-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JlhRMZ6Jt5OTBDtWkEraAZeTFeclI9B9WU3ImqY7x9UHPLL24UvwA6MGn1C4jXW+ /d0YE+w+V1YFn+VrfTHoiw== 0000950134-98-008769.txt : 19981113 0000950134-98-008769.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950134-98-008769 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST EQUITY PROPERTIES INC CENTRAL INDEX KEY: 0000726516 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 956799846 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11777 FILM NUMBER: 98745425 BUSINESS ADDRESS: STREET 1: 10670 NORTH CENTRAL EXPRESSWAY STREET 2: SUITE 501 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2147505800 MAIL ADDRESS: STREET 1: 10670 NORTH CENTRAL EXPRESSWAY STREET 2: SUITE 501 CITY: DALLAS STATE: TX ZIP: 75231 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST III DATE OF NAME CHANGE: 19970123 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1998 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 September 30, 1998 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 September 30, 1998, registrant had 10,570,944 shares of Common Stock issued and outstanding. 1 2 FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES FORM 10-Q September 30, 1998 INDEX
Part I Financial Information: Page No. Item 1. Financial Statements. Consolidated Balance Sheets September 30, 1998 (Unaudited) and December 31, 1997.............................................4 Consolidated Statements of Income (Unaudited) Nine Months and Three Months Ended September 30, 1998 and 1997...................................5 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 1998 and 1997....................................................6 Notes to Consolidated Financial Statements.........................................................8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................9 Part II Other Information: Item 6. Exhibits and Reports on Form 8-K..........................................................10
3 Board of Directors First Equity Properties, Inc. and Subsidiaries The accompanying consolidated balance sheets of First Equity Properties, Inc. and subsidiaries as of September 30, 1998 and December 31, 1997, and the related consolidated statements of income for the three and nine month periods ended September 30, 1998 and 1997 and cash flows for the nine month periods ended September 30, 1998 and 1997 were not audited by us and, accordingly, we do not express an opinion on them. FARMER, FUQUA, HUNT & MUNSELLE, P.C. Dallas, Texas October 28, 1998 4 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
September 30, 1998 December 31, (Unaudited) 1997 Motel and other property and equipment, less accumulated depreciation of $57,546 and $480,094, respectively $ 181,881 $ 5,693,509 Cash and cash equivalents 246,391 144,906 Accounts receivable - trade 1,039,415 1,190,357 Accounts receivable - affiliates 1,639,244 17,217,713 Notes receivable 3,352,320 -- Prepaid expenses -- 10,500 Investments 40,703,000 41,526,000 Other assets 3,005,089 3,065,995 Deferred tax asset 1,325,000 5,300,000 ----------- ----------- $51,492,340 $74,148,980 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 2,700,926 $ 2,830,913 Notes payable - affiliate 2,694,484 2,279,578 Accounts payable - trade 219,282 444,274 Accounts payable - affiliates 3,833,136 74,597 Accrued liabilities 165,897 557,242 Income taxes payable 334,000 596,215 ----------- ----------- Total liabilities 9,947,725 6,782,819 Minority interest in limited partnership 8,308,290 6,163,464 Shareholders' Equity Series A preferred stock, $.01 par value; 40,000 shares authorized; 32,500 shares issued and outstanding at December 31, 1997, stated at liquidation value -- 32,500,000 Other preferred stock, $.01 par value; 4,960,000 shares authorized; none issued or outstanding -- -- 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 31,849,067 27,315,439 ----------- ----------- Total shareholders' equity 33,236,325 61,202,697 ----------- ----------- $51,492,340 $74,148,980 =========== ===========
4 5 FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine months ended September 30, Three months ended September 30, ----------------------------------------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenue Commission income $ 12,976,462 $ 10,554,958 $ 4,539,158 $ 2,788,244 Consulting fee income 7,267,384 5,880,776 1,622,163 1,655,193 Management fee income 5,126,141 4,113,159 1,794,727 1,444,889 Motel 1,014,091 1,561,459 -- 660,295 Other 1,997,470 1,661,976 879,705 564,738 ------------ ------------ ------------ ------------ 28,381,548 23,772,328 8,835,753 7,113,359 Operating expenses Consulting fees expense 5,500,000 -- 5,500,000 Salaries and wages 3,698,943 2,354,986 1,111,168 835,243 General and administrative 781,411 1,739,787 259,407 279,112 Minority interest in limited partnership 2,144,825 1,291,298 586,079 251,624 Other operating expenses 1,117,424 779,311 202,950 244,117 Depreciation and amortization 179,467 233,586 18,968 71,649 Insurance and taxes 698,068 162,052 250,708 41,844 Repairs and maintenance 76,381 155,786 1,543 53,134 Franchise fees 73,523 130,579 -- 57,669 Telephone and utilities 110,558 99,544 9,057 28,233 Advertising and promotion 79,408 79,436 2,940 28,733 Legal and professional fees 201,844 114,134 64,940 22,645 Loss on sale of motel properties 865,159 -- 6,580 -- ------------ ------------ ------------ ------------ Total operating expenses 15,527,011 7,140,499 8,014,340 1,914,003 ------------ ------------ ------------ ------------ Income from operations 12,854,537 16,631,829 821,413 5,199,356 Other expenses Interest expense (365,616) (335,270) (161,678) (102,205) ------------ ------------ ------------ ------------ Earnings before income taxes 12,488,921 16,296,559 659,735 5,097,151 Deferred tax benefit (expense) (3,975,000) 3,766,135 (1,325,000) 1,177,952 Current tax provision (189,123) (423,711) 1,146,877 (132,526) ------------ ------------ ------------ ------------ (4,164,123) 3,342,424 (178,123) 1,045,426 ------------ ------------ ------------ ------------ Net income $ 8,324,798 $ 19,638,983 $ 481,612 $ 6,142,577 ============ ============ ============ ============ Earnings per share $ .79 $ 1.86 $ .05 $ .59 ============ ============ ============ ============ Weighted average shares outstanding 10,570,944 10,570,944 10,570,944 10,570,944 ============ ============ ============ ============
5 6 FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended September 30, -------------- -------------- 1998 1997 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,324,798 $ 19,638,983 Adjustments to reconcile net income to net cash used for operating activities Loss on sale of motel properties 865,159 -- Depreciation and amortization 179,467 233,586 Minority interest in limited partnership 2,144,826 1,291,298 Other 195,016 -- (Increase) decrease in Accounts receivable - trade 150,942 (15,706) Accounts receivable - affiliates (19,139,698) (19,090,773) Prepaid expenses and other 14,500 (23,218) Deferred tax asset 3,975,000 (3,766,135) Increase (decrease) in Accounts payable (224,992) (99,880) Accounts payable - affiliates 3,758,539 -- Accrued expenses (391,345) 132,417 Other current liabilities -- (439,992) Income taxes payable (262,215) 423,711 -------------- -------------- Net cash provided (used) by operating activities (410,003) (1,715,709) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (172,341) (171,507) Net cash acquired from acquisition -- 298,105 Proceeds from sale of motel properties 275,354 -- -------------- -------------- Net cash provided by investing activities 103,013 126,598 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable - related parties 505,761 1,716,393 Payments on long term debt (97,286) (141,527) -------------- -------------- Net cash provided (used) by financing activities 408,475 1,574,866 -------------- -------------- Net increase in cash and cash equivalents 101,485 (14,245) Cash and cash equivalents at beginning of period 144,906 76,355 -------------- -------------- Cash and cash equivalents at end of period $ 246,391 $ 62,110 ============== ==============
6 7 FIRST EQUITY PROPERTIES, INC. & SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - Continued (Unaudited)
Nine months ended September 30, 1998 1997 ----------- ------------ Noncash investing and financing activities: Reduction of receivable from affiliate in exchange for: Redemption of preferred stock $32,500,000 $ -- Payment of dividends 3,791,167 -- Exchange of investment for account receivable from affiliates 1,573,000 -- Assets received and liabilities assumed in connection with sale of Motel properties: Notes receivable 3,600,000 -- Investment in real property 750,000 -- Mortgage payable on investment in real property 290,000 -- Preferred stock issued for acquisition -- 32,500,000 Long term debt paid by related party -- 887,855 Stock issued to company to retire debt -- 9,482,000 Details of acquisition: Fair value of assets acquired $ -- $ 34,171,349 Liabilities assumed -- (4,706,322) Goodwill -- 3,034,973 Stock issued -- (32,500,000) ----------- ------------ Cash paid -- -- Plus: cash acquired -- 298,105 ----------- ------------ Net cash acquired from acquisition $ -- $ 298,105 =========== ============
7 8 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1998 (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, 1998. For further information, refer to the Company's annual report on Form 10-K for the year ended December 31, 1997. NOTE B - MOTEL PROPERTIES In June 1998, the company disposed of its three motel properties located in the Spokane, Washington area for $4,660,000. The properties were exchanged for a combination of cash, notes receivable and real estate. Revenues and income from the properties sold are not material to the future operations of the company. 8 9 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, 1998 compared to three months ended September 30, 1997 For the quarter, revenues were $8,835,753 compared to $7,113,359 in 1997. The increase resulted primarily from higher commission income and increased management fees. Operating expenses increased significantly due to higher consulting fees, higher general and administrative expenses and increased salaries and wages. Results of Operations Nine months ended September 30, 1998 compared to nine months ended September 30, 1997 Revenues increased to $28,381,548 due to higher commission income, higher consulting fee income, higher management fee income and increased construction fee income. Operating expenses increased due to higher consulting fees, higher general and administrative expenses, higher salaries and wages, higher insurance and taxes and loss on sale of motel properties. Financial Condition and Liquidity At September 30, 1998, the company had cash and cash equivalents of $246,391. Year to date, the Company redeemed $32,500,000 of it's preferred stock in exchange for reduction of receivable from an affiliate. 9 10 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES Part II Other Information Item 6. Exhibits and Reports on Form 8 - K (a) Exhibits Exhibit Number Description of Exhibit -------------- ---------------------- 27.0 Financial Data Schedule, filed herewith (b) Reports on Form 8-K - None 10 11 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 12, 1998 /s/ F. Terry Shumate, Director, Vice President, Secretary and Treasurer (Principal Financial and Accounting Officer) 11 12 INDEX TO EXHIBITS Exhibits Exhibit Number Description of Exhibit - -------------- ---------------------- 27.0 Financial Data Schedule, filed herewith EX-27.0 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 246,391 0 1,039,415 0 0 0 239,427 57,546 51,492,340 0 5,395,410 0 0 105,710 33,130,615 51,492,340 28,381,548 28,381,548 0 0 15,527,011 0 365,616 12,488,921 4,164,123 8,324,798 0 0 0 8,324,798 0.79 0.79
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