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, 2002 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.) WACHOVIA SECURITIES, THREE WACHOVIA CENTER - 6TH FLOOR 401 S. TRYON STREET, CHARLOTTE, NC 28288-1164 (Address of principal executive offices) (Zip Code) 704-383-3179 (Registrant's telephone number, including area code) IJL FINANCIAL CENTER, P.O. BOX 1012 CHARLOTTE, NC 28201-1012 (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 August 8, 2002. Page 1 of 8 Sequentially Numbered Pages INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP CONDENSED BALANCE SHEETS AS OF JUNE 30, 2002, AND DECEMBER 31, 2001 June 30,2002 December 31, (Unaudited) 2001 ------------------- ------------------- ASSETS: Land Held for Sale $1,911,500 $1,911,500 Cash and Cash Equivalents 112,572 129,674 Other 0 0 ------------------- ------------------- $2,024,072 $2,041,174 =================== =================== LIABILITIES AND PARTNERS' EQUITY (DEFICIT): Accrued Liabilities $10 0 Note Payable 0 0 ------------------- ------------------- 0 10 0 ------------------- ------------------- Class A Limited Partners' Interest 2,024,204 2,041,315 Subordinated Limited Partners' Interest 71 71 General Partners' Interest (214) (212) ------------------- ------------------- 2,024,062 2,041,174 ------------------- ------------------- $2,024,072 $2,041,174 =================== =================== See Notes to Condensed Financial Statements 2 INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP CONDENSED STATEMENTS OF OPERATIONS Three Three Six Six Months Months Months Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2002 2001 2002 2001 (Unaudited) (Unaudited) (Unaudited) (Unaudited) --------------- -------------- --------------- ----------------- INCOME: Sale of Real Estate $ 0 $4,338,360 $ 0 $4,338,360 Interest Income 284 7,021 650 7,056 --------------- -------------- --------------- ----------------- 284 4,345,381 650 4,345,416 EXPENSES: Property Taxes 0 0 10 38 Insurance Expense 250 263 250 263 Professional and Legal Fees 2,475 4,045 9,680 12,649 Cost of Real Estate Sale 0 4,623,774 0 4,623,774 General and Administrative Costs 4,157 4,541 7,823 7,411 Interest Expense 0 9,081 0 15,060 --------------- -------------- --------------- ----------------- 6,882 4,641,704 17,763 4,659,194 --------------- -------------- --------------- ----------------- NET LOSS ($6,598) ($296,323) ($17,112) ($313,778) =============== ============== =============== ================= NET LOSS ALLOCATION: General Partners (1) (30) (2) (31) Class A Limited Partners (6,597) (296,294) (17,111) (313,747) --------------- -------------- --------------- ----------------- ($6,598) ($296,323) ($17,112) ($313,778) =============== ============== =============== ================= CLASS A LIMITED PARTNERSHIP UNITS OUTSTANDING 7,650 7,650 7,650 7,650 --------------- -------------- --------------- ----------------- NET LOSS PER CLASS A UNIT ($0.86) ($38.73) ($2.24) ($41.01) =============== ============== =============== ================= See Notes to Condensed Financial Statements 3 INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP CONDENSED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited) Subordinated General Limited Limited Partners Partners Partner Total ------------- -------------- ------------- ------------- Partners' Equity (Deficit) at December 31, 2000 ($160) $6,029,973 $84 $6,029,897 Net Loss for the Six Months Ended June 30, 2001 (31) (313,747) 0 (313,778) Less Cash Distributions (347) (3,467,628) 0 (3,467,975) ------------- -------------- ------------- ------------- Partners' Equity (Deficit) at June 30, 2001 ($191) $2,248,598 $84 $2,248,144 ============= ============== ============= ============= Partners' Equity (Deficit) at December 31, 2001 ($212) $2,041,315 $71 $2,041,174 Net Loss for the Six Months Ended June 30, 2002 (2) (17,111) 0 (17,112) ------------- -------------- ------------- ------------- Partners' Equity (Deficit) at June 30, 2002 ($214) $2,024,204 $71 $2,024,062 ============= ============== ============= ============= See Notes to Condensed Financial Statements 4 INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 Six Months Six Months Ended Ended June 30, 2002 June 30, 2001 (Unaudited) (Unaudited) ------------------ ---------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Loss ($17,112) ($313,778) Adjustments to reconcile net loss to net cash used for operations: Decrease(Increase) in Accounts Receivable 0 17,427 (Decrease)Increase in Accrued Liabilities 10 (76,708) ------------------ ---------------- Net Cash Used for Operating Activities (17,102) (373,059) ------------------ ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of Real Estate 0 4,329,479 Decrease in Interest Receivable 0 24,934 ------------------ ---------------- Net Cash Provided by Investing Activities 0 4,354,413 CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to Limited Partners 0 (3,467,974) (Decrease)Increase in Note Payable 0 (387,405) ------------------ ---------------- Net Cash Provided by Financing Activities 0 (3,855,379) Increase (Decrease) in Cash and Cash Equivalents (17,102) 125,975 ------------------ ---------------- Cash and Cash Equivalents at Beginning of Period 129,674 1,649 ------------------ ---------------- Cash and Cash Equivalents at End of Period $112,572 $127,624 ================== ================ See Notes to Condensed Financial Statements 5 INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 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, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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 August 8, 2002, 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. As of 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 June 30, 2002, the Registrant had cash on hand of $112,572. 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 property 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. On June 29, 2001, a distribution of $3,467,975 (representing $453 per unit) was distributed to the limited partners. 6 2. RESULTS OF OPERATIONS The Registrant's net loss was $17,112 for the six months ended June 30, 2002 as compared to $313,778 for the six months ended June 30, 2001. The large difference between the two periods is due to the loss realized from the sale of the property during the June 30, 2001 period. Professional and legal fees decreased from $12,649 as of June 30, 2001, to $9,680 for the six months ended June 30, 2002. These fees are less due to the greater expense incurred during 2001 related to the sale of the property. Interest expense decreased from $15,060 for the six months ended June 30, 2001, to $0 for the six months ended June 30, 2001. This decrease reflects the fact that the entire principal balance was repaid in 2001. All other expenses were in line with those incurred during the second quarter 2001. 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. In June 2000, the Partnership entered into a contract with Greenfield Development Company, LLC, to sell 97 acres of the 145 acres unimproved land for $45,000 per acre, subject to adjustments for wetlands acreage. The actual proceeds from the sale totaled $4,338,360. The purchaser deposited $50,000 earnest money with a title agency. Under the terms of the contract, the purchaser had until November 6, 2000, to complete their due diligence, however, Greenfield requested two 90-day extensions of the closing date to provide them time to obtain a wetlands permit from the U.S. Army Corps of Engineers which permit was necessary to allow the proposed development. An additional $25,000 earnest money was deposited with the title agency for the first extension and $50,000 was deposited for the second extension. The first extension expired on March 6, 2001, and the sale was consummated on May 11, 2001. On June 29, 2001, a cash distribution in the amount of $3,467,975 or $453 per unit was distributed to the limited partners. Crosland Commercial continues to list and market for sale the remaining approximate 48 acres of the property consisting of Tract 1A and Tract 1D. 7 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits EX 99.1 Certification by Officer filed June 30, 2002. (b) Reports on Form 8-K No reports on Form 8-K were required to be filed during the six months ended June 30, 2002. 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 (REGISTRANT) BY: /S/J. CHRISTOPHER BOONE ----------------------- J. CHRISTOPHER BOONE ISC REALTY CORPORATION, GENERAL PARTNER AND PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT DATE: AUGUST 8, 2002 8