SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 1998 33-2732
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ARMORED STORAGE INCOME INVESTORS 2
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(Exact name of Registrant as specified in its charter)
California 93-0930503
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3839 N. 3rd Street, Suite 108
Phoenix, Arizona 85012
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(Address of and zip code of principal executive offices)
(602) 230-1655
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(Registrant's telephone number, including area code)
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
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<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
PART I
FINANCIAL INFORMATION
---------------------
ITEM 1 FINANCIAL STATEMENTS PAGE
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Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Unaudited Financial Statements 6
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2
a California Limited Partnership
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
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ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,096,049 1,068,145
Furniture and fixtures 25,446 22,655
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1,364,320 1,333,625
Less accumulated depreciation (416,462) (407,462)
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947,858 926,163
Cash and cash equivalents 65,298 99,503
Due from former General Partner(Note 4) 52,046 52,046
Other assets 2,700 2,700
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$ 1,067,902 $ 1,080,412
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 13,988 21,609
Commitments (Note 3)
Partners' capital
General partner (3,986) (3,742)
Limited partners 1,057,900 1,062,545
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$ 1,067,902 $ 1,080,412
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See Notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENT OF OPERATIONS
(unaudited)
For the Three Months For the Year For the Year
Ended Ended Ended
------------------------ ------------ ------------
March March December December
31, 1998 31, 1997 31, 1997 31, 1996
-------- -------- -------- --------
Income
Rental $ 54,738 $ 59,855 $231,117 $221,032
Interest 476 401 1,850 1,504
-------- -------- -------- --------
55,214 60,256 232,967 222,536
-------- -------- -------- --------
Expenses
Property Operations 24,203 28,410 107,676 95,154
Administration 26,901 17,809 52,718 49,875
Amortization &
Depreciation 9,000 8,135 35,610 35,492
-------- -------- -------- --------
60,104 54,354 196,004 180,521
-------- -------- -------- --------
Net Income (loss) $ (4,890) $ 5,902 $ 36,963 $ 42,015
======== ======== ======== ========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Three Months Ended
------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
Cash Flows From Operating Activities
Cash received from customers $ 54,738 $ 59,855
Cash paid to suppliers (60,099) (53,382)
Interest received 1,850 401
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Net cash provided by operating activities $ (3,511) 6,874
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Cash Flows From Investing Activities
Additions to property (30,694) --
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Cash Flows From Financing Activities
Distributions to partners -- --
-------- --------
Net cash used in financing activities -- --
-------- --------
Increase (decrease) in cash $(34,205) $ 6,874
Cash and cash equivalents:
Beginning 99,503 87,874
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Ending $ 65,298 $ 94,748
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Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ (4,890) $ 5,902
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 9,000 8,135
Change in assets and liabilities:
Increase (decrease) in accounts payable (7,621) (7,163)
-------- --------
Net cash provided by operating activities $ (3,511) $ 6,874
======== ========
See Notes to Financial Statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
March 31, 1998
NOTE 1: Partnership Organization
Armored Storage Income Investors 2 ("the Partnership") was organized
under the laws of the State of California pursuant to an agreement of
limited partnership filed January 13, 1986, for the purpose of
acquiring, developing and operating self-service storage facilities.
The Partnership was authorized to issue a total of 20,000 units for a
total offering of $10,000,000. Sales of the Partnership units commenced
in April of 1986. The Partnership reached its minimum funding
requirement of 2,400 units of limited partnership interests on
September 22, 1986, and has sold 4,210 units in total. The
Partnership's offering period closed on April 3, 1987.
NOTE 2: Summary of Significant Accounting Policies
Property and equipment:
Property and equipment is stated at cost. Depreciation is
computed principally by the straight-line method over the
following estimated useful lives:
Years
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Building 30
Furniture and Fixtures 5
Interest, real estate taxes and other costs including
acquisition fees related directly to properties under
long-term development contracts were capitalized. Costs were
not capitalized beyond net realizable value. Costs related to
operating properties are expensed as incurred.
Rental income:
The Partnership receives rental income from its existing
self-storage facility. All rental agreements are for
month-to-month tenancy. Rental income is recognized on the
accrual basis in accordance with generally accepted accounting
principles.
Income taxes:
The Partnership does not record a provision for income taxes,
since Federal and state income tax regulations provide that
any taxes on income of a Partnership are payable by the
partners as individuals. The Partnership's tax returns are
prepared on the accrual basis.
Syndication fees:
Syndication fees are those expenses incurred in the issuing
and marketing of partnership interests. These expenses include
broker and registration fees, legal fees, tax and accounting
fees, and printing costs. These fees are not amortizable and
are presented as a reduction in partners' capital in the
financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
March 31, 1998
NOTE 2. Summary of Significant Accounting Policies, continued
Organization costs:
Organization costs which are included in other assets consist
of legal fees incident to the creation of the Partnership,
accounting fees for establishing an accounting system and
filing fees. These costs are being amortized using the
straight-line method over 60 months.
Cash and cash equivalents:
For purposes of reporting cash flows, the Partnership
considers all money market funds to be cash equivalents.
Unaudited financial statements:
The financial statements for the three months ended March 31,
1999 are unaudited, however, in management's opinion they
include all adjustments necessary for a fair statement of the
results of operations for such interim periods. The interim
period results of operations are not necessarily indicative of
results for a full year.
NOTE 3: Commitments
The partnership has the following commitments:
(a) The Partnership entered into an agreement with Armored
Management, LLC on January 1, 1998, to manage the
Partnership's self-storage facility. The term of the agreement
is for one year and shall be renewed from year to year unless
and until either party terminates the agreement. The agreement
provides that the manager shall receive, as compensation for
services, 6% of the actual gross cash receipts.
(b) The Partnership also entered into an agreement with Armored
Management, LLC for the management of the Partnership's
accounting, securities reporting, database and investor
relations activities. The term of the agreement is for one
year and shall be renewed from year to year unless and until
either party terminates the agreement. The agreement provides
for a flat fee of $3,000 per month as compensation for
administrative services.
(c) The Partnership reimburses the General Partner for the costs
of goods and materials used by and for the Partnership and
administrative services necessary to the operation of the
Partnership.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
March 31, 1998
NOTE 4: Due From Former General Partner
Due from former General Partner represents a receivable to the
Partnership for those amounts reimbursed to the former Managing General
Partner for syndication fees incurred in excess of the percentage
allowable by the Partnership's prospectus with respect to the total
amount of limited partners capital raised. On April 3, 1987 the
offering was terminated. Based on actual units sold through the date of
termination, it was determined by the General Partner that too much had
been paid to the former Managing General Partner. The excess, which
amounted to $93,438, has been reclassified to due from former General
Partner. At March 31, 1998 the balance due from former General Partner
was $52,046.
<PAGE>
PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Partnership has one operating facility located in Phoenix, Arizona.
The Partnership's facility generated an aggregate gross operating revenue of
$54,738 during the first three months of 1998 compared to $59,855 during the
first three months of 1997. The facility maintained an occupancy level of 80% at
the end of March 1998, down from 90% the prior year.
Operating expenses through March 31, 1998 were $24,203 compared to
$28,410 for 1997. Advertising costs were the main reason for the decrease from
the prior year. Administrative expenses for 1998 were $26,901 opposed to $17,809
in 1997. Timing differences explain the variation between the two years.
The property has had increased vacancies due to increased competition
in the metro Phoenix market and due to some maintenance issues affecting several
rental lockers. During the quarter over $30,000 was invested in the property to
help turn the occupancy rate around.
Liquidity and Capital Resources
As of March 31, 1998, the Partnership held cash and cash equivalents
totaling $65,298 as compared to $94,748 for the corresponding quarter of 1997.
<PAGE>
PART II
OTHER INFORMATION
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Item 1: Legal Proceedings:
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Not applicable.
Item 2: Changes in securities:
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Not applicable.
Item 3: Defaults Upon Senior Securities:
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Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders:
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Not applicable.
Item 5: Other information:
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Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARMORED STORAGE INCOME INVESTORS 2
(Registrant)
By: Armored Management L.L.C.
Its General Partner
By: /s/ Dale D. Ulrich
--------------------------
Dale D. Ulrich, Member
Dated: 5/7/98
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Armored Storage Income Investors 2 Limited Partnership
Appendix A to Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
3 Months Ended March 31, 1998
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 65,298
<SECURITIES> 0
<RECEIVABLES> 5,400
<ALLOWANCES> 2,700
<INVENTORY> 0
<CURRENT-ASSETS> 67,998
<PP&E> 1,364,320
<DEPRECIATION> 416,462
<TOTAL-ASSETS> 1,067,902
<CURRENT-LIABILITIES> 13,988
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,053,914
<TOTAL-LIABILITY-AND-EQUITY> 1,067,902
<SALES> 0
<TOTAL-REVENUES> 55,214
<CGS> 0
<TOTAL-COSTS> 33,203
<OTHER-EXPENSES> 26,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,890)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
