<PAGE>   1
                                                         

                       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 SEPTEMBER 30, 1997
                         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.)

                                INTERSTATE TOWER
                                 P. O. BOX 1012
                            CHARLOTTE, NC 28201-1012
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (704) 379-9164
              (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 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 8, 1997

                    Page 1 of 11 Sequentially Numbered Pages


<PAGE>   2

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP


                            CONDENSED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                               September 30,
                                                                    1997             December 31,
                                                                (Unaudited)             1996
                                                                -----------          -----------
<S>                                                             <C>                  <C>        
     ASSETS:

Land Held for Sale                                              $ 6,534,310          $ 6,534,310
Cash and Cash Equivalents                                             1,713                    0
Other                                                                34,432               32,842
                                                                -----------          -----------

                                                                $ 6,570,455          $ 6,567,152
                                                                ===========          ===========




     LIABILITIES AND PARTNERS' EQUITY (DEFICIT):

Checks Written in Excess of Recorded Bank Balance               $         0          $        95
Accrued Liabilities                                                 152,619              129,351
Note Payable                                                        142,155              127,656
                                                                -----------          -----------

                                                                    294,774              257,102
                                                                -----------          -----------


Class A Limited Partners' Interest                                6,275,726            6,310,092
Subordinated Limited Partners' Interest                                  90                   90
General Partners' Interest                                             (135)                (132)
                                                                -----------          -----------

                                                                  6,275,681            6,310,050
                                                                -----------          -----------

                                                                $ 6,570,455          $ 6,567,152
                                                                ===========          ===========


</TABLE>


            See attached notes to the condensed financial statements


                                       2

<PAGE>   3
                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

                       CONDENSED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                 Three             Three              Nine             Nine
                                              Months Ended     Months Ended       Months Ended     Months Ended
                                              September 30,    September 30,      September 30,    September 30,
                                                   1997             1996               1997             1996
                                               (Unaudited)      (Unaudited)        (Unaudited)      (Unaudited)
                                              -------------    -------------      -------------    -------------
<S>                                             <C>               <C>               <C>               <C>     
INCOME:
  Interest Income                               $    568          $    541          $  1,700          $  1,651
                                                --------          --------          --------          --------
                                                     568               541             1,700             1,651

EXPENSES:
  Property Taxes                                      45                43               132               131
  Insurance Expense                                  145                59               437               351
  Professional and Legal Fees                      5,281             4,698            23,049            21,953
  General and Administrative Costs                   405             1,847             1,558             2,879
  Interest Expense                                 3,804             3,229            10,893             9,462
                                                --------          --------          --------          --------
                                                   9,680             9,876            36,069            34,776

NET LOSS                                        $ (9,112)         $ (9,335)         $(34,369)         $(33,125)


NET LOSS ALLOCATION:

General Partners                                $     (1)         $     (1)         $     (3)         $     (3)
Class A Limited Partners                          (9,111)           (9,334)          (34,366)          (33,122)
                                                --------          --------          --------          --------
                                                  (9,112)           (9,335)          (34,369)          (33,125)
                                                ========          ========          ========          ========



CLASS A LIMITED PARTNERSHIP
 UNITS OUTSTANDING                                 7,650             7,650             7,650             7,650
                                                --------          --------          --------          --------

NET LOSS PER CLASS A UNIT                       $  (1.19)         $  (1.22)         $  (4.49)         $  (4.33)
                                                ========          ========          ========          ========

</TABLE>


            See attached notes to the condensed financial statements


                                       3


<PAGE>   4


            INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

               CONDENSED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                     Subordinated
                                              General             Limited               Limited
                                              Partners            Partners              Partner               Total
                                            -----------          -----------         -------------        -----------
<S>                                         <C>     <C>          <C>                  <C>                 <C>        
Partners' Equity (Deficit)
  at December 31, 1995                      $      (124)         $ 6,397,968          $        92         $ 6,397,936

Net Loss for the Nine Months
  Ended September 30, 1996                           (3)             (33,122)                   0             (33,125)
                                            -----------          -----------          -----------         -----------


Partners' Equity (Deficit)
  at September 30, 1996                     $      (127)         $ 6,364,846          $        92         $ 6,364,811
                                            ===========          ===========          ===========         ===========


Partners' Equity (Deficit)
  at December 31, 1996                      $      (132)         $ 6,310,092          $        90         $ 6,310,050

Net Loss for the Nine Months
  Ended September 30, 1997                           (3)             (34,366)                   0             (34,369)
                                            -----------          -----------          -----------         -----------

Partners' Equity (Deficit)
  at September 30, 1997                     $      (135)         $ 6,275,726          $        90         $ 6,275,681
                                            ===========          ===========          ===========         ===========

</TABLE>


            See attached notes to the condensed financial statements


                                       4


<PAGE>   5

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

                       CONDENSED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996


<TABLE>
<CAPTION>
                                                      Nine Months        Nine Months
                                                         Ended             Ended
                                                      September 30,     September 30,
                                                          1997              1996
                                                      (Unaudited)        (Unaudited)
                                                      -------------     -------------
<S>                                                     <C>               <C>      
CASH FLOW FROM OPERATING ACTIVITIES:

Net Loss                                                $(34,369)         $(33,125)

Adjustments to reconcile net loss to net
 cash used for operations:

 Increase in Property Taxes Payable                          132               131
 Increase in Accrued Liabilities                          23,041            21,618
 Increase in Other Assets                                 (1,590)           (1,590)
                                                        --------          --------

 Net Cash Used for Operating Activities                  (12,786)          (12,966)
                                                        --------          --------


CASH FLOWS FROM FINANCING ACTIVITIES:

 Increase in Note Payable                                 14,499            12,000
                                                        --------          --------

 Net Cash Provided by Financing Activities                14,499            12,000
                                                        --------          --------

 Increase in Cash and Cash Equivalents                     1,713              (966)

Cash and Cash Equivalents at Beginning
 of Period                                                     0               591
                                                        --------          --------

Cash and Cash Equivalents at End of Period              $  1,713          $   (375)
                                                        ========          ========



            See attached notes to the condensed financial statements
                                    

                                       5

</TABLE>

                                        

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                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

                               SEPTEMBER 30, 1997

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, 1997, are not
necessarily indicative of the results that may be expected for the year to end
December 31, 1997.

2.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 1, 1997, there were 772
unit holders of record. The Partnership's business now consists of holding for
investment, disposing and otherwise dealing in 145 acres of undeveloped land
("the Property") located in York County, South Carolina. As of September 30,
1997, the Partnership held all 145 acres of the Property.

Until January 1, 1993, the Managing General Partner was Performance Investments,
Inc. (PII), which is 100% owned by Mr. William Garith Allen and a family member.
Mr. Allen and ISC Realty Corporation (ISCR) are also General Partners in the
Partnership and effective January 1, 1993, assumed the role of co-managing
partners. Mr. Allen also holds all of the Subordinated Limited Partner interest,
which may be assigned to one of his affiliates at any time.

The General Partners are solely responsible for the day-to-day management and
operation of the property. ISCR is responsible for certain administrative
functions of the Partnership and beginning in November, 1989, is entitled to an
annual administrative fee equal to .25% of the cost of the property acquired.
Payment of such administrative fee is deferred until the sale of the property
and the return of the Class A Limited Partners' invested capital plus their
preferred return, as defined.

                                        6

<PAGE>   7
3.   RELATED PARTY TRANSACTIONS

At September 30, 1997, the Registrant had an account receivable from Performance
Investments, Inc. ("PII") which is 100% owned by Mr. William Garith Allen and a
family member, of $17,427 plus accrued interest receivable of $17,005 related to
the reimbursement of certain costs required in connection with organizing the
Partnership and the property. In connection with the consent order entered into
in November 1991, the amount will be offset against any amounts due PII or Mr.
Allen in connection with the sale of the property.

The Partnership incurred expenses of $12,156 for the nine months ended September
30, 1997, and 1996, respectively for service rendered by ISCR in connection with
certain administrative functions of the Partnership. Since payments of these
fees is deferred, they are included in accrued liabilities in the accompanying
balance sheets.

                                       7
<PAGE>   8


                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

                  ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1.   LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997, the Registrant had $1,713 on hand in the form of cash
and cash equivalents. On May 23, 1995, the General Partner, ISCR, paid off an
existing line of credit with First Citizens Bank and entered into an agreement
to advance up to $150,000 to the Partnership as needed. As of September 30,
1997, $142,155 had been advanced from ISCR to the Partnership. It is anticipated
that future deficits at the Partnership will be funded by ISCR in the same
manner. Under the Partnership Agreement, the General Partner shall lend funds to
the Partnership as and when necessary sufficient to pay expenses of the
Partnership where the Working Capital Reserve is inadequate to cover payment of
such expenses. Any such loans by the General Partners will be repaid out of the
first available funds of the Partnership with interest at the Prime Rate plus
2%. Until the Registrant disposes of the Property, its only sources of
additional capital are loans and advances.

2.   RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996

For the nine months ended September 30, 1997, the Partnership reported a net
loss of $34,369 as compared to a net loss of $33,125 for the nine months ended
September 30, 1996.

The Registrant incurred total expenses of $36,069 for the nine month period,
compared to $34,776 for the same period in 1996. Interest expense increased
$1,096 for the nine months ended September 30, 1997, compared to the same period
in 1996 due to a higher level of borrowings outstanding.

THREE MONTHS ENDED SEPTEMBER 30, 1997, AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996

The Partnership reported a net loss of $9,112 for the three months ended
September 30, 1997, as compared to a net loss of $9,335 for the same period in
1996. Total operating expenses decreased from $9,876 to $9,680 for the three
months ended September 30, 1997.

Interest expense increased $575 and professional fees increased $583 for the
three months ended September 30, 1997, compared to the same period in 1996.
Interest expense increased as a result of higher borrowings. Professional fees
increased due to an increase in investor servicing costs. General and
administrative costs decreased $1,442 during the three month period in 1997.



                                       8
<PAGE>   9


INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In May, 1996, the Partnership filed a Complaint in the General Court of
Justice, Superior Court Division against William Garith Allen, a General
Partner, seeking in the alternative, damages for Mr. Allen's failure to purchase
the Property at the Put Price or an order, in accordance with the provisions of
the Partnership Agreement, that Mr. Allen has forfeited his right to a
distribution as the subordinated Limited Partner, that Mr. Allen is required to
withdraw as a General Partner and transfer his general partnership interest to
ISCR, and that he is required to cause Performance Investments Inc. to withdraw
as a general partner and transfer its general partnership interest to ISCR. In
the alternative, the Partnership is seeking damages equal to the difference
between the current value of the Property and the Put Price. The lawsuit is in
the preliminary discovery stage. Mr. Allen has not asserted any claims against
the Partnership and the Partnership believes that its claims against Mr. Allen
have merit. Mr. Allen has asserted that he is insolvent and will be unable to
satisfy any award that the Partnership may recover. The Partnership is
investigating that assertion and will continue to evaluate the claim and the
likelihood of any recovery based upon the information received from Mr. Allen.

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. There were no matters submitted for vote during the quarter
     covered by this report.

ITEM 5. OTHER INFORMATION.

         None.


                                       9

<PAGE>   10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits

                  EX-27             FINANCIAL DATA SCHEDULE  (FOR SEC USE ONLY)

         (b)      Reports on Form 8-K
                    
                  No reports on Form 8-K were required to be filed during the
                  nine months ended September 30, 1997.

                                       10

<PAGE>   11


                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/ J. CHRISTOPHER BOONE
                                             ------------------------
                                             J. Christopher Boone
                                             President

Date: November 10, 1997
      _________________




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