10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012

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 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 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 o	Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  x  NO  o

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

Class	Outstanding at May 14, 2012
Common Stock, $0.10 Par Value	5,243,107 shares

SECURITY LAND AND DEVELOPMENT CORPORATION

Form 10-Q

Index

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2012 and September 30, 2011	1
	Consolidated Statements of Income and Retained Earnings for the Three Month Periods Ended and for the Six Month Periods Ended March 31, 2012 and 2011	2
	Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended and for the Six Month Periods Ended March 31, 2012 and 2011	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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SECURITY LAND AND DEVELOPMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

	March 31,		September 30,
	2012		2011
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	70,053	$	51,190
Receivables from tenants	209,541		339,738
Total current assets	279,594		390,928
INVESTMENT PROPERTIES
Investment properties for lease, net of accumulated depreciation	5,649,413		5,711,502
Land and improvements held for investment or development	3,639,598		3,639,598
	9,289,011		9,351,100
OTHER ASSETS	79,809		83,096
	$	9,648,414	$	9,825,124
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	194,868	$	310,994
Income taxes payable	214,919		160,979
Current maturities of notes payable and line of credit	823,103		504,660
Current maturities of deferred revenue	27,145		24,652
Total current liabilities	1,260,035		1,001,285
LONG-TERM LIABILITIES
Notes payable and line of credit, less current portion	3,108,628		3,674,873
Deferred income taxes	789,514		788,107
Deferred revenue, less current portion	53,396		65,723
Total long-term liabilities	3,951,538		4,528,703
Total liabilities	5,211,573		5,529,988
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	3,579,314		3,437,609
Total Equity	4,436,841		4,295,136
Liabilities and Equity	$	9,648,414	$	9,825,124

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

1

SECURITY LAND AND DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

	For the Three Month						For the Six Month
	Period Ended March 31,						Period Ended March 31,
	2012			2011			2012			2011
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
OPERATING REVENUE
Rent revenue	$	350,021		$	355,611		$	702,106		$	703,789
OPERATING EXPENSES
Depreciation and amortization	32,688			32,688			65,375			65,376
Property taxes	63,795			67,659			126,806			124,880
Payroll and related costs	20,673			20,059			43,561			41,255
Insurance and utilities	10,084			9,403			20,605			20,462
Repairs and maintenance	6,780			8,427			17,609			17,913
Professional services	20,564			3,653			54,226			32,553
Bad Debt	7,279			1,916			8,561			3,327
Other	1,140			639			2,859			1,641
	163,003			144,444			339,602			307,407
Operating income	187,018			211,167			362,504			396,382
OTHER INCOME (EXPENSE)
Interest	(65,436		)	(74,147		)	(133,182		)	(150,803		)
Other Income	—			—			—			5
	(65,436		)	(74,147		)	(133,182		)	(150,798		)
Income before income taxes	121,582			137,020			229,322			245,584
INCOME TAXES PROVISION	47,816			47,789			87,617			90,886
Net income	73,766			89,231			141,705			154,698
RETAINED EARNINGS, BEGINNING OF PERIOD	3,505,548			3,233,577			3,437,609			3,168,110
RETAINED EARNINGS, END OF PERIOD	3,579,314			3,322,808			3,579,314			3,322,808
PER SHARE DATA
Net income per common share	$	0.01		$	0.02		$	0.03		$	0.03

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

2

SECURITY LAND AND DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Month						For the Six Month
	Period Ended March 31,						Period Ended March 31,
	2012			2011			2012			2011
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
OPERATING ACTIVITIES
Net income	$	73,766		$	89,231		$	141,705		$	154,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,688			32,688			65,375			65,376
Changes in deferred and accrued amounts:	65,134			(6,499		)	59,585			10,035
Net cash provided by operating activities	171,588			115,420			266,665			230,109
INVESTING ACTIVITIES
Proceeds from the sale of land	—			1,500			—			1,500
Additions to investment property	—			(1,000		)	—			(1,000		)
Net cash provided by investing activities	—			500			—			500
FINANCING ACTIVITIES
Principal payments on notes payable	(125,012		)	(116,361		)	(247,802		)	(230,906		)
Net cash used in financing activities	(125,012		)	(116,361		)	(247,802		)	(230,906		)
Net increase (decrease) in cash and cash equivalents	46,576			(441		)	18,863			(297		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	23,477			23,400			51,190			23,256
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,053		$	22,959		$	70,053		$	22,959
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	66,002		$	74,147		$	133,748		$	150,803
Cash paid for income taxes	$	31,000		$	12,000		$	31,000		$	36,677

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

3

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, 2011 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 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 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 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 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-K for the year ended September 30, 2011 for further information regarding its critical accounting policies.

4

Note  2 — Investment Properties

Investment properties leased or held for lease to others under operating leases consisted of the following at
March 31, 2012 and September 30, 2011:

	March 31,			September 30,
	2012			2011
	(unaudited)
National Plaza building, land and improvements	$	5,138,796		$	5,138,796
Evans Ground Lease, land and improvements	2,430,373			2,430,373
Commercial land and improvements	3,639,598			3,639,598
	11,208,767			11,208,767
Less accumulated depreciation	(2,038,882		)	(1,978,150		)
	9,169,885			9,230,617
Residential rental property	145,847			145,847
Less accumulated depreciation	(26,721		)	(25,364		)
	119,126			120,483
Investment properties for lease, net of accumulated depreciation	$	9,289,011		$	9,351,100

Depreciation expense totaled approximately $31,000 and $62,000 for both the three-month and six-month periods ended March 31, 2012 and 2011.

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.  As of March 31, 2012, the Company is working with Publix on plans to renovate and upgrade this center.  Currently the Company is working with creditors to finance the planned renovation.

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 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.

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 $3,639,598 at March 31, 2012 and September 30, 2011.

Refer to the Company’s Form 10-K for the year ended September 30, 2011 for further information on operating lease agreements and land held for investment or development purposes.

5

Note  3 — Notes Payable and Line of Credit

Notes payable and line of credit consisted of the following at:

	March 31, 2012			September 30, 2011
	(unaudited)
A note payable to the seller of approximately 2.81 acres of land in North Augusta, South Carolina, collateralized by the land. The note is payable in monthly installments of $7,182 through June 2013, and bears interest at a fixed rate of 6%.	$	103,542		$	142,838
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%.	1,222,587			1,384,507
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 $19,137, including interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%.	2,305,602			2,352,188
A line of credit with a regional financial institution for up to $251,934 procured in March 2008 with a floating interest rate based on prime and originally payable in full in April 2009. In April 2009 the Company refinanced the $243,019 line of credit with a regional financial institution. The Company entered into an agreement with the same regional financial institution to borrow the outstanding balance of $243,019, bearing interest based on the greater of prime or 6% with interest payments due monthly, maturing in April 2010. In January 2010 the Company renewed this line of credit and increased the open balance to $300,250. This agreement originally matured in February 2011. In December 2010, the Company renewed the line of credit to December 5, 2011, at the greater of prime plus 1% or 6%. In December 2011, the Company renewed the line of credit to December 12, 2012, at the greater of prime plus 1% or 6%. The current balance relates to the purchase of the 1 acre adjoining the North Augusta, South Carolina property in May 2008 and is collateralized by the residential property on Stanley Drive in Augusta, Georgia.	300,000			300,000
	3,931,731			4,179,533
Less current maturities	(823,103		)	(504,660		)
	$	3,108,628		$	3,674,873

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 $823,103, including the line of credit of $300,000.  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.

The Company expects to renew the $300,000 line of credit through refinancing prior to its maturity in December 2012.  Although the company expects to secure this refinancing prior to the maturity of the line of credit, there can be no assurances that such refinancing will be secured or that such refinancing will be on terms acceptable to the Company.

(Continued)

6

Note  3 — Notes Payable and Line of Credit, (Continued)

If the Company is unsuccessful in either of their efforts described above, the Company intends to seek additional financing or sell certain of its assets.

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 99% of the Company’s revenues are earned from two of the Company’s investment properties, National Plaza and the Evans Ground Lease, which comprise approximately 52% and 47% 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 41% of its revenues though its lease with Publix.

Note  5 —  Related Party Transactions

The Company hired an attorney who sits on the Company’s Board of Directors and who also serves a Vice President of the Company, to represent the Company in a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged.  It is the opinion of the Company’s management that the Company is not liable for this claim.

7

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, 2012, and a comparative analysis of the same period for 2011 are presented below:

					Increase (Decrease)
					2012 compared to 2011
	2012		2011		Amount			Percent
Rent revenue	$	702,106	$	703,789	$	(1,683	)	1	%
Operating expenses	339,602		307,407		32,195			10	%
Interest expense	133,182		150,803		(17,621		)	-12	%
Income tax expense	87,617		90,886		(3,296		)	-4	%
Net income	141,705		154,698		(12,993		)	-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.

Refer to the Company’s Form 10-K for the year ended September 30, 2011 for further information regarding the properties owned and their lease terms.

Total operating expenses for the six months ended March 31, 2012 increased compared to the same period for 2011 due primarily to increased bad debt expense and professional fees.  Bad debt expense increased due to the write-off of an accounts receivable management deemed uncollectible.  Professional fees increased due to increased legal fees related to an ongoing dispute over a tenant’s claim for reimbursement of certain expenses charged.  It is the opinion of the Company’s management that the Company does not owe any reimbursement.  Management expects operating expenses for the remainder of the current fiscal year to be comparable to the current operating period.

Interest expense for the six month period ended March 31, 2012 decreased compared to 2011 due to the decrease in debt resulting from scheduled principle payments. Management expects interest expense for the remainder of the current fiscal year to continue to decrease slightly as outstanding debt is amortized.

Income tax expense for the six month period ended March 31, 2012 decreased slightly compared to the same period for 2011.  Management expects income tax expense for the remainder of the current fiscal year to be comparable to the current operating period.

Liquidity and Sources of Capital:

The Company’s ratio of current assets to current liabilities at March 31, 2012 was 22%.  The ratio was 39% at September 30, 2011.

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 $823,103, including the Company’s line of credit of $300,000.  The Company projects that it will be able to fund the

8

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.

In addition the Company’s line of credit of $300,000 at March 31, 2012 is due to be repaid in December 2012.  The Company expects to renew the $300,000 line of credit through refinancing prior to its maturity in December 2012.  Although the company expects to secure this refinancing prior to the maturity of the line of credit, there can be no assurances that such refinancing will be secured or that such refinancing will be on terms acceptable to the Company.

If the Company is unsuccessful in either of their efforts described above, the Company intends to seek additional financing or sell certain of its assets.

Cautionary Note Regarding Forward-Looking Statements:

The results of operations for the six-month period ended March 31, 2012 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, 2011, 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, 2011 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.

9

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.  It is the opinion of the Company’s management that the Company is not liable for this claim.  The Company has accrued approximately $56,000 for professional fees and other expenses to defend its position.

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, 2012 is formatted in Extensible Business Reporting Language (XBRL): (i) The Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Retained Earnings, (iii) the Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.

10

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, 2012
	T. Greenlee Flanagin	Date
	President
	Chief Executive Officer and Chief Financial Officer

11

EX-31.1

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 14, 2012

/s/ T. Greenlee Flanagin

T. Greenlee Flanagin

President and Chief Executive Officer and
Chief Financial Officer

1

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-Q for the quarter ended March 31, 2012 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, 2012

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.

1

XML

Concentrations

6 Months Ended

Mar. 31, 2012

Concentrations

Concentrations

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 99% of the Company’s revenues are earned from two of the Company’s investment properties, National Plaza and the Evans Ground Lease, which comprise approximately 52% and 47% 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 41% of its revenues though its lease with Publix.

XML

Notes Payable and Line of Credit

6 Months Ended

Mar. 31, 2012

Notes Payable and Line of Credit

Notes Payable and Line of Credit

Note  3 — Notes Payable and Line of Credit

Notes payable and line of credit consisted of the following at:

	March 31, 2012			September 30, 2011
	(unaudited)
A note payable to the seller of approximately 2.81 acres of land in North Augusta, South Carolina, collateralized by the land. The note is payable in monthly installments of $7,182 through June 2013, and bears interest at a fixed rate of 6%.	$	103,542		$	142,838
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%.	1,222,587			1,384,507
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 $19,137, including interest, through May 1, 2027, and bears interest at a fixed rate of 5.85%.	2,305,602			2,352,188
A line of credit with a regional financial institution for up to $251,934 procured in March 2008 with a floating interest rate based on prime and originally payable in full in April 2009. In April 2009 the Company refinanced the $243,019 line of credit with a regional financial institution. The Company entered into an agreement with the same regional financial institution to borrow the outstanding balance of $243,019, bearing interest based on the greater of prime or 6% with interest payments due monthly, maturing in April 2010. In January 2010 the Company renewed this line of credit and increased the open balance to $300,250. This agreement originally matured in February 2011. In December 2010, the Company renewed the line of credit to December 5, 2011, at the greater of prime plus 1% or 6%. In December 2011, the Company renewed the line of credit to December 12, 2012, at the greater of prime plus 1% or 6%. The current balance relates to the purchase of the 1 acre adjoining the North Augusta, South Carolina property in May 2008 and is collateralized by the residential property on Stanley Drive in Augusta, Georgia.	300,000			300,000
	3,931,731			4,179,533
Less current maturities	(823,103		)	(504,660		)
	$	3,108,628		$	3,674,873

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 $823,103, including the line of credit of $300,000.  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.

The Company expects to renew the $300,000 line of credit through refinancing prior to its maturity in December 2012.  Although the company expects to secure this refinancing prior to the maturity of the line of credit, there can be no assurances that such refinancing will be secured or that such refinancing will be on terms acceptable to the Company.

If the Company is unsuccessful in either of their efforts described above, the Company intends to seek additional financing or sell certain of its assets.

XML

CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2012	Sep. 30, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 70,053	$ 51,190
Receivables from tenants	209,541	339,738
Total current assets	279,594	390,928
INVESTMENT PROPERTIES
Investment properties for lease, net of accumulated depreciation	5,649,413	5,711,502
Land and improvements held for investment or development	3,639,598	3,639,598
Total investment properties	9,289,011	9,351,100
OTHER ASSETS	79,809	83,096
Total Assets	9,648,414	9,825,124
CURRENT LIABILITIES
Accounts payable and accrued expenses	194,868	310,994
Income taxes payable	214,919	160,979
Current maturities of notes payable and line of credit	823,103	504,660
Current maturities of deferred revenue	27,145	24,652
Total current liabilities	1,260,035	1,001,285
LONG-TERM LIABILITIES
Notes payable and line of credit, less current portion	3,108,628	3,674,873
Deferred income taxes	789,514	788,107
Deferred revenue, less current portion	53,396	65,723
Total long-term liabilities	3,951,538	4,528,703
Total liabilities	5,211,573	5,529,988
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	3,579,314	3,437,609
Total Equity	4,436,841	4,295,136
Liabilities and Equity	$ 9,648,414	$ 9,825,124

XML

Basis of Presentation

6 Months Ended

Mar. 31, 2012

Basis of Presentation

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, 2011 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 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 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 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 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-K for the year ended September 30, 2011 for further information regarding its critical accounting policies.

XML

Investment Properties

6 Months Ended

Mar. 31, 2012

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, 2012 and September 30, 2011:

	March 31,			September 30,
	2012			2011
	(unaudited)
National Plaza building, land and improvements	$	5,138,796		$	5,138,796
Evans Ground Lease, land and improvements	2,430,373			2,430,373
Commercial land and improvements	3,639,598			3,639,598
	11,208,767			11,208,767
Less accumulated depreciation	(2,038,882		)	(1,978,150		)
	9,169,885			9,230,617
Residential rental property	145,847			145,847
Less accumulated depreciation	(26,721		)	(25,364		)
	119,126			120,483
Investment properties for lease, net of accumulated depreciation	$	9,289,011		$	9,351,100

Depreciation expense totaled approximately $31,000 and $62,000 for both the three-month and six-month periods ended March 31, 2012 and 2011.

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.  As of March 31, 2012, the Company is working with Publix on plans to renovate and upgrade this center.  Currently the Company is working with creditors to finance the planned renovation.

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 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.

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 $3,639,598 at March 31, 2012 and September 30, 2011.

Refer to the Company’s Form 10-K for the year ended September 30, 2011 for further information on operating lease agreements and land held for investment or development purposes.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2012	Sep. 30, 2011
CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 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

Document and Entity Information	6 Months Ended
	Mar. 31, 2012	May 14, 2012
Document and Entity Information
Entity Registrant Name	SECURITY LAND & DEVELOPMENT CORP
Entity Central Index Key	0000088572
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,243,107
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Mar. 31, 2011
OPERATING REVENUE
Rent revenue	$ 350,021	$ 355,611	$ 702,106	$ 703,789
OPERATING EXPENSES
Depreciation and amortization	32,688	32,688	65,375	65,376
Property taxes	63,795	67,659	126,806	124,880
Payroll and related costs	20,673	20,059	43,561	41,255
Insurance and utilities	10,084	9,403	20,605	20,462
Repairs and maintenance	6,780	8,427	17,609	17,913
Professional services	20,564	3,653	54,226	32,553
Bad Debt	7,279	1,916	8,561	3,327
Other	1,140	639	2,859	1,641
Total operating expenses	163,003	144,444	339,602	307,407
Operating income	187,018	211,167	362,504	396,382
OTHER INCOME (EXPENSE)
Interest	(65,436)	(74,147)	(133,182)	(150,803)
Other Income				5
Total other income (expense)	(65,436)	(74,147)	(133,182)	(150,798)
Income before income taxes	121,582	137,020	229,322	245,584
INCOME TAXES PROVISION	47,816	47,789	87,617	90,886
Net income	73,766	89,231	141,705	154,698
RETAINED EARNINGS, BEGINNING OF PERIOD	3,505,548	3,233,577	3,437,609	3,168,110
RETAINED EARNINGS, END OF PERIOD	$ 3,579,314	$ 3,322,808	$ 3,579,314	$ 3,322,808
PER SHARE DATA
Net income per common share (in dollars per share)	$ 0.01	$ 0.02	$ 0.03	$ 0.03

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012	Mar. 31, 2011
OPERATING ACTIVITIES
Net income	$ 73,766	$ 89,231	$ 141,705	$ 154,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,688	32,688	65,375	65,376
Changes in deferred and accrued amounts:	65,134	(6,499)	59,585	10,035
Net cash provided by operating activities	171,588	115,420	266,665	230,109
INVESTING ACTIVITIES
Proceeds from the sale of land		1,500		1,500
Additions to investment property		(1,000)		(1,000)
Net cash provided by investing activities		500		500
FINANCING ACTIVITIES
Principal payments on notes payable	(125,012)	(116,361)	(247,802)	(230,906)
Net cash used in financing activities	(125,012)	(116,361)	(247,802)	(230,906)
Net increase (decrease) in cash and cash equivalents	46,576	(441)	18,863	(297)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	23,477	23,400	51,190	23,256
CASH AND CASH EQUIVALENTS, END OF PERIOD	70,053	22,959	70,053	22,959
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	66,002	74,147	133,748	150,803
Cash paid for income taxes	$ 31,000	$ 12,000	$ 31,000	$ 36,677

XML

Related Party Transactions

6 Months Ended

Mar. 31, 2012

Related Party Transactions

Related Party Transactions

Note  5 —  Related Party Transactions

The Company hired an attorney who sits on the Company’s Board of Directors and who also serves a Vice President of the Company, to represent the Company in a legal matter regarding a tenant’s claim for reimbursement of certain expenses charged.  It is the opinion of the Company’s management that the Company is not liable for this claim.