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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.




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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. 2




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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
    
    2003ASSETSUnimproved land held for investment purposes
    
    $
    1,911,500
    
    
    
    1,911,500Cash and cash equivalents
    
    
    11,291
    
    
    
    60,261Total assets
    
    $
    1,922,791
    
    
    
    1,971,761LIABILITIES AND PARTNERS CAPITALLiabilitiesAccrued expenses
    
    
    20,491
    
    
    
    3,882Due to general partner
    
    
    15,001
    
    
    
    1,991Total liabilities
    
    
    35,492
    
    
    
    5,873Partners CapitalClass A limited partners interest (authorization, 9,588 units; issued and
outstanding, 7,650 units in 2004 and 2003)
    
    
    1,887,459
    
    
    
    1,966,038Subordinated limited partner interest
    
    
    67
    
    
    
    69General partners capital deficiency
    
    
    (227
    )
    
    
    (219
    )Total partners capital
    
    
    1,887,299
    
    
    
    1,965,888Total liabilities and partners capital
    
    $
    1,922,791
    
    
    
    1,971,761
 See accompanying notes to financial statements. 3




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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 EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003OPERATING REVENUEInterest
    
    $
    82
    
    
    
    13
    
    
    
    337
    
    
    
    186Total operating revenue
    
    
    82
    
    
    
    13
    
    
    
    337
    
    
    
    186OPERATING EXPENSEProfessional fees
    
    
    19,038
    
    
    
    11,781
    
    
    
    75,852
    
    
    
    34,682Property tax
    
    
    28
    
    
    
    10
    
    
    
    84
    
    
    
    20General and administrative
    
    
    870
    
    
    
    555
    
    
    
    2,990
    
    
    
    2,680Total operating expense
    
    
    19,936
    
    
    
    12,346
    
    
    
    78,926
    
    
    
    37,382Net loss
    
    $
    (19,854
    )
    
    
    (12,333
    )
    
    
    (78,589
    )
    
    
    (37,196
    )NET LOSS ALLOCATED TOClass 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
    
    
    
    7,650Net loss per weighted average Class A
limited partnership unit
    
    $
    (2.60
    )
    
    
    (1.61
    )
    
    
    (10.27
    )
    
    
    (4.86
    )
 See accompanying notes to financial statements. 4




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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
    
    SubordinatedLimited
    
    GeneralUnits
    
    Capital
    
    Partner
    
    Partners
    
    TotalPartners capital (deficiency),
December 31, 2002
    
    
    7,650
    
    
    $
    2,008,747
    
    
    
    70
    
    
    
    (215
    )
    
    
    2,008,602Net loss
    
    
    
    
    
    
    (37,193
    )
    
    
    
    
    
    
    (3
    )
    
    
    (37,196
    )Partners capital (deficiency),
September 30, 2003
    
    
    7,650
    
    
    
    1,971,554
    
    
    
    70
    
    
    
    (218
    )
    
    
    1,971,406Partners capital (deficiency),
December 31, 2003
    
    
    7,650
    
    
    
    1,966,038
    
    
    
    69
    
    
    
    (219
    )
    
    
    1,965,888Net 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. 5




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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 EndedSeptember 30,2004
    
    2003OPERATING ACTIVITIESNet loss
    
    $
    (78,589
    )
    
    $
    (37,196
    )Adjustments to reconcile net loss to net cash
provided by operating activitiesIncrease in
due to general partner - related party
    
    
    13,010
    
    
    
    36,992Increase in accrued expenses
    
    
    16,609
    
    
    
    270Net cash provided by operating activities
    
    
    (48,970
    )
    
    
    66Increase (decrease) in cash and cash equivalents
    
    
    (48,970
    )
    
    
    66Cash and cash equivalents, beginning of period
    
    
    60,261
    
    
    
    97,478Cash and cash equivalents, end of period
    
    $
    11,291
    
    
    $
    97,544
 See accompanying notes to financial statements. 6




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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. 7




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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. 8




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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. 9




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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. 10




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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 BooneJames Christopher Boone           
    President Date: November 15, 2004 11