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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 September 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
Commission file number 0-11777
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 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
September 30, 2000
INDEX
<TABLE>
<CAPTION>
Part I Financial Information: Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999..........................3
Consolidated Statement of Earnings (Unaudited)
Three Months and Nine Months Ended September 30, 2000 and 1999................4
Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended September 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
</TABLE>
2
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 56,927 $ 550
Investments 51,137,790 55,512,710
Accounts receivable - affiliate 939,036 --
Notes receivable 3,128,213 3,457,617
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$55,261,966 $58,970,877
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 2,077,032 $ 2,234,040
Notes payable - affiliate -- --
Accounts payable - trade 5,548,224 5,548,224
Accounts payable - affiliate -- 3,370,010
Income taxes payable -- 72,000
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Total liabilities 7,625,256 11,224,274
Minority interest in limited partnership 10,073,956 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 36,175,496 36,284,898
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Total shareholders' equity 37,562,754 37,672,156
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$55,261,966 $58,970,877
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</TABLE>
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenue
Commission income $ -- $ 3,670,703 $ -- $ 10,213,526
Management fee income -- 1,821,594 -- 5,530,960
Consulting fee income -- 195,755 -- 2,748,453
Other 35 288,673 2,667 1,088,362
Interest 70,077 73,357 212,582 229,572
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70,112 6,050,082 215,249 19,810,873
Operating expenses
Salaries and wages 241 1,191,776 241 5,293,721
Consulting fees expense -- 5,000,000 -- 5,000,000
General and administrative 130 361,146 737 1,410,715
Minority interest in limited partnership -- 282,982 -- 1,212,340
Insurance and taxes 4,816 729,784 4,816 1,024,740
Other operating expenses -- 38,932 7,500 240,868
Legal and professional fees 9,739 44,520 45,619 261,197
Loss on sale of motel properties -- 94,095 -- 97,129
Depreciation and amortization -- 26,469 -- 94,406
Telephone and utilities -- 17,420 -- 56,998
Repairs and maintenance -- 12,968 -- 20,238
Advertising and promotion -- 1,640 -- 5,410
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Total operating expenses 14,926 7,801,732 58,913 14,717,762
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Income from operations 55,186 (1,751,650) 156,336 5,093,111
Other expenses
Interest expense (47,709) (112,528) (265,738) (342,125)
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Earnings before income taxes 7,477 (1,864,178) (109,402) 4,750,986
Deferred tax benefit (expense) -- -- -- --
Current tax provision -- 635,000 -- (1,615,000)
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-- 635,000 -- (1,615,000)
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Net income $ 7,477 $ (1,229,178) $ (109,402) $ 3,135,986
============= ============= ============= =============
Earnings per share $ -- $ (.11) $ (.01) $ .30
============= ============= ============= =============
Weighted average shares outstanding 10,570,944 10,570,944 10,570,944 10,570,944
============= ============= ============= =============
</TABLE>
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (109,402) $ 3,135,986
Adjustments to reconcile net earnings (loss) to
net cash used for operating activities
Loss on sale of motel properties -- 97,129
Depreciation and amortization -- 94,406
Minority interest in limited partnership (491) 1,212,340
Non-cash litigation settlement -- 175,000
Other -- (2,125)
(Increase) decrease in
Accounts receivable - trade -- (618,411)
Accounts receivable - affiliate (939,036) (7,965,515)
Prepaid expenses and other -- (1,885)
Notes receivable -- (115,804)
Increase (decrease) in
Accounts payable -- 791,526
Accrued expenses -- 217,549
Accounts payable - affiliate 125,823 1,320,743
Accrued interest - notes payable - affiliate -- 156,863
Income taxes payable (72,000) 1,376,500
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Net cash used for operating activities (995,106) (125,698)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (54,095)
Proceeds from sale -- 525,000
Collections from note receivable 329,404 --
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Net cash provided by investing activities 329,404 470,905
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related parties 879,087 --
Payments on long term debt (157,008) (376,088)
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Net cash provided by (used for) financing activities 722,079 (376,088)
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Net increase (decrease) in cash and cash equivalents 56,377 (30,881)
Cash and cash equivalents at beginning of period 550 325,699
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Cash and cash equivalents at end of period $ 56,927 $ 294,818
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</TABLE>
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the nine months ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Exchange of account payable from affiliate for
a note payable from affiliate $ 3,495,833 $ --
Exchange of an investment in preferred stock of
an affiliate for a note payable to an affiliate $ 4,374,920 $ --
Exchange of account receivable from affiliate for
an investment in preferred stock of affiliate $ -- $14,647,710
</TABLE>
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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.
7
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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 September 30, 2000 compared to three months ended September
30, 1999
Revenues decreased to $70,112 versus prior year of $6,050,082. The decrease was
due to the loss of property management and brokerage contracts in the fourth
quarter of 1999. Total operating expenses decreased to $14,926 in 2000 from
$7,801,732 in 1999.
The decrease in income tax expense was due to lower operating income.
Results of Operations
Nine months ended September 30, 2000 compared to nine months ended September 30,
1999
Revenues decreased to $215,249 versus prior year of $19,810,873. The decrease
was due to lower commission and management fee income, lower consulting fee
income and lower motel revenue. In the fourth quarter of 1999, all property
management and brokerage contracts were terminated and awarded to non-affiliated
companies. Total operating expenses decreased to $58,913 in 2000 from
$14,717,762 in 1999.
The decrease in income tax expense was due to lower operating income.
Financial Condition and Liquidity
At September 30, 2000, the Company had total assets of $55,261,966 compared to
$58,970,877 at December 31, 1999. Cash and cash equivalents were $56,927.
Total liabilities were $7,625,256 versus $11,224,274 at December 31, 1999.
Part II Other Information
Item 6. Exhibits and Reports on Form 8 - K
(a) Exhibits
27 Financial Data Schedules, filed herewith
(b) Reports on Form 8-K - None
8
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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.
November 13, 2000 /s/ F. Terry Shumate, Director,
Vice President, Secretary and Treasurer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C>
27 Financial Data Schedule
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