1 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 March 31, 2000 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 ----------------------- FIRST EQUITY PROPERTIES, INC. -------------------------------------------------------------------------- (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.) 10670 N. Central Expressway, Suite 410, Dallas, Texas 75231 --------------------------------------------------------- (Address of principal executive offices) 214-750-5800 --------------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (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 . 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 March 31, 2000, registrant had 10,570,944 shares of Common Stock issued and outstanding. 2 FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES FORM 10-Q March 31, 2000 INDEX Part I Financial Information: Page No. Item 1. Financial Statements Consolidated Balance Sheets March 31, 2000 (Unaudited) and December 31, 1999...................3 Consolidated Statement of Earnings (Unaudited) Three Months Ended March 31, 2000 and 1999.........................4 Consolidated Statement of Cash Flows (Unaudited) Three Months Ended March 31, 2000 and 1999.........................5 Notes to Consolidated Financial Statements...........................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................8 Part II Other Information: Item 6. Exhibits and Reports on Form 8-K............................8 2 3 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, 2000 December 31, (Unaudited) 1999 -------------- ----------- Cash and cash equivalents $ 11,106 $ 550 Investments 55,512,710 55,512,710 Notes receivable 3,446,552 3,457,617 ----------- ----------- $58,970,368 $58,970,877 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 2,206,224 $ 2,234,040 Notes payable - affiliate 3,390,010 -- Accounts payable - trade 5,548,224 5,548,224 Accounts payable - affiliate -- 3,370,010 Income taxes payable 72,000 72,000 ----------- ----------- Total liabilities 11,216,458 11,224,274 Minority interest in limited partnership 10,074,437 10,074,447 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 36,292,215 36,284,898 ----------- ----------- Total shareholders' equity 37,679,473 37,672,156 ----------- ----------- $58,970,368 $58,970,877 =========== =========== 3 4 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS For the three months ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ------------ ------------ Revenue Commission income $ -- $ 2,218,837 Management fee income -- 1,772,888 Consulting fee income -- 1,067,062 Interest income 69,596 76,700 Other 1,876 326,162 ------------ ------------ 71,472 5,461,649 Operating expenses Salaries and wages -- 1,341,741 Minority interest in earnings of limited partnership -- 407,393 General and administrative 607 386,859 Insurance and taxes -- 160,560 Other operating expenses 7,500 153,074 Legal and professional fees 3,209 89,185 Depreciation and amortization -- 33,969 Telephone and utilities -- 15,622 Repairs and maintenance -- 3,025 Advertising and promotion -- 1,414 ------------ ------------ Total operating expenses 11,316 2,592,842 ------------ ------------ Earnings from operations 60,156 2,868,807 Other expenses Interest expense (52,839) (116,973) ------------ ------------ Earnings before income taxes 7,317 2,751,834 Income tax benefit (expense) Deferred -- -- Current -- (940,000) ------------ ------------ -- (940,000) ------------ ------------ NET EARNINGS $ 7,317 $ 1,811,834 ============ ============ Earnings per share $ -- $ .17 ============ ============ Weighted average shares outstanding 10,570,944 10,570,944 ============ ============ 4 5 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 7,317 $ 1,811,834 Adjustments to reconcile net income to net cash provided by (used for) operating activities Depreciation and amortization -- 33,969 Minority interest in limited partnership (10) 407,393 (Increase) decrease in Accounts receivable - trade -- 25,511 Accounts receivable - affiliate -- (3,781,749) Notes receivable -- (8,939) Other assets -- (1,882) Increase (decrease) in Accounts payable -- 125,468 Accrued expenses -- (289,196) Accounts payable - affiliate 20,000 599,289 Income taxes payable -- 940,000 ----------- ----------- Net cash provided by (used for) operating activities 27,307 (138,302) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment -- (31,439) Collections from note receivable 11,065 -- ----------- ----------- Net cash provided by (used for) investing activities 11,065 (31,439) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable - related parties -- 51,713 Payments on long term debt (27,816) (25,739) ----------- ----------- Net cash provided by (used for) financing activities (27,816) 25,974 ----------- ----------- Net increase (decrease) in cash and cash equivalents 10,556 (143,767) Cash and cash equivalents at beginning of period 550 325,699 ----------- ----------- Cash and cash equivalents at end of period $ 11,106 $ 181,932 =========== =========== 5 6 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued For the three months ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ---------- --------- Exchange of account payable from affiliate for a note payable from affiliate $3,390,010 $ --- 6 7 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by 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, 2000. For further information, refer to the Company's annual report on Form 10-K for the year ended December 31, 1999. 7 8 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three months ended March 31, 2000 compared to three months ended March 31, 1999 Revenues decreased to $71,472 versus prior year of $5,461,649. The decrease was due to lower commission income, lower consulting fee income and lower motel revenue. In the fourth quarter of 1999, all property management and brokerage contracts were cancelled. Total operating expenses decreased to $11,316 in 2000 from $2,592,842 in 1999. The decrease in income tax expense was due to lower operating income. Financial Condition and Liquidity At March 31, 2000, the Company had total assets of $58,970,368 compared to $58,970,877 at December 31, 1999. Cash and cash equivalents were $11,106. Total liabilities were $11,216,458 versus $11,224,274 at December 31, 1999. Part II Other Information Item 6. Exhibits and Reports on Form 8 - K (a) Exhibits Exhibit Number Description of Exhibit -------------- ----------------------------------------- 27 Financial Data Schedules, filed herewith (b) Reports on Form 8-K - None 8 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to he signed on its behalf by the undersigned thereunto duly authorized. FIRST EQUITY PROPERTIES, INC. May 11, 1999 /s/ F. Terry Shumate, Director, Vice President, Secretary and Treasurer 9 10 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule