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, 2002
[_] 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 _____
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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 April 15, 2002
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Common Stock, $.10 Par Value 5,247,107 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 March 31, 2002 1
Condensed Consolidated Statements of Income for the Six Months
Ended March 31, 2002 and 2001, and the Three Months Ended
March 31, 2002 and 2001 2
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended March 31, 2002 and 2001 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)
March 31, 2002
ASSETS
Current assets
Cash $ 104,162
----------
Total current assets 104,162
----------
Investments and other assets
Land and improvements, at cost 2,186,478
Property leased to others under operating
leases, less accumulated depreciation
$847,737 4,612,421
----------
6,798,899
----------
$6,903,061
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,517
Current portion of long-term debt 185,841
Accrued interest 24,290
Other current liabilities 82,284
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Total current liabilities 295,932
----------
Long-term debt, less current maturities 3,512,900
----------
Deferred taxes 228,073
----------
Deferred income 324,569
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Stockholders' equity
Common stock, at par value 623,761
Paid-in capital 333,766
Retained earnings 1,684,060
----------
2,641,587
Less subscribed shares 100,000
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2,541,587
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$6,903,061
==========
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 Six Three Six
Months Months Months Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
2002 2002 2001 2001
--------- --------- --------- ---------
Revenues, rent earned $ 184,290 $ 363,181 $ 173,770 $ 342,094
--------- --------- --------- ---------
Operating expenses:
Payroll and related costs 17,675 29,430 18,928 34,635
Depreciation 36,563 68,459 31,848 64,006
Property taxes 18,032 39,222 17,193 38,479
Repairs and maintenance 5,565 11,868 5,416 11,570
Professional services 11,706 11,706 6,779 9,279
Insurance 3,421 6,163 4,629 7,712
Other 7,746 14,961 5,890 15,817
--------- ---------- --------- ---------
100,708 181,809 90,683 181,498
--------- ---------- --------- ---------
Operating income 83,582 181,372 83,087 160,596
--------- --------- --------- ---------
Nonoperating income and
(expense):
Interest income 452 951 968 2,198
Interest expense (72,260) (145,279) (78,347) (153,068)
--------- --------- --------- ---------
(71,808) (144,328) (77,379) (150,870)
--------- --------- --------- ---------
Income before
income taxes 11,774 37,044 5,708 9,726
Applicable income taxes 1,916 6,557 825 2,459
--------- --------- --------- ---------
Net income $ 9,858 $ 30,487 $ 4,883 $ 7,267
========= ========= ========= =========
Income per
common share $ - $ - $ - $ -
========= ========= ========= =========
See notes to condensed consolidated financial statements.
2
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
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Cash flows from operating activities
Cash received from leases $ 391,193 $ 363,943
Interest received 951 2,198
Cash paid to suppliers and employees (153,144) (141,050)
Interest paid (145,279) (128,778)
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Net cash provided by
operating activities 93,721 96,313
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Cash flows from investing activities
Purchase of land and improvements - (277,160)
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Net cash used in
investing activities - (277,160)
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Cash flows from financing activites
Property acquisition debt - 250,000
Principal payments on debt (88,024) (91,936)
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Net cash provided by (used in)
financing activities (88,024) 158,064
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Net increase/(decrease) in cash 5,697 (22,783)
Cash at beginning of period 98,465 93,516
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Cash at end of period $ 104,162 $ 70,733
========== ===========
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 30,487 $ 7,267
Deferred income taxes 5,557 1,459
Depreciation 68,459 64,006
Change in receivables 34,175 34,175
Others, net (44,957) (10,594)
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Net cash provided by operating
activities $ 93,721 $ 96,313
========== ===========
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, 2001 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 adopted the provisions of SFAS No. 142 effective October
1, 2001. The adoption of the provisions of SFAS No. 142 did not have a
material effect on the Company's financial position or 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 March 31, 2002:
Land $ 375,796
Warehouse and buildings 5,084,362
----------
5,460,158
Less accumulated depreciation 847,737
----------
$4,612,421
==========
Refer to the Company's Form 10-KSB for the year ended September 30,
2001 for further information on operating lease agreements and terms.
Note 3 - Long-term debt
Long-term debt consisted of the following at March 31, 2002:
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. $3,510,673
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 $144,000 due at that
time, interest adjusted based on changes in the prime rate,
secured by real estate. 188,068
----------
3,698,741
Less current maturities 185,841
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$3,512,900
==========
Item 2. Management's Discussion and Analysis of Plan or Operation
The Company's results of operations for the six month period ended
March 31, 2002, and a comparative analysis of the same period for the
2001 year are presented below:
Increase (Decrease) 2002
Compared to 2001
------------------------
2002 2001 Amount Percent
---------- ---------- ---------- -----------
Leasing revenue $ 363,181 $ 342,094 $ 21,087 6.2%
Operating expenses 181,809 181,498 311 -
Interest expense 145,279 153,068 (7,789) (5.1%)
5
Item 2. Management's Discussion and Analysis of Plan of Operation
(Continued)
Revenue from leasing consists primarily of revenue from the Company's
strip center on Washington Road in Augusta, Georgia and from the office
building on Old Evens Road Evans, Georgia. Revenue from leasing has
remained relatively constant from 2001 to 2002.
On an annualized basis, current revenue from leasing remains constant
from leasing revenue for the Company's fiscal year ended September 30,
2001.
Refer to the Company's Form 10-KSB for the year ended September 30,
2001 for further information regarding the properties owned and lease
terms.
Operating expenses for the six months ended March 31, 2002 are
comparable to the six months ended March 31, 2001 and, on an annualized
basis, are comparable to the Company's operating expenses for the
fiscal year ended September 30, 2001. Management of the Company expects
operating expenses for the remainder of the current fiscal year to be
comparable to the present six month period.
Interest expense for the current period has decreased from 2001 as the
Company continues to reduce outstanding debt.
The Company's ratio of current assets to current liabilities at March
31, 2002 was .35. The ratio was .26 at March 31, 2001.
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
March 31, 2002.
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 April 19, 2002
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T. Greenlee Flanagin Date
President
Chief Executive Officer
8
INDEX TO EXHIBITS
Exhibit Number Description Sequential Page Number
None.
9