10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2016
☐	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 issuer as specified in its charter)

Georgia	58-1088232
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

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  ☒   NO  ☐

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 

See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ☒    NO  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

                                                                                                                            ☐ Yes      ☒ 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 May 12, 2016
Common Stock, $0.10 Par Value	5,243,107 shares

Table of Contents

SECURITY LAND AND DEVELOPMENT CORPORATION

Form 10-Q

Index

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2016 and September 30, 2015	1
	Consolidated Statements of Income and Retained Earnings for the Three Month Periods ended and for the Six Month Periods ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Cash Flows for the Three Month Periods ended and for the Six Month Periods ended March 31, 2016 and 2015	3
	Notes to the Consolidated Financial Statements	4-7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8-9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4.	Controls and Procedures	9
Part II	OTHER INFORMATION	10
Item 1.	Legal Proceedings	10
Item 1A.	Risk Factors	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3.	Defaults Upon Senior Securities	10
Item 4.	Reserved for Future Use	10
Item 5.	Other Information	10
Item 6.	Exhibits	10
	SIGNATURES	11-13

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SECURITY LAND AND DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
	March 31,		September 30,
	2016		2015
	(unaudited)
ASSETS
CURRENT ASSETS
Cash	$	607,058	$	412,847
Receivables from tenants, net of allowance of $52,255
at both March 31, 2016 and September 30, 2015		311,650		386,469
Prepaid property taxes		-		23,251
Income taxes receivable		-		14,263
Total current assets		918,708		836,830
INVESTMENT PROPERTIES
Investment properties for lease, net of accumulated depreciation		6,996,784		7,075,175
Land and improvements held for investment or development		3,785,618		3,752,863
		10,782,402		10,828,038
OTHER ASSETS		74,490		79,353
	$	11,775,600	$	11,744,221
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	172,254	$	282,769
Income taxes payable		86,286		-
Current maturities of notes payable		245,051		239,168
Total current liabilities		503,591		521,937
LONG-TERM LIABILITIES
Notes payable, less current portion		2,901,753		3,025,458
Deferred income taxes		1,422,079		1,413,187
Total long-term liabilities		4,323,832		4,438,645
Total liabilities		4,827,423		4,960,582
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share; 30,000,000 shares authorized;
5,243,107 shares issued and outstanding		524,311		524,311
Additional paid-in capital		333,216		333,216
Retained earnings		6,090,650		5,926,112
Total Stockholders' Equity		6,948,177		6,783,639
Liabilities and Stockholders' Equity	$	11,775,600	$	11,744,221
The accompanying notes are an integral part of these consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
	For the Three Months				For the Six Months
	Ended March 31,				Ended March 31,
	2016		2015		2016		2015
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
OPERATING REVENUES
Rent Revenues	$	419,998	$	383,653	$	830,358	$	764,925
OPERATING EXPENSES
Depreciation and amortization		49,054		42,309		98,110		84,620
Property taxes		68,199		69,228		132,678		133,650
Payroll and related costs		29,295		20,222		113,926		42,093
Insurance and utilities		16,600		8,677		27,567		17,448
Repairs and maintenance		14,276		7,377		21,906		23,501
Professional services		18,750		18,000		48,878		42,944
Bad debt		-		-		-		2,814
Penalties		-		7,026		-		11,544
Other		1,879		728		5,781		2,442
		198,053		173,567		448,846		361,056
Operating income		221,945		210,086		381,512		403,869
OTHER INCOME (EXPENSE)
Interest expense		(39,810)		(46,426)		(80,338)		(91,313)
Other income		-		-		7,616		-
		(39,810)		(46,426)		(72,722)		(91,313)
Income before income taxes		182,135		163,660		308,790		312,556
INCOME TAXES PROVISION (BENEFIT)
Income tax expense		77,544		69,723		135,360		129,740
Income tax deferred (benefit) expense		(7,611)		(3,494)		8,892		(6,991)
		69,933		66,229		144,252		122,749
Net income		112,202		97,431		164,538		189,807
RETAINED EARNINGS, BEGINNING
OF PERIOD		5,978,448		4,526,349		5,926,112		4,433,973
RETAINED EARNINGS, END OF PERIOD	$	6,090,650	$	4,623,780	$	6,090,650	$	4,623,780
PER SHARE DATA
Net income per common share	$	0.02	$	0.02	$	0.03	$	0.04
The accompanying notes are an integral part of these consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Three Months				For the Six Months
	Ended March 31,				Ended March 31,
		2016		2015		2016		2015
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
OPERATING ACTIVITIES
Net income	$	112,202	$	97,431	$	164,538	$	189,807
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization		49,054		42,309		98,110		84,620
Deferred income tax		(7,611)		(3,494)		8,892		(6,991)
Changes in deferred and accrued amounts		(17,084)		(188,600)		88,104		(194,496)
Net cash provided by (used in) operating activities		136,561		(52,354)		359,644		72,940
INVESTING ACTIVITIES
Sale of investment properties and other assets for
improvements to property held for lease		-		11,250		-		11,250
Additions to investment properties and other assets for
improvements to property held for lease		(39,906)		(11,949)		(47,611)		(11,949)
Net cash used in investing activities		(39,906)		(699)		(47,611)		(699)
FINANCING ACTIVITIES
Repayments to stockholder		-		(50,433)		-		(50,433)
Proceeds from note payable		-		1,500,000		-		1,500,000
Principal payments on notes payable		(59,268)		(962,485)		(117,822)		(1,123,479)
Net cash (used in) provided by financing activities		(59,268)		487,082		(117,822)		326,088
Net increase in cash		37,387		434,029		194,211		398,329
CASH, BEGINNING OF PERIOD		569,671		30,282		412,847		65,982
CASH, END OF PERIOD	$	607,058	$	464,311	$	607,058	$	464,311
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	39,817	$	46,815	$	80,610	$	90,204
Cash paid for income taxes	$	34,326	$	188,241	$	34,811	$	226,143
The accompanying notes are an integral part of these consolidated financial statements.
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SECURITY LAND AND DEVELOPMENT CORPORATION

Notes to the Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q, Article 8 of Regulation S-X and accounting principles generally accepted in the United States of America; therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows.  Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods.  Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited financial statements appearing in our Form 10-K for the year ended September 30, 2015 when reviewing these interim financial statements.

The financial statements include estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.  The consolidated financial statements include the accounts of Security Land and Development Corporation and its four wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC 2, LLC and SLDC III, LLC (described on a consolidated basis as the “Company”).  Significant intercompany transactions and accounts are eliminated in consolidation.

Critical Accounting Policies:

Estimates of Useful Lives of Investment Properties for Purposes of Depreciation

Management has estimated useful lives of investment properties, except for land, that is leased, and the Company utilizes the straight-line method to compute depreciation over the estimated useful lives of the investment properties.  Actual depreciation of investment properties will vary from management’s estimates, and the value of investment properties is more directly impacted by market conditions and the physical condition of the investment properties.

Evaluation of Long-Lived Assets for Impairment

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of investment properties may not be recoverable.  In evaluating recoverability, the Company generally estimates future cash flows expected to result from the use of the asset and its eventual disposition.  An impairment loss is recognized when the expected future cash flows of the asset are less than its carrying amount.

Estimates of Income Tax Rates Applicable to Deferred Taxes

The Company has deferred income taxes through a series of tax-deferred like-kind exchange transactions on certain investment properties and through accelerated depreciation elections on certain other assets.  Actual income taxes that may become due when taxable gains are realized on the sale of assets may differ from management’s estimates as a result of changes in tax laws, the tax status of the Company, or the actual taxable earnings of the Company in the periods the deferred income taxes become due.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding its critical accounting policies.

 -4-

Note 1 – Basis of Presentation, Continued

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts (Topic 606). The new standard is effective for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impacts of adoption and the implementation approach to be used.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes. Under the amended guidance, deferred tax liabilities and assets are required to be classified as noncurrent in a classified statement of financial position. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted as of the beginning of an interim or annual reporting period. The Company has not yet adopted the amended guidance.  The Company is currently evaluating the impact of adoption.

In February 2016, the FASB issued new guidance to change accounting for leases and that will generally require most leases to be recognized on the balance sheet. The new lease standard only contains targeted changes to accounting by lessors, however, lessees will be required to recognize most leases in their balance sheets as lease liabilities for lease payments and right-of-use assets representing the lessee’s rights to use the underlying assets for the lease terms for lease arrangement longer than 12 months. Under this approach, a lessee will account for most existing capita/finance leases as Type A leases and most existing operating leases as Type B leases. Type A and Type B leases have unique accounting and disclosure requirements. Existing sale-leaseback guidance, including guidance for real estate, will be replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted for all companies and organizations. Management is currently analyzing the impact of the adoption of this guidance on the company’s consolidated financial statements, including assessing changes that might be necessary to information technology system, processes and internal controls to capture new data and address changes in financial reporting.

Note 2 – Investment Properties

Investment properties leased or held for lease to others under operating leases consisted of the following at
March 31, 2016 and September 30, 2015:

	March 31, 2016			September 30, 2015
	(unaudited)
National Plaza building, land and improvements	$	5,320,274		$	5,305,419	)
Evans Ground Lease, land and improvements		2,382,673			2,382,673
Wrightsboro Road Building, land and improvements		1,905,875			1,905,875
Commercial land and improvements		3,785,619			3,752,863
		13,394,441			13,346,830
Less accumulated depreciation		(2,612,039	)		(2,518,792	)
Investment properties for lease, net of depreciation	$	10,782,402		$	10,828,038

Depreciation expense totaled approximately $45,000 and $40,000 for the three-month periods ended March 31, 2016 and 2015, respectively and approximately $93,000 and $80,000 for the six-month periods ended March 31, 2016 and 2015, respectively.   

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Note 2 – Investment Properties, Continued

National Plaza is a retail strip center located on Washington Road in Augusta Georgia. Approximately 81% of the rentable space at the National Plaza is leased to Publix Supermarkets, Inc., the National Plaza’s anchor tenant. 

The Company entered into a long-term ground lease with a major national tenant and its developer in May 2006 on approximately 18 acres of land in Columbia County, Georgia. The agreement required monthly rental payments of $20,833 during the development period, which was completed in January 2007. Following the expiration of the development period, the lease required annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16. The lessee has an option to renew at year 21 and another option every 5 years thereafter for a possible total lease term of 50 years. The lease provides for the tenant to pay for insurance and property taxes. The Company is recognizing rents on a straight-line basis over the lease term. 

In September of 2015 the Company purchased a commercial building consisting of approximately 25,000 square feet of retail space and 27,000 square feet of warehouse space on approximately 3.5 acres of land located on Wrightsboro Road. The retail space is currently leased to a local retailer and rent commenced on October 1, 2015. The related lease term is 10 years with annual rental payments totaling $142,000, paid monthly, increasing to $153,000 per year at year 6. The warehouse space was available for lease as of September 30, 2015. The Company is recognizing rents on a straight-line basis over the lease term. 

The Company holds several parcels of land for investment or development purposes, including 19.38 acres of land in North Augusta, South Carolina, purchased in parcels during 2007 and 2008. The Company also owns approximately 85 acres of land in south Richmond County, Georgia and a 1.1 acre parcel along Washington Road in Augusta, Georgia that adjoins the Company’s National Plaza investment property. The aggregate costs of these investment properties held for investment or development was $3,785,618 and $3,752,863 at March 31, 2016 and September 30, 2015, respectively.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information on operating lease agreements and land held for investment or development purposes.

Note  3 – Notes Payable

Notes payable consisted of the following at:

	March 31, 2016	September 30, 2015
	(unaudited)
A note payable to an insurance company collateralized with approximately 18 acres of land in Columbia County, Georgia, and an assignment of the long-term ground lease. The note is payable in monthly installments of $17,896, including principal and interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%.	1,757,672	1,812,690
A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $15,220, including principal and interest, through April 2025, and bears interest at a fixed rate of 4%. The proceeds were used to pay the Company’s outstanding income tax liability, four notes payable collateralized by the Company’s land held for lease and investment portfolio and one uncollateralized note payable to a shareholder. The proceeds were also used to fund improvements at National Plaza.	1,389,132	1,451,936
	3,146,804	3,264,626
Less current maturities	(245,051)	(239,168)
	$ 2,901,753	$ 3,025,458

Note  3 – Notes Payable, Continued

Management of the Company expects future liquidity needs of the Company to be funded from rent revenues, refinancing and the appreciation in investment properties (which can be sold or mortgaged, if necessary). 

Current maturities of notes payable will require the Company to make payments over the next 12 months totaling $245,051. The Company projects that it will be able to fund the payment of its current maturities of notes payable through cash flows generated from its operations and cash on hand, but there can be no assurance that this will occur.

Note  4 – Income Taxes

At September 30, 2015 the Company had income taxes receivable of $14,263 related to the fiscal year 2015. As of March 31, 2016 the Company’s outstanding income taxes payable is $86,286, all of which relates to 2016.

Note  5 - Concentrations

Substantially all of the Company’s assets consist of real estate located in Richmond and Columbia Counties in the state of Georgia and in Aiken County, South Carolina. Substantially all of the Company’s revenues are earned from three of the Company’s investment properties, National Plaza, the Evans Ground Lease, and Wrightsboro Road Lease, which comprise approximately 50%, 40% and 9% of the Company’s revenues, respectively. The anchor tenant for National Plaza, Publix Supermarkets, Inc. (“Publix”), a regional food supermarket chain, leases approximately 81% of the space at National Plaza. The Company generates approximately 35% of its revenues though its lease with Publix.

Note  6 - Related Party Transactions

The Company purchases insurance from an insurance company of which a member of the Company’s Board of Directors is President Emeritus. The Company’s Board of Directors believes that the insurance prices obtained from such company were not in excess of prices that would have been paid had the Company obtained this insurance from other sources.

The Company hired an attorney who is also a member of the Company’s Board of Directors and who also serves as Vice President of the Company, to represent the Company in a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged. The matter was settled in June 2015.

Note  7 - Legal Matter

In June 2015, the Company settled a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged to the tenant by the Company. Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding this settlement.

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Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations:

The Company’s results of operations for the six months ended March 31, 2016, and a comparative analysis of the same period for 2015 are presented below:

					Increase (decrease)
					2016 compared to 2015
	2016		2015		Amount		Percent
	$	830,358	$	764,925	$	65,433	9%
Operating expenses		448,846		361,056		87,790	24%
Interest expense		80,338		91,313		(10,975)	-12%
Income tax expense		144,252		122,749		21,503	18%
Other income		7,616		-		7,616	N/A
Net income		164,538		189,807		(25,269)	-13%

Rent revenue consists of rent revenue from the Company’s National Plaza, a strip center on Washington Road in Augusta, Georgia, and the Evans Ground Lease in Evans, Georgia. The Company also earned rent revenue from a lease on the Wrightsboro Road property with an apparel and home goods retailer and a ground lease with an auto-repair service operation on an out-parcel of National Plaza. Rental income for the six months ended March 31, 2016 increased compared to the same period for 2015 due to the addition of the rent related to the Wrightsboro Road property lease.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding the properties owned and their lease terms.

Total operating expenses for the six months ended March 31, 2016 increased compared to the same period for 2015 due to a bonus to the Company’s president in relation to the sale of an approximately 1 acre outparcel of National Plaza and the Stanley Drive house. The proceeds from this sale were used in a tax deferred like kind exchange for the Wrightsboro Road property that was purchased in September 2015. The Company’s operating expenses also increased due to the property tax expense for Wrightsboro Road property purchased during 2015. Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding these transactions. In addition, operating expense also increased due to depreciation cost related to the Wrightsboro Road property acquired in 2015.  Management expects operating expenses for the remainder of the current fiscal year to decrease slightly relative to the current operating period as no other similar bonuses are anticipated in the current fiscal year.

Interest expense for the six months ended March 31, 2016 decreased compared to 2015 due to the decrease in debt resulting from scheduled principal payments. Management expects interest expense for the remainder of the current fiscal year to continue to decrease as outstanding debt continues to amortize.

Income tax expense for the six months ended March 31, 2016 increased compared to the same period for 2015 due to increased revenues and resulting net income for the current quarter as noted above.

-8-

Liquidity and Sources of Capital:

The Company’s ratio of current assets to current liabilities at March 31, 2016 was 182%. The ratio was 160% at September 30, 2015. 

Management of the Company expects future liquidity needs of the Company to be funded from rent revenues, refinancing and the appreciation in investment properties (which can be sold or mortgaged, if necessary). 

Current maturities of notes payable will require the Company to make payments over the next 12 months totaling $245,051. The Company projects that it will be able to fund the payment of its current maturities of notes payable through cash flows generated from its operations and cash on hand, but there can be no assurance that this will occur.

Cautionary Note Regarding Forward-Looking Statements:

The results of operations for the three and six months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year. 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.

Item  3. Quantitative and Qualitative Disclosures About Market Risks

   Not applicable to smaller reporting companies

Item  4. Controls and Procedures

(a)      Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures were ineffective.

(b)      There were no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date the Chief Executive Officer carried out the evaluation.

As of September 30, 2015, the Company’s management evaluated the effectiveness of its internal control. Based on the evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was ineffective as of September 30, 2015 and identified a material weakness related to the lack of segregation of duties, accounting personnel with the requisite knowledge of GAAP and the lack of written policies and procedures over financial reporting.

Notwithstanding the existence of this material weakness in our internal control over financial reporting, our management believes that the consolidated financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented. There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item  1. Legal Proceedings

During 2011, the Company was notified by a tenant of a claim for reimbursement of certain expenses charged by the Company. The Company accrued approximately $150,000 for professional fees and other expenses to defend its position. The matter was settled in the year ended September 30, 2015 and the $150,000 was recognized as income as a result of the settlement. 

Item  1A. Risk Factors

The Company, as a smaller reporting company, is not required to provide the information required by this item.

Item  2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item  3. Defaults Upon Senior Securities

None

Item  4. Reserved for Future Use

Item  5. Other Information

Management of the Company notes that no Forms 8-K were filed during the period and Management is not aware of any un-reported matters occurring during the period that would require disclosure in a Form 8-K. 

Item  6. Exhibits

(a)	Exhibit No.	Description
	31.1	Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	32.1	Certification Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
	101	The following financial information from Security Land and Development Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 is formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Retained Earnings, (iii) the condensed Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.

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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 AND DEVELOPMENT CORPORATION

(Registrant)

By:	/s/ T. Greenlee Flanagin	May 12, 2016
	T. Greenlee Flanagin	Date
	President
	Chief Executive Officer and Chief Financial Officer

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EX-31

EXHIBIT 31.1

CERTIFICATIONS

I, T. Greenlee Flanagin, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Security Land and Development Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and  have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;  and

d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors.

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information.

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 12, 2016

/s/ T. Greenlee Flanagin

T. Greenlee Flanagin

President and Chief Executive Officer and
Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Security Land and Development Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, T. Greenlee Flanagin, President and Chief Executive Officer of the Company, does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

	(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By:
	/s/ T. Greenlee Flanagin
	T. Greenlee Flanagin
	President
	Chief Executive Officer and Chief
	Financial Officer
	May 12, 2016

A signed original of this written statement required by Section 906 has been provided to Security Land and Development Corporation and will be retained by Security Land and Development Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2016	May. 12, 2016
Document and Entity Information:
Entity Registrant Name	SECURITY LAND & DEVELOPMENT CORP
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Entity Central Index Key	0000088572
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		5,243,107
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2016	Sep. 30, 2015
CURRENT ASSETS
Cash	$ 607,058	$ 412,847
Receivables from tenants, net of allowance of $52,255 at both March 31, 2016 and September 30, 2015	$ 311,650	386,469
Prepaid property taxes		23,251
Income taxes receivable		14,263
Total current assets	$ 918,708	836,830
INVESTMENT PROPERTIES
Investment properties for lease, net of accumulated depreciation	6,996,784	7,075,175
Land and improvements held for investment or development	3,785,618	3,752,863
Total investment properties	10,782,402	10,828,038
OTHER ASSETS	74,490	79,353
Total Assets	11,775,600	11,744,221
CURRENT LIABILITIES
Accounts payable and accrued expenses	172,254	$ 282,769
Income taxes payable	86,286
Current maturities of notes payable	245,051	$ 239,168
Total current liabilities	503,591	521,937
LONG-TERM LIABILITIES
Notes payable, less current portion	2,901,753	3,025,458
Deferred income taxes	1,422,079	1,413,187
Total long-term liabilities	4,323,832	4,438,645
Total liabilities	4,827,423	4,960,582
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share; 30,000,000 shares authorized; 5,243,107 shares issued and outstanding	524,311	524,311
Additional paid-in capital	333,216	333,216
Retained earnings	6,090,650	5,926,112
Total Stockholders' Equity	6,948,177	6,783,639
Liabilities and Stockholders' Equity	$ 11,775,600	$ 11,744,221

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2016	Sep. 30, 2015
Statement of Financial Position [Abstract]
Allowance on receivables from tenants	$ 52,255	$ 52,255
Common Stock, Par Value	$ 0.10	$ 0.10
Common Stock, Shares Authorized	30,000,000	30,000,000
Common Stock, shares issued	5,243,107	5,243,107
Common Stock, shares outstanding	5,243,107	5,243,107

XML

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
OPERATING REVENUES
Rent revenues	$ 419,998	$ 383,653	$ 830,358	$ 764,925
OPERATING EXPENSES
Depreciation and amortization	49,054	42,309	98,110	84,620
Property taxes	68,199	69,228	132,678	133,650
Payroll and related costs	29,295	20,222	113,926	42,093
Insurance and utilities	16,600	8,677	27,567	17,448
Repairs and maintenance	14,276	7,377	21,906	23,501
Professional services	$ 18,750	$ 18,000	$ 48,878	42,944
Bad debt				2,814
Penalties		$ 7,026		11,544
Other	$ 1,879	728	$ 5,781	2,442
Total operating expenses	198,053	173,567	448,846	361,056
Operating income	221,945	210,086	381,512	403,869
OTHER INCOME (EXPENSE)
Interest expense	$ (39,810)	$ (46,426)	(80,338)	$ (91,313)
Other Income			7,616
Total other income (expense)	$ (39,810)	$ (46,426)	(72,722)	$ (91,313)
Income before income taxes	182,135	163,660	308,790	312,556
INCOME TAXES PROVISION (BENEFIT)
Income tax expense	77,544	69,723	135,360	129,740
Income tax deferred (benefit) expense	(7,611)	(3,494)	8,892	(6,991)
Total income taxes provision (benefit)	69,933	66,229	144,252	122,749
Net income	112,202	97,431	164,538	189,807
RETAINED EARNINGS, BEGINNING OF PERIOD	5,978,448	4,526,349	5,926,112	4,433,973
RETAINED EARNINGS, END OF PERIOD	$ 6,090,650	$ 4,623,780	$ 6,090,650	$ 4,623,780
PER SHARE DATA
Net income per common share	$ 0.02	$ 0.02	$ 0.03	$ 0.04

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
OPERATING ACTIVITIES
Net income	$ 112,202	$ 97,431	$ 164,538	$ 189,807
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	49,054	42,309	98,110	84,620
Deferred income tax	(7,611)	(3,494)	8,892	(6,991)
Changes in deferred and accrued amounts	(17,084)	(188,600)	88,104	(194,496)
Net cash provided by (used in) operating activities	$ 136,561	(52,354)	$ 359,644	72,940
INVESTING ACTIVITIES
Sale of investment properties and other assets for improvements to property held for lease		11,250		11,250
Additions to investment properties and other assets for improvements to property held for lease	$ (39,906)	(11,949)	$ (47,611)	(11,949)
Net cash used in investing activities	$ (39,906)	(699)	$ (47,611)	(699)
FINANCING ACTIVITIES
Repayments to stockholder		(50,433)		(50,433)
Proceeds from note payable		1,500,000		1,500,000
Principal payments on notes payable	$ (59,268)	(962,485)	$ (117,822)	(1,123,479)
Net cash (used in) provided by financing activities	(59,268)	487,082	(117,822)	326,088
Net increase in cash	37,387	434,029	194,211	398,329
CASH, BEGINNING OF PERIOD	569,671	30,282	412,847	65,982
CASH, END OF PERIOD	607,058	464,311	607,058	464,311
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	39,817	46,815	80,610	90,204
Cash paid for income taxes	$ 34,326	$ 188,241	$ 34,811	$ 226,143

XML

Basis of Presentation

6 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q, Article 8 of Regulation S-X and accounting principles generally accepted in the United States of America; therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows.  Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods.  Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited financial statements appearing in our Form 10-K for the year ended September 30, 2015 when reviewing these interim financial statements.

The financial statements include estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.  The consolidated financial statements include the accounts of Security Land and Development Corporation and its four wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, SLDC 2, LLC and SLDC III, LLC (described on a consolidated basis as the “Company”).  Significant intercompany transactions and accounts are eliminated in consolidation.

Critical Accounting Policies:

Estimates of Useful Lives of Investment Properties for Purposes of Depreciation

Management has estimated useful lives of investment properties, except for land, that is leased, and the Company utilizes the straight-line method to compute depreciation over the estimated useful lives of the investment properties.  Actual depreciation of investment properties will vary from management’s estimates, and the value of investment properties is more directly impacted by market conditions and the physical condition of the investment properties.

Evaluation of Long-Lived Assets for Impairment

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of investment properties may not be recoverable.  In evaluating recoverability, the Company generally estimates future cash flows expected to result from the use of the asset and its eventual disposition.  An impairment loss is recognized when the expected future cash flows of the asset are less than its carrying amount.

Estimates of Income Tax Rates Applicable to Deferred Taxes

The Company has deferred income taxes through a series of tax-deferred like-kind exchange transactions on certain investment properties and through accelerated depreciation elections on certain other assets.  Actual income taxes that may become due when taxable gains are realized on the sale of assets may differ from management’s estimates as a result of changes in tax laws, the tax status of the Company, or the actual taxable earnings of the Company in the periods the deferred income taxes become due.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding its critical accounting policies.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts (Topic 606). The new standard is effective for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impacts of adoption and the implementation approach to be used.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes. Under the amended guidance, deferred tax liabilities and assets are required to be classified as noncurrent in a classified statement of financial position. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted as of the beginning of an interim or annual reporting period. The Company has not yet adopted the amended guidance.  The Company is currently evaluating the impact of adoption.

In February 2016, the FASB issued new guidance to change accounting for leases and that will generally require most leases to be recognized on the balance sheet. The new lease standard only contains targeted changes to accounting by lessors, however, lessees will be required to recognize most leases in their balance sheets as lease liabilities for lease payments and right-of-use assets representing the lessee’s rights to use the underlying assets for the lease terms for lease arrangement longer than 12 months. Under this approach, a lessee will account for most existing capita/finance leases as Type A leases and most existing operating leases as Type B leases. Type A and Type B leases have unique accounting and disclosure requirements. Existing sale-leaseback guidance, including guidance for real estate, will be replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted for all companies and organizations. Management is currently analyzing the impact of the adoption of this guidance on the company’s consolidated financial statements, including assessing changes that might be necessary to information technology system, processes and internal controls to capture new data and address changes in financial reporting.

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Investment Properties

6 Months Ended

Mar. 31, 2016

INVESTMENT PROPERTIES

Investment Properties

Note 2 – Investment Properties

Investment properties leased or held for lease to others under operating leases consisted of the following at March 31, 2016 and September 30, 2015:

	March 31, 2016			September 30, 2015
	(unaudited)
National Plaza building, land and improvements	$	5,320,274		$	5,305,419	)
Evans Ground Lease, land and improvements		2,382,673			2,382,673
Wrightsboro Road Building, land and improvements		1,905,875			1,905,875
Commercial land and improvements		3,785,619			3,752,863
		13,394,441			13,346,830
Less accumulated depreciation		(2,612,039	)		(2,518,792	)
Investment properties for lease, net of depreciation	$	10,782,402		$	10,828,038

Depreciation expense totaled approximately $45,000 and $40,000 for the three-month periods ended March 31, 2016 and 2015, respectively and approximately $93,000 and $80,000 for the six-month periods ended March 31, 2016 and 2015, respectively.   

National Plaza is a retail strip center located on Washington Road in Augusta Georgia. Approximately 81% of the rentable space at the National Plaza is leased to Publix Supermarkets, Inc., the National Plaza’s anchor tenant. 

The Company entered into a long-term ground lease with a major national tenant and its developer in May 2006 on approximately 18 acres of land in Columbia County, Georgia. The agreement required monthly rental payments of $20,833 during the development period, which was completed in January 2007. Following the expiration of the development period, the lease required annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16. The lessee has an option to renew at year 21 and another option every 5 years thereafter for a possible total lease term of 50 years. The lease provides for the tenant to pay for insurance and property taxes. The Company is recognizing rents on a straight-line basis over the lease term. 

In September of 2015 the Company purchased a commercial building consisting of approximately 25,000 square feet of retail space and 27,000 square feet of warehouse space on approximately 3.5 acres of land located on Wrightsboro Road. The retail space is currently leased to a local retailer and rent commenced on October 1, 2015. The related lease term is 10 years with annual rental payments totaling $142,000, paid monthly, increasing to $153,000 per year at year 6. The warehouse space was available for lease as of September 30, 2015. The Company is recognizing rents on a straight-line basis over the lease term. 

The Company holds several parcels of land for investment or development purposes, including 19.38 acres of land in North Augusta, South Carolina, purchased in parcels during 2007 and 2008. The Company also owns approximately 85 acres of land in south Richmond County, Georgia and a 1.1 acre parcel along Washington Road in Augusta, Georgia that adjoins the Company’s National Plaza investment property. The aggregate costs of these investment properties held for investment or development was $3,785,618 and $3,752,863 at March 31, 2016 and September 30, 2015, respectively.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information on operating lease agreements and land held for investment or development purposes.

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Notes Payable

6 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Notes Payable

Note  3 – Notes Payable

Notes payable consisted of the following at:

	March 31, 2016	September 30, 2015
	(unaudited)
A note payable to an insurance company collateralized with approximately 18 acres of land in Columbia County, Georgia, and an assignment of the long-term ground lease. The note is payable in monthly installments of $17,896, including principal and interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%.	1,757,672	1,812,690
A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $15,220, including principal and interest, through April 2025, and bears interest at a fixed rate of 4%. The proceeds were used to pay the Company’s outstanding income tax liability, four notes payable collateralized by the Company’s land held for lease and investment portfolio and one uncollateralized note payable to a shareholder. The proceeds were also used to fund improvements at National Plaza.	1,389,132	1,451,936
	3,146,804	3,264,626
Less current maturities	(245,051)	(239,168)
	$ 2,901,753	$ 3,025,458

Management of the Company expects future liquidity needs of the Company to be funded from rent revenues, refinancing and the appreciation in investment properties (which can be sold or mortgaged, if necessary). 

Current maturities of notes payable will require the Company to make payments over the next 12 months totaling $245,051. The Company projects that it will be able to fund the payment of its current maturities of notes payable through cash flows generated from its operations and cash on hand, but there can be no assurance that this will occur.

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Income Taxes

6 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note  4 – Income Taxes

At September 30, 2015 the Company had income taxes receivable of $14,263 related to the fiscal year 2015. As of March 31, 2016 the Company’s outstanding income taxes payable is $86,286, all of which relates to 2016.

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Concentrations

6 Months Ended

Mar. 31, 2016

Concentrations

Concentrations

Note  5 - Concentrations

Substantially all of the Company’s assets consist of real estate located in Richmond and Columbia Counties in the state of Georgia and in Aiken County, South Carolina. Substantially all of the Company’s revenues are earned from three of the Company’s investment properties, National Plaza, the Evans Ground Lease, and Wrightsboro Road Lease, which comprise approximately 50%, 40% and 9% of the Company’s revenues, respectively. The anchor tenant for National Plaza, Publix Supermarkets, Inc. (“Publix”), a regional food supermarket chain, leases approximately 81% of the space at National Plaza. The Company generates approximately 35% of its revenues though its lease with Publix.

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Related Party Transactions

6 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note  6 - Related Party Transactions

The Company purchases insurance from an insurance company of which a member of the Company’s Board of Directors is President Emeritus. The Company’s Board of Directors believes that the insurance prices obtained from such company were not in excess of prices that would have been paid had the Company obtained this insurance from other sources.

The Company hired an attorney who is also a member of the Company’s Board of Directors and who also serves as Vice President of the Company, to represent the Company in a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged. The matter was settled in June 2015.

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Legal Matter

6 Months Ended

Mar. 31, 2016

Legal Matter

Legal Matter

Note  7 - Legal Matter

In June 2015, the Company settled a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged to the tenant by the Company. Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding this settlement.

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Basis of Presentation (Policies)

6 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Estimates of Useful Lives of Investment Properties for Purposes of Depreciation

Estimates of Useful Lives of Investment Properties for Purposes of Depreciation

Management has estimated useful lives of investment properties, except for land, that is leased, and the Company utilizes the straight-line method to compute depreciation over the estimated useful lives of the investment properties.  Actual depreciation of investment properties will vary from management’s estimates, and the value of investment properties is more directly impacted by market conditions and the physical condition of the investment properties.

Evaluation of Long-Lived Assets for Impairment

Evaluation of Long-Lived Assets for Impairment

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of investment properties may not be recoverable.  In evaluating recoverability, the Company generally estimates future cash flows expected to result from the use of the asset and its eventual disposition.  An impairment loss is recognized when the expected future cash flows of the asset are less than its carrying amount.

Estimates of Income Tax Rates Applicable to Deferred Taxes

Estimates of Income Tax Rates Applicable to Deferred Taxes

The Company has deferred income taxes through a series of tax-deferred like-kind exchange transactions on certain investment properties and through accelerated depreciation elections on certain other assets.  Actual income taxes that may become due when taxable gains are realized on the sale of assets may differ from management’s estimates as a result of changes in tax laws, the tax status of the Company, or the actual taxable earnings of the Company in the periods the deferred income taxes become due.

Refer to the Company’s Form 10-K for the year ended September 30, 2015 for further information regarding its critical accounting policies.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts (Topic 606). The new standard is effective for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impacts of adoption and the implementation approach to be used.

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes. Under the amended guidance, deferred tax liabilities and assets are required to be classified as noncurrent in a classified statement of financial position. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted as of the beginning of an interim or annual reporting period. The Company has not yet adopted the amended guidance.  The Company is currently evaluating the impact of adoption.

In February 2016, the FASB issued new guidance to change accounting for leases and that will generally require most leases to be recognized on the balance sheet. The new lease standard only contains targeted changes to accounting by lessors, however, lessees will be required to recognize most leases in their balance sheets as lease liabilities for lease payments and right-of-use assets representing the lessee’s rights to use the underlying assets for the lease terms for lease arrangement longer than 12 months. Under this approach, a lessee will account for most existing capita/finance leases as Type A leases and most existing operating leases as Type B leases. Type A and Type B leases have unique accounting and disclosure requirements. Existing sale-leaseback guidance, including guidance for real estate, will be replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted for all companies and organizations. Management is currently analyzing the impact of the adoption of this guidance on the company’s consolidated financial statements, including assessing changes that might be necessary to information technology system, processes and internal controls to capture new data and address changes in financial reporting.

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Investment Properties (Tables)

6 Months Ended

Mar. 31, 2016

INVESTMENT PROPERTIES

Schedule of Investment properties leased or held for lease

Investment properties leased or held for lease to others under operating leases consisted of the following at March 31, 2016 and September 30, 2015:

	March 31, 2016			September 30, 2015
	(unaudited)
National Plaza building, land and improvements	$	5,320,274		$	5,305,419	)
Evans Ground Lease, land and improvements		2,382,673			2,382,673
Wrightsboro Road Building, land and improvements		1,905,875			1,905,875
Commercial land and improvements		3,785,619			3,752,863
		13,394,441			13,346,830
Less accumulated depreciation		(2,612,039	)		(2,518,792	)
Investment properties for lease, net of depreciation	$	10,782,402		$	10,828,038

XML

Notes Payable (Tables)

6 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of notes payable and line of credit

Notes payable consisted of the following at:

	March 31, 2016	September 30, 2015
	(unaudited)
A note payable to an insurance company collateralized with approximately 18 acres of land in Columbia County, Georgia, and an assignment of the long-term ground lease. The note is payable in monthly installments of $17,896, including principal and interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%.	1,757,672	1,812,690
A note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $15,220, including principal and interest, through April 2025, and bears interest at a fixed rate of 4%. The proceeds were used to pay the Company’s outstanding income tax liability, four notes payable collateralized by the Company’s land held for lease and investment portfolio and one uncollateralized note payable to a shareholder. The proceeds were also used to fund improvements at National Plaza.	1,389,132	1,451,936
	3,146,804	3,264,626
Less current maturities	(245,051)	(239,168)
	$ 2,901,753	$ 3,025,458

XML

Investment Properties (Details) - USD ($)	Mar. 31, 2016	Sep. 30, 2015
Real Estate Properties [Line Items]
Investment property gross	$ 13,394,441	$ 13,346,830
Less accumulated depreciation	(2,612,039)	(2,518,792)
Investment properties for lease, net of depreciation	10,782,402	10,828,038
National Plaza building, land and improvements [Member]
Real Estate Properties [Line Items]
Investment property gross	5,320,274	5,305,419
Evans Ground Lease, land and improvements [Member]
Real Estate Properties [Line Items]
Investment property gross	2,382,673	2,382,673
Wrightsboro Road Building, land and improvements [Member]
Real Estate Properties [Line Items]
Investment property gross	1,905,875	1,905,875
Commercial land and improvements [Member]
Real Estate Properties [Line Items]
Investment property gross	$ 3,785,619	$ 3,752,863

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Investment Properties (Details Textual)	1 Months Ended		3 Months Ended		6 Months Ended
	Sep. 30, 2015 USD ($) ft² a	May. 31, 2006 USD ($) a	Mar. 31, 2016 USD ($) a	Mar. 31, 2015 USD ($)	Mar. 31, 2016 USD ($) a	Mar. 31, 2015 USD ($)
Depreciation expense			$ 45,000	$ 40,000	$ 93,000	$ 80,000
Percentage of National Plaza space leased to Publix Supermarkets, Inc					81.00%
Operating lease renewable term					21 years
Land and improvements held for investment or development	$ 3,752,863		$ 3,785,618		$ 3,785,618
Retail Space [Member]
Minimum rental payment of operating lease	$ 142,000
Renewal period	10 years
Purchased of commercial building | ft²	25,000
Increase minimum rental payment after 6 year	$ 153,000
Warehouse Space [Member]
Purchased of commercial building | ft²	27,000
Land and improvements held for investment or development, area | a	3.5
Washington Road In Augusta [Member]
Land and improvements held for investment or development, area | a			1.1		1.1
North Augusta [Member]
Land and improvements held for investment or development, area | a			19.38		19.38
South Richmond County [Member]
Land and improvements held for investment or development, area | a			85		85
Lease Agreements [Member]
Area of land for lease in Columbia County, Georgia | a		18
Monthly rental payments, development period		$ 20,833
Annual rental payments		$ 500,000
Annual rental payments description		First 5 years
Percentage of rent increasing in years 6, 11, and 16		5.00%
Renewal period		21 years
Renewal period description		Every 5 years thereafter
Total lease term		50 years

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Notes Payable (Details)	6 Months Ended
	Mar. 31, 2016 USD ($) a	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
Total notes payable	$ 3,146,804	$ 3,264,626
Less current maturities	(245,051)	(239,168)
Noncurrent notes payable	2,901,753	3,025,458
Note payable to an insurance company collateralized in Columbia County, Georgia, and an assignment of the long-term ground lease [Member]
Debt Instrument [Line Items]
Total notes payable	$ 1,757,672	1,812,690
Interest rate (in percent)	5.85%
Periodic monthly installments	$ 17,896
Area purchased in adjoining the North Augusta, South Carolina property (in acres) | a	18
Note payable to a regional financial institution, secured with a mortgage interest in National Plaza and an assignment of rents [Member]
Debt Instrument [Line Items]
Total notes payable	$ 1,389,132	$ 1,451,936
Interest rate (in percent)	4.00%
Periodic monthly installments	$ 15,220

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Income Taxes (Details Textual) - USD ($)	Mar. 31, 2016	Sep. 30, 2015
Income Tax Disclosure [Abstract]
Total outstanding income tax payable	$ 86,286
Income Taxes Receivable		$ 14,263