Direct Investment Holdings Group, Inc. - Quarter Report: 2005 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

FIRST EQUITY PROPERTIES, INC.

(Exact name of registrant as specified in the charter)

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

1800 Valley View Lane, Suite 300, Dallas, Texas 75234

(Address of principal executive offices)

214-750-5800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes þ No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

     As of June 30, 2005, registrant had 1,057,628 shares of Common Stock issued and outstanding.

 

 

FIRST EQUITY PROPERTIES, INC.

FORM 10-Q
June 30, 2005

INDEX

		Page No.
Part I Financial Information:
Item 1. Financial Statements
Balance Sheets June 30, 2005 (Unaudited) and December 31, 2004			3
Statement of Earnings (Unaudited) Three Months and Six Months Ended June 30, 2005 and 2004			4
Statement of Cash Flows (Unaudited) Six Months Ended June 30, 2005 and 2004			5
Notes to Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			8
Item 4. Controls and Procedures			8
Part II Other Information:
Item 6. Exhibits			9
Certification Pursuant to Section 302
Certification Pursuant to Section 906

FIRST EQUITY PROPERTIES, INC.

BALANCE SHEETS

ASSETS

		June 30, 2005				December 31,
		(Unaudited)				2004
Cash and cash equivalents		$	951			$	4,621
Notes and interest receivable			2,548,741				2,626,588
		$	2,549,692			$	2,631,209

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable — affiliate		$	2,259,340			$	2,448,936
Total liabilities			2,259,340				2,448,936
Shareholders’ equity
Preferred stock, $0.01 par, 4,960,000 shares authorized, none issued and outstanding			—				—
Common stock, $0.01 par, 40,000,000 shares authorized, 1,057,628 shares issued and outstanding			10,576				10,576
Capital in excess of par value			1,376,682				1,376,682
Retained earnings (deficit)			(1,096,906	)			(1,204,985	)
Total shareholders’ equity			290,352				182,273
		$	2,549,692			$	2,631,209

FIRST EQUITY PROPERTIES, INC.

STATEMENTS OF EARNINGS
For the three months and six months ended June 30, 2005 and 2004
(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2005				2004				2005				2004
Revenue
Interest income		$	60,023			$	45,045			$	119,388			$	59,632
			60,023				45,045				119,388				59,632
Operating expenses
General and administrative			754				1,157				1,890				1,893
Legal and professional fees			5,044				12,730				9,419				17,667
Total operating expenses			5,798				13,887				11,309				19,560
Net income from continuing operations			54,225				31,158				108,079				40,072
Income from discontinued operations			—				—				—				45,715
Impairment loss			—				—				—				(37,931,116	)
NET EARNINGS (LOSS)		$	54,225			$	31,158			$	108,079			$	(37,845,329	)
Earnings (loss) per share
Net earnings from continuing operations		$	.05			$	.03			$	.10			$	.04
Discontinued operations			—				—				—				(35.82	)
Net earnings (loss)		$	.05			$	.03			$	.10			$	(35.78	)
Weighted average shares outstanding			1,057,628				1,057,628				1,057,628				1,057,628

FIRST EQUITY PROPERTIES, INC.

STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2005 and 2004
(Unaudited)

		2005				2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)		$	108,079			$	90,701
Adjustments to reconcile net income to net cash provided by (used for) operating activities
(Increase) decrease in
Interest receivable			77,847				(24,041	)
Accounts receivable — affiliate			—				12,590
Increase (decrease) in
Accounts payable — affiliate			(189,596	)			(77,500	)
Net cash provided by (used for) operating activities			(3,670	)			1,750
Net increase (decrease) in cash and cash equivalents			(3,670	)			1,750
Cash and cash equivalents at beginning of period			4,621				5,450
Cash and cash equivalents at end of period		$	951			$	7,200
Noncash investing and financing activities:
Exchange of investment for note receivable			—				585,000

FIRST EQUITY PROPERTIES, INC.

NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE A — BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared by First Equity Properties, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for interim periods are not necessarily indicative of the results for any subsequent quarter or the entire fiscal year ending December 31, 2005.

NOTE B — DISCONTINUED OPERATIONS

Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), established a single accounting model for the impairment or disposal of long-lived assets including discontinued operations. This statement requires that the operations related to segments that have been sold, or segments that are intended to be sold, be presented as discontinued operations in the statement of operations for all periods presented, and the segments intended to be sold are to be designated as “held for sale” on the balance sheet. In the event of a future asset sale, the company is required to reclassify portions of previously reported operations to discontinued operations within the Statements of Operations. For the six months ended June 30, 2004, income from discontinued operations relates to the disposition of subsidiaries providing management services.

In May 2004, the Company sold the subsidiaries of the Company that provide management services for $250,000 cash and a note receivable in the amount of $1,822,540. In the quarter ended March 31, 2004, the Company recorded an impairment of $37,931,116, representing the write down of certain assets of the those two subsidiaries that provided the management services to the value agreed to between the related party buyer and seller. The primary asset written down was the investment in preferred stock of an affiliate.

NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)

NOTE B — DISCONTINUED OPERATIONS — continued

The impairment loss resulted in the generation of a deferred tax asset of approximately $13,000,000 for which a valuation allowance of the entire amount has been provided since management cannot be assured of the utilization of the deferred tax asset.

The results of discontinued operations of the subsidiaries consisted of the following for the three months and six months ended June 30, 2005 and June 30, 2004:

		Three months ended June 30,								Six months ended June 30,
		2005				2004				2005				2004
Operating revenues		$	—			$	—			$	—			$	45,715
Net income from discontinued operations		$	—			$	—			$	—			$	45,715

NOTE B — REVERSE STOCK SPLIT

On June 7, 2004, the members of the Board of Directors of FEPI proposed and recommended to the stockholders a reverse-split on a 1-for-10 basis of the shares of Common Stock, par value $0.01 per share, without any adjustment to the par value per share, and without any reduction in the authorized number of shares of Common Stock at the same par value. The proposal was approved by the shareholders and became effective July 12, 2004. The share amounts in the accompanying financial statements and notes give effect to this reverse split as if it occurred at the beginning of earliest period presented.

FIRST EQUITY PROPERTIES, INC.

Item 2.		Managements Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three months ended June 30, 2005 compared to three months ended June 30, 2004

Currently the Company’s primary assets are interest bearing securities. Revenues from operations increased to $60,023 from prior year of $45,045 due to higher interest income as a result of three full months in 2005 of interest income from the note receivable received in the second quarter of 2004. Total operating expenses decreased to $5,798 in 2005 from $13,887 in 2004. The decrease in operating expenses was due to lower legal and professional fees in 2005.

Six months ended June 30, 2005 compared to six months ended June 30, 2004

Revenues from operations increased to $119,388 from prior year of $59,632 due to higher interest income as a result of six full months in 2005 of interest income from the note receivable received in the second quarter of 2004. Total operating expenses decreased to $11,309 in 2005 from $19,560 in 2004. The decrease in operating expenses was due to lower legal and professional fees in 2005. The discontinued operations represent the income from the management contracts of the company that were sold in May 2004.

Financial Condition and Liquidity

At June 30, 2005, the Company had total assets of $2,549,692 compared to $2,631,209 at December 31, 2004. Cash and cash equivalents were $951. Total liabilities were $2,259,340 versus $2,448,936 at December 31, 2004. The decrease in assets resulted from the collection of interest receivable which was then used to pay liabilities.

Item 4. Controls and Procedures

Based upon their most recent evaluation, which was completed as of the end of the period covered by this report, the Acting Principal Executive Officer and Acting Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective at June 30, 2005 to ensure that information required to be disclosed in reports within the time period specified in Securities and Exchange Commission rules and forms. There were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2005, that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

Part II Other Information

          Item 6. Exhibits

(a)		Exhibits
		Exhibit 31.1 — Certification Pursuant to Rules 13a-14 and 15d-14 Under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
		Exhibit 32.1 — Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to he signed on its behalf by the undersigned thereunto duly authorized.

		FIRST EQUITY PROPERTIES, INC.
August 19, 2005		/s/ Ken L. Joines,
		Vice President, Secretary and Chief      Accounting Officer