10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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 000-11777

FIRST EQUITY PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	95-6799846
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1603 LBJ Freeway, Suite 800

Dallas, Texas 75234

(Address of principal executive offices)

(Zip Code)

(469) 522-4200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.  þ.  Yes   ¨  No.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) *.  þ.  Yes  ¨   No.

* The registrant has not yet been phased into the interactive data requirements

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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨	Accelerated filer  ¨
Non-accelerated filer  ¨  (Do not check if a smaller reporting company)	Smaller reporting company   þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨  Yes  þ   No

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common Stock, $.01 par value	1,057,628
(Class)	(Outstanding at August 13, 2019)

1 

FIRST EQUITY PROPERTIES, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3
	Statements of Operations for the three and six months ended June 30, 2019 and 2018 (unaudited)	4
	Statement of Shareholders’ Equity for the six months ended June 30, 2019 and 2018 (unaudited)	5
	Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)	6
	Notes to Financial Statements	7-8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-10
Item 3.	Controls and Procedures	10
PART II. OTHER INFORMATION
Item 4.	Exhibits	11
SIGNATURES		12-15

2 

PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS

FIRST EQUITY PROPERTIES, INC.
BALANCE SHEET
	June 30, 2019			December 31, 2018
					(unaudited)
Assets
Notes receivable and accrued interest - related parties		1,553,267			1,592,418
Accounts receivable - related parties		168,535			—
Cash and cash equivalents		45,251			201,057
Total assets	$	1,767,053		$	1,793,475
Liabilities and Shareholders' Equity
Notes payable and accrued interest - related parties		584,360			584,360
Accounts payable - other		4,454			—
Accounts payable - related parties		367,115			367,565
Total liabilities		955,929			951,925
Shareholders' equity
Common stock, $0.01 par value; 40,000,000 shares authorized; 1,057,628 issued and outstanding		10,576			10,576
Preferred stock, $0.01 par value; 4,960,000 shares authorized; none issued or outstanding		—			—
Paid in capital		1,376,682			1,376,682
Retained earnings (deficit)		(576,134	)		(545,708	)
Total shareholders' equity		811,124			841,550
Total liabilities and shareholders' equity	$	1,767,053		$	1,793,475
The accompanying notes are an integral part of these financial statements.

3 

FIRST EQUITY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Operating Expenses
Administrative fees - related parties		18,000			18,000			36,000			36,000
General and administrative		5,482			5,125			8,872			8,151
Legal and professional fees		3,394			3,450			33,601			32,851
Total operating expenses		26,876			26,575			78,473			77,002
Income (loss) before interest expense and taxes		(26,876	)		(26,575	)		(78,473	)		(77,002	)
Other income (expense)
Interest income - related parties		38,725			38,755			77,025			81,330
Interest expense - related parties		(14,569	)		(16,894	)		(28,978	)		(37,024	)
Net income (loss) applicable to common shareholders	$	(2,720	)	$	(4,714	)	$	(30,426	)	$	(32,696	)
Earnings (loss) per share	$	—		$	—		$	(0.03	)	$	(0.03	)
Weighted average shares outstanding		1,057,628			1,057,628			1,057,628			1,057,628

The accompanying notes are an integral part of these financial statements.

4 

FIRST EQUITY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended June 30, 2019
(unaudited)
	Common Stock				Paid in		Retained			Total
	Shares		Amount		Capital		Earnings (Deficit)			Equity
Balances at January 1, 2019	1,057,628	$	10,576	$	1,376,682	$	(545,708	)	$	841,550
Net income (loss)	—		—		—		(30,426	)		(30,426	)
Balances at June 30, 2019	1,057,628	$	10,576	$	1,376,682	$	(576,134	)	$	811,124
	Common Stock				Paid in		Retained			Total
	Shares		Amount		Capital		Earnings (Deficit)			Equity
Balances at January 1, 2018	1,057,628	$	10,576	$	1,376,682	$	(501,150	)	$	886,108
Net income (loss)	—		—		—		(32,696	)		(32,696	)
Balances at June 30, 2018	1,057,628	$	10,576	$	1,376,682	$	(533,846	)	$	853,412

The accompanying notes are an integral part of these financial statements.

5 

FIRST EQUITY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	For the six months ended June 30,
	2019			2018
Cash Flows from Operating Activities
Net Income (Loss)	$	(30,426	)	$	(32,696	)
Adjustments to reconcile net income applicable to common shareholders to net cash provided by (used in) operating activities:
(Increase) decrease in
Interest receivable - related parties		39,151			13,029
Accounts receivable - related parties		(168,535	)		(265,860	)
Increase (decrease) in
Accounts payable - other		4,454			2,707
Accounts payable - related parties		(450	)		—
Interest payable - related parties		—			(10,394	)
Net cash provided by (used for) operating activities		(155,806	)		(293,214	)
Cash Flows from Investing Activities
Notes receivable - related parties		—			500,000
Net cash provided by (used for) investing activities		—			500,000
Cash Flows from Financing Activities
Notes payable - related parties		—			(207,015	)
Net cash provided by (used for) financing activities		—			(207,015	)
Net increase (decrease) in cash and cash equivalents		(155,806	)		(229	)
Cash and cash equivalents at the beginning of period		201,057			914
Cash and cash equivalents at the end of period	$	45,251		$	685
Supplemental disclosures of cash flow information:
Cash paid for interest expense to related parties	$	28,978		$	47,417
The accompanying notes are an integral part of these financial statements.

6 

FIRST EQUITY PROPERTIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1.      ORGANIZATION AND BASIS OF PRESENTATION

Organization and business

First Equity Properties, Inc. is a Nevada based corporation organized in December 19, 1996 and the Company is headquartered in Dallas, TX. The Company’s principal line of business and source of revenue is currently investments and interest on notes receivable. The Company is currently in the business of real estate investing. FEPI is a publicly traded company however, no trading market presently exists for the shares of common stock and its value is therefore not determinable.

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2018.  Operating results for the six month period ended June 30, 2019 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2018.

Cost capitalization

Costs related to planning and developing a project are capitalized and classified as Real Estate development costs in the Consolidated Balance Sheets. We capitalized certain operating expenses until development is substantially complete, but no later than one year from the cessation of major development activity.

Newly issued accounting pronouncements

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results of operation.

NOTE 2. FEDERAL INCOME TAXES

The Company accounts for income taxes in accordance with Accounting Standards Codification, (“ASC”) No. 740, “Accounting for Income Taxes”. ASC 740 requires an asset and liability approach to financial accounting for income taxes. In the event differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in deferred tax assets, ASC 740 requires an evaluation of the probability of being able to realize the future benefits indicated.

Recognition of the benefits of deferred tax assets will require the Company to generate future taxable income. There is no assurance that the Company will generate earnings in future years.

7 

NOTE 3. NOTES RECEIVABLE AND ACCRUED INTEREST – RELATED PARTIES

Receivables from related parties primarily consist of two notes of $1,164,113 and $389,154 which are due to the Company in quarterly installments of interest only. The notes accrue interest at 10% per annum.  The maturity date of these notes has been extended to December 31, 2019.

	2019		2018
Notes receivable – related parties
Unsecured, due on demand, interest rate of 10%, due monthly	$	1,553,267	$	1,553,267
Accrued interest – related parties		0		39,151
Total notes and accounts receivable – related parties	$	1,553,267	$	1,592,418

NOTE 4. NOTES PAYABLE AND ACCRUED INTEREST – RELATED PARTIES

	2019		2018
Uncollateralized notes payable – related parties
due on demand, interest rate of 10%, payable quarterly	$	584,360	$	584,360
Accrued interest and intercompany – related parties		0		0
Total notes payable – related parties	$	584,360	$	584,360

Long term debt and accrued interest is due December 31, 2019.

NOTE 5. RELATED PARTIES TRANSACTIONS

Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in best interest of our company.

The Company has an administrative agreement with Pillar Income Asset Management, Inc., an affiliated entity, for accounting and administrative services. The total expense of the six months ended June 30, 2019 was $36,000 which is included in General and Administrative expenses of the Statements of Operations. Pillar owes the Company $168,535 at June 30, 2019. The Company owes another related entity $367,115 as of June 30, 2019.

NOTE 6. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through August 13, 2019, the date the financial statements were available to be issued, and has determined that there are none to be reported.

8 

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected by the forward-looking statements. We caution you that while forward-looking statements reflect our good-faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Related parties

We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity.

Results of Operations

The following discussion is based on our Statement of Operations within our Financial Statements as presented in Part 1, Item 1 of this report for the six months ended June 30, 2019 and 2018. The discussion is not meant to be an all-inclusive discussion of the changes within our operations. Instead, we have focused on the significant items relevant to obtain an understanding of the changes in our operations.

The results of operations for the six months ended June 30, 2019, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

Our sole source of income is from the interest received on related party receivables. The principal balances on those receivables have been consistent for the past years, thus making our revenues consistent from year to year. Expenses are primarily related to professional and administrative fees and interest on related party notes.

Comparison of the three months ended June 30, 2019 to the same period ended 2018.

We reported net loss applicable to common shareholders of ($2,720) for the three months ended June 30, 2019 as compared to net income to common shareholders of ($4,714) for the same period ended 2018.

Comparison of the six months ended June 30, 2019 to the same period ended 2018.

We reported a net loss applicable to common shareholders of ($30,426) for the six months ended June 30, 2019 as compared to a net loss to common shareholders of ($32,696) for the same period ended 2018.

9 

Liquidity and Capital Resources

General

Our principal liquidity needs for the next twelve months are funding of normal recurring expenses including interest expense and legal and administrative fees.

Our principal source of cash is proceeds from interest income on our notes receivables. The following impacted our balance sheet as of June 30, 2019:

Our cash and cash equivalents decreased due to short term funding to a related party.

Our accounts receivable – related parties increased due to short term funding to a related party.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

A review and evaluation was performed by management under the supervision and with the participation of the Principal Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2019. Based upon that most recent evaluation, which was completed as of the end of the period covered by this Form 10-K, the Principal Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at June 30, 2019 to ensure that information required to be disclosed in reports that the Company files submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time period specified by the Securities and Exchange Commission (“SEC”) rules and forms. As a result of this evaluation, there were no significant changes in the Company’s internal control over financial reporting during the period ended June 30, 2019 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

(b) Changes in Internal Controls over Financial Reporting.

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2019, that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

10 

PART II – OTHER INFORMATION

ITEM 4. EXHIBITS

The following exhibits are filed with this report or incorporated by reference as indicated.

Exhibit Number	Description
3.1	Articles of Incorporation of Wespac Property Corporation as filed with and endorsed by the Secretary of State of California on December 16, 1996 (incorporation by reference is made to Exhibit 3.1 to Form 8-K of First Equity Properties, Inc. for event reported June 19, 1996).
3.2	Articles of Incorporation of First Equity Properties, Inc. filed with and approved by the Secretary of State of Nevada on December 19, 1996 (incorporation by reference is made to Exhibit 3.2 to Form 8-K of First Equity Properties, Inc. for event reported June 19, 1996).
3.3	Bylaws of First Equity Properties, Inc. as adopted December 20, 1996 (incorporation by reference is made to Exhibit 3.3 to Form 8-K of First Equity Properties, Inc. for event reported June 19, 1996).
3.4	Agreement and Plan of Merger of Wespac Property Corporation and First Equity Properties, Inc. dated December 23, 1996 (incorporation by reference is made to Exhibit 3.4 to Form 8-K of First Equity Properties, Inc. for event reported June 19, 1996).
3.5	Articles of Merger of Wespac Property Corporation into First Equity Properties, Inc. as filed with and approved with the Secretary of State in Nevada December 24, 1996 (incorporation by reference is made to Exhibit 3.5 to Form 8-K of First Equity Properties, Inc. for event reported June 19, 1996).
3.6	Certificate of Designation of Preferences and Relative Participating or Optional of Other Special Rights and Qualifications, Limitations or Restrictions thereof of the Series A 8% Cumulative Preferred Stock (incorporation by reference is made to Exhibit 3.6 to Form 10-KSB of First Equity Properties, Inc. for the fiscal year ended December 31, 1996.)
31.1 *	Certification of Principal Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.
31.2 *	Certification of Principal Financial and Accounting Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.
32.1 *	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

11 

SIGNATURE PAGE

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.
Date: August 13, 2019	By:	/s/ R. Neil Crouch II
		R. Neil Crouch II Director, President & Treasurer
	FIRST EQUITY PROPERTIES, INC.
Date: August 13, 2019	By:	/s/ Cecelia K. Maynard
		Cecelia K. Maynard Director, Vice President & Secretary

12 

EXHIBIT 31.1

RULE 13a – 14(a)/15d – 14(a) CERTIFICATION

I, R. Neil Crouch II, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Equity Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining internal controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to insure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: August 13, 2019	By:	/s/ R. Neil Crouch II
		R. Neil Crouch II President and Treasurer (Principal Executive Officer)

13 

EXHIBIT 31.2

RULE 13a – 14(a)/15d – 14(a) CERTIFICATION

I, Cecelia K. Maynard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Equity Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining internal controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to insure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: August 13, 2019	By:	/s/ Cecelia K. Maynard
		Cecelia K. Maynard Vice President & Secretary (Principal Financial Officer)

14 

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of First Equity Properties, Inc. (the “Company”), on Form 10-Q for the period ended June 30, 2019, as filed with Securities Exchange Commission on the date hereof (the “Report”), R. Neil Crouch II, Director, President and Treasurer of the Company, and Cecelia K. Maynard, Vice President and Secretary of the Company, each hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 13, 2019	By:	/s/ R. Neil Crouch II
		R. Neil Crouch II President and Treasurer

Date: August 13, 2019	By:	/s/ Cecelia K. Maynard
		Cecelia K. Maynard Vice President and Secretary

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 13, 2019
Document And Entity Information
Entity Registrant Name	FIRST EQUITY PROPERTIES INC
Entity Central Index Key	0000726516
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Is Entity Emerging Growth Company?	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Common Stock, Shares Outstanding		1,057,628
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

XML

Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Assets
Notes receivable and accrued interest - related parties	$ 1,553,267	$ 1,592,418
Accounts receivable - related parties	168,535
Cash and cash equivalents	45,251	201,057
Total assets	1,767,053	1,793,475
Liabilities and Shareholders' Equity
Notes payable and accrued interest - related parties	584,360	584,360
Accounts payable - other	4,454
Accounts payable - related parties	367,115	367,565
Total liabilities	955,929	951,925
Shareholders' equity
Common stock, $0.01 par value; 40,000,000 shares authorized; 1,057,628 issued and outstanding	10,576	10,576
Preferred stock, $0.01 par value; 4,960,000 shares authorized; none issued or outstanding
Paid in capital	1,376,682	1,376,682
Retained earnings (deficit)	(576,134)	(545,708)
Total shareholders' equity	811,124	841,550
Total liabilities and shareholders' equity	$ 1,767,053	$ 1,793,475

XML

Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred Stock, par value	$ .01	$ 0.01
Preferred Stock, shares authorized	4,960,000	4,960,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock, par value	$ .01	$ 0.01
Common Stock, shares authorized	40,000,000	40,000,000
Common Stock, shares issued	1,057,628	1,057,628
Common Stock, shares outstanding	1,057,628	1,057,628

XML

Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating Expenses
Administrative fees - related parties	$ 18,000	$ 18,000	$ 36,000	$ 36,000
General and administrative	5,482	5,125	8,872	8,151
Legal and professional fees	3,394	3,450	33,601	32,851
Total operating expenses	26,876	26,575	78,473	77,002
Income (loss) before interest expense and taxes	(26,876)	(26,575)	(78,473)	(77,002)
Other income (expense)
Interest income - related parties	38,725	38,755	77,025	81,330
Interest expense - related parties	(14,569)	(16,894)	(28,978)	(37,024)
Net income (loss) applicable to common shareholders	$ (2,720)	$ (4,714)	$ (30,426)	$ (32,696)
Earnings (loss) per share			$ (0.03)	$ (0.03)
Weighted average shares outstanding	1,057,628	1,057,628	1,057,628	1,057,628

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Shareholders Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2017	1,057,628
Beginning balance, value at Dec. 31, 2017	$ 10,576	$ 1,376,682	$ (501,150)	$ 886,108
Net income (loss)			(32,696)	(32,696)
Ending balance, shares at Jun. 30, 2018	1,057,628
Ending balance, value at Jun. 30, 2018	$ 10,576	1,376,682	(533,846)	853,412
Beginning balance, shares at Dec. 31, 2018	1,057,628
Beginning balance, value at Dec. 31, 2018	$ 10,576	1,376,682	(545,708)	841,550
Net income (loss)			(30,426)	(30,426)
Ending balance, shares at Jun. 30, 2019	1,057,628
Ending balance, value at Jun. 30, 2019	$ 10,576	$ 1,376,682	$ (576,134)	$ 811,124

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Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash Flows from Operating Activities
Net Income (Loss)	$ (30,426)	$ (32,696)
Adjustments to reconcile net income applicable to common shareholders to net cash provided by (used in) operating activities:
Interest receivable - related parties	39,151	13,029
Accounts receivable - related parties	(168,535)	(265,860)
Accounts payable - other	4,454	2,707
Accounts payable - related parties	(450)
Interest payable - related parties		(10,394)
Net cash provided by (used for) operating activities	(155,806)	(293,214)
Cash Flows from Investing Activities
Notes receivable - related parties		500,000
Net cash provided by (used for) investing activities		500,000
Cash Flows from Financing Activities
Notes payable - related parties		(207,015)
Net cash provided by (used for) financing activities		(207,015)
Net increase (decrease) in cash and cash equivalents	(155,806)	(229)
Cash and cash equivalents at the beginning of period	201,057	914
Cash and cash equivalents at the end of period	45,251	685
Supplemental disclosures of cash flow information:
Cash paid for interest expense to related parties	$ 28,978	$ 47,417

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1. ORGANIZATION AND BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1.      ORGANIZATION AND BASIS OF PRESENTATION

Organization and business

First Equity Properties, Inc. is a Nevada based corporation organized in December 19, 1996 and the Company is headquartered in Dallas, TX. The Company’s principal line of business and source of revenue is currently investments and interest on notes receivable. The Company is currently in the business of real estate investing. FEPI is a publicly traded company however, no trading market presently exists for the shares of common stock and its value is therefore not determinable.

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2018.  Operating results for the six month period ended June 30, 2019 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2018.

Cost capitalization

Costs related to planning and developing a project are capitalized and classified as Real Estate development costs in the Consolidated Balance Sheets. We capitalized certain operating expenses until development is substantially complete, but no later than one year from the cessation of major development activity.

Newly issued accounting pronouncements

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results of operation.

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2. FEDERAL INCOME TAXES

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

FEDERAL INCOME TAXES

NOTE 2. FEDERAL INCOME TAXES

The Company accounts for income taxes in accordance with Accounting Standards Codification, (“ASC”) No. 740, “Accounting for Income Taxes”. ASC 740 requires an asset and liability approach to financial accounting for income taxes. In the event differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in deferred tax assets, ASC 740 requires an evaluation of the probability of being able to realize the future benefits indicated.

Recognition of the benefits of deferred tax assets will require the Company to generate future taxable income. There is no assurance that the Company will generate earnings in future years.

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3. NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES

NOTE 3. NOTES RECEIVABLE AND ACCRUED INTEREST – RELATED PARTIES

Receivables from related parties primarily consist of two notes of $1,164,113 and $389,154 which are due to the Company in quarterly installments of interest only. The notes accrue interest at 10% per annum.  The maturity date of these notes has been extended to December 31, 2019.

	2019		2018
Notes receivable – related parties
Unsecured, due on demand, interest rate of 10%, due monthly	$	1,553,267	$	1,553,267
Accrued interest – related parties		0		39,151
Total notes and accounts receivable – related parties	$	1,553,267	$	1,592,418

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4. NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES

NOTE 4. NOTES PAYABLE AND ACCRUED INTEREST – RELATED PARTIES

	2019		2018
Uncollateralized notes payable – related parties
due on demand, interest rate of 10%, payable quarterly	$	584,360	$	584,360
Accrued interest and intercompany – related parties		0		0
Total notes payable – related parties	$	584,360	$	584,360

Long term debt and accrued interest is due December 31, 2019.

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5. RELATED PARTIES TRANSACTIONS

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

RELATED PARTIES TRANSACTIONS

NOTE 5. RELATED PARTIES TRANSACTIONS

Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in best interest of our company.

The Company has an administrative agreement with Pillar Income Asset Management, Inc., an affiliated entity, for accounting and administrative services. The total expense of the six months ended June 30, 2019 was $36,000 which is included in General and Administrative expenses of the Statements of Operations. Pillar owes the Company $168,535 at June 30, 2019. The Company owes another related entity $367,115 as of June 30, 2019.

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6. SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 6. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through August 13, 2019, the date the financial statements were available to be issued, and has determined that there are none to be reported.

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1. ORGANIZATION AND BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business

Organization and business

First Equity Properties, Inc. is a Nevada based corporation organized in December 19, 1996 and the Company is headquartered in Dallas, TX. The Company’s principal line of business and source of revenue is currently investments and interest on notes receivable. The Company is currently in the business of real estate investing. FEPI is a publicly traded company however, no trading market presently exists for the shares of common stock and its value is therefore not determinable.

Basis of presentation

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2018.  Operating results for the six month period ended June 30, 2019 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2018.

Cost capitalization

Cost capitalization

Costs related to planning and developing a project are capitalized and classified as Real Estate development costs in the Consolidated Balance Sheets. We capitalized certain operating expenses until development is substantially complete, but no later than one year from the cessation of major development activity.

Newly issued accounting pronouncements

Newly issued accounting pronouncements

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results of operation.

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3. NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES

	2019		2018
Notes receivable – related parties
Unsecured, due on demand, interest rate of 10%, due monthly	$	1,553,267	$	1,553,267
Accrued interest – related parties		0		39,151
Total notes and accounts receivable – related parties	$	1,553,267	$	1,592,418

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4. NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES

	2019		2018
Uncollateralized notes payable – related parties
due on demand, interest rate of 10%, payable quarterly	$	584,360	$	584,360
Accrued interest and intercompany – related parties		0		0
Total notes payable – related parties	$	584,360	$	584,360

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3. NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Notes receivable - related parties Unsecured, due on demand, interest rate of 10%, due monthly	$ 1,553,267	$ 1,553,267
Accrued interest - related parties	0	39,151
Total notes and accounts receivable - related parties	$ 1,553,267	$ 1,592,418

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3. NOTES RECEIVABLE AND ACCRUED INTEREST - RELATED PARTIES (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Sep. 30, 2018
Notes receivable - related parties	$ 1,553,267		$ 1,553,267
Proceeds from notes receivable		$ 500,000
Note Receivable 1 [Member]
Notes receivable - related parties				$ 1,164,113
Stated interet rate				10.00%
Note Receivable 2 [Member]
Notes receivable - related parties				$ 389,154
Stated interet rate				10.00%

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4. NOTES PAYABLE AND ACCRUED INTEREST – RELATED PARTIES - NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Uncollateralized notes payable - related parties due on demand, interest rate of 10%, payable quarterly	$ 584,360	$ 584,360
Accrued interest and intercompany - related parties	0	0
Total notes payable - related parties	$ 584,360	$ 584,360

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4. NOTES PAYABLE AND ACCRUED INTEREST - RELATED PARTIES (Details Narrative)	6 Months Ended
	Jun. 30, 2019
Debt Disclosure [Abstract]
Debt maturity date	Dec. 31, 2019

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5. RELATED PARTIES TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Related party expense	$ 18,000	$ 18,000	$ 36,000	$ 36,000
Pillar Capital [Member]
Related party expense			168,535
Related Entity [Member]
Related party expense			$ 367,115