U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 [_] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ______________ Commission File Number 0-7865. ------ SECURITY LAND AND DEVELOPMENT CORPORATION ----------------------------------------- GEORGIA 58-1088232 ------- ---------- (State or other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) Number) 2816 Washington Road, #103, Augusta, Georgia 30909 - --------------------------------- ----- (Address of Principal Executive Zip Code Offices) Issuers Telephone Number (706) 736-6334 -------------- ------------------------------------------------------------------ (Former Name, Address & fiscal year, if changed from last report.) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _______ ------ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at March 31, 2000 - ---------------------------- ----------------------------- Common Stock, $.10 Par Value 5,258,886 shares Transitional Small Business Disclosure Format: Yes ___________ No X ---------- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements The following condensed consolidated financial statements of Security Land and Development Corporation and Subsidiary are included herein: Page ---- Condensed Consolidated Balance Sheet as of March 31, 2000 2 Condensed Consolidated Statements of Income for the Six Months Ended March 31, 2000 and 1999, and the Three Months Ended March 31, 2000 and 1999 3 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2000 and 1999 4 Notes to Condensed Consolidated Financial Statements 5 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Balance Sheet (Unaudited) March 31, 2000 ASSETS Current assets Cash $ 108,576 ---------- Total current assets 108,576 ---------- Investments and other assets Land and improvements, at cost 1,663,061 Property leased to others under operating leases, less accumulated depreciation $1,186,979 4,793,558 ---------- 6,456,619 ---------- $6,565,195 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 3,517 Current portion of long-term debt 128,786 Accrued interest 25,146 Other current liabilities 64,736 ---------- Total current liabilities 222,185 ---------- Long-term debt, less current maturities 3,661,333 ---------- Deferred taxes 136,135 ---------- Deferred income 373,873 ---------- Stockholders' equity Common stock, at par value 623,761 Paid-in capital 333,766 Retained earnings 1,314,142 ---------- 2,271,669 Less subscribed shares 100,000 ---------- 2,171,669 ---------- $6,565,195 ========== See notes to the condensed consolidated financial statements. 2 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Income (Unaudited) Three Six Three Six Months Months Months Months Ended Ended Ended Ended March 31, March 31, March 31, March 31, 2000 2000 1999 1999 --------- ---------- --------- ---------- Revenues, rent earned $166,136 $ 339,171 $159,912 $ 326,270 -------- --------- -------- --------- Operating expenses: Payroll and related costs 15,865 28,813 14,496 25,217 Depreciation 33,526 67,052 33,526 67,052 Taxes 17,726 34,768 14,781 30,167 Professional services 13,020 16,020 9,310 20,910 Insurance 2,656 6,325 2,167 6,492 Other 14,359 24,511 11,425 25,870 -------- --------- -------- --------- 97,152 177,489 85,705 175,708 -------- --------- -------- --------- Operating income 68,984 161,682 74,207 150,562 -------- --------- -------- --------- Nonoperating income (expense): Gain on sale of property 662,094 662,094 - - Interest income 2,461 4,747 1,556 3,011 Interest expense (75,025) (150,532) (77,431) (155,558) -------- --------- -------- --------- 589,530 516,309 (75,875) (152,547) -------- --------- -------- --------- Income (loss) before income taxes 658,514 677,991 (1,668) (1,985) Applicable income taxes 89,051 92,723 2,963 5,927 -------- --------- -------- --------- Net income (loss) $569,463 $ 585,268 $ (4,631) $ (7,912) ======== ========= ======== ========= Income (loss) per common share $ .11 $ .11 $ - $ - ======== ========= ======== ========= See notes to the condensed consolidated financial statements. 3 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For the Six Months Ended March 31, 2000 and 1999 (Unaudited) 2000 1999 --------- --------- Cash flows from operating activities Cash received from leases $ 360,736 $ 344,945 Interest received 4,747 3,011 Cash paid to suppliers and employees (143,327) (137,082) Interest paid (125,386) (155,558) --------- --------- Net cash provided by operating activities 96,770 55,316 --------- --------- Cash flows from investing activities Purchase of land and improvements (91,832) - --------- --------- Net cash used in investing activities (91,832) - --------- --------- Cash flows from financing activities Principal payments on long-term debt (52,278) (57,738) --------- --------- Net cash used in financing activities (52,278) (57,738) --------- --------- Net decrease in cash (47,340) (2,422) Cash at beginning of period 155,916 157,248 --------- --------- Cash at end of period $ 108,576 $ 154,826 ========= ========= Reconciliation of net income to net cash provided by operating activities: Net income (loss) $ 585,268 $ (7,912) Deferred income taxes 91,973 5,927 Gain on sale of property (662,094) - Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation 67,052 67,052 Changes in assets and liabilities Decrease in receivables 34,031 31,000 Increase (decrease) in accounts payable, accrued expenses and deferrals (19,460) (40,751) --------- --------- Net cash provided by operating activities $ 96,770 $ 55,316 ========= ========= See notes to the condensed consolidated financial statements. 4 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Notes to Condensed Consolidated Financial Statements Note 1 - Summary of significant accounting policies The accompanying financial statements are presented in accordance with the requirements of Form 10-QSB and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's annual Form 10-KSB filing. Accordingly, the reader of this Form 10-QSB may wish to refer to the Company's Form 10-KSB for the year ended September 30, 1999 for further information. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited. In the opinion of management, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. Note 2 - Investment in leases and property under operating leases Property leased or held for lease to others under operating leases consists of the following at March 31, 2000: Land $ 512,760 Warehouse and buildings 5,467,776 ---------- 5,980,536 Less accumulated depreciation 1,186,978 ---------- $4,793,558 ========== Refer to the Company's Form 10-KSB for the year ended September 30, 1999 for further information on operating lease agreements and terms. Note 3 - Long-term debt Long-term debt consisted of the following at March 31, 2000: 7.875% note payable to an insurance company due in monthly payments of $35,633, including interest, through June 2015, collateralized by real estate and assignment of lease payments from the property. $3,790,119 Less current maturities 128,786 ---------- $3,661,333 ========== 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Company's results of operations for the six month period ended March 31, 2000, and a comparative analysis of the same period for the 1999 year are presented below: Increase (Decrease) 2000 Compared to 1999 ------------------- 2000 1999 Amount Percent -------- -------- -------- ------- Leasing revenue $339,171 $326,270 $12,901 4.0% Operating expenses 177,489 175,708 1,781 1.0% Interest expense 150,532 155,558 (5,026) (3.2)% Revenue from leasing has increased from 1999 primarily as a result of a new tenant beginning October 1, 1999 at the Company's retail strip center located on Washington Road in Augusta, Georgia. On an annualized basis, current revenue from leasing remains constant from leasing revenue for the Company's fiscal year ended September 30, 1999. Refer to the Company's Form 10-KSB for the year ended September 30, 1999 for further information regarding the properties owned and lease terms. Operating expenses for the 2000 period are comparable to 1999 and, on an annualized basis, are comparable to the Company's operating expenses for the fiscal year ended September 30, 1999. Management of the Company expects operating expenses for the remainder of the fiscal year to be comparable to the present six month period. Interest expense for the current period is comparable to 1999 and, on an annualized basis, is comparable to the Company's interest expense for the fiscal year ended September 30, 1999. During the quarter ended March 31, 2000 the Company sold approximately 32 acres of undeveloped land located on Washington Road in Augusta, Georgia. The Company recognized a gain of $662,094 on the sale. A principal officer and stockholder of the Company acted as real estate agent on the sale through a brokerage company. The brokerage company received a commission of $47,000 on the sale. The Company invested the sale proceeds in purchases of additional undeveloped land. The Company purchased approximately 10 acres in Evans, Georgia on Belair Road and North Belair Road Extension, at Washington Road. The land was purchased in two transactions. The Company owns a 68% interest in 6.92 acres on Washington Road. The first transaction was to acquire the remaining approximately 32% of this tract, and approximately 4 additional acres. The land was acquired from an entity in which a principal stockholder and member of the Board of Directors of the Company is a significant owner. The purchase price of the land was $522,846. The second transaction was a purchase of approximately 4 acres in Evans, Georgia at North Belair Road Extension, adjacent to the purchased property previously described. The land was jointly owned by principal stockholders and members of the Board of Directors of the Company and their families, and was acquired by the Company from these individuals. The purchase price of the land was $371,970. The sale and purchase transactions described above have been structured as a tax-deferred like-kind exchange under Section 1031 of the Internal Revenue Code. Accordingly, the Company has not provided for current income taxes related to the gain on the sale, but has provided for appropriate deferred income taxes. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Company's ratio of current assets to current liabilities at March 31, 2000 was .49. The ratio was .87 at March 31, 1999. During the current quarter the Company satisfied liquidity needs through operating revenues. Management of the Company continues to expect future liquidity needs to be met from operating revenues of the Company. The Company does not expect any significant change in the number of employees. Cautionary Note Regarding Forward-Looking Statements The Company may, from time to time, make written or oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission (the "Commission") and its reports to stockholders. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, but not limited to, competition from other real estate companies, the ability of the Company to obtain financing for projects, and the continuing operations of tenants. 7 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) The Company did not file any reports on Form 8-K during the three months ended March 31, 2000. 8 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SECURITY LAND & DEVELOPMENT CORPORATION --------------------------------------- (Registrant) May 15, 2000 By: /s/ T. Greenlee Flanagin ---------------------------- T. GREENLEE FLANAGIN President Chief Executive Officer 9 INDEX TO EXHIBITS ----------------- Exhibit Number Description Sequential Page Number 27 Financial Data Schedule 11 - 12 10