Organization and Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2015

Organization and Accounting Policies [Abstract]

In preparing the financial statements in accordance with U.S. GAAP, management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates and assumptions.

Reclassification

Certain prior period amounts in the accompanying Consolidated Financial Statements have been reclassified to conform to the current period’s presentation.

Lease Termination Income

Lease Termination Income is recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company.

During the six months ended March 31, 2015, the Company entered into a lease termination agreement with its tenant, Norton McNaughton of Squire, Inc. (Norton), whereby the Company received a lease termination fee of $238,625 in December 2014, terminating the lease effective January 31, 2015. Prior to the lease termination, Norton was leasing the Company’s 302,400 square foot building located in its Hanahan, SC location though April 29, 2015 at an annualized rent of approximately $1,389,000, or $4.54 per square foot. Prior to the lease termination, Norton sub-leased the Company’s space to Science Applications International Corporation (SAIC). In conjunction with the lease termination, the Company simultaneously entered into a lease agreement for four years and three months with SAIC from February 1, 2015 through April 30, 2019 at an initial annualized rent of approximately $1,406,000, or $4.65 per square foot, with 2% increases each year.

The Company’s lease with its tenant, Graybar Electric Company (Graybar), at its 26,340 square foot building located in Ridgeland (Jackson), MS has an early termination option which may be exercised at any time on the condition that the Company is provided with six months of notice. The Company has not received notice nor does the Company anticipate that this tenant will exercise its early termination option. Annual rent on both the U.S. GAAP straight-line rent basis and on the cash basis for this location is $109,275 or $4.15 per square foot and the lease expires in July 2019.

The Company’s lease with its tenant, CHEP USA, Inc. (CHEP), at its 83,000 square foot building located in Roanoke, VA has an early termination option which may be exercised after August 2021, on the condition that the Company is provided with six months of notice and CHEP pays the Company a $500,000 termination fee. The U.S. GAAP straight-line rent per annum for this location is $468,364 or $5.64 per square foot and the lease expires in January 2025.

The Company’s lease with its tenant, Pittsburgh Glass Works, LLC (PGW), at its 102,135 square foot building located in O’Fallon (St. Louis), MO has an early termination option which may be exercised after January 1, 2016 but before December 31, 2016, on the condition that the Company is provided with six months of notice and PGW pays the Company a $213,462 termination fee. Additionally, PGW has an early termination option which may be exercised after January 1, 2017, on the condition that the Company is provided with six months of notice and PGW pays the Company a $106,731 termination fee. Annual rent on both the U.S. GAAP straight-line rent basis and on the cash basis for this location is $426,924 or $4.18 per square foot and the lease expires in June 2018.

Other than the Company’s leases with Graybar, CHEP and PGW, the Company does not have any other leases that contain an early termination option.

Stock Compensation Plan

The Company has a Stock Option and Stock Award Plan, adopted in 2007 and amended and restated in 2010 (the 2007 Plan), authorizing the grant to officers and key employees of options to purchase up to 1,500,000 shares of common stock including up to 100,000 shares of restricted stock awarded to any one participant in any one fiscal year.

The Company accounts for awards of stock options and restricted stock in accordance with ASC 718-10, Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). The compensation cost for stock option grants is determined using option pricing models, intended to estimate the fair value of the awards at the grant date less estimated forfeitures. The compensation expense for restricted stock is recognized based on the fair value of the restricted stock awards less estimated forfeitures. The fair value of restricted stock awards is equal to the fair value of the Company’s stock on the grant date. The amortization of compensation costs for stock options grants and restricted stock are included in General and Administrative Expenses in the accompanying Consolidated Statements of Income and amounted to $96,673 and $85,137 for the three months ended March 31, 2015 and 2014, respectively and amounted to $186,905 and $171,634 for the six months ended March 31, 2015 and 2014, respectively.

During the three and six months ended March 31, 2015 and 2014, the following stock options were granted under the Company’s 2007 Stock Option and Stock Award Plan, as amended and restated (the “2007 Plan”):

Date of Grant	Number of Employees	Number of Shares	Option Price	Expiration Date

1/5/15	1	65,000	$11.16	1/5/23
1/3/14	1	65,000	$8.94	1/3/22

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in the fiscal year indicated:

6.71%

	Fiscal 2015	Fiscal 2014

Dividend yield	5.38%
Expected volatility	19.78%	19.07%
Risk-free interest rate	1.97%	2.45%
Expected lives (years)	8	8
Estimated forfeitures	-0-	-0-

The fair value of options granted during the three and six months ended March 31, 2015 and 2014 was $0.93 and $0.53, respectively.

During the six months ended March 31, 2015, no shares of restricted stock were granted under the Company’s 2007 Plan. During the six months ended March 31, 2015, four participants exercised options to purchase 81,200 shares of common stock at a weighted average exercise price of $7.54 per share for total proceeds of $612,409. As of March 31, 2015, a total of 604,646 shares were available to grant as stock options or as restricted stock and there were outstanding options to purchase 635,000 shares under the 2007 Plan. The aggregate intrinsic value of options outstanding as of March 31, 2015 was $1,545,850 and the intrinsic value of options exercised during the six months ended March 31, 2015 was $333,369.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” as a new Topic, Accounting Standards Codification ("ASC") Topic 606. The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new standard, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. This ASU is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 and shall be applied using either a full retrospective or modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the impact this standard may have on the consolidated financial statements and the method of adoption.

In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the potential impact the new standard will have on its consolidated financial statements and the method of adoption.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying Consolidated Financial Statements.

- Definition

Disclosure of accounting policy for leasing arrangements (both lessor and lessee). This disclosure may address (1) lease classification (that is, operating versus capital), (2) how the term of a lease is determined (for example, the circumstances in which a renewal option is considered part of the lease term), (3) how rental revenue or expense is recognized for a lease that contains rent escalations, (4) an entity's accounting treatment for deferred rent, including that which arises from lease incentives, rent abatements, rent holidays, or tenant allowances (5) an entity's accounting treatment for contingent rental payments and (6) an entity's policy for reviewing, at least annually, the residual values of sales-type and direct-finance leases. The disclosure also may indicate how the entity accounts for its capital leases, leveraged leases or sale-leaseback transactions.

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