The Company's primary business activities are the acquisition, development and leasing of developed and undeveloped real estate. The objectives of the Company are capital appreciation from real estate investments and income from leasing. The Company believes that the market value of much of the real estate owned by the Company is greater than its original cost. The Company believes that the continued development and decreasing supply of vacant land in the Augusta, Georgia area has resulted in substantial appreciation in value in many of the Company's investment properties. These appreciated investment properties are available as a source of capital to the Company. Critical Accounting Policies: Estimates of Useful Lives of Investment Properties for Purposes of Depreciation Company management has estimated the useful lives of investment properties, except for land, that are leased, and Company management 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 Company management 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, Company management 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 Company management 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. Company management has estimated deferred income tax liabilities of $764,645 at September 30, 2013 . 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. Results of Operations: Increase (Decrease) 2013 compared to 2012 2013 2012 Amount Percent Rent revenue $1,429,995 $1,418,122 $11,873 1% Operating expenses 677,618 692,299 (14,681) -2% Interest expense 234,088 264,090 (30,002) -11% Net income 382,285 284,261 98,024 35% - 7 - -------------------------------------------------------------------------------- Rent revenue from leasing activities is provided by the following properties: 2013 2012 2011 National Plaza $703,725 $688,738 $670,331 Outparcel at National Plaza 61,713 56,400 56,400 Evans Ground Lease 658,557 666,984 667,681 Other 6,000 6,000 6,000 $1,429,995 $1,418,122 $1,400,412 Years Ended September 30, 2013 and 2012 National Plaza consists of approximately 69,000 square feet. Approximately 56,000 square feet is leased to Publix as the investment property's anchor tenant. See Item 2, "Properties" for additional information regarding the lease agreement with Publix. The remaining approximately 13,000 square feet is available for lease to additional tenants. This additional space was approximately 60% leased as of September 30, 2013 and 2012. Attempts are being made to lease vacant space. Also see Item 2, "Properties" for effective rental rates and lease expirations related to this property. Rent revenue from Publix and National Plaza increased slightly as compared with the prior years' amounts due to leasing an additional 2,600 square feet to a restaurant in December of 2011. In May 2006 the Company entered into a long-term ground lease with Lowes, a national home improvement retailer, with a portion of total monthly rent due during the construction period, which was completed in January 2007 . Rent revenues for the Evans Ground Lease in 2013 remained relatively consistent with 2012. See Item 2, "Properties" for additional information regarding the Evans Ground Lease. Management expects both of the above two lease arrangements to continue to provide a substantial portion of the Company's revenues. Operating expenses decreased by $14,681 , (-2%) from 2012. Operating costs of the Company consists mainly of the costs of managing National Plaza and property taxes related to the Company's land holding portfolio. Company management expects operating expenses for 2014 to be relatively consistent with 2013. Interest expense decreased by $30,002 (-11%) from 2012. The Company's interest costs relate to outstanding debt on the Company's land holdings as discussed above in Item 2, "Properties". Continued amortization of outstanding debt balances resulted in decreased interest expense in 2013. Company management expects interest expense for the year ending September 30, 2014 to decline from interest expense for the current fiscal year as the outstanding debt continues to amortize. Liquidity and Sources of Capital: The percentage of current assets to current liabilities was 48% at September 30, 2013 , and was 36% at September 30, 2012 . 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 in fiscal year 2014 totaling $584,491 . 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. At September 30, 2012 the Company had an outstanding balance on a line of credit of $300,000 which was due to be repaid in December 2012 . In November of 2012 the Company secured refinancing of this line of credit through conversion to a term note collateralized by residential rental properties. The new loan matures in July of 2018. As of September 30, 2013 the Company's cash flows from operations is approximately $102,900 while current maturities of debt are approximately $584,491 . If the Company experiences cash flow shortages and is unable to generate adequate cash flows from operations to fund current debt maturities and other obligations, the Company's management intends to seek additional financing from other sources but there can be no assurance that this will occur. In the past, the Company has been successful in seeking additional financing. These sources of capital include selling certain of its fully owned and un-collateralized assets or borrowing money from certain shareholders. In the first quarter of fiscal year 2013, the Company borrowed $30,000 from a member of the Company's Board of Directors to meet short term cash flow needs. This amount was repaid with interest at 6% in the first quarter of fiscal year 2013. Capital Expenditure Commitments: The Company currently has no significant commitments for capital expenditures for the next twelve months. - 8 - --------------------------------------------------------------------------------
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