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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2005.

For the transition period from              to             .

Commission file number 0-15571

CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP

(Exact name or registrant as specified in its charter)

4000 Blue Ridge Road, Suite 100

Raleigh, North Carolina 27612

(Address of principal executive office)

(Zip Code)

(919) 781-1700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 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  ¨

PART I - FINANCIAL INFORMATION

Item 1. Financial Information

a) Income Statement

STATEMENTS OF INCOME (Unaudited)

See notes to unaudited financial statements.

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b) Balance Sheets

BALANCE SHEETS

See notes to unaudited financial statements.

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c) Statements of Changes in Partners’ Capital

STATEMENTS OF CHANGES IN PARTNERS’ EQUITY (Unaudited)

See notes to unaudited financial statements.

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d) Statements of Changes in Financial Position

STATEMENTS OF CASH FLOW (Unaudited)

Supplemental disclosures of cash flow information

Cash paid for interest during the three months ended March 31 was $0 in 2005 and $0 in 2004.

See notes to unaudited financial statements.

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e) Notes to Financial Statements

NOTES TO UNAUDITED FINANCIAL STATEMENTS

March 31, 2005

NOTE A - SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS

Carolina Investment Partners, Limited Partnership (the “Registrant”), was organized in 1985 to invest in real property which it will sell or lease undeveloped or develop into office or commercial projects. Walsmith Associates Two, a North Carolina general partnership, is the general partner (the “General Partner”).

Basis of Presentation:

The accompanying March 31, 2005 financial statements of the Registrant are unaudited. In the opinion of the General Partner, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the period presented are not necessarily indicative of the results that may be expected for the entire year.

NOTE B - LAND HELD FOR INVESTMENT AND RELATED COMMITMENTS AND TRANSACTIONS

In July, 1986, the Registrant purchased for $1,223,175 an undeveloped 16.3-acre parcel of land in Cary, North Carolina, known as the Wellington Parcel, from Wellington Park Associates (“WPA”), an affiliate of the General Partner. The land was carried at the lower of (i) contract cost plus capitalized purchase and closing costs or (ii) net realizable value. The contract under which the Registrant purchased the parcel provided that WPA would share with the Registrant in any profits resulting from the sale of the Wellington Parcel.

In June 1986, the Registrant purchased for approximately $3,080,200 an undeveloped 26.7-acre parcel of land in Cary, North Carolina, known as the Martin Parcel, from an affiliate of the General Partner. The land is carried at the lower of (i) contract cost plus capitalized purchase and closing costs or (ii) net realizable value.

In 1996, 1997 and 1998 the Registrant sold the Wellington Parcel to a third party under the terms of an Agreement for the Purchase and Sale of Real Estate, as amended (“the Agreement”), between the Registrant, Wellington Center Associates LLC (successor to Churchill & Banks, Ltd.) (“WCA”), and ADA Corporation of North Carolina (“ADA”), an affiliate of the Registrant’s General Partner. The total sales price for the property sold, a portion of which was owned by ADA, was $3,927,636. This sales price was allocated among the Registrant and ADA based upon acreage sold by each, with $3,730,963 to the Registrant and $196,673 to ADA. As of April 9, 1998, all of the Wellington Parcel was sold.

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On November 1, 2002, the Registrant entered into a contract for the sale of approximately two and half (2.5) gross acres of the Martin Parcel for $5.00 per square foot. The contract also contains a one-year option for the buyer to purchase the remainder of the nine-acre tract of land at a price of $4.50 per square foot. The buyer may extend this option for up to two additional years by paying the Registrant $30,000 for each year extended. The prices for the second and third option years are $4.75 and $5.00 per square foot, respectively. The options will end no later than December 31, 2005. Upon the completion of the sale, the Registrant will pay a broker’s commission of two percent (2%) to the Buyer’s agent. As of May 13, 2005, the sale has not been completed and the buyer has not extended the options.

On January 25, 2005, under the terms of a quitclaim deed, the Registrant received an undeveloped 1.99 acre parcel in Cary, North Carolina from the North Carolina Department of Transportation as part of the settlement of the right of way claim with the Registrant. This parcel of land is adjacent to the Martin Parcel described above. The land is carried at fair market value as of the date of the quitclaim deed.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Registrant’s operations resulted in net income of $385,852 during the quarter ended March 31, 2005 compared to a net loss of $5,664 during the same period of 2004. The primary differences between 2005 and 2004 were:

As of March 31, 2005, the Registrant has $4,447 in cash and short-term investments. Cost of improvements payable to the Town of Cary will be approximately $160,500. The Registrant believes that this amount will be due in the near future and will be paid by the developer of the property. As described above, the Registrant has a contract to sell 2.5 acres. The Registrant believes that the closing of this contract would provide to the Registrant approximately $525,000 after estimated closing costs. If the closing does not occur before the assessment becomes due, or does not close at all, the Registrant believes that it will be successful in borrowing funds to finance the assessment and the Registrant’s current operations.

Since December 31, 2004, the Registrant has obtained loans from Alton L. Smith, III, Donald F. Walston and C. Stephen Smith, each of whom is a general partner of the General Partner, in the amount of $11,582 to finance the Registrant’s current operating expenses. These loans, which are payable upon demand, accrue interest monthly at the prime interest rate. Accrued interest as of March 31, 2005 is $154. The Registrant anticipates that these loans and accrued interest will be repaid upon the sale of 2.5 acres, as described above. There can be no assurances that the Registrant will be able to obtain additional financing or, if so, upon what terms the Registrant will be able to obtain such financing. If the Registrant is unable to obtain the necessary financing, the general partner has agreed to finance any cash shortfalls.

The Registrant maintains its excess funds in a money market account at RBC Centura Bank. The General Partner believes these accounts are an appropriate investment of the Registrant’s funds. Until its properties are sold, placed into development and/or refinanced, the Registrant anticipates deficits from operations and administrative expenses.

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Cautionary Statement Identifying Important Factors That Could Cause the Registrant’s Actual Results to Differ From Those Projected in Forward Looking Statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, readers of this document, and any document incorporated by reference herein, are advised that this document and documents incorporated by reference into this document contain both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Registrant or its management, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about the Registrant or its business.

This document and any documents incorporated by reference herein also identify important factors which could cause actual results to differ materially from those indicated by the forward looking statements. These risks and uncertainties include uncertainties about whether real estate sales under contract will close, the ability of the Registrant to sell its other real estate assets, the price of real estate sales, environmental and similar liabilities, future operating expenses and the adequacy of capital resources to meet future operating expenses, which are described herein and/or in documents incorporated by reference herein.

The cautionary statements made pursuant to the Private Litigation Securities Reform Act of 1995 above and elsewhere by the Registrant should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Registrant prior to the effective date of such Act. Forward looking statements are beyond the ability of the Registrant to control and in many cases the Registrant cannot predict what factors would cause actual results to differ materially from those indicated by the forward looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

An evaluation of the Registrant’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act) was carried out under the supervision and with the participation of the Registrant’s management, including the general partner of Walsmith Associates Two, which is the general partner of the Registrant. Based on that evaluation, the general partner has

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concluded that the Registrant’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this report (March 31, 2005), in ensuring that material information relating to the Registrant’s required to be disclosed by the Registrant in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to the Registrant’s management, including the Registrant’s general partner, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes in the Registrant’s internal controls over financial reporting during the Registrant’s most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

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Part II

Item 6. Exhibits and Reports on Form 8-K

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 13, 2005

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