SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO 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
Commission file number 000-18547
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
| North Carolina (State or other jurisdiction of incorporation or organization) |
56-1669199 (I.R.S. Employer Identification No.) |
ISC REALTY CORPORATION
1329 EAST MOREHEAD STREET, SUITE 201
CHARLOTTE, NC 28204
(Address of principal executive offices)
(Zip Code)
(704) 383-7918
(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 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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
Form 10-Q
FORWARD LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q include “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Act of 1934, as amended (the “Exchange Act”). Forward looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industry and economies in which we operate and other information that is not historical information. You can identify a forward looking statement by our use of the words “anticipate”, “estimate”, “expect”, “intend”, “plan”, “may”, “will”, “continue”, “believe”, “objective”, “projection”, “forecast”, “goal”, and similar expressions. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed or anticipated in any such forward looking statements.
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PART I. FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
BALANCE SHEETS
(Unaudited)
September 30, 2004 and December 31, 2003
| September 30, | December 31, | |||||||
| 2004 |
2003 |
|||||||
ASSETS |
||||||||
Unimproved land held for investment purposes |
$ | 1,911,500 | 1,911,500 | |||||
Cash and cash equivalents |
11,291 | 60,261 | ||||||
Total assets |
$ | 1,922,791 | 1,971,761 | |||||
LIABILITIES AND PARTNERS’ CAPITAL |
||||||||
Liabilities |
||||||||
Accrued expenses |
20,491 | 3,882 | ||||||
Due to general partner |
15,001 | 1,991 | ||||||
Total liabilities |
35,492 | 5,873 | ||||||
Partners’ Capital
|
||||||||
Class A limited partners’ interest (authorization, 9,588 units; issued and
outstanding, 7,650 units in 2004 and 2003) |
1,887,459 | 1,966,038 | ||||||
Subordinated limited partner interest |
67 | 69 | ||||||
General partners’ capital deficiency |
(227 | ) | (219 | ) | ||||
Total partners’ capital |
1,887,299 | 1,965,888 | ||||||
Total liabilities and partners’ capital |
$ | 1,922,791 | 1,971,761 | |||||
See accompanying notes to financial statements.
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months and Nine Months Ended September 30, 2004 and 2003
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
OPERATING REVENUE |
||||||||||||||||
Interest |
$ | 82 | 13 | 337 | 186 | |||||||||||
Total operating revenue |
82 | 13 | 337 | 186 | ||||||||||||
OPERATING EXPENSE |
||||||||||||||||
Professional fees |
19,038 | 11,781 | 75,852 | 34,682 | ||||||||||||
Property tax |
28 | 10 | 84 | 20 | ||||||||||||
General and administrative |
870 | 555 | 2,990 | 2,680 | ||||||||||||
Total operating expense |
19,936 | 12,346 | 78,926 | 37,382 | ||||||||||||
Net loss |
$ | (19,854 | ) | (12,333 | ) | (78,589 | ) | (37,196 | ) | |||||||
NET LOSS ALLOCATED TO |
||||||||||||||||
Class A limited partners |
$ | (19,852 | ) | (12,332 | ) | (78,579 | ) | (37,193 | ) | |||||||
Subordinated limited partner |
— | — | (2 | ) | — | |||||||||||
General partners |
(2 | ) | (1 | ) | (8 | ) | (3 | ) | ||||||||
Net loss |
$ | (19,854 | ) | (12,333 | ) | (78,589 | ) | (37,196 | ) | |||||||
Weighted average Class A limited
partnership units outstanding |
7,650 | 7,650 | 7,650 | 7,650 | ||||||||||||
Net loss per weighted average Class A
limited partnership unit |
$ | (2.60 | ) | (1.61 | ) | (10.27 | ) | (4.86 | ) | |||||||
See accompanying notes to financial statements.
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
STATEMENTS OF PARTNERS’ CAPITAL
(Unaudited)
Nine Months Ended September 30, 2004 and 2003
| Class A Limited Partners |
Subordinated |
|||||||||||||||||||
| Limited | General | |||||||||||||||||||
| Units |
Capital |
Partner |
Partners |
Total |
||||||||||||||||
Partners’ capital (deficiency),
December 31, 2002 |
7,650 | $ | 2,008,747 | 70 | (215 | ) | 2,008,602 | |||||||||||||
Net loss |
— | (37,193 | ) | — | (3 | ) | (37,196 | ) | ||||||||||||
Partners’ capital (deficiency),
September 30, 2003 |
7,650 | 1,971,554 | 70 | (218 | ) | 1,971,406 | ||||||||||||||
Partners’ capital (deficiency),
December 31, 2003 |
7,650 | 1,966,038 | 69 | (219 | ) | 1,965,888 | ||||||||||||||
Net loss |
— | (78,579 | ) | (2 | ) | (8 | ) | (78,589 | ) | |||||||||||
Partners’ capital (deficiency),
September 30, 2004 |
7,650 | $ | 1,887,459 | 67 | (227 | ) | 1,887,299 | |||||||||||||
See accompanying notes to financial statements.
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, 2004 and 2003
| Nine Months Ended | ||||||||
| September 30, |
||||||||
| 2004 |
2003 |
|||||||
OPERATING ACTIVITIES |
||||||||
Net loss |
$ | (78,589 | ) | $ | (37,196 | ) | ||
Adjustments to reconcile net loss to net cash
provided by operating activities |
||||||||
Increase in
due to general partner - related party |
13,010 | 36,992 | ||||||
Increase in accrued expenses |
16,609 | 270 | ||||||
Net cash provided by operating activities |
(48,970 | ) | 66 | |||||
Increase (decrease) in cash and cash equivalents |
(48,970 | ) | 66 | |||||
Cash and cash equivalents, beginning of period |
60,261 | 97,478 | ||||||
Cash and cash equivalents, end of period |
$ | 11,291 | $ | 97,544 | ||||
See accompanying notes to financial statements.
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
NOTE TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2004 and 2003
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Interstate Land Investors II Limited Partnership (“Registrant” or “Partnership”) is a North Carolina limited partnership. The Partnership’s business consists of holding for investment, disposing and otherwise dealing in approximately 48 acres of undeveloped land (the “Property”) located in York County, South Carolina.
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, the financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited financial statements of the Registrant, include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such financial statements for all periods presented. The financial position and results of operations as of and for the three months and nine months ended September 30, 2004, are not necessarily indicative of the results of operations that may be expected in the future.
Please refer to the Registrant’s 2003 Annual Report on Form 10-K for additional information related to the Registrant’s organization and to the Registrant’s audited financial statements for the two years ended December 31, 2003, including the related notes to financial statements.
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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES.
As of September 30, 2004, the Registrant had $11,291 in cash and cash equivalents. The Registrant will retain this cash to pay ongoing partnership expenses. Until the Registrant disposes of the remaining approximately 48 acres of Property, its only sources of additional capital are from general partner advances or other borrowings. A line of credit of $200,000 has been established by the general partner for the purpose of making advances to the Registrant to cover future operating expenses of the Registrant. The general partner advanced $15,000 to the Registrant from this line of credit during the quarter. Prior advances made to the Registrant totaling $64,307 were repaid in August 2004 from cash on hand.
As of September 30, 2004, the amount due to general partner was $15,001 compared to $1,991 on December 31, 2003. This increase from the end of 2003 was driven by expenses incurred by the Registrant during the first nine months of 2004.
RESULTS OF OPERATIONS.
Three months ended September 30, 2004
The Registrant’s net loss was $19,854 for the third quarter of 2004 as compared to a net loss of $12,333 for the same period in 2003. The increased loss for the current quarter was primarily due to higher professional fees.
Interest income of $82 for the third quarter 2004 increased from $13 for the same quarter last year due to a higher interest rate paid for cash on hand in 2004.
Professional fees increased to $19,038 in the third quarter of 2004 compared to $11,781 for the third quarter of 2003. This increase primarily reflects higher database management fees as well as increased audit fees.
Nine months ended September 30, 2004
The Registrant’s net loss was $78,589 for the first nine months of 2004 as compared to a net loss of $37,196 for the same period in 2003. The increased loss for the first nine months of 2004 compared to the same period last year was primarily due to higher professional fees.
Interest income of $337 for the first nine months of 2004 increased from $186 for the same period last year due to a higher interest rate paid for cash on hand in 2004.
Professional fees increased to $75,852 for the first nine months of 2004 compared to $34,682 for the same period in 2003. The increase reflects higher accounting and legal fees as well as higher database management fees. General and Administrative expenses increased to $2,990 for the first nine months of 2004 compared to $2,680 for the same period in 2003.
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnership does not hold any financial instruments with market risk exposure.
ITEM 4 — CONTROLS AND PROCEDURES.
As of September 30, 2004, the end of the period covered by this Quarterly Report on Form 10-Q, the Registrant’s general partner (the Partnership’s principal executive officer and principal financial officer), acting through its President, evaluated the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the President concluded that as of September 30, 2004, the end of the period covered by this Quarterly Report on Form 10-Q, the Registrant maintained effective disclosure controls and procedures. In addition, no change in the Registrant’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter to which this Quarterly Report on Form 10-Q relates that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The remaining approximate 48 acres of the Property is listed for sale with Grubb & Ellis Bissell Patrick. Two Offers to Purchase have been received from potential buyers. The first offer was received on June 29, 2004 for the purchase of Tract 1A which is approximately 17 acres. A second offer was received on July 20, 2004 for the purchase of both Tract 1A and Tract 1D, which comprise the remaining 48 acres of the Property. Neither of these offers materialized into formal sale agreements and discussions have ceased with these potential buyers. Inquiries on the property by potential purchasers have continued, however, no formal offers are outstanding as of the date of this report.
Effective August 13, 2004, ISC Realty Corporation (“ISCR”), which is the general partner of Interstate Land Investors II Limited Partnership, was sold to Vineyard Capital Advisors, LLC, which is a wholly-owned limited-liability company of J. Christopher Boone, who was a former President of ISCR.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 31.1 Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification by Principal 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
None.
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INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
(a North Carolina limited partnership)
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.
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/ James Christopher Boone | |
| James Christopher Boone President |
Date: November 15, 2004
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