<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED December 31, 2002

                                       OR
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM ........ TO .........

                                                   0-11777
                    COMMISSION FILE NUMBER .........................

                          FIRST EQUITY PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)


                      Nevada                                 95-6799846
           State of other jurisdiction of                 (I.R.S. Employer
           incorporation or organization                  Identification No.)


1800 Valley View Lane, Suite 100, Dallas, Texas                 75234
    (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code           214 750-5800

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class              Name of each exchange on which registered
           None



           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, par value $0.01 per share

                                (Title of class)

         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 ...X.... No ......

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]




<PAGE>



              APPLICABLE ONLY TO REGISTRANTS 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 Section 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 ...X.... No ........

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes ........ No ...X....

         As of March 21, 2003, registrant had 10,570,944 shares of common stock
issued and outstanding. Of the total shares outstanding, 2,642,736 shares were
held by other than those who may be deemed not to be affiliated, but the
aggregate market value of such shares held by non-affiliates as of June 30, 2002
(the last business day of Registrant's most recently completed second fiscal
quarter) is not ascertainable since no trading market existed on that date or
presently exists for the shares of common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None



<PAGE>



ITEM 1.  BUSINESS.

         First Equity Properties, Inc. ("We" or "FEPI" or the "Company") was
incorporated by the filing of Articles of Incorporation in the State of Nevada
on December 19, 1996. Its fiscal year ends December 31 of each year.

         Prior to January 1, 1997, the Company's only business consisted of the
management and operation of three motel properties in the Spokane, Washington
area. Until June 30, 1998, the Company was engaged in the hospitality business
(management and operation of three motel properties, one of which was exchanged
for a residential property and two of such properties have been sold under a
contract for deed). During the fiscal years ended December 31, 1998 and 1999,
the Company, through its subsidiaries engaged in property management (management
of commercial real property, including retail centers, office buildings,
industrial properties and hotels), and real estate brokerage (services in
locating, leasing and purchasing real estate). Since October 1999, the Company
and its subsidiaries have conducted no substantial business, but are available
to engage in property management and real estate brokerage activities.

TRANSACTION OF SUCCESSION.

         FEPI is the successor-in-interest to Wespac Investors Trust III, a
California real estate investment trust ("WESPAC") originally established August
22, 1983 which had its shares of beneficial interest, no par value, registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934. Wespac was the
subject of two filings for protection under Chapter 11 of the United States
Bankruptcy Code, one filed April 13, 1988 (the "1988 Reorganization") which
resulted in a plan of reorganization approved and confirmed by the court on
March 29, 1989 with certain amendments, and which was closed by the court on
August 21, 1992 and a filing made January 27, 1994 in the case styled In re:
Wespac Investors Trust III, Case No. 94-00228-K11, in the United States
Bankruptcy Court for the Eastern District of Washington (the "1994
Reorganization"). A plan of reorganization dated March 22, 1996 (as modified)
was confirmed by Order Confirming Plan of Reorganization dated May 15, 1996,
entered May 20, 1996, as amended by order entered October 29, 1996 approving
First Modification to Plan of Reorganization (the " Modified Plan"). Pursuant to
the Modified Plan, and shareholders' approval, Wespac was converted from a
California business trust into a Nevada corporation, coupled with a change of
the name of the resulting entity. Pursuant to such transaction, persons deemed
to be prior holders of shares of




                                       1
<PAGE>




beneficial interest, no par value, of Wespac became holders of FEPI Common Stock
on a one-for-one exchange basis. On February 11, 1997, the Court entered its
final decree which closed the 1994 Reorganization. See "Item 3. Legal
Proceedings."

HOSPITALITY BUSINESS

         Prior to December 31, 1996, the Company's only business consisted of
ownership and operation of two Comfort Inn hotels and one Rodeway Inn hotel
(sold June 1, 1997 and foreclosed on by the Company in January 1998) located in
Spokane, Washington. The two Comfort Inn hotels are The Comfort Inn-Valley (a
76-room hotel located at N. 905 Sullivan Road, Spokane Valley, Washington) and
The Comfort Inn-North (a 96-room hotel located at N. 7111 Division Street,
Spokane, Washington). Such properties are collectively referred to as the
"Spokane Properties."

         During June 1998, FEPI entered into a contract for deed to sell the two
Comfort Inn hotels (Comfort Inn North and Comfort Inn Valley) to an unaffiliated
Washington corporation for a total of $4,000,000 with a small down payment and
an all inclusive wrap-around note which "wraps" certain existing underlying
indebtedness. As a part of the transaction, FEPI ceded the management of the
properties to the unaffiliated Washington corporation and it assumed the
underlying indebtedness due to US Bank. During March 2001, the underlying
indebtedness to U.S. Bank was paid in full through a refinancing of the
properties and the contract for deed satisfied; at that time, FEPI ceased to
hold any record title to the real property and received second lien notes for
the balances owed.

         Also during June, 1998, FEPI exchanged the Rodeway Inn hotel to an
unaffiliated party for a residential property in Couer d'Alene, Idaho which has
since been sold. Such Rodeway Inn had previously been sold on June 1, 1997 to a
corporation owned by a former director and officer of the Company. The Rodeway
Inn is a 90-room hotel located at W. 4301 Sunset Boulevard, Spokane, Washington.
See "Item 13. Certain Relationships and Related Transactions." During January
1998, the Company foreclosed on the Spokane Rodeway following a failure of
performance by the purchaser on the related note receivable.

         Such dispositions ended the Company's direct ownership in the
hospitality line of business.

PROPERTY MANAGEMENT

         Effective January 1, 1997, the Company acquired all of the issued and
outstanding Common Stock of Carmel Realty, Inc., a Texas Corporation ("Carmel"),
and an 81.6% limited partnership interest in



                                       2
<PAGE>


Carmel Realty Services, Ltd., a Texas limited partnership ("CRSL"). The general
partner of CRSL is Basic Capital Management, Inc., a Nevada corporation ("BCM")
which is the contractual advisor to and for performs administrative services for
three other publicly held entities which are engaged in the real estate
business. See also "Item 12. Certain Relationships and Related Transactions."
Carmel is engaged in the management and direction of various portfolios of
commercial real property including retail centers, office buildings, industrial
properties and hotels. Carmel maintained the management responsibility for five
hotels totaling 1,000 rooms and approximately 15,000,000 square feet of
commercial real estate through September 30, 1999. CRSL managed multi-family
portfolios which included over 32,000 multi-family units through seven
third-party regional management companies through September 30, 1999.

         Both Carmel and CRSL provided management services primarily to four
publicly-traded real estate entities throughout the continental United States
through September 30, 1999. Under such arrangements Carmel or CRSL received a
fee of 5% or less of the monthly gross rents collected on the properties under
Management. CRSL subcontracted with other entities for the provision of property
level services. All property management contracts pursuant to which Carmel and
CRSL provided management services to the four publicly-traded real estate
entities are subject to cancellation on 30 days' written notice. Carmel and CRSL
have not expended any significant sum during each of the last two fiscal years
on research and development activities. Effective October 1, 1999, the four
publicly traded real estate entities transferred management of their properties
to another entity and Carmel and CRSL ceased all such management activities.

         The real estate business overall, including management of real estate,
is highly competitive and Carmel and CRSL compete with numerous entities engaged
in similar activities, some of which may have greater financial resources than
those of Carmel and/or CRSL. Management of Carmel and CRSL believe that success
against such competition is dependent upon the geographic location of the
properties, the performance of the property managers in areas such as marketing,
collections and the ability to control operating expenses, the amount of new
construction in the area and maintenance and appearance of each individual
property. Additional competitive factors with respect to commercial industrial
properties are the ease of access to the property, adequacy of related
facilities such as parking, and sensitivity to market conditions in setting rent
levels. With respect to multi-family residential units, competition is also
based upon the design and mix of the units and the ability to provide a
community atmosphere for tenants. Management of Carmel and CRSL also believe
that general economic circumstances and trends and new properties in the
vicinity of each of the properties managed by Carmel and CRSL are also
competitive factors.



                                       3
<PAGE>



         At March 21, 2003, Carmel and CRSL had no employees.

REAL ESTATE BROKERAGE

         Carmel also provides real estate brokerage services (on a nonexclusive
basis) to three publicly-traded real estate entities and a number of other
entities and individuals and receives brokerage commissions under varying
arrangements from a fixed amount to a sliding scale on a percentage basis. In
general, such services include assistance in locating, leasing or purchasing
real estate. Carmel receives fees equal to the lesser of (i) a percentage of the
cost of acquisition, inclusive of commissions, if any, paid to nonaffiliated
brokers, or (ii) the compensation customarily charged in arm's-length
transactions by others rendering similar property acquisition services as an
ongoing public activity in the same geographical location and for comparable
property. During the fourth quarter of 1999, the four publicly-traded real
estate entities transferred their brokerage operations to another entity.

ITEM 2.  PROPERTIES.

         The Company's principal offices are located at 1800 Valley View Lane,
Suite 100, Dallas, Texas 75234. In the opinion of the Company's management, the
Company's offices are suitable and adequate for its present operations.

         Prior to December 31, 1996, the Company's only business consisted of
ownership and operation of two Comfort Inn hotels and one Rodeway Inn hotel
(sold effective June 1, 1997 and foreclosed upon during January 1998) located in
Spokane, Washington, all of which were disposed of during 1998.

ITEM 3.  LEGAL PROCEEDINGS.

         During January 1988, four of the elected Trustees of Wespac resigned
pursuant to an agreement with U.S. Real Estate Advisors, Inc. ("USREA"), a
privately held California corporation, and four new trustees were elected, all
of whom were officers of USREA. Also, during January 1988 Wespac entered into
certain financing arrangements with USREA and on April 13, 1988 the Trustees who
were also officers of USREA caused Wespac to file for protection under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the Central District of California under case No. 88-02222-JR which resulted
in a plan of reorganization approved and confirmed by the Court on March 29,
1989 with certain amendments. The 1988 Reorganization was closed by the
Bankruptcy Court on August 21, 1992.



                                       4
<PAGE>



         Wespac acted as a Debtor-in-Possession in the 1988 reorganization which
concluded in the Third Amended Plan of Reorganization dated January 24, 1989
(the "1989 Plan"), confirmation of which served to re-vest all assets of the
Estate in Wespac, free and clear of all liabilities except those payable under
the 1989 Plan. As provided for by that 1989 Plan, USREA exercised its warrants
by purportedly forgiving $715,586.50 which Wespac allegedly owed under an
Amended Financing Agreement. Wespac then liquidated all real estate assets
except a shopping center in Ogden, Utah (later sold) and three hotels located in
Spokane, Washington consisting of The Rodeway Inn-Spokane House, The Comfort Inn
Valley, and The Comfort Inn North. The 1988 Reorganization was closed by the
Court on August 21, 1992.

         On January 27, 1994, Wespac again instituted a Chapter 11 bankruptcy
proceeding styled In re: Wespac Investors Trust III, Case No. 94-00228-K11, in
the United States Bankruptcy Court for the Eastern District of Washington, to
seek a restructuring of the assets and liabilities of Wespac, in response to
certain litigation that resulted in at least one judgment. A plan of
reorganization dated March 22, 1996 (as modified) was confirmed by Order
Confirming Plan of Reorganization dated May 15, 1996, entered May 20, 1996 (the
"Confirmed Plan"). During the process of consummation of the Confirmed Plan, and
on the eve of issuance of the final decree with respect to the Confirmed Plan,
and emergence from the 1994 Reorganization, the Board of Trustees of Wespac by
motion filed October 29, 1996 sought a modification of the Confirmed Plan which
resulted in the entry of an Order from the Court approving the First
Modification to Plan of Reorganization (as modified) (the "Modification").

         Pursuant to the Confirmed Plan, Class 6 consisted of the Allowed
Interest of former public shareholders in "Old Common Stock," all of which was
canceled on the Effective Date of the Confirmed Plan (June 15, 1996) with one
share of beneficial interest of Wespac deemed to be exchanged for each share of
Allowed Interest, other than Greenbriar Corporation who were then to hold in the
aggregate 25% of the New Shares of Beneficial Interest. After objections to
proofs of interest demonstrating an interest in another entity, it was
determined that the Allowed Interest of such holders were equivalent to
2,642,236 Shares of Beneficial Interest.

         Also, pursuant to the Confirmed Plan, upon the Effective Date,
Greenbriar Corporation reduced its claim to the so-called "USREA Shares"
acquired from Zimco to equal 25% of the Allowed Interest (a total of 2,642,736
Shares of Beneficial Interest) and Nevada Sea Investments, Inc. ("Nevada Sea")
was deemed to exercise an option to receive all such Shares of Beneficial
Interest. In addition, in the compromise of the Wespac Creditors' Claim,
Greenbriar Corporation was



                                       5
<PAGE>



to receive, pursuant to the Confirmed Plan, 50% of the issued and outstanding
Shares of Beneficial Interest, but prior to the Effective Date of the Confirmed
Plan, by agreement, Greenbriar Corporation entered into an arrangement pursuant
to which Greenbriar Corporation conveyed to Nevada Sea an undivided 50% in and
to the creditors' claim resulting in an undivided 25% out of an aggregate of 50%
of New Shares of Beneficial Interest of Wespac to be issued, on a "when issued"
basis, to Nevada Sea in consideration of cancellation of certain indebtedness.
As a result, prior to the implementation of the procedures set forth in the
Modification and as of November 29, 1996, there were deemed to be 10,570,944
Shares of Beneficial Interest, no par value of Wespac, available for issuance to
Shareholders, of which 2,642,736 Shares were issuable to public shareholders (an
aggregate of 25% of such Shares), 2,642,736 Shares were issuable to Greenbriar
Corporation (an aggregate of 25% of such Shares) and 5,285,472 Shares of
Beneficial Interest were issuable to Nevada Sea (an aggregate of 50% of such
Shares).

         Confirmation of the Confirmed Plan (as modified) served to re-vest all
assets of the estate in Wespac free and clear of all liabilities except those
payable pursuant to the Confirmed Plan. Under the Confirmed Plan, Wespac
retained the Spokane Properties and all allowed claims have been provided for or
paid. The effect of the Modification was to distribute to the shareholders of
Wespac a proposal to convert Wespac from a California business trust into a
Nevada corporation through the "Incorporation Procedure" described therein,
coupled with a change of the name of Wespac. Such proposal was distributed to
the shareholders of Wespac who, by November 29, 1996, approved the proposal by a
vote in excess of 84% in favor. The Incorporation Procedure was implemented.
Following completion of the Incorporation Procedure Wespac submitted to the
Court a Certificate of Substantial Consummation and requested the entry of a
Final Decree on January 24, 1997 to close the 1994 Reorganization. The Final
Decree was entered by the Court February 11, 1997.

         The Company's subsidiaries are involved in certain legal actions
arising in the ordinary course of business. Management of the Company believes
that such litigation and claims, individually and in the aggregate, will be
resolved without material effect upon the Company's financial position or
results of operations.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company.



                                       6
<PAGE>



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         FEPI's shares of Common Stock, par value $0.01 per share, are available
for trading in the over-the-counter market, but to the knowledge of management
of FEPI, no shares have traded since their issuance. The CUSIP Number is
320097-10-8. The shares of Beneficial Interest of WESPAC traded through the
first quarter of 1988 and, at one time, were quoted on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"). Since cessation of
trading on NASDAQ, there has been no established, independent trading market for
the shares of Beneficial Interest of WESPAC or the shares of Common Stock of
FEPI as the successor.

         No cash dividends have been declared or paid during the period from
January 1, 1994 to the present on either the shares of Beneficial Interest of
the Trust or the shares of Common Stock of FEPI as the successor.

         As of March 21, 2003, the 10,570,944 shares of Common Stock of FEPI
issued and outstanding were held by approximately 2,400 holders of record.

ITEM 6.  SELECTED FINANCIAL DATA.

         The selected consolidated historical financial data presented below for
the five fiscal years ended December 31, 2002 are derived from the audited
consolidated financial statements and reflect (i) the adoption of fresh start
reporting in accordance with AICPA Statement of Position 90-7, (ii) confirmation
and consummation of the Modified Plan, which resulted in a "short period" from
June 15, 1996 (fresh start) through December 31, 1996, (iii) the transaction of
succession, and (iv) the acquisition by the Company of Carmel Realty, Inc. and a
99% limited partnership interest in Carmel Realty Services, Ltd. The following
data should be read in conjunction with the Consolidated Financial Statements
and Notes thereto included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."



                                       7
<PAGE>



<Table>
<Caption>
                                                                               Year Ended
                                                                              December 31,

CONSOLIDATED STATEMENT                          2002             2001            2000            1999              1998
OF OPERATIONS DATA:                             ----             ----            ----            ----              ----


<S>                                            <C>              <C>        <C>               <C>                <C>
REVENUES                                       189,264          153,614    $     285,733     $  19,638,650      $ 35,563,209

OPERATING COSTS                                     --               --               --        15,234,044        16,300,214

GENERAL AND ADMINISTRATIVE                      34,408          121,420           70,554         1,655,537         1,472,368

LOSS ON SALE OF ASSETS                              --               --               --           (97,128)       (1,152,206)

INTEREST EXPENSE                                    --           29,107          326,471           448,477           486,730

EARNINGS (LOSS) BEFORE INCOME TAXES            154,856            3,087         (111,292)        2,203,464        16,151,691

INCOME TAX EXPENSE (CURRENT)                        --               --               --           200,906          (93,623)

INCOME TAX (EXPENSE) BENEFIT
(DEFERRED)                                          --               --               --                --       (5,300,000)
                                         -------------    -------------    -------------     -------------      ------------
NET EARNINGS (LOSS)                      $     154,856    $       3,087    $    (111,292)    $   2,002,558      $ 10,758,068
                                         -------------    =============    =============     =============      ============
NET EARNINGS (LOSS) PER SHARE            $        0.01    $        0.00    $      (0.01)     $        0.19      $       1.02
                                         -------------    =============    =============     =============      ============
WEIGHTED AVERAGE SHARES OUTSTANDING         10,570,994       10,570,994       10,570,944        10,570,944        10,570,944
CONSOLIDATED BALANCE
SHEET DATA:
TOTAL ASSETS                             $  41,465,237    $  47,282,650    $  55,259,416     $  58,970,877      $ 51,698,791

SHORT TERM DEBT                          $   3,198,932        9,171,201        2,048,559         2,234,040         4,336,145

LONG TERM DEBT                                      --               --               --                --         2,776,336

STOCKHOLDERS' EQUITY                     $  37,718,807       37,563,951       37,560,864        37,672,156        35,669,598

MINORITY INTEREST IN SUBSIDIARY                547,498          547,498       10,074,447        10,074,447         8,916,712
</Table>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION.

         The following discussion and analysis provide information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. The discussion should
be read in conjunction with the financial statements and notes thereto.



                                       8
<PAGE>



YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2002, the Company had total assets of $41,465,237. Of
that amount $5,450 was held in cash. The Company had no long-term debt at
December 31, 2002.

RESULTS OF OPERATIONS

         Net earnings was $154,856 in 2002 compared to prior year earnings of
$3,087. The increase in net earnings resulted from the absence of interest
expense and bad debt expense in 2002 and increased management fees.

ENVIRONMENTAL MATTERS

         Under various federal, state and local environmental laws, ordinances
and regulations, the Company may be potentially liable for removal or
remediation costs, as well as certain other potential costs, relating to
hazardous or toxic substances (including governmental fines and injuries to
persons and property) where any property-level manager in the employee of a
subsidiary of the Company may have arranged for the removal, disposal or
treatment of hazardous or toxic substances. Management is not aware of any
environmental liability relating to the above matters that would have a material
adverse effect on the Company's business, assets or results of operations.

INFLATION

         The effects of inflation on the Company's operations are not
quantifiable. To the extent that inflation affects interest rates, the Company's
earnings from any short-term investments and the cost of new financings as well
as the cost of variable rate financing will be affected.



                                       9
<PAGE>



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is exposed to market risk from changes in interest rates
which may adversely affect its financial position, results of operations and
cash flows. In seeking to minimize the risks from interest rate fluctuations,
the Company manages exposures through its regular operating activities. The
Company does not use financial instruments for trading or other speculative
purposes and is not a party to any leveraged financial instruments.

         Based upon the Company's market risk sensitive instruments (including
variable rate debt) outstanding at December 31, 2001, the Company has determined
that there was no material market risk exposure to the Company's financial
position, results of operations or cash flows as of such date.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Financial Statements, together with an index thereto, are attached
hereto following the signature page to this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS

         The business affairs of the Company are managed by, or under the
direction of, the Board of Directors. The Board of Directors is responsible for
the general investment policies of the Company and for such general supervision
of the business of the Company conducted by its officers, agents, employees,
advisors or independent contractors as may be necessary to insure that such
business conforms to policies adopted by the Board of Directors. Pursuant to
Article III, Section 3.1, of the Bylaws of the Company, there shall not be less
than three (3) nor more than fifteen (15) directors of the Company. The number
of directors shall be determined from time to time by resolution of the
directors and the last fixing of that number of directors was at three (3) at
the time of creation of the Company. The initial three directors were the three
members of the Board of Trustees of the Trust. The term of office of each
director is one year and until the election and qualification of his or her
successor. Directors may succeed themselves in office and are to be elected at
the annual



                                       10
<PAGE>



meeting of stockholders or appointed by the Company's incumbent Board of
Directors.

         The current directors of the Company (both of whom are also executive
officers) are listed below, together with their ages, all positions and offices
with the Company, their principal occupation, business experience and
directorship with other companies during the last five years or more. Each of
the following individuals was named as a director within the last twelve months
and was elected by the Board of Directors to fill a vacancy created by a prior
resignation. None of the Directors originally named in the Articles of
Incorporation of the Company filed December 19, 1996 are currently Directors. A
vacancy existed on the Board of Directors following the resignation effective
March 1, 1997 of Georgie Liebelt. See "Item 13. Certain Relationships and
Related Transactions." On April 5, 2001, F. Terry Shumate, a Director since
inception, resigned creating a second vacancy. On February 1, 2002, acting in
his capacity as the sole remaining Director, Karl Blaha, then President and a
Director, elected Ronald E. Kimbrough to fill the vacancy created by the
resignation of Georgie Liebelt and elected Ken Joines to fill the vacancy
created by the resignation of F. Terry Shumate. Such action filled all three
positions on the Board of Directors with Messrs. Kimbrough, Joines and Blaha.
Kimbrough was also elected Vice President and Treasurer, and Joines was elected
Secretary. On February 7, 2002, Karl L. Blaha resigned as a member of the Board
of Directors and President of the Company. A vacancy exists on the Board of
Directors following the resignation effective February 7, 2002 of Karl Blaha.


<Table>
<Caption>
     NAME                          AGE         POSITION WITH THE COMPANY
<S>                                 <C>
Ronald E. Kimbrough                 49         Vice President and Treasurer
Ken Joines                          34         Secretary
</Table>

         Ronald E. Kimbrough is acting Principal Executive Officer (since
February 2002), and Executive Vice President and Chief Financial Officer (since
January 2002) of American Realty Investors, Inc. ("ARL"), a New York Stock
Exchange ("NYSE") listed entity engaged in real estate; Executive Vice President
and Chief Financial Officer (since January 2002) of Basic Capital Management,
Inc. ("BCM"), a contractual advisor to many entities engaged in the real estate
business, Income Opportunity Realty Investors, Inc. ("IORI"), an American Stock
Exchange listed REIT, Transcontinental Realty Investors, Inc. ("TCI"), an NYSE
listed REIT; Controller (September 2001 - January 2002) of BCM; Vice President
and Treasurer (January 1998 - September 2001) of Syntek West, Inc., a real
estate company, and One Realco Corporation ("One Realco") a real estate company.



                                       11
<PAGE>



         Ken Joines is Vice President and Director (since April 2001) of Syntek
West, Inc., a real estate company based in Dallas, Texas; for more than five
years prior thereto through March 2001, Mr. Joines was employed by Whitson
Management Group, a fee-only financial planning and business consulting firm
based in Phoenix, Arizona, in various financial advisory capacities, the last of
which was as Vice President and Chief Financial Officer.

         There are no family relationships among the directors or executive
officers of the Company.

MEETINGS AND COMMITTEES OF DIRECTORS

         The Company's Board of Directors acted upon six matters by unanimous
written consent since December 19, 1996 and has held no formal meetings. The
Board of Directors has no standing audit, nominating or compensation committee.

COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT.

         Under the securities laws of the United States, the Company's
directors, executive officers, and any person holding more than 10% of the
Company's shares of common stock are required to report their ownership of the
Company's shares and any changes in ownership to the Commission. Specific due
dates for these reports have been established and the Company is required to
report any failure to file by the date. All the filing requirements were
satisfied by the Company's directors, executive officers and 10% holders during
1996. In making these statements, the Company has relied on the written
representations of its directors and executive officers and its 10% holders and
copies of the reports that they filed with the Commission, both with respect to
the Trust, as a predecessor to the Company, and the Company.

ITEM 11. EXECUTIVE COMPENSATION.

         Neither the executive officers nor directors received salaries or cash
compensation from the Company or its predecessor, Wespac, for acting in such
capacity during the two years ended December 31, 2002, in an amount required to
be disclosed under this item. The only director or executive officer who
received salaried compensation from the Company or its predecessor, Wespac, was
Georgie Liebelt whose compensation until her resignation effective March 1, 1997
was $59,000 per year plus a $6,000 per year car allowance. The Company has no
retirement, annuity or pension plan covering its directors or executive
officers.



                                       12
<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The Company's voting securities consist of the shares of common stock,
par value $0.01 per share. As of March 15, 2001, according to the stock transfer
records of the Company and other information available to the Company, the
following persons were known to be the beneficial owners of more than five
percent (5%) of the outstanding shares of common stock of the Company:


<Table>
<Caption>
     TITLE OF CLASS              NAME AND ADDRESS OF BENEFICIAL OWNER         AMOUNT AND       PERCENT OF
                                                                               NATURE OF         CLASS
                                                                              BENEFICIAL
                                                                               OWNERSHIP
<S>                                                                            <C>                <C>
Shares of Common                 Nevada Sea Investments, Inc.                  5,285,472          50%
Stock, par value $0.01           1800 Valley View Lane                           shares
per share                        Suite 100
                                 Dallas, Texas 75234
Shares of Common                 Greenbriar Corporation                        2,642,736          25%
Stock, par value $0.01           4265 Kellway Circle                             shares
per share                        Dallas, Texas 75248
</Table>

(1)  Based on 10,570,944 shares of common stock outstanding on March 21, 2003.

         As of March 21, 2003, according to the stock transfer records of the
Company and other information available to the Company, each of the directors
and executive officers of the Company, and all present executive officers and
directors as a group, beneficially own the following shares:

<Table>
<Caption>
       TITLE OF CLASS            NAME AND ADDRESS OF BENEFICIAL OWNER         AMOUNT AND       PERCENT OF
                                                                               NATURE OF        CLASS (a)
                                                                              BENEFICIAL
                                                                               OWNERSHIP
<S>                              <C>                                            <C>             <C>
Shares of Common Stock, par      Ronald E. Kimbrough                             none             none
value $0.01 per share            1800 Valley View Lane, Suite 100
                                 Dallas, Texas 75234
Shares of Common Stock, par      Ken Joines                                      none             none
value $0.01 per share            1800 Valley View Lane, Suite 100
                                 Dallas, Texas 75234
Shares of Common Stock, par      All officers and directors as a group           none             none
value $0.01 per share
</Table>

(a)  Based on 10,570,944 shares of common stock outstanding on March 21, 2003.



                                       13
<PAGE>



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         On June 25, 1996, in connection with the Confirmed Plan, the Company
received an advance of funds from Nevada Sea in the amount of $250,000 unsecured
and bearing interest at the rate of 8% per annum. Subsequent to the initial
advance, Nevada Sea and/or its affiliates have advanced an additional $2,391,552
to the Company under the same terms and conditions. During 1999, the Company
repaid all amounts advanced together with interest at the rate of 8% per annum.

         Effective January 1, 1997, the Company acquired from Syntek West, Inc.,
a Nevada corporation, all of the issued and outstanding common stock of Carmel
Realty, Inc., a Texas corporation ("Carmel") and an 81.6% limited partnership
interest in Carmel Realty Services, Ltd., a Texas limited partnership ("CRSL")
for an aggregate purchase price of $22,500,000, which was paid by the issuance
of 32,500 shares of Series A 8% Cumulative Preferred Stock with a liquidation
value of $1,000 per share (the "Series A Preferred Stock"). The Series A
Preferred Stock has a right to cumulative cash dividends of $80 per share per
annum, payment of $1,000 per share in the event of dissolution, liquidation of
winding up of the Company before any distribution is made to the holders of
Common Stock, optional redemption at any time at a price of $1,000 per share,
plus cumulative dividends, no right to conversion into any other securities of
the Company, and no voting rights except as may be required by law. See "Item 1.
Business," for a brief description of businesses of Carmel and CRSL and see the
Notes to the Financial Statements. During 1998, the Company redeemed all of its
$32,500,000 preferred stock in exchange for reduction of receivables from Syntek
West, Inc.

         Effective January 1, 1997 the Company contracted with Regis Management
Corporation, a subsidiary of Carmel, to manage the day-to-day operations of the
Spokane Properties for 5% of the gross revenues from the Spokane Properties.
Such management arrangement ceased at the time of disposition of the Spokane
Properties during June 1998.

         Effective June 1, 1997, the Company sold a 90-room Roadway Inn located
at W. 4301 Sunset Boulevard, Spokane, Washington to Georgie Liebelt. At the time
of the sale the Company paid off the underlying debt secured by the property
sold. Ms. Liebelt was appointed a Trustee of Wespac in January 1994 and served
in that capacity until implementation of the Incorporation Procedure. She was an
initial director of the Company and Regional Director for the Company
responsible for all operations involving the hotel properties located in
Spokane, Washington. Ms. Liebelt resigned as a Director effective March 1, 1997.
The purchase price for the Roadway Inn was $1,475,000 paid by the delivery of a
promissory note from Spokane House, Inc. (a Washington corporation wholly owned
by Georgie Liebelt) secured by a



                                       14
<PAGE>



Deed of Trust covering the property and a security interest on all related
personal property. Such note bore interest at 5% per annum for the period from
June 1, 1997 to June 1, 1998 and was to increase by 1% per annum until it
reached 9% for the period from June 1, 2001 to July 10, 2002. At the time of
maturity of the Note, Spokane House, Inc. was obligated to pay the lesser of (i)
the total of the unpaid principal and interest due on the note, or (ii) the
appraised value of the property as of June 1, 2002. In addition, the Company
loaned to Spokane House, Inc. $160,000 to fund needed renovations on the
property. Commencing March 1, 1997, Spokane House, Inc. became the operator of
the property, retaining all income and paying all expenses relating to the
operation of the property. In January 1998 the Company foreclosed on the
property following a failure of performance on the promissory note and wrote off
the $160,000 loan. The Company exchanged the property in June 1998 for a
residential property in Couer d'Alene, Idaho (since sold). See also the Notes to
the Consolidated Financial Statements.

ITEM 14. CONTROLS AND PROCEDURES

Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-K, our Acting Principal Executive and Chief Financial
Officer, believe our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) are effective. There were not any significant
changes in internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, and there has not
been any corrective action with regard to significant deficiencies and material
weaknesses.



                                       15
<PAGE>



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)  Financial Statements.  The following documents are filed as part
of this report:

<Table>
<Caption>
                   1. Consolidated Financial Statements.                                       Page

<S>                                                                                            <C>
                   Independent auditor's report                                                 F-1

                   Consolidated Balance Sheets as of December
                   31, 2002 and 2001                                                            F-2

                   Consolidated Statements of Operations for the
                   three years ended December 31, 2002                                          F-3

                   Consolidated Statements of Changes in
                   Shareholders' Equity for the three years
                   ended December 31, 2002                                                      F-4

                   Consolidated Statements of Cash Flows for the
                   three years ended December 31, 2003                                          F-5

                   Notes to Consolidated Financial Statements                                   F-6
</Table>

                  2.  Financial Statement Schedules.

                  All other schedules and financial statements are omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.

         (b) Reports on Form 8-K. During the last quarter of the period covered
by this report, no reports on Form 8-K were filed.

         (c) Exhibits. The following documents are filed herewith as exhibits or
incorporated by the references indicated below:



               EXHIBIT
             DESIGNATION                       DESCRIPTION OF EXHIBIT

                 2.1                Plan of Reorganization (as modified) dated
                                    March 22, 1996 (incorporation by reference
                                    is made by Exhibit 2.1 to Form 8-K of
                                    First Equity Properties, Inc. for event
                                    reported June 19, 1996).

                 2.2                First Amended Disclosure Statement (as
                                    modified) dated March 22, 1996
                                    (incorporation by reference is made to
                                    Exhibit 2.2 to Form 8-K of First Equity
                                    Properties, Inc. for event reported June
                                    19, 1996).





                                       16
<PAGE>



              EXHIBIT
             DESIGNATION                      DESCRIPTION OF EXHIBIT

                 2.3                Order Confirming Plan of Reorganization
                                    dated May 15, 1996 entered May 20, 1996
                                    (incorporation by reference is made to
                                    Exhibit 2.3 to Form 8-K of First Equity
                                    Properties, Inc. for event reported
                                    June 19, 1996).

                 2.4                First Modification to Plan of Reorganization
                                    (as modified) dated October 29, 1996
                                    (incorporation by reference is made to
                                    Exhibit 2.4 to Form 8-K of First Equity
                                    Properties, Inc. for event reported June 19,
                                    1996).

                 2.5                Ex parte Order approving modification to
                                    Plan of Reorganization (as modified) entered
                                    October 29, 1996 (incorporation by reference
                                    is made to Exhibit 2.5 to Form 8-K of First
                                    Equity Properties, Inc. for event reported
                                    June 19, 1996).

                 2.6                Certificate of Substantial Consummation
                                    dated January 21, 1997 (incorporation by
                                    reference is made to Exhibit 2.6 to Form 8-K
                                    of First Equity Properties, Inc. for event
                                    reported June 19, 1996).

                 2.7                Final Decree issued by the Court on February
                                    11, 1997 (incorporation by reference is made
                                    to Exhibit 2.7 to Form 8-K of First Equity
                                    Properties, Inc. for event reported June 19,
                                    1996).

                 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).



                                       17
<PAGE>



              EXHIBIT
             DESIGNATION                     DESCRIPTION OF EXHIBIT


                 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.)

                21*                 Subsidiaries of the Registrant

                99.1*               Certification of Acting Principal
                                    Executive Officer and Chief Financial
                                    Officer

         *filed herewith




                                       18
<PAGE>



                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed by the undersigned, thereunto
duly authorized.



                                            FIRST EQUITY PROPERTIES, INC.

Dated: March 28, 2003

                                            By  /s/Ronald E. Kimbrough
                                                --------------------------
                                            Ronald E. Kimbrough, Director,
                                            Vice President and Treasurer



         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacity and on
the date indicated.



/s/ Ronald E. Kimbrough           Director, Vice President      March 28, 2003
-----------------------           and Treasurer
Ronald E. Kimbrough               (Principal Executive and
                                  Financial and
                                  Accounting Officer)

/s/ Ken Joines
-----------------------           Director and Secretary        March 28, 2003
Ken Joines




                                       19
<PAGE>



                                 CERTIFICATIONS


I, Ronald E. Kimbrough, certify that:


1.       I have reviewed this annual report on Form 10-K of First Equity
Properties, Inc.;

2.       Based on my knowledge, this annual 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 annual
report;

3.       Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4.       The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

                  (a) designed such disclosure controls and procedures to ensure
         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 annual report is
         being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this annual report; and

                  (c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

                  (a) all significant deficiencies in the design or operation of
         internal controls which could adversely affect the registrant's ability
         to record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; 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; and

6.      The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


         Dated: March 28, 2003.


                                             Ronald E. Kimbrough, Vice President
                                             and Treasurer (Acting Principal
                                             Executive and Chief Financial
                                             Officer)


                                       20
<PAGE>
                                INDEX TO FINANCIAL STATEMENTS


<Table>
<Caption>
                                                                               Page
                                                                               ----
<S>                                                                            <C>
INDEPENDENT AUDITOR'S REPORT                                                   F-1

CONSOLIDATED FINANCIAL STATEMENTS

     Balance sheets as of December 31, 2002 and 2001                           F-2

     Statements of operations for the years ended December 31, 2002,
          2001 and 2000                                                        F-3

     Statements of changes in shareholders' equity for the years ended
          December 31, 2002, 2001 and 2000                                     F-4

     Statements of cash flows for the years ended December 31, 2002,
          2001 and 2000                                                        F-5

     Notes to financial statements                                             F-6
</Table>

All other schedules and financial statements are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.


<PAGE>



                          INDEPENDENT AUDITOR'S REPORT



Board of Directors
First Equity Properties, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of First Equity
Properties, Inc. and subsidiaries as of December 31, 2002 and 2001 and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the years ended December 31, 2002, 2001 and 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Equity Properties, Inc. and subsidiaries as of December 31, 2002 and 2001 and
the results of their operations and their cash flows for the years ended
December 31, 2002, 2001 and 2000, in conformity with U.S. generally accepted
accounting principles.




March 18, 2003
Plano, Texas



                                      F-1
<PAGE>




                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,

                                     ASSETS

<Table>
<Caption>
                                                                                 2002                  2001
                                                                           ---------------       ---------------
<S>                                                                       <C>                   <C>
Cash and cash equivalents                                                  $         5,450       $         8,985
Accounts receivable - affiliate                                                    346,338               851,946
Investments                                                                     41,113,449            46,421,719
                                                                           ---------------       ---------------

                                                                           $    41,465,237       $    47,282,650
                                                                           ===============       ===============
<Caption>
                      LIABILITIES AND SHAREHOLDERS' EQUITY

<S>                                                                       <C>                   <C>
Accounts payable - trade                                                          $239,999       $     5,548,224
Accounts payable - affiliate                                                     2,958,933             3,622,977
                                                                           ---------------       ---------------

         Total liabilities                                                       3,198,932             9,171,201

Minority interest in subsidiary                                                    547,498               547,498

Shareholders' equity
  Preferred stock, $.01 par value; 4,960,000 shares
     authorized; none issued or outstanding                                             --                    --
  Common stock, $0.01 par, 40,000,000 shares authorized,
    10,570,944 shares issued and outstanding                                       105,710               105,710
  Capital in excess of par value                                                 1,281,548             1,281,548
  Retained earnings                                                             36,331,549            36,176,693
                                                                           ---------------       ---------------

         Total shareholders' equity                                             37,718,807            37,563,951
                                                                           ---------------       ---------------

                                                                           $    41,465,237       $    47,282,650
                                                                           ===============       ===============
</Table>


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

                                      F-2
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 2002, 2001 and 2000


<Table>
<Caption>

                                               2002           2001            2000
                                            ----------     ----------      ----------
<S>                                         <C>            <C>             <C>
Revenue
   Management fees                          $  189,230     $  104,591      $       --
   Interest                                         34         49,023         284,167
   Other                                            --             --           1,566
                                            ----------     ----------      ----------

                                               189,264        153,614         285,733
Operating expenses
   Legal and accounting                         30,329         34,951          46,313
   General and administrative                    4,079          9,669          24,241
   Bad debt expense                                 --         76,800              --
                                            ----------     ----------      ----------

         Total operating expenses               34,408        121,420          70,554
                                            ----------     ----------      ----------

Earnings from operations                       154,856         32,194         215,179

Other expenses
     Interest expense                               --        (29,107)       (326,471)
                                            ----------     ----------      ----------

         NET EARNINGS (LOSS)                $  154,856     $    3,087      $ (111,292)
                                            ==========     ==========      ==========

Earnings (loss) per share                   $     0.01     $     0.00      $     (.01)
                                            ==========     ==========      ==========

Weighted average shares outstanding         10,570,944     10,570,944      10,570,944
                                            ==========     ==========      ==========
</Table>


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


                                      F-3
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
              For the Years Ended December 31, 2002, 2001 and 2000



<Table>
<Caption>

                                        Common Stock               Preferred Stock       Capital       Retained
                                 ---------------------------    --------------------    in excess      earnings          Total
                                    Shares         Amount        Shares      Amount       of par       (deficit)         equity
                                 ------------   ------------    --------    --------   ------------   ------------    ------------


<S>                               <C>               <C>             <C>                  <C>           <C>             <C>
Balances at January 1, 2000        10,570,944        105,710          --          --      1,281,548     36,284,898      37,672,156

Net loss                                   --             --          --          --             --       (111,292)       (111,292)
                                 ------------   ------------    --------    --------   ------------   ------------    ------------
Balances at December 31, 2000      10,570,944        105,710          --          --      1,281,548     36,173,606      37,560,864

Net earnings                               --             --          --          --             --          3,087           3,087
                                 ------------   ------------    --------    --------   ------------   ------------    ------------

Balances at December 31, 2001      10,570,944   $    105,710          --          --   $  1,281,548   $ 36,176,693    $ 37,563,951

Net earnings                               --             --          --          --             --        154,856         154,856
                                 ------------   ------------    --------    --------   ------------   ------------    ------------

Balances at December 31, 2002      10,570,944   $    105,710          --          --   $  1,281,548   $ 36,331,549    $ 37,718,807
                                 ============   ============    ========    ========   ============   ============    ============
</Table>



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



                                      F-4
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Year Ended December 31, 2002, 2001 and 2000
<Table>
<Caption>


                                                                 2002               2001                 2000
                                                            --------------      --------------      --------------
<S>                                                         <C>                   <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)                                         $      154,856        $      3,087       $    (111,292)
   Adjustments to reconcile net earnings
     (loss) to net cash used for operating activities
   Loss on sale of assets and write-off                                 --              76,800                  --
   (Increase) decrease in
       Accounts receivable - affiliate                               5,609            (598,609)           (966,359)
   Increase (decrease) in
       Accounts payable - affiliate                               (164,000)              5,999             153,145
       Accrued interest - affiliate                                     --                  --              77,117
       Income taxes payable                                             --                  --             (72,000)
                                                            --------------      --------------      --------------

  Net cash used for operating activities                            (3,535)           (512,723)           (919,389)

CASH FLOWS FROM INVESTING ACTIVITIES
   Payments received on notes receivable                                --           2,525,588             347,029
                                                            --------------      --------------      --------------

Net cash provided by investing activities                               --           2,525,588             347,029

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable - affiliate                              --                  --             801,970
   Payments on long-term debt                                           --          (2,048,559)           (185,481)
                                                            --------------      --------------      --------------

Net cash provided by (used for) financing activities                    --          (2,048,559)            616,489
                                                            --------------      --------------      --------------

Net increase (decrease) in cash and cash equivalents                (3,535)            (35,694)             44,129

Cash and cash equivalents at beginning of period                     8,985              44,679                 550
                                                            --------------      --------------      --------------

Cash and cash equivalents at end of period                  $        5,450      $        8,985      $       44,679
                                                            ==============      ==============      ==============
</Table>



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



                                      F-5
<PAGE>




                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2002, 2001 and 2000


NOTE A - HISTORY

         WesPac Investors Trust III ("WesPac), a California business trust, was
         originally organized on August 22, 1983. On January 24, 1994, WesPac
         instituted a Chapter 11 bankruptcy proceeding in the United States
         Bankruptcy Court for the Eastern District of Washington. A Plan of
         Reorganization dated March 22, 1996 (as modified) was confirmed by
         order dated May 15, 1996 and was amended by Order entered October 29,
         1996 approving the First Modification to Plan of Reorganization (the
         "Modified Plan"). Pursuant to the Modified Plan, WesPac was converted
         from a California business trust into a Nevada corporation. First
         Equity Properties, Inc. (the "Company"), which was incorporated in
         Nevada on December 19, 1996, was the surviving entity following the
         incorporation of WesPac into a California corporation and subsequent
         merger of that California corporation with and into the Company
         accomplished by Articles of Merger and a Plan of Merger filed in the
         States of California and Nevada on December 24, 1996. The Company
         automatically, by operation of law, succeeded to all of the assets,
         rights, duties, liabilities and obligations of the California
         corporation (as the immediate successor to WesPac) upon the
         effectiveness of the Merger on December 24, 1996.

         In general, the Modified Plan provided for the cancellation of the
         former publicly-held shares on the effective date of the Modified Plan
         with one share of the Company deemed to be exchanged for each former
         publicly-held share with the former public shareholders to hold, in the
         aggregate, 25% of the equity interest in the Company. Confirmation of
         the Modified Plan served to re-vest all assets of the estate of WesPac
         free and clear of all liabilities, except those payable pursuant to the
         Modified Plan. Under the Modified Plan, WesPac retained the Certain
         Motel Properties and all allowed claims were provided for or paid.

NOTE B - FRESH START REPORTING

         In accordance with AICPA Statement of Position 90-7, "Financial
         Reporting by Entities in Reorganization Under the Bankruptcy Code",
         ("SOP 90-7") the Company was required to adopt "fresh start" reporting
         and reflect the effects of such adoption in the financial statements as
         of June 15, 1996. The ongoing impact of the adoption of fresh-start
         reporting is reflected in the accompanying financial statements.

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Operations

         The Company and its subsidiaries provided management services to a
         variety of commercial and residential real estate entities throughout
         the continental United States. Effective October 1, 1999, substantially
         all of the contracts for management services were transferred from the
         Company. In addition, the Company indirectly invests in real estate
         entities and marketable securities through its investment in the
         preferred stock of Realty Advisors, Inc.



                                      F-6
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                        December 31, 2002, 2001 and 2000


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Principles of Consolidation

         The consolidated financial statements include the accounts of First
         Equity Properties, Inc., its wholly-owned subsidiary Carmel Realty,
         Inc. and its majority-owned subsidiary, Carmel Realty Services, Ltd.
         All significant intercompany accounts and transactions have been
         eliminated in consolidation.

         Cash Equivalents

         For purposes of the statement of cash flows, the Company considers all
         short-term investments with original maturities of three months or less
         to be cash equivalents.

         Property, Equipment, Depreciation and Amortization

         Property and equipment in place on June 15, 1996 are stated at fair
         value in accordance with fresh-start reporting. Additions are stated at
         cost. Depreciation and amortization are provided over the estimated
         useful lives of the assets on the straight-line method. Maintenance and
         repairs of a routine nature are charged to expense. Renewals and
         betterments which extend the useful life of existing assets are
         capitalized and depreciated over their estimated useful lives.

         Investments

         Investments consist of non-marketable investments in private companies,
         and are carried at the lower of cost or estimated net realizable value.

         Accounting Estimates

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make certain
         estimates and assumptions that affect the amounts reported in the
         financial statements and accompanying notes. Actual results could
         differ from those estimates.

         Income Taxes

         The Company accounts for income taxes in accordance with Statement of
         Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
         Income Taxes". SFAS 109 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, SFAS 109 requires an
         evaluation of the probability of being able to realize the future
         benefits indicated by such assets. A valuation allowance is provided
         for a portion or all of the deferred tax assets when there is an
         uncertainty regarding the Company's ability to recognize the benefits
         of the assets in future years.



                                      F-7
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                        December 31, 2002, 2001 and 2000


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Credit Risk

         The Company's trade accounts receivable arise in the normal course of
         business and primarily relate to management of commercial and
         residential properties located throughout the United States. Such
         receivables are unsecured. The Company performs ongoing credit
         evaluations of the entities from whom such amounts are receivable. The
         Company places its cash investments in high credit quality institutions
         and, by policy, limits the amount of credit exposure to any one
         institution.

         Earnings (Loss) per Share

         Earnings (loss) per share (EPS) are calculated in accordance with
         Statement of Financial Accounting Standards No. 128, Earnings per Share
         (SFAS 128), which was adopted in 1997 for both years presented. Basic
         EPS is computed by dividing income available to common shareholders by
         the weighted average number of common shares outstanding during the
         period. Diluted EPS does not apply to the Company due to the absence of
         dilutive potential common shares. The adoption of SFAS 128 had no
         effect on previously reported EPS.

NOTE D - ACCOUNTS RECEIVABLE - AFFILIATES
<Table>
<Caption>
                                      2002           2001
                                   ----------     ----------
<S>                                  <C>            <C>
Regis Realty                       $  283,528     $  283,528
TRS, Ltd. and other                    62,810         68,418
Basic Capital Management, Inc.             --        500,000
                                   ----------     ----------

                                   $  346,338     $  851,947
                                   ==========     ==========
</Table>

NOTE E - INVESTMENTS

         The investment in Realty Advisors, Inc. preferred stock at December 31,
         2002 and 2001 is $41,113,449 and $45,836,719, respectively, and
         represents 416,632 and 464,889 shares, respectively, of no par value,
         non-voting preferred stock with a liquidation value of $110 per share.
         These shares do not earn dividends. Realty Advisors, Inc. is an
         affiliated company who invests in real estate directly and indirectly
         through investments in real estate entities. At June 30, 2002, Realty
         Advisors, Inc. had total assets of $191,887,270, total liabilities of
         $86,423,702 and total shareholders equity of $105,463,568. The Company
         redeemed 48,257 shares of the preferred stock valued at their cost of
         $110 per share to pay an account payable to an affiliate in 2002. In
         2001, the value of the preferred stock was reduced as a result of the
         application of the purchase method of accounting for the acquisition of
         the minority interest of the subsidiary which holds the preferred
         stock. The Company acquired all but a 1% minority interest from a
         related party in Carmel Realty Services, Ltd. The Company paid
         $4,225,879 for the 17.4% interest in Realty Advisors, Inc.


                                      F-8
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                        December 31, 2002, 2001 and 2000


NOTE E - INVESTMENTS - CONTINUED

         Investments at December 31, 2002 includes 58,500 shares of preferred
         stock in North American Mortgage, a related party, valued at $585,000.
         The shares have a par value of $10, are non-voting shares with a
         liquidation value of $10 per share and do not earn dividends.

NOTE F - NOTES PAYABLE - AFFILIATE

         The Company has a revolving line of credit with Nevada Sea Investments,
         Inc., a shareholder. Amounts borrowed under the line bear interest at
         8% per year and are due on demand.

NOTE G - INCOME TAXES

         Income tax expense (benefit) differed from the amounts computed by
         applying the U.S. federal income tax rate of 35% to pretax income in
         2002, 2001 and 2000 as a result of the following:
<Table>
<Caption>
                                      2002          2001          2000
                                    --------      --------     --------
<S>                                 <C>           <C>          <C>
Computed expected tax expense       $ 54,000      $     --     $     --
Alternative minimum tax credit            --            --           --
Net operating loss carryforward      (54,000)           --           --
                                    --------      --------     --------
                                    $     --      $     --     $     --
                                    ========      ========     ========
</Table>

         Deferred income taxes reflect the effects of temporary differences
         between the tax bases of assets and liabilities and the reported
         amounts of those assets and liabilities for financial reporting
         purposes. Deferred income taxes also reflect the value of net operating
         losses and an offsetting valuation allowance. The Company's total
         deferred tax asset and corresponding valuation allowance at December
         31, 2002, 2001, and 2002 consisted of the following:
<Table>
<Caption>
                                                       2002          2001         2000
                                                     --------      --------     --------
<S>                                                  <C>           <C>          <C>
         Deferred tax asset
             Net operating loss carryforward         $ 86,447      $     --     $     --

         Less:  Valuation Allowance                   (86,447)
                                                     --------      --------     --------
                                                           --            --           --
         Net deferred tax asset                      ========      ========     ========
</Table>


         The deferred tax asset that arose related to the net operating loss
         carryforward has been reduced to $-0- as management cannot be assured
         of the utilization of the deferred tax asset.




                                      F-9
<PAGE>




                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                        December 31, 2002, 2001 and 2000


NOTE H - RELATED PARTY TRANSACTIONS

         The Company provided management services primarily to five affiliated
         publicly traded real estate entities throughout the United States.
         Under such arrangements, the Company received a fee of 5% or less of
         the monthly gross rents collected on the properties under management.
         The Company subcontracts with other entities for the provision of
         property level services. Substantially all property management
         contracts, constituting most management service revenues, with the five
         publicly traded real estate entities were cancelled effective October
         1, 1999.

NOTE I - FINANCIAL INSTRUMENTS

         The estimated fair values of the Company's financial instruments at
         December 31, 2002 and 2001 follow:

<Table>
<Caption>



                                                            2002                             2001
                                                 -----------------------------     -----------------------------
                                                  Carrying            Fair           Carrying          Fair
                                                    Value            Amount           Amount           Value
                                                 ------------     ------------     ------------     ------------
<S>                                              <C>              <C>              <C>              <C>
         Accounts receivable - affiliates        $   346,338      $   346,338      $   851,946      $   851,946
         Investments                              41,113,449       41,113,449       46,421,719       46,421,719
</Table>

         The carrying values of cash and cash equivalents, accounts receivable
         and payable, and accrued liabilities approximate fair value due to
         short-term maturities of these assets and liabilities.

         Investments are accounted for using the cost method and pertain to
         investments in companies for which fair values are not readily
         available, but are believed to exceed carrying amounts.

NOTE J - COMMITMENTS AND CONTINGENCIES

         The Company is involved in various legal actions incidental to its
         business. In Management's opinion, none of these actions will have a
         material adverse effect on the Company's financial position.




                                      F-10
<PAGE>



                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                        December 31, 2002, 2001 and 2000


NOTE K - SUPPLEMENTAL CASH FLOW INFORMATION

<Table>
<Caption>
                                                                2002             2001           2000
                                                           -------------    ------------    ------------
<S>                                                        <C>              <C>             <C>
Cash paid during the year for:
  Interest                                                 $       --       $   29,107      $   221,000
  Income taxes                                                     --               --           76,000

Noncash investing and financing activities:
  Redemption of preferred stock to settle
       an account payable to affiliate                      5,308,225               --               --
  Exchange of accounts payable for accounts
       receivable affiliate                                   500,000               --               --
  Exchange of account payable from affiliate
       for minority interest in subsidiary                         --        4,225,879               --
  Effective writedown of investment due to
       application of purchase method of
       accounting for the acquisition of
       minority interest                                           --        5,301,071               --
  Exchange of a note receivable for an
       investment in preferred stock of affiliate                  --          585,000               --
  Note payable exchanged for
       amounts due to affiliate                                    --               --        3,495,833
  Preferred stock investment exchanged
       for notes payable                                           --               --        4,374,920
</Table>

NOTE L - EMPLOYEE BENEFIT PLAN

         The Company has a 401(k) plan for the benefit of its employees.
         Employees can contribute to the plan up to 15% of their salary, subject
         to certain maximum dollar amounts set forth by the Internal Revenue
         Service, pursuant to a salary reduction agreement, upon meeting age and
         length of service requirements. The Companies' matching contribution is
         a discretionary percentage of electing employees' contributions, and
         totaled $-0- in 2002, 2001 and 2000.

NOTE M - COMPREHENSIVE INCOME

         Statement of Financial Accounting Standards No. 130, Reporting
         Comprehensive Income, (SFAS 130), requires that total comprehensive
         income be reported in the financial statements. For the years ended
         December 31, 2002, 2001, and 2000, the Company's comprehensive income
         was equal to its net income and the Company does not have income
         meeting the definition of other comprehensive income.




                                      F-11
<PAGE>


                                INDEX TO EXHIBITS


              EXHIBIT
             DESIGNATION                       DESCRIPTION OF EXHIBIT

                 2.1                Plan of Reorganization (as modified) dated
                                    March 22, 1996 (incorporation by reference
                                    is made by Exhibit 2.1 to Form 8-K of
                                    First Equity Properties, Inc. for event
                                    reported June 19, 1996).

                 2.2                First Amended Disclosure Statement (as
                                    modified) dated March 22, 1996
                                    (incorporation by reference is made to
                                    Exhibit 2.2 to Form 8-K of First Equity
                                    Properties, Inc. for event reported June
                                    19, 1996).

                 2.3                Order Confirming Plan of Reorganization
                                    dated May 15, 1996 entered May 20, 1996
                                    (incorporation by reference is made to
                                    Exhibit 2.3 to Form 8-K of

                 2.4                First Equity Properties, Inc. for event
                                    reported June 19, 1996). First Modification
                                    to Plan of Reorganization (as modified)
                                    dated October 29, 1996 (incorporation by
                                    reference is made to Exhibit 2.4 to Form 8-K
                                    of First Equity Properties, Inc. for event
                                    reported June 19, 1996).

                 2.5                Ex parte Order approving modification to
                                    Plan of Reorganization (as modified) entered
                                    October 29, 1996 (incorporation by reference
                                    is made to Exhibit 2.5 to Form 8-K of First
                                    Equity Properties, Inc. for event reported
                                    June 19, 1996).

                 2.6                Certificate of Substantial Consummation
                                    dated January 21, 1997 (incorporation by
                                    reference is made to Exhibit 2.6 to Form 8-K
                                    of First Equity Properties, Inc. for event
                                    reported June 19, 1996).

                 2.7                Final Decree issued by the Court on February
                                    11, 1997 (incorporation by reference is made
                                    to Exhibit 2.7 to Form 8-K of First Equity
                                    Properties, Inc. for event reported June 19,
                                    1996).

                 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).




<PAGE>

              EXHIBIT
             DESIGNATION                      DESCRIPTION OF EXHIBIT

                 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.)

                21*                 Subsidiaries of the Registrant

                99.1*               Certification of Acting Principal
                                    Executive Officer and Chief Financial
                                    Officer


         *filed herewith