10QSB

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 March 31, 2008
o	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 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  x   NO  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES  o   NO  x

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 March 31, 2008
Common Stock, $0.10 Par Value	5,247,107 shares

Transitional Small Business Disclosure Format:   YES  o   NO  x

SECURITY LAND AND DEVELOPMENT CORPORATION

AND SUBSIDIARIES

Form 10-QSB

Index

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2008 and September 30, 2007	1
	Consolidated Statements of Income and Retained Earnings for the Three Month Period Ended and the Six Month Period Ended March 31, 2008 and 2007	2
	Condensed Consolidated Statements of Cash Flows for the Three Month Period Ended and the Six Month Period Ended March 31, 2008 and 2007	3
	Notes to the Consolidated Financial Statements	4-6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7-8
Item 3.	Controls and Procedures	8
Part II	OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	9
	SIGNATURES	9

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,		September 30,
	2008		2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	357,406	$	347,024
Receivables from tenants	103,589		156,879
Prepaid property taxes	—		20,088
Income taxes receivable	11,954		—
Total current assets	472,949		523,991
INVESTMENT PROPERTIES
Investment properties for lease, net of accumulated depreciation	6,248,836		6,310,924
Land and improvements held for investment or development	2,799,313		2,711,464
	9,048,149		9,022,388
OTHER ASSETS	101,177		104,041
	$	9,622,275	$	9,650,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	107,661	$	171,656
Income taxes payable	—		30,553
Current maturities of notes payable and line of credit	409,249		324,283
Current maturities of deferred revenue	24,652		24,652
Total current liabilities	541,562		551,144
LONG-TERM LIABILITIES
Notes payable and line of credit, less current portion	4,956,389		5,123,640
Deferred income taxes	473,129		467,091
Deferred revenue, less current portion	152,005		164,331
Total long-term liabilities	5,581,523		5,755,062
Total liabilities	6,123,085		6,306,206
STOCKHOLDERS’ EQUITY
Common stock, par value $.10 per share; 30,000,000 shares authorized; 5,247,107 shares issued and outstanding	524,711		524,711
Additional paid-in capital	332,816		332,816
Retained earnings	2,641,663		2,486,687
	3,499,190		3,344,214
	$	9,622,275	$	9,650,420

The accompanying notes are an integral part of these consolidated financial statements.

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SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

	For the Three Month						For the Six Month
	Period Ended March 31,						Period Ended March 31,
	2008			2007			2008			2007
RENT REVENUE	$	360,620		$	338,194		$	702,800		$	570,347
OPERATING EXPENSES
Depreciation and amortization	32,476			31,607			64,953			63,214
Property taxes	60,383			34,500			118,057			56,088
Payroll and related costs	16,256			15,170			31,315			29,465
Insurance and utilities	11,599			9,119			21,077			17,590
Repairs and maintenance	7,924			6,900			15,314			11,400
Professional services	17,341			8,751			24,361			22,369
Other	2,583			300			3,391			1,356
	148,562			106,347			278,468			201,482
Operating income	212,058			231,847			424,332			368,865
OTHER EXPENSE
Interest	(88,544		)	(56,825		)	(176,319		)	(116,060		)
Income before income taxes	123,514			175,022			248,013			252,805
INCOME TAXES	44,601			54,392			93,037			84,727
Net income	78,913			120,630			154,976			168,078
RETAINED EARNINGS, BEGINNING OF PERIOD	2,562,720			2,181,370			2,486,687			2,133,922
RETAINED EARNINGS, END OF PERIOD	$	2,641,633		$	2,302,000		$	2,641,663		$	2,302,000
PER SHARE DATA
Net income per common share	$	0.02		$	0.02		$	0.03		$	0.03

The accompanying notes are an integral part of these consolidated financial statements.

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SECURITY LAND AND DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Month						For the Six Month
	Period Ended March 31,						Period Ended March 31,
	2008			2007			2008			2007
OPERATING ACTIVITIES
Net income	$	78,913		$	120,630		$	154,976		$	168,078
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,476			31,607			64,953			63,214
Changes in deferred and accrued amounts:	(68,605		)	(87,573		)	(39,413		)	(226,815		)
Net cash provided by operating activities	42,784			64,664			180,516			4,477
INVESTING ACTIVITIES
Purchases of, and improvements to, investment properties	(86,524		)	—			(87,849		)	—
FINANCING ACTIVITIES
Repayments to stockholders, net	—			—			—			(500		)
Proceeds from (repayments to) line of credit	1,934			(3,000		)	1,934			236,791
Principal payments on notes payable, net of proceeds	(5,372		)	(67,897		)	(84,219		)	(179,917		)
Net cash (used in) financing activities	(3,438		)	(70,897		)	(82,285		)	56,374
Net increase (decrease) in cash and cash equivalents	(47,178		)	(6,233		)	10,382			60,851
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	404,584			86,312			347,024			19,228
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	357,406		$	80,079		$	357,406		$	80,079
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	92,197		$	56,825		$	183,952		$	116,060
Cash paid for income taxes	$	95,320		$	—		$	129,494		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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SECURITY LAND AND DEVELOPMENT CORPORATION
AND SUBSIDIARIES

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-QSB 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-KSB for the year ended September 30, 2007 when reviewing 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 three wholly owned subsidiaries, Royal Palms Motel, Inc., SLDC, LLC, and SLDC 2, 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 are 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 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 the 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-KSB for the year ended September 30, 2007 for further information regarding its critical accounting policies

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Note 2 – Investment Properties

Investment properties leased or held for lease to others under operating leases consisted of the following at March 31, 2008 and September 30, 2007:

	March 31, 2008			September 30, 2007
				(audited)
National Plaza building, land and improvements	$	5,136,296		$	5,136,296
Evans Ground Lease, land and improvements	2,535,588			2,535,588
Commercial land and improvements	2,799,313			2,711,464
	10,471,197			10,383,348
Less accumulated depreciation	(1,553,034		)	(1,492,303		)
	8,918,163			8,891,045
Residential rental property	145,847			145,847
Less accumulated depreciation	(15,861		)	(14,504		)
	129,986			131,343
Investment properties for lease, net of accumulated depreciation	$	9,048,149		$	9,022,388

Depreciation expense totaled $124,176 for the year ended September 30, 2007.  Depreciation expense totaled $62,088 and $62,088, respectively, for the six-month period ended March 31, 2008 and 2007, respectively.

The 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 requires annual rental payments of $500,000 for the first 5 years then increasing 5% in years 6, 11, and 16.  The lease 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.

The Company also holds several parcels of land for investment or development purposes, including 14.57 acres of land in North Augusta, South Carolina, purchased in April 2007 for $2,180,246, and 84.4 acres of land in south Richmond County, Georgia.  In February 2008, the Company entered into a contract to purchase approx. 1 acre of land adjoining its North Augusta property.  The closing is scheduled for May 2008.  The contract required $10,000 of refundable earnest money from the buyer, which was paid in the second quarter of 2008.  The Company plans to finance the purchase through cash on hand and through drawing on a line of credit secured on March 21^st, 2008 with a floating interest rate and a balance due on April 9^th, 2009.  The line is secured by residential rental property owned in Richmond County, GA.

Refer to the Company’s Form 10-KSB for the year ended September 30, 2007, for further information on operating lease agreements and land held for investment or development purposes.

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Note 3 – Notes Payable and Line of Credit

Notes payable consisted of the following at:

	March 31, 2008			September 30, 2007
				(audited)
Wachovia Short Term Note Payable drawn to procure site work on the North Augusta, South Carolina property during the second quarter of 2008. This loan is secured by an Auction Rate Security account held as part of the Company’s cash equivalents. The note bears interest at prime plus 2.125% (7.375% at March 31, 2008)	$	75,000		$	—
First Bank Line of Credit – A line of credit procured in March 2008 with a floating interest rate based on prime (5.25% at March 31, 2008) and payable in full in April 2009. The current balance relates to costs of closing the line of credit and the Company plans to draw against this line of credit to fund future land investment purchases and other development costs. The Line of Credit is secured by residential rental property owned in Richmond County, GA.	1,934			—
A note payable to an insurance company, secured with a mortgage interest in National Plaza and an assignment of rents. The note is payable in monthly installments of $35,633, including interest, through June 2015, and bears interest at a fixed rate of 7.875%.	2,356,264			2,474,553
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 $21,234, including interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%. A portion of the proceeds from the loan was used to pay off other notes payable outstanding.	2,932,440			2,973,370
	5,365,638			5,447,923
Less current maturities	(409,249		)	(324,283		)
	$	4,956,389		$	5,123,640

Note 4 – 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 North Augusta, South Carolina.  Approximately 100% of the Company’s revenues are earned from two of the Company’s investment properties, National Plaza and the Evans Ground Lease which both comprise approximately 50% of the Company’s revenues.  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 37% of its revenues though its lease with Publix.

Note 5 – Subsequent Events

On April 2, 2008, the Company entered into a contract to purchase an additional 2.5 acres adjoining land currently held in North Augusta, South Carolina.  The closing is scheduled for July 2, 2008.  The Company plans to finance this purchase through the land’s current owner with a 6% fixed rate loan over a 5 year term.

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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, 2008, and a comparative analysis of the same period for 2007 are presented below:

					Increase (Decrease)
					2008 compared to 2007
	2008		2007		Amount			Percent
Rent revenue	$	702,800	$	570,347	$	132,453		23	%
Operating expenses	278,468		201,482		76,986			38	%
Interest expense	176,319		116,060		60,259			52	%
Income tax expense	93,037		84,727		8,310			10	%
Net income	154,976		168,078		(13,102		)	-8	%

Rent revenue consists primarily 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 ground lease with an auto-repair service operation on an out parcel of National Plaza.  Rent revenue increased for the six months ended March 31, 2008 primarily due to the completion of the development period of the long-term ground lease on the approximately 18 acres in Columbia County, Georgia in January 2007.  Upon completion of the development period, in January 2007, the Company began earning full monthly revenue.  During the development period the Company had been receiving $20,833 in monthly rent. Upon expiration of the development period, which was January 2007, the Company began receiving $41,677 a month.

Refer to the Company’s Form 10-KSB for the year ended September 30, 2007 for further information regarding the properties owned and their lease terms.

Total operating expenses for the six months ended March 31, 2008 increased compared with the same period for 2007.  This increase was due largely to increase property taxes, which increased due to the purchase of the approximately 14.57 acres of land in North Augusta, South Carolina, in April 2007.  Management expects operating expenses for the remainder of the current fiscal year to be comparable to the current operating period.

Interest expense for the current period increased compared to 2007 due to debt undertaken to procure the approximately 14.57 acres of land in North Augusta, South Carolina, purchased in April 2007.  Management expects interest expense for the remainder of the current fiscal year to be comparable to the current operating period.

Income tax expense for the six-month period ended March 31, 2008 increased slightly as the Company’s decreased net income due to increased operating and interest expense was offset by the differences between the reporting of deferred revenue for financial accounting purposes and income tax purposes.

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Liquidity and Sources of Capital:

The Company’s ratio of current assets to current liabilities at December 31, 2007 was 87%.   The ratio was 95% at September 30, 2007.  Management of the Company expects future liquidity needs of the Company to be funded from operating revenues of the Company, including the increased rents from the ground lease of the approximately 18 acres in Columbia County, Georgia, and appreciation in investment properties (which can be sold or mortgaged, if necessary).  The Company continues to pursue additional sources of rent revenue and to evaluate opportunities to reduce operating costs.  The Company has the ability to obtain additional short term financing, should it become necessary, until revenues and cash flow from operations can be sufficiently increased.

Cautionary Note Regarding Forward-Looking Statements:

The results of operations for the three month period and the six month period ended March 31, 2008 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. Controls and Procedures

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 Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s SEC filings. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer carried out the evaluation.

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PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(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
(b)	No reports on Form 8-K were filed during the three months ended March 31, 2008.

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 14, 2008
	T. Greenlee Flanagin	Date
	President
	Chief Executive Officer and Chief Financial Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, T. Greenlee Flanagin, certify that:

1.  I have reviewed this quarterly report on Form 10-QSB 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 small business issuer as of, and for, the periods presented in this report;

4.  The small business issuer’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 small business issuer 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 small business issuer, 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)  Omitted;

c)  Evaluated the effectiveness of the small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.  The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent function):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which could adversely affect the small business issuer’s ability to record, process, summarize and report financial data and have identified for the small business issuer’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls.

Date: May 14, 2008

/s/ T. Greenlee Flanagin

T. Greenlee Flanagin

President and Chief Executive Officer and
Chief Financial Officer

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EX-32.1

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-QSB for the quarter ended March 31, 2008 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 14, 2008

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.

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