<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, 1997
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 31, 1997
Page 1 of 11 Sequentially Numbered Pages
<PAGE> 2
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Balance Sheets
As of June 30, 1997, and December 31, 1996
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
ASSETS:
Land Held for Sale $ 6,534,310 $ 6,534,310
Cash and Cash Equivalents 3,309 0
Other 33,902 32,842
----------- -----------
$ 6,571,521 $ 6,567,152
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Checks Written in Excess of Recorded Bank Balance $ 0 $ 95
Accrued Liabilities 144,573 129,351
Note Payable 142,155 127,656
----------- -----------
286,728 257,102
----------- -----------
Class A Limited Partners' Interest 6,284,838 6,310,092
Subordinated Limited Partners' Interest 90 90
General Partners' Interest (135) (132)
----------- -----------
6,284,793 6,310,050
----------- -----------
$ 6,571,521 $ 6,567,152
=========== ===========
</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,
1997 1996 1997 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME:
Interest Income $ 578 $ 552 $ 1,132 $ 1,110
-------- -------- -------- --------
578 552 1,132 1,110
EXPENSES:
Property Taxes 43 43 87 87
Insurance Expense 146 146 292 292
Professional and Legal Fees 7,546 7,438 17,768 16,963
General and Administrative Costs 1,153 359 1,153 1,237
Interest Expense 3,710 3,221 7,089 6,233
-------- -------- -------- --------
12,598 11,207 26,389 24,812
-------- -------- -------- --------
NET LOSS ($12,020) ($10,655) ($25,257) ($23,702)
======== ======== ======== ========
NET LOSS ALLOCATION:
General Partners 1 1 (3) (2)
Class A Limited Partners 12,019 10,654 (25,254) (23,700)
-------- -------- -------- --------
$ 12,020 $ 10,655 ($25,257) ($23,702)
======== ======== ======== ========
CLASS A LIMITED PARTNERSHIP
UNITS OUTSTANDING 7,650 7,650 7,650 7,650
-------- -------- -------- --------
NET LOSS PER CLASS A UNIT $ 1.57 $ 1.39 ($ 3.30) ($ 3.10)
======== ======== ======== ========
</TABLE>
See Notes to Condensed Financial Statements
3
<PAGE> 4
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
Condensed Statements of Partners' Equity (Deficit)
For the Six Months Ended June 30, 1997, and 1996
(Unaudited)
<TABLE>
<CAPTION>
Subordinated
General Limited Limited
Partners Partners Partner Total
-------- -------- ------- -----
<S> <C> <C> <C> <C>
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
===== =========== === ===========
Partners' Equity (Deficit)
at December 31, 1996 ($132) $ 6,310,092 $90 $ 6,310,050
Net Loss for the Six Months
Ended June 30, 1997 (3) (25,254) 0 ($ 25,257)
----- ----------- --- -----------
Partners' Equity (Deficit)
at June 30, 1997 ($135) $ 6,284,838 $90 $ 6,284,793
===== =========== === ===========
</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, 1997, and 1996
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net Loss ($ 25,257) ($ 23,702)
Adjustments to reconcile net loss to net cash used for operations:
Increase in Accrued Liabilities 15,222 14,337
Increase in Other Assets (1,060) (1,060)
-------- --------
Net Cash Used for Operating Activities (11,095) (10,425)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Note Payable 14,499 11,000
-------- --------
Net Cash Provided by Financing Activities 14,499 11,000
Increase (Decrease) in Cash and Cash Equivalents 3,404 575
Cash and Cash Equivalents at Beginning
of Period (95) 591
-------- --------
Cash and Cash Equivalents at End of Period $ 3,309 $ 1,166
======== ========
</TABLE>
See Notes to Condensed Financial Statements
5
<PAGE> 6
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
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, 1997, are not
necessarily indicative of the results that may be expected for the year to end
December 31, 1997.
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 July 31, 1997, there were 772
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, 1997,
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, 1997, the Registrant had an account receivable from Performance
Investments, Inc. ("PII") which is 100% owned Mr. William Garith Allen and a
family member, of $17,427 plus accrued interest receivable of $16,475 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,
1997, and 1996, 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, 1997, the Registrant had $3,309 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 1997 in excess of the
cash and cash equivalents on hand as of June 30, 1997. 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, 1997, AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
For the six months ended June 30, 1997, the Partnership reported a net loss of
$25,257 as compared to a net loss of $23,702 for the six months ended June 30,
1996.
The Registrant incurred total expenses of $26,389 for the six month period,
compared to $24,812 for the same period in 1996. Interest expense increased $856
for the six months ended June 30, 1997, compared to the same period in 1996 due
to a higher level of borrowings outstanding. Professional and legal fees
increased $805 due primarily to higher charges for investor processing services.
THREE MONTHS ENDED JUNE 30, 1997, AS COMPARED TO THREE MONTHS ENDED
JUNE 30, 1996
The Partnership reported a net loss of $12,020 for the three months ended June
30, 1997, as compared to a net loss of $10,655 for the same period in 1996.
Total operating expenses increased from $11,207 to $12,598 for the three months
ended June 30, 1997.
Interest expense increased $489 and general and administrative costs increased
$794 for the three months ended June 30, 1997, compared to the same period in
1996. Interest expense increased as a result of higher borrowings. General and
administrative costs increased due to the timing of payments for fees associated
with SEC-required filings.
8
<PAGE> 9
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May, 1996, the Partnership filed a Complaint in the General Court of
Justice, Superior Court Division against William Garith Allen, a General
Partner, seeking in the alternative, damages for Mr. Allen's failure to purchase
the Property at the Put Price or an order, in accordance with the provisions of
the Partnership Agreement, that Mr. Allen has forfeited his right to a
distribution as the subordinated Limited Partner, that Mr. Allen is required to
withdraw as a General Partner and transfer his general partnership interest to
ISCR, and that he is required to cause Performance Investments Inc. to withdraw
as a general partner and transfer its general partnership interest to ISCR. In
the alternative, the Partnership is seeking damages equal to the difference
between the current value of the Property and the Put Price. The lawsuit is in
the preliminary discovery stage. Mr. Allen has not asserted any claims against
the Partnership and the Partnership believes that its claims against Mr. Allen
have merit. Mr. Allen has asserted that he is insolvent and will be unable to
satisfy any award that the Partnership may recover. The Partnership is
investigating that assertion and will continue to evaluate the claim and the
likelihood of any recovery based upon the information received from Mr.
Allen.
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.
ITEM 5. OTHER INFORMATION.
None.
9
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EX 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, 1997.
10
<PAGE> 11
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, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERSTATE LAND INVESTORS II FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,309
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,309
<PP&E> 6,534,310
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,571,521
<CURRENT-LIABILITIES> 286,728
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,284,793
<TOTAL-LIABILITY-AND-EQUITY> 6,571,521
<SALES> 0
<TOTAL-REVENUES> 1,132
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,089
<INCOME-PRETAX> (25,257)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,257)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,257)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
