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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 December 31, 1998
[_] 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.
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SECURITY LAND AND DEVELOPMENT CORPORATION
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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) Zip Code
Issuers Telephone Number (706) 736-6334
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- --------------------------------------------------------------------------------
(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 _______
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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 December 31, 1998
- ------------------------------ --------------------------------
Common Stock, $.10 Par Value 5,237,607 shares
Transitional Small Business Disclosure Format: Yes ___________ No X
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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:
<TABLE>
<CAPTION>
Page
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<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED DECEMBER 31, 1998 AND 1997 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 - 7
</TABLE>
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 111,012
Other current assets 31,082
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TOTAL CURRENT ASSETS 142,094
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INVESTMENTS AND OTHER ASSETS
Land and improvements, at cost 909,135
Property leased to others under operating leases, less accumulated
depreciation $1,019,349 4,961,046
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5,870,181
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$6,012,275
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES $ 3,517
Accounts payable 119,064
Current portion of long-term debt 39,221
Other current liabilities ----------
161,802
TOTAL CURRENT LIABILITIES ----------
3,824,351
LONG-TERM DEBT, LESS CURRENT MATURITIES ----------
46,442
DEFERRED TAXES ----------
404,688
DEFERRED INCOME ----------
STOCKHOLDERS' EQUITY 623,761
Common stock, at par value 333,766
Paid-in capital 717,465
Retained earnings ----------
1,674,992
100,000
Less subscribed shares ----------
1,574,992
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$6,012,275
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</TABLE>
See notes to the condensed consolidated financial statements.
2
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Revenues, rent earned $166,358 $174,170
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Operating expenses:
Payroll and related costs 10,721 10,633
Depreciation 33,526 33,526
Taxes 15,386 23,635
Professional services 11,600 3,042
Insurance 4,325 2,217
Other 14,445 11,610
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90,003 84,663
-------- --------
Operating income 76,355 89,507
-------- --------
Nonoperating income:
Interest income 1,455 645
Interest (expense) (78,127) (80,185)
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(76,672) (79,540)
-------- --------
Income (loss) before income taxes ( 317) 9,967
Applicable income taxes 2,964 3,549
-------- --------
Net income (loss) $( 3,281) $ 6,418
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Income (loss) per common share $ - $ -
======== ========
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from leases $ 166,417 $ 197,955
Interest received 1,455 645
Cash paid to suppliers and employees (107,711) (35,462)
Interest paid ( 78,127) (80,185)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ( 17,966) 82,953
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt ( 28,270) (26,214)
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NET CASH (USED IN) FINANCING ACTIVITIES ( 28,270) (26,214)
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NET (DECREASE) INCREASE IN CASH ( 46,236) 56,739
CASH AT BEGINNING OF PERIOD 157,248 26,798
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CASH AT END OF PERIOD $ 111,012 $ 83,537
========= ==========
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income (loss) $( 3,281) $ 6,418
Deferred income taxes 2,964 3,549
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation 33,528 33,526
Changes in assets and liabilities
(Increase) decrease in other assets 59 ( 3,694)
Increase (decrease) in accounts payable, accrued
expenses, and deferrals ( 51,236) 43,154
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $( 17,966) $ 82,953
========= ==========
</TABLE>
See notes to the condensed consolidated financial statements.
4
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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, 1998 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 December 31, 1998:
<TABLE>
<S> <C>
Land $ 512,760
Warehouse and buildings 5,467,635
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5,980,395
Less accumulated depreciation 1,019,349
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$4,961,046
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</TABLE>
Refer to the Company's Form 10-KSB for the year ended September 30, 1998 for
further information on operating lease agreements and terms.
NOTE 3 - LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1998:
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. $3,943,415
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Less current maturities 119,064
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$3,824,351
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5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's results of operations for the three month period ended December
31, 1998, and a comparative analysis of the same period for the 1997 year are
presented below:
<TABLE>
<CAPTION>
Increase (Decrease)
1998 Compared to
1997
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1998 1997 Amount Percent
-------- -------- ------ -------
<S> <C> <C> <C> <C>
Leasing revenue $166,358 $174,170 $(8,352) (4.8)%
Operating expenses 90,003 84,663 5,340 6.3
Interest expense 78,127 80,185 (2,058) (2.6)
</TABLE>
Revenue from leasing has declined from 1997 primarily as a result of decreased
common area maintenance fees from leased property and from a tenant vacancy at
the Company's retail strip center located on Washington Road in Augusta,
Georgia. The vacancy was not related to the strip center's anchor tenant.
On an annualized basis, current revenue from leasing has decreased from leasing
revenue for the Company's fiscal year ended September 30, 1998.
Refer to the Company's Form 10-KSB for the year ended September 30, 1998 for
further information regarding the properties owned and lease terms.
Operating expenses for 1998 include professional fees paid to a developer to
assist the Company in identifying real estate opportunities in the Company's
market area. The Company did not incur expenses of this nature during 1997.
Except for this professional expense, operating expenses for the current quarter
are comparable to 1997 and, on an annualized basis, are comparable to the
Company's operating expenses for the fiscal year ended September 30, 1998.
Management of the Company expects quarterly operating expenses for the remainder
of the fiscal year to be comparable to the current quarter.
Interest expense for the current quarter is comparable to 1997 and, on an
annualized basis, is comparable to the Company's interest expense for the fiscal
year ended September 30, 1998.
The Company's ratio of current assets to current liabilities at December 31,
1998 was .88. The ratio was .50 at December 31, 1997.
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.
6
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Year 2000
Management believes internally there are no material Year 2000 issues associated
with the Company's simple EDP system. The Company is considering Year 2000
exposure related to a material concentration of business with the Company's
tenant Publix Supermarkets at the retail strip center. At this time management
cannot predict if there will be a material cost associated with Year 2000
compliance for this major customer and material concentration of business.
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
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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 December 31, 1998.
8
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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
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(Registrant)
February 8, 1999 By: /s/ T. Greenlee Flanagin
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T. GREENLEE FLANAGIN
President
Chief Executive Officer
9
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INDEX TO EXHIBITS
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Exhibit Number Description Sequential Page Number
27 Financial Data Schedule 11 - 12
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 111,012
<SECURITIES> 0
<RECEIVABLES> 31,082
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 142,094
<PP&E> 6,859,530
<DEPRECIATION> 1,019,349
<TOTAL-ASSETS> 6,012,275
<CURRENT-LIABILITIES> 161,802
<BONDS> 3,824,351
0
0
<COMMON> 623,761
<OTHER-SE> 717,465
<TOTAL-LIABILITY-AND-EQUITY> 1,574,992
<SALES> 0
<TOTAL-REVENUES> 166,358
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 90,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,127
<INCOME-PRETAX> (317)
<INCOME-TAX> 2,964
<INCOME-CONTINUING> (3,281)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,281)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
