10QSB 1 d10qsb.txt QUARTERLY REPORT 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 June 30, 2001 [ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period of_________ to _________ Commission File Number 0-7865. ------ SECURITY LAND AND DEVELOPMENT CORPORATION ----------------------------------------- (Exact name of small business issuer as specified in its charter) Georgia 58-1088232 ------- ---------- (State or other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 2816 Washington Road, #103, Augusta, Georgia 30909 -------------------------------------------------- (Address of Principal Executive Offices) Issuers Telephone Number (706) 736-6334 -------------- -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Year) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- 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 August 14, 2001 ----- ------------------------------ Common Stock, $.10 Par Value 5,258,886 shares Transitional Small Business Disclosure Format: YES NO X ----- ----- SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Form 10-QSB Index
Part I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet as of June 30, 2001 1 Condensed Consolidated Statements of Income for the Nine Months Ended June 30, 2001 and 2000, and the Three Months Ended June 30, 2001 and 2000 2 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2001 and 2000 3 Notes to Condensed Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis or Plan of Operation 5-6 Part II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 7 SIGNATURES 8 INDEX TO EXHIBITS 9
SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Part I. Financial Information Condensed Consolidated Balance Sheet (Unaudited) June 30, 2001
ASSETS Current assets Cash $ 86,023 ---------- Total current assets 86,023 ---------- Investments and other assets Land and improvements, at cost 2,186,499 Property leased to others under operating leases, less accumulated depreciation $745,583 4,714,554 ---------- 6,901,053 ---------- $6,987,076 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 3,517 Current portion of long-term debt 352,941 Accrued interest 24,290 Other current liabilities 99,095 ---------- Total current liabilities 479,843 ---------- Long-term debt, less current maturities 3,477,488 ---------- Deferred taxes 214,736 ---------- Deferred income 343,058 ---------- Stockholders' equity Common stock, at par value 623,761 Paid-in capital 333,766 Retained earnings 1,614,424 ---------- 2,571,951 Less subscribed shares 100,000 ---------- 2,471,951 ---------- $6,987,076 ==========
See notes to condensed consolidated financial statements. 1 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
Three Nine Three Nine Months Ended Months Ended Months Ended Months Ended June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000 ----------------- ----------------- ----------------- ----------------- Revenues, rent earned $177,960 $ 520,054 $164,902 $ 504,073 ----------------- ----------------- ----------------- ----------------- Operating expenses: Payroll and related costs 15,397 50,032 12,580 41,393 Depreciation 33,696 97,702 30,310 97,362 Property taxes 16,945 55,424 17,500 52,268 Repairs and maintenance 5,755 17,325 4,250 10,250 Professional services 10,220 19,499 4,320 20,340 Insurance 5,349 13,061 2,958 9,283 Other 6,682 22,499 5,915 24,426 ----------------- ----------------- ----------------- ----------------- 94,044 275,542 77,833 255,322 ----------------- ----------------- ----------------- ----------------- Operating income 83,916 244,512 87,069 248,751 ----------------- ----------------- ----------------- ----------------- Nonoperating income and (expense): Gain on sale of property - - 311,816 973,910 Interest income 960 3,158 1,593 6,340 Interest expense (77,290) (230,358) (74,394) (224,926) ----------------- ----------------- ----------------- ----------------- (76,330) (227,200) 239,015 755,324 ----------------- ----------------- ----------------- ----------------- Income before income taxes 7,586 17,312 326,084 1,004,075 Applicable income taxes 1,138 3,597 60,412 153,135 ----------------- ----------------- ----------------- ----------------- Net income $ 6,448 $ 13,715 $265,672 $ 850,940 ================= ================= ================= ================= Income per common share $ - $ - $ .05 $ .16 ================= ================= ================= =================
See notes to condensed consolidated financial statements. 2 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For the Nine Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 --------- --------- Cash flows from operating activities Cash received from leases $ 554,229 $ 519,615 Interest received 3,158 6,340 Cash paid to suppliers and employees (176,064) (146,444) Interest paid (230,358) (224,926) --------- --------- Net cash provided by operating activities 150,965 154,585 --------- --------- Cash flows from investing activities Purchase of land and improvements (277,160) (106,362) --------- --------- Net cash used in investing activities (277,160) (106,362) --------- --------- Cash flows from financing activities Property acquisition debt 250,000 - Principal payments on debt (131,298) (84,785) --------- --------- Net cash provided by (used in) financing activities 118,702 (84,785) --------- --------- Net decrease in cash (7,493) (36,562) Cash at beginning of period 93,516 155,916 --------- --------- Cash at end of period $ 86,023 $ 119,354 ========= ========= Reconciliation of net income to net cash provided by operating activities: Net income $ 13,715 $ 850,940 Deferred income taxes 3,597 153,135 Gain on sale of property - (973,910) Depreciation 97,702 97,362 Change in receivables 34,175 34,000 Others, net (1,776) (6,942) --------- --------- Net cash provided by operating activities $ 150,965 $ 154,585 ========= =========
See notes to condensed consolidated financial statements. 3 SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARY Notes to Condensed Consolidated Financial Statements Note 1 - Summary of significant accounting policies The accompanying financial statements are presented in accordance with the requirements of Form 10-QSB and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's annual Form 10-KSB filing. Accordingly, the reader of this Form 10-QSB may wish to refer to the Company's Form 10-KSB for the year ended September 30, 2000 for further information. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited. In the opinion of management, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. Recent Accounting Pronouncements -------------------------------- In June 2001, the Financial Accounting Standards Board issued two Statements of Financial Accounting Standards, No. 141, Business Combinations (SFAS No. 141), and No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, Business Combinations, and FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. All business combinations in the scope of SFAS No. 141 are to be accounted for using one method, the purchase method. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. Use of the pooling-of- interests method for those business combinations is prohibited. The provisions of SFAS No. 141 also apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001, or later. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of the 40-year maximum life required by SFAS No. 142. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001. The Company expects to adopt the provisions of SFAS No. 142 effective October 1, 2002. The Company is in the process of determining the impact the adoption of the provisions of SFAS No. 142 will have on financial position and results of operations. 4 Note 2 - Investment in leases and property under operating leases Property leased or held for lease to others under operating leases consists of the following at June 30, 2001: Land $ 375,796 Warehouse and buildings 5,084,341 ---------- 5,460,137 Less accumulated depreciation 745,583 ---------- $4,714,554 ========== Refer to the Company's Form 10-KSB for the year ended September 30, 2000 for further information on operating lease agreements and terms. Note 3 - Long-term debt Long-term debt consisted of the following at June 30, 2001: 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. $3,619,976 9.500% note payable to financial institution due in monthly payments of $3,250, including interest, through November 2003, with a balloon payment of approximately $200,000 due at that time, interest adjusted based on changes in the prime rate, secured by real estate. 210,453 ---------- 3,830,429 Less current maturities 352,941 ---------- $3,477,488 ==========
Item 2. Management's Discussion and Analysis of Plan or Operation The Company's results of operations for the nine month period ended June 30, 2001, and a comparative analysis of the same period for the 2000 year are presented below:
Increase (Decrease) 2001 Compared to 2000 ------------------------------- 2001 2000 Amount Percent ------------ ----------- ------------ ---------- Leasing revenue $520,054 $504,073 $15,981 3.2% Operating expenses 275,542 255,322 20,220 7.9% Interest expense 230,358 224,926 5,432 2.4%
5 Item 2. Management's Discussion and Analysis of Plan of Operation (Continued) Revenue from leasing consists of revenue from the Company's strip center on Washington Road in Augusta, Georgia. Revenue from leasing has remained relatively constant from 2000 to 2001. On an annualized basis, current revenue from leasing remains constant from leasing revenue for the Company's fiscal year ended September 30, 2000. Refer to the Company's Form 10-KSB for the year ended September 30, 2000 for further information regarding the properties owned and lease terms. Operating expenses for the nine months ended June 30, 2001 are comparable to the nine months ended June 30, 2000 and, on an annualized basis, are comparable to the Company's operating expenses for the fiscal year ended September 30, 2000. Management of the Company expects operating expenses for the remainder of the current fiscal year to be comparable to the present nine month period. Interest expense for the current period is comparable to 2000 and, on an annualized basis, is comparable to the Company's interest expense for the fiscal year ended September 30, 2000. The Company's ratio of current assets to current liabilities at June 30, 2001 was .18. The ratio was .50 at June 30, 2000. During the current quarter the Company satisfied liquidity needs through operating revenues. Management of the Company continues to expect future liquidity needs to be met from operating revenues of the Company. The Company does not expect any significant change in the number of employees. Cautionary Note Regarding Forward-Looking Statements: The Company may, from time to time, make written or oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission (the "Commission") and its reports to stockholders. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, but not limited to, competition from other real estate companies, the ability of the Company to obtain financing for projects, and the continuing operations of tenants. 6 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. Description ----------- ----------- None. (b) No reports on Form 8-K were filed during the three months ended June 30, 2001. 7 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SECURITY LAND AND DEVELOPMENT CORPORATION (Registrant) By: /s/ T. Greenlee Flanagin August 10, 2001 ------------------------ --------------- T. Greenlee Flanagin Date President Chief Executive Officer 8 INDEX TO EXHIBITS Exhibit Number Description Sequential Page Number None. 9