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 March 31, 2014

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 300

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) *.  ¨.  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 May 9, 2014)

1

FIRST EQUITY PROPERTIES, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	3
	Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited)	4
	Statement of Shareholders’ Equity for the three months ended March 31, 2014 (unaudited)	5
	Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (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 6.	Exhibits	11
SIGNATURES		12

2

PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS

FIRST EQUITY PROPERTIES, INC.

BALANCE SHEET

	March 31, 2014			December 31, 2013
	(unaudited)
Assets
Notes receivable and accrued interest - affiliates		2,251,195			2,694,033
Cash and cash equivalents		154,443			346
Total assets	$	2,405,638		$	2,694,379
Liabilities and Shareholders' Equity
Notes payable and accrued interest - affiliates	$	1,251,141		$	1,493,010
Accounts payable - other		-			3,015
Accounts payable - affiliates		277,802			318,822
Total liabilities		1,528,943			1,814,847
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)		(510,563	)		(507,726	)
Total shareholders' equity		876,695			879,532
Total liabilities and shareholders' equity	$	2,405,638		$	2,694,379

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

3

FIRST EQUITY PROPERTIES, INC.

STATEMENT OF OPERATIONS

(unaudited)

	For the three months ended
	March 31,
	2014			2013
Revenue
Interest income - from affiliates	$	57,162		$	59,364
Other income		-		$	-
Total income		57,162			59,364
Operating Expenses
General and administrative - affiliates		15,000			7,500
General and administrative		2,083			3,093
Legal and professional fees		9,132			1,576
Total operating expenses		26,215			12,169
Income (loss) before interest expense and taxes		30,947			47,195
Other income (expense)
Interest expense - affiliates		(33,784	)		(17,318	)
Income (loss) before income taxes		(2,837	)		29,877
Income tax expense		-			(3,029	)
Net income (loss) applicable to common shareholders	$	(2,837	)	$	26,848
Earnings (loss) per share	$	-		$	0.03
Weighted average shares outstanding		1,057,628			1,057,628

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

4

FIRST EQUITY PROPERTIES, INC.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three months ended March 31, 2014

(unaudited)

	Common Stock						Retained
					Paid in		Earnings
	Shares		Amount		Capital		(Deficit)			Total Equity
Balances at January 1, 2014		1,057,628	$	10,576	$	1,376,682	$	(507,726	)	$	879,532
Net income (loss)		-		-		-		(2,837	)		(2,837	)
Balances  at March 31, 2014		1,057,628	$	10,576	$	1,376,682	$	(510,563	)	$	876,695

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

5

FIRST EQUITY PROPERTIES, INC.

STATEMENT OF CASH FLOWS

(unaudited)

	For the three months ended
	March 31,
	2014			2013
Cash Flows from Operating Activities
Net Income (Loss)	$	(2,837	)	$	26,848
Adjustments to reconcile net income applicable to common shareholders to net cash provided by (used in) operating activities:
(Increase) decrease in
Interest receivable - affiliates		(57,162	)		(48,849	)
Increase (decrease) in
Accounts payable - other		(3,015	)		(6,431	)
Accounts payable - affiliates		15,623			(359,616	)
Interest payable - affiliates		(179,512	)		384,434
Federal income tax payable		-			3,029
Net cash provided by (used for) operating activities		(226,903	)		(585	)
Cash Flows from Financing Activities
Notes payable - affiliates		(119,000	)		-
Notes receivable - affiliates		500,000			-
Net cash provided by (used for) financing activities		381,000			-
Net increase (decrease) in cash and cash equivalents		154,097			(585	)
Cash and cash equivalents at the beginning of period		346			1,542
Cash and cash equivalents at the end of period	$	154,443		$	957
Supplemental disclosures of cash flow information:
Cash paid for interest on notes payable	$	153,296		$	-
Cash paid for principal on notes payable	$	119,000		$	-
Cash received for principal on notes receivable	$	259,246		$	-
Cash received for interest on notes receivable	$	240,754		$	-

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

First Equity Properties, Inc. is 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 has been earnings on investments and interest on notes receivable.  Management of the Company is exploring alternatives, seeking to establish or acquire new business operations for the Company.  Management cannot predict or give any assurance that any new business enterprise will be acquired by the Company at any time in the near future.  FEPI’s common stock is publicly held 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.  Certain 2011 balances have been reclassified to conform to the 2012 presentation.

The year-end Balance Sheet at December 31, 2013, was derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements.  For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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.

NOTE 3.  NOTES RECEIVABLE AND ACCRUED INTEREST – AFFILIATE

Receivables from affiliates primarily consist of two notes of $1,822,540 and $585,000 which are payable 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, 2015.  The Company received $259,246 of principal and $240,754 of interest in March on these notes.

	2014		2013
Notes receivable – affiliates
Unsecured, due on demand, interest rate of 10%, due monthly	$	2,148,294	$	2,407,540
Accrued interest – affiliates		57,162		240,754
Accounts receivable – affiliates		45,739		45,739
Total notes and accounts receivable – affiliates	$	2,251,195	$	2,694,033

7

NOTE 4.  NOTES PAYABLE AND ACCRUED INTEREST – AFFILIATE

	2014		2013
Uncollateralized notes payable – affiliates
due on demand, interest rate of 10%, payable quarterly	$	1,251,141	$	1,370,140
Accrued interest and intercompany - affiliates		-		122,870
Total notes payable – affiliates	$	1,251,141	$	1,493,010

NOTE 5.  RELATED PARTIES TRANSACTIONS

Transactions involving related partiescannot 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 terns, 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 three months ended March 31, 2014 was $15,000 which is included in General and Administrative expenses of the Consolidated Statements of Operations.

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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 three months ended March 31, 2014 and 2013. 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.

9

The results of operations for the three months ended March 31, 2014, 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 affiliated 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 affiliated notes.

Comparison of the three months ended March 31, 2014 to the same period ended 2013.

We reported net loss applicable to common shareholders of ($2,837) for the three months ended March 31, 2014 as compared to a net income to common shareholders of $26,848 for the same period ended 2013.

The change from net income to net loss was primarily due to the increase in interest expense on notes payable due to an increase in the rate from 4.25% to 10%.  General and administrative – affiliates expenses increased due to an increase in administrative fees and legal and professional fees increased due to an increase in audit fees.

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 March 31, 2014:

Our notes receivable and accrued interest – affiliates decreased due to payments received on principal and interest on notes receivables.

Our notes payable and accrued interest  – affiliates decreased due to payments made on principal and interest owed on notes payable.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Financial Officer and Acting Principal Executive Officer of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Company’s Chief Financial Officer and Acting Principal Executive Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in the Company’s periodic SEC filings.

(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 March 31, 2014, 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  6. 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: May 15, 2014	By:	/s/ Daniel J. Moos
		Daniel J. Moos Director, President & Treasurer
	FIRST EQUITY PROPERTIES, INC.
Date: May 15, 2014	By:	/s/ Steven Shelley
		Steven Shelley Director, Vice President & Secretary

12

EX-31.1

EXHIBIT 31.1

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

I, Daniel J. Moos, 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: May 15, 2014	By:	/s/ Daniel J. Moos
		Daniel J. Moos President and Treasurer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

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

I, Steven Shelley, 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: May 15, 2014	By:	/s/ Steven Shelley
		Steven Shelley Vice President & Secretary (Principal Financial Officer)

EX-32.1

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 March 31, 2014, as filed with Securities Exchange Commission on the date hereof (the “Report”), Daniel J. Moos, Director, President and Treasurer of the Company, and Steven Shelley, 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: May 15, 2014	By:	/s/ Daniel J. Moos
		Daniel J. Moos President and Treasurer

Date: May 15, 2014	By:	/s/ Steven Shelley
		Steven Shelley Vice President and Secretary

XML

NOTES RECEIVABLE AND ACCRUED INTEREST - AFFILIATE

3 Months Ended

Mar. 31, 2014

NOTES RECEIVABLE AND ACCRUED INTEREST - AFFILIATE

NOTES RECEIVABLE AND ACCRUED INTEREST - AFFILIATE

NOTE 3.  NOTES RECEIVABLE AND ACCRUED INTEREST – AFFILIATE

Receivables from affiliates primarily consist of two notes of $1,822,540 and $585,000 which are payable 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, 2015.  The Company received $259,246 of principal and $240,754 of interest in March on these notes.

	2014		2013
Notes receivable – affiliates
Unsecured, due on demand, interest rate of 10%, due monthly	$	2,148,294	$	2,407,540
Accrued interest – affiliates		57,162		240,754
Accounts receivable – affiliates		45,739		45,739
Total notes and accounts receivable – affiliates	$	2,251,195	$	2,694,033

XML

FEDERAL INCOME TAXES

3 Months Ended

Mar. 31, 2014

FEDERAL INCOME TAXES

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

XML

BALANCE SHEET (USD $)	Mar. 31, 2014	Dec. 31, 2013
Current Assets
Notes receivable and accrued interest - affiliates	$ 2,251,195	$ 2,694,033
Cash and cash equivalents	154,443	346
Total assets	2,405,638	2,694,379
Current Liabilities
Notes payable and accrued interest - affiliates	1,251,141	1,493,010
Accounts payable - other	0	3,015
Accounts payable - affiliates	277,802	318,822
Total liabilities	1,528,943	1,814,847
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	0	0
Paid in capital	1,376,682	1,376,682
Retained earnings (deficit)	(510,563)	(507,726)
Total shareholders' equity	876,695	879,532
Total liabilities and shareholders' equity	$ 2,405,638	$ 2,694,379

XML

STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Operating Activities
Net Income (Loss)	$ (2,837)	$ 26,848
Adjustments to reconcile net income applicable to common shareholders to net cash provided by (used in) operating activities:
(Increase) decrease in Interest receivable - affiliates	(57,162)	(48,849)
Increase (decrease) in Accounts payable - other	(3,015)	(6,431)
Accounts payable - affiliates	15,623	(359,616)
Interest payable - affiliates	(179,512)	384,434
Federal income tax payable	0	3,029
Net cash provided by (used for) operating activities	(226,903)	(585)
Cash Flows from Financing Activities
Notes payable - affiliates	(119,000)	0
Notes receivable - affiliates	500,000	0
Net cash provided by (used for) financing activities	381,000	0
Net increase (decrease) in cash and cash equivalents	154,097	(585)
Cash and cash equivalents at the beginning of period.	346	1,542
Cash and cash equivalents at the end of period	154,443	957
Supplemental disclosures of cash flow information:
Cash paid for interest on notes payable	153,296	0
Cash paid for principal on notes payable	119,000	0
Cash received for principal on notes receivable	259,246	0
Cash received for interest on notes receivable	$ 240,754	$ 0

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ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2014

ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1.      ORGANIZATION AND BASIS OF PRESENTATION

Organization

First Equity Properties, Inc. is 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 has been earnings on investments and interest on notes receivable.  Management of the Company is exploring alternatives, seeking to establish or acquire new business operations for the Company.  Management cannot predict or give any assurance that any new business enterprise will be acquired by the Company at any time in the near future.  FEPI’s common stock is publicly held 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.  Certain 2011 balances have been reclassified to conform to the 2012 presentation.

The year-end Balance Sheet at December 31, 2013, was derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements.  For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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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BALANCE SHEETS PARENTHETICALS (USD $)	Mar. 31, 2014	Dec. 31, 2013
Parentheticals
Common Stock, par value	$ 0.01	$ 0.01
Common Stock, shares issued	1,057,628	1,057,628
Common Stock, shares outstanding	1,057,628	1,057,628
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, shares authorized	4,960,000	4,960,000

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NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE (DETAILS) (USD $)	Dec. 31, 2013	Mar. 31, 2013
NOTES PAYABLE
Uncollateralized notes payable - affiliates due on demand, interest of 10%, payable quarterly	$ 1,370,140	$ 1,251,141
Accrued interest and intercompany - affiliates	122,870	0
Total notes payable - affiliates	$ 1,493,010	$ 1,251,141

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 09, 2014
Document and Entity Information
Entity Registrant Name	FIRST EQUITY PROPERTIES INC
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Entity Central Index Key	0000726516
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		1,057,628
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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RELATED PARTIES TRANSACTIONS (DETAILS) (USD $)	3 Months Ended
	Mar. 31, 2014
RELATED PARTIES TRANSACTIONS
Total expense for accounting and administrative services.	$ 15,000

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STATEMENTS OF OPERATIONS (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenue
Interest income - from affiliates	$ 57,162	$ 59,364
Total income	57,162	59,364
Operating Expenses
General and administrative - affiliates	15,000	7,500
General and administrative	2,083	3,093
Legal and professional fees	9,132	1,576
Total operating expenses	26,215	12,169
Income (loss) before interest expense and taxes	30,947	47,195
Other income (expense)
Interest expense - affiliates	(33,784)	(17,318)
Income (loss) before income taxes	(2,837)	29,877
Income tax expense		(3,029)
Net income (loss) applicable to common shareholders	$ (2,837)	$ 26,848
Earnings (loss) per share		$ 0.03
Weighted average shares outstanding	1,057,628	1,057,628

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ACCOUNTING POLICIES (POLICIES)

3 Months Ended

Mar. 31, 2014

Accounting Policies

Organization and Business

Organization

First Equity Properties, Inc. is 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 has been earnings on investments and interest on notes receivable.  Management of the Company is exploring alternatives, seeking to establish or acquire new business operations for the Company.  Management cannot predict or give any assurance that any new business enterprise will be acquired by the Company at any time in the near future.  FEPI’s common stock is publicly held 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.  Certain 2011 balances have been reclassified to conform to the 2012 presentation.

The year-end Balance Sheet at December 31, 2013, was derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements.  For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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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RELATED PARTIES TRANSACTIONS

3 Months Ended

Mar. 31, 2014

RELATED PARTIES TRANSACTIONS

Related Party Transactions Disclosure

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 terns, 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 three months ended March 31, 2014 was $15,000 which is included in General and Administrative expenses of the Consolidated Statements of Operations.

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Notes and accounts receivable - affiliates (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Notes receivable - affiliates {1}
Unsecured, due on demand, interest rate of 10%, due monthly	$ 2,148,294	$ 2,407,540
Accrued interest - affiliates	57,162	240,754
Accounts receivable - affiliates	45,739	211,525
Total notes and accounts receivable - affiliates	$ 2,251,195	$ 2,694,033

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NOTES RECIEVABLE AND ACCRUED INTEREST - AFFILIATE (Table)

3 Months Ended

Mar. 31, 2014

NOTES RECIEVABLE AND ACCRUED INTEREST - AFFILIATE

NOTES RECEIVABLE AND ACCRUED INTEREST - AFFILIATE

The Company received $259,246 of principal and $240,754 of interest in March on these notes.

	2014		2013
Notes receivable – affiliates
Unsecured, due on demand, interest rate of 10%, due monthly	$	2,148,294	$	2,407,540
Accrued interest – affiliates		57,162		240,754
Accounts receivable – affiliates		45,739		45,739
Total notes and accounts receivable – affiliates	$	2,251,195	$	2,694,033

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NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE ( Table)

3 Months Ended

Mar. 31, 2014

NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE {2}

NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE

NOTES PAYABLE AND ACCRUED INTEREST – AFFILIATE

	2014		2013
Uncollateralized notes payable – affiliates
due on demand, interest at Prime + 1%, payable quarterly	$	1,251,141	$	1,370,140
Accrued interest and intercompany - affiliates		-		122,870
Total notes payable – affiliates	$	1,251,141	$	1,493,010

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Receivables affiliates (DETAILS) (USD $)	Mar. 31, 2014
Receivables affiliates
Receivable affiliates primary note 1 mature on 31/12/2015	$ 1,822,540
Receivable affiliates primary note 2 31/12/2015	585,000
Notes accrues interest per annum at	10.00%
The Company received of principal	259,246
Company received interest in March on these notes.	$ 240,754

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STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $)	Common Stock shares	Common Stock amount USD ($)	Paid in capital USD ($)	Retained Earnings (Deficit) USD ($)	Total Equity USD ($)
Balances at Jan. 01, 2014	1,057,628	10,576	1,376,682	(507,726)	879,532
Net income (loss)		$ 0	$ 0	$ (2,837)	$ (2,837)
Balances at Mar. 31, 2014	1,057,628	10,576	1,376,682	(510,563)	876,695

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NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE

3 Months Ended

Mar. 31, 2014

NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE

NOTES PAYABLE AND ACCRUED INTEREST - AFFILIATE

NOTE 4.  NOTES PAYABLE AND ACCRUED INTEREST – AFFILIATE

	2014		2013
Uncollateralized notes payable – affiliates
due on demand, interest rate of 10%, payable quarterly	$	1,251,141	$	1,370,140
Accrued interest and intercompany - affiliates		-		122,870
Total notes payable – affiliates	$	1,251,141	$	1,493,010