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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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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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
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
10670 N. Central Expressway, Suite 410, Dallas, Texas 75231
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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
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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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 2000, registrant had 10,570,944 shares of Common Stock
issued and outstanding.
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FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES
FORM 10-Q
June 30, 2000
INDEX
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 (Unaudited) and December 31, 1999..................................................3
Consolidated Statement of Earnings (Unaudited)
Three Months and Six Months Ended June 30, 2000 and 1999.........................................4
Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended June 30, 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
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 December 31,
(Unaudited) 1999
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ASSETS
Cash and cash equivalents $ 8,843 $ 550
Investments 55,512,710 55,512,710
Accounts receivable - affiliate 765,036 --
Notes receivable 3,438,796 3,457,617
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$ 59,725,385 $ 58,970,877
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 2,177,866 $ 2,234,040
Notes payable - affiliate 4,298,027 --
Accounts payable - trade 5,548,224 5,548,224
Accounts payable - affiliate -- 3,370,010
Income taxes payable 72,000 72,000
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Total liabilities 12,096,117 11,224,274
Minority interest in limited partnership 10,073,991 10,074,447
Shareholders' Equity
Common stock, $0.01 par, 40,000,000 shares
authorized, 10,570,944 shares issued and outstanding 105,710 105,710
Capital in excess of par value 1,281,548 1,281,548
Retained earnings 36,168,019 36,284,898
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Total shareholders' equity 37,555,277 37,672,156
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$ 59,725,385 $ 58,970,877
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended June 30, Six months ended June 30,
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2000 1999 2000 1999
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Revenue
Commission income $ -- $ 4,323,986 $ -- $ 6,542,823
Management fee income -- 1,936,478 -- 3,709,366
Consulting fee income -- 1,485,636 -- 2,552,698
Other 756 473,527 2,632 799,689
Interest 72,909 79,515 142,505 156,215
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73,665 8,299,142 145,137 13,760,791
Operating expenses
Salaries and wages -- 2,760,204 -- 4,101,945
General and administrative -- 662,710 607 1,049,569
Minority interest in limited partnership -- 521,965 -- 929,358
Insurance and taxes -- 134,396 -- 294,956
Other operating expenses -- 51,900 7,500 204,974
Legal and professional fees 32,671 127,492 35,880 216,677
Depreciation and amortization -- 33,968 -- 67,937
Telephone and utilities -- 23,956 -- 39,578
Repairs and maintenance -- 4,245 -- 7,270
Advertising and promotion -- 2,356 -- 3,770
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Total operating expenses 32,671 4,323,192 43,987 6,916,034
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Income from operations 40,994 3,975,950 101,150 6,844,757
Other expenses
Interest expense (165,190) (112,624) (218,029) (229,597)
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Earnings before income taxes (124,196) 3,863,326 (116,879) 6,615,160
Deferred tax benefit (expense) -- -- -- --
Current tax provision -- (1,310,000) -- (2,250,000)
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-- (1,310,000) -- (2,250,000)
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Net income $ (124,196) $ 2,553,326 $ (116,879) $ 4,365,160
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Earnings per share $ (.01) $ .24 $ (.01) $ .41
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Weighted average shares outstanding 10,570,944 10,570,944 10,570,944 10,570,944
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (116,879) $ 4,365,160
Adjustments to reconcile net income to net cash
used for operating activities
Depreciation and amortization -- 67,938
Minority interest in limited partnership (456) 929,361
(Increase) decrease in
Accounts receivable - trade -- (244,863)
Accounts receivable - affiliate (765,036) (7,965,515)
Prepaid expenses and other -- (1,885)
Notes receivable -- (123,137)
Increase (decrease) in
Accounts payable -- 147,009
Accrued expenses -- 162,588
Accounts payable - affiliate 125,823 181,578
Income taxes payable -- 2,250,000
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Net cash used for operating activities (756,548) (231,766)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (51,139)
Collections from note receivable 18,821 --
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Net cash provided by (used for) investing activities 18,821 (51,139)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related parties 802,194 104,000
Payments on long term debt (56,174) (52,094)
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Net cash provided by financing activities 746,020 51,906
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Net increase (decrease) in cash and cash equivalents 8,293 (230,999)
Cash and cash equivalents at beginning of period 550 325,699
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Cash and cash equivalents at end of period $ 8,843 $ 94,700
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the six months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
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Exchange of account payable from affiliate for
a note payable from affiliate $ 3,495,833 $ --
Exchange of account receivable from affiliate for
a investment in preferred stock of affiliate $ -- $ 14,647,710
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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.
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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 June 30, 2000 compared to three months ended June 30, 1999
Revenues decreased to $73,665 versus prior year of $8,299,142. The decrease was
due to the loss of property management and brokerage contracts in the fourth
quarter of 1999. Total operating expenses decreased to $32,671 in 2000 from
$4,323,192 in 1999.
The decrease in income tax expense was due to lower operating income.
Results of Operations
Six months ended June 30, 2000 compared to six months ended June 30, 1999
Revenues decreased to $145,137 versus prior year of $13,760,791. 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 $43,987 in 2000
from $6,916,034 in 1999.
The decrease in income tax expense was due to lower operating income.
Financial Condition and Liquidity
At June 30, 2000, the Company had total assets of $59,725,385 compared to
$58,970,877 at December 31, 1999. Cash and cash equivalents were $8,843.
Total liabilities were $12,096,117 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
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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.
August 11, 2000 /s/ F. Terry Shumate, Director,
Vice President, Secretary and Treasurer
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INDEX TO EXHIBIT
EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule