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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
x | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended December 31, 2002
o | Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period of to
Commission File Number 0-7865.
SECURITY LAND AND DEVELOPMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Georgia (State or other Jurisdiction of Incorporation or Organization) | 58-1088232 (I.R.S. Employer Identification Number) |
2816 Washington Road, #103, Augusta, Georgia 30909
(Address of Principal Executive Offices)
Issuers Telephone Number (706) 736-6334
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Year)
Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
Class Common Stock, $.10 Par Value | Outstanding at January 31, 2003 5,247,107 shares |
Transitional Small Business Disclosure Format: Yes o No x
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Form 10-QSB
Index
PART I | FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements | ||||||
Condensed Consolidated Balance Sheet as of December 31, 2002 | 1 | ||||||
Condensed Consolidated Statements of Income for the Three Months Ended December 31, 2002 and 2001 | 2 | ||||||
Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2002 and 2001 | 3 | ||||||
Notes to Condensed Consolidated Financial Statements | 4-5 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5-6 | |||||
Item 3. | Controls and Procedures | 7 | |||||
PART II | OTHER INFORMATION | ||||||
Item 6. | Exhibits and Reports on Form 8-K | 7 |
SIGNATURES | 8 |
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Part I. Financial Information
Condensed Consolidated Balance Sheet
(Unaudited)
December 31, 2002
ASSETS | ||||
Current assets | ||||
Cash | $ | 78,092 | ||
Total current assets | 78,092 | |||
Investments and other assets | ||||
Land and improvements, at cost | 2,186,478 | |||
Property leased to others under operating leases, less accumulated depreciation $947,555 | 4,658,449 | |||
Deferred tax asset | 5,635 | |||
6,850,562 | ||||
$ | 6,928,654 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 3,517 | ||
Current portion of long-term debt | 342,938 | |||
Accrued interest | 24,290 | |||
Other current liabilities | 66,588 | |||
Total current liabilities | 437,333 | |||
Long-term debt, less current maturities | 3,333,954 | |||
Deferred taxes | 258,405 | |||
Deferred income | 306,078 | |||
Stockholders’ equity | ||||
Common stock, at par value | 623,761 | |||
Paid-in capital | 333,766 | |||
Retained earnings | 1,735,357 | |||
2,692,884 | ||||
Less subscribed shares | 100,000 | |||
2,592,884 | ||||
$ | 6,928,654 | |||
See notes to condensed consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months Ended December 31, 2002 | Three Months Ended December 31, 2001 | ||||||
Revenues, rent earned | $ | 182,917 | $ | 178,891 | |||
Operating expenses: | |||||||
Payroll and related costs | 16,315 | 11,755 | |||||
Depreciation | 36,194 | 31,896 | |||||
Property taxes | 27,353 | 21,190 | |||||
Repairs and maintenance | 14,500 | 6,303 | |||||
Professional services | 5,998 | — | |||||
Insurance | 1,576 | 2,742 | |||||
Other | 7,476 | 7,215 | |||||
109,412 | 81,101 | ||||||
Operating income | 73,505 | 97,790 | |||||
Nonoperating income and (expense): | |||||||
Interest income | 243 | 499 | |||||
Interest expense | (71,243 | ) | (73,019 | ) | |||
(71,000 | ) | (72,520 | ) | ||||
Income before income taxes | 2,505 | 25,270 | |||||
Applicable income taxes | 692 | 4,641 | |||||
Net income | $ | 1,813 | $ | 20,629 | |||
Income per common share | $ | .00 | $ | .00 | |||
See notes to condensed consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2002 and 2001
(Unaudited)
2002 | 2001 | ||||||
Cash flows from operating activities | |||||||
Cash received from leases | $ | 229,437 | $ | 206,904 | |||
Interest received | 243 | 499 | |||||
Cash paid to suppliers and employees | (147,312 | ) | (103,430 | ) | |||
Interest paid | (71,243 | ) | (73,019 | ) | |||
Net cash provided by Operating activities | 11,125 | 30,954 | |||||
Cash flows from financing activities | |||||||
Principal payments on debt | (49,418 | ) | (43,133 | ) | |||
Net cash provided by (used in) Financing activities | (49,418 | ) | (43,133 | ) | |||
Net decrease in cash | (38,293 | ) | (12,179 | ) | |||
Cash at beginning of period | 116,385 | 98,465 | |||||
Cash at end of period | $ | 78,092 | $ | 86,286 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 1,813 | $ | 20,629 | |||
Deferred income taxes | 692 | 3,644 | |||||
Depreciation | 36,194 | 31,896 | |||||
Net change in assets and liabilities | (27,574 | ) | (25,215 | ) | |||
Net cash provided by operating Activities | $ | 11,125 | $ | 30,954 | |||
See notes to condensed consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
Note 1 - Summary of significant accounting policies
The accompanying financial statements are presented in accordance with the requirements of Form 10-QSB and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Company’s annual Form 10-KSB filing. Accordingly, the reader of this Form 10-QSB may wish to refer to the Company’s Form 10-KSB for the year ended September 30, 2002 for further information. |
The financial information has been prepared in accordance with the Company’s customary accounting practices and has not been audited. In the opinion of management, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. |
Note 2 - Investment in leases and property under operating leases
Property leased or held for lease to others under operating leases consists of the following at December 31, 2002: |
Land | $ | 397,673 | ||
Warehouse and buildings | 5,208,331 | |||
5,606,004 | ||||
Less accumulated depreciation | 947,555 | |||
$ | 4,658,449 | |||
Refer to the Company’s Form 10-KSB for the year ended September 30, 2002 for further information on operating lease agreements and terms. |
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Note 3 - Long-term debt
Long-term debt consisted of the following at December 31, 2002: |
7.875% note payable to an insurance company due in monthly payments of $35,633, including interest, through June 2015, collateralized by real estate and assignment of lease payments from the property. | $ | 3,394,173 | ||
Prime +.25% note payable to financial institution due in monthly payments of $3,250, including interest, through November 2003, with a balloon payment of approximately $144,000 due at that time, interest adjusted based on changes in the prime rate, secured by real estate. | 166,425 | |||
Prime rate note payable to financial institution due in monthly payments of $1,330, including interest, through June 2005, with a balloon payment of approximately $90,000 due at that time, interest adjusted based on changes in the prime rate, secured by real estate. | 116,294 | |||
3,676,892 | ||||
Less current maturities | 342,938 | |||
$ | 3,333,954 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The Company’s results of operations for the three month period ended December 31, 2002, and a comparative analysis of the same period for the 2001 year are presented below:
Increase (Decrease) 2002 Compared to 2001 | |||||||||||||
2002 | 2001 | Amount | Percent | ||||||||||
Leasing revenue | $ | 182,917 | $ | 178,891 | $ | 4,026 | 2.3 | % | |||||
Operating expenses | 109,412 | 81,101 | 28,311 | 34.9 | % | ||||||||
Interest expense | 71,243 | 73,019 | (1,776 | ) | (2.4 | %) |
Revenue from leasing consists primarily of revenue from the Company’s strip center on Washington Road in Augusta, Georgia and from the office building on old Evans Road in Evans, Georgia. Revenue from leasing has remained relatively constant from 2001 to 2002.
On an annualized basis, current revenue from leasing remains constant from leasing revenue for the Company’s fiscal year ended September 30, 2002.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Refer to the Company’s Form 10-KSB for the year ended September 30, 2002 for further information regarding the properties owned and lease terms.
Operating expenses for the three months ended December 31, 2002 have increased as compared to the three months ended December 31, 2001. The increase is primarily due to increases in depreciation, property taxes, repairs and maintenance, and professional services. The increase in depreciation expense is a result of additional property acquired by the Company. The increase in property taxes is a result of an increase in the assessments by the taxing authorities. The increase in repairs and maintenance is a result of additional repair costs incurred related to the strip center. Management of the Company expects operating expenses for the remainder of the current fiscal year to be comparable to the present three-month period.
Interest expense for the current period is comparable to 2001 and, on an annualized basis, is comparable to the Company’s interest expense for the fiscal year ended September 30, 2002.
The Company’s ratio of current assets to current liabilities at December 31, 2002 was .18. The ratio was .38 at December 31, 2001. This decrease is due to a maturity date for balloon payment on a loan falls within the next 12 months.
During the current quarter the Company satisfied liquidity needs through operating revenues. Management of the Company continues to expect future liquidity needs to be met from operating revenues of the Company.
The Company does not expect any significant change in the number of employees.
Cautionary Note Regarding Forward-Looking Statements:
The Company may, from time to time, make written or oral forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission (the “Commission”) and its reports to stockholders. Such forward-looking statements are made based on management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, but not limited to, competition from other real estate companies, the ability of the Company to obtain financing for projects, and the continuing operations of tenants.
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Item 3. | Controls and Procedures |
Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s SEC filings. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted 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.
There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer carried out the evaluation.
Part II - Other Information
Item 6. | Exhibits and Reports on Form 8-K |
(a) Exhibit No. Description |
99.1 Certification Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |
(b) No reports on Form 8-K were filed during the three months ended December 31, 2002. |
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SECURITY LAND AND DEVELOPMENT CORPORATION
(Registrant)
By: | /s/ T. GREENLEE FLANAGIN | February 14, 2003 | ||||
T. Greenlee Flanagin President Chief Executive Officer | Date |
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CERTIFICATIONS
I, T. Greenlee Flanagin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Security Land and Development Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/ T. GREENLEE FLANAGIN | |||
T. Greenlee Flanagin President and Chief Executive Officer |