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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE QUARTER ENDED March 31, 2006
 or
 o
    
    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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 1800 Valley View Lane, Suite 300
Dallas, Texas 75234
 (Address of principal executive offices)
 (Zip Code)
 469-522-4200
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o þ
 o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
 o o
 APPLICABLE ONLY TO CORPORATE ISSUERS:
  Common Stock, $.01 par value
    
    
    1,057,628(Class)
    
    (Outstanding at March 31, 2006)




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FIRST EQUITY PROPERTIES, INC.
 
  Page No.Part I Financial Information:Item 1. Financial StatementsBalance Sheets
March 31, 2006 (Unaudited) and December 31, 2005
    
    
    3Statement of Earnings (Unaudited)
Three Months Ended March 31, 2006 and 2005
    
    
    4Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 2006 and 2005
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7Item 4. Controls and Procedures
    
    
    7Part II Other Information:Item 6. Exhibits
    
    
    8Certification of Acting Principal Executive Officer and Chief Financial and Accounting OfficerCertification of Acting Principal Executive Officer and Chief Financial and Accounting Officer
  2




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FIRST EQUITY PROPERTIES, INC.
 
  March 31, 2006
    
    
    December 31,(Unaudited)
    
    
    2005ASSETSCash and cash equivalents
    
    $
    10,136
    
    
    $
    4,029Deferred tax asset
    
    
    10,200
    
    
    
    Notes and interest receivable
    
    
    2,407,540
    
    
    
    2,468,224Total assets
    
    $
    2,427,876
    
    
    $
    2,472,253LIABILITIES AND SHAREHOLDERS EQUITYFederal income taxes payable (estimated)
    
    $
    12,350
    
    
    $
    Accounts payable
    
    
    7,116
    
    
    
    7,320Accounts payable  affiliate
    
    
    1,952,980
    
    
    
    2,053,980Total liabilities
    
    
    1,972,446
    
    
    
    2,061,300Shareholders equityPreferred stock, $0.01 par, 4,960,000 shares
authorized, none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par, 40,000,000 shares
authorized, 1,057,628 shares issued and outstanding
    
    
    10,576
    
    
    
    10,576Capital in excess of par value
    
    
    1,376,682
    
    
    
    1,376,682Retained earnings (deficit)
    
    
    (931,828
    )
    
    
    (976,305
    )Total shareholders equity
    
    
    455,430
    
    
    
    410,953Total liabilities and shareholders equity
    
    $
    2,427,876
    
    
    $
    2,472,253
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FIRST EQUITY PROPERTIES, INC.
 
    2006
    
    
    2005RevenueInterest income
    
    $
    59,364
    
    
    $
    59,36559,364
    
    
    
    59,365Operating expensesGeneral and administrative
    
    
    1,057
    
    
    
    1,136Legal and professional fees
    
    
    11,680
    
    
    
    4,375Total operating expenses
    
    
    12,737
    
    
    
    5,511Income before taxes
    
    
    46,627
    
    
    
    53,854Current federal estimated income taxes
    
    
    (15,750
    )
    
    
    Deferred tax benefit
    
    
    13,600
    
    
    
    NET EARNINGS (LOSS)
    
    $
    44,477
    
    
    $
    53,854Earnings (loss) per shareNet earnings (loss)
    
    $
    .04
    
    
    $
    .05Weighted average shares outstanding
    
    
    1,057,628
    
    
    
    1,057,628
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FIRST EQUITY PROPERTIES, INC.
 
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet earnings (loss)
    
    $
    44,477
    
    
    $
    53,854Adjustments to reconcile net earnings (loss) to net cash
provided by (used for) operating activities(Increase) decrease inInterest receivable
    
    
    60,684
    
    
    
    (55,864
    )Deferred tax asset
    
    
    (10,200
    )
    
    
    Increase (decrease) inCurrent federal income taxes payable (estimated)
    
    
    12,350
    
    
    
    Accounts payable
    
    
    (204
    )
    
    
    Accounts payable  affiliate
    
    
    (101,000
    )
    
    
    Net cash provided by (used for) operating activities
    
    
    6,107
    
    
    
    (2,010
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,107
    
    
    
    (2,010
    )Cash and cash equivalents at beginning of period
    
    
    4,029
    
    
    
    4,621Cash and cash equivalents at end of period
    
    $
    10,136
    
    
    $
    2,611Interest paid for the period
    
    
    
    
    
    
    Taxes paid for the period
    
    
    
    
    
    
    
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FIRST EQUITY PROPERTIES, INC.
 
    NOTE A  BASIS OF PRESENTATION
 The accompanying unaudited financial statements have been prepared by First Equity
Properties, Inc. (the Company) pursuant to the rules and regulations of the Securities
and Exchange Commission. The financial statements reflect all adjustments that are, in the
opinion of management, necessary to fairly present such information. All such adjustments
are of a normal recurring nature. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, certain information and footnote
disclosures, including a description of significant accounting policies normally included
in financial statements prepared in accordance with accounting principles generally
accepted in the United States of America, have been condensed or omitted pursuant to such
rules and regulations.These financial statements should be read in conjunction with the financial statements and
notes thereto included in the Companys 2005 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations for interim periods are not
necessarily indicative of the results for any subsequent quarter or the entire fiscal year
ending December 31, 2006.
 NOTE B
 FEDERAL INCOME TAXES
 The accompanying unaudited 2006 financial statements contain an accrual for current federal
income taxes calculated using annualized net income of approximately of $186,000. Using a
estimated tax rate of 34%, the estimated tax liability for the year would be approximately
$63,000. The $15,750 included as current income tax expense in the accompanying unaudited
2006 financial statements represents one quarter of the estimated tax liability for the
year. There are no significant differences between the Companys net income for financial
and income tax reporting.The Company reduced the valuation allowance on the deferred tax asset related to the net
operating loss carryforward of approximately $40,000 resulting in a deferred tax benefit of
approximately $13,500 as reflected in the accompanying unaudited 2006 financial statements.
The Company reduced the allowance because management has determined that they will more
likely than not be able to utilize the net operating loss carryforward
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FIRST EQUITY PROPERTIES, INC.
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
       
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ExhibitDesignation
    
    Description of Exhibit3.1
    
    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 Acting Principal Executive Officer and Chief Financial and
Accounting Officer pursuant to Rules 13a-14 and 15d-14 under the Securities
Exchange Act of 193432.1*
    
    Rule 1350 Certification of Acting Principal Executive
Officer and Chief Financial and Accounting Officer pursuant to 18 U.S.C. Section
1350
 
 *
    
    filed herewith. 8




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SIGNATURES  FIRST EQUITY PROPERTIES, INC.May 15, 2006
    
    /s/ Ken L. Joines,Ken L. Joines, Vice President and Treasurer(Acting Principal Executive Officer and ChiefFinancial and Accounting Officer)
 9