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:
September 30, 1999 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
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4425 N. 24th Street, Suite 225
Phoenix, Arizona 85016
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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 [ ]
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
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)
September 30, September 30,
1999 1998
----------- -----------
ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,100,520 1,100,520
Furniture and fixtures 25,446 25,446
----------- -----------
1,368,791 1,368,791
Less accumulated depreciation 471,941 434,462
----------- -----------
896,850 934,329
Cash and cash equivalents 50,772 54,196
Other assets 3,200 2,700
----------- -----------
$ 950,822 $ 991,225
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 34,282 33,479
Commitments (Note 3)
Partners' capital
General partner (6,030) (3,035)
Limited partners 968,556 1,012,827
Less amount due from
general partner (45,986) (52,046)
----------- -----------
$ 950,822 $ 991,225
=========== ===========
See notes to financial statements.
2
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENT OF OPERATIONS
(unaudited)
For the Year For the Year
For the Nine Months Ended Ended Ended
------------------------------ ------------ ------------
September 30, September 30, December 31, December 31,
1999 1998 1998 1997
------------- ------------- ------------ ------------
Income
Rental $ 161,417 $161,817 $216,513 $231,117
Interest 587 1,220 1,420 1,854
--------- -------- -------- --------
162,004 163,037 217,933 232,967
--------- -------- -------- --------
Expenses
Property Operations 89,105 74,745 103,495 107,676
Administration 45,604 47,154 56,537 52,718
Amortization &
Depreciation 27,600 27,000 36,879 35,610
--------- -------- -------- --------
162,309 148,899 196,911 196,004
--------- -------- -------- --------
Net Income (loss) $ (305) $ 14,138 $ 21,022 $ 36,963
========= ======== ======== ========
See notes to financial statements.
3
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Nine Months Ended
----------------------------
September 30, September 30,
1999 1999
------------ -------------
Cash Flows From Operating Activities
Cash received from customers $ 161,417 $ 161,817
Cash paid to suppliers (123,825) (110,029)
Interest received 587 1,220
--------- ---------
Net cash provided by operating activities $ 38,179 $ 53,008
--------- ---------
Cash Flows From Investing Activities
Capital improvements $ -- $ (35,165)
--------- ---------
Net cash used in investing activities $ -- $ (35,165)
--------- ---------
Cash Flows From Financing Activities
Distribution to partners $ (50,520) $ (63,150)
--------- ---------
Net cash used in financing activities $ (50,520) $ (63,150)
--------- ---------
Increase (decrease) in cash $ (12,341) $ (45,307)
Cash and cash equivalents:
Beginning 63,113 99,503
--------- ---------
Ending $ 50,772 $ 54,196
========= =========
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
Net income (loss) $ (305) $ 14,138
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 27,600 27,000
Change in assets and liabilities:
Increase (decrease) in accounts payable 10,884 11,870
--------- ---------
Net cash provided by operating activities $ 38,179 $ 53,008
========= =========
See Notes to Financial Statements.
4
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1999
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
-----
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.
5
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1999
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 nine months ended September 30, 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, 1999, 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.
6
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1999
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 September 30, 1999 the
balance due from former General Partner was $45,986.
NOTE 5 IMPACT OF YEAR 2000
The Company's assessment of its Year 2000 issues is complete. The Company
has determined that there is likely to be no material adverse consequence
of Year 2000 issues on the Company's business, results of operations, or
financial condition. The Company has few information technology or
non-information technology aspects which may be affected by Year 2000;
those that may be affected are the computing system used to administer
operations. Investigation and queries of the software and hardware
suppliers have determined by written statements or other assurances that
they are Year 2000 compliant. The Company has no major supplier, vendor, or
customers which is likely to materially affect the Company if it is
affected by the Year 2000 problem. The Company has determined that it is at
little risk of material disruption of its business due to Year 2000 issues.
In the event the computing system fails, the Company will purchase and
replace the necessary hardware and software for critical systems and
contact the software and hardware suppliers to replace, at their cost, the
failed components for remaining computers. Costs for the Year 2000
compliance have been for investigation only and no remedial actions have or
will be taken. The costs have been minimal and are not material to the
financial condition of the Company.
7
<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
$161,417 during the first nine months of 1999 compared to $161,817 during the
first nine months of 1998. The facility reached an occupancy level of 77% at the
end of September, 1999, down from 83% a year ago.
Operating expenses through September 30, 1999 were $89,105 compared to
$74,745 for 1998. Increases in property taxes, salaries, and repairs were
responsible for the increases. Administrative expenses for 1999 were $45,604
opposed to $47,154 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Partnership held cash and cash equivalents
totaling $50,772 as compared to $54,196 for the corresponding quarter of 1998.
8
<PAGE>
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS:
Not applicable.
ITEM 2: CHANGES IN SECURITIES:
Not applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES:
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
ITEM 5: OTHER INFORMATION:
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: 11/8/99
---------------------------
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 50,772
<SECURITIES> 0
<RECEIVABLES> 6,400
<ALLOWANCES> 3,200
<INVENTORY> 0
<CURRENT-ASSETS> 53,972
<PP&E> 1,368,791
<DEPRECIATION> 471,941
<TOTAL-ASSETS> 950,822
<CURRENT-LIABILITIES> 34,282
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 916,540
<TOTAL-LIABILITY-AND-EQUITY> 950,822
<SALES> 0
<TOTAL-REVENUES> 162,004
<CGS> 0
<TOTAL-COSTS> 116,705
<OTHER-EXPENSES> 45,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (305)
<INCOME-TAX> 0
<INCOME-CONTINUING> (305)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (305)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
