<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, 2000
[_] 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.
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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, 2000
were $708,093.
As of the close of the period covered by this report, registrant had outstanding
5,258,886 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 strip 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 approximately 13,000 square feet of rental space is available for
lease to additional tenants. At September 30, 2000, approximately 10,400
square feet of this space was leased.
2. Commercial property on Washington Road in Augusta, currently leased as a
single family home.
3. Development property totaling approximately 10 adjoining acres on Belair
Road and North Belair Road Extension at Washington Road in Evans, Georgia.
The Company owns certain other properties that are fully described in Item 2,
"Description of Property."
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 99% of the Company's net leased assets. Leasing revenue from the
lease with Publix Supermarkets, Inc. represented 78% and 79% of the Company's
total gross leasing revenue for the years ended September 30, 2000 and 1999,
respectively. Management of the Company expects this lease to continue to
provide a substantial portion of the Company's revenue from leasing. See Item 2,
"Description of Property" for additional information related to this property
and the lease agreement.
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/or stockholders of the Company.
1
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ITEM 2. DESCRIPTION OF PROPERTY
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 in fee simple interest:
1. Strip center on approximately 15 acres on Washington Road in Augusta,
Georgia.
2. Approximately 3.68 acres with a residential structure on Washington Road in
Augusta, Georgia.
3. Approximately 10.78 undeveloped acres on Belair Road and North Belair Road
Extension at Washington Road in Evans, Georgia.
4. 108 undeveloped acres in south Richmond County, Georgia.
5. A one-acre lot adjacent to the Royal Palms Motel in Augusta, Georgia.
6. Approximately 1.0 acres of undeveloped land on Old Evans Road, near
Washington Road in Augusta, Georgia.
7. One undeveloped lot in Dublin, Georgia.
8. Approximately 1.0 acres of undeveloped land held for investment purposes on
Washington Road in Augusta, Georgia.
Description of real estate and operating data -
The net book value of the strip center amounts to approximately 65% of the
Company's total assets at September 30, 2000.
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 center
was constructed with the intention of being operated as a strip center and is
suitable and adequate for such purpose. 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, 2000 and 1999, 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 2000 this reimbursement was approximately $34,175. 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
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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 balance
of the loan was $3,711,726 at September 30, 2000. The loan matures May 2015 and
will be fully amortized at that time. The loan is secured by the center and the
assignment of lease payments from the property. The property is located on
Washington Road in Augusta, Georgia. This road is the location of numerous
business establishments, including competing strip centers. The road also has a
high volume of traffic providing potential customers for the Company's tenants.
The Company's operation of the center is dependent upon management's ability to
maintain an anchor tenant and to maintain a high occupancy of the 13,000 square
feet leased to other tenants. The Company competes with other strip centers in
the area to maintain stable occupancy. Management of the Company believes that
the location and visibility of the center provides for favorable conditions for
maintaining occupancy. At September 30, 2000, the Company had leased 80% of the
13,000 square feet not leased to Publix. These individual leases have terms of
from three to five years with monthly lease payments ranging from $1,050 to
$2,800. Following is certain information regarding the strip center at
September 30, 2000:
Occupancy rate - 96% (Publix is the only tenant to occupy 10% or more
of the leasable square feet.)
Effective rental rates - Square Feet Rental Per
Leased Square Foot
----------- -----------
Publix Supermarkets, Inc. 56,146 $ 8.25
Other tenants 10,400 12.15
The principal business of the other tenants currently includes a hair salon,
take-out restaurant, stock brokerage office and similar small business
operations.
Schedule of lease expirations for each of the next ten years, beginning with the
Company's year end September 30, 2001 is presented below (does not include
potential extensions).
<TABLE>
<CAPTION>
Total area in Percentage of
Number of tenants square feet Annual rental gross annual
Year ending whose leases will covered by represented by rental represented
September 30, expire expiring leases expiring leases by expiring leases
------------- ----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
2001 2 2,600 30,902 5%
2002 1 2,600 33,800 6%
2003 1 1,300 16,900 3%
2004 - - - -
2005 2 2,600 37,050 8%
2006 - 2010 - - - -
</TABLE>
The percentage of gross annual rental represented by expiring leases as
presented above is based on the gross annual rental for the current year and was
calculated as if each lease was in effect for the full twelve month fiscal
period.
The Company currently does not have plans for significant renovations or
improvements to the center.
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The Federal tax basis of the center, excluding land and before accumulated
depreciation, is $4,832,562. Accumulated depreciation is $1,068,486. 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 2000 were
$44,651.
During the year ended September 30, 2000, the Company sold approximately 32
acres of undeveloped land located on Washington Road in Augusta, Georgia,
described as property 2 of Item 2 from the September 30, 1999 Form 10-KSB
report. The net sales price of the sale was approximately $890,000. The
Company recognized a gain of $646,094 on the sale.
The Company invested the sale proceeds in purchases of additional undeveloped
land. The Company purchased approximately 10 acres in Evans, Georgia on Belair
Road and North Belair Road Extension, at Washington Road. The land was purchased
in two transactions. The first transaction was to acquire the remaining one-
third interest in 6.92 acres of land from an entity in which a principal
stockholder and member of the Board of Directors of the Company is a significant
owner. The purchase price of the land was $522,846. The second transaction was a
purchase of approximately 4 acres in Evans, Georgia adjacent to the purchased
property previously described. The land was jointly owned by principal
stockholders and members of the Board of Directors of the Company and their
families, and was acquired by the Company from these individuals. The purchase
price of the land was $371,970.
The sale and purchase transactions described above have been structured as a
tax-deferred like-kind exchange under Section 1031 of the Internal Revenue Code.
The net book value of the investment property acquired in the transaction
described above amounts to approximately 19% of the Company's total assets. The
property has a federal tax basis of $1,288,861. There is no debt on the
property. The property is held by the Company for investment and appreciation.
Total property taxes on the property were $12,683 for 2000.
No other property owned by the Company at September 30, 2000, had a book value
amounting to 10% or more of the total assets of the Company.
During the year ended September 30, 2000, the Company sold an industrial
property site located on approximately 16 acres in Athens, Georgia, described as
property 3 of Item 2 of the September 30, 1999 Form 10-KSB report. The Company
recognized a gain of $311,816 on the sale.
This sale transaction has been structured as a tax-deferred like-kind exchange
under Section 1031 of the Internal Revenue Code. The Company has identified
potential replacement properties but as of September 30, 2000 has not completed
the property acquisition. The funds for acquisition are being held by a third-
party intermediary and are presented on the Company's balance sheet as
Replacement Property Funds.
The approximately 1.0 acres of undeveloped land on Old Evans Road in Augusta,
Georgia has a Federal tax basis of $342,122. There is no debt on the
property. The Company currently has no plans for development or improvement of
this property. The property is held by the Company for investment and
appreciation. The property is located in an area of Augusta that has
experienced both commercial and residential growth for a number of years. This
land is also located near Washington
4
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Road (though not near the strip center). The continued development in this area
and the decreasing supply of vacant land may enhance the appreciation and future
marketability of the property. Total property taxes on the property were $3,287
for 2000.
The combined Federal tax basis of the remaining investment properties of the
Company is approximately $140,000. There is no debt on any of these properties.
The properties are undeveloped real estate held by the Company for investment
and appreciation. The Company currently has no plans for development or
improvement of these properties.
All of the properties owned by the Company are owned in fee simple interest.
In the opinion of management of the Company, all of the properties owned by the
Company are adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS
The Company is presently not a party to any matters of litigation.
ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS
The annual meeting of stockholders of the Company will be held in March of 2001,
as designated by a vote of the board of directors on May 2, 2000, for the
purpose of voting to set the number of directors serving the Company, to elect a
slate of directors to serve the Company, and to elect an audit firm for the
Company.
5
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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 750.
No dividends have been declared or paid during the two years ending September
30, 2000. The Company has no restrictions that currently, or that may
reasonably be expected, to limit materially the amount of dividends paid.
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
Increase (Decrease)
2000 compared to
1999
-------------------
2000 1999 Amount Percent
-------- -------- -------- --------
Leasing revenue $708,093 $694,165 $ 13,928 2%
Operating expenses 346,937 357,507 (10,570) ( 3)
Interest expense 296,926 333,942 (37,016) (11)
Land sale 957,910 - 957,910 100
Net income 871,834 8,129 863,705 -
Increase (Decrease)
1999 compared to
1998
-------------------
1999 1998 Amount Percent
-------- -------- -------- --------
Leasing revenue $694,165 $719,968 $(25,803) ( 4)%
Operating expenses 357,507 319,993 37,514 12
Interest expense 333,942 317,537 16,405 5
Net income 8,129 75,345 (67,216) (89)
Revenue from leasing activities is provided by the following properties:
2000 1999 1998
-------- -------- --------
Retail strip center $685,595 $671,221 $682,961
Bulk storage warehouse - 1,400 3,400
Other 22,498 21,544 33,607
6
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Years Ended September 30, 2000 and 1999
The retail strip center was completed in May 1995, with 1996 being the first
full twelve month period of operations. The center consists of approximately
69,000 square feet. Approximately 56,000 square feet is leased to Publix
Supermarkets, Inc. as the center's anchor store. See Item 2, "Description of
Property" for information regarding the lease agreement with Publix. The
remaining approximately 13,000 square feet is available for lease to additional
tenants. This additional space was 80% leased as of the period ending September
30, 2000 and 90% leased as of the period ended September 30, 1999. Also see Item
2, "Description of Property" for effective rental rates and lease expirations
related to this property.
Leasing revenue from the retail strip center remained relatively consistent
compared with respective prior year's amounts. Management expects the strip
center to be a principal activity of the Company and to continue to provide a
substantial portion of the Company's operating revenue.
Revenue from the bulk storage warehouse on the industrial property site for 2000
has decreased as the property was sold by the Company during 2000.
Revenue from the Company's other leasing properties has remained relatively
constant from 1999.
Two land-sales transactions in the current year accounted for $646,094 and
$311,816, respectively, of gains recognized for book purposes, for a total of
approximately $957,910. These transactions are fully described in Item 2,
"Description of Property."
Operating expenses decreased $10,570 (3%) from 1999. Management of the Company
expects operating expenses for 2001 to be consistent with 2000. Significant
line item expense fluctuations from 1999 to 2000 are presented below.
Commission expense decreased $4,800 from 1999 due to the culmination of the
contract for commissions paid to professionals for leasing property owned by the
Company.
Professional services expenses decreased approximately $4,500 from 1999 due to
the culmination of the contract for fees paid to a consultant to locate
additional tenants for the Company's properties and to locate potential
purchasers for the Company's properties currently for sale.
Interest expense for the current fiscal year has decreased from 1999 as a result
of the timing of a principal and interest payment during the previous fiscal
year in which an additional payment had been recognized. Management expects
interest expense for the year ending September 30, 2001 to decline from interest
expense for the current fiscal year as the outstanding debt continues to
amortize.
Income tax expense increased approximately $156,910 from 1999 due to the
Company's increase in income before income taxes, primarily related to current
year land sales.
The ratio of current assets to current liabilities was .50 at September 30,
2000, and was .83 at September 30, 1999. Management of the Company expects
future liquidity needs of the Company to be met from operating revenues of the
Company.
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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.
Years Ended September 30, 1999 and 1998
The retail strip center was completed in May 1995, with 1996 being the first
full twelve month period of operations. The center consists of approximately
69,000 square feet. Approximately 56,000 square feet is leased to Publix
Supermarkets, Inc. as the center's anchor store. See Item 2, "Description of
Property" for information regarding the lease agreement with Publix. The
remaining approximately 13,000 square feet is available for lease to additional
tenants. This additional space was 90% leased as of the period ending September
30, 1999 and 90% leased as of the period ended September 30, 1998. Also see
Item 2, "Description of Property" for effective rental rates and lease
expirations related to this property.
Leasing revenue from the retail strip center remained relatively consistent
compared with respective prior year's amounts. However, a slight decline from
1998 did occur primarily as a result of uncollectible rents from certain
tenants. Management expects the strip center to be a principal activity of the
Company and to continue to provide a substantial portion of the Company's
operating revenue.
Revenue from the bulk storage warehouse on the industrial property site has
declined from 1998 to 1999. Occupancy of the warehouse has been less than 10%
annually for the last four years. This property is currently for sale by the
Company.
Revenue from the Company's other leasing properties has remained relatively
constant from 1998.
Operating expenses increased $37,514 (12%) from 1998. Management of the Company
expects operating expenses for 2000 to be consistent with 1999. Significant
line item expense fluctuations from 1998 to 1999 are presented below.
Commission expense increased $5,200 from 1998 due to commissions paid to
professionals for leasing property owned by the Company.
Repairs and maintenance expense increased approximately $6,400 from 1998 as a
result of fees paid to have property, owned by the Company, graded in
preparation for future leasing.
Professional services expenses increased approximately $9,800 from 1998 due to
fees paid to a consultant to locate additional tenants for the Company's
properties and to locate potential purchasers for the Company's properties
currently for sale.
An increase from 1998 of approximately $8,300 in payroll and related costs was
primarily the result of a salary increase awarded an employee of the Company for
assuming additional responsibilities.
Interest expense for the current fiscal year has increased from 1998 as a result
of the timing of a principal and interest payment during the current fiscal year
in which an additional payment has been recognized in the current fiscal year.
Management expects interest expense for the year ending
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September 30, 2000 to decline from interest expense for the current fiscal year
as the outstanding debt continues to amortize.
Income tax expense decreased approximately $10,800 from 1998 due to the
Company's decrease in income before income taxes.
The ratio of current assets to current liabilities was .83 at September 30,
1999, and was .93 at September 30, 1998. Management of the Company expects
future liquidity needs of the Company to be met from operating revenues of the
Company.
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.
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.
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ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of Security Land & Development
Corporation and Subsidiary are included herein:
Page No.
--------
Report of Independent Certified Public Accountants 11
Consolidated Balance Sheets as of September 30, 2000 and 1999 12
Consolidated Statements of Income and Comprehensive Income
for the years ended September 30, 2000 and 1999 13
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 2000 and 1999 14
Consolidated Statements of Cash Flows for the years ended
September 30, 2000 and 1999 15
Notes to Consolidated Financial Statements 16 - 21
10
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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 sheets of Security Land
and Development Corporation and Subsidiary as of September 30, 2000 and 1999,
and the related consolidated statements of income and comprehensive income,
stockholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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, 2000 and 1999, and
the consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Augusta, Georgia
November 1, 2000
11
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 2000 and 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 93,516 $ 155,916
Lease payments receivable 34,175 34,031
---------- ----------
Total current assets 127,691 189,947
---------- ----------
Investments and other assets
Land and improvements, at cost 1,677,591 909,135
Property leased to others under operating leases, less
accumulated depreciation 2000 $647,880; 1999 $1,119,927 4,532,277 4,860,470
Deferred tax asset 4,903 7,877
---------- ----------
Total investments and other assets 6,214,771 5,777,482
---------- ----------
Replacement property funds 511,726 -
---------- ----------
$6,854,188 $5,967,429
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,517 $ 3,517
Accrued expenses 42,503 28,781
Accrued property taxes 69,250 68,094
Current maturities of long-term debt 139,302 128,786
---------- ----------
Total current liabilities 254,572 229,178
---------- ----------
Long-term debt, less current maturities 3,572,424 3,713,611
---------- ----------
Deferred taxes 207,409 52,039
---------- ----------
Deferred income 361,547 386,199
---------- ----------
Stockholders' equity
Common stock, par value $.10 per share, authorized 30,000,000
shares; issued 6,258,886, outstanding 5,258,886 623,761 623,761
Additional paid-in capital 333,766 333,766
Retained earnings 1,600,709 728,875
---------- ----------
2,558,236 1,686,402
Less subscribed shares (1,000,000 shares) 100,000 100,000
---------- ----------
Total stockholders' equity 2,458,236 1,586,402
---------- ----------
$6,854,188 $5,967,429
========== ==========
</TABLE>
See notes to consolidated financial statements.
12
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Revenue, rents earned $ 708,093 $ 694,165
---------- ----------
Operating expenses
Payroll and related costs 51,272 49,847
Depreciation 127,672 134,104
Repairs and maintenance 37,339 32,734
Property taxes 69,768 68,167
Commissions 360 5,200
Professional services 27,257 31,756
Insurance 13,127 13,737
Other 20,142 21,962
---------- ----------
346,937 357,507
---------- ----------
Operating income 361,156 336,658
---------- ----------
Nonoperating income (expense)
Gain on sale of property 957,910 -
Interest income 8,038 6,847
Interest expense (296,926) (333,942)
---------- ----------
669,022 (327,095)
---------- ----------
Income before income taxes 1,030,178 9,563
Applicable income taxes 158,344 1,434
---------- ----------
Net income $ 871,834 $ 8,129
========== ==========
Income per common share $ 0.17 $ 0.00
========== ==========
</TABLE>
See notes to consolidated financial statements.
13
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Common Stock Total
----------------------
Outstanding Par Paid-In Retained Subscribed Stockholders'
Shares Value Capital Earnings Shares Equity
----------- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
September 30, 1998 5,258,886 $623,761 $333,766 $ 720,746 $100,000 $1,578,273
Net income - - - 8,129 - 8,129
----------- -------- -------- ---------- ---------- ----------
Balance,
September 30, 1999 5,258,886 623,761 333,766 728,875 100,000 1,586,402
Net income - - - 871,834 - 871,834
----------- -------- -------- ---------- ---------- ----------
Balance,
September 30, 2000 5,258,886 $623,761 $333,766 $1,600,709 $100,000 $2,458,236
=========== ======== ======== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
14
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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Cash received from leases $ 683,297 $ 666,623
Interest received 8,038 6,847
Cash paid to suppliers and employees (204,387) (211,572)
Interest paid (296,926) (333,942)
--------- ---------
Net cash provided by operating activities 190,022 127,956
--------- ---------
Cash flows from investing activities
Purchase of and improvements to investment real estate (121,751) -
--------- ---------
Net cash used in investing activities (121,751) -
--------- ---------
Cash flows from financing activities
Principal payments on long-term debt (130,671) (129,288)
--------- ---------
Net cash used in financing activities (130,671) (129,288)
--------- ---------
Net decrease in cash and cash equivalents (62,400) (1,332)
Cash and cash equivalents
Beginning 155,916 157,248
--------- ---------
Ending $ 93,516 $ 155,916
========= =========
Reconciliation of net income to net cash provided by
operating activities
Net income $ 871,834 $ 8,129
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 127,672 134,104
Amortization of deferred income (24,652) (24,652)
Gain on sale of property (957,910) -
Deferred taxes 158,344 -
Changes in other assets and liabilities 14,734 10,375
--------- ---------
Net cash provided by operating activities $ 190,022 $ 127,956
========= =========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
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 and
Columbia 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, 2000 and 1999, substantially all operating
revenues and operating expenses were related to the activity of real estate
leasing. For 2000 and 1999, approximately 99% and 95%, respectively, 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, 2000 and 1999, leasing revenues were
received from predominantly one property. The retail strip center provided
approximately 91% of gross leasing revenue for each of the years. During 2000
and 1999, approximately 86% and 88%, respectively, of revenue from the strip
center was from a lease with a 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, 2000 and 1999
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 comprehensive 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.
Fair value of financial instruments - In preparing fair value estimate
-----------------------------------
disclosures, the Company generally utilizes quoted market prices for financial
instruments. 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, 2000 and 1999:
2000 1999
---------- ----------
Land $ 335,796 $ 512,760
Warehouse and buildings 4,844,361 5,467,637
---------- ----------
5,180,157 5,980,397
Less accumulated depreciation 647,880 1,119,927
---------- ----------
$4,532,277 $4,860,470
========== ==========
17
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements - Continued
September 30, 2000 and 1999
Note 2 - Investment in leases and property under operating leases (Continued)
The Company's primary leasing activity is a retail strip center.
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 2000 and 1999, the supermarket did not achieve this sales level.
At September 30, 2000, future minimum lease payments under the operating lease
agreements for the retail strip center are as follows (not including potential
extensions):
2001 $ 569,105
2002 550,196
2003 504,371
2004 500,255
2005 486,171
Thereafter 4,477,644
----------
$7,087,742
==========
The Company has other lease agreements that are short-term in nature and are not
material for inclusion in the above presentation.
Note 3 - Long-term debt
Long-term debt consisted of the following at September 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
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. $3,711,726 $3,842,397
Less current maturities 139,302 128,786
---------- ----------
$3,572,424 $3,713,611
========== ==========
</TABLE>
18
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements - Continued
September 30, 2000 and 1999
Note 3 - Long-term debt (Continued)
Aggregate maturities of long-term debt are due as follows:
2001 $ 139,302
2002 150,677
2003 162,981
2004 176,289
2005 190,684
Later 2,891,793
----------
$3,711,726
==========
All interest incurred for 2000 and 1999 was expensed by the Company.
Note 4 - Land sales
During the year ended September 30, 2000, the Company sold approximately 32
acres of undeveloped land located in Augusta, Georgia. The net sales price of
the sale was approximately $890,000. The Company recognized a gain of $646,094
on the sale. A principal officer and stockholder of the Company acted as real
estate agent on the sale through a brokerage company. The brokerage company
received a commission of $47,000 on the sale.
The Company invested the sale proceeds in purchases of additional undeveloped
land. The Company purchased approximately 10 acres in Evans, Georgia. The land
was purchased in two transactions. The first transaction was to acquire the
remaining one-third interest in 6.92 acres of land from an entity in which a
principal stockholder and member of the Board of Directors of the Company is a
significant owner. The purchase price of the land was $522,846. The second
transaction was a purchase of approximately 4 acres in Evans, Georgia adjacent
to the purchased property previously described. The land was jointly owned by
principal stockholders and members of the Board of Directors of the Company and
their families, and was acquired by the Company from these individuals. The
purchase price of the land was $371,970.
The sale and purchase transactions described above have been structured as a
tax-deferred like-kind exchange under Section 1031 of the Internal Revenue Code.
Accordingly, the Company has not provided for current income taxes related to
the gain on the sale, but has provided for appropriate deferred income taxes.
During the year ended September 30, 2000, the Company sold an industrial
property site located on approximately 16 acres in Athens, Georgia. The Company
recognized a gain of $311,816 on the sale.
This sale transaction has also been structured as a tax-deferred like-kind
exchange under Section 1031 of the Internal Revenue Code. Accordingly, the
Company has not provided for current income taxes related to the gain on the
sale, but has provided for appropriate deferred income taxes. The Company has
identified potential replacement properties but as of September 30, 2000 has not
completed the property acquisition. The funds for acquisition are being held by
a third-party intermediary and are presented on the Company's balance sheet as
Replacement Property Funds.
19
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to ConsolidatCed Financial Statements - Continued
September 30, 2000 and 1999
Note 5 - Related party transactions
During 1999, a director of the Company was also an investor of an entity that
was a tenant at the retail strip center. Total gross leasing revenue from this
tenant was approximately $33,800 for 1999. An unrelated party entered into a
lease for this space at December 1, 1999. Related party transactions related to
land sales and purchases are fully described in Note 4.
Note 6 - Income taxes
The total income taxes in the consolidated statements of income are as follows:
2000 1999
-------- -------
Deferred tax expense $158,344 $1,434
Net change, deferred tax valuation allowance - -
-------- ------
Deferred tax expense $158,344 $1,434
======== ======
The Company's provision for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to income before income taxes.
A reconciliation of the differences is as follows:
September 30, 2000 September 30, 1999
-------------------- --------------------
Amount Percent Amount Percent
-------- --------- -------- ---------
Tax at statutory rate $154,527 15% $ 1,434 15%
Increase in income taxes resulting
from permanent differences 3,817 - -
-------- ------ ------- ------
Provision for income taxes $158,344 15% $ 1,434 15%
======== ====== ======= ======
Net deferred tax assets consist of the following components as of
September 30, 2000 and 1999:
2000 1999
--------- --------
Deferred tax assets:
Loss carryforwards $ 9,306 $ 12,280
Less valuation allowance 4,403 4,403
--------- --------
4,903 7,877
--------- --------
Deferred tax liabilities
Leased property $ (63,722) (52,039)
Deferred gains (143,687) -
--------- ---------
(207,409) (52,039)
--------- ---------
$(202,506) $ (44,162)
========= =========
20
<PAGE>
SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements - Continued
September 30, 2000 and 1999
Note 6 - Income taxes (Continued)
For the year ended September 30, 1996, the Company recorded a net adjustment to
the deferred tax valuation allowance of $14,838, for a total valuation allowance
of $24,518. For the year ending September 30, 1997, the Company utilized a
substantial portion of the deferred tax asset and recorded a reduction in the
valuation allowance of $18,753. For the year ended September 30, 1998, the
Company reduced the valuation allowance by $1,279. The Company did not adjust
the allowance during 1999 or 2000. 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.
At September 30, 2000, the Company has approximately $58,000 of net operating
loss carryforwards for tax purposes available for use by the Company. The
carryforwards expire from 2010 to 2013.
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, 2000 and 1999:
Cash and cash equivalents - Due to their demand nature, the estimated fair
value approximates the carrying amount.
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, 2000 was
approximately $3.6 million, compared to the carrying amount of
approximately $3.7 million. The estimated fair value at September 30, 1999
was approximately $3.7 million, compared to the carrying amount of
approximately $3.8 million.
21
<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
Chairman of Board of Directors since 1983; past manager of Revco Drug Store, Inc.
member of Board since 1983; brother of President.
T. Greenlee Flanagin Licensed real estate agent
President since 1983; member of Board since
1983; brother of Chairman of Board.
M. David Alalof Former President; stockholder and agent with A.H.S.,
Vice President; member of Board since 1977. Inc., an insurance concern
John C. Bell, Jr. Attorney at Law
Member of Board since 1983.
Gregory B. Scurlock Senior Vice President, First Union Bank, Augusta, GA
Secretary/Treasurer; member of Board since 1983.
Robert M. Flanagin Licensed real estate agent
Member of Board since 1987.
brother of President and Chairman.
</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,
2000 the Company's executive officers, directors and owners of more than 10% of
its Common Stock complied with all filing requirements.
22
<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.
NAME COMPENSATION DATE
T. Greenlee Flanagin $33,426 September 30, 2000
T. Greenlee Flanagin 28,586 September 30, 1999
T. Greenlee Flanagin 26,216 September 30, 1998
There were no annuity, pension or retirement benefits paid during the fiscal
year ended September 30, 2000 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 $100 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, 2000 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.
NUMBER OF SHARES OF
NAME OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
T. Greenlee Flanagin (1) 815,213 15.5
Ann Flanagin Smith (1) 387,541 7.4
W. Stewart Flanagin, Jr. (1) 463,052 8.8
Robert Flanagin (1) 499,083 9.5
John C. Bell, Jr. 330,865 6.3
(1) Combined with the following, these individuals form the "Flanagin family
group":
Estate of W. Stewart Flanagin, Sr. 79,585 1.5
The Flanagin family group owns 2,244,474 shares which is approximately 43% of
all shares of stock outstanding.
23
<PAGE>
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, 2000, by Directors
and executive officers:
NAME OF COMMON STOCK
BENEFICIAL BENEFICIALLY PERCENT
OWNER ADDRESS OWNED OF CLASS
W. Stewart Flanagin, Jr. 1117 Glenn Avenue 463,052 8.8
Augusta, GA 30904
T. Greenlee Flanagin 3326 Wheeler Road 815,213 15.5
Augusta, GA 30903
M. David Alalof P.O. Box 15637 27,526 0.5
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 499,083 9.5
Augusta, GA 30909
All Directors and officers as a group consisting of
seven individuals. 2,136,239 40.6
The Flanagin family and all Directors and Officers as a group beneficially own
2,603,365 shares which is approximately 49.5% of all shares of stock
outstanding.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of business, the Company may enter into transactions with
Directors, officers, security holders, or their immediate family members.
During 2000 the Company acquired the remaining one-third interest in land from
an entity in which John C. Bell, Jr., a Director and security holder, was a 50%
owner. In this transaction the Company acquired the remaining one-third interest
in 6.92 acres of land in Evans, Georgia on Belair Road and North Belair Road
Extension, at Washington Road. The purchase price of the land was $522,846.
In a separate transaction from above, the Company acquired from the following
individuals, who were equal owners in the property, approximately 4.0 acres of
land in Evans, Georgia on Belair Road and North Belair Road Extension, at
Washington Road. The purchase price of the land was $371,970.
W. Stewart Flanagin, Jr. Director and security holder
T. Greenlee Flanagin President, Director and security holder
24
<PAGE>
Robert M. Flanagin Director and security holder
Ann Flanagin Smith Security holder
Virginia Wilson Flanagin Immediate family member of Director and
security holder
Tate McKenzie Flanagin Immediate family member of Director and security
holder
W. Stewart Flanagin, III Immediate family member of Director and security
holder
John Lawrence Smith Immediate family member of Director and security
holder
Chesley Stewart Smith Immediate family member of Director and security
holder
Harriette Robinson Flanagin Immediate family member of Director and
security holder
T. Greenlee Flanagin, Jr. Immediate family member of Director and security
holder
During 1999, the Company did not enter into 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
21 Subsidiaries of the Registrant
27 Financial data schedules
b) The Company did not file any reports on Form 8-K during the quarter ended
September 30, 2000.
25
<PAGE>
INDEX TO EXHIBITS
Page
11 Computation of Earnings Per Share 28
21 Subsidiaries of the Registrant 29
27 Financial data schedules 30 and 31
26
<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)
/s/ T. Greenlee Flanagin December 20, 2000
------------------------------------------------------
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.
/s/ W. Stewart Flanagin, Jr. December 20, 2000
-------------------------------------------------------
W. STEWART FLANAGIN, JR. (Date)
Chairman of Board
Chief Financial Officer
Chief Accounting Officer
/s/ M. David Alalof December 20, 2000
-------------------------------------------------------
M. DAVID ALALOF (Date)
Secretary-Treasurer
/s/ Gregory B. Scurlock December 20, 2000
-------------------------------------------------------
GREGORY B. SCURLOCK (Date)
Director
27
