U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 10-Q
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Commission File Number 0-7865.

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SECURITY LAND AND DEVELOPMENT CORPORATION

(Exact name of issuer as specified in its charter)

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)

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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.    YESx⌧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.

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).  YESx⌧    NO  ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨ ☐Yesx⌧No

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

Table of Contents

SECURITY LAND AND DEVELOPMENT CORPORATION

Form 10-Q

Index

PARTI.FINANCIALINFORMATION
Item1.FinancialStatements

SECURITY LAND AND DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS

PART I. FINANCIAL INFORMATION

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

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

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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

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

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SECURITYLANDANDDEVELOPMENT CORPORATION

Notes to the Consolidated Financial Statements

Note1–BasisofPresentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10 Q,10-Q, Article 8 of Regulation S XS-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 K10-K for the year ended September 30, 20162017 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.

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 linestraight-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 LivedLong-Lived Assets for Impairment

The Company evaluates long livedlong-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 kindtax-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 K10-K for the year ended September 30, 20162017 for further information regarding its critical accounting policies.

(Continued)

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Note1–BasisofPresentation,Continued

Recently Issued Accounting StandardsIssuedAccountingStandards

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers in future periods. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. 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 impact of adoption and the implementation approach to be used.

In August 2015, the FASB deferred the effective date of ASU 2014 09,2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014 092014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

In December 2016, the FASB issued amendments to clarify the Accounting Standards Codification, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events,consideredintheaggregate,thatraisesubstantialdoubtabouttheorganization’sabilitytocontinueasagoingconcernwithinoneyearafterthedatethatthefinancialstatementsareissued.TheguidancewillbeeffectivefortheCompanyfortheannualperiodendingSeptember30,2017,andforannualperiodsandinterimperiodsthereafter.TheCompanydoesnotexpectthisguidancetohaveamaterialeffectonitsfinancialstatements.

��

(Continued)

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Note1–BasisofPresentation,Continued

InFebruary2016,theFASBamendedtheLeases topic of the Accounting Standards Codification to require all leases with lease terms over 12 months to be capitalized as a right of useright-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

In November, 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 31,15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra entityintra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2017, the FASB issued guidance to clarify the definitions of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.statements

In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification.  The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards.  The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  The effective date and transitionrequirementsfor the technical corrections will be effective for the Company for reportingperiodsbeginningafterDecember15,2019.EarlyadoptionispermittedforinterimorannualgoodwillimpairmenttestsperformedontestingdatesafterJanuary1,2017.TheCompanydoesnotexpecttheseamendmentstohaveamaterialeffectonitsfinancialstatements.

(Continued)

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Note1–BasisofPresentation,Continued

InFebruary2017,theFASBamendedtheOtherIncomeTopicoftheAccountingStandardsCodificationtoclarifythescopeoftheguidanceonnonfinancial asset de recognitionde-recognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the de recognitionde-recognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017.The Company does not expect these amendments to have a material effect on its financial statements.

In September 2017, the FASB updated the Revenue from Contracts with Customers and the Leases Topics of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance about certain public business entities (PBEs) electing to use the non-PBE effective dates solely to adopt the FASB’s new standards on revenue and leases. The amendments were effective upon issuance. The Company is currently in the process of evaluating the impact of adoption of this guidance, however it does not expect these amendments to have a material effect on its financial statements.

In November 2017, the FASB updated the Income Statement and Revenue from Contracts with Customers Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to revenue recognition. The amendments were effective upon issuance. The Company is currently evaluating the impact on revenue recognition, however it does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards settingstandards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Certain reclassifications have been made to the prior quarter ended December 31, 2016. These reclassifications had no effect on previously reported stockholders’ equity, net income or cash flows.

Note 2 – Investment Properties

Investment properties leased or held for lease to others under operating leases consisted of the following at June 30,
December 31, 2017 and September 30, 2016:2017:

Depreciationexpense totaled approximately $47,000 for the three monththree-month periods ended June 30,December 31, 2017 and 2016, and approximately $141,000 and $140,000 for the nine month periods ended June 30, 2017 and 2016, respectively.2016.

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.

(Continued)

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Note 2 – Investment Properties, Continued

The Company entered into a long termlong-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 2013, 2018,years 6, 11, and 2023.16. The lessee has an option to renew in 2028year 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 linestraight-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 in 2021. The warehouse space is available for lease. The Company is recognizing rents on a straight linestraight-line basis over the lease term.

(Continued)

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Note2–InvestmentProperties,Continued

TheCompanyholdsseveralparcels 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 acre1.1-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 $3,804,728 at June 30,December 31, 2017 and September 30, 2016,2017, respectively.

Refer to the Company’s Form 10 K10-K for the year ended September 30, 20162017 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:

(Continued)

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Note 3 – Notes Payable, and Line of CreditContinued

Notes payable

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

ManagementCurrent maturities of notes payable will require theCompanyexpectsfutureliquidityneeds to make payments over the next 12 months totaling $393,033. The Company projects that it will be able to fund the payment oftheCompanyto its current maturities of notes payable through cash flows generated from its operations and cash on hand, but there can befundedfromrentrevenues,refinancingandtheappreciationininvestmentproperties(whichcanbesoldormortgaged,ifnecessary). no assurance that this will occur.

CurrentmaturitiesofnotespayableandlineofcreditwillrequiretheCompanytomakepaymentsoverthenext12monthstotaling$2,759,729.TheCompanyprojectsthatitwillbeabletofundthepaymentofitscurrentmaturitiesofnotespayablethroughcashflowsgeneratedfromitsoperationsandcashonhand,buttherecanbenoassurancethatthiswilloccur.TheCompanyplanstorefinancethelineofcredittoatermnote.

Note4–IncomeTaxes

AtSeptember30,2016,theCompanyhadincometaxesreceivableof$22,441relatedtothefiscalyear2016.AsofJune30,2017,theCompanyhasincometaxespayableof$25,025relatedtothefiscalyear2017.

- 9 -At September 30, 2017, the Company had income taxes payable of $19,917 related to the fiscal year 2017. As of December 31, 2017, the Company has income taxes payable of $57,355 related to the fiscal year 2017.

The Tax Cuts and Jobs Act (TCJA) was signed into law by the President on Friday December 22, 2017. The TCJA  includes the reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%, changes in business deductions, and many international provisions.  The drop in the corporate rate is effective for tax years beginning after December 31, 2017.  IRC Section 15 indicates that “if any rate of tax imposed…changes, and if the taxable year includes the effective date of the change…, then tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year, and the tax for such taxable year shall be the sum of that proportion of each tentative tax which the number of days in each period bears to the number of days in the entire taxable year.” (§15(a)).  As the Company is a fiscal year taxpayer, they will receive a partial benefit for the drop in the federal corporate tax rate for their fiscal year ended September 30, 2018.  The weighted average federal tax rate computed in accordance with IRC Section 15 is 24.25% for the current fiscal year.

Based on the drop in the corporate tax rate to a flat 21%, the Company revalued each of their deferred tax assets and liabilities in the current period using the new corporate tax rate.  The net impact from this revaluing resulted in a tax benefit recognized in the current period ending December 31, 2017 of $463,167.

Income taxes have been provided using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

During the three-month period ended December 31, 2017, the Company recorded $396,215 in income tax benefits at an effective rate of -233.88% The Company records income taxes using an estimated annual effective tax rate for interim reporting. The individually largest factor contributing to the difference between the federal statutory rate of 24.25% and the Company’s effective tax rate for the three-month period ended December 31, 2017 was the benefit relating to the revaluing of the deferred tax asset and liability balances to the new federal statutory rate.  

Note5 - Concentrations

SubstantiallyalloftheCompany’sassetsconsistofrealestatelocatedinRichmondandColumbiaCountiesin 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 the Wrightsboro Road Lease, which comprise approximately 53%51%, 38%40% and 9% of the Company’s revenues, respectively, for the nine monththree-month period ended June 30,December 31, 2017. 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 31% of its revenues through its lease with Publix.

Item2.Unregistered Sales of Equity Securities and Use of Proceeds

None

Item3.Defaults Upon Senior Securities

None

Item4.Reserved for Future Use

Item  5. Other Information

Item5.Other Information

Management of the Company notes that no Forms 8 K8-K were filed during the period andfor the departure of two members of the Board of Directors. Management is not aware of any un reportedun-reported matters occurring during the period that would require disclosureany additional disclosures in a Form 8 K.8-K. 

Item  6. Exhibits6.Exhibits

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SIGNATURES

In accordancewiththerequirementsoftheExchangeAct,theregistrantcausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.

SECURITYLANDANDDEVELOPMENTCORPORATION
(Registrant)

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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)

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