                
                
                1,380,000
                
                
                $
                -
                
                
                
                
                
                
                $
                53,820Net
      loss for the period
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                (50,709
                )Balances,
      September 30, 2008
                
                $
                9,736
                
                
                
                9,736,200
                
                
                $
                3,600
                
                
                
                3,600,000
                
                
                $
                153,803
                
                
                $
                (73,140
                )The
      accompanying notes are an integral part of these consolidated financial
      statements
  6
 Table of Contents
  MONTGOMERY
      REAL ESTATE SERVICE, INC.FKA
      MEDIA GROUP SOUTH, INC.Consolidated
      Statements of Cash FlowsFor
      the Nine Months Ended September 30, 2008 and 20079
      Months Ended
                
                
                9
      Months Ended9/30/2008
                
                
                9/30/2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                (50,709
                )
                
                $
                2,438Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
                
                
                7,839
                
                
                
                7,839Common
      stock issued for services received
                
                
                55,200
                
                
                
                -(Increase)
      decrease in operating assets:Accounts
      receivable
                
                
                (2,210
                )
                
                
                (384
                )Other
      assets
                
                
                4,415
                
                
                
                -Increase
      (decrease) in operating liabilities:Accounts
      payable and other current liabilities
                
                
                (5,809
                )
                
                
                (401
                )NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                
                
                8,726
                
                
                
                9,492CASH
      FLOWS FROM FINANCING ACTIVITIES:Principal
      repayments of long term debt
                
                
                (9,141
                )
                
                
                (9,024
                )NET
      CASH (USED IN) FINANCING ACTIVITIES
                
                
                (9,141
                )
                
                
                (9,024
                )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (415
                )
                
                
                468CASH
      AND CASH EQUIVALENTS:Beginning
      of period
                
                
                1,093
                
                
                
                5End
      of period
                
                $
                678
                
                
                $
                473OTHER
      SUPPLEMENTAL CASH FLOW DISCLOSURES:Cash
      paid during the period for interest
                
                $
                10,083
                
                
                $
                10,825Cash
      paid during the period for income taxes
                
                $
                -
                
                
                $
                -The
      accompanying notes are an integral part of these consolidated financial
      statements
  7
 Table of Contents
  MONTGOMERY REAL ESTATE SERVICE,
INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008 (UNAUDITED)
  NOTE 1 -
BASIS OF PRESENTATION
 
 The
consolidated financial statements of Montgomery Real Estate Service, Inc. (the
"Company"), included herein were prepared, without audit, pursuant to rules and
regulations of the Securities and Exchange Commission. Because certain
information and notes normally included in consolidated financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America were condensed or omitted pursuant to such rules and
regulations, these consolidated financial statements should only be read in
conjunction with the consolidated financial statements and notes thereto
included in our audited consolidated financial statements as included in our
Form 10-K for the year ended December 31, 2007.
 
 Interim
Financial Information
 
 The
unaudited interim consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
considered necessary for a fair presentation of the financial position, results
of operations and cash flows as of (at) September 30, 2008, and 2007, have been
included. Readers of these consolidated financial statements should note that
the interim results for the three and nine month periods ended September 30,
2008 is not necessarily indicative of the results that may be expected for the
fiscal year as a whole.
 
 NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES
 
 Business
Activity— Montgomery Real Estate Service, Inc. f/k/a Media Group South,
Inc. ("The Company") was organized under laws of the State of as a
C-Corporation. The Company owns 100% interest in Front Street First Corp, (Front
Street) a Nevada Corporation.  Front Street merged with and into the
Company as a wholly owned subsidiary on December 31, 2007.  The
purpose of Front Street is to buy, sell, rent, and improve any and all aspects
of real estate. Front Street currently owns one building in Chicopee,
Massachusetts.
 
 Cash and
Cash Equivalents—For purposes of the Consolidated Statement of Cash
Flows, the Company considers liquid investments with an original maturity of
three months or less to be cash equivalents.
 
 Management’s
Use of Estimates—The preparation of 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 consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
  Revenue
Recognition—The Company’s revenue is derived from rental income from 6
leases, and all 6 are paid on a “month to month” basis.
 
 In
accordance with SFAS 13, paragraph 23, the cost of property held for leasing by
major classes of property according to nature or function, and the amount of
accumulated depreciation in total, is presented in the accompanying September
30, 2008 consolidated balance sheet. There are no contingent rentals included in
income in the accompanying statements of operations. With the exception of the
month-to-month leases, revenue is recognized on a straight-line basis and
amortized into income on a monthly basis, over the lease term.
 
 Comprehensive
Income (Loss)—The Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive
Income”, which establishes standards for the reporting and display of
comprehensive income and its components in the consolidated financial
statements.  There were no items of comprehensive income (loss)
applicable to the Company during the periods covered in the consolidated
financial statements.
 
 Advertising
Costs—Advertising costs are expensed as incurred. For the quarters ended
September 30, 2008 and 2007, the Company incurred $0 and $0
respectively.
 
 Fair
Value of Financial Instruments—The carrying amounts reported in the
consolidated balance sheet for cash, accounts receivable and payable approximate
fair value based on the short-term maturity of these instruments.
 
 Net Loss
per Common Share—Statement of Financial Accounting Standard (SFAS) No.
128 requires dual presentation of basic and diluted earnings per share (EPS)
with a reconciliation of the numerator and denominator of the EPS
computations.  Basic earnings per share amounts are based on the
weighted average shares of common stock outstanding.  If applicable,
diluted earnings per share would assume the conversion, exercise or issuance of
all potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share.  Accordingly, this presentation has been adopted for the period
presented.  There were no adjustments required to net loss for the
period presented in the computation of diluted earnings per share.
 
 Income
Taxes—Income taxes are provided in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, “Accounting for Income
Taxes.”A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net operating
loss-carry forwards.
 
 Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that, and some portion or the entire
deferred tax asset will not be realized.  Deferred tax assets and
liabilities are adjusted for the effect of changes in tax laws and rates on the
date of enactment.
 
 Accounts
Receivable—Accounts deemed uncollectible are written off in the year they
become uncollectible.
  Impairment
of Long-Lived Assets—The Company evaluated the recoverability of its
property and equipment, and other assets in accordance with Statements of
Financial Accounting Standards (SFAS) No. 121, “Accounting for the Impairment of
Long-Lived Assets to be Disposed of” which requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the estimated future undiscounted cash flows attributable to such assets
or the business to which such intangible assets relate.
 
 Property
and equipment—Rental property is stated at cost. Depreciation is provided
by the straight-line method over the estimated economic life of the rental
property’s remaining 27.5 years.
 
 NOTE 3 –
NOTES PAYABLE
 
 Mortgages
incurred for the purchase of the rental property consist of the following
approximate amounts:
 
 Secured,
      Commercial Mortgage to an unrelated party.Dated
      February 15, 2005, Bearing 6.75% interest.
              
              $
              157,000Secured,
      Commercial Mortgage to an unrelated party.Date
      February 15, 2005, Bearing 7% interest.
              
              
              32,000$
              191,000
 
 NOTE 4 -
GOING CONCERN
 
 As shown
in the accompanying consolidated financial statements, we have suffered
recurring losses from operation to date. We have a net deficiency of $73,140 as
of September 30, 2008. These factors raise substantial doubt about our ability
to continue as a going concern.
 
 Management's plans in regard to this
matter are to raise equity capital and seek strategic relationships and
alliances in order to increase revenues in an effort to generate positive cash
flow. Additionally, we must continue to rely upon equity infusions from
investors in order to improve liquidity and sustain operations. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 8
 Table of Contents
  ITEM 2.  
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  Montgomery
Real Estate Service, Inc. is hereby providing cautionary statements identifying
important factors that could cause our actual results to differ materially from
those projected in forward-looking statements made in this quarterly report on
Form 10-Q. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"likely will result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans" and "projection") are not historical facts and
may be forward-looking statements and involve estimates and uncertainties which
could cause actual results to differ materially from those expressed in the
forward-looking statements. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the following key
factors that have a direct bearing on our results of operations: the absence of
contracts with customers or suppliers; our ability to maintain and develop
relationships with customers and suppliers; our ability to successfully
integrate acquired businesses or new brands; the impact of competitive products
and pricing; supply constraints or difficulties; the retention and availability
of key personnel; and general economic and business conditions.
 
 We
caution that the factors described herein could cause actual results to differ
materially from those expressed in any forward-looking statements and that the
investors should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events or circumstances. Consequently, no forward-looking statement can be
guaranteed.
 
 New
factors emerge from time to time, and it is not possible for us to predict all
such factors. Further, we cannot assess the impact of each such factor on our
results of operations or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
 
 Introduction
 
 We were
incorporated on February 8, 2000 under the laws of the State of
Nevada.  From the beginning of 2003 until December 31, 2007 we had no
operations no assets.  We were a dormant company and with no
revenues.  Subsequent to December 31, 2007 we have begun operating in
the real estate industry and now engage in the business of buying, selling,
renting, and improving real estate. We are an early stage company and currently
own 100% of the common stock of Front Street First Corp., which, in turn, owns
property in Chicopee, Massachusetts, near Springfield in western Massachusetts
at 472 Front Street. Specifically, we own a three-story house that consists of
six units and generates revenue by rentals on units. We plan to continue in this
line of business for the foreseeable future. Our executive offices are located
at c/o Lessard Property Management, Inc. 191 Chestnut Street in Springfield,
Massachusetts 01103. Our telephone number is at Lessard Property Management,
Inc. is (413) 734-3116. We are currently authorized to issue 275,000,000 shares
of common stock and 25,000,000 shares of preferred stock. Both have a par value
of $.001 per share. The preferred shares are convertible into common on a one
for ten conversion basis. We currently have 9,736,200 shares of common stock
issued and outstanding.
 
 Our
business plan is to buy more investment properties which we believe have good
cash flows or good cash flow potential, plus a favorable estimated resale value.
We plan to lease our properties primarily to residential tenants. We plan to
make limited improvements to our properties, so that we can increase occupancy,
improve cash flows, and enhance potential resale value.
 
 As shown
in the accompanying audited financial statements, we have suffered recurring
losses from operations since our inception. We experienced net income (losses)
of ($12,767) and $180 during 2007 and 2006, respectively. We had a total
accumulated deficit of $22,431 as of December 31, 2007. These factors raise
substantial doubt about our ability to continue as a going concern.
 
 THE
BUILDING AT 472 FRONT STREET
 
 On
December 31, 2007, we acquired 100% of the common stock of Front Street First
Corp., which in turn, owns 100% of a three-story apartment house, with six units
in central downtown Chicopee, Massachusetts at 472 Front Street, which the board
of directors had identified as an acceptable business opportunity. We are
obligated to secured commercial mortgages to two unrelated parties collectively
for $203,201 in order to obtain the property. As of December 31, 2007, the
mortgages had been paid down to an aggregate of $197,872.
 
 As of
December 31, 2007, we had six lease agreements in place for the building. The
leases are managed by Lessard Property Management, Inc. on our behalf, and the
monthly amounts due under the leases, in the aggregate, total $4,465 per month
according to the rent roll. We have not reported the individual lease amounts,
because they are in the names of private individuals.
 
 Lessard
Property Management has a contract with us to manage these leases, and their fee
for doing so is 8% of the collected rent, or $150 per project, whichever is
greater.  For a full list of duties performed by Lessard Property
Management, Inc. please refer to Exhibit 10.1 on the SEC filings. This property
management agreement was assigned to us by, Duane Bennett, trustee of our
majority shareholder, for no additional consideration, other than as part of the
process by which he deeded the property to us.
 
 9
 Table of Contents
  OVERVIEW
OF OUR MARKET AREA
 
 The city
of Chicopee lies on the outskirts of the Springfield, Massachusetts urban area,
located in the Pioneer Valley near the intersection of U.S. Interstates 90 (the
Massachusetts Turnpike) and 91.  Interstate 90 is the major east-west
highway crossing Massachusetts. Interstate 91 is the major north-south highway
that runs directly through the heart of New England. Chicopee is located
approximately 90 miles west of Boston, Massachusetts, 70 miles southeast of
Albany, New York and 30 miles north of Hartford,
Connecticut.  Chicopee serves as the home of Westover Air Force
Reserve Base and Barnes Air National Guard Base and is located in Hampden
County, Massachusetts, whose estimated 2007 population was 464,758. Hampden
County’s current annual growth rate is 0.3%.
 
 The
economy in our primary market area enjoys the presence of large employers such
as the Baystate Health, Big Y Supermarkets, University of Massachusetts, Mass
Mutual Financial Group, Mercy Medical Center, Friendly Ice Cream Corporation,
Yankee Candle, and Hasbro Games.  Performance Foods is near completion
of its 275,000 square foot distribution facility and Harvey Industries will
build a new 250,000 square foot manufacturing facility in the Chicopee River
Industrial Park. Other employment and economic activity is provided by financial
institutions, eight other colleges and universities, several other hospitals and
a variety of wholesale and retail trade businesses.
 
 Recent
local developments such as the announcement by Baystate Health of a $259 million
expansion, a historic downtown hotel in Springfield will be redeveloped next
year with a new parking garage and a rebound in the class A office market will
bring improvements to the local economy.  According to the NAI Global
2008 Market Report, although the real estate market in Western Massachusetts
continues to have problems, the fourth quarter of 2007 ended with positive
changes in the area and with new commercial and industrial development planned
for the future, the Greater Springfield, Massachusetts area is expected to
rebound in 2008.
 
 According
to the Pioneer Valley Planning Commission's "Briefing Report:  The
Economic Impact of the Proposed New Haven-Hartford-Springfield Commuter Rail
Line," dated December 2006, the economic impact of building the proposed New
Haven-Hartford-Springfield commuter rail line will be
significant.  The operation of the commuter rail line will create
about 249 new jobs in the corridor as well as increase regional economic output
by almost $15 million per year and regional income tax revenues by about $1.2
million per year for the 10-year period 2011-2020.
 
 A press
release put out on May 1, 2008 by the University of Massachusetts Donahue
Institute indicates that Massachusetts has stayed above the average national
economic growth, which through March has grown by a 3.2% annual rate compared to
a .6% rate for the nation. Additionally, the state has added 4,600 jobs while
the nation has cut over 200,000 jobs.  Massachusetts is home to many
technology, biotechnology and health science industries that are in high
demand.  For this reason, Michael Goodman, Director of Economic and
Public Policy Research at the University of Massachusetts’ Donahue Institute
stated that, “The technology part of our economy is offsetting the housing
market.”
 
 These
market factors form the setting in which we plan to execute our business
model.
 
 OUR PLAN
TO ACQUIRE OTHER RENTAL PROPERTIES
 
 Our
business plan is to buy more rental properties that we believe are undervalued,
compared to their cash flows and estimated resale value. Our strategy is to
identify rental properties with a favorable purchase price relative to their
market value, as well as positive cash flow. We plan to buy properties primarily
leased to residential tenants. We are prepared to make some improvements to our
properties, so that we can increase occupancy, improve cash flows, and enhance
potential resale value. We will most likely seek properties in the Springfield,
Massachusetts area for the next 12 months.
  Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plans. We operate primarily in the Springfield,
Massachusetts area. We plan to strengthen our position in this market. We plan
to expand our operations through our acquisition and improvement of real
estate.
  We
presently own one three-story apartment building in Chicopee, Massachusetts.
Duane Bennett, has previously owned and operated a real estate company in the
Springfield, Massachusetts area, and has long-term contacts in the area. We
anticipate that we will begin to locate and negotiate for the purchase of
additional properties during the second quarter of 2008. We hope to acquire
additional real estate in the next 12 months, and to utilize the proceeds from
the resale of those properties, along with their revenues, to pay our operating
costs for the next twelve months; however, there are no assurances that this
revenue will be sufficient to cover our operating costs. Accordingly, if our
revenues are not sufficient, management actions would be taken to raise equity
capital, seek strategic relationships and alliances, and build our marketing
efforts to generate positive cash flow provide the means for us to continue as a
going concern. Mr. Bennett is related to us as our officer, director and sole
shareholder of the Northeast Nominee Trust, our majority shareholder. There is
not a written agreement in place with Mr. Bennett and he has no obligation to
provide additional funds.
  PROPERTY
LOCATION PROCEDURES
  We plan
to conduct a preliminary analysis that consists of:
 
 ·
              Reviewing
      real estate sales information provided by local board of realtors
      associations and our review of the census tract increases. The information
      that we may obtain that would weigh in favor or our proceeding with a
      property acquisition would be:
 
 o
              High
      volume of real estate sales within the specific
  area
 o
              New
      schools and major commercial developments in the
  area
 o
              Improved
      state and city roads in the area
 
 The
information that we may obtain that would weigh against our proceeding with a
property acquisition would be:
 
 o
              Hazardous
      waste in the area
 o
              High
      crime in the area
 o
              Overcrowding
      in the area
 
 The data
that we analyze to determine whether to purchase properties are:
 
 ·
              Demographic
      data that suggests increased demand in a specific area. The data that
      would weigh in favor of our proceeding with a purchase would
      be:
 o
              Increase
      in industrial activity such as a major corporation moving into the area
      creating new jobs and increasing residential housing
    demand.
 o
              Increase
      in the population’s median income levels for a certain
    area.
 o
              Low
      crime rate in the area
 ·
              Demographic
      data that would weigh against a purchase would
  be:
 o
              Migration
      of industrial companies outside the
area.
 o
              Decrease
      in income levels
 o
              High
      crime rate in the area
 
 In order
to determine and evaluate the fastest growing areas, we will obtain reports from
report surveys and reporting companies. These reports will provide detailed
information that we will then study to determine where the good areas of growth
are.
 
 We will
also rely on information provided by the U.S. Census Bureau to obtain
information pertaining to population shifts and number of total people in a
specific area. We plan also to compare the population figures from the 1990
census with those of the 2000 census.
 DETAILED
MARKET AND FINANCIAL ANALYSIS
 
 We will
perform detailed market and financial analysis regarding each property we decide
to review for purchase so as to determine whether the specific location is
appropriate for acquisition and development. That detailed information will
include the following:
 
 ·
              Number
      of properties on the market.
 ·
              Number
      of properties sold in the past 12
months.
 ·
              Sales
      prices asked per property.
 ·
              Sales
      price sold per property.
 ·
              Total
      square footage and acreage per
property
 ·
              Total
      number of units per property.
 ·
              Total
      number of pending closings per
property.
 
 PURCHASE
PROCEDURES
 
 Once we
have located a property that we may want to purchase, we will ascertain whether
the owner is willing to sell the property. We then negotiate a purchase price
and ask the following questions of the prospective seller and/or obtain answers
from third parties:
 
 ·
              When
      does the owner want to sell and close? Favorable conditions we look for
      regarding this factor are:
 o
              The
      seller is willing and able to sell within a six-month
    period.
 o
              Typically,
      the timing and motivation of sellers to enter into contract to sell may
      include several factors such as: estate planning, gifts to family, age,
      health and other personal factors.
 
 ·
              How
      much will the owner sell the land for?  Favorable conditions we
      will look for regarding this factor
are:
 o
              The
      price is below market value. We determine market value through appraisals
      and comparable sales reports in the
area.
 o
              With
      respect to price, we would also consider value trends, such as historical
      yearly increases in property values
 
 ·
              Are
      there any defects on the title?  Favorable conditions we will
      look for regarding this factor are:
 o
              No
      liens and/or encumbrances.
 o
              The
      buyer is able to deliver a clean title within the time we would like to
      close.
 
 ·
              Does
      the landowner have title insurance on the property?  Favorable
      conditions we will look for regarding this factor
  are:
 o
              The
      landowner has title insurance on the
property.
 o
              The
      landowner is able to secure title insurance on the
    property.
 o
              We
      would be able to obtain title insurance on the purchased
      property.
 
 We will
obtain the following documents from the seller during our due diligence on the
property:
  ·
              General
      maps;
 ·
              Environmental
      reports
 ·
              Copies
      of existing zoning maps and
regulations;
 ·
              Conduct
      land inspection procedures;
 ·
              Proposed
      zoning regulations;
 ·
              Deeds;
 ·
              Title
      insurance; and
 ·
              Tax
      bills.
 
  We then
verify the accuracy of these documents and determine how the information
contained in the documents impacts the property that we are considering to
purchase.
  10
 Table of Contents
  OUR
FINANCING PROCEDURES
  We will
attempt to obtain financing from local banks doing business within the area
where we are attempting to purchase property. Our officer and director, Mr.
Bennett, has, in the past, personally guaranteed repayment of debt for property
purchases along with necessary corporate guarantees, and we plan to use such
guarantees in the future, if necessary; however, there are no assurances that
Mr. Bennett, or we, will be in a financial position to do so. We do not have any
written agreements now or in the past with Mr. Bennett, obligating him to
guarantee repayment of future debt or any of our other obligations. Mr. Bennett
is not otherwise under any legal obligation to provide us with capital. Assuming
we can pay down some of the mortgages on our property, we hope to leverage the
property with a financial institution or private lender so that funds are
available for additional purchases, based on using the property as
collateral.
 
 The
procedures for obtaining our financing are as follows:
 
 1.
              File
      loan application.
 2.
              Credit
      checks, property appraisal done.
 3.
              Loan
      documents drafted.
 4.
              Down
      payment made that is typically approximately 5 to 10% of the appraised
      value.
 5.
              Institution
      lends funds for the balance, less certain transaction fees that are
      typically between approximately 2 to
3%.
 6.
              A
      lien is then filed with the appropriate recorder’s
  office.
 
 There are
no assurances that our financing procedures will be adequate to secure the funds
needed to sustain our operations.
 
 DISTRIBUTION
 
 We have
no distribution agreements in place with anyone. We plan to sell the properties
we acquire primarily through direct selling efforts involving established real
estate brokers and property managers and corporations that may have a need for
residential and/or commercial real estate. We plan to contract with real estate
brokers, sub-contractors and other agents to assist in us on a
project-by-project basis.
  NEW
PRODUCTS OR SERVICES
 
 We
currently have no new products or services announced to the public. We will make
public announcement in the future upon entering into material contracts to
acquire any new real estate projects.
  COMPETITIVE
BUSINESS CONDITIONS
 
 We face
significant competition both in acquiring rental properties and in attracting
renters. Our primary market area of residential multi-family unit rentals is
highly competitive, and we face direct competition from a significant number of
multi-family unit landlords, many with a local, state-wide or regional presence
and, in some cases, a national presence. Many of these landlords are
significantly larger and have greater financial resources than us. Our
competition for renters comes from newer built apartment complexes as well as
older apartment buildings.
 
 New jobs
created in 2007 (30,800) was the strongest it’s been five years.  But
as the year ended, growth slowed to 22,400 (0.9%).  The businesses
that helped jumpstart 2007 have had sluggish growth recently.  Red
Capital Research, forecast job growth to slow (0.3%) in
2008.  However, Red Capital Group thinks that in 2009 there will be
big progress in the employment sectors, such as transportation, finance,
business services, and education and health service firms.
 
 According
to Red Capital Group’s March 2008 Market Overview Multifamily Housing Update, a
total of 10,600 units were completed over 2006 and 2007, an uncharacteristically
active 24- month period.  However, despite recent weakness, Reis Inc.
is optimistic with regard to New England assets.  The service expects
owners to have faster rates of effective rent growth in 2008- 2009.
(2.8%)
 
 The
average price per unit rose 12% in 2007 to $173,789.  Furthermore,
according to Real Capital Analytics, trade activity soared 150% to $3.006. Red
Capital Group estimates that there is a five-year holding period, with a total
return of 5.5%.
 
 In
addition, we face significant competition from home builders and land
developers, because many renters have moved out of the rental market into
single-family homes. Nationally, there are over one hundred major land
developers. Approximately 10% of these developers capture approximately 50% of
the market for such developments. These developers have greater financial
resources than we do and are better poised for market retention and expansion
than we are. Specifically, our competition with national homebuilders is as
follows:
 
 ·
              Pulte
      Homes;
 ·
              Ryan Homes;
 ·
              Ryland
      Homes;
 ·
              Toll
      Brothers
 ·
              John
      Weiland Homes;
 ·
              Crescent
      Resources; and
 ·
              Harris
      Group
 
 These
national homebuilders purchase land or lots of vacant land parcels to build
single-family homes, often in connection with nearby shopping centers and
commercial buildings. The national homebuilders have substantial resources to
enable them to build single-family homes for resale.
 
 These
builders engage in single-family home development and have greater financial
resources than we do. In addition, these companies have greater operational
resources because they are able to perform a variety of development tasks
themselves. These companies purchase vacant land tracts and perform all the work
necessary to construct the homes, such as land clearing and road development and
then build the homes themselves. In contrast, we do not have the financial or
operational resources to perform these tasks. These national and local builders
are better equipped to acquire tracts of land equipped with these capabilities
due to their operational and financial superiority over us.
 
 We have
no competitive advantages over any of the individuals and/or companies against
whom we compete. We have significantly less capital, assets, revenues, employees
and other resources than our local and/or national competition. There are no
barriers to entry into this market.
  INTELLECTUAL
PROPERTY
  At
present, we do not have any patents, trademarks, licenses, franchises,
concessions, and royalty agreements, labor contracts or other proprietary
interests.
  GOVERNMENT
REGULATION ISSUES
  We are
subject to applicable provisions of federal and state securities laws and to
regulations specifically governing the real estate industry, including those
governing fair housing and federally backed mortgage programs. Our operations
will also be subject to regulations normally incident to business operations,
such as occupational safety and health acts, workmen's compensation statutes,
unemployment insurance legislation and income tax and social security related
regulations. Although we will use our best efforts to comply with applicable
regulations, we can provide no assurance of our ability to do so, nor can we
fully predict the effect of these regulations on our proposed
activities.
 
 RESEARCH
AND DEVELOPMENT
 
 We have
spent no funds on research and development.
  EMPLOYEES
  
 Presently,
we have no employees. We have no employment agreements with any of our
management. We do not anticipate hiring any additional employees in the next 12
months.
 
 11
 Table of Contents
  RESULTS OF
OPERATIONS
 
 Revenues
(for the three and nine months ended September 30, 2008 and 2007).
 
 Revenues
increased $287 or 1% to $13,839 for the three months ended September 30, 2008,
respectively, as compared with $13,552 for the three months ended September 30,
2007, respectively. Revenues increased $2,257 or 5.5% to $41,246 for the nine
months ended September 30, 2008, respectively, as compared with $38,989 for the
nine months ended September 30, 2007, respectively. Revenues consisted of
rentals on residential rental properties. The reasons for the above increases in
revenues are attributable to cost of living increases on rents.
 
 All sales
transactions were with unrelated parties.
 
 Cost
of Sales (for the three and nine months ended September 30, 2008 and
2007).
 
 None.
 
 Expenses
(for the three and nine months ended September 30, 2008 and 2007).
 
 Operating
expenses for the three months ended September 30, 2008 increased $54,149 or
722.5% to $62,847. The increase in expenses during this period was primarily
attributable to an increase in general and administrative expenses that
pertained to more repairs and maintenance which increased in the second quarter
of 2008. The major increase is attributable to the payment for services rendered
in the amount of $55,200 (1,380,000 common shares * $.04 market price =
$55,200).
 
 Operating
expenses for the nine months ended September 30, 2008 increase $56,146 or 318%
to $81,872. The increase in expenses during this period was primarily
attributable to an increase in general and administrative expenses that
pertained to more repairs and maintenance which increased in the first and
second quarters of 2008. The major increase is attributable to the payment for
services rendered in the amount of $55,200 (1,380,000 common shares * $.04
market price = $55,200).
 
 We expect
increases in expenses through the year 2008 as we move toward developing our
business plan and registering our common stock. In addition, we expect cash
outlays for professional fees to increase to around $20,000 per year for
compliance with the reporting requirements of the Securities and Exchange
Commission once our registration is deemed effective.
 
 We do not
have any lease agreements for our principal office and do not currently have any
employment agreements.
 
 Income
Taxes (for the three and nine months ended September 30, 2008 and
2007).
 
 We had no
provision for income taxes for the three and nine months ended September 30,
2008 and 2007, respectively, due to our net loss.
 
 If we
incur losses, we may have a deferred tax asset. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that, some portion or all of the deferred tax asset will not be
realized. Deferred tax assets and liabilities are adjusted for the effect of
changes in tax laws and rates on the date of enactment. We do not currently have
any net deferred tax assets.
  Income/Losses
(for the three and nine months ended September 30, 2008 and 2007).
 
 We had a
net income (loss) of $(52,369), or less than $.01 per common share for the
three-month period ended September 30, 2008. This compares to a net income of
$1,207 or less than $.01 per common share for the same period ended September
30, 2007. The decrease in net income is attributable to the increase in general
and administrative expenses as mentioned above.
 
 We had a
net income (loss) of $(50,709), or less than $.01 per common share for the
nine-month period ended September 30, 2008. This compares to a net income of
$2,438 or less than $.01 per common share for the same period ended September
30, 2007. The decrease in net income is attributable to the effect of the
increase in general and administrative expenses as mentioned above.
 
 Impact
of Inflation.
 
 We
believe that inflation has had a negligible effect on operations since
inception. We believe that we can offset inflationary increases in the cost of
operations by increasing sales and improving operating
efficiencies.
 
 Liquidity
and Capital Resources (for the nine months ended September 30, 2008 and
2007).
 
 Cash
flows provided by operations were $8,726 and $9,492 for the nine months ended
September 30, 2008 and 2007, respectively. These were mainly attributable to an
increase and decrease in accounts payable and non-cash depreciation charges of
$7,839 in both periods.
 
 Cash
flows provided by (used in) financing activities were $(9,141) and $(9,024) for
the nine months ended September 30, 2008 and 2007, respectively. Cash flows used
in these periods were due solely to repayments on notes payable on our income
producing rental property.
 
 Overall,
we have funded our cash needs from inception through September 30, 2008 with a
series of equity and debt transactions, including those with related parties as
described above. If we are unable to receive additional cash from our related
parties, we may need to rely on financing from outside sources through debt or
equity transactions. Our related parties are under no legal obligation to
provide us with capital infusions. Failure to obtain such financing could have a
material adverse effect on our operations and financial condition. This could
include an inability to do sufficient advertising for the homes that we sell,
which would make us less competitive in the marketplace. We could also find it
more difficult to enter into strategic joint venture relationships with third
parties. Finally, it would most likely delay the implementation of our business
plan. An alternative plan of operation in the event of a failure to obtain
financing would be to continue operations as currently configured, with the
result being little, if any, projected growth. Another alternative would be to
enter into a joint venture with another company that has working capital
available, albeit on less favorable terms than had we obtained financing, for
the development of our business plan.
 
 We had
cash on hand of only $678 and working capital of $18,902 as of September 30,
2008. Our current amount of cash in the bank is insufficient to fund our
operations for the next twelve months. We will rely on the existence of revenue
from our business, if any, and funding from outside sources; however, we have no
current or projected capital reserves that will sustain our business for the
next 12 months. Also, if the projected revenues fall short of needed capital we
will not be able to sustain our capital needs for the next twelve months. We
will then need to obtain additional capital through equity or debt financing to
sustain operations for an additional year. A lack of significant revenues during
the remainder of 2007 will significantly affect our cash position and make it
necessary to raise additional funds through equity or debt financing. Our
current level of operations would require capital of approximately $10,000 to
sustain operations through year 2007 and approximately $35,000 per year
thereafter. Modifications to our business plans or additional property
acquisitions may require additional capital for us to operate. There can be no
assurance that additional capital will be available to us when needed or
available on terms favorable to us.
 
 On a
long-term basis, liquidity depends on continuation and expansion of operations,
receipt of revenues, and additional infusions of capital and debt financing. We
are considering launching a local advertising campaign. Our current capital and
revenues are insufficient to fund such marketing. If we choose to launch such a
campaign, we will require substantially more capital. If necessary, we will
raise this capital through an additional stock offering. However, there can be
no assurance that we will be able to obtain additional equity or debt financing
in the future, if at all. If we are unable to raise additional capital, our
growth potential will be adversely affected and we will have to significantly
modify our plans. For example, if we unable to raise sufficient capital to
develop our business plan, we may need to:
 
 - Seek
projects of lesser value or that may be less profitable
 - Seek
smaller projects, which are less capital intensive, in lieu of larger projects;
or
 - Seek
projects that are outside our geographical area to generate some revenue for
us.
  Demand
for our rental services will be dependent on, among other things, market
acceptance of our services, the real estate market in general and general
economic conditions, which are cyclical in nature. Inasmuch as a major portion
of our activities is the receipt of rents from residential properties, our
business operations may be adversely affected by our competitors and prolonged
recession periods.
 
 Our
success will depend upon implementing our plan of operations and the risks
associated with our business plans. We operate a small real estate rental
business in the Springfield, Massachusetts area. We plan to strengthen our
position in this market. We also plan to expand our operations in the
Springfield area.
 
 Going
concern
 
 As shown
in the accompanying consolidated financial statements, we have suffered
recurring losses from operation to date. We have a net deficiency of $73,140 as
of September 30, 2008. These factors raise substantial doubt about our ability
to continue as a going concern.
 
 Management's
plans in regard to this matter are to raise equity capital and seek strategic
relationships and alliances in order to increase revenues in an effort to
generate positive cash flow. Additionally, we must continue to rely upon equity
infusions from investors in order to improve liquidity and sustain operations.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 12
 Table of Contents
  ITEM
3.QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM 4. CONTROLS AND
PROCEDURES.
  DISCLOSURE CONTROLS AND
      PROCEDURES
  Our
management, including our Principal Executive Officer and Principal Financial
Officer, has evaluated the design, operation, and effectiveness of our
disclosure controls and procedures pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”). There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control objectives.
Based upon the evaluation performed by our management, including its Principal
Executive Officer and Principal Financial Officer, it was determined that, as of
the end of the period covered by this quarterly report, our disclosure controls
and procedures were effective to provide reasonable assurance that information
required to be disclosed in the reports filed or submitted pursuant to the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the rules and forms of the SEC, and that such information
is accumulated and communicated to our management, including its Principal
Executive Officer and Principal Financial Officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding
disclosures
  Changes in Internal Control
Over Financial Reporting
 
 Our
Principal Executive Officer and Principal Financial Officer have determined
that, during the period covered by this quarterly report, there were no changes
in our internal control over financial reporting that materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting. They have also concluded that there were no significant changes in
our internal controls after the date of the evaluation.
 
 PART II.  OTHER
INFORMATION
 
 Item
1.      Legal Proceedings
 
 None.
 
 Item
2.      Unregistered Sales of Equity Securities and Use
of Proceeds
 
 None.
 
 Item
3.      Defaults Upon Senior Securities
 
 None.
 
 Item
4.      Submission of Matters to a Vote of Security Holders
 
 None.
 
 Item
5.      Other Information
 
 None.
 
 Item
6.      Exhibits and Reports on Form8-K
 
 Exhibits
  31.1 CEO
Certification Pursuant to Section 302
 31.2 CFO Certification Pursuant to
Section 302(included in
Exhibit 31.1)
 32.1
CEO Certification Pursuant to Section 906
 32.2 CFO Certification Pursuant to
Section 906(included in
Exhibit 32.1)
 
 Reports on Form
8-K
  None
  13
 Table of Contents
  SIGNATURES
 
 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.
  MONTGOMERY
      REAL ESTATE SERVICE, INC.
                (Registrant)Date:
      November 13, 2008
              By:
              /s/
      Duane BennettDuane
      Bennett
                President,
      Chief Executive Officer, and
                Chief
      Financial Officer