<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------- -----------------
Commission File Number 0-7865.
------
SECURITY LAND AND DEVELOPMENT CORPORATION
(A GEORGIA CORPORATION)
INTERNAL REVENUE SERVICE
EMPLOYER IDENTIFICATION NUMBER 58-1088232
2816 WASHINGTON ROAD, #103, AUGUSTA, GA 30909
TELEPHONE NUMBER 706-736-6334
Securities registered pursuant to Section 12(b) of the Act
None
Securities registered pursuant to Section 12(g) of the Act
Common Stock
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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
------ ------
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The registrant's total revenues for the fiscal year ended September 30, 1996
were $617,164.
As of the close of the period covered by this report, registrant had outstanding
5,237,607 shares of common stock. There is no established market for the common
stock of the registrant. Therefore, the aggregate market value of the voting
stock held by non-affiliates of the registrant is not known.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
Security Land and Development Corporation (the "Company") was organized and
incorporated in Georgia in 1970. The Company, including its wholly owned
subsidiary, the Royal Palms Motel, Inc., has developed two (2) primary business
activities, these activities being (1) the acquisition of undeveloped land for
investment purposes and sale at a future date or development of the land and
sale after developed and, (2) the acquisition or development of income producing
properties for investment purposes and income from leasing activities. The
Company's principal office and activities are in Augusta, Georgia.
The Company's primary development and income producing activities are:
1. Retail stip center on approximately 15 acres on Washington Road in Augusta.
Approximately 56,000 square feet is being leased to Publix Supermarkets,
Inc. and is operated as a retail food supermarket. The remaining 13,000
square feet of rental space is available for lease to other tenants. The
Company has obtained tenants for and is leasing approximately 40% of the
13,000 square feet. Subsequent to September 30, 1996, the Company obtained
additional tenants for this space, for a total occupancy of 80% of the
13,000 square feet. The Company is currently seeking additional tenants
for the remaining space. The Company owns approximately 35 acres of
undeveloped land adjacent to the strip center and is marketing this
property for sale as commercial and residential real estate.
2. Building on approximately 1.6 acres of land in Augusta. Leased to a single
tenant for operation as a restaurant.
3. Bulk warehouse storage facility in Athens, Georgia. The Company owns and
has available for lease approximately 248,000 square feet of storage space.
4. Commercial property on Washington Road in Augusta, currently leased as a
single family home.
The Company owns certain other properties that are described in Item 2.
Construction of the retail strip center in Augusta was completed in May 1995 and
the lease with Publix became effective May 15, 1995. The center represents
approximately 90% of the Company's net leased assets. Leasing revenue from the
lease with Publix Supermarkets, Inc. represented 88% and 71% of the Company's
total leasing revenue for the years ended September 30, 1996 and 1995,
respectively. Management of the Company expects this lease to continue to
provide a substantial portion of the Company's revenue from leasing. See
"Description of Properties" for additional information related to this property
and the lease agreement.
The land and building in Augusta leased for operation as a restaurant provided
7% and 17% of the Company's total leasing revenue for the years ended September
30, 1996 and 1995, respectively. See "Description of Properties" for additional
information related to this property and lease agreement.
1
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The bulk storage warehouse facility in Athens provided 2% and 6% of the
Company's total leasing revenue for the years ended September 30, 1996 and 1995,
respectively. Occupancy of the warehouse has been less than 10% annually for
the past three years. While there are no known competing bulk warehouses in
Athens, the demand for bulk storage space has been insufficient to obtain
substantial occupancy. Management of the Company does not expect leasing
revenue from this facility to contribute substantially to the Company's
continuing leasing revenue. See "Description of Properties" for additional
information related to this property and lease agreements.
The Company owns additional undeveloped land in Dublin, Georgia and in the
Augusta, Georgia area that is being held for investment purposes.
A significant portion of the Company's real estate owned is on or near
Washington Road in Augusta, Georgia. The area contains a large number of
business establishments. Management of the Company believes that land in this
area is in great demand and that the market value of the property owned is
greater than the carrying value.
The Company presently has three part-time employees, all of whom are officers
and stockholders of the Company.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company owns developed and undeveloped real estate in several locations in
the State of Georgia. There are no limitations on the percentage of assets
which may be invested in any one property or type of property. The Company
acquires various properties for investment purposes and for leasing activities.
The Company currently owns the following properties:
1. Strip center on approximately 15 acres on Washington Road in Augusta,
Georgia.
2. Approximately 35 acres of undeveloped land on Washington Road in Augusta,
Georgia, adjacent to the strip center owned by the Company.
3. Approximately 1.6 acres with 3,300 square foot commercial building on
Washington Road in Augusta, Georgia.
4. Bulk warehouse storage facility on approximately 15 acres in Athens,
Georgia.
5. A 68% interest in 3.68 acres with a residential structure on Washington
Road in Augusta, Georgia.
6. A 68% interest in 6.92 undeveloped acres on Washington Road in Augusta,
Georgia.
7. 108 undeveloped acres in south Richmond County, Georgia.
8. A one-acre lot adjacent to the Royal Palms Motel in Augusta, Georgia.
9. One lot on Stanley Drive in Augusta, Georgia.
2
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10. One undeveloped lot in Dublin, Georgia.
Construction of the retail strip center on Washington Road was completed May
1995. The center has 69,000 square feet of available lease space. The Company
has leased 56,000 square feet to Publix Supermarkets, Inc., which, as the
center's anchor store, operates a retail food supermarket. The Company, as
lessor, has a twenty year lease agreement with Publix. The lease became
effective May 15, 1995. The lease provides for annual rentals of $463,205, and
for the Company to receive 1.25% of this store's annual gross sales in excess of
approximately $37 million. For the Company's years ended September 30, 1996 and
1995, the supermarket had not achieved this sales level. The lease also
provides for Publix to reimburse the Company for property taxes paid on the
facility on a pro rata basis of the space occupied by Publix. For 1996 this
reimbursement was approximately $29,000. At the lessee's option the lease may
be extended in five year increments for an additional twenty years on
substantially the same lease terms. As part of the lease agreement, Publix
contributed approximately $500,000 to the construction of the facility. The
Company capitalized this contribution and is recognizing it as revenue over the
twenty year life of the lease. The center, excluding land, cost approximately
$4,800,000. The Company has financed the center with a $4,300,000 loan fixed at
7.875% interest amortized monthly for twenty years. Annual principal and
interest payments are $427,596. The loan is secured by the center and the
assignment of lease payments from the property. At September 30, 1996, the
Company had leased approximately 40% of the 13,000 square feet not leased to
Publix. Subsequent to September 30, 1996, the Company obtained tenants for
approximately an additional 40% of this space. These individual leases have
terms of from three to five years with monthly lease payments ranging from $900
to $1,300. Following is certain information regarding the strip center at
September 30, 1996:
Occupancy rate - 93%.
Effective rental rates -
Square Feet Rental Per
Leased Square Foot
------------ -----------
Publix Supermarkets, Inc. 56,146 $ 8.25
Other tenants 5,200 11.94
3
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Schedule of lease expirations for each of the next ten years, beginning with the
Company's year end September 30, 1997, (includes leases obtained subsequent to
September 30, 1996, does not include potential extensions).
<TABLE>
<CAPTION>
Total area in Percentage of
Number of tenants square feet Annual rental gross annual
whose leases will covered by represented by rental represented
expire expiring leases expiring leases by expiring leases
----------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C>
1997 - 1998 - - $ - - %
1999 2 3,900 41,760 7
2000 2 3,900 56,556 10
2001 1 1,300 18,199 4
2002 1 1,300 15,450 3
2003 - 2006 - - - -
</TABLE>
The Federal tax basis of the center, excluding land, is $4,832,561. Accumulated
depreciation is $302,783. The building and structure is being depreciated by
the straight-line method over 39 years. The site work of the center is being
depreciated by the 150% declining balance method over 15 years. Total property
taxes on the center for 1996 were $36,304.
The approximately 35 acres of undeveloped land adjacent to the strip center has
a Federal tax basis of $212,976. There is no debt on the property. The land is
accessed from Washington Road and Stanley Drive. The Company is currently
marketing this property for sale as professional and residential real estate.
The 1.6 acres with 3,300 square foot commercial structure on Washington Road in
Augusta, Georgia is currently leased to an establishment that operates the
property as a restaurant. The current lease agreement expires December 1997.
Annual lease payments are $44,000. The lease requires the lessee to pay
substantially all costs associated with the property including insurance, taxes
and repairs. There is no debt on the property. The Federal tax basis of the
property, excluding land, is $99,100. Accumulated depreciation is $25,530. The
property is being depreciated by the straight-line method over 31.5 years. The
Federal tax basis of the land is $300,900. The average effective annual rental
rate for the building space was $13.45 per square foot for the year ended
September 30, 1996. Property taxes on the land and building combined are
$5,260.
The warehousing facility located in Athens, Georgia is known as Chase Park and
is located on approximately 15 acres of land on Barber, Oneta and Chase Streets.
The facility consists of two structures with a combined total space of 248,000
square feet. There are thirty-five warehouse compartments that are individually
leased. The structures are wood frame with metal siding and have brick fire
walls separating warehouse compartments at various points. The facility was
constructed in approximately 1902. Some of the 248,000 square feet is in need
of repairs and is not in a leasable condition. This facility is currently for
sale by the Company. Based on square feet, the warehouse was approximately 5%
leased at September 30, 1996. The Company is seeking additional tenants,
however, the demand for bulk warehouse space in Athens has not been sufficient
to maintain tenants. The Company leases warehouse space on a relatively short-
term basis, generally
4
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not extending beyond a one-year term. There is no debt on the property. The
Federal tax basis of the property net of accumulated depreciation of $520,333 is
$246,405 at September 30, 1996. The property is being depreciated by the
straight-line method over an average life of eighteen years. Annual real estate
taxes are approximately $6,000. Due to the low occupancy of the warehouse,
presentation of average annual effective rental rates would not provide
meaningful information.
The combined Federal tax basis, for depreciation purposes, of the remaining
investment properties of the Company is approximately $150,000.
All of the properties owned by the Company are owned in fee simple interest,
except for properties where a percentage is stated.
In the opinion of management of the Company, all of the properties owned by the
Company are adequately covered by insurance.
Management of the Company is planning to construct a building at the west end of
the retail strip center on land owned by the Company. The building will be
leased by the Company as commercial property. The Company is negotiating a
lease of this property to Blockbuster Video. Substantially all planning and
negotiations related to this potential construction and lease occurred
subsequent to September 30, 1996.
ITEM 3. LEGAL PROCEEDINGS
The Company is presently not a party to any matters of litigation.
ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders for the
quarter ended September 30, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the Company's securities. The approximate
number of holders of the Company's common stock is 693.
No dividends have been declared or paid during the two years ending September
30, 1996. The Company has no restrictions that currently, or that may
reasonably be expected to limit materially the amount of dividends paid.
5
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's primary business activities are the acquisition, development and
leasing of developed and undeveloped real estate. The objectives of the Company
are capital appreciation from real estate investments and income from leasing.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
INCREASE (DECREASE)
1996 COMPARED TO
1995
-------------------
1996 1995 AMOUNT PERCENT
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Leasing revenue $ 617,164 $258,981 $358,183 138.3 %
Operating expenses 301,664 248,613 53,051 21.3
Interest expense 334,096 120,990 213,016 176.0
Timber sale 8,010 61,386 (53,376) (87.0)
Land sale - 30,229 (30,229) (100.0)
Net loss 19,368 24,021 (4,653) (19.4)
Revenue from leasing activities is provided by the following properties:
1996 1995
---------- --------
Retail strip center $544,537 $183,786
Bulk storage warehouse 14,220 15,891
Commercial building, operated as a restaurant 43,800 45,245
Other 14,607 14,059
</TABLE>
The retail strip center was completed in May 1995, with 1996 being the first
full twelve month period of operations. Annual lease payments from Publix are
$463,205. At September 30, 1996, the Company had leased approximately 40% of
the additional space available for lease. However, due to these leases
beginning near the fiscal year end, the positive impact on revenues will be
greater in the Company's next fiscal year. In addition, the Company obtained
tenants for an additional 40% of the remaining space shortly after year end.
Management expects this increase in the occupancy of the center to provide
approximately $100,000 annually in additional revenue. Management expects the
strip center to continue to be a principal activity of the Company and to
continue to provide a substantial portion of the Company's operating revenue.
As discussed in Item 2, management is currently planning for an addition to this
property.
Revenue from the bulk storage warehouse has remained constant from 1995.
Occupancy of the warehouse has been less than 10% annually for the last three
years. Management is seeking additional tenants for the warehouse, however,
management is not aware of developments in the Athens area that may increase the
demand for warehouse space. As discussed in Item 2, this property is currently
for sale by the Company.
Revenue from the commercial building operated as a restaurant is consistent with
the prior year due to a continuing lease agreement with the single tenant
occupying the building. The revenue from
6
<PAGE>
the lease on this property represented 7% and 17% of total gross leasing revenue
for the years ended September 30, 1996 and 1995, respectively. This property is
located on Washington Road in Augusta. This road has a high traffic volume and
is the location of many other business establishments. The Company believes the
property is in a favorable location and that the demand for building space in
this area will continue. The property is currently for sale by the Company.
Payroll bonus expense decreased $45,000, or 100.0% from 1995. During 1995 the
Company's Board of Directors approved a bonus to the President for his
contributions during the building of the retail strip center.
Depreciation expense increased $80,628, or 142.4% from 1995 due to 1996 being
the first full twelve month period of depreciation on the retail strip center.
Management expects depreciation for 1997 to be consistent with 1996.
Repairs and maintenance expense increased $3,697, or 44.6% from 1995 due to
costs related to a full year of operations of the strip center. Management
expects repairs and maintenance expense for 1997 to be consistent with 1996.
Property tax expense increased $23,025, or 65.4% from 1995. The 1996 property
tax expense represents the first tax assessment of the strip center. Management
expects property tax expense for 1997 to be consistent with 1996.
Professional services expense decreased $17,965, or 55.0% from 1995 due to
certain costs related to completion of the strip center occurring in 1995.
Management expects professional services expense for 1997 to be consistent with
1996.
Interest expense increased $213,106, or 176.1% from 1995 due to 1996 being the
first full year of debt service on the strip center. Management expects
interest expense for 1997 to be consistent with 1996.
Revenue from timber sales and land sales have declined from 1995. These types
of sales are not recurring activities of the Company and are not expected to be
substantial or continuing sources of revenue for the Company.
The liquidity of the Company declined during 1996 as the Company utilized
current assets to fund operations. The ratio of current assets to current
liabilities was .23 at September 30, 1996, and was .34 at September 30, 1995.
The Company satisfied current year liquidity needs through operating revenue and
a $24,000 short-term loan from a director of the Company. The loan was repaid
this year. Management of the Company expects future liquidity needs to be met
from operating revenues of the Company. Management of the Company expects the
Company's future liquidity position to be enhanced by the additional lease
revenues to be generated from the 80% occupancy of the additional space at the
strip center.
The Company believes that the market value of much of the real estate owned by
the Company is greater than the original cost and that significant value has
been added to the real estate by the continued development and decreasing supply
of vacant land in the area. These properties are available as a source of
capital to the Company.
7
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of Security Land & Development
Corporation and Subsidiary are included herein:
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
Report of Independent Certified Public Accountants 9
Report of Independent Certified Public Accountants 10
Consolidated Balance Sheets as of September 30, 1996 and 1995 11
Consolidated Statements of Income for the years ended
September 30, 1996 and 1995 12
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1996 and 1995 13
Consolidated Statements of Cash Flows for the years ended
September 30, 1996 and 1995 14 and 15
Notes to Consolidated Financial Statements 16 - 22
</TABLE>
8
<PAGE>
[LETTERHEAD OF CHERRY, BEKAERT & HOLLAND GOES HERE.]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Security Land and Development
Corporation and Subsidiary
Augusta, Georgia
We have audited the accompanying consolidated balance sheet of Security Land and
Development Corporation and Subsidiary as of September 30, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Security Land and
Development Corporation and Subsidiary as of September 30, 1996, and the results
of its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
CHERRY, BEKAERT & HOLLAND, L.L.P.
Augusta, Georgia /s/ CHERRY, BEKAERT & HOLLAND
November 27, 1996 -----------------------------
9
<PAGE>
[LETTERHEAD OF MAULDIN & JENKINS GOES HERE.]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Security Land and Development
Corporation and Subsidiary
Augusta, Georgia
We have audited the accompanying consolidated balance sheet of Security
Land and Development Corporation and Subsidiary as of September 30, 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Security
Land and Development Corporation and Subsidiary as of September 30, 1995, and
the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
MAULDIN & JENKINS, LLC
Augusta, Georgia /s/ MAULDIN & JENKINS, LLC
December 12, 1995 --------------------------
10
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 24,097 $ 77,811
Income tax receivable - 12,125
Other current assets 141 141
Lease payments receivable 29,406 -
---------- ----------
TOTAL CURRENT ASSETS 53,644 90,077
---------- ----------
INVESTMENTS AND OTHER ASSETS
Land and improvements, at cost 317,014 307,719
Property leased to others under operating leases,
less accumulated depreciation 1996 $739,995;
1995 $602,741 5,640,400 5,777,392
Deferred income taxes 17,238 17,238
---------- ----------
TOTAL INVESTMENTS AND OTHER ASSETS 5,974,652 6,102,349
---------- ----------
$6,028,296 $6,192,426
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 3,517 $ 3,517
Accrued expenses 12,920 14,253
Accrued bonus - 45,000
Accrued property taxes 60,957 34,414
Current maturities of long-term debt 101,766 113,935
Short-term loans 50,500 50,500
---------- ----------
TOTAL CURRENT LIABILITIES 229,660 261,619
---------- ----------
LONG-TERM DEBT, less current maturities 4,081,761 4,183,527
---------- ----------
DEFERRED TAXES 20,260 6,646
---------- ----------
DEFERRED INCOME 460,154 484,805
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share, authorized
30,000,000 shares; issued 6,237,607 shares 623,761 623,761
Additional paid-in capital 333,766 333,766
Retained earnings 378,934 398,302
---------- ----------
1,336,461 1,355,829
Less subscribed shares (1,000,000 shares) 100,000 100,000
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,236,461 1,255,829
---------- ----------
$6,028,296 $6,192,426
========== ==========
See notes to consolidated financial statements.
</TABLE>
11
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
REVENUE, rents earned $ 617,164 $ 258,981
---------- ----------
OPERATING EXPENSES
Payroll and related costs 40,922 37,157
Payroll bonus - 45,000
Depreciation 137,254 56,626
Repairs and maintenance 11,994 8,297
Property taxes 58,216 35,191
Commissions 3,144 7,070
Professional services 14,647 32,612
Insurance 9,460 8,553
Rent 5,200 3,500
Other 20,827 14,607
---------- ----------
301,664 248,613
---------- ----------
Operating income 315,500 10,368
---------- ----------
NONOPERATING INCOME (EXPENSE)
Interest income 4,832 1,266
Interest expense ( 334,096) ( 120,990)
Gain on sale of timber from investment property 8,010 61,386
Gain on sale of land - 30,229
---------- ----------
( 321,254) ( 28,109)
---------- ----------
(Loss) before income taxes ( 5,754) ( 17,741)
APPLICABLE INCOME TAXES 13,614 6,280
---------- ----------
Net (loss) $( 19,368) $( 24,021)
========== ==========
(LOSS) PER COMMON SHARE $( 0.00) $( 0.00)
========== ==========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock
------------------- Total
Par Paid-In Retained Subscribed Stockholders'
Shares Value Capital Earnings Shares Equity
-------- --------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 30, 1994 6,237,607 $623,761 $333,766 $422,323 $100,000 $1,279,850
Net (loss) - - - (24,021) - (24,021)
--------- -------- -------- -------- -------- ----------
BALANCE,
SEPTEMBER 30, 1995 6,237,607 623,761 333,766 398,302 100,000 1,255,829
Net (loss) - - - (19,368) - (19,368)
--------- -------- -------- -------- -------- ----------
BALANCE,
SEPTEMBER 30, 1996 6,237,607 $623,761 $333,766 $378,934 $100,000 $1,236,461
========= ======== ======== ======== ======== ==========
</TABLE>
See notes to consolidated financial statements.
13
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from leases $ 563,107 $ 250,764
Income tax refund 12,125 6,539
Interest received 4,832 1,266
Cash paid to suppliers and employees ( 184,200) ( 144,657)
Interest paid ( 334,096) ( 120,990)
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 61,768 ( 7,078)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of timber 8,010 61,386
Proceeds from sale of land - 43,311
Purchase of property and equipment ( 9,557) ( 5,457)
Disbursement on construction in progress - ( 24,083)
Cash received for loan commitment - 64,500
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES ( 1,547) 139,657
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans 24,000 45,000
Repayments of short-term loans ( 24,000) ( 45,000)
Principal payments on long-term debt ( 113,935) ( 67,271)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES ( 113,935) ( 67,271)
---------- ----------
Net increase (decrease) in cash and cash equivalents ( 53,714) 65,308
Cash and cash equivalents
Beginning 77,811 12,503
---------- ----------
Ending $ 24,097 $ 77,811
========== ==========
</TABLE>
14
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
RECONCILIATION OF NET (LOSS) TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES
Net (loss) $( 19,368) $( 24,021)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities
Depreciation 137,254 56,626
Amortization of deferred income ( 24,651) ( 8,217)
(Gain) on sale of timber ( 8,010) ( 61,386)
(Gain) on sale of land - ( 30,229)
Changes in assets and liabilities:
Decrease in tax receivable 12,125 6,539
(Increase) in lease payments receivable ( 29,406) -
Increase (decrease) in accounts payable and
accrued expenses ( 19,790) 47,330
Increase in deferred tax liabilities 13,614 6,280
--------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 61,768 $( 7,078)
========= ==========
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Draws from construction loan, made through third-
party developer $ - $2,814,582
========= ==========
Letter of credit from related party, returned when
permanent financing was obtained $ - $ 64,500
========= ==========
Conversion of construction loan to permanent
financing $ - $4,300,000
========= ==========
Contribution to construction costs, made by major
tenant of property leased by the Company $ - $ 493,022
========= ==========
Transfer of land from investment to property
leased to others $ - $ 300,000
========= ==========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Security Land and Development Corporation is engaged in the acquisition of
developed and undeveloped real estate to be held for investment purposes or to
be developed and leased as income producing property. Acquired and leased
properties are within the State of Georgia, predominantly in Richmond, Columbia
and Clark counties.
Royal Palms Motel, Inc., a wholly-owned subsidiary of Security Land and
Development Corporation, is presently not engaged in business operations. The
assets and liabilities of the subsidiary are not significant to the consolidated
statement presentation.
For the years ended September 30, 1996 and 1995, substantially all operating
revenues earned and operating expenses incurred were related to the activity of
real estate leasing. For 1996 and 1995, approximately 90% of net leased assets
consisted of a retail strip center of which approximately 80% is leased to a
regional food supermarket.
During the years ended September 30, 1996 and 1995, leasing revenues were
received from predominantly two properties. A commercial building operated as a
restaurant provided approximately 10% and 20% of gross leasing revenues for the
years, respectively. The building is leased to a single tenant. The retail
strip center provided approximately 90% and 70% of gross leasing revenue for the
years, respectively. Substantially all of this revenue was from the lease with
the regional food supermarket.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation - The consolidated financial statements include the
- ---------------------
accounts of Security Land and Development Corporation and its wholly-owned
subsidiary, Royal Palms Motel, Inc., (described on a consolidated basis as the
"Company"). Significant intercompany transactions and accounts are eliminated
in consolidation.
Use of estimates - The preparation of financial statements in conformity with
- ----------------
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue recognition - The Company recognizes rental and lease payments as
- -------------------
revenue in the lease period to which the payment relates. Revenue from sales of
real estate is recognized when appropriate actions have been completed by
purchaser and seller to support revenue recognition.
16
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property, equipment and land - Property, equipment and land is stated at cost.
- ----------------------------
Depreciation of property and equipment is computed principally by the straight-
line method over the following estimated useful lives:
Property leased to others 30 - 40 years
Fixtures and furnishings 5 - 7 years
Maintenance and repairs of property and equipment are charged to operations and
major improvements which extend the useful life of the assets are capitalized.
Upon retirement, sale or other disposition of property and equipment, the cost
and accumulated depreciation are eliminated from the accounts and the gain or
loss is included in income in the period of disposition.
Cash and cash equivalents - For purposes of reporting cash flows, the Company
- -------------------------
considers financial instruments of a demand nature to be cash equivalents.
Income taxes - The Company files a consolidated tax return.
- ------------
Provisions for income taxes are based on amounts reported in the consolidated
statements of income and include deferred taxes on temporary differences in the
recognition of income and expense for tax and financial statement purposes.
Deferred taxes are computed on the liability method.
Earnings per share - Earnings per share are calculated on the basis of the
- ------------------
weighted average number of shares outstanding. The Company has no stock option
plans.
New accounting pronouncement - During the current fiscal year the Company
- ----------------------------
adopted Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments". The statement requires disclosure of fair
value information about financial instruments of the Company. In cases where
quoted market prices are not available for certain financial instruments, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used.
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 September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land $ 813,660 $ 813,660
Warehouse and buildings 5,566,735 5,556,473
---------- ----------
6,380,395 6,380,133
Less accumulated depreciation 739,995 602,741
---------- ----------
$5,640,400 $5,777,392
========== ==========
</TABLE>
17
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 2 - INVESTMENT IN LEASES AND PROPERTY UNDER OPERATING LEASES (CONTINUED)
The Company's primary leasing activities are a retail strip center and a
commercial building operated as a restaurant.
Approximately 80% of the retail strip center is leased to a regional food
supermarket. The lease requires minimum annual rental payments of $463,200,
expires in 2015 and is renewable for a total of an additional twenty years at
substantially the same lease terms. The lease provides for the supermarket to
pay for interior maintenance and utilities and property taxes on a proportional
basis.
In construction of the retail strip center, the supermarket contributed
approximately $500,000 to the cost of the construction. The Company has
recorded this contribution as a deferred revenue and is recognizing the revenue
using the straight-line method over the twenty-year life of the lease with the
supermarket.
The lease agreement also provides for the Company to receive each year 1.25% of
the individual supermarket's gross sales in excess of approximately $37 million.
For 1996 and 1995, the supermarket did not achieve this sales level.
The commercial building is leased to a single tenant that operates a restaurant
on the property. The lease agreement requires minimum annual rental payments of
$44,400, expires December 1997, and requires the lessee to pay property taxes,
insurance and substantially all other costs associated with the property.
At September 30, 1996, future minimum lease payments under the operating lease
agreements for the retail strip center and the commercial building are as
follows (not including potential extensions):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 507,600
1998 474,300
1999 463,200
2000 463,200
2001 463,200
Thereafter 5,867,200
----------
$8,238,700
==========
</TABLE>
The Company has other lease agreements that are short-term in nature and are not
material for inclusion in the above presentation.
NOTE 3 - SHORT-TERM LOANS - RELATED PARTY
Short-term loans from a director of the Company consisted of the following at
September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash advances, no stated interest rate or
maturity date, unsecured $50,500 $50,500
======= =======
</TABLE>
18
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 4 - LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
8.5% note payable to a director of the Company,
due in monthly payments of $4,055, including
interest, through February 1996, collateralized
by real estate. $ - $ 19,852
7.875% note payable to an insurance company due
in monthly payments of $35,633, including interest,
through June 2015, collateralized by retail strip
center and assignment of lease payments from the
property. 4,183,527 4,277,610
---------- ----------
4,183,527 4,297,462
Less current maturities 101,766 113,935
---------- ----------
$4,081,761 $4,183,527
========== ==========
</TABLE>
Aggregate maturities of long-term debt are due as follows:
<TABLE>
<S> <C>
1997 $ 101,766
1998 110,076
1999 119,064
2000 128,786
2001 139,302
Later 3,584,533
----------
$4,183,527
==========
</TABLE>
In 1996, total interest incurred and expensed was $334,096. In 1995, total
interest incurred was $206,490, of which $85,500 was capitalized, and $120,990
was expensed.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has entered into transactions with directors, officers and major
stockholders or business entities in which these parties have significant
financial interests. These transactions for 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
DIRECTOR AND STOCKHOLDER, rental commission $2,184 $3,360
====== ======
DIRECTOR, PRESIDENT AND STOCKHOLDER, management fee $ 960 $ 900
====== ======
</TABLE>
19
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
DIRECTOR AND STOCKHOLDER:
Short-term loans
Beginning balance $ 50,500 $ 50,500
Advances 24,000 35,000
Payments (24,000) (35,000)
-------- --------
Ending balance $ 50,500 $ 50,500
======== ========
Payments on long-term debt $ 19,852 $ 44,881
======== ========
Interest on long-term debt $ 424 $ 3,781
======== ========
DIRECTOR AND STOCKHOLDER, short-term loan,
(advanced and repaid in 1995) $ - $ 10,000
======== ========
STOCKHOLDER, rental commission $ 2,600 $ -
======== ========
</TABLE>
NOTE 6 - INCOME TAXES
The total income taxes in the consolidated statements of income are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax expense (benefit) $(1,224) $15,960
Net change, deferred tax valuation allowance 14,838 (9,680)
------- -------
Deferred tax expense $13,614 $ 6,280
======= =======
</TABLE>
The Company's provision for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to (loss) before income taxes.
A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
September 30, 1996 September 30, 1995
-------------------- ----------------------
Amount Percent Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Tax (benefit) at statutory rate $(863) -% $(2,661) (15)%
Increase (decrease) in income taxes
resulting from:
Valuation allowance 14,838 - 9,680 55
Other, net (361) - (739) (5)
------- ------- ------- -------
Provision for income taxes $13,614 -% $ 6,280 35%
======= ======= ======= =======
</TABLE>
20
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 6 - INCOME TAXES - CONTINUED
Net deferred tax assets consist of the following components as of September 30,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS:
Accrued compensation bonus $ - $ 6,750
Loss carryforwards 41,756 20,168
------- -------
41,756 26,918
Less valuation allowance 24,518 9,680
------ -------
17,238 17,238
------- -------
DEFERRED TAX LIABILITIES, leased property 20,260 6,646
------- -------
$(3,022) $10,592
======= =======
</TABLE>
During the year ended September 30, 1995, the Company recorded a valuation
allowance of $9,680 on the deferred tax assets. For the year ended September
30, 1996, the Company recorded a net adjustment to the valuation allowance of
$14,838, for a total valuation allowance of $24,518. The valuation allowance is
to reduce the recorded deferred tax assets to an amount that management believes
will ultimately be realized. Realization of deferred tax assets is dependent
upon sufficient future taxable income during the period that deductible
temporary differences and carryforwards are expected to be available to reduce
taxable income.
Net operating loss carryforwards for tax purposes as of September 30, 1996 have
the following expiration dates:
<TABLE>
<CAPTION>
Expiration date Amount
--------------- --------
<S> <C>
2008 $ 86,191
2009 18,016
2010 173,323
--------
$277,530
========
</TABLE>
NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS
Methods and assumptions of determining estimated fair value, and the estimated
fair values of the Company's financial instrument assets and liabilities are as
follows at September 30, 1996:
Cash and cash equivalents - Due to their demand nature, the estimated fair value
approximates the carrying amount.
21
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996 AND 1995
NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Short-term loans - These are loans from a related party that have no stated
interest rate or stated maturity date. Due to the nature of these loans, a
comparable type instrument does not exist and an estimated fair value cannot
be determined.
Long-term debt - The fair value of the long-term debt is estimated based on
management's estimate of interest rates available to the Company for
comparable debt having similar remaining maturities and collateral
requirements. The estimated fair value at September 30, 1996 was approximately
$4,030,000, compared to the carrying amount of $4,183,527.
22
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The independent certified public accountants reporting on the September 30, 1995
year resigned as of May 15, 1996. The accountants' report on the financial
statements for either of the past two years did not contain an adverse opinion
or disclaimer of opinion, nor were such reports modified as to uncertainty,
audit scope, or accounting principle.
The decision to change accountants was not recommended or approved by the Board
of Directors or an audit or similar committee of the Board of Directors.
As to the Company's two most recent fiscal years or any later interim period,
there were no disagreements with the accountants on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures, which, if not resolved to the accountants' satisfaction, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with the report. The accountants did not advise the Company of any
of the following:
1. That internal controls necessary to develop reliable financial statements
did not exist;
2. That information has come to the attention of the former accountants which
made it unwilling to rely on management's representation, un unwilling to
be associated with the financial statements prepared by management, or
3. That the scope of the audit should be expanded significantly or information
has come to the accountants' attention that it concluded will, or if
further investigated might, materially impact the fairness or reliability
of a previously issued audit report or the underlying financial statements,
or the financial statements issued or to be issued covering the fiscal
period(s) subsequent to the date of the most recent audited financial
statements (including information that might preclude the issuance of an
unqualified audit report), and the issue was not resolved to the
accountants' satisfaction prior to its resignation or dismissal.
23
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth certain information for the current directors and
executive officers of the Company. There are no arrangements or understandings
between any officers and any other persons pursuant to the election of the
officers.
<TABLE>
<CAPTION>
NAME, AGE AND
POSITION LAST FIVE YEARS BUSINESS EXPERIENCE
<S> <C>
W. Stewart Flanagin, Jr. Pharmacist and store owner of Hill Drug Company and past manager
48 - Chairman of Board of Directors since 1983; of Revco Drug Store, Inc.
member of Board since 1983; brother of President;
son of Director
T. Greenlee Flanagin Licensed real estate agent
47 - President since 1983; member of Board since
1983; brother of Chairman of Board; son of Director
Melvin D. Barton Former Chairman of Board of Directors; past partner in Barton
53 - Vice President; Member of Board since 1977 Building Supply; president of Barton Investment Co., Inc.
M. David Alalof Former President; stockholder and agent with A.H.S., Inc., an
52 - Secretary/Treasurer; member of Board since 1977 insurance concern
E. R. Murphy Retired
78 - Assistant Secretary/Treasurer; member of Board
since 1980
W. Stewart Flanagin, Sr. Retired
82 - Member of Board since 1983; father of Chairman;
father of President and Director
John C. Bell, Jr. Attorney at Law
48 - Member of Board since 1983
Gregory B. Scurlock Senior Vice President, First Union Bank, Augusta, GA
48 - Member of Board since 1983
Robert M. Flanagin Licensed real estate agent
38 - Member of Board since 1987; brother of Chairman;
brother of President and Director; son of Director
</TABLE>
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the SEC thereunder require the Company's executive officers and
directors and persons who own more than 10% of the Company's Common Stock, as
well as certain affiliates of such persons, to file initial reports of ownership
and reports of changes in ownership with the SEC. Executive officers, directors
and persons owning more than 10% of the Company's Common Stock are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on its review of the copies of such forms received by
it and written representations that no other reports were required for those
persons, the Company believes that during the fiscal year ended September 30,
1996 the Company's executive officers, directors and owners of more than 10% of
its Common Stock complied with all filing requirements.
24
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The table below shows the compensation of the Chief Executive Officer for the
three most recent fiscal years. There were no executive officers whose
compensation exceeded $100,000.
<TABLE>
<CAPTION>
NAME COMPENSATION DATE
<S> <C> <C>
T. Greenlee Flanagin $19,874 September 30, 1996
T. Greenlee Flanagin 19,034 September 30, 1995
T. Greenlee Flanagin 18,520 September 30, 1994
</TABLE>
Subsequent to September 30, 1995, the Board of Directors approved a bonus of
$45,000 to be paid to T. Greenlee Flanagin for services relating to the
construction period oversight and leasing of the strip center. This amount was
accrued and expensed in the fiscal year ended 1995. This amount is not included
in the totals above.
There were no annuity, pension or retirement benefits paid during the fiscal
year ended September 30, 1996 and none are proposed to be paid to any officer or
director of Security Land & Development Corporation.
The Company does not have a stock option plan.
Each Director of the Company receives compensation of $50 per Director's meeting
for services performed as a Director.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders:
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of September 30, 1996 by each person who is
known to the Board of Directors of the Company to own beneficially five percent
(5%) or more of the outstanding common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
<S> <C> <C>
T. Greenlee Flanagin (1) 781,205 14.9
Ann Flanagin Smith (1) 387,541 7.4
W. Stewart Flanagin, Jr. (1) 461,052 8.8
Robert Flanagin (1) 499,083 9.5
John C. Bell, Jr. 330,865 6.3
</TABLE>
(1) Combined with the following, these individuals form the "Flanagin family
group":
<TABLE>
<S> <C> <C>
W. Stewart Flanagin, Sr. 79,585 1.5
Harriette F. Flanagin 34,008 0.6
</TABLE>
25
<PAGE>
The Flanagin family group owns 2,242,474 shares which is approximately 43% of
all shares of stock outstanding.
Security Ownership of Management:
The following table sets forth certain information with respect to the
beneficial ownership of the common stock, as of September 30, 1996, by Directors
and executive officers:
<TABLE>
<CAPTION>
NAME OF COMMON STOCK
BENEFICIAL BENEFICIALLY PERCENT
OWNER ADDRESS OWNED OF CLASS
<S> <C> <C> <C>
W. Stewart Flanagin, Jr. 1117 Glenn Avenue 461,052 8.8
Augusta, GA 30904
T. Greenlee Flanagin 3326 Wheeler Road 781,205 14.9
Augusta, GA 30903
Melvin D. Barton 1229 D'Antignac Street 25,000 0.5
Augusta, GA 30901
M. David Alalof P.O. Box 15637 27,526 0.5
Augusta, GA 30909
E. R. Murphy 2224 Anthony Road 50,000 0.9
Augusta, GA 30904
W. Stewart Flanagin, Sr. 3052 Skinner Mill Road 29,585 1.5
Augusta, GA 30909
John C. Bell, Jr. P.O. Box 1547 330,865 6.3
Augusta, GA 30903
Gregory B. Scurlock 821 Heard Avenue 500 0.1
Augusta, GA 30904
Robert M. Flanagin 3052 Skinner Mill Road 449,083 9.5
Augusta, GA 30909
All Directors and officers as a group consisting of nine 2,254,816 43.1
individuals
</TABLE>
The Flanagin family and all Directors and Officers as a group beneficially own
2,676,365 shares which is approximately 51.09% of all shares of stock
outstanding.
26
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of business, the Company may enter into transactions with
Directors, officers or security holders. During 1996 and 1995, the Company did
not enter into any such transactions that are required to be presented under
this Item.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits required by Item 601 of Regulation S-B.
EXHIBIT
NUMBER DESCRIPTION
11 Computation of Earnings Per Share
16 Letter on Change in Certifying Accountant
21 Subsidiaries of the Registrant
27 Financial data schedules
b) The Company filed Form 8-K on August 6, 1996, to report that the Board of
Directors of the Company had elected the firm of Cherry, Bekaert & Holland,
L.L.P., to audit the Company's annual consolidated financial statements.
27
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
11 Computation of Earnings Per Share 29
16 Letter on Change in Certifying Accountant 30 and 31
21 Subsidiaries of the Registrant 32
27 Financial data schedules 33 and 34
</TABLE>
28
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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)
T. Greenlee Flanagin December 20, 1997
-------------------------------------------
T. GREENLEE FLANAGIN (Date)
President
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date so indicated.
W. Stewart Flanagin, Jr. December 20, 1997
--------------------------------------------
W. STEWART FLANAGIN, JR. (Date)
Chairman of Board
Chief Financial Officer
Chief Accounting Officer
W. S. Flanagin, Jr. December 20, 1997
- --------------------------------------------
W. S. FLANAGIN, SR. (Date)
Director
M. David Alalof December 20, 1997
--------------------------------------------
M. DAVID ALALOF (Date)
Secretary-Treasurer
E. R. Murphy December 20, 1997
- --------------------------------------------
E. R. MURPHY (Date)
Assistant Secretary-Treasurer
29
<PAGE>
EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1996 1995
<S> <C> <C>
Net (loss) $ (19,368) $ (24,021)
Weighted average number of shares outstanding 5,237,607 5,237,607
---------- ----------
Net (loss) per common shares (0.00) (0.00)
========== ==========
</TABLE>
30
<PAGE>
EXHIBIT 16.
Item 4. Changes in Registrant's Certifying Accountant.
(b) Item 304(a)(1) of Regulation S-B:
304(a)(1)(i): The former accountant, Mauldin & Jenkins, resigned May 15,
1996, as stated in a letter from Mauldin & Jenkins attached hereto as
Exhibit "(7)(c)(1)" and made a part hereof.
304(a)(1)(ii): Mauldin & Jenkins' report on the financial statements for
either of the past two years did not contain any adverse opinion or
disclaimer of opinion, nor were such reports modified as to uncertainty,
audit scope, or accounting principles.
304(a)(1)(iii): As of May 15, 1996, the resignation of Mauldin & Jenkins
has not yet been accepted or approved by the Board of Directors or an audit
or similar committee of the Board of Directors.
304(a)(1)(iv): As to Security Land's two most recent fiscal years or any
later interim period, there were no disagreements with Mauldin & Jenkins
(the "Accountant") on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedure, which, if
not resolved to the Accountant's satisfaction, would have caused it to make
reference to the subject matter of the disagreement(s) in connection with
its report. The Accountant did not advise Security Land of any of the
following:
(1) That internal controls necessary to develop reliable financial
statements did not exist; or
(2) That information has come to the attention of the former
Accountant which made it unwilling to rely on management's
representations, or unwilling to be associated with the financial
statements prepared by management; or
(3) That the scope of the audit should be expanded significantly,
or information has come to the Accountant's attention that it
concluded will, or if further investigated might, materially impact
the fairness or reliability of a previously issued audit report or
the underlying financial statements, or the financial statements
issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent audited financial statements (including
information that might preclude the issuance of an unqualified
audit report), and the issue was not resolved to the Accountant's
satisfaction prior to its resignation or dismissal.
304(a)(2): The Company has not yet engaged other accountants.
Item 304(a)(3) of Regulation S-B:
Letter from Mauldin & Jenkins attached hereto as Exhibit
"(7)(c)(2)" and made a part hereof.
31
<PAGE>
Item 7. Financial Statements and Exhibits.
(C) Exhibits.
(1) Letter of Mauldin & Jenkins resignation.
(2) Letter of Mauldin & Jenkins required by Item 304(a)(3) of
Regulation S-B.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Security Land and Development Corporation
- --------------------------
Date
By:
----------------------------------------
T. Greenlee Flanagin, President
32
<PAGE>
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
Royal Palms Motel, Inc. - 100% owned by Security Land & Development Corporation.
Incorporated in Georgia. Presently not engaged in business activities.
33
<TABLE> <S> <C>
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