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**FORM      10-Q**

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**  **
**QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT**
**OF      1934 **

**FOR      THE QUARTER ENDED JUNE 30, 2006 **

**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.)** |
|                                                                                                                 |                                                                                     |                                                                      |
| **1800                Valley View Lane, Suite 300****Dallas,                Texas 75234**                            |
|                                                                                                                 | **(Address                of principal executive offices)****(Zip                Code)** |                                                                      |
|                                                                                                                 |                                                                                     |                                                                      |
|                                                                                                                 | **(214)                750-5800**                                                        |                                                                      |
|                                                                                                                 | **(Registrant’s                telephone number, including area code)**            |                                                                      |
|                                                                                                                 |                                                                                     |                                                                      |
| ___________________________________________________________________________________________                          |
| **(Former                name, former address and former fiscal year, if changed since last                report)** |

**Large      accelerated filer **
** ̈**
**  Accelerated      filer **
** ̈**
**   Non-accelerated      filer **
**x**

**APPLICABLE      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE**

**PRECEDING      FIVE YEARS:**

**APPLICABLE      ONLY TO CORPORATE ISSUERS: **

| **Common                Stock, $.01 par value** | **1,057,628**                                     |
|-------------------------------------------------|---------------------------------------------------|
| **(Class)**                                     | **(Outstanding                at June 30, 2006)** |

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**FIRST      EQUITY PROPERTIES, INC.**

**FORM      10-Q**

**TABLE      OF CONTENTS**

|                                                                                                                                                  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PART                I:** **FINANCIAL                INFORMATION**                                                                              | **PAGE** |
|                                                                                                                                                  |   |
| Item                1. Financial                Statements                                                                                       |   |
| Balance                Sheets at June 30, 2006 (Unaudited) and December 31, 2005                                                                      | 3 |
| Statements                of Earnings for the three and six months ended June 30, 2006 and                2005                (Unaudited)             | 4 |
| Statements                of Cash Flows for the six months ended June 30, 2006 and 2005                (Unaudited)                                    | 5 |
| Notes                to Financial Statements                                                                                                          | 6 |
| Item                2. Management’s                Discussion and Analysis of Financial Condition and Results of                Operations | 7 |
| Item                4. Controls                and Procedures                                                                                    | 7 |
|                                                                                                                                                  |   |
|                                                                                                                                                  |   |
| **PART                II.** **OTHER                INFORMATION**                                                                                 |   |
|                                                                                                                                                  |   |
| Item                6. Exhibits                                                                                                                  | 8 |
| SIGNATURE                PAGES                                                                                                                   | 9 |

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**FIRST      EQUITY PROPERTIES, INC.**

**BALANCE      SHEETS**

|                                                                                                                                       |   | **June                30,****2006** |      | **December                31,****2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------|--------|
|                                                                                                                                       |   | **(Unaudited)**                     |      |                                    |   |
| **Assets**                                                                                                                                 |   |                                |      |
| Cash                and cash equivalents                                                                                              |   | $                                   | 4,652     |                                    | $      | 4,029 |   |
| Notes                and interest receivable                                                                                          |   |                                | 2,407,540 |                                    |   | 2,468,224 |   |
| Deferred                tax asset                                                                                                     |   |                                | 6,800     |                                    |   | — |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
|                                                                                                                                       |   | $                                   | 2,418,992 |                                    | $      | 2,472,253 |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
| **Liabilities                and Stockholders’ Equity**                                                                              |   |                                |      |                                    |   |   |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
| Accounts                payable                                                                                                       |   | $                                   | 7,733     |                                    | $      | 7,320 |   |
| Federal                income taxes payable                                                                                           |   |                                | 27,400    |                                    |   | — |   |
| Accounts                payable - affiliate                                                                                           |   |                                | 1,892,980 |                                    |   | 2,053,980 |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
| Total                liabilities                                                                                                           |   |                                | 1,928,113 |                                    |   | 2,061,300 |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
| Shareholders’                equity                                                                                                  |   |                                |      |                                    |   |   |   |
| Preferred                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                andoutstanding |   |                                | 10,576    |                                    |   | 10,576 |   |
| Capital                in excess of par value                                                                                    |   |                                | 1,376,682 |                                    |   | 1,376,682 |   |
| Retained                earnings (deficit)                                                                                            |   |                                | (896,379  | )                                       |   | (976,305 | ) |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
| Total                shareholders’ equity                                                                                       |   |                                | 490,879   |                                    |   | 410,953 |   |
|                                                                                                                                       |   |                                |      |                                    |   |   |   |
|                                                                                                                                       |   | $                                   | 2,418,992 |                                    | $      | 2,472,253 |   |

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**FIRST      EQUITY PROPERTIES, INC.**

**STATEMENTS      OF EARNINGS**

**(Unaudited)**

|                                                         |   | **For                the Three Months****Ended                June 30,** |      | **For                the Six Months****Ended                June 30,** |   |
|--------------------------------------------------------------|--------|--------------------------------------------------------------------------|-----------|------------------------------------------------------------------------|--------|
|                                                         |   | **2006**                                                                 |      | **2005**                                                               |   | **2006** |   | **2005** |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |
| Revenue                                                 |   |                                                                     |      |                                                                   |   |   |   |   |   |
| Interest                income                          |   | $                                                                        | 60,023    |                                                                   | $      | 60,023 |   | $ | 119,387 |   | $ | 119,388 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Operating                expenses                            |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| General                and administrative               |   |                                                                     | 1,100     |                                                                   |   | 754 |   |   | 2,157 |   |   | 1,890 |   |
| Legal                and professional fees              |   |                                                                     | 5,024     |                                                                   |   | 5,044 |   |   | 16,704 |   |   | 9,419 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Total                operating expenses                      |   |                                                                     | 6,124     |                                                                   |   | 5,798 |   |   | 18,861 |   |   | 11,309 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Net                income from continuing operations         |   |                                                                     | 53,899    |                                                                   |   | 54,225 |   |   | 100,526 |   |   | 108,079 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Corporate                income tax expense             |   |                                                                     | (18,450   | )                                                                      |   | — |   |   | (34,200 | ) |   | — |   |
| Deferred                tax benefit                     |   |                                                                     | —   |                                                                   |   | — |   |   | 13,600 |   |   | — |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| NET                EARNINGS                             |   | $                                                                        | 35,449    |                                                                   | $      | 54,225 |   | $ | 79,926 |   | $ | 108,079 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) per share                     |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Net                earnings from continuing operations  |   | $                                                                        | 0.03      |                                                                   | $      | 0.05 |   | $ | 0.08 |   | $ | 0.10 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Net                earnings (loss)                      |   | $                                                                        | 0.03      |                                                                   | $      | 0.05 |   | $ | 0.08 |   | $ | 0.10 |   |
|                                                         |   |                                                                     |      |                                                                   |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding      |   |                                                                     | 1,057,628 |                                                                   |   | 1,057,628 |   |   | 1,057,628 |   |   | 1,057,628 |   |

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**FIRST      EQUITY PROPERTIES, INC.**

**STATEMENTS      OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                      |   | **For                the Six Months****Ended                June 30,** |     |
|---------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|----------|
|                                                                                                                      |   | **2006**                                                               |     | **2005** |   |
|                                                                                                                      |   | **(dollars                in thousands)**                              |     |
|                                                                                                                      |   |                                                                   |     |   |   |
| **Cash                Flows from Operating Activities**                                                                   |   |                                                                   |     |   |   |
| Net                earnings                                                                                          |   | $                                                                      | 79,926   |   | $ | 108,079 |   |
| Adjustments                to reconcile net income to net cash provided by (used for) operating                activities |   |                                                                   |     |   |   |   |   |
| (Increase)                decrease in                                                                                     |   |                                                                   |     |   |   |   |   |
| Interest                receivable                                                                                        |   |                                                                   | 60,684   |   |   | 77,847 |   |
| Deferred                tax asset                                                                                         |   |                                                                   | (6,800   | ) |   | — |   |
| Increase                (decrease) in                                                                                     |   |                                                                   |     |   |   |   |   |
| Accounts                payable                                                                                           |   |                                                                   | 413      |   |   | — |   |
| Federal                income taxes payable                                                                               |   |                                                                   | 27,400   |   |   | — |   |
| Accounts                payable - affiliate                                                                               |   |                                                                   | (161,000 | ) |   | (189,596 | ) |
|                                                                                                                      |   |                                                                   |     |   |   |   |   |
| Net                cash provided by (used for) operating activities                                                       |   |                                                                   | 623      |   |   | (3,670 | ) |
|                                                                                                                      |   |                                                                   |     |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                                  |   |                                                                   | 623      |   |   | (3,670 | ) |
|                                                                                                                      |   |                                                                   |     |   |   |   |   |
| Cash                and cash equivalents at the beginning of period                                                  |   |                                                                   | 4,029    |   |   | 4,621 |   |
|                                                                                                                      |   |                                                                   |     |   |   |   |   |
| Cash                and cash equivalents at the end of period                                                        |   | $                                                                      | 4,652    |   | $ | 951 |   |

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**FIRST      EQUITY PROPERTIES, INC.**

**NOTES      TO FINANCIAL STATEMENTS**

**NOTE      A. - BASIS OF PRESENTATION**

**NOTE      B. FEDERAL INCOME TAXES**

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

***Results      of Operations***

***Financial      Condition and Liquidity***

**ITEM      4.**
**CONTROLS      AND PROCEDURES**

| (a) | 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 Vice President, Treasurer                and Chief Accounting 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 Vice President, Treasurer and Chief                Accounting Officer concluded that the Company’s disclosure controls and                procedures are effective in timely alerting him to material information                relating to the Company (including its consolidated subsidiaries)                required                to be included in the Company’s periodic SEC                filings. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | There                have been no changes in the Company’s internal controls over financial                reporting during the quarter ended June 30, 2006, that have materially                affected or are reasonably likely to materially affect the Company’s                internal controls over financial                reporting. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**PART      II. OTHER INFORMATION**

**ITEM 6.      EXHIBITS**

| **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 Acting Principal Executive Officer and Chief Financial and Accounting                Officer pursuant to Rules 13a-14 and 15d-14 under the Securities                Exchange Act of 1934                                                                                                                                                                                                                                                               |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.1*                 | Rule 1350                Certification of Acting Principal Executive Officer and Chief Financial                and Accounting Officer pursuant to 18 U.S.C. Section                1350                                                                                                                                                                                                                                                                                                |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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**SIGNATURE      PAGE**

|   |  FIRST                EQUITY PROPERTIES, INC. |
|--------|----------------------------------------------------|
|   |                                               |   |   |
| Date:  | August                14, 2006                     | By: | /s/                Steven A. Abney     |
|   |                                               |   | Steven                A. Abney |
|   |                                               |   | Vice                President, Treasurer and Chief Financial Officer |
|   |                                               |   |   |
|   |                                               |   |   |
|   |                                               |   |   |

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