<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for Quarterly Period Ended JUNE 30, 1996
Commission file number 33-30312
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
NORTH CAROLINA 56-1681116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
INTERSTATE TOWER
P. O. BOX 1012
CHARLOTTE, NC 28201-1012
(Address of principal executive offices)
(Zip Code)
(704) 379-9164
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
7,650 limited partnership units outstanding at July 10, 1996
Page 1 of 10 Sequentially Numbered Pages
<PAGE> 2
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Balance Sheets
As of June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
---------- ----------
<S> <C> <C>
ASSETS:
Land Held for Sale $6,534,310 $6,534,310
Cash and Cash Equivalents 1,166 591
Other 31,782 30,722
---------- ----------
$6,567,258 $6,565,623
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Accrued Liabilities 114,707 100,370
Note Payable 122,280 111,280
---------- ----------
236,987 211,650
---------- ----------
Class A Limited Partners' Interest 6,330,310 6,354,010
Subordinated Limited Partners' Interest 91 91
General Partners' Interest (130) (128)
---------- ----------
6,330,271 6,353,973
---------- ----------
$6,567,258 $6,565,623
========== ==========
</TABLE>
See Notes to Condensed Financial Statements
2
<PAGE> 3
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Statements of Operations
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME:
Interest Income $ 552 $ 530 $ 1,110 $ 1,061
-------- ------- -------- --------
552 530 1,110 1,061
EXPENSES:
Property Taxes 0 553 0 1,106
Professional and Legal Fees 7,584 6,117 17,255 16,599
Amortization of Organizational Costs 0 0 0 6,627
General and Administrative Costs 402 583 1,324 583
Interest Expense 3,221 2,456 6,233 4,764
-------- ------- -------- --------
11,207 9,709 24,812 29,679
-------- ------- -------- --------
NET LOSS $ 10,655 $ 9,179 $ 23,702 $ 28,618
======== ======= ======== ========
NET LOSS ALLOCATION:
General Partners (1) (1) (2) (3)
Class A Limited Partners (10,654) (9,178) (23,700) (28,615)
-------- ------- -------- --------
$(10,655) $(9,179) $(23,702) $(28,618)
======== ======= ======== ========
CLASS A LIMITED PARTNERSHIP
UNITS OUTSTANDING 7,650 7,650 7,650 7,650
-------- ------- -------- --------
NET LOSS PER CLASS A UNIT $ (1.39) $ (1.20) $ (3.10) $ (3.74)
======== ======= ======== ========
</TABLE>
See Notes to Consensed Financial Statements
3
<PAGE> 4
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Statements of Partners' Equity (Deficit)
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(Unaudited)
Subordinated
General Limited Limited
Partners Partners Partner Total
-------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Partners' Equity (Deficit)
at December 31, 1994 $ (128) $6,354,010 $ 91 $6,353,973
------- ---------- ------ ----------
Net Loss for the Six Months
Ended June 30, 1995 (3) (28,615) 0 (28,618)
------- ---------- ------ ----------
Partners' Equity (Deficit)
at June 30, 1995 $ (131) $6,325,395 $ 91 $6,325,355
======= ========== ====== ==========
Partners' Equity (Deficit)
at December 31, 1995 $ (128) $6,354,010 $ 91 $6,353,973
Net Loss for the Six Months
Ended June 30, 1996 (2) (23,700) 0 (23,702)
------- ---------- ------ ----------
Partners' Equity (Deficit)
at June 30, 1996 $ (130) $6,330,310 $ 91 $6,330,271
======= ========== ====== ==========
</TABLE>
See Notes to Condensed Financial Statements
4
<PAGE> 5
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
(Unaudited) (Unaudited)
------------ -------------
<S> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net Loss $(23,702) $(28,618)
Adjustments to reconcile net loss to net
cash used for operations:
Amortization of Organizational Costs 0 6,627
Increase in Property Taxes Payable 0 1,106
Increase in Accrued Liabilities 14,337 8,832
Increase in Other Assets (1,060) (1,060)
-------- --------
Net Cash Used for Operating Activities (10,425) (13,113)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Note Payable 11,000 14,037
-------- --------
Net Cash Provided by Financing Activities 11,000 14,037
Increase (Decrease) in Cash and Cash Equivalents 575 924
Cash and Cash Equivalents at Beginning
of Period 591 40
-------- --------
Cash and Cash Equivalents at End of Period $ 1,166 $ 964
======== ========
</TABLE>
See Notes to Condensed Financial Statements
5
<PAGE> 6
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year to end
December 31, 1996.
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interstate Land Investors II Limited Partnership ("Registrant" or
"Partnership") is a North Carolina limited partnership. The Partnership filed
registration statements in 1989 and 1990 and offered the sale of the limited
partnership interests to persons who were admitted as limited partners. The
initial offering became effective September 29, 1989 and was terminated
November 3, 1989. The post effective amendment was filed in August 1990,
approved in November 1990 and closed November 30, 1990. Capital contributions
of $100 were received from the general partners and $7,650,000 from the limited
partners. The limited partnership units were sold in $1,000 units. On August
14, 1996, there were 769 unit holders of record. The Partnership's business
now consists of holding for investment, disposing and otherwise dealing in 145
acres of undeveloped land ("the Property") located in York County, South
Carolina. As of July 31, 1996, the Partnership held all 145 acres of the
Property.
Until January 1, 1993, the Managing General Partner was Performance
Investments, Inc. (PII), which is 100% owned by Mr. William Garith Allen and a
family member. Mr. Allen and ISC Realty Corporation (ISCR) are also General
Partners in the Partnership and effective January 1, 1993, assumed the role of
co-managing partners. Mr. Allen also holds all of the Subordinated Limited
Partner interest, which may be assigned to one of his affiliates at any time.
The General Partners are solely responsible for the day-to-day management and
operation of the property. ISCR is responsible for certain administrative
functions of the Partnership and beginning in November, 1989, is entitled to an
annual administrative fee equal to .25% of the cost of the property acquired.
Payment of such administrative fee is deferred until the sale of the property
and the return of the Class A Limited Partners' invested capital plus their
preferred return, as defined.
6
<PAGE> 7
3. RELATED PARTY TRANSACTIONS
At June 30, 1995 the Registrant had an account receivable from Performance
Investments, Inc. ("PII") which is 100% owned Mr. William Garrith Allen and a
family member, of $17,427 plus accrued interest receivable of $14,355 related
to the reimbursement of certain costs required in connection with organizing
the Partnership and the property. In connection with the consent order entered
into in November 1991, the amount will be offset against any amounts due PII or
Mr. Allen in connection with the sale of the property.
The Partnership incurred expense of $8,105 for the six months ended June 30,
1996 and 1995, respectively for service rendered by ISCR in connection with
certain administrative functions of the Partnership. Since payments of these
fees is deferred, they are included in accrued liabilities in the accompanying
balance sheets.
7
<PAGE> 8
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Registrant had $1,166 on hand in the form of cash and
cash equivalents. These funds will be maintained as working capital reserves
to fund the costs of ad valorem taxes, insurance, administrative expenses and
other costs and expenses associated with owning the Property. The Registrant
anticipates that it will incur operating expenses during 1996 in excess of the
cash and cash equivalents on hand as of June 30, 1996. On May 23, 1995 the
General Partner, ISCR, paid off an existing line of credit with First Citizens
Bank and entered into an agreement to advance up to $150,000 to the Partnership
as needed. The advances accrue interest at Prime plus 2% and will only be
repaid upon the sale of the property in accordance with Section 8.2 of the
Agreement of Limited Partnership.
Until the Registrant disposes of the Property, its only sources of additional
capital are loans and advances.
2. RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
For the six months ended June 30, 1996 the Partnership reported a net loss of
$23,702 as compared to a net loss of $28,618 for the six months ended June 30,
1995.
The Registrant incurred total expenses of $24,812 for the six month period,
compared to $29,679 for the same period in 1995. Property tax decreased from
$1,106 for the six months ended June 30, 1995 to $0 for the same period in 1996
as a result of the property tax exemption filed in 1993 with the York County
Assessors office. Amortization expense decreased from $6,627 for the six
months ended June 30, 1995 to $0 for the same period in 1996 due to the
completion of amortization of the organizational costs in the first quarter
1995. Interest expense increased $1,469 for the six months ended June 30, 1996
compared to the same period in 1995 due to a higher level of borrowings
outstanding.
THREE MONTH'S ENDED JUNE 30, 1996 AS COMPARED TO THREE MONTHS ENDED JUNE 30,
1995
The Partnership reported a net loss of $10,655 for the three months ended June
30, 1996 as compared to a net loss of $9,179 for the same period in 1995.
Total operating expenses increased from $9,709 to $11,207 for the three months
ended June 30, 1996.
Interest expense increased $765 and professional fees increased $1,467 for the
three months ended June 30, 1996 compared to the same period in 1995. Interest
expense increased as a result of higher borrowings. Professional fees
increased due to the timing of payments for audit and tax return costs.
8
<PAGE> 9
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership filed a complaint on May 24, 1996 against Mr. Allen for
failure to purchase the property at the "Put Price". The outcome of the action
is indeterminable at this time. The Partnership is seeking damages as
determined by the court for breach of contract.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None. There were no matters submitted for vote during the quarter covered
by this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the six months
ended June 30, 1996.
9
<PAGE> 10
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
SIGNATURE
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.
INTERSTATE LAND INVESTORS II
LIMITED PARTNERSHIP
By: ISC REALTY CORPORATION
--------------------------------
As Principal Executive Officer,
Principal Financial Officer, and
Principal Accounting Officer of
the Registrant
By: /S/ J. Christopher Boone
--------------------------------
J. Christopher Boone
President
Date: August 13, 1996
------------------
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,166
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,534,310
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,567,258
<CURRENT-LIABILITIES> 0
<BONDS> 236,987
0
0
<COMMON> 0
<OTHER-SE> 6,330,271
<TOTAL-LIABILITY-AND-EQUITY> 6,567,258
<SALES> 1,110
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,233
<INCOME-PRETAX> (23,702)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,702)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,702)
<EPS-PRIMARY> (3.10)
<EPS-DILUTED> (3.10)
</TABLE>
