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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] 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 0-11777
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FIRST EQUITY PROPERTIES, INC.
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(Exact name of registrant as specified in the charter)
Nevada 95-6799846
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1800 Valley View Lane, Suite 160, Dallas, Texas 75234
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(Address of principal executive offices)
214-750-5800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X . No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 2002, registrant had 10,570,944 shares of Common Stock
issued and outstanding.
FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES
FORM 10-Q
June 30, 2002
INDEX
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2002 (Unaudited) and December 31, 2001..................................................3
Consolidated Statement of Earnings (Unaudited)
Three Months and Six Months Ended June 30, 2002 and 2001.........................................4
Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended June 30, 2002 and 2001..........................................................5
Notes to Consolidated Financial Statements.........................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................................7
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K.............................................................7
2
FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2002 December 31,
(Unaudited) 2001
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Cash and cash equivalents $ 13,901 $ 8,985
Investments 46,421,719 46,421,719
Accounts receivable - affiliate 885,264 851,946
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$47,320,884 $47,282,650
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable - trade $ 5,548,224 $ 5,548,224
Accounts payable - affiliate 3,582,977 3,622,977
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Total liabilities 9,131,201 9,171,201
Minority interest in limited partnership 547,498 547,498
Shareholders' equity
Common stock, $0.01 par, 40,000,000 shares
authorized, 10,570,944 shares issued and outstanding 105,710 105,710
Capital in excess of par value 1,281,548 1,281,548
Retained earnings 36,254,927 36,176,693
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Total shareholders' equity 37,642,185 37,563,951
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$47,320,884 $47,282,650
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3
FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended June 30, Six months ended June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenue
Management fees $ 49,984 $ -- $ 94,943 $ --
Interest income 9 4,073 28 48,895
------------ ------------ ------------ ------------
49,993 4,073 94,971 48,895
Operating expenses
General and administrative 859 835 1,711 1,587
Other operating expenses -- -- -- --
Legal and professional fees 12,425 22,456 15,026 31,363
Bad debt expense -- 76,800 -- 76,800
------------ ------------ ------------ ------------
Total operating expenses 13,284 100,091 16,737 109,750
------------ ------------ ------------ ------------
Income (loss) from operations 36,709 (96,018) 78,234 (60,855)
Other expenses
Interest expense -- -- -- (29,108)
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Net earnings (loss) $ 36,709 $ (96,018) $ 78,234 $ (89,963)
============ ============ ============ ============
Earnings (loss) per share $ -- $ (.01) $ .01 $ (.01)
============ ============ ============ ============
Weighted average shares outstanding 10,570,944 10,570,944 10,570,944 10,570,944
============ ============ ============ ============
4
FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2002 and 2001
(Unaudited)
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 78,234 $ (89,963)
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Bad debt expense -- 76,800
Decrease in accounts payable - affiliate (40,000) --
Increase in accounts receivable - affiliate (33,318) (500,053)
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Net cash provided by (used for) operating activities 4,916 (513,216)
CASH FLOWS FROM INVESTING ACTIVITIES
Collections from note receivable -- 2,525,588
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Net cash provided by investing activities -- 2,525,588
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable - related parties -- (2,048,559)
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Net cash used for financing activities -- (2,048,559)
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Net increase (decrease) in cash and cash equivalents 4,916 (36,187)
Cash and cash equivalents at beginning of period 8,985 44,679
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Cash and cash equivalents at end of period $ 13,901 $ 8,492
=========== ===========
Noncash investing and financing activities:
Exchange of account payable from affiliate for minority interest in
subsidiary and effective writedown of investment due to application of
purchase method of accounting for the acquisition of minority interest $ -- $ 4,225,879
5
FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial statements.
Operating results for the interim period presented are not necessarily
indicative of the results that may be expected for the year ended December
31, 2002. For further information, refer to the Company's annual report on
Form 10-K for the year ended December 31, 2001.
6
FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three months ended June 30, 2002 compared to three months ended June 30, 2001
Revenues increased to $49,993 versus prior year of $4,073. The increase was due
to management fee income in the current quarter that was not present in the same
quarter last year. Total operating expenses decreased to $13,284 in 2001 from
$100,091 in 2001 due to the drop in bad debt expense.
Results of Operations
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Revenues increased to $94,971 versus prior year of $48,895. The increase was due
to management fee income in the current year that was not present last year.
Total operating expenses decreased to $16,737 in 2002 from $109,750 in 2001
primarily due to lower bad debt expense.
Financial Condition and Liquidity
At June 30, 2002, the Company had total assets of $47,320,884 compared to
$47,282,650 at December 31, 2001. Cash and cash equivalents were $13,901.
At June 30, 2002 the Company had total illiquid investments of $45,836,720,
which consists of preferred stock of Realty Advisors, Inc., an affiliated
company.
Total liabilities were $9,131,201 versus $9,171,201 at December 31, 2001.
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 - Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K - None
7
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.
FIRST EQUITY PROPERTIES, INC.
August 13, 2002 /s/ Ronald E. Kimbrough, Vice President,
Secretary, and Treasurer
8
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002