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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 for Quarterly Period Ended SEPTEMBER 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-30312
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
NORTH CAROLINA 56-1681116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WACHOVIA SECURITIES, NC0170
301 S. COLLEGE ST. - 17TH FLOOR
CHARLOTTE, NC 28288-0170
(Address of principal executive offices)
(Zip Code)
(704) 715-1384
(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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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 November 19, 2003
Page 1 of 9 Sequentially Numbered Pages
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
September 30,
2003 December 31,
(Unaudited) 2002
------------- ------------
ASSETS:
Unimproved Land Held for Investment Purposes $ 1,911,500 $ 1,911,500
Cash and Cash Equivalents 97,544 97,478
----------- -----------
TOTAL ASSETS $ 2,009,044 $ 2,008,978
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Accrued Liabilities $ 290 $ 20
Due to General Partner 37,348 356
----------- -----------
TOTAL LIABILITIES 37,638 376
----------- -----------
Class A Limited Partners' Interest 1,971,554 2,008,747
Subordinated Limited Partners' Interest 70 70
General Partners' Interest (219) (215)
----------- -----------
TOTAL PARTNER'S EQUITY 1,971,405 2,008,602
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY: $ 2,009,044 $ 2,008,978
=========== ===========
See attached notes to condensed financial statements
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------- -------------
INCOME:
Interest Income $ 13 $ 286 $ 186 $ 1,102
-------- -------- -------- --------
Total Income 13 286 186 1,102
EXPENSES:
Property Taxes 10 10 20 20
Insurance Expense 0 0 250 250
Professional and Legal Fees 6,910 250 18,450 9,930
General and Administrative Costs 5,426 10,013 18,662 17,836
-------- -------- -------- --------
Total Expenses 12,346 10,273 37,382 28,036
-------- -------- -------- --------
NET INCOME (LOSS) $(12,334) $ (9,987) $(37,197) $(26,934)
======== ======== ======== ========
NET INCOME (LOSS) ALLOCATION:
General Partners $ (1) $ (1) $ (4) $ (3)
Class A Limited Partners (12,332) (9,986) (37,193) (26,931)
-------- -------- -------- --------
Total Net Income (Loss)
Allocated to Partners $(12,334) $ (9,987) $(37,197) $(26,934)
======== ======== ======== ========
CLASS A LIMITED PARTNERSHIP
UNITS OUTSTANDING 7,650 7,650 7,650 7,650
======== ======== ======== ========
NET LOSS PER CLASS A
LIMITED PARTNERSHIP UNIT $ (1.61) $ (1.31) $ (4.86) $ (3.52)
======== ======== ======== ========
See attached notes to condensed financial statements
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
CONDENSED STATEMENT OF PARTNERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Subordinated
General Limited Limited
Partners Partners Partner Total
----------- ----------- ------------ -----------
Partners' Equity (Deficit)
at December 31, 2001 $ (212) $ 2,041,315 $ 71 $ 2,041,174
Net Income (Loss) for the Nine Months
Ended September 30, 2002 (3) (26,931) 0 (26,934)
----------- ----------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
AT SEPTEMBER 30, 2002 $ (215) $ 2,014,384 $ 71 $ 2,014,240
=========== =========== =========== ===========
Partners' Equity (Deficit)
at December 31, 2002 $ (215) $ 2,008,747 $ 70 $ 2,008,602
Net Income (Loss) for the Nine Months
Ended September 30, 2003 (4) (37,193) 0 (37,197)
----------- ----------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
AT SEPTEMBER 30, 2003 $ (219) $ 1,971,554 $ 70 $ 1,971,405
=========== =========== =========== ===========
See attached notes to condensed financial statements
4
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
Nine Months Nine Months
Ended Ended
September 30, September 30,
2003 2002
(Unaudited) (Unaudited)
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $ (37,197) $ (26,934)
Adjustments to reconcile net loss to net cash used for operations:
Increase in Accrued Liabilities 270 20
--------- ---------
Net Cash Used for Operating Activities: (36,927) (26,914)
CASH FLOW FROM FINANCING ACTIVITIES:
Advance from Related Party 36,992 0
--------- ---------
Net Cash Provided by Financing Activities $ 36,992 $ 0
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents $ 66 $ (26,914)
--------- ---------
Cash and Cash Equivalents at Beginning of Period 97,478 129,674
--------- ---------
Cash and Cash Equivalents at End of Period $ 97,544 $ 102,760
========= =========
See attached notes to condensed financial statements
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2003
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 nine month period ended September 30, 2003, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.
2. ORGANIZATION
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 November
11, 2003, there were 775 unit holders of record. The Partnership's business now
consists of holding for investment, disposing and otherwise dealing in
approximately 48 of the original 145 acres of undeveloped land ("the Property")
located in York County, South Carolina. On May 10, 2001, the Partnership sold
97 acres of the property to Greenfield Development Company and the Partnership
now holds approximately 48 of the remaining acres of the Property for sale.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1. LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2003, the Registrant had $97,544 on hand in the form of
cash and cash equivalents. The Registrant will retain this cash to pay ongoing
partnership expenses. Until the Registrant disposes of the Property, its only
sources of additional capital are additional loans and proceeds from the sale
of resources (i.e., timber) on the Property, if any.
On May 11, 2001, the Partnership sold 96.9 acres of the property to Greenfield
Development Company LLC. The gross sale price of the facility was $4,338,360. A
portion of the sale proceeds in the amount of $313,543 was used to pay debts to
the General Partner. Closing costs and pro-rations incurred at settlement
totaled $447,609 leaving net cash proceeds to the partnership of $3,577,208. On
June 14, 2001, a .33 acre right-of-way was purchased by South Carolina Dept. of
Transportation for $15,000.
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On June 29, 2001, a distribution of $3,467,975 (representing $453 per unit) was
distributed to the limited partners.
2. RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 2003 Compared to
the Three Months Ended September 30, 2002. The Registrant's net loss was
$12,334 for the three months ended September 30, 2003 as compared to a net loss
of $9,987 for the three months ended September 30, 2002. The difference between
the two periods is due to higher professional and legal fees incurred during
the 2003 period.
Results of Operations for the Nine Months Ended September 30, 2003 Compared to
the Nine Months Ended September 30, 2002. The Registrant's net loss was $37,197
for the nine months ended September 30, 2003 as compared to a net loss of
$26,934 for the nine months ended September 30, 2002. The difference between
the two periods is due to higher professional and legal fees incurred during
the 2003 period.
Professional and legal fees increased from $9,930 as of September 30, 2002, to
$18,450 for the nine months ended September 30, 2003. This increase is due to
the higher cost of accounting fees charged for tax preparation and electronic
filing changes that became effective in 2003 and outsourced database
maintenance fees, including the cost of printing partnership-addressed
envelopes to mail K-1s to the limited partners. All other expenses were in line
with those incurred during the third quarter 2002.
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnership does not hold any financial instruments with market risk
exposure.
4. CONTROLS AND PROCEDURES
The General Partner's Senior Vice President (the Partnership's principal
executive officer and principal financial officer) has concluded, as of the end
of the period covered by this report, based on his evaluation as required by
Rules 13a-15 or 15d-15 of the Securities Exchange Act of 1934, as amended, that
the Partnership's disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Partnership in the reports
filed or submitted by it under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and include controls and procedures
designed to ensure that information required to be disclosed by the Partnership
in such reports is accumulated and communicated to the Partnership's
management, including the General Partner's Senior Vice President, as
appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Partnership's internal control over financial
reporting identified in connection with the evaluation required by paragraph
(d) of Rules 13a-15 or 15d-15 of the Securities Exchange Act of 1934, as
amended, that occurred during the Partnership's last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
Partnership's internal control over financial reporting.
7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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.
The remaining approximate 48 acres of the Property is listed for sale
with Grubb & Ellis Bissell Patrick. Should a sale of the Property occur from
this contractual listing agreement, the past president of ISCR, J. Christopher
Boone, may receive a sales commission through a separate agreement between Mr.
Boone and Grubb & Ellis Bissell Patrick. As the purchase price of the Property
is not known, the Partnership is unable to determine the amount of the sales
commission, if any, that Mr. Boone may receive.
On September 30, 2003, an Offer to Purchase was received from a
potential buyer. The terms of this offer were not acceptable and a counter
offer was made and countered back. However, due to a contingency clause
relating to the purchase of an adjacent, unrelated property, the General
Partner decided it was not in the best interest of the Partnership to incur the
substantial cost of a Partnership vote with the possibility of the contingency
on the adjacent property expiring and canceling the offer. Negotiations are
ongoing as of the date of this filing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 31.1 Certification by Principal Executive and
Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification by Principal Executive and
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the
three months ended September 30, 2003.
8
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/Jeffrey K. Harpel
--------------------------------------------
Jeffrey K. Harpel
Date: November 19, 2003
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