Document and Entity Information
Document and Entity Information | 12 Months Ended |
Sep. 30, 2018USD ($)shares | |
Document and Entity Information: | |
Entity Registrant Name | SECURITY LAND & DEVELOPMENT CORP |
Document Type | 10-K |
Document Period End Date | Sep. 30, 2018 |
Amendment Flag | false |
Entity Central Index Key | 88,572 |
Current Fiscal Year End Date | --09-30 |
Entity Common Stock, Shares Outstanding | shares | 3,766,290 |
Entity Filer Category | Non-accelerated Filer |
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 | FY |
Entity Public Float | $ | $ 0 |
Entity Small Business | true |
Entity Emerging Growth | false |
Entity Shell Company | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
CURRENT ASSETS | ||
Cash | $ 493,446 | $ 254,522 |
Receivables from tenants, net of an allowance of $73,927 and $71,967 at September 30, 2018 and 2017, respectively | 412,008 | 365,589 |
Prepaid property taxes | 27,555 | 29,768 |
Total current assets | 933,009 | 649,879 |
INVESTMENT PROPERTIES | ||
Investment properties for lease, net of accumulated depreciation | 6,554,718 | 6,742,993 |
Land and improvements held for investment or development | 3,804,728 | 3,804,728 |
Total investment properties | 10,359,446 | 10,547,721 |
OTHER ASSETS | 12,716 | 17,774 |
Total Assets | 11,305,171 | 11,215,374 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 234,381 | 223,482 |
Income taxes payable | 75,630 | 19,917 |
Current maturities of notes payable | 407,554 | 388,322 |
Total current liabilities | 717,565 | 631,721 |
LONG-TERM LIABILITIES | ||
Notes payable, less current portion and deferred financing costs | 3,928,690 | 4,330,863 |
Deferred income taxes | 1,006,252 | 1,367,556 |
Total long-term liabilities | 4,934,942 | 5,698,419 |
Total liabilities | 5,652,507 | 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 September 30, 2018 and 3,797,137 shares issued and outstanding at September 30, 2017 | 376,629 | 379,719 |
Retained earnings | 5,276,035 | 4,505,515 |
Total Stockholders' Equity | 5,652,664 | 4,885,234 |
Liabilities and Stockholders' Equity | $ 11,305,171 | $ 11,215,374 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance on receivables from tenants | $ 73,927 | $ 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 - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING REVENUES | ||
Rent revenues | $ 1,758,920 | $ 1,721,499 |
OPERATING EXPENSES | ||
Depreciation and amortization | 198,665 | 191,371 |
Property taxes | 282,651 | 277,664 |
Payroll and related costs | 141,455 | 108,434 |
Insurance and utilities | 67,776 | 69,141 |
Repairs and maintenance | 51,579 | 122,202 |
Professional services | 80,073 | 191,566 |
Bad debt | 1,960 | 1,419 |
Other | 6,314 | 16,341 |
Total operating expenses | 830,473 | 978,138 |
Operating income | 928,447 | 743,361 |
OTHER INCOME (EXPENSE) | ||
Interest expense | (222,504) | (200,671) |
Other income | 0 | 5,924 |
Total other income (expense) | (222,504) | (194,747) |
Income before income taxes | 705,943 | 548,614 |
INCOME TAXES PROVISION (BENEFIT) | ||
Income tax expense | 241,522 | 255,909 |
Income tax deferred benefit | (356,991) | (39,112) |
Total income taxes provision | (115,469) | 216,797 |
Net income | $ 821,412 | $ 331,817 |
PER SHARE DATA | ||
Net income per common share | $ 0.22 | $ 0.09 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-In Capital | Retained Earnings | 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 | 821,412 | 821,412 | ||
Purchase and retirement of common stock | (3,090) | 0 | (50,892) | (53,982) |
Ending balance, value at Sep. 30, 2018 | $ 376,629 | $ 0 | $ 5,276,035 | $ 5,652,664 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 821,412 | $ 331,817 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Bad debts | 1,960 | 1,419 |
Depreciation and amortization | 198,665 | 191,371 |
Interest on deferred financing costs | 5,332 | 4,723 |
Write off deferred financing costs | 0 | 24,178 |
Changes in deferred and accrued amounts | ||
Receivables from tenants | (48,379) | 30,101 |
Prepaid property taxes | 2,213 | (3,302) |
Income taxes receivable | 0 | 22,441 |
Accounts payable and accrued expenses | 10,899 | (3,138) |
Income taxes payable | 55,714 | 19,917 |
Deferred income taxes | (361,304) | (39,112) |
Net cash provided by operating activities | 686,512 | 580,415 |
INVESTING ACTIVITIES | ||
Additions to investment properties and other assets for improvements to property held for lease | 0 | (7,207) |
Net cash used in investing activities | 0 | (7,207) |
FINANCING ACTIVITIES | ||
Purchase and retirement of common stock | (53,982) | (2,530,473) |
Proceeds from line of credit | 0 | 2,500,000 |
Payments on line of credit | 0 | (2,500,000) |
Proceeds from note payable | 0 | 3,209,423 |
Principal payments on notes payable | (393,606) | (1,464,333) |
Payments for deferred financing costs | 0 | (33,963) |
Net cash used in financing activities | (447,588) | (819,346) |
Net increase (decrease) in cash | 238,924 | (246,138) |
CASH, BEGINNING OF YEAR | 254,522 | 500,660 |
CASH, END OF YEAR | 493,446 | 254,522 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 223,074 | 173,912 |
Cash paid for income taxes | $ 155,280 | $ 212,862 |
1. SUMMARY OF SIGNIFICANT ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES | 12 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES Business activities Security Land and Development Corporation ("the Company") is engaged in the acquisition of developed and undeveloped real estate to be held for investment purposes or to be developed and leased as income producing property. Substantially all investment properties held and leased by the Company are located within the State of Georgia, in Richmond and Columbia counties and in North Augusta, South Carolina. Royal Palms Motel, Inc., a wholly owned subsidiary of Security Land and Development Corporation, is a holding company for a parcel of land in Richmond County, Georgia. During 2004, the Company organized, as its sole member, SLDC, LLC, a Georgia limited liability company. During 2007, the Company organized, as its sole member, SLDC2, LLC, a Georgia limited liability company. During 2008, the Company organized, as its sole member, SLDC III, LLC, a South Carolina limited liability company. SLDC, LLC, SLDC2, LLC, and SLDC III, LLC were organized by the Company to hold title to certain real estate that the Company plans to develop. During 2018 and 2017, substantially all operating revenues and operating expenses were related to real estate leasing. A substantial portion of rent revenues were earned from two investment properties, a commercial retail center, consisting of approximately 69,000 square feet on Washington Road in Augusta, Georgia ("National Plaza") and the Evans Ground Lease on Washington Road in Evans, Georgia ("Evans Ground Lease"). National Plaza provided approximately 53% of gross rent revenue in 2018 and 2017. Approximately 81% of National Plaza was leased to a regional food supermarket, with annual rents from the lease totaling $463,200. National Plaza comprises approximately 36% of the asset Investment Properties for Lease, net of Accumulated Depreciation. The Evans Ground Lease provided approximately 38% and 39% of gross rental revenues in 2018 and 2017, respectively. This property, leased to a national home improvement retailer, earned rents totaling approximately $542,000 in both 2018 and 2017. The Evans Ground Lease comprises approximately 36% of investment properties held for lease, net, by the Company at September 30, 2018. In September of 2015, the Company purchased a commercial building on 3.5 acres of land located on Wrightsboro Road in Augusta, Georgia. The building is partially leased to a local retailer with a rental period beginning October 1, 2015. The Wrightsboro Road property represents approximately 28% of the Company's net leased assets at September 30, 2018. The Wrightsboro Road lease provided approximately 9% of gross rental revenue in 2018 and 2017. Basis of presentation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of Security Land and Development Corporation and its wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC2, LLC, and SLDC III, LLC (described on a consolidated basis as the "Company"). All intercompany transactions and accounts are eliminated in consolidation. Use of estimates The consolidated 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. Revenue recognition Rent revenue is recognized on a straight-line basis over the term of the related lease agreements. The Company is reimbursed by tenants for property taxes and other maintenance fees. These reimbursements billed totaled $314,338 and $300,113, which is included in rent revenues, for the years ended September 30, 2018 and 2017, respectively. Gains, or losses, realized from sales of real estate are recognized substantially when title to the property has passed and the risks and benefits of ownership have been transferred to the buyer. Investment properties Investment properties are stated at cost. Depreciation of the investment properties is computed principally using the straight-line method over the following estimated useful lives: Buildings for lease 30 - 40 years Land improvements on property for lease 15 years Major renewals or improvements on investment properties are capitalized, while maintenance and repairs that do not improve or extend the useful lives of the assets are charged to expense when incurred. Upon retirement, sale or other disposition of investment properties, the cost and accumulated depreciation are eliminated from the accounts and the gain or loss is included in income in the period of disposition. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 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 is less than the carrying amount. The Company measures the impairment loss as the amount by which the asset's carrying amount exceeds the fair value of the asset. At September 30, 2018 and 2017, the Company believes that none of its long-lived assets are impaired. Receivables from tenants Receivables from tenants consist of rents, property taxes and other maintenance fees payable under the terms of lease agreements. Receivables are carried at original invoice amount. Management estimates an allowance for doubtful accounts by regularly evaluating individual tenant receivables and considering the collectability of balances due based on each tenant's financial condition, credit history, and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recognized in income when received. The Company has an allowance for uncollectible accounts of $73,927 and $71,967 at September 30, 2018 and 2017, respectively. Lease commissions Lease commissions are capitalized and amortized over the term of the related leases, using the straight-line method. Lease commissions, net of accumulated amortization, of $12,716 and $17,774 at September 30, 2018 and 2017, respectively, are included in Other Assets in the accompanying consolidated balance sheets. Deferred financing costs In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, S implifying the Presentation of Debt Issuance Costs. Income taxes The Company files a consolidated income tax return. Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the financial reporting basis and income tax basis of assets and liabilities. Deferred tax assets and liabilities represent future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are adjusted for changes in tax laws and tax rates when those changes are enacted. The Company has adopted the provisions under ASC Topic 740, "Income Taxes" ("ASC 740") which requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense in its financial statements. Management is not aware of any uncertain tax positions as of September 30, 2018. At September 30, 2017, the Company had income taxes payable of $19,917 related to the fiscal year 2017. As of September 30, 2018, all income taxes payable related to the fiscal year 2017 had been paid, and $75,630 of income tax payable has been accrued for the fiscal year 2018. 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. Internal Revenue Code (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 quarter ended December 31, 2017 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 twelve-month period ended September 30, 2018, the Company recorded $115,469 in income tax benefits at an effective rate of approximately -49%. 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 twelve-month period ended September 30, 2018 was the benefit relating to the revaluing of the deferred tax asset and liability balances to the new federal statutory rate. Statements of 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 September 30, 2018, the percentage of common stock owned by the Flanagin Family was approximately 58%. The Company purchased and retired a total of 1,476,817 shares of its stock for $2,584,455. Included within these shares purchased by the Company were 160,500 shares sold by members of the Flanagin family. The Company utilized funds procured from a line of credit as noted above in Note 3 - Notes Payable and Line of Credit. Net income per common share Net income per common share is calculated on the basis of the weighted average number of shares outstanding. The Company has no stock option plans, or other instruments resulting in earnings per share dilution. For 2018 and 2017, the weighted average number of shares outstanding was 3,766,290 and 3,797,137. Only basic net income per common share is presented. Recently issued accounting standards In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. 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. This guidance also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The guidance was effective for the Company for reporting periods beginning after December 31, 2017. 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 was 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 were 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 were 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 were 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 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 were 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 were 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 were 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 was 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 for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements. 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 were 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 Jobs Act. The amendments were effective upon issuance. The Company has disclosed the impact within Note 1 to the financial statements. In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to make narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments will be effective for the Company for reporting periods beginning December 15, 2018. The Company does not expect these amendments to have a material effect on its financial statements. In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to give entities another option for transition and to provide lessors with a practical expedient. The amendments will be effective for the Company for reporting periods beginning after December 15, 2018. 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. Concentrations Substantially all the Company's assets consist of real estate located in Richmond and Columbia Counties in the State of Georgia, and in North Augusta, South Carolina. Approximately 100% and 99% of the Company's revenues were rental related revenue in 2018 and 2017, respectively. In both 2018 and 2017, approximately 53% of the Company's rental revenues were earned from National Plaza. Approximately 81% of National Plaza is leased to one tenant, a regional food supermarket. Approximately 38% and 39% of the Company's rental revenues in 2018 and 2017, respectively, were earned from the Evans Ground Lease, which is 100% leased to a major national home improvement retailer. The majority of the Company's receivables from tenants at September 30, 2018 and 2017 were receivable from two tenants, the regional food supermarket that leases property at National Plaza, and the major national home improvement retailer under the Evans Ground Lease. The Company places its cash with high quality financial institutions. At times the Company's cash balances may be in excess of Federal Deposit Insurance Corporation limits. Subsequent events Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Unrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events, other than noted below, occurred that require accrual or disclosure. On June 27, 2018, the Company entered into an agreement with WSQ, LLC, a Georgia Limited Liability Company, for the sale of National Plaza along with two adjoining outparcels, located on Washington Road in Augusta, Georgia. The sale price was $21,000,000 and the closing of the sale occurred on December 13, 2018. The Company intends to use a portion of the proceeds from the National Plaza sale for a like-kind-exchange to purchase a property located in Augusta, Georgia. The identified property would be a long-term ground lease with an established national retailer that is currently occupying the premise. The expected purchase price of this property per the sales contract is $15,000,000 and the annual revenue from this long-term ground lease would be approximately $810,000, with approximately nine and half years remaining on the initial lease term. This lease does have sixteen five year extension options, with the first five year extension beginning in 2028 at a 10% escalation in the annual rent amount. If additional extension periods are exercised, rent amounts will increase every other extension period beginning in year 2033 at a rate of 5%. In addition to using the proceeds of the National Plaza sale being used for the purchase of the aforementioned property, the Board of the Directors of the Company also plans to evaluate the possibility of paying dividends at a yet to be determined amount from a portion of the proceeds from the sale of National Plaza. The Company is also paying bonuses of approximately 3.75% of the gross sales price. At the closing of National Plaza, the Company also paid off the note payable with a regional financial institution for a loan that is currently collateralized by the National Plaza center. |
2. INVESTMENT PROPERTIES
2. INVESTMENT PROPERTIES | 12 Months Ended |
Sep. 30, 2018 | |
INVESTMENT PROPERTIES | |
Investment Properties | NOTE 2 - INVESTMENT PROPERTIES Investment properties leased or held for lease Investment properties leased or held for lease to others under operating leases consist of the following at September 30: 2018 2017 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 (3,079,905) (2,891,630) Investment properties for lease, net of depreciation $ 10,359,446 $ 10,547,721 Depreciation expense totaled $188,275 and $186,314 in 2018 and 2017, respectively. Approximately 81% of National Plaza is leased to a regional food supermarket. The lease requires minimum annual rental payments of $463,200. The original term expired in 2015 and the tenant exercised a 5 year option. This lease is renewable for a total of an additional 15 years at substantially similar lease terms. The lease provides for the supermarket to pay for interior maintenance and utilities and property taxes on a proportional basis. The lease agreement also provides for the Company to receive each year 1.25% of the individual supermarket's gross sales in excess of approximately $37 million. For 2018 and 2017, the supermarket did not achieve this gross sales level. In 2003, the Company entered into a 20-year ground lease arrangement on an outparcel of National Plaza. The ground lease provides for minimum rent of $45,000 annually, for the first 10 years of the lease. The minimum rent increases by approximately 10% after year 10 and then again after year 15 of the ground lease. Other lease agreements at National Plaza range in terms from one to five years. The Company entered into a long-term ground lease with a major national home improvement retailer tenant and its developer in May 2006 on the 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 of 2007. Following the expiration of the development period, the lease requires annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16. The lease has an option to renew at 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. In June of 2015, the Company sold approximately 1 acre of undeveloped land previously included as part of National Plaza adjoining Stanley Drive and a residential house located on Stanley Drive resulting in a gain on sale of approximately $1,860,000. 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 of $142,000, increasing to $153,000 at year 6. The warehouse space was available for lease as of September 30, 2018. Future minimum rents receivable under the operating lease agreements are as follows for the years ending September 30: 2019 $ 1,337,749 2020 1,113,205 2021 794,420 2022 815,786 2023 812,406 Thereafter 2,203,029 $ 7,076,595 On June 27, 2018, the Company entered into an agreement with WSQ, LLC, a Georgia Limited Liability Company, for the sale of National Plaza along with two adjoining outparcels, located on Washington Road in Augusta, Georgia. The closing of the sale occurred on December 13, 2018. After this sale, future minimum rents receivable under the existing operating lease agreements not associated with National Plaza (excluding pending purchase of property discussed in Note 1- Subsequent events are as follows for the years ending September 30: 2019 $ 693,250 2020 693,250 2021 704,610 2022 725,282 2023 732,173 Thereafter 2,187,862 $ 5,736,427 Land and improvements held for investment or development The Company also holds for investment or future development approximately 19.38 acres of undeveloped commercial land in North Augusta, South Carolina, purchased in several parcels during 2007 and 2008. The Company also owns approximately 85 acres of land in south Richmond County and a 1.1 acre parcel along Washington Road in Augusta, Georgia, that adjoins the Company's National Plaza investment property. See also Note 1 - Subsequent events. The aggregate cost of these investment properties held for investment or development was $3,804,728 at both September 30, 2018 and 2017. |
3. NOTES PAYABLE
3. NOTES PAYABLE | 12 Months Ended |
Sep. 30, 2018 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | NOTE 3 - NOTES PAYABLE Notes payable consisted of the following at September 30: 2018 2017 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 proceeds from this note were used to pay down a line of credit and a note payable collateralized by National Plaza. $ 2,925,424 $ 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%. 1,457,207 1,582,647 4,382,631 4,770,904 Less deferred financing costs (46,387) (51,719) Less current maturities of notes payable (407,554) (388,322) $ 3,928,690 $ 4,330,863 Aggregate maturities of notes payable are as follows at September 30, 2018: 2019 $ 407,554 2020 427,449 2021 448,973 2022 471,277 2023 494,714 Thereafter 2,132,664 $ 4,382,631 All interest incurred for 2018 and 2017 was expensed by the Company. |
4. INCOME TAXES
4. INCOME TAXES | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 4 - INCOME TAXES Deferred income taxes are the result of qualified tax-free exchanges of property transacted in previous years and reporting depreciation differently for income tax purposes. The tax effects of temporary differences that give rise to the deferred tax liability are as follows as of September 30: 2018 2017 Deferred income tax liabilities: Basis in Investment Properties $ 1,006,252 $ 1,367,556 Taxable gains deferred by the Company in prior years and in the current year through qualified tax-free like-kind exchanges totaled approximately $2,835,235. These deferred gains for tax reporting comprise a substantial portion of the Company's deferred income tax liabilities as of September 30, 2018 and 2017, net of the effects of depreciation. The (benefit) provision for income taxes is as follows: For the years ended September 30, 2018 2017 Current expense $ 241,522 $ 255,909 Deferred benefit (356,991 ) (39,112 ) $ (115,469 ) $ 216,797 The provision for income taxes for the years ended September 30, 2018 and 2017 differs from the amount obtained by applying the U.S. federal and state income tax rate to pretax income due to the following: 2018 2017 Net income before tax $ 705,943 $ 548,614 Expected federal tax expense at 24.25% and 34% 171,006 186,529 State tax expense, net of federal benefit 47,965 21,725 Federal (benefit) expense of tax rate change (330,104 ) - Other (benefit) expense (4,336 ) 8,543 Tax (benefit) expense $ (115,469 ) $ 216,797 See also Note 1 - Subsequent events. |
5. RELATED PARTY TRANSACTIONS
5. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 5 - RELATED PARTY TRANSACTIONS The Company purchases insurance from an insurance company of which a former member of the Company's Board of Directors is President Emeritus. The former board member sold his shares and resigned from the Board of Directors during the year ended September 30, 2017. The Company believes that the insurance prices obtained from such company were not in excess of prices that would have been paid had the Company obtained this insurance from other sources. During the years ended September 30, 2018 and 2017, the Company paid $6,000 and $8,200, respectively, to the son of the President for accounting services. The Company believes the amount paid is not in excess of prices that would have been paid had the Company obtained these services from other sources. During December 2017, the Board of Directors voted to pay a bonus of $10,000 each to four Flanagin family members. All of the members are employees of the Company and three of the employees are members of the Board of Directors. See also Note 1 - Subsequent events. |
1. SUMMARY OF SIGNIFICANT ACC_2
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES (Policies) | 12 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business activities | Business activities Security Land and Development Corporation ("the Company") is engaged in the acquisition of developed and undeveloped real estate to be held for investment purposes or to be developed and leased as income producing property. Substantially all investment properties held and leased by the Company are located within the State of Georgia, in Richmond and Columbia counties and in North Augusta, South Carolina. Royal Palms Motel, Inc., a wholly owned subsidiary of Security Land and Development Corporation, is a holding company for a parcel of land in Richmond County, Georgia. During 2004, the Company organized, as its sole member, SLDC, LLC, a Georgia limited liability company. During 2007, the Company organized, as its sole member, SLDC2, LLC, a Georgia limited liability company. During 2008, the Company organized, as its sole member, SLDC III, LLC, a South Carolina limited liability company. SLDC, LLC, SLDC2, LLC, and SLDC III, LLC were organized by the Company to hold title to certain real estate that the Company plans to develop. During 2018 and 2017, substantially all operating revenues and operating expenses were related to real estate leasing. A substantial portion of rent revenues were earned from two investment properties, a commercial retail center, consisting of approximately 69,000 square feet on Washington Road in Augusta, Georgia ("National Plaza") and the Evans Ground Lease on Washington Road in Evans, Georgia ("Evans Ground Lease"). National Plaza provided approximately 53% of gross rent revenue in 2018 and 2017. Approximately 81% of National Plaza was leased to a regional food supermarket, with annual rents from the lease totaling $463,200. National Plaza comprises approximately 36% of the asset Investment Properties for Lease, net of Accumulated Depreciation. The Evans Ground Lease provided approximately 38% and 39% of gross rental revenues in 2018 and 2017, respectively. This property, leased to a national home improvement retailer, earned rents totaling approximately $542,000 in both 2018 and 2017. The Evans Ground Lease comprises approximately 36% of investment properties held for lease, net, by the Company at September 30, 2018. In September of 2015, the Company purchased a commercial building on 3.5 acres of land located on Wrightsboro Road in Augusta, Georgia. The building is partially leased to a local retailer with a rental period beginning October 1, 2015. The Wrightsboro Road property represents approximately 28% of the Company's net leased assets at September 30, 2018. The Wrightsboro Road lease provided approximately 9% of gross rental revenue in 2018 and 2017. |
Basis of presentation | Basis of presentation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of Security Land and Development Corporation and its wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC2, LLC, and SLDC III, LLC (described on a consolidated basis as the "Company"). All intercompany transactions and accounts are eliminated in consolidation. |
Use of estimates | Use of estimates The consolidated 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. |
Revenue recognition | Revenue recognition Rent revenue is recognized on a straight-line basis over the term of the related lease agreements. The Company is reimbursed by tenants for property taxes and other maintenance fees. These reimbursements billed totaled $314,338 and $300,113, which is included in rent revenues, for the years ended September 30, 2018 and 2017, respectively. Gains, or losses, realized from sales of real estate are recognized substantially when title to the property has passed and the risks and benefits of ownership have been transferred to the buyer. |
Investment properties | Investment properties Investment properties are stated at cost. Depreciation of the investment properties is computed principally using the straight-line method over the following estimated useful lives: Buildings for lease 30 - 40 years Land improvements on property for lease 15 years Major renewals or improvements on investment properties are capitalized, while maintenance and repairs that do not improve or extend the useful lives of the assets are charged to expense when incurred. Upon retirement, sale or other disposition of investment properties, the cost and accumulated depreciation are eliminated from the accounts and the gain or loss is included in income in the period of disposition. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 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 is less than the carrying amount. The Company measures the impairment loss as the amount by which the asset's carrying amount exceeds the fair value of the asset. At September 30, 2018 and 2017, the Company believes that none of its long-lived assets are impaired. |
Receivables from tenants | Receivables from tenants Receivables from tenants consist of rents, property taxes and other maintenance fees payable under the terms of lease agreements. Receivables are carried at original invoice amount. Management estimates an allowance for doubtful accounts by regularly evaluating individual tenant receivables and considering the collectability of balances due based on each tenant's financial condition, credit history, and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recognized in income when received. The Company has an allowance for uncollectible accounts of $73,927 and $71,967 at September 30, 2018 and 2017, respectively. |
Lease commissions | Lease commissions Lease commissions are capitalized and amortized over the term of the related leases, using the straight-line method. Lease commissions, net of accumulated amortization, of $12,716 and $17,774 at September 30, 2018 and 2017, respectively, are included in Other Assets in the accompanying consolidated balance sheets. |
Deferred financing costs | Deferred financing costs In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, S implifying the Presentation of Debt Issuance Costs. |
Income taxes | Income taxes The Company files a consolidated income tax return. Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the financial reporting basis and income tax basis of assets and liabilities. Deferred tax assets and liabilities represent future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are adjusted for changes in tax laws and tax rates when those changes are enacted. The Company has adopted the provisions under ASC Topic 740, "Income Taxes" ("ASC 740") which requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense in its financial statements. Management is not aware of any uncertain tax positions as of September 30, 2018. At September 30, 2017, the Company had income taxes payable of $19,917 related to the fiscal year 2017. As of September 30, 2018, all income taxes payable related to the fiscal year 2017 had been paid, and $75,630 of income tax payable has been accrued for the fiscal year 2018. 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. Internal Revenue Code (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 quarter ended December 31, 2017 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 twelve-month period ended September 30, 2018, the Company recorded $115,469 in income tax benefits at an effective rate of approximately -49%. 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 twelve-month period ended September 30, 2018 was the benefit relating to the revaluing of the deferred tax asset and liability balances to the new federal statutory rate. |
Statements of equity | Statements of 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 September 30, 2018, the percentage of common stock owned by the Flanagin Family was approximately 58%. The Company purchased and retired a total of 1,476,817 shares of its stock for $2,584,455. Included within these shares purchased by the Company were 160,500 shares sold by members of the Flanagin family. The Company utilized funds procured from a line of credit as noted above in Note 3 - Notes Payable and Line of Credit. |
Net income per common share | Net income per common share Net income per common share is calculated on the basis of the weighted average number of shares outstanding. The Company has no stock option plans, or other instruments resulting in earnings per share dilution. For 2018 and 2017, the weighted average number of shares outstanding was 3,766,290 and 3,797,137. Only basic net income per common share is presented. |
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. 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. This guidance also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The guidance was effective for the Company for reporting periods beginning after December 31, 2017. 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 was 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 were 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 were 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 were 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 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 were 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 were 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 were 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 was 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 for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements. 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 were 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 Jobs Act. The amendments were effective upon issuance. The Company has disclosed the impact within Note 1 to the financial statements. In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to make narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments will be effective for the Company for reporting periods beginning December 15, 2018. The Company does not expect these amendments to have a material effect on its financial statements. In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to give entities another option for transition and to provide lessors with a practical expedient. The amendments will be effective for the Company for reporting periods beginning after December 15, 2018. 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. |
Concentrations | Concentrations Substantially all the Company's assets consist of real estate located in Richmond and Columbia Counties in the State of Georgia, and in North Augusta, South Carolina. Approximately 100% and 99% of the Company's revenues were rental related revenue in 2018 and 2017, respectively. In both 2018 and 2017, approximately 53% of the Company's rental revenues were earned from National Plaza. Approximately 81% of National Plaza is leased to one tenant, a regional food supermarket. Approximately 38% and 39% of the Company's rental revenues in 2018 and 2017, respectively, were earned from the Evans Ground Lease, which is 100% leased to a major national home improvement retailer. The majority of the Company's receivables from tenants at September 30, 2018 and 2017 were receivable from two tenants, the regional food supermarket that leases property at National Plaza, and the major national home improvement retailer under the Evans Ground Lease. The Company places its cash with high quality financial institutions. At times the Company's cash balances may be in excess of Federal Deposit Insurance Corporation limits. |
Subsequent events | Subsequent events Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Unrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events, other than noted below, occurred that require accrual or disclosure. On June 27, 2018, the Company entered into an agreement with WSQ, LLC, a Georgia Limited Liability Company, for the sale of National Plaza along with two adjoining outparcels, located on Washington Road in Augusta, Georgia. The sale price was $21,000,000 and the closing of the sale occurred on December 13, 2018. The Company intends to use a portion of the proceeds from the National Plaza sale for a like-kind-exchange to purchase a property located in Augusta, Georgia. The identified property would be a long-term ground lease with an established national retailer that is currently occupying the premise. The expected purchase price of this property per the sales contract is $15,000,000 and the annual revenue from this long-term ground lease would be approximately $810,000, with approximately nine and half years remaining on the initial lease term. This lease does have sixteen five year extension options, with the first five year extension beginning in 2028 at a 10% escalation in the annual rent amount. If additional extension periods are exercised, rent amounts will increase every other extension period beginning in year 2033 at a rate of 5%. In addition to using the proceeds of the National Plaza sale being used for the purchase of the aforementioned property, the Board of the Directors of the Company also plans to evaluate the possibility of paying dividends at a yet to be determined amount from a portion of the proceeds from the sale of National Plaza. The Company is also paying bonuses of approximately 3.75% of the gross sales price. At the closing of National Plaza, the Company also paid off the note payable with a regional financial institution for a loan that is currently collateralized by the National Plaza center. |
1. SUMMARY OF SIGNIFICANT ACC_3
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of estimated useful lives | Buildings for lease 30 - 40 years Land improvements on property for lease 15 years |
2. INVESTMENT PROPERTIES (Table
2. INVESTMENT PROPERTIES (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
INVESTMENT PROPERTIES | |
Schedule of Investment properties leased or held for lease | 2018 2017 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 (3,079,905) (2,891,630) Investment properties for lease, net of depreciation $ 10,359,446 $ 10,547,721 |
Schedule of future minimum rents receivable | Future minimum rents receivable under the operating lease agreements are as follows for the years ending September 30: 2019 $ 1,337,749 2020 1,113,205 2021 794,420 2022 815,786 2023 812,406 Thereafter 2,203,029 $ 7,076,595 On June 27, 2018, the Company entered into an agreement with WSQ, LLC, a Georgia Limited Liability Company, for the sale of National Plaza along with two adjoining outparcels, located on Washington Road in Augusta, Georgia. The closing of the sale occurred on December 13, 2018. After this sale, future minimum rents receivable under the existing operating lease agreements not associated with National Plaza (excluding pending purchase of property discussed in Note 1- Subsequent events are as follows for the years ending September 30: 2019 $ 693,250 2020 693,250 2021 704,610 2022 725,282 2023 732,173 Thereafter 2,187,862 $ 5,736,427 |
3. NOTES PAYABLE (Tables)
3. NOTES PAYABLE (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable and line of credit | 2018 2017 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 proceeds from this note were used to pay down a line of credit and a note payable collateralized by National Plaza. $ 2,925,424 $ 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%. 1,457,207 1,582,647 4,382,631 4,770,904 Less deferred financing costs (46,387) (51,719) Less current maturities of notes payable (407,554) (388,322) $ 3,928,690 $ 4,330,863 |
Schedule of aggregate maturities of notes payable and the line of credit | 2019 $ 407,554 2020 427,449 2021 448,973 2022 471,277 2023 494,714 Thereafter 2,132,664 $ 4,382,631 |
4. INCOME TAXES (Tables)
4. INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred income tax liabilities | 2018 2017 Deferred income tax liabilities: Basis in Investment Properties $ 1,006,252 $ 1,367,556 |
Schedule of provision for income taxes | For the years ended September 30, 2018 2017 Current expense $ 241,522 $ 255,909 Deferred benefit (356,991 ) (39,112 ) $ (115,469 ) $ 216,797 |
Schedule of effective income tax rate reconciliation | 2018 2017 Net income before tax $ 705,943 $ 548,614 Expected federal tax expense at 24.25% and 34% 171,006 186,529 State tax expense, net of federal benefit 47,965 21,725 Federal (benefit) expense of tax rate change (330,104 ) - Other (benefit) expense (4,336 ) 8,543 Tax (benefit) expense $ (115,469 ) $ 216,797 |
1. SUMMARY OF SIGNIFICANT ACC_4
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES (Details) | 12 Months Ended |
Sep. 30, 2018 | |
Building [Member] | Minimum [Member] | |
Estimated useful lives | 30 years |
Building [Member] | Maximum [Member] | |
Estimated useful lives | 40 years |
Land Improvements [Member] | |
Estimated useful lives | 15 years |
1. SUMMARY OF SIGNIFICANT ACC_5
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES (Details Narrative) | 12 Months Ended | |
Sep. 30, 2018USD ($)aft²Integershares | Sep. 30, 2017USD ($)aIntegershares | |
Number of investment properties | Integer | 2 | 2 |
Rent revenue | $ 1,758,920 | $ 1,721,499 |
Reimbursed by tenants for property taxes and other maintenance fees | 314,338 | 300,113 |
Impairment of long-lived assets | 0 | 0 |
Allowance for uncollectible accounts | 73,927 | 71,967 |
Other assets | 12,716 | 17,774 |
Income taxes payable | $ 75,630 | 19,917 |
Effective income tax rate | 24.25% | |
Net impact from revaluing corporate tax rate | $ 463,167 | |
Income tax provision (benefit) | $ (115,469) | $ 216,797 |
Weighted average number of shares outstanding (in shares) | shares | 3,766,290 | 3,797,137 |
Common Stock [Member] | Board of Directors, not Flanagin Family [Member] | ||
Stock repurchased, shares | shares | 192,860 | |
Rent Revenue [Member] | ||
Concentration percentage | 100.00% | 99.00% |
Flanagin Family [Member] | Common Stock [Member] | ||
Concentration percentage | 58.00% | |
Stock repurchased, shares | shares | 1,476,817 | |
Stock repurchased, value | $ 2,584,455 | |
National Plaza [Member] | ||
Area of investment properties | ft² | 69,000 | |
Percent leased | 81.00% | |
Rent revenue | $ 463,200 | |
National Plaza [Member] | Rent Revenue [Member] | ||
Concentration percentage | 53.00% | 53.00% |
National Plaza [Member] | Investment Properties for Lease [Member] | ||
Concentration percentage | 36.00% | |
Evans Ground Lease [Member] | ||
Rent revenue | $ 542,000 | $ 542,000 |
Evans Ground Lease [Member] | Rent Revenue [Member] | ||
Concentration percentage | 38.00% | 39.00% |
Evans Ground Lease [Member] | Investment Properties for Lease [Member] | ||
Concentration percentage | 36.00% | |
Wrightsboro [Member] | ||
Area of investment properties | a | 3.5 | 3.5 |
Wrightsboro [Member] | Rent Revenue [Member] | ||
Concentration percentage | 9.00% | 9.00% |
Wrightsboro [Member] | Net Leased Assets [Member] | ||
Concentration percentage | 28.00% |
2. INVESTMENT PROPERTIES (Detai
2. INVESTMENT PROPERTIES (Details - Real estate) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Real Estate Properties [Line Items] | ||
Investment property gross | $ 13,439,351 | $ 13,439,351 |
Less accumulated depreciation | (3,079,905) | (2,891,630) |
Investment properties for lease, net of depreciation | 10,359,446 | 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 | 1,928,690 |
Commercial land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | $ 3,804,728 | $ 3,804,728 |
2. INVESTMENT PROPERTIES (Det_2
2. INVESTMENT PROPERTIES (Details - Minimum rentals) | Sep. 30, 2018USD ($) |
National Plaza [Member] | |
Schedule of Future minimum rents receivable | |
2,019 | $ 1,337,749 |
2,020 | 1,113,205 |
2,021 | 794,420 |
2,022 | 815,786 |
2,023 | 812,406 |
Thereafter | 2,203,029 |
Future minimum payments receivable | 7,076,595 |
Not National Plaza [Member] | |
Schedule of Future minimum rents receivable | |
2,019 | 693,250 |
2,020 | 693,250 |
2,021 | 704,610 |
2,022 | 725,282 |
2,023 | 732,173 |
Thereafter | 2,187,862 |
Future minimum payments receivable | $ 5,736,427 |
2. INVESTMENT PROPERTIES (Det_3
2. INVESTMENT PROPERTIES (Details Narrative) | 12 Months Ended | |
Sep. 30, 2018USD ($)aft² | Sep. 30, 2017USD ($)a | |
Depreciation expense | $ | $ 188,275 | $ 186,314 |
National Plaza [Member] | ||
Operating lease renewable term | 15 years | |
Additional lease information | 1.25% of the gross sales in excess of approximately $37 million | |
Area of property held | ft² | 69,000 | |
Undeveloped Commercial Land [Member] | ||
Cost of properties held for investment or development | $ | $ 3,804,728 | $ 3,804,728 |
Wrightsboro [Member] | ||
Area of property held | 3.5 | 3.5 |
Wrightsboro [Member] | Retail Space [Member] | ||
Area of property held | ft² | 25,000 | |
Wrightsboro [Member] | Warehouse Space [Member] | ||
Area of property held | ft² | 27,000 | |
North Augusta, SC [Member] | ||
Area of property held | 19.38 | |
Richmond County [Member] | ||
Area of property held | 85 | |
Washington Road [Member] | ||
Area of property held | 1.1 |
3. NOTES PAYABLE (Details - Not
3. NOTES PAYABLE (Details - Notes payable) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Debt Instrument [Line Items] | ||
Total notes payable | $ 4,382,631 | $ 4,770,904 |
Less current maturities | (407,554) | (388,322) |
Less deferred financing costs | (46,387) | (51,719) |
Noncurrent notes payable | 3,928,690 | 4,330,863 |
Note Payable 1 [Member] | ||
Debt Instrument [Line Items] | ||
Total notes payable | $ 2,925,424 | 3,188,257 |
Interest rate (in percent) | 4.30% | |
Periodic monthly installments | $ 33,050 | |
Debt maturity date | Aug. 31, 2027 | |
Note Payable 2 [Member] | ||
Debt Instrument [Line Items] | ||
Total notes payable | $ 1,457,207 | $ 1,582,647 |
Interest rate (in percent) | 5.85% | |
Periodic monthly installments | $ 17,896 | |
Debt maturity date | May 1, 2027 |
3. NOTES PAYABLE (Details - Mat
3. NOTES PAYABLE (Details - Maturities) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Schedule of aggregate maturities of notes payable and the line of credit refinanced | ||
2,019 | $ 407,554 | |
2,020 | 427,449 | |
2,021 | 448,973 | |
2,022 | 471,277 | |
2,023 | 494,714 | |
Thereafter | 2,132,664 | |
Long-term debt | $ 4,382,631 | $ 4,770,904 |
4. INCOME TAXES (Details - Defe
4. INCOME TAXES (Details - Deferred liabilities) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Deferred income tax liabilities: | ||
Basis in Investment Properties | $ 1,006,252 | $ 1,367,556 |
4. INCOME TAXES (Details - Prov
4. INCOME TAXES (Details - Provision for Income Taxes) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Provision for income taxes | ||
Current expense | $ 241,522 | $ 255,909 |
Deferred expense (benefit) | (356,991) | (39,112) |
Income taxes provision (benefit) | $ (115,469) | $ 216,797 |
4. INCOME TAXES (Details - Reco
4. INCOME TAXES (Details - Reconciliation) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Effective income tax rate reconciliation | ||
Net income before tax | $ 705,943 | $ 548,614 |
Expected federal tax expense at 24.25% and 34% | 171,006 | 186,529 |
State tax expense, net of federal benefit | 47,965 | 21,725 |
Federal (benefit) expense of tax rate change | (330,104) | 0 |
Other (benefit) expense | (4,336) | 8,543 |
Tax (benefit) expense | $ (115,469) | $ 216,797 |
4. INCOME TAXES (Details Narrat
4. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred income tax liabilities | $ 2,835,235 | $ 2,835,235 |
Expected federal tax rate | 24.25% | 34.00% |
5. RELATED PARTY TRANSACTIONS (
5. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Son of the President [Member] | ||
Professional fees, related party | $ 6,000 | $ 8,200 |