Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2018 | Feb. 11, 2019 | |
Document and Entity Information: | ||
Entity Registrant Name | SECURITY LAND & DEVELOPMENT CORP | |
Document Type | 10-Q | |
Document Period End Date | Dec. 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 | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Entity Small Business | true | |
Entity Emerging Growth | false |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
CURRENT ASSETS | ||
Cash | $ 3,030,268 | $ 493,446 |
Receivables from tenants, net of an allowance of $73,927 and $71,967 at December 31, 2018 and September 30, 2018, respectively | 261,403 | 412,008 |
Prepaid property taxes | 0 | 27,555 |
Total current assets | 3,291,671 | 933,009 |
INVESTMENT PROPERTIES | ||
Investment properties for lease, net of accumulated depreciation | 19,226,807 | 6,554,718 |
Land and improvements held for investment or development | 3,478,868 | 3,804,728 |
Total investment properties | 22,705,675 | 10,359,446 |
OTHER ASSETS | 0 | 12,716 |
Total Assets | 25,997,346 | 11,305,171 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 244,554 | 234,381 |
Income taxes payable | 1,587,250 | 75,630 |
Current maturities of notes payable | 134,987 | 407,554 |
Total current liabilities | 1,966,791 | 717,565 |
LONG-TERM LIABILITIES | ||
Notes payable, less current portion and deferred financing costs | 1,260,692 | 3,928,690 |
Deferred income taxes | 4,071,161 | 1,006,252 |
Total long-term liabilities | 5,331,853 | 4,934,942 |
Total liabilities | 7,298,644 | 5,652,507 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value $.10 per share; 30,000,000 shares authorized; 3,766,290 shares issued and outstanding | 376,629 | 376,629 |
Retained earnings | 18,322,073 | 5,276,035 |
Total Stockholders' Equity | 18,698,702 | 5,652,664 |
Liabilities and Stockholders' Equity | $ 25,997,346 | $ 11,305,171 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
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 | 3,766,290 |
Common Stock, shares outstanding | 3,766,290 | 3,766,290 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
OPERATING REVENUE | ||
Rent revenue | $ 393,886 | $ 417,717 |
OPERATING EXPENSES | ||
Depreciation and amortization | 78,987 | 48,333 |
Property taxes | 58,281 | 70,024 |
Payroll and related costs | 828,296 | 23,529 |
Insurance and utilities | (4,120) | 6,366 |
Repairs and maintenance | 8,552 | 7,151 |
Professional services | 78,643 | 21,740 |
Bad debt expense | 1,949 | 0 |
Other | 41,909 | 1,008 |
Total operating expenses | 1,092,497 | 178,151 |
Operating (loss) income | (698,611) | 239,566 |
OTHER INCOME (EXPENSE) | ||
Gain on sale | 18,367,269 | 0 |
Interest expense | (46,090) | (70,159) |
Total other income (expense) | 18,321,179 | (70,159) |
Income before income taxes | 17,622,568 | 169,407 |
INCOME TAXES PROVISION (BENEFIT) | ||
Income tax expense | 1,511,620 | 54,207 |
Income tax deferred expense (benefit) | 3,064,910 | (450,422) |
Total income taxes provision | 4,576,530 | (396,215) |
Net income | $ 13,046,038 | $ 565,622 |
PER SHARE DATA | ||
Net income per common share | $ 3.46 | $ 0.15 |
Weighted average shares outstanding | 3,766,290 | 3,793,150 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock [Member] | Retained Earnings | Total |
Beginning balance, value at Sep. 30, 2017 | $ 379,719 | $ 4,505,515 | $ 4,885,234 |
Net income | 565,622 | 565,622 | |
Purchase and retirement of common stock | (2,455) | (40,425) | (42,880) |
Ending balance, value at Dec. 31, 2017 | 377,264 | 5,030,712 | 5,407,976 |
Beginning balance, value at Sep. 30, 2018 | 376,629 | 5,276,035 | 5,652,664 |
Net income | 13,046,038 | 13,046,038 | |
Ending balance, value at Dec. 31, 2018 | $ 376,629 | $ 18,322,073 | $ 18,698,702 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 13,046,038 | $ 565,622 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Gain on sale | (18,367,269) | 0 |
Bad debts | 1,949 | 0 |
Deferred financing costs | (16,146) | 0 |
Depreciation and amortization | 77,654 | 48,333 |
Interest on deferred financing costs | 1,333 | 1,333 |
Deferred income tax | 3,064,909 | (450,422) |
Changes in deferred and accrued amounts | 1,698,004 | 38,826 |
Net cash provided by operating activities | (493,528) | 203,692 |
INVESTING ACTIVITIES | ||
Additions to investment properties and other assets for properties held for lease | (15,044,916) | 0 |
Proceeds from sale of investment properties and other assets held for lease | 21,017,164 | 0 |
Net cash used in investing activities | 5,972,248 | 0 |
FINANCING ACTIVITIES | ||
Purchase and retirement of common stock | 0 | (42,880) |
Principal payments on notes payable | (2,941,898) | (116,944) |
Net cash used in financing activities | (2,941,898) | (159,824) |
Net increase in cash | 2,536,822 | 43,868 |
CASH, BEGINNING OF PERIOD | 493,446 | 254,522 |
CASH, END OF PERIOD | 3,030,268 | 298,390 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 48,954 | 68,943 |
Cash paid for income taxes | $ 0 | $ 0 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 3 Months Ended |
Dec. 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, 2018 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, 2018 for further information regarding its critical accounting policies. Recently Adopted 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 is effective for the Company for reporting periods beginning October 1, 2018. 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 affects 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 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 is effective for the Company for reporting periods beginning October 1, 2018. The Company applied the guidance using a modified retrospective approach. 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 October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. The Company will applied the guidance using a modified retrospective approach. Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-2, Leases (Topic 842), The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements We continue to evaluate the impact this pronouncement will have on our financial statements and the Company is currently assessing the potential changes to its accounting and whether such changes will have a material impact on its consolidated financial statements and condensed notes to its consolidated financial statements. We evaluated the revenue recognition for all contracts within this scope under existing accounting standards and under the new revenue recognition ASU and confirmed that there were no differences in the amounts recognized or the pattern of recognition. Therefore, the adoption of this ASU did not result in an adjustment to our retained earnings on January 1, 2018. 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 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. 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 has evaluated the impact of adoption of this guidance and determined that these amendments do not 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. |
2. INVESTMENT PROPERTIES
2. INVESTMENT PROPERTIES | 3 Months Ended |
Dec. 31, 2018 | |
INVESTMENT PROPERTIES | |
Investment Properties | Note 2 - Investment Properties Investment properties leased or held for lease to others under operating leases consisted of the following at December 31, 2018 and September 30, 2018: December 31, 2018 September 30, 2018 (unaudited) (audited) National Plaza building, land and improvements $ - $ 5,322,260 Bobby Jones Ground Lease, land and lease intangible Evans Ground Lease, land and improvements 15,044,916 2,382,673 - 2,382,673 Wrightsboro Road building, land and improvements 1,929,690 1,929,690 Commercial land and improvements 3,478,868 3,804,728 22,836,147 13,439,351 Less accumulated depreciation (130,472) (3,079,905) Investment properties for lease, net of depreciation and amortization $ 22,705,675 $ 10,359,446 Depreciation and amortization expense totaled approximately $77,000 and $47,000 for the three-month periods ended December 31, 2018 and 2017, respectively. Sale of National Plaza 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 sold this property in December of 2018 for $21,000,000 and recognized a gain on the sale of $18,367,269. See Note 8 for additional disclosures regarding the National Plaza retail strip center. 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. Purchase of Bobby Jones Ground Lease In December of 2018, the Company purchased a tract of land, consisting of 19.32 acres, and a ground lease with a major discount retailer for $15,044,916 using proceeds from the sale of National Plaza to fund the purchase. The ground lease commenced on November 21, 2005 and the initial term expires on May 1, 2028. The Company began recognizing rental income as of the date of closing. The original lease term is 20 years with sixteen five-year extension options. Annual rental payments total $810,636 and rent is payable monthly. The Company's management has made an estimated allocation of the purchase price, assigning $4,358,453 to land and $10,686,463 to the ground lease until an appraisal can be completed during the quarter ended March 31, 2019. Once the independent appraisal is completed the asset allocations may be adjusted based on the appraised allocations. The Company's management has preliminarily assumed the useful life of the lease should coincide with the remaining lease term, which is approximately 112 months, and has recorded amortization expense accordingly. The useful life and accumulated amortization will be adjusted accordingly per the appraisal, once complete, if necessary. 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. This 1.1-acre parcel was included in the sale of the National Plaza investment property. The aggregate costs of these investment properties held for investment or development was $3,478,868 and $3,804,728 at December 31, 2018 and September 30, 2018, respectively. Refer to the Company's Form 10-K for the year ended September 30, 2018 for further information on operating lease agreements and land held for investment or development purposes. |
3. NOTES PAYABLE
3. NOTES PAYABLE | 3 Months Ended |
Dec. 31, 2018 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | Note 3 - Notes Payable Notes payable consisted of the following at: December 31, (unaudited) September 30, (audited) A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note was payable in monthly installments of $33,050, through August 2027, and accrued interest at an annual fixed rate of 4.3%. The note payable was collateralized by National Plaza. In December of 2018 the Company sold National Plaza and used a portion of the proceeds to pay off this note. $ - $ 2,925,424 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%. 1,424,673 1,457,207 1,424,673 4,382,631 Less deferred financing costs (28,994) (46,387) Less current maturities of notes payable (134,987) (407,554) $ 1,260,692 $ 3,928,690 Current maturities of notes payable will require the Company to make payments over the next 12 months totaling $134,987. |
4. INCOME TAXES
4. INCOME TAXES | 3 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Note 4 - Income Taxes Income tax payable of $1,587,250 has been accrued as of the quarter ended December 31, 2018. As of January 31, 2019, all income taxes payable of $75,630 related to the fiscal year 2018 had been paid and $1,511,620 of accrued income taxes are payable for the quarter ended December 31, 2019. 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 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 -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. Deferred income taxes are the result of qualified tax-free exchanges of property transacted in current and prior 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: December 31, 2018 September 30, 2018 Deferred income tax liabilities: Basis in Investment Properties $ 4,071,161 $ 1,006,252 Taxable gains deferred by the Company in prior years and in the current year through qualified tax-free like-kind exchanges totaled approximately $15,604,996. These deferred gains for tax reporting comprise a substantial portion of the Company's deferred income tax liabilities as of December 31, 2018 and September 30, 2018, net of the effects of depreciation. The provision (benefit) for income taxes is as follows: For the three months ended December 31, 2018 2017 Current expense $ 1,511,620 $ 54,207 Deferred expense (benefit) 3,064,910 (450,422 ) $ 4,576,530 $ (396,215 ) The provision for income taxes for the three months ended December 31, 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 $ 17,622,568 $ 169,407 Expected federal tax expense at December 31, 2018 and 2017 is 21% and 24.25% respectively 3,700,739 41,081 State tax expense, net of federal benefit 840,596 13,126 Federal (benefit) expense of tax rate change - (450,422 ) Other expense 35,195 - Tax expense (benefit) $ 4,576,530 $ (396,215 ) |
5. CONCENTRATIONS
5. CONCENTRATIONS | 3 Months Ended |
Dec. 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 rental revenues were earned from four of the Company's investment properties, National Plaza, the Evans Ground Lease, the Bobby Jones Ground Lease and the Wrightsboro Road Lease, which comprise approximately 40%, 43%, 8% and 9% of the Company's revenues, respectively, for the three-month period ended December 31, 2018. The anchor tenant for National Plaza, Publix Supermarkets, Inc. ("Publix"), a regional food supermarket chain, leased approximately 81% of the space at National Plaza. Prior to the sale of National Plaza in December of 2018 the Company generated approximately 29% of its revenues through its lease with Publix. See Note 8 for additional disclosures regarding the National Plaza retail strip center. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Dec. 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. During the quarter, the Company paid bonuses of $787,500 to stockholders, who are also board members, related to the sale of National Plaza. During the quarter, the Company paid legal fees of $25,000 to a stockholder, who is also a board member, related to resolving an operational matter with a tenant at National Plaza. |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 3 Months Ended |
Dec. 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 was 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 December 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 $2,584,461. 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. During the quarter ended December 31, 2019 the Company paid off this term note with proceeds from the sale of National Plaza. |
8. SALE OF NATIONAL PLAZA
8. SALE OF NATIONAL PLAZA | 3 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
SALE OF NATIONAL PLAZA | Note 8 - Sale of National Plaza On June 27, 2018, the Company entered into an agreement with WSQ, LLC, a Georgia Limited Liability Company, for the sale of its retail strip center (the "National Plaza") along with two adjoining outparcels, located on Washington Road in Augusta, Georgia for a combined total sales price of $21,000,000. The closing of the sale occurred on December 13, 2018, and the Company recognized a gain on the sale of $18,367,269. |
9. PURCHASE OF BOBBY JONES GROU
9. PURCHASE OF BOBBY JONES GROUND LEASE | 3 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
PURCHASE OF BOBBY JONES GROUND LEASE | Note 9 - Purchase of Bobby Jones Ground Lease On December 20, 2018, the Company purchased a tract of land, consisting of 19.32 acres, and a ground lease with a major discount retailer and building owned by the retailer for $15,044,916 using proceeds from the sale of National Plaza to fund the purchase, including $44,916 in transaction costs. The ground lease commenced on November 21, 2005 and the initial term expires on May 1, 2028. The Company's management has made an estimated allocation of the purchase price, assigning $4,358,453 to land and $10,686,463 to the ground lease until an appraisal can be completed during the quarter ended March 31, 2019. Once the independent appraisal is completed the asset allocations may be adjusted based on the appraised allocations and adjustments could be material. The Company's management has preliminarily assumed the useful life of the lease should coincide with the remaining lease term, which is approximately 112 months, and has recorded amortization expense accordingly. The useful life and accumulated amortization will be adjusted accordingly per the appraisal, once complete, if necessary. |
1. SUMMARY OF SIGNIFICANT ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES (Policies) | 3 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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. |
Esitmates 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, 2018 for further information regarding its critical accounting policies. |
Recently Adopted Accounting Standards | Recently Adopted 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 is effective for the Company for reporting periods beginning October 1, 2018. 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 affects 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 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 is effective for the Company for reporting periods beginning October 1, 2018. The Company applied the guidance using a modified retrospective approach. 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 October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. 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 are effective for the Company for reporting periods beginning October 1, 2018. The Company will applied the guidance using a modified retrospective approach. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-2, Leases (Topic 842), The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements We continue to evaluate the impact this pronouncement will have on our financial statements and the Company is currently assessing the potential changes to its accounting and whether such changes will have a material impact on its consolidated financial statements and condensed notes to its consolidated financial statements. We evaluated the revenue recognition for all contracts within this scope under existing accounting standards and under the new revenue recognition ASU and confirmed that there were no differences in the amounts recognized or the pattern of recognition. Therefore, the adoption of this ASU did not result in an adjustment to our retained earnings on January 1, 2018. 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 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. 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 has evaluated the impact of adoption of this guidance and determined that these amendments do not 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. |
2. INVESTMENT PROPERTIES (Table
2. INVESTMENT PROPERTIES (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
INVESTMENT PROPERTIES | |
Schedule of Investment properties leased or held for lease | December 31, 2018 September 30, 2018 (unaudited) (audited) National Plaza building, land and improvements $ - $ 5,322,260 Bobby Jones Ground Lease, land and lease intangible Evans Ground Lease, land and improvements 15,044,916 2,382,673 - 2,382,673 Wrightsboro Road building, land and improvements 1,929,690 1,929,690 Commercial land and improvements 3,478,868 3,804,728 22,836,147 13,439,351 Less accumulated depreciation (130,472) (3,079,905) Investment properties for lease, net of depreciation and amortization $ 22,705,675 $ 10,359,446 |
3. NOTES PAYABLE (Tables)
3. NOTES PAYABLE (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable and line of credit | December 31, (unaudited) September 30, (audited) A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note was payable in monthly installments of $33,050, through August 2027, and accrued interest at an annual fixed rate of 4.3%. The note payable was collateralized by National Plaza. In December of 2018 the Company sold National Plaza and used a portion of the proceeds to pay off this note. $ - $ 2,925,424 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%. 1,424,673 1,457,207 1,424,673 4,382,631 Less deferred financing costs (28,994) (46,387) Less current maturities of notes payable (134,987) (407,554) $ 1,260,692 $ 3,928,690 |
4. INCOME TAXES (Tables)
4. INCOME TAXES (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred income tax liabilities | December 31, 2018 September 30, 2018 Deferred income tax liabilities: Basis in Investment Properties $ 4,071,161 $ 1,006,252 |
Schedule of provision for income taxes | For the three months ended December 31, 2018 2017 Current expense $ 1,511,620 $ 54,207 Deferred expense (benefit) 3,064,910 (450,422 ) $ 4,576,530 $ (396,215 ) |
Schedule of effective income tax rate reconciliation | 2018 2017 Net income before tax $ 17,622,568 $ 169,407 Expected federal tax expense at December 31, 2018 and 2017 is 21% and 24.25% respectively 3,700,739 41,081 State tax expense, net of federal benefit 840,596 13,126 Federal (benefit) expense of tax rate change - (450,422 ) Other expense 35,195 - Tax expense (benefit) $ 4,576,530 $ (396,215 ) |
2. INVESTMENT PROPERTIES (Detai
2. INVESTMENT PROPERTIES (Details - Real estate) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
Real Estate Properties [Line Items] | ||
Investment property gross | $ 22,836,147 | $ 13,439,351 |
Less accumulated depreciation | (130,472) | (3,079,905) |
Investment properties for lease, net of depreciation | 22,705,675 | 10,359,446 |
National Plaza building, land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | 0 | 5,322,260 |
Bobby Jones Ground Lease, land and improvements [Member] | ||
Real Estate Properties [Line Items] | ||
Investment property gross | 15,044,916 | 0 |
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 | $ 3,478,868 | $ 3,804,728 |
2. INVESTMENT PROPERTIES (Det_2
2. INVESTMENT PROPERTIES (Details Narrative) | 3 Months Ended | ||
Dec. 31, 2018USD ($)aft² | Dec. 31, 2017USD ($) | Sep. 30, 2018USD ($) | |
Depreciation and amortization expense | $ 77,654 | $ 48,333 | |
Gain on sale of property | 18,367,269 | $ 0 | |
Cost of properties held for investment or development | 3,478,868 | $ 3,804,728 | |
National Plaza [Member] | |||
Gross sale price of property | 21,000,000 | ||
Gain on sale of property | $ 18,367,269 | ||
Columbia County, GA [Member] | |||
Area of property held | a | 18 | ||
Lease commencment date | Jan. 1, 2017 | ||
Lessor description | Annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11 and 16 | ||
Option to renew? | true | ||
Description of terms and conditions of option to extend lessor's operating lease. | The lessee has an option to renew in year 21 and another option every 5 years thereafter | ||
Total lease term | 50 years | ||
Cost of properties held for investment or development | $ 3,804,728 | ||
Wrightsboro [Member] | |||
Area of property held | a | 3.5 | ||
Lease commencment date | Oct. 1, 2015 | ||
Lessor description | Annual rental payments of $142,000 paid monthly, increasing to $153,000 per year in 2021 | ||
Total lease term | 10 years | ||
Wrightsboro [Member] | Retail Space [Member] | |||
Area of property held | ft² | 25,000 | ||
Wrightsboro [Member] | Warehouse Space [Member] | |||
Area of property held | ft² | 27,000 | ||
Boby Jones Ground Lease [Member] | |||
Area of property held | a | 19.32 | ||
Payment for purchase of lease | $ 15,044,916 | ||
Lease commencment date | Nov. 21, 2005 | ||
Lessor description | Annual rental payments of $810,036 payable monthly. | ||
Boby Jones Ground Lease [Member] | Land [Member] | |||
Payment for purchase of lease | $ 4,358,453 | ||
Boby Jones Ground Lease [Member] | Ground Lease [Member] | |||
Payment for purchase of lease | $ 10,686,483 | ||
North Augusta, SC [Member] | |||
Area of property held | a | 19.38 | ||
Richmond County [Member] | |||
Area of property held | a | 85 | ||
Washington Road [Member] | |||
Area of property held | a | 1.1 |
3. NOTES PAYABLE (Details - Not
3. NOTES PAYABLE (Details - Notes payable) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Sep. 30, 2018 | |
Debt Instrument [Line Items] | ||
Total notes payable | $ 1,424,673 | $ 4,382,631 |
Less current maturities | (134,987) | (407,554) |
Less deferred financing costs | (28,994) | (46,387) |
Noncurrent notes payable | 1,260,692 | 3,928,690 |
Note Payable 1 [Member] | ||
Debt Instrument [Line Items] | ||
Total notes payable | 0 | $ 2,925,424 |
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 | $ 1,424,673 | $ 1,457,207 |
Interest rate (in percent) | 5.85% | |
Periodic monthly installments | $ 17,896 | |
Debt maturity date | May 1, 2027 |
3. NOTES PAYABLE (Details Narra
3. NOTES PAYABLE (Details Narrative) | Dec. 31, 2018USD ($) |
Notes Payable [Abstract] | |
Long term debt payments due next 12 months | $ 134,987 |
4. INCOME TAXES (Details - Defe
4. INCOME TAXES (Details - Deferred liabilities) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
Deferred income tax liabilities: | ||
Basis in Investment Properties | $ 4,071,161 | $ 1,006,252 |
4. INCOME TAXES (Details - Prov
4. INCOME TAXES (Details - Provision for Income Taxes) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Provision for income taxes | ||
Current expense | $ 1,511,620 | $ 54,207 |
Deferred expense (benefit) | 3,064,910 | (450,422) |
Income taxes provision (benefit) | $ 4,576,530 | $ (396,215) |
4. INCOME TAXES (Details - Reco
4. INCOME TAXES (Details - Reconciliation) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Effective income tax rate reconciliation | ||
Net income before tax | $ 17,622,568 | $ 169,407 |
Expected federal tax expense at December 31, 2018 and 2017 is 21% and 24.25% respectively | 3,700,739 | 41,081 |
State tax expense, net of federal benefit | 840,596 | 13,126 |
Federal (benefit) expense of tax rate change | 0 | (450,422) |
Other expense | 35,195 | 0 |
Tax expense (benefit) | $ 4,576,530 | $ (396,215) |
4. INCOME TAXES (Details Narrat
4. INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |||
Income tax payable | $ 1,587,250 | ||
Increase (decrease) in income tax expense | 463,167 | $ 115,469 | |
Tax-free like-kind exchanges | $ 15,604,996 | ||
Expected federal tax rate | 21.00% | 24.25% | 24.25% |
5. CONCENTRATIONS (Details Narr
5. CONCENTRATIONS (Details Narrative) - Sales Revenue Net [Member] | 3 Months Ended |
Dec. 31, 2018 | |
National Plaza [Member] | |
Concentration risk percentage | 40.00% |
Evans Ground Lease [Member] | |
Concentration risk percentage | 43.00% |
Boby Jones Ground Lease [Member] | |
Concentration risk percentage | 8.00% |
Wrightsboro [Member] | |
Concentration risk percentage | 9.00% |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Board Members [Member] | |
Bonus paid related to sale of property | $ 787,500 |
Stockholder [Member] | |
Legal fees paid | $ 25,000 |
7. STOCKHOLDERS' EQUITY (Detail
7. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 3 Months Ended | |
May 05, 2017 | Dec. 31, 2018 | |
Buy Back Offer [Member] | ||
Purchase and retirement of common stock | $ 2,584,461 | |
Purchase and retirement of common stock, shares | 1,477,817 | |
Flanagin [Member] | ||
Equity interest owned | 58.00% | |
Flanagin [Member] | Buy Back Offer [Member] | ||
Purchase and retirement of common stock, shares | 192,860 |
8. SALE OF NATIONAL PLAZA (Deta
8. SALE OF NATIONAL PLAZA (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Gain on sale of property | $ 18,367,269 | $ 0 |
National Plaza [Member] | ||
Gross sale price of property | 21,000,000 | |
Gain on sale of property | $ 18,367,269 |
9. PURCHASE OF BOBBY JONES GR_2
9. PURCHASE OF BOBBY JONES GROUND LEASE (Details Narrative) - Boby Jones Ground Lease [Member] | 3 Months Ended |
Dec. 31, 2018USD ($)a | |
Area of property held | a | 19.32 |
Payment for purchase of lease | $ 15,044,916 |
Payment of transaction costs | $ 44,916 |
Lease commencment date | Nov. 21, 2005 |
Lease expiration date | May 1, 2028 |
Land [Member] | |
Payment for purchase of lease | $ 4,358,453 |
Ground Lease [Member] | |
Payment for purchase of lease | $ 10,686,483 |