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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 QUARTERLY PERIOD ENDED MARCH 31, 2005 Commission file number       0-11777 FIRST EQUITY PROPERTIES,
INC. 
  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 
  214-750-5800 
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ. No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). 
 Yes o No
þ. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS. Indicate by check mark whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes þ. No o APPLICABLE ONLY TO CORPORATE ISSUERS: As of March 31, 2005, registrant had 1,057,628 shares of Common Stock issued and outstanding.   1




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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES FORM 10-Q
March 31, 2005 INDEX Page No.Part I Financial Information:Item 1. Financial StatementsConsolidated Balance Sheets March 31, 2005 (Unaudited) and December 31, 2004
    
    3Consolidated Statement of Earnings (Unaudited) Three Months Ended March 31, 2005 and 2004
    
    4Consolidated Statement of Cash Flows (Unaudited) Three Months Ended March 31, 2005 and 2004
    
    5Notes to Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    8Item 4. Controls and Procedures
    
    8Part II Other Information:Item 6. Exhibits
    
    9Certification Pursuant to Section 302Certification Pursuant to Section 906
  2




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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES 
  March 31, 2005
    
    
    December 31,(Unaudited)
    
    
    2004ASSETSCash and cash equivalents
    
    $
    2,611
    
    
    $
    4,621Notes and interest receivable
    
    
    2,682,452
    
    
    
    2,626,588$
    2,685,063
    
    
    $
    2,631,209LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable  affiliate
    
    $
    2,448,936
    
    
    $
    2,448,936Total liabilities
    
    
    2,448,936
    
    
    
    2,448,936Shareholders 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)
    
    
    (1,151,131
    )
    
    
    (1,204,985
    )Total shareholders equity
    
    
    236,127
    
    
    
    182,273$
    2,685,063
    
    
    $
    2,631,209
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES 
 
  2005
    
    
    2004RevenueInterest income
    
    $
    59,365
    
    
    $
    14,58759,365
    
    
    
    14,587Operating expensesGeneral and administrative
    
    
    1,136
    
    
    
    736Legal and professional fees
    
    
    4,375
    
    
    
    4,937Total operating expenses
    
    
    5,511
    
    
    
    5,673Net income from continuing operations
    
    
    53,854
    
    
    
    8,914Income from discontinued operations
    
    
    
    
    
    
    45,715Impairment loss
    
    
    
    
    
    
    (37,931,116
    )NET EARNINGS (LOSS)
    
    $
    53,854
    
    
    $
    (37,876,487
    )Earnings (loss) per shareNet earnings from continuing operations
    
    $
    .05
    
    
    $
    .01Discontinued operations
    
    
    
    
    
    
    (35.82
    )Net earnings (loss)
    
    $
    .05
    
    
    $
    (35.81
    )Weighted average shares outstanding
    
    
    1,057,628
    
    
    
    1,057,628
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES 
 
  2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet earnings (loss)
    
    $
    53,854
    
    
    $
    (37,876,487
    )Adjustments to reconcile net earnings (loss) to net cash
provided by (used for) operating activitiesImpairment loss
    
    
    
    
    
    
    37,931,116(Increase) decrease inInterest receivable
    
    
    (55,864
    )
    
    
    (14,585
    )Accounts receivable  affiliate
    
    
    
    
    
    
    (5,000
    )Increase (decrease) inAccounts payable  affiliate
    
    
    
    
    
    
    (33,900
    )Net cash provided by (used for) operating activities
    
    
    (2,010
    )
    
    
    1,144Net increase (decrease) in cash and cash equivalents
    
    
    (2,010
    )
    
    
    1,144Cash and cash equivalents at beginning of period
    
    
    4,621
    
    
    
    6,127Cash and cash equivalents at end of period
    
    $
    2,611
    
    
    $
    7,271Interest paid for the period
    
    
    2,500
    
    
    
    Taxes paid for the period
    
    
    
    
    
    
    
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES 
 
  NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated 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 2004 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, 2005. NOTE B  DISCONTINUED OPERATIONS Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), established a single accounting model for the impairment or
disposal of long-lived assets including discontinued operations. This statement requires
that the operations related to segments that have been sold, or segments that are intended
to be sold, be presented as discontinued operations in the statement of operations for all
periods presented, and the segments intended to be sold are to be designated as held for
sale on the balance sheet. In the event of a future asset sale, the company is required to
reclassify portions of previously reported operations to discontinued operations within the
Statements of Operations. For the three months ended March 31, 2004, income from
discontinued operations related to the disposition of subsidiaries providing management
services. In May 2004, the Company sold the subsidiaries of the Company that provided management
services for total consideration of $2,072,540. In the quarter ended March 31, 2004, the
Company recorded an impairment of $37,931,116, representing the write down of certain assets
of those two subsidiaries that provided the management services to the value agreed to
between the related party buyer and seller. The primary asset written down was the
investment in preferred stock of an affiliate. 6




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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) NOTE B  DISCONTINUED
OPERATIONS - continued The impairment loss resulted in the generation of a deferred tax asset of approximately
$13,300,000 for which a valuation allowance of the entire amount was provided since
management cannot be assured of the utilization of the deferred tax asset. The results of discontinued operations of the subsidiaries consisted of the following for
the quarters ended March 31, 2005 and March 31, 2004: March 31,
    
    
    March 31,2005
    
    
    2004Operating revenues
    
    $
    
    
    
    $
    45,715Net income from discontinued operations
    
    $
    
    
    
    $
    45,715
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FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES 
  Item 2.
    Managements Discussion and Analysis of
Financial Condition and Results of Operations Results of Operations Three months ended March 31, 2005 compared to three months ended March 31, 2004 Revenues from operations increased to $59,365 from prior year of $14,587 due to increased interest
income because of the new note receivable that was in place in 2005 that was not there in 2004.
Total operating expenses decreased to $5,511 in 2005 from $5,673 in 2004. The decrease in
operating expenses was due to a slight reduction in legal and professional fees in 2005. The discontinued operations in 2004 represent the income from the management contracts of the
subsidiaries that were sold in May 2004. Financial Condition and Liquidity At March 31, 2005, the Company had total assets of $2,685,063 compared to $2,631,209 at December
31, 2004. Cash and cash equivalents were $2,611. The increase in assets results from the accrual
of interest receivable on the notes receivable. Total liabilities remained the same from December 31, 2004 to March 31, 2005. 
 Item 4. Controls and Procedures (a) Within the 90 days prior to the date of 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 Acting Chief Accounting Officer, of the effectiveness
of the design and operation of the Companys disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon the evaluation, the Companys Vice President, Treasurer
and Acting 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 significant changes in the Companys internal controls or in other factors
that could significantly affect the Companys internal controls subsequent to the date the
Company carried out this evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses. 8




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Part II Other Information 
 Item 6. Exhibits (a) Exhibits Exhibit 31.1  Certification Pursuant to Rules 13a-14 and 15d-14 Under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith. 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, filed herewith. 9




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SIGNATURES 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.May 16, 2005
    
    /s/
    
    Ken L. Joines,Vice President and Treasurer (Acting Principal
Executive Officer and Chief Financial and
Accounting Officer)
 10