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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Registrant's telephone number, including area code: (314) 955-4188

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 of 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

See Notes to Financial Statements.

See Notes to Financial Statements.

See Notes to Financial Statements.

See Notes to Financial Statements.

Note A Summary of Significant Accounting Policies

Gulledge Realty Investors II, L.P. (the Registrant) is a limited partnership organized in December 1983 under the laws of the Commonwealth of Virginia for the purpose of acquiring limited partner interests in real estate limited partnerships ("Project Partnerships"). These Project Partnerships include Colony Place Associates, Ltd. ("Colony"), Country Oaks Apartments Limited Partnership ("Country Oaks"), Hawthorn Housing Limited Partnership ("Hawthorn"), and Olympic Housing Limited Partnership ("Olympic"). The Project Partnerships previously included Pine West Ltd. and Rancho Vista Associates, which limited partner interests were sold in 2001, and Florence Housing Associates and Greentree Housing Limited Partnership, which assets were sold in 2000 and 1999, respectively. Each of the Project Partnerships is an operating real estate project which receives mortgage interest subsidies and/or rental assistance from the United States Department of Housing and Urban Development (HUD) or Farmer 's Home Administration. The Registrant commenced operations in March 1984.

The Registrant is in the process of selling the remaining Project Partnerships in order to liquidate its assets and dissolve. Hawthorn and Olympic are under sales contracts, subject to due diligence reviews and regulatory approval, with a third-party purchaser. Proceeds from the sale of Hawthorn will be used to pay the outstanding balance of the note payable and accrued interest (see Note B) and a significant amount of the liabilities of the Registrant. Proceeds from the sale of Olympic will also be used to pay liabilities of the Registrant. The Registrant does not anticipate that either sale will produce enough proceeds to make a distribution to the limited partners. The Registrant anticipates the sale of Olympic to close in the fourth quarter of 2002 and the sale of Hawthorn to close in the first half of 2003, but due to the buyer's due diligence being incomplete and the necessity of HUD approval, the timing and ultimate sale cannot be determined with certainty. The Registrant is under n egotiations with third parties to sell Colony and Country Oaks.

The financial statements include only those assets, liabilities, and results of operations which relate to the business of the Registrant and do not include any assets, liabilities, or operating results attributable to the partners' individual activities. These financial statements should be read in conjunction with the Registrant's annual report on Form 10-K for the year ended December 31, 2001. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim period have been reflected. All such adjustments consist of normal recurring accruals, unless otherwise disclosed in these interim

(Continued)

financial statements. The results of operations, for the nine months ended September 30, 2002, are not necessarily indicative of the results for the year ending December 31, 2002. Where appropriate, prior year's financial information has been reclassified to conform with the current year presentation.

Comprehensive income/(loss) for the nine month periods ended September 30, 2002 and 2001 were equal to the Registrant's net income/(loss).

Cash equivalents consist of interest bearing money market account balances.

The investments in Project Partnerships are accounted for using the equity method of accounting. Under the equity method, investments are reflected at cost, adjusted for the Registrant's share of the Project Partnerships' income or loss. The Registrant is under no obligation to contribute additional capital, or to lend monies necessary to fund cash flow deficiencies of the Project Partnerships, because the Registrant is a limited partner in such partnerships. The investment account will not be reduced below zero because the Registrant is not liable for Project Partnership losses in excess of such investment. Any distributions received from the Project Partnerships, subsequent to reducing the investment account to zero, will be recognized as income in the year received.

The Registrant's ownership interests in two other Project Partnerships (Colony and Olympic) are pledged as collateral in connection with promissory notes issued by the respective Project Partnerships. The Colony promissory note was due June 30, 1997 and had been extended to November 30, 1999, while the General Partner attempted to locate a buyer. A buyer was not located before November 30, 1999. This note is currently in default. Therefore, the Colony noteholder may demand payment and Colony may revert to its noteholder. The Olympic promissory note was due December 31, 2000. This note is currently in default. The Olympic noteholder has notified Olympic of its demand for payment. Therefore, Olympic may revert to its noteholder at any time. Olympic is under a sales contract to a third-party purchaser subject to a due diligence review and regulatory approval.

Notwithstanding the balances owed on the defaulted notes, none of the Project Partnerships are experiencing significant cash flow deficiencies.

(Continued)

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimated.

No provision has been made for current or deferred federal income taxes since they are the responsibility of each partner. Certain state income taxes are paid by the Registrant on behalf of the partners, and are expensed when paid. Profits (or gains) and losses of the Registrant are allocated to the partners in accordance with the partnership agreement.

The Registrant's principal line of business is investing in Project Partnerships that own and operate low-income housing projects that are financed and/or operated under federal or state housing assistance programs. Management believes that the Registrant operates in one business segment.

Note B Note Payable and Accrued Interest Payable

The note payable bears simple interest at a rate of 11 percent and is collateralized by the Registrant's ownership interest in Hawthorn, the Registrant's major source of distribution income. The note bore simple interest at a rate of 9 percent until the note expired on June 30, 2002, at which time, the interest rate increased to 11 percent. Under the terms of the note, principal and interest, as well as annual consulting fees of $19,000 to the general partner of the Registrant and $25,000 to the noteholder, are payable solely from distributions received by the Registrant from Hawthorn. The Registrant is not required to make any payments related to the note from distribution income it receives from any other Project Partnership. At September 30, 2002, the note plus accrued interest totaled $3,643,954. The note is currently in default and as a result, Hawthorn may revert to the noteholder. The noteholder has not notified the Registrant of a demand for payment or a claim on the collateral. Hawthorn is under a sales contract, subject to a due diligence review and regulatory approval, with a third-party purchaser.

The Registrant is a limited partnership formed to acquire limited partner interests in real estate limited partnerships (Project Partnerships). Part of the original objective of the Registrant was to generate tax losses for investors. However, due to changes in the tax regulations, there are some restrictions on the use of these losses. The Registrant is in the process of selling the remaining Project Partnerships in order to liquidate its assets and dissolve. The Registrant's investments in the Project Partnerships are recorded using the equity method of accounting (see Note A to Financial Statements).

Revenues were $410,201 for the nine months ended September 30, 2002 compared to $129,988 for the same period a year ago. Expenses increased to $390,848 compared to $367,683 in 2001. The increase in revenue was primarily due to an increase in distributions from zero-basis Project Partnerships. The increase in expense was mainly due to an increase in interest expense on the note payable.

The increase in distributions from zero-basis Project Partnerships in 2002 as compared to 2001 was mainly the result of the accounting treatment of distributions from limited liability partnerships under the equity method (see Note A to the Financial Statements). In 2002, the Registrant received a $399,314 distribution from Hawthorn, which was recognized as distributions from zero-basis Project Partnerships because the Registrant's beginning investment balance in Hawthorn was zero. In 2001, the Registrant received $373,481 of distributions from Hawthorn. The distribution reduced the Registrant's $286,570 beginning investment balance in Hawthorn to zero and the remaining $86,911 was recognized as distributions from zero-basis Project Partnerships. The increase in distribution income from Hawthorn was partially offset by a decrease in distributions received from the remaining Project Partnerships.

The decrease in equity in income of Project Partnerships was also due to the accounting treatment of investments in limited liability partnerships under the equity method. In 2002, the Registrant did not recognize equity in income of Project Partnerships from Hawthorn, because the beginning investment balance was zero. In 2001, the beginning investment balance in Hawthorn was above zero. The Registrant recognized $32,323 as equity in income of Project Partnerships, which represented its pro-rata share of the earnings of Hawthorn prior to receipt of a distribution. The distribution reduced the investment balance to zero and the remaining amount was recognized as distributions from zero-basis project partnerships as explained above.

The increase in miscellaneous income was due to a $10,000 deposit received under the terms of a contract for the sale of Colony. The prospective buyer exercised its right under the sales contract to terminate the sale, forfeiting the deposit to the Registrant.

(Continued)

The increase in operating expenses in 2002 as compared to 2001 was the result of an increase in state taxes being paid on behalf of two of the Project Partnerships.

The increase in interest expense in 2002 compared to 2001 was the result of a 2 percent increase in the interest rate of the note payable that became effective July 1, 2002.

The Registrant is liable for a promissory note that bears simple interest at a rate of 11 percent and is collateralized by the Registrant's ownership interest in Hawthorn. Principal and interest payable totaled $3,643,954 at September 30, 2002. Principal and interest can only be paid from distributions received from Hawthorn. The Registrant is not required to use distributions from any other Project Partnership to make payments on this promissory note. The promissory note along with accrued interest was due on June 30, 2002 and is currently in default. As a result, Hawthorn may revert to the noteholder (see Note B to Financial Statements). The noteholder has not notified the Registrant of a demand for payment or a claim on the collateral. Hawthorn is under a sales contract, subject to a due diligence review and regulatory approval, with a third party purchaser.

The Registrant's ownership interests in two other Project Partnerships (Colony and Olympic) are pledged as collateral in connection with promissory notes issued by the respective Project Partnerships. The Colony promissory note was due June 30, 1997 and had been extended to November 30, 1999, while the General Partner attempted to locate a buyer. A buyer was not located before November 30, 1999. This note is currently in default. Therefore, the Colony noteholder may demand payment and Colony may revert to its noteholder. The Olympic promissory note expired December 31, 2000. This note is currently in default. The Olympic noteholder has notified Olympic of its demand for payment. Therefore, Olympic may revert to its noteholder at any time. Olympic is under a sales contract to a third-party purchaser subject to a due diligence review and regulatory approval.

No material changes have occurred related to the Registrant's policies, procedures, controls or risk profile.

The management of the Registrant including Mr. Douglas L. Kelly as President and Mr. Joseph G. Porter as Vice President have evaluated the Registrant's disclosure controls and procedures. Under rules promulgated by the SEC, disclosure controls and procedures are defined as those "controls or other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms." Based on the evaluation of the Registrant's disclosure controls and procedures, it was determined that such controls and procedures were effective as of November 11, 2002, the date of the conclusion of the evaluation.

Further, there were no significant changes in the internal controls or in other factors that could significantly affect these controls after November 11, 2002, the date of the conclusion of the evaluation of disclosure controls and procedures.

Pursuant to the requirements of Section 13 or 15(d) 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.