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 June 30, 2001
[ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period of_________ to _________
Commission File Number 0-7865.
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SECURITY LAND AND DEVELOPMENT CORPORATION
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(Exact name of small business issuer as specified in its charter)
Georgia 58-1088232
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(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2816 Washington Road, #103, Augusta, Georgia 30909
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(Address of Principal Executive Offices)
Issuers Telephone Number (706) 736-6334
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- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Year)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
--- ---
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 August 14, 2001
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Common Stock, $.10 Par Value 5,258,886 shares
Transitional Small Business Disclosure Format: YES NO X
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Form 10-QSB
Index
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2001 1
Condensed Consolidated Statements of Income for the Nine
Months Ended June 30, 2001 and 2000, and the Three Months
Ended June 30, 2001 and 2000 2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 2001 and 2000 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis or Plan of Operation 5-6
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
INDEX TO EXHIBITS 9
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Part I. Financial Information
Condensed Consolidated Balance Sheet
(Unaudited)
June 30, 2001
ASSETS
Current assets
Cash $ 86,023
----------
Total current assets 86,023
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Investments and other assets
Land and improvements, at cost 2,186,499
Property leased to others under operating
leases, less accumulated depreciation
$745,583 4,714,554
----------
6,901,053
----------
$6,987,076
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,517
Current portion of long-term debt 352,941
Accrued interest 24,290
Other current liabilities 99,095
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Total current liabilities 479,843
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Long-term debt, less current maturities 3,477,488
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Deferred taxes 214,736
----------
Deferred income 343,058
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Stockholders' equity
Common stock, at par value 623,761
Paid-in capital 333,766
Retained earnings 1,614,424
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2,571,951
Less subscribed shares 100,000
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2,471,951
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$6,987,076
==========
See notes to condensed consolidated financial statements.
1
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Nine Three Nine
Months Ended Months Ended Months Ended Months Ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
----------------- ----------------- ----------------- -----------------
Revenues, rent earned $177,960 $ 520,054 $164,902 $ 504,073
----------------- ----------------- ----------------- -----------------
Operating expenses:
Payroll and related costs 15,397 50,032 12,580 41,393
Depreciation 33,696 97,702 30,310 97,362
Property taxes 16,945 55,424 17,500 52,268
Repairs and maintenance 5,755 17,325 4,250 10,250
Professional services 10,220 19,499 4,320 20,340
Insurance 5,349 13,061 2,958 9,283
Other 6,682 22,499 5,915 24,426
----------------- ----------------- ----------------- -----------------
94,044 275,542 77,833 255,322
----------------- ----------------- ----------------- -----------------
Operating income 83,916 244,512 87,069 248,751
----------------- ----------------- ----------------- -----------------
Nonoperating income and
(expense):
Gain on sale of property - - 311,816 973,910
Interest income 960 3,158 1,593 6,340
Interest expense (77,290) (230,358) (74,394) (224,926)
----------------- ----------------- ----------------- -----------------
(76,330) (227,200) 239,015 755,324
----------------- ----------------- ----------------- -----------------
Income before
income taxes 7,586 17,312 326,084 1,004,075
Applicable income taxes 1,138 3,597 60,412 153,135
----------------- ----------------- ----------------- -----------------
Net income $ 6,448 $ 13,715 $265,672 $ 850,940
================= ================= ================= =================
Income per
common share $ - $ - $ .05 $ .16
================= ================= ================= =================
See notes to condensed consolidated financial statements.
2
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
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Cash flows from operating activities
Cash received from leases $ 554,229 $ 519,615
Interest received 3,158 6,340
Cash paid to suppliers and employees (176,064) (146,444)
Interest paid (230,358) (224,926)
--------- ---------
Net cash provided by
operating activities 150,965 154,585
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Cash flows from investing activities
Purchase of land and improvements (277,160) (106,362)
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Net cash used in
investing activities (277,160) (106,362)
--------- ---------
Cash flows from financing activities
Property acquisition debt 250,000 -
Principal payments on debt (131,298) (84,785)
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Net cash provided by (used in)
financing activities 118,702 (84,785)
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Net decrease in cash (7,493) (36,562)
Cash at beginning of period 93,516 155,916
--------- ---------
Cash at end of period $ 86,023 $ 119,354
========= =========
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 13,715 $ 850,940
Deferred income taxes 3,597 153,135
Gain on sale of property - (973,910)
Depreciation 97,702 97,362
Change in receivables 34,175 34,000
Others, net (1,776) (6,942)
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Net cash provided by operating
activities $ 150,965 $ 154,585
========= =========
See notes to condensed consolidated financial statements.
3
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, 2000 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.
Recent Accounting Pronouncements
--------------------------------
In June 2001, the Financial Accounting Standards Board issued two
Statements of Financial Accounting Standards, No. 141, Business
Combinations (SFAS No. 141), and No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142). SFAS No. 141 addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16,
Business Combinations, and FASB Statement No. 38, Accounting for
Preacquisition Contingencies of Purchased Enterprises. All business
combinations in the scope of SFAS No. 141 are to be accounted for using one
method, the purchase method. The provisions of SFAS No. 141 apply to all
business combinations initiated after June 30, 2001. Use of the pooling-of-
interests method for those business combinations is prohibited. The
provisions of SFAS No. 141 also apply to all business combinations
accounted for by the purchase method for which the date of acquisition is
July 1, 2001, or later.
SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon
their acquisition. SFAS No. 142 also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. Under SFAS No. 142, goodwill and
intangible assets that have indefinite useful lives will not be amortized
but rather will be tested at least annually for impairment. Intangible
assets that have finite useful lives will continue to be amortized over
their useful lives, but without the constraint of the 40-year maximum life
required by SFAS No. 142. The provisions of SFAS No. 142 are required to be
applied starting with fiscal years beginning after December 15, 2001.
The Company expects to adopt the provisions of SFAS No. 142 effective
October 1, 2002. The Company is in the process of determining the impact
the adoption of the provisions of SFAS No. 142 will have on financial
position and results of operations.
4
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 June 30, 2001:
Land $ 375,796
Warehouse and buildings 5,084,341
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5,460,137
Less accumulated depreciation 745,583
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$4,714,554
==========
Refer to the Company's Form 10-KSB for the year ended September 30, 2000
for further information on operating lease agreements and terms.
Note 3 - Long-term debt
Long-term debt consisted of the following at June 30, 2001:
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. $3,619,976
9.500% note payable to financial institution due in monthly
payments of $3,250, including interest, through November 2003,
with a balloon payment of approximately $200,000 due at that time,
interest adjusted based on changes in the prime rate, secured by
real estate. 210,453
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3,830,429
Less current maturities 352,941
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$3,477,488
==========
Item 2. Management's Discussion and Analysis of Plan or Operation
The Company's results of operations for the nine month period ended June
30, 2001, and a comparative analysis of the same period for the 2000 year
are presented below:
Increase (Decrease) 2001
Compared to 2000
-------------------------------
2001 2000 Amount Percent
------------ ----------- ------------ ----------
Leasing revenue $520,054 $504,073 $15,981 3.2%
Operating expenses 275,542 255,322 20,220 7.9%
Interest expense 230,358 224,926 5,432 2.4%
5
Item 2. Management's Discussion and Analysis of Plan of Operation
(Continued)
Revenue from leasing consists of revenue from the Company's strip center on
Washington Road in Augusta, Georgia. Revenue from leasing has remained
relatively constant from 2000 to 2001.
On an annualized basis, current revenue from leasing remains constant from
leasing revenue for the Company's fiscal year ended September 30, 2000.
Refer to the Company's Form 10-KSB for the year ended September 30, 2000
for further information regarding the properties owned and lease terms.
Operating expenses for the nine months ended June 30, 2001 are comparable
to the nine months ended June 30, 2000 and, on an annualized basis, are
comparable to the Company's operating expenses for the fiscal year ended
September 30, 2000. Management of the Company expects operating expenses
for the remainder of the current fiscal year to be comparable to the
present nine month period.
Interest expense for the current period is comparable to 2000 and, on an
annualized basis, is comparable to the Company's interest expense for the
fiscal year ended September 30, 2000.
The Company's ratio of current assets to current liabilities at June 30,
2001 was .18. The ratio was .50 at June 30, 2000.
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.
6
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
----------- -----------
None.
(b) No reports on Form 8-K were filed during the three months ended
June 30, 2001.
7
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 AND DEVELOPMENT CORPORATION
(Registrant)
By: /s/ T. Greenlee Flanagin August 10, 2001
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T. Greenlee Flanagin Date
President
Chief Executive Officer
8
INDEX TO EXHIBITS
Exhibit Number Description Sequential Page Number
None.
9