Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2018 | May 11, 2018 | |
Document and Entity Information: | ||
Entity Registrant Name | SECURITY LAND & DEVELOPMENT CORP | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Entity Central Index Key | 88,572 | |
Current Fiscal Year End Date | --09-30 | |
Entity Common Stock, Shares Outstanding | 3,766,290 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Small Business Entity | true |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2018 | Sep. 30, 2017 |
CURRENT ASSETS | ||
Cash | $ 325,295 | $ 254,522 |
Receivables from tenants, net of allowance of $72,793 and $71,967 at March 31, 2018 and September 30, 2017, respectively | 345,317 | 365,589 |
Prepaid property taxes | 0 | 29,768 |
Total current assets | 670,612 | 649,879 |
INVESTMENT PROPERTIES | ||
Investment properties for lease, net of accumulated depreciation | 6,648,855 | 6,742,993 |
Land and improvements held for investment or development | 3,804,728 | 3,804,728 |
Total investment properties | 10,453,583 | 10,547,721 |
OTHER ASSETS | 15,245 | 17,774 |
Total Assets | 11,139,440 | 11,215,374 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 161,020 | 223,482 |
Income taxes payable | 7,615 | 19,917 |
Current maturities of notes payable | 397,771 | 388,322 |
Total current liabilities | 566,406 | 631,721 |
LONG-TERM LIABILITIES | ||
Notes payable, less current portion and deferred financing costs | 4,131,594 | 4,330,863 |
Deferred income taxes | 913,469 | 1,367,556 |
Total long-term liabilities | 5,045,063 | 5,698,419 |
Total liabilities | 5,611,469 | 6,330,140 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value $.10 per share; 30,000,000 shares authorized; 3,766,290 shares issued and outstanding at March 31, 2018 and 3,797,137 shares issued and outstanding at September 30, 2017 | 376,629 | 379,719 |
Retained earnings | 5,151,342 | 4,505,515 |
Total Stockholders' Equity | 5,527,971 | 4,885,234 |
Liabilities and Stockholders' Equity | $ 11,139,440 | $ 11,215,374 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance on receivables from tenants | $ 72,793 | $ 71,967 |
Common Stock, Par Value | $ 0.10 | $ 0.10 |
Common Stock, Shares Authorized | 30,000,000 | 30,000,000 |
Common Stock, shares issued | 3,766,290 | 3,797,137 |
Common Stock, shares outstanding | 3,766,290 | 3,797,137 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING REVENUES | ||||
Rent revenues | $ 484,580 | $ 431,151 | $ 902,297 | $ 846,090 |
OPERATING EXPENSES | ||||
Depreciation and amortization | 48,334 | 49,351 | 96,667 | 98,703 |
Property taxes | 70,023 | 67,594 | 140,047 | 135,187 |
Payroll and related costs | 67,644 | 26,778 | 91,173 | 52,841 |
Insurance and utilities | 11,658 | 8,506 | 18,024 | 21,647 |
Repairs and maintenance | 11,556 | 25,213 | 18,707 | 40,225 |
Professional services | 28,527 | 28,460 | 50,267 | 85,492 |
Other | 4,280 | 7,737 | 5,289 | 22,572 |
Total operating expenses | 242,022 | 213,639 | 420,174 | 456,667 |
Operating income | 242,558 | 217,512 | 482,123 | 389,423 |
OTHER INCOME (EXPENSE) | ||||
Interest | 45,506 | 36,863 | 115,665 | 73,464 |
Total other income (expense) | (45,506) | (36,863) | (115,665) | (73,464) |
Income before income taxes | 197,052 | 180,649 | 366,458 | 315,959 |
INCOME TAXES PROVISION (BENEFIT) | ||||
Income tax expense | 69,613 | 79,245 | 123,820 | 138,376 |
Income tax deferred benefit | (3,665) | (10,259) | (454,087) | (18,027) |
Total income taxes provision (benefit) | 65,948 | 68,986 | (330,267) | 120,349 |
Net income | $ 131,104 | $ 111,663 | $ 696,725 | $ 195,610 |
Net income per common share | $ 0.03 | $ 0.02 | $ 0.18 | $ 0.04 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Total |
Beginning balance, value at Sep. 30, 2016 | $ 524,311 | $ 333,216 | $ 6,226,363 | $ 7,083,890 |
Net income | 331,817 | 331,817 | ||
Purchase and retirement of common stock | (144,592) | (333,216) | (2,052,665) | (2,530,473) |
Ending balance, value at Sep. 30, 2017 | 379,719 | 0 | 4,505,515 | 4,885,234 |
Net income | 696,725 | 696,725 | ||
Purchase and retirement of common stock | (3,090) | (50,898) | (53,988) | |
Ending balance, value at Mar. 31, 2018 | $ 376,629 | $ 0 | $ 5,151,342 | $ 5,527,971 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES | ||||
Net income | $ 131,104 | $ 111,663 | $ 696,725 | $ 195,610 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Bad debts | 826 | (3,019) | 826 | (1,503) |
Depreciation and amortization | 48,334 | 48,184 | 96,667 | 96,369 |
Interest on deferred financing costs | 1,333 | 1,167 | 2,666 | 2,334 |
Deferred income tax | (3,665) | (10,259) | (454,087) | (18,027) |
Changes in deferred and accrued amounts | (64,377) | 52,351 | (25,550) | 142,503 |
Net cash provided by operating activities | 113,555 | 200,087 | 317,247 | 417,286 |
FINANCING ACTIVITIES | ||||
Purchase and retirement of common stock | (11,108) | 0 | (53,988) | 0 |
Principal payments on notes payable | (75,542) | (62,218) | (192,486) | (123,685) |
Net cash used in financing activities | (86,650) | (62,218) | (246,474) | (123,685) |
Net increase in cash | 26,905 | 137,869 | 70,773 | 293,601 |
CASH, BEGINNING OF PERIOD | 298,390 | 656,392 | 254,522 | 500,660 |
CASH, END OF PERIOD | 325,295 | 794,261 | 325,295 | 794,261 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||
Cash paid for interest | 44,244 | 37,129 | 113,187 | 77,508 |
Cash paid for income taxes | $ 121,510 | $ 42,862 | $ 121,510 | $ 43,351 |
1. Basis of Presentation
1. Basis of Presentation | 6 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Note 1 – Basis of Presentation The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q, Article 8 of Regulation S-X and accounting principles generally accepted in the United States of America; therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows. Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited financial statements appearing in our Form 10-K for the year ended September 30, 2017 when reviewing these interim financial statements. The financial statements include estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The consolidated financial statements include the accounts of Security Land and Development Corporation and its four wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC 2, LLC and SLDC III, LLC (described on a consolidated basis as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation. Critical Accounting Policies: Estimates of Useful Lives of Investment Properties for Purposes of Depreciation Management has estimated useful lives of investment properties, except for land that is leased, and the Company utilizes the straight-line method to compute depreciation over the estimated useful lives of the investment properties. Actual depreciation of investment properties will vary from management’s estimates, and the value of investment properties is more directly impacted by market conditions and the physical condition of the investment properties. Evaluation of Long-Lived Assets for Impairment The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of investment properties may not be recoverable. In evaluating recoverability, the Company generally estimates future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is recognized when the expected future cash flows of the asset are less than its carrying amount. Estimates of Income Tax Rates Applicable to Deferred Taxes The Company has deferred income taxes through a series of tax-deferred like-kind exchange transactions on certain investment properties and through accelerated depreciation elections on certain other assets. Actual income taxes that may become due when taxable gains are realized on the sale of assets may differ from management’s estimates as a result of changes in tax laws, the tax status of the Company, or the actual taxable earnings of the Company in the periods the deferred income taxes become due. Refer to the Company’s Form 10-K for the year ended September 30, 2017 for further information regarding its critical accounting policies. Recently Issued Accounting Standards In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers in future periods. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impact of adoption and the implementation approach to be used. In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued amendments to clarify the Accounting Standards Codification, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to require all leases with lease terms over 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows. In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In November, 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB issued guidance to clarify the definitions of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows. In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset de-recognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the de-recognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017 . In September 2017, the FASB updated the Revenue from Contracts with Customers and the Leases Topics of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance about certain public business entities (PBEs) electing to use the non-PBE effective dates solely to adopt the FASB’s new standards on revenue and leases. The amendments were effective upon issuance. The Company is currently in the process of evaluating the impact of adoption of this guidance, however it does not expect these amendments to have a material effect on its financial statements. In November 2017, the FASB updated the Income Statement and Revenue from Contracts with Customers Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to revenue recognition. The amendments were effective upon issuance. The Company is currently evaluating the impact on revenue recognition, however it does not expect these amendments to have a material effect on its financial statements. In March 2018, the FASB updated the Income Taxes Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to the income tax accounting implications of the Tax Cuts and Job Act. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. Reclassifications Certain reclassifications have been made to a prior quarter ended March 31, 2017. These reclassifications had no effect on previously reported stockholders’ equity, net income or cash flows. |
2. Investment Properties
2. Investment Properties | 6 Months Ended |
Mar. 31, 2018 | |
INVESTMENT PROPERTIES | |
Investment Properties | Investment properties leased or held for lease to others under operating leases consisted of the following at March 31, 2018 and September 30, 2017: March 31, 2018 September 30, 2017 (unaudited) (audited) National Plaza building, land and improvements $ 5,322,260 $ 5,322,260 Evans Ground Lease, land and improvements 2,382,673 2,382,673 Wrightsboro Road building, land and improvements 1,929,690 1,929,690 Commercial land and improvements 3,804,728 3,804,728 13,439,351 13,439,351 Less accumulated depreciation (2,985,768 ) (2,891,630 ) Investment properties for lease, net of depreciation $ 10,453,583 $ 10,547,721 Depreciation expense totaled approximately $47,000 for the three-month periods ended March 31, 2018 and 2017 and approximately $94,000 for the six-month periods ended March 31, 2018 and 2017. National Plaza is a retail strip center located on Washington Road in Augusta Georgia. Approximately 81% of the rentable space at the National Plaza is leased to Publix Supermarkets, Inc., the National Plaza’s anchor tenant. The Company entered into a long-term ground lease with a major national tenant and its developer in May 2006 on approximately 18 acres of land in Columbia County, Georgia. The agreement required monthly rental payments of $20,833 during the development period, which was completed in January 2007. Following the expiration of the development period, the lease required annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16. The lessee has an option to renew in year 21 and another option every 5 years thereafter for a possible total lease term of 50 years. The lease provides for the tenant to pay for insurance and property taxes. The Company is recognizing rents on a straight-line basis over the lease term. In September of 2015, the Company purchased a commercial building consisting of approximately 25,000 square feet of retail space and 27,000 square feet of warehouse space on approximately 3.5 acres of land located on Wrightsboro Road. The retail space is currently leased to a local retailer and rent commenced on October 1, 2015. The related lease term is 10 years with annual rental payments totaling $142,000, paid monthly, increasing to $153,000 per year in 2021. The warehouse space is available for lease. The Company is recognizing rents on a straight-line basis over the lease term. The Company holds several parcels of land for investment or development purposes, including 19.38 acres of land in North Augusta, South Carolina, purchased in parcels during 2007 and 2008. The Company also owns approximately 85 acres of land in south Richmond County, Georgia and a 1.1-acre parcel along Washington Road in Augusta, Georgia that adjoins the Company’s National Plaza investment property. The aggregate costs of these investment properties held for investment or development was $3,804,728 at both March 31, 2018 and September 30, 2017. Refer to the Company’s Form 10-K for the year ended September 30, 2017 for further information on operating lease agreements and land held for investment or development purposes. |
3. Notes Payable
3. Notes Payable | 6 Months Ended |
Mar. 31, 2018 | |
Notes Payable [Abstract] | |
Notes Payable | Note 3 – Notes Payable Notes payable consisted of the following at: March 31, 2018 September 30, 2017 (unaudited) (audited) A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $33,050, through August 2027, and accrues interest at an annual fixed rate of 4.3%. The note payable is collateralized by National Plaza. $ 3,057,601 $ 3,188,257 A note payable to an insurance company collateralized with approximately 18 acres of land in Columbia County, Georgia, and an assignment of the long-term ground lease. The note is payable in monthly installments of $17,896, including principal and interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%. 1,520,817 1,582,647 4,578,418 4,770,904 Less deferred financing costs (49,053 ) (51,719 ) Less current maturities of notes payable (397,771 ) (388,322 ) $ 4,131,594 $ 4,330,863 Management of the Company expects future liquidity needs of the Company to be funded from rent revenues, refinancing and the appreciation in investment properties (which can be sold or mortgaged, if necessary). Current maturities of notes payable will require the Company to make payments over the next 12 months totaling $397,771. The Company projects that it will be able to fund the payment of its current maturities of notes payable through cash flows generated from its operations and cash on hand, but there can be no assurance that this will occur. |
4. Income Taxes
4. Income Taxes | 6 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 4 – Income Taxes At September 30, 2017, the Company had income taxes payable of $19,917 related to the fiscal year 2017. As of March 31, 2018, all income taxes payable related to the fiscal year 2017 had been paid. The Tax Cuts and Jobs Act (TCJA) was signed into law by the President on Friday December 22, 2017. The TCJA includes the reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%, changes in business deductions, and many international provisions. The drop in the corporate rate is effective for tax years beginning after December 31, 2017. IRC Section 15 indicates that “if any rate of tax imposed…changes, and if the taxable year includes the effective date of the change…, then tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year, and the tax for such taxable year shall be the sum of that proportion of each tentative tax which the number of days in each period bears to the number of days in the entire taxable year.” (§15(a)). As the Company is a fiscal year taxpayer, they will receive a partial benefit for the drop in the federal corporate tax rate for their fiscal year ended September 30, 2018. The weighted average federal tax rate computed in accordance with IRC Section 15 is 24.25% for the current fiscal year. Based on the drop in the corporate tax rate to a flat 21%, the Company revalued each of their deferred tax assets and liabilities in the current period using the new corporate tax rate. The net impact from this revaluing resulted in a tax benefit of $463,167 recognized as of December 31, 2017. Income taxes have been provided using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. During the six-month period ended March 31, 2018, the Company recorded $330,267 in income tax benefits at an effective rate of -90.12% The Company records income taxes using an estimated annual effective tax rate for interim reporting. The individually largest factor contributing to the difference between the federal statutory rate of 24.25% and the Company’s effective tax rate for the six-month period ended March 31, 2018 was the benefit relating to the revaluing of the deferred tax asset and liability balances to the new federal statutory rate. |
5. Concentrations
5. Concentrations | 6 Months Ended |
Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Note 5 - Concentrations Substantially all of the Company’s assets consist of real estate located in Richmond and Columbia Counties in the state of Georgia and in Aiken County, South Carolina. Substantially all of the Company’s revenues are earned from three of the Company’s investment properties, National Plaza, the Evans Ground Lease, and the Wrightsboro Road Lease, which comprise approximately 55%, 37% and 8% of the Company’s revenues, respectively, for the three-month period ended March 31, 2018. The anchor tenant for National Plaza, Publix Supermarkets, Inc. (“Publix”), a regional food supermarket chain, leases approximately 81% of the space at National Plaza. The Company generates approximately 29% of its revenues through its lease with Publix. |
6. Related Party Transactions
6. Related Party Transactions | 6 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 6 - Related Party Transactions During the quarter, the Company paid a stockholder who is also the son of the President for accounting services. The Company’s Board of Directors believes that the accounting services paid to the son of its President were not in excess of prices that would have been paid had the Company obtained accounting services from other sources. |
7. Stockholders' Equity
7. Stockholders' Equity | 6 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Note 7 – Stockholders’ Equity On February 7, 2017, Security Land and Development Corporation offered to purchase up to 2,526,247 shares (approximately 48.2% of the Company’s outstanding shares) of its common stock from its stockholders through a tender offer (“the Offer”) at a price of $1.25 per share. The Offer is part of a plan intended to enhance stockholder value and provide liquidity for the stockholders. The Offer expired on March 15, 2017, was extended by the Company, and on April 19, 2017 Security Land and Development Corporation amended the above offer to increase the offer price to $1.60 per share. The amended Offer expired on May 5, 2017. On May 5, 2017, Security Land and Development Corporation amended the April 19, 2017 Offer to increase the offer price to $1.75 per share. Within the offer period, 192,860 shares were sold by members of the Board of Directors who are not part of the Flanagin family. As of March 31, 2018, the Flanagin family owned approximately 58% of the Company’s common stock. During the offer period, the Company has purchased and retired a total of 1,477,817 shares of its stock for $2,584,430. Included within these shares purchased by the Company were 192,860 shares sold by members of the Board of Directors who are not part of the Flanagin family. The Company utilized cash on hand and funds obtained from the line of credit that has since been converted to a term note. See Note 3 – Notes Payable. |
1. Basis of Presentation (Polic
1. Basis of Presentation (Policies) | 6 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q, Article 8 of Regulation S-X and accounting principles generally accepted in the United States of America; therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows. Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited financial statements appearing in our Form 10-K for the year ended September 30, 2017 when reviewing these interim financial statements. The financial statements include estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The consolidated financial statements include the accounts of Security Land and Development Corporation and its four wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC 2, LLC and SLDC III, LLC (described on a consolidated basis as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation. |
Estimates of Useful Lives of Investment Properties for Purposes of Depreciation | Estimates of Useful Lives of Investment Properties for Purposes of Depreciation Management has estimated useful lives of investment properties, except for land that is leased, and the Company utilizes the straight-line method to compute depreciation over the estimated useful lives of the investment properties. Actual depreciation of investment properties will vary from management’s estimates, and the value of investment properties is more directly impacted by market conditions and the physical condition of the investment properties. |
Evaluation of Long-Lived Assets for Impairment | Evaluation of Long-Lived Assets for Impairment The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of investment properties may not be recoverable. In evaluating recoverability, the Company generally estimates future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is recognized when the expected future cash flows of the asset are less than its carrying amount. |
Estimates of Income Tax Rates Applicable to Deferred Taxes | Estimates of Income Tax Rates Applicable to Deferred Taxes The Company has deferred income taxes through a series of tax-deferred like-kind exchange transactions on certain investment properties and through accelerated depreciation elections on certain other assets. Actual income taxes that may become due when taxable gains are realized on the sale of assets may differ from management’s estimates as a result of changes in tax laws, the tax status of the Company, or the actual taxable earnings of the Company in the periods the deferred income taxes become due. Refer to the Company’s Form 10-K for the year ended September 30, 2017 for further information regarding its critical accounting policies. |
Recently issued accounting standards | Recently Issued Accounting Standards In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers in future periods. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impact of adoption and the implementation approach to be used. In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued amendments to clarify the Accounting Standards Codification, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to require all leases with lease terms over 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows. In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In November, 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB issued guidance to clarify the definitions of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows. In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset de-recognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the de-recognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017 . In September 2017, the FASB updated the Revenue from Contracts with Customers and the Leases Topics of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance about certain public business entities (PBEs) electing to use the non-PBE effective dates solely to adopt the FASB’s new standards on revenue and leases. The amendments were effective upon issuance. The Company is currently in the process of evaluating the impact of adoption of this guidance, however it does not expect these amendments to have a material effect on its financial statements. In November 2017, the FASB updated the Income Statement and Revenue from Contracts with Customers Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to revenue recognition. The amendments were effective upon issuance. The Company is currently evaluating the impact on revenue recognition, however it does not expect these amendments to have a material effect on its financial statements. In March 2018, the FASB updated the Income Taxes Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to the income tax accounting implications of the Tax Cuts and Job Act. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. |
Reclassifications | Reclassifications Certain reclassifications have been made to a prior quarter ended March 31, 2017. These reclassifications had no effect on previously reported stockholders’ equity, net income or cash flows. |
2. Investment Properties (Table
2. Investment Properties (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
INVESTMENT PROPERTIES | |
Schedule of Investment properties leased or held for lease | March 31, 2018 September 30, 2017 (unaudited) (audited) National Plaza building, land and improvements $ 5,322,260 $ 5,322,260 Evans Ground Lease, land and improvements 2,382,673 2,382,673 Wrightsboro Road building, land and improvements 1,929,690 1,929,690 Commercial land and improvements 3,804,728 3,804,728 13,439,351 13,439,351 Less accumulated depreciation (2,985,768 ) (2,891,630 ) Investment properties for lease, net of depreciation $ 10,453,583 $ 10,547,721 |
3. Notes Payable (Tables)
3. Notes Payable (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | March 31, 2018 September 30, 2017 (unaudited) (audited) A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $33,050, through August 2027, and accrues interest at an annual fixed rate of 4.3%. The note payable is collateralized by National Plaza. $ 3,057,601 $ 3,188,257 A note payable to an insurance company collateralized with approximately 18 acres of land in Columbia County, Georgia, and an assignment of the long-term ground lease. The note is payable in monthly installments of $17,896, including principal and interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%. 1,520,817 1,582,647 4,578,418 4,770,904 Less deferred financing costs (49,053 ) (51,719 ) Less current maturities of notes payable (397,771 ) (388,322 ) $ 4,131,594 $ 4,330,863 |
2. Investment Properties (Detai
2. Investment Properties (Details - Real estate) - USD ($) | Mar. 31, 2018 | Sep. 30, 2017 |
Real Estate Properties [Line Items] | ||
Investment property gross | $ 13,439,351 | $ 13,439,351 |
Less accumulated depreciation | (2,985,768) | (2,891,630) |
Total investment properties | 10,453,583 | 10,547,721 |
National Plaza building, land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | 5,322,260 | 5,322,260 |
Evans Ground Lease, land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | 2,382,673 | 2,382,673 |
Wrightsboro Road Building land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | 1,929,690 | 1,929,690 |
Commercial land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | $ 3,804,728 | $ 3,804,728 |
2. Investment Properties (Det18
2. Investment Properties (Details Narrative) | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2018USD ($)ft²aInteger | Mar. 31, 2017USD ($) | Mar. 31, 2018USD ($)ft²aInteger | Mar. 31, 2017USD ($) | Sep. 30, 2017USD ($) | |
Depreciation expense | $ | $ 47,000 | $ 47,000 | $ 94,000 | $ 94,000 | |
Cost of properties held for investment or development | $ | $ 3,804,728 | $ 3,804,728 | $ 3,804,728 | ||
National Plaza [Member] | |||||
Operating lease description | The Company entered into a long-term ground lease with a major national tenant and its developer in May 2006 on approximately 18 acres of land in Columbia County, Georgia. The agreement required monthly rental payments of $20,833 during the development period, which was completed in January 2007. Following the expiration of the development period, the lease required annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16. The lessee has an option to renew in year 21 and another option every 5 years thereafter for a possible total lease term of 50 years. | ||||
National Plaza [Member] | Rentable Space [Member] | One Customer [Member] | |||||
Concentration percentage | 81.00% | ||||
Wrightsboro [Member] | |||||
Operating lease description | In September of 2015, the Company purchased a commercial building consisting of approximately 25,000 square feet of retail space and 27,000 square feet of warehouse space on approximately 3.5 acres of land located on Wrightsboro Road. The retail space is currently leased to a local retailer and rent commenced on October 1, 2015. The related lease term is 10 years with annual rental payments totaling $142,000, paid monthly, increasing to $153,000 per year in 2021. The warehouse space is available for lease. The Company is recognizing rents on a straight-line basis over the lease term. | ||||
Acres of property held | Integer | 3.5 | 3.5 | |||
Wrightsboro [Member] | Retail Space [Member] | |||||
Area of property held | ft² | 25,000 | 25,000 | |||
Wrightsboro [Member] | Warehouse Space [Member] | |||||
Area of property held | ft² | 27,000 | 27,000 | |||
North Augusta, SC [Member] | |||||
Acres of property held | 19.38 | 19.38 | |||
Richmond County [Member] | |||||
Acres of property held | 85 | 85 | |||
Washington Road [Member] | |||||
Acres of property held | 1.1 | 1.1 |
3. Notes Payable (Details - Not
3. Notes Payable (Details - Notes payable) - USD ($) | 6 Months Ended | |
Mar. 31, 2018 | Sep. 30, 2017 | |
Debt Instrument [Line Items] | ||
Total notes payable | $ 4,578,418 | $ 4,770,904 |
Less deferred financing costs | (49,053) | (51,719) |
Less current maturities | (397,771) | (388,322) |
Noncurrent notes payable | 4,131,594 | 4,330,863 |
Note Payable 1 [Member] | ||
Debt Instrument [Line Items] | ||
Total notes payable | 3,057,601 | $ 3,188,257 |
Interest rate (in percent) | 4.30% | |
Periodic monthly installments | $ 33,050 | |
Debt maturity date | Aug. 31, 2027 | |
Collateral | Mortgage interest in National Plaza and an assignment of rents | |
Note Payable 2 [Member] | ||
Debt Instrument [Line Items] | ||
Total notes payable | $ 1,520,817 | $ 1,582,647 |
Interest rate (in percent) | 5.85% | |
Periodic monthly installments | $ 17,896 | |
Debt maturity date | May 1, 2027 | |
Collateral | 18 acres of land in Columbia County, GA, and an assignment of the long-term ground lease |
3. Notes Payable (Details Narra
3. Notes Payable (Details Narrative) | Mar. 31, 2018USD ($) |
Notes Payable [Abstract] | |
Current maturities of notes payable | $ 397,771 |
4. Income Taxes (Details Narrat
4. Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Sep. 30, 2017 | |
Income taxes payable | $ 7,615 | $ 7,615 | $ 19,917 | ||
Weighted average tax rate | 24.25% | ||||
Net impact from revaluing tax benefit | $ 463,167 | ||||
Total income taxes provision (benefit) | (65,948) | $ (68,986) | $ 330,267 | $ (120,349) | |
Effective tax rate | (90.12%) | ||||
Fiscal Year 2017 [Member] | |||||
Income taxes payable | $ 0 | $ 0 | $ 19,917 |
5. Concentrations (Details)
5. Concentrations (Details) | 6 Months Ended |
Mar. 31, 2018 | |
Sales Revenue, Net [Member] | Publix [Member] | |
Concentration percentage | 29.00% |
National Plaza [Member] | Rent Revenue [Member] | |
Concentration percentage | 55.00% |
National Plaza [Member] | Rentable Space [Member] | One Customer [Member] | |
Concentration percentage | 81.00% |
Evans Ground Lease [Member] | Rent Revenue [Member] | |
Concentration percentage | 37.00% |
Wrightsboro Road Lease [Member] | Rent Revenue [Member] | |
Concentration percentage | 8.00% |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended |
May 05, 2017 | Mar. 31, 2018 | Sep. 30, 2017 | |
Purchase and retirement of common stock | $ 53,988 | $ 2,530,473 | |
Buy Back Offer [Member] | |||
Purchase and retirement of common stock | $ 2,584,430 | ||
Purchase and retirement of common stock, shares | 1,477,817 | ||
Flanagin [Member] | |||
Equity interest owned | 58.00% | ||
Purchase and retirement of common stock, shares | 192,860 |