Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2021
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)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | FEPI | None |
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. ☑ 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
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 ☑ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ 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, $.0 par value | 1,057,628 | |
| (Class) | (Outstanding at May 24-2021) |
FIRST EQUITY PROPERTIES, INC.
FORM 10-Q
TABLE OF CONTENTS
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| FIRST EQUITY PROPERTIES, INC. |
| BALANCE SHEET |
March 31, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Note receivable and accrued interest - related party | $ | 750,523 | $ | 750,523 | ||||
| Cash and cash equivalents | — | 27,518 | ||||||
| Total assets | $ | 750,523 | $ | 778,041 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Accounts payable - other | — | 2,494 | ||||||
| Total liabilities | — | 2,494 | ||||||
| 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) | (636,735 | ) | (611,711 | ) | ||||
| Total shareholders' equity | 750,523 | 775,547 | ||||||
| Total liabilities and shareholders' equity | $ | 750,523 | $ | 778,041 | ||||
The accompanying notes are an integral part of these financial statements.
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| FIRST EQUITY PROPERTIES, INC. |
| STATEMENTS OF OPERATIONS |
| (unaudited) |
| For the three months ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating Expenses | ||||||||
| Administrative fees - related parties | $ | 3,015 | $ | 18,000 | ||||
| General and administrative | 7,876 | 4,182 | ||||||
| Legal and professional fees | 32,639 | 30,813 | ||||||
| Total operations expenses | 43,530 | 52,995 | ||||||
| Loss from operation before interest expense and taxes | (43,530 | ) | (52,995 | ) | ||||
| Other income (expense) | ||||||||
| Interest income - related parties | 18,506 | 38,725 | ||||||
| Interest expense - related parties | — | (14,569 | ) | |||||
| Net loss applicable to common shareholders | $ | (25,024 | ) | $ | (28,839 | ) | ||
| Loss per share | $ | (0.02 | ) | $ | (0.03 | ) | ||
| Weighted average shares outstanding | 1,057,628 | 1,057,628 | ||||||
The accompanying notes are an integral part of these financial statements.
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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the three months ended March 31, 2021 and 2020
(unaudited)
| Common Stock | Retained | |||||||||||||||||||
| Shares | Amount | Paid in Capital | Earnings (Deficit) | Total Equity | ||||||||||||||||
| Balance at January 1, 2021 | 1,057,628 | $ | 10,576 | $ | 1,376,682 | $ | (611,711 | ) | $ | 775,547 | ||||||||||
| Net loss | $ | (25,024 | ) | $ | (25,024 | ) | ||||||||||||||
| Balance at March 31, 2021 | 1,057,628 | $ | 10,576 | $ | 1,376,682 | $ | (636,735 | ) | $ | 750,523 | ||||||||||
| Common Stock | Retained | |||||||||||||||||||
| Shares | Amount | Paid in Capital | Earnings (Deficit) | Total Equity | ||||||||||||||||
| Balance at January 1, 2020 | 1,057,628 | $ | 10,576 | $ | 1,376,682 | $ | (576,219 | ) | $ | 811,039 | ||||||||||
| Net loss | $ | (28,839 | ) | $ | (28,839 | ) | ||||||||||||||
| Balance at March 31, 2020 | 1,057,628 | $ | 10,576 | $ | 1,376,682 | $ | (605,058 | ) | $ | 782,200 | ||||||||||
The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
| For the three months ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | (25,024 | ) | $ | (28,839 | ) | ||
| Adjustments to reconcile net loss applicable to common shareholders to net cash provided by (used in) operating activities: | ||||||||
| (Increase) decrease in Accounts receivable - related parties | — | 168,495 | ||||||
| Increase (decrease) in Accounts payable - other | (2,494 | ) | 29,759 | |||||
| Net cash provided by (used for) operating activities | (27,518 | ) | 169,415 | |||||
| Net increase (decrease) in cash and cash equivalents | (27,518 | ) | 169,415 | |||||
| Cash and cash equivalents at the beginning of period | 27,518 | 41,526 | ||||||
| Cash and cash equivalents at the end of period | $ | — | $ | 210,941 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest expense to related parties | $ | — | $ | 14,569 | ||||
The accompanying notes are an integral part of these financial statements.
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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, 2020. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2021.
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. CHANGE OF CONTROL
A Stock Purchase Agreement (the “Agreement”) has been made and entered into and closing completed as of April 7, 2021, by and among A Way Financial, Inc., a Delaware Business Corporation (the “Purchaser”) and TPS Income, Inc., and Nevada Sea Investments, Inc. (the “Sellers”).
Sellers were, prior to the transaction closing the beneficial owner of the following shares of the Company: (i)TPS Income, Inc.(“TPS”) owned 37.48%; and (ii) Nevada Sea Investments, Inc.(“Nevada Sea”)owned 37.82% of 1,057,628 shares of all issued and outstanding shares of the Company’s Common Stock which were held in the respective name of the Sellers. As of the completion of the closing on April 7, 2021, the shares formerly owned by Sellers are owned by the Purchaser.
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FIRST EQUITY PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. NOTE RECEIVABLE AND ACCRUED INTEREST – RELATED PARTY
The Company, in connection with the change in control, directed that the $750,523 note receivable be purchased by Direct Mortgage Investors Inc. from First Equity Properties, Inc. on April 7th, 2021.
| 2021 | 2020 | |||||||
| Note receivable – related party | ||||||||
| Unsecured, due on demand, annual interest rate of 1% | $ | 750,523 | $ | 750,523 | ||||
| Total note and account receivable – related party | $ | 750,523 | $ | 750,523 | ||||
NOTE 4. 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 had an administrative agreement, through change in control, with Pillar Income Asset Management, Inc., an affiliated entity, for accounting and administrative services. The total expense of the three months ended March 31, 2021 was $3,015 which is included in General and Administrative expenses of the Statements of Operations.
NOTE 5. 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 6. SUBSEQUENT EVENTS
We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and across our portfolio. While we did not experience significant disruptions during 2020 from the COVID-19 pandemic, we are unable to predict the impact the COVID-19 pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties.
The Company has evaluated subsequent events through May 24, 2021, the date the financial statements were available to be issued and has determined that there are none to be reported.
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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.
Change of Control Transaction
1. A Stock Purchase Agreement (the “Agreement”) has been made and entered into and closing completed as of 4/7/2021, by and among A Way Financial Inc., a Delaware Business Corporation (the “Purchaser”) and TPS Income, inc., and nevada SEA investments, inc (the “Sellers”).
2. Sellers were, prior to the transaction closing the beneficial owner of the following shares of First Equity Properties, Inc. (“FEPI”) Common Stock: (i) TPS Income, Inc. (“TPS”) owned 37.48%; and (ii) Nevada Sea Investments, Inc. (“Nevada Sea”) owned 37.82% of 1,057,628 shares of all issued and outstanding shares of FEPI Common Stock (“Shares”). The Shares were held in the respective names of the Sellers.
3. As of completion of the closing, the shares formerly owned by Sellers are owned by the Purchaser.
4. The Company, in connection with the change in control, directed that the $750,523 note receivable be purchased by Direct Mortgage Investors Inc. from First Equity Properties, Inc. on April 7th, 2021.
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, 2021 and 2020. 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 three months ended March 31, 2021, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.
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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.
Comparison of the three months ended March 31, 2021 to the same period ended 2020.
We reported net loss applicable to common shareholders of ($25,024) for the three months ended March 31, 2021 as compared to a net loss to common shareholders of ($28,839) for the same period ended 2020.
Liquidity and Capital Resources
General
Our principal liquidity needs for the next twelve months are funding of normal recurring expenses of legal and administrative fees.
Our principal source of cash is proceeds from interest income on our note receivables. The following impacted our balance sheet as of March 31, 2021:
Our notes receivable and accounts receivable – related parties remain the same and Direct Mortgage Investors Inc. purchased the note receivable from First Equity Properties Inc. on April 7th, 2021.
Our cash and cash equivalents decreased $ 27,518 from operation in 1st quarter 2021.
Our accounts payable – other decreased by payments in 1st quarter 2021.
Stockholders’ equity decreased by $ 25,024 in the 1st quarter 2021, resulting in retained earning decrease.
| 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 March 31, 2021. Based upon that most recent evaluation, which was completed as of the end of the period covered by this Form 10-Q, the Principal Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at March 31, 2021 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 March 31, 2021 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 March 31, 2021, that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting. |
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| 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 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. | |||
| 101.INS* | XBRL Instance Document | |||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |||
| 101.CAL* | XBRL Taxonomy Calculation Linkbase Document | |||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||
| *Filed herewith. | ||||
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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 24, 2021 | /s/ JAMES ANDERSON | ||||
James Anderson | |||||
| Director, President & Treasurer |
| FIRST EQUITY PROPERTIES, INC. | |||||
| Date: May 24, 2021 | /s/ GLEN GOMEZ | ||||
| Glen Gomez | |||||
| Director, Vice President & Secretary |
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