UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
|
[X]
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the fiscal year ended:
December 31, 200
8
|
|
|
|
[
]
|
TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the transition period from ____________________ to
_____________
|
|
Commission
file number
__________________________
|
|
LANDMARK LAND COMPANY,
INC.
|
|
(Exact
name of registrant as specified in its charter)
|
|
|
|
|
DELAWARE
|
77-0024129
|
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
|
|
2817 Crain Highway, Upper Marlboro,
Maryland
|
20774
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
|
|
Issuer's
Telephone Number, Including Area Code: (301) 574-3330
|
|
|
|
Securities
registered under Section 12(b) of the Exchange Act:
|
|
|
|
|
Title Of Each Class
|
Name of Each Exchange On Which
Registered
|
|
Common
Stock, $0.50 par value
|
None
|
|
|
|
Securities
registered under Section 12(g) of the Exchange Act:
|
|
|
|
None
|
|
(Title
of
class)
|
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
|
[ ]
Yes
|
[√]
No
|
|
|
|
|
|
Indicate
by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Exchange Act.
|
[ ]
Yes
|
[√]
No
|
|
|
|
|
|
Indicate
by check mark whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
|
[√]
Yes
|
[ ]
No
|
|
|
|
|
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form
10-K.
|
[√]
|
|
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 definitions of “large accelerated filer, “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check
one):
|
Large
accelerated file
|
[
]
|
Accelerated
filer
|
[
]
|
|
|
|
|
|
|
Non-accelerated
filer
(Do
not check if a smaller reporting company)
|
[
]
|
Smaller
reporting company
|
[√]
|
|
|
|
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
|
[ ]
Yes
|
[√]
No
|
The
aggregate market value of the 2,465,479 shares of voting and non-voting common
equity held by non-affiliates of the issuer on June 30, 2008 was
$4,930,958. For the purposes of computing the above market value, the
voting stock beneficially held by directors, officers, key employees and 10% or
more shareholders of the company was considered as held by "affiliates". The
aggregate market value was computed by reference to the average bid and asked
prices of the common stock on such date as reported by Pink Sheets from trading
information from the National Association of Securities Dealers Composite feed
or other qualified inter-dealer quotation medium.
APPLICABLE
ONLY TO CORPORATE ISSUERS
The
number of shares outstanding of the issuer's common stock, $0.50 par value as of
March 30, 2009 was 7,567,530.
DOCUMENTS
INCORPORATED BY REFERENCE
The
following documents are herewith incorporated by reference: None
|
Landmark
Land Company, Inc.
|
|
INDEX
TO ANNUAL REPORT ON FORM 10-K
|
|
YEAR
ENDED DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
Number
|
|
PART
I
|
|
|
|
|
|
|
Business
|
5
|
|
|
|
|
|
|
|
|
Properties
|
7
|
|
|
|
|
|
|
|
|
Legal
Proceedings
|
8
|
|
|
|
|
|
|
|
|
Submission
of Matters to a Vote of Security Holders
|
9
|
|
|
|
|
|
|
PART
II
|
|
|
|
|
|
|
|
|
|
|
|
Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
9
|
|
|
|
|
|
|
|
|
Selected
Financial Data
|
9
|
|
|
|
|
|
|
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
10
|
|
|
|
|
|
|
|
|
Financial
Statements
|
13
|
|
|
|
|
|
|
|
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
14
|
|
|
|
|
|
|
|
|
Controls
and Procedures
|
14
|
|
|
|
|
|
|
|
|
Other
Information
|
15
|
|
|
|
|
|
|
PART
III
|
|
|
|
|
|
|
|
|
|
Directors,
Executive Officers and Corporate Governance
|
15
|
|
|
|
|
|
|
|
|
Executive
Compensation
|
17
|
|
|
|
|
|
|
|
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
19
|
|
|
|
|
|
|
|
|
Certain
Relationships and Related Transactions, and Director
Independence
|
21
|
|
|
|
|
|
|
PART
IV
|
|
|
|
|
|
|
|
|
|
|
Principal
Accounting Fees and Services
|
22
|
|
|
|
|
|
|
|
|
Exhibits,
Financial Statement Schedules
|
22
|
|
|
|
|
|
|
|
|
F-1 - F-28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPORTANT
ADVISORY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
report and the documents incorporated into this report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 ("PSLRA"), including, but not limited to, statements relating to the
company's business objectives and strategy. Such forward-looking statements are
based on current expectations, management beliefs, certain assumptions made by
the company's management, and estimates and projections about the company's
industry. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," "forecasts," "is likely," "predicts,"
"projects," "judgment," variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict with respect to
timing, extent, likelihood and degree of occurrence. Therefore, actual
results and outcomes may differ materially from those expressed, forecasted, or
contemplated by any such forward-looking statements.
Factors
that could cause actual events or results to differ materially include, but are
not limited to, the following: the company’s limited cash flow from operations;
early terminations of existing golf course management agreements; the company's
ability to expand its golf management business; general demand for the company's
services or products, intense competition from other golf course managers and
residential developers/builders; changes in laws and regulations
affecting the company and/or its services; the outcomes of future litigation and
contingencies; trends in the golf and housing industry; changes in local,
national and international economies; the current war against terrorism;
risks arising from natural disasters; risks involved in doing business in
foreign countries; and risks inherent in and associated with doing business in a
recreational and/or interest rate sensitive industry. Given these uncertainties,
investors are cautioned not to place undue reliance on any such forward-looking
statements.
Unless
required by law, the company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, readers should carefully review the risk
factors set forth in other reports or documents that the company files from time
to time with the Securities and Exchange Commission (the "SEC"), particularly
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current
Reports on Form 8-K.
PART
I
Item 1. Business
Landmark Land Company, Inc. (the
"company"):
Landmark Land Company, Inc., a Delaware corporation, is in
the business of developing and managing real estate and golf projects throughout
the world. At various times in the past, the company has availed
itself of the possibilities of acquiring high quality developments that for
various reasons had become distressed. It was at these times that the
company acquired well known developments in the U.S. such as La Quinta, Mission
Hills, Palm Beach Polo, and Kiawah Island. In each case, the company
was able to re-plan, reposition, and reintroduce these quality developments to
the market. The economic conditions that we are now experiencing make
it extremely difficult to anticipate new resort developments commencing in the
near future. As a result, the company is focusing its experience and
talent on analyzing a number of the many distressed developments in the U.S. and
Caribbean markets which were commenced over the past several years, but which
are now currently dormant or in some form of financial
difficulty. Many of these opportunities are well located and well
planned, but lack the financing and/or market necessary for them to
continue. A good example of this type of opportunity is a world class
Jack Nicklaus resort development on the island of St. Lucia named Point
Hardy. The company entered into a management agreement with the
owners of this development in the first quarter of 2009 and it is currently in
negotiations with regard to several other management and/or development
agreements.
Prior to
October 1991, the company was in the business of real estate development and
sales, including owning and operating a number of resort golf courses and tennis
clubs, as well as owning a savings bank, a mortgage banking company, a life
insurance company, and other financial services companies. Substantially all of
the company's operations were owned and its businesses conducted, by
subsidiaries of Oak Tree Savings Bank, S.S.B. ("OTSB"), Landmark's savings bank
subsidiary headquartered in New Orleans, Louisiana.
In 1991,
as a result of regulations and requirements of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), the Office of Thrift
Supervision ("OTS") seized substantially all of the company's assets and
transferred them to a newly chartered federal thrift institution in which the
company and its shareholders had no interest. Subsequent to this
seizure, the company had little operational activity and extremely limited
capital resources and liquidity. Between 1991 and 2002, the company
was essentially dormant, except for the pursuit of a lawsuit captioned Landmark
Land Company, Inc. v. United States (Case No. 95-502-C in the United States
Court of Federal Claims). The suit included claims by the company for
breach of contract, restitution, and deprivation of property without just
compensation or due process of law.
During
2000, the company was awarded a judgment of approximately $21 million against
the United States in the above-referenced suit, which judgment was affirmed on
appeal in July 2001. A further appeal period expired during the first
quarter of 2002 without a further appeal being filed and the company received
the full amount of the judgment in March 2002. After settling a
number of outstanding claims, the company now pursues golf and real estate
management and development opportunities through the subsidiaries and contracts
discussed below.
Apes Hill Development
SRL:
In December 2005, the company’s newly formed subsidiary,
LML Caribbean, Ltd., entered into an agreement with C.O. Williams Investments
Inc., an affiliate of a large general contractor in Barbados, for the formation
of Apes Hill Development SRL (“Apes Hill”). A copy of the Members’
Agreement for Apes Hill Development SRL was attached to the company’s Form 10KSB
for the year ended December 31, 2005, filed March 23, 2006. Since its formation,
Apes Hill has purchased approximately 472 acres in Barbados on which it is
developing a golf course, and approximately 375 residential lots and/or
units. The company indirectly owns 33.33% of Apes Hill and, since the
beginning of 2006, has invested approximately $4.0 million in such entity. Apes
Hill has negotiated financing from a local lender in the amount of $60.7 million
for the development of the golf course, infrastructure, beach club, and initial
residential phases of the project, all of which were begun in 2006 and 2007
.
Lot sales began
in the fourth quarter of 2007.
South Padre Island Development,
LLC:
On October 1, 2004, the company's wholly-owned
subsidiary, DPMG, Inc. (“DPMG”), acquired South Padre Island Development, L.P.,
a Delaware limited partnership ("South Padre"). South Padre is the
owner of South Padre Island Golf Club and its related residential lot and
housing development activities in the Town of Laguna Vista, Cameron County,
Texas. The details of such purchase were discussed in the company’s
Form 10-KSB for the year ended December 31, 2004 which was filed on March 30,
2005, as well as the company’s Form 8-K which was filed on October 7,
2004. On June 1, 2006, the company converted South Padre Island
Development, L.P. to South Padre Island Development, LLC. Effective August 31,
2006, DPMG transferred its 100% member interest in South Padre to the
company.
Presidential Golf Club,
LLC:
In December 2005, the company’s subsidiary, DPMG, entered into
a limited liability company agreement with V.O.B. Limited Partnership
(“V.O.B.”), the owner and developer of the approximately 1,200 acre Beechtree
residential development located near Upper Marlboro, Maryland (a suburb of
Washington, D.C.). Each of V.O.B. and DPMG owned 50% of Presidential
Golf Club, LLC (“Presidential”). V.O.B. contributed approximately 240
acres of real property to Presidential and each of V.O.B. and DPMG contributed
$700,000 in equity for the development of an 18-hole championship golf
course. V.O.B. agreed to lend to Presidential the remaining funds to
complete the golf facility which DPMG now manages.
During
the first quarter of 2008, DPMG and V.O.B. agreed to amendments to the
Presidential operating agreement that restructured V.O.B.’s contributions for
the construction of the golf course and related facilities effective July 31,
2007. Under the amended agreement, V.O.B. wrote off a portion of the
cost of the golf course against its surrounding real estate development and
converted the remainder of its funding from debt to equity. In
addition, DPMG’s ownership in Presidential was diluted from 50% to
7.45%. The company accounts for its investment under the cost
method. Presidential opened its golf course for play on May 1,
2008.
Lake Presidential Beverage Company,
LLC
is a wholly owned subsidiary of the company formed on November 7,
2007 to hold the alcoholic beverage license and to operate the food and beverage
services for the Lake Presidential Golf Club in Maryland. The
beverage company breaks even on the food and beverage operations, paying lease
rentals to Lake Presidential Golf Club in the approximate amount of any revenues
in excess of operating expenses.
Landmark of Spain,
Inc.:
In February 2003, the company formed Landmark of Spain,
Inc., a Delaware corporation, owned 100% by the company. In March
2003, Landmark of Spain, Inc. and a local Spanish entity formed a new Spanish
company, Landmark Developments of Spain, S.L. to pursue real estate development
opportunities in Spain and Portugal. Landmark of Spain, Inc. owns 50% of the
Spanish company and accounts for its investments on the equity
method. Landmark of Spain, Inc. has invested approximately 1,000,000€
($1.3 million at time of funding) in Landmark Developments of Spain, S.L. as of
December 31, 2008. Landmark Developments of Spain, S.L. is currently
managing the Arcos Gardens golf and real estate development located near the
town of Arcos in the Andalucia region of Spain. This development is
anchored by a recently completed championship golf course designed by the
company and the project is planned, upon build-out, to feature a hotel and
approximately 525 residential units.
DPMG,
Inc.:
Effective August 31, 2003, the company acquired all the
outstanding stock of KES, Inc., an Ohio corporation that owned directly or
indirectly 100% of DPMG, and three other subsidiaries, the primary assets of
which consisted of interests in undeveloped land and golf and real estate
management and development contracts
.
Effective June
30, 2004, KES, Inc. and its other subsidiaries, were merged into DPMG in a
tax-free reorganization under Internal Revenue Code Section 368.
In
addition to managing the company's equity interests in golf and real estate
development in Texas, Barbados and Maryland described above and in Item 2 below,
DPMG personnel also service the company's other business activity -- the
contract management of golf courses and golf-related real estate developments
owned by third parties. Consulting and management agreements cover
both operating golf courses and uncompleted golf course and residential
developments in various stages of entitlement processing and/or
construction.
The
projects under management as of December 31, 2008 are located in New York,
California, Maryland, Barbados and Spain. The company's compensation
under these agreements is generally comprised of a minimum monthly fee plus
percentage participations in either gross or net profits. The company
also receives fees for golf course design and/or the preparation of golf course
grading plans. The length of the management agreements vary by
project, with some extending for a term of 10 years or more, however, in some
cases, the owner has the right to terminate upon 30 days notice and there are no
assurances that one or more of these agreements may not be cancelled during the
current calendar year.
The
company is currently pursuing additional opportunities in the golf/residential
real estate sector with a particular emphasis on properties in the
Caribbean. Given the current oversupply of golf courses in most U.S.
markets, the company believes that the economic potential for golf-related
developments in the Caribbean is compelling. The company also
believes that market conditions are favorable for the acquisition of distressed
golf-related properties in the U.S. and the company may seek to invest in
developed or undeveloped properties where reasonable investment or development
returns are projected. The company currently has no firm commitments
as to any such investments or acquisitions.
The
market for golf course management services in the U.S. is very competitive.
Several large companies such as Troon Golf have traditionally managed a large
number of courses, but as profit margins have tightened over the recent years at
U.S. golf facilities, a number of smaller, lower-cost managers have entered the
market. The company markets its services by providing a wider range
of services than is generally available in the golf management industry today.
From pre-development services, including the preparation of economic feasibility
studies, processing of governmental approvals and golf course design, through
construction management services and golf course management, the company offers
a wide range of expertise to manage all phases of a golf related development or
operation. While most of the golf management competition performs
only golf management services, the company has the capacity to plan and develop
residential and resort communities centered around golf-related
amenities. The company intends to continue to market its services by
emphasizing its expertise in all phases of golf and golf-related
development.
The
company currently has 110 employees, 27 of whom are employed by DPMG in support
of the company, its contract management services and its subsidiaries' ongoing
operations, and 83 of whom are employed by South Padre in support of its golf
and real estate operations.
The
company owned, as of December 31, 2008, the following real property located in
the South Padre Island Development, Laguna Vista, Texas:
|
1.
|
52
developed lots held for sale, none of which was under
contract,
|
|
|
|
|
2.
|
16
residential units held for sale, none of which was under
contract,
|
|
|
|
|
3.
|
50
developed lots held for development,
|
|
|
|
|
4.
|
10
residential units leased to tenants,
|
|
|
|
|
5.
|
An
18-hole championship golf course with driving range, clubhouse,
maintenance barn and appurtenant improvements,
|
|
|
|
|
6.
|
An
additional 9-hole executive golf course currently used primarily as a
practice facility, and
|
|
|
|
|
7.
|
Approximately
1,800 acres of property held for future development and/or construction,
perhaps half of which is currently developable.
|
|
|
|
During
2007, the company purchased approximately 1,800 acres adjacent to the South
Padre Island Development project at a cost of $4.5 million. During
2008, the company closed on the sale of four lots at an average sales price of
approximately $112,000 and twenty residential units at an average sales price of
approximately $211,000. During 2007 the company closed on the sale of
thirty lots at an average sales price of approximately $88,000 per lot and
ninety-six residential units at an average sales price of approximately $177,000
per unit. Substantially all development and construction activity is
financed with loans from local financial institutions. The principal
amount, interest rate, and certain other provisions regarding these loans are
set forth in Note 11 to the Consolidated Financial Statements.
The lot
and housing market in the vicinity of the South Padre Island Development project
is subject to the same competitive conditions as in other regional housing
markets. The market consists of both primary and second home buyers
who are attracted to the golf course and other amenities available in and near
the project. Sales of residential properties at South Padre during
2008 reflect the dramatic decline in the housing markets across the country and,
in the event market conditions do not improve, 2009 sales may be little better
than in 2008.
The South
Padre golf course is operated primarily as an amenity for the real estate
development/sales operation. During 2008, approximately 29,500 rounds
were played at an average rate of approximately $37.00 per round. The
company projects that the course's financial performance will improve with the
continuing growth of the residential community; however, the course is not
expected to generate a significant profit in the near term.
In
Barbados, a subsidiary of the company owns a 33.33% interest in Apes Hill, which
during December 2005 purchased approximately 470 acres on the island of Barbados
for US$12.0 million. This price consisted of US$4.0 million in cash
with the remainder paid through the issuance to the seller of the other 66.67%
ownership interest in Apes Hill. This property has approvals for the
development of a golf course, hotel, and approximately 375 residential lots or
units. Apes Hill negotiated financing with a local lender to provide a US$60.7
million credit facility to develop the infrastructure, golf course and initial
residential phases of the project, which development was begun in
2006. The housing market in Barbados for projects such as this is
primarily comprised of second home purchasers from the U.K. and
Ireland. In December 2007, Apes Hill closed the sale of fourteen lots
totaling approximately US$6.4 million in sales value. During 2008,
Apes Hill closed the sale of one hundred five lots totaling approximately
US$64.0 million. At December 31, 2008 the company held deposits on
contracts for the sale of seventeen additional lots with a total sales value of
approximately US$28.0 million; however, there is no assurance that the demand
for future residential product will remain high. There are numerous
other second-home projects in Barbados which will compete with Apes Hill for
potential purchasers; however, the Apes Hill project, while not having the
advantage of being on the coast, has dramatic views and excellent recreational
facilities to attract those interested in a high-end golf
community.
In
Maryland, the company owns a 7.45% interest in Presidential, which owns an
18-hole championship golf course on approximately 240 acres near Upper Marlboro,
Maryland. The course opened for play in May 2008. The
demand for additional golf facilities in the area has remained flat in recent
years due to the relatively small increase in golfers utilizing public fee
facilities; however, Presidential hopes to use its proximity to downtown D.C. to
tap the potential group outing business that exists in the area.
The
company also owns a 45% interest in a 128+ acre parcel near the town of Hana,
island and county of Maui, state of Hawaii. The parcel is currently
undeveloped; however, in 2007 it received preliminary approvals for subdivision
into approximately 14 agricultural lots. Work continues toward the
final approvals, and it is expected that the finished lots may be available for
sale in 2010.
As of
December 31, 2008, the company had no commitments to purchase additional real
property, although investment opportunities may arise in golf and/or residential
real estate projects which the company may pursue under the right
circumstances.
As of
December 31, 2008, the company had a management contract covering approximately
2,000 acres in the towns of Pine Plains and Milan, Duchess County, New York,
which includes an existing 18-hole golf course. The company was
retained in July 2004 to renovate and expand the existing golf course and to
design, develop and manage the remainder of the project property into an
environmentally sensitive community. The current phase of the
planning and approval process for such development is continuing under the
direct management of the owner; however, the complexity of this process makes it
difficult to project a final approval date. The company's
compensation under its management agreement consists of fees and a future profit
participation; however, no additional fees are due under the contract until
approvals permit the beginning of construction activity.
In April
2002, the company’s subsidiary, DPMG, entered into a management agreement with
Gyrodyne Company of America, Inc. (“Gyrodyne”) to manage the planning and
development of an approximately 320 acre parcel on Long Island, New
York. However, in November 2005, the local public university (the
State University of NY at Stony Brook) took title to approximately 245 acres of
the parcel and Gyrodyne initiated an eminent domain lawsuit against the
university. During February 2007, a new agreement with Gyrodyne was
entered into whereby Gyrodyne agreed to compensate DPMG for past services, the
old management agreement was terminated, and DPMG agreed to provide consulting
services to Gyrodyne in connection with the litigation. The details
of the new agreement were discussed in the company’s Form 8-K which was filed on
February 16, 2007. Fees under the new agreement continue through
February 2010.
The
company leases office space on a month-to-month lease in Upper Marlboro,
Maryland as its company headquarters. The owner of the leased
premises is developing the property surrounding the office and expects to
demolish the current structure within the next few years. The company
is seeking zoning approvals to construct its headquarters office building on a
leased parcel of ground at the Presidential Golf Club in Upper Marlboro,
Maryland. In addition, the company leases office space from the South
Padre Island Community Homeowners Association on a month-to-month lease for its
South Padre Island Development operations.
The
company is currently in negotiations with the owners of other property in the
United States and the Caribbean for the acquisition and/or management of golf,
hotel and residential projects. While the success of such
negotiations is uncertain at this time, management feels that projects such as
these in which the company can earn fees as well as a percentage of profits will
be very important for the company's success.
In the
opinion of management, all of the company's properties are adequately insured;
however, the company has been unable to procure affordable liability coverage
for its construction operations at South Padre.
Depreciation
of the company's properties and amortization of its contract property rights are
more fully described in Note 1 to the Consolidated Financial
Statements.
Item 3.
Legal Proceedings
The
company is not currently a party to any pending legal proceeding other than
non-material, routine litigation that is incidental to the company’s
business.
Item 4.
Submission of
Matters to a Vote of Security Holders
On
December 9, 2008, the company held an annual shareholders’ meeting at the South
Padre Island Development project, Laguna Vista, Texas. At such
meeting, the company shareholders (i) reelected Gerald G. Barton, Jim L. Awtrey,
Bernard G. Ille, David A. Sislen, Robert W. White, William W. Vaughan, III and
Harold F. Zagunis as company Directors, and (ii) ratified the appointment of
Aronson & Company as the independent registered accounting firm for the
fiscal year ending December 31, 2008. On January 20, 2009, the
services of Aronson & Company, the company’s independent registered
accounting firm, were terminated and the company retained The Reznick Group as
its new independent registered accounting firm. (See Item 9 below for
further discussion on the change in accounting firms.) The votes for
each Director and the ratification of the appointment of Aronson & Company
as the independent registered accounting firm, as well as the number of votes
against and abstentions, are set forth in the table below:
|
|
|
Votes
For
|
|
Votes
Against
|
|
Votes
Withheld
|
|
Broker
Non-Votes
|
|
Abstentions
|
|
Reelection
of Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald
G. Barton
|
|
|
6,642,435
|
|
-
|
|
|
209,287
|
|
-
|
|
-
|
|
Jim
L. Awtrey
|
|
|
6,642,435
|
|
-
|
|
|
209,287
|
|
-
|
|
-
|
|
Bernard
G. Ille
|
|
|
6,848,681
|
|
-
|
|
|
3,034
|
|
-
|
|
-
|
|
David
A. Sislen
|
|
|
6,848,741
|
|
-
|
|
|
2,974
|
|
-
|
|
-
|
|
Robert
W. White
|
|
|
6,848,741
|
|
-
|
|
|
2,974
|
|
-
|
|
-
|
|
William
W. Vaughan, III
|
|
|
6,642,435
|
|
-
|
|
|
209,287
|
|
-
|
|
-
|
|
Harold
F. Zagunis
|
|
|
6,848,741
|
|
-
|
|
|
2,974
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aronson
& Company as the registered independent accounting firm for the fiscal
year ending December 31, 2008
|
|
|
6,769,180
|
|
76,300
|
|
|
-
|
|
-
|
|
6,375
|
PART
II
Item 5.
Market for
Registrant’s Common Equity and Related Stockholder Matters
The
following tables set forth the high and low reported sales prices for the common
stock of the company as reported for each calendar quarter commencing after
December 31, 2006:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.75
|
|
|
$
|
1.21
|
|
|
$
|
3.50
|
|
|
$
|
2.25
|
|
|
Second
Quarter
|
|
|
2.00
|
|
|
|
1.20
|
|
|
|
3.35
|
|
|
|
2.70
|
|
|
Third
Quarter
|
|
|
2.00
|
|
|
|
1.50
|
|
|
|
3.00
|
|
|
|
2.50
|
|
|
Fourth
Quarter
|
|
|
1.50
|
|
|
|
.75
|
|
|
|
2.53
|
|
|
|
1.02
|
|
The
company's common stock was delisted and trading was suspended during October of
1991 by the Midwest Stock Exchange and the American Stock Exchange. Since that
date, the common stock of the company has been traded in the non-Nasdaq
over-the-counter markets. The high and low bid information was
obtained from Pink Sheets from trading information as reported by the National
Association of Securities Dealers composite feed or other qualified inter-dealer
quotation medium. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions. As of March 30, 2009, there were 638 holders of record
of the company's common stock. These numbers do not include
stockholders who hold their shares in “street name” or in “nominee” accounts
with banks, brokerage firms and other authorized holding
institutions.
On August
26, 2006, the company declared a dividend of $0.10 per share on the company's
common stock, payable in four quarterly installments of $0.025 per share, to
shareholders of record at the close of business on September 8, 2006, November
30, 2006, February 28, 2007, and May 31, 2007, respectively. On
August 10, 2007, November 6, 2007, February 13, 2008, May 8, 2008 and July 14,
2008, the company declared a special dividend of $0.025 on the company’s common
stock to shareholders of record at close of business on August 24, 2007,
November 22, 2007, February 24, 2008, June 3, 2008 and August 22, 2008,
respectively. Dividend payments are generally payable on the first
business day which is ten days after each respective record date. The
company is attempting to conserve cash and improve its liquidity position,
consequently, it discontinued payment of dividends on common stock in the fourth
quarter of 2008 until further notice.
The
company did not sell or purchase any shares of the company’s common stock during
2008 or 2007.
Item 6.
Selected Financial Data
Not
applicable.
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operation
Overview
The
company, through subsidiaries, owns and manages for others, interests in real
estate and golf oriented real estate developments. After a long
period of relative dormancy, the company acquired the first of its operating
companies in 2003 and has continued to rebuild its business through acquisitions
and expansion as discussed in Item 1. Year to year comparisons should
be analyzed carefully and historical results should not be assumed to be
indicative of the company’s future operations.
Management’s
analysis of the company’s operations and comments on its current financial
condition are as follows:
Liquidity
and capital resources
Liquidity
needs in 2009
are expected
to exceed amounts available or committed to be available at December 31,
2008. The company’s Consolidated Balance Sheet at December 31, 2008
reports current assets totaling $2.2 million and current liabilities totaling
$17.9 million for a $15.7 million excess of current liabilities over current
assets. Approximately $12.7 million of the current liabilities is due
to two Texas banks that have funded the company’s South Padre real estate
development for the last ten years. Subsequent to December 31,
2008, both banks have agreed to renew the company’s lines of credit into 2010 on
substantially the same terms, except for a $1 million reduction in the maximum
amount, reducing the total lines available to $13.4 million. We do
not expect the change to have any significant impact on our real estate
operations. Additionally, approximately $2.2 million of the current
liabilities is owed to affiliates who have previously advanced funds for working
capital and are not expected to demand repayment until the company’s liquidity
position improves. One of those affiliates has committed up to $1.1
million additional funds in 2009 to fund anticipated operating
shortfalls.
The
company expects profits from its Barbados affiliate in 2009, but expects losses
from its domestic operations. The profits in Barbados are projected
to be used to repay bank loans and/or to be reinvested in continuing development
of the Apes Hill property and accumulated profits are not expected to be
available for distribution to the owners until 2010 or 2011. To
reduce the anticipated 2009 cash flow shortfall from domestic operations, the
company has reduced operating expenses, including reductions in personnel and,
effective April 1, 2009, is deferring payment of 20% of certain company
executives’ salaries until cash is available to pay the deferred
amounts. Current staffing levels remain adequate to service
additional projects that the company is pursuing. To meet the
remaining cash flow shortfall, the company has applied for new lines of credit
from banks operating in the Caribbean and expects funding from those banks
before additional funds are required to pay certain 2009 operating costs;
however, there is no guarantee that such commitments and funding will be
received. If such loans are not received, the company could be
required to make further reductions in personnel and to liquidate real estate or
other assets at prices less than would be expected under normal operating
conditions. The Consolidated Financial Statements do not reflect any
adjustments that might result from the outcome of these
uncertainties.
Current assets
totaled $2.2
million at December 31, 2008 and $6.0 million at December 31, 2007 reflecting,
primarily, the use of cash resources to pay 2008 operating costs. The
temporary increase in receivables from affiliates resulted, primarily, from the
timing of payments received from the company’s Barbados affiliate.
Real estate and golf management
contract rights
reflect the unamortized purchase price of contract rights
acquired in 2003. Amortization of the cost of these contracts is
recorded using the gross revenue method over the life of the
contracts. Minimal amortization was recorded in 2008 and none was
recorded in 2007. Amortization of the remaining unamortized cost will
resume when approvals are in place and development commences under the company’s
contract on the New York property as discussed in Note 1 (VIII) to the
Consolidated Financial Statements. No new contracts were purchased in
2008 or 2007.
Real estate
held for either
development or sale changed little -- from $15.9 million at December 31, 2007 to
$15.5 million at December 31, 2008 -- but with a noticeable shift from real
estate under development to completed inventory held for sale as construction
was completed on houses built on a speculative basis.
Property and equipment
increased $1.1 million during 2008, reflecting the cost of new golf maintenance
equipment and ten houses converted to rental property at South Padre, offset, in
part, by depreciation recorded for the year. When completed housing
units were not selling in 2008, the company transferred ten units from inventory
held for sale to operating properties and rented them on short-term leases of
6-12 months to recover holding costs on those units until the market
improves. See Note 2 to the Consolidated Financial Statements
for additional information on the composition of property and
equipment.
Other assets
increased by
$11.1 million during 2008, reflecting, primarily, the company’s share of profits
from its Barbados affiliate, which profits were reinvested in additional
development in the Barbados project.
Liabilities
increased from
$20.0 million at December 31, 2007 to $21.6 million at December 31, 2008,
reflecting a $1.1 million increase in bank loans for the purchase of equipment
and development of real estate at South Padre, a $0.5 million increase in
accounts payable and accrued expenses and other smaller increases and decreases
in other liabilities. South Padre finances its real estate
development primarily with loans from local and regional banks. The
loans are secured by deeds of trust on the real property and by guarantees
issued by the company. Debt is typically repaid from real estate
sales proceeds. Details of the various loans from banks and
affiliates are included in Notes 10 and 11 to the Consolidated Financial
Statements. Subsequent to December 31, 2008, both banks have agreed
to renew the company’s lines of credit into 2010 on substantially the same
terms, except for a reduction of $1.0 million in the maximum amount, reducing
total lines available to $13.4 million. We do not expect the change
to have any significant effect on the company’s real estate
operations. Debt to affiliates in the approximate amount of $2.2
million, including accrued interest, is due on demand, but is owed to
stockholders of the company who advanced the funds in prior years to provide
working capital liquidity.
Stockholders’ equity
increased by $6.4 million in 2008 reflecting net income of $6.1 million, the
sale of $1.0 million of preferred stock, minimal amounts of amortization of
employee stock option costs and unrealized gain on foreign currency exchange,
partially offset by $0.7 million dividends paid on common and preferred stock,
all as discussed in Notes 6 and 14 to the Consolidated Financial
Statements.
While the
company continues to seek other management and investment opportunities, there
are no outstanding investment commitments at December 31, 2008.
Revenue
Real estat
e sales at South
Padre totaled 4 lots and 20 houses during 2008, generating $4.7 million in
revenue, compared to 30 lots and 96 houses closed during 2007, generating $19.7
million in revenue. The real estate market in the lower Rio Grande
Valley where the South Padre project is located is both a primary and secondary
home market with a significant portion of the market comprised of “winter
Texans” from the upper mid-west. As discussed in Item 2, the company
acquired approximately 1,800 acres adjoining the South Padre development in 2007
and anticipates phased development of the property to meet future demand in this
long-term project. The dramatic slowdown in real estate sales
nationwide has now reached south Texas, reflected in the 76% drop in real estate
sales revenue in 2008 from 2007. The backlog of pending sales
contracts dropped from eighty contracts at December 31, 2006 to only four
contracts at December 31, 2007 and no contracts at December 31,
2008. Prospective purchasers are once again visiting the development
at South Padre and South Padre has taken 9 sales contracts in the first quarter
of 2009; however, the company anticipates 2009 real estate sales revenue to be
only slightly better than 2008.
Golf
related revenue totaled
$2.1 million in 2008, comprised of $1.1 million from course revenue, $0.3
million from merchandise sales, and $0.7 million from food and beverage sales,
including $0.4 million from the new Lake Presidential Golf Club in Maryland that
opened in May 2008. This compares to golf revenue of $1.9 million in
2007, comprised of $1.3 million from course revenue, $0.3 million from
merchandise sales, and $0.3 million from food and beverage
sales. Paid golf rounds totaled 29,538 in 2008 and 31,639 in
2007. The golf course is a public, daily fee course, but is operated
primarily as an amenity for the surrounding real estate
development. During 2006, South Padre expanded its golf clubhouse to
include a full service restaurant and bar that opened for business in December
2006 and, during 2007, completed a new nine-hole executive golf
course. The new course was developed primarily to provide golf
frontage for residential lot development and will be used primarily as a
practice facility until demand for golf play justifies its operation as a daily
fee facility. While the company anticipates increases in golf play as
more golfers move into the residential community, weather and other factors
could adversely affect future golf operations.
Management and consulting
agreements generated $4.1 million and $2.3 million in fee revenue in the
years ended December 31, 2008 and 2007, respectively. The increase
reflects primarily increased planning and construction supervision fees in
Barbados. The company was also reimbursed for out-of-pocket expenses
related to the agreements in the amounts of $1.4 million in 2008 and $1.8
million in 2007. Most of the company’s golf management contracts are
on a short-term basis that may be cancelled on thirty to ninety days
notice.
While the
company has traditionally directed its management to those properties in which
it has an equity interest, management believes the current recession is likely
to generate more opportunities for the company to use its expertise to assist
troubled golf or real estate developments on a straight fee basis.
Costs
of Revenues
Costs of real estate sold
,
including land, development, construction, and closing costs, totaled $3.3
million in 2008 and $13.0 million in 2007. Gross profit margins
differ between lot development and vertical house construction, among different
subdivisions and among various models of houses. Gross profit on real
estate sales averaged 29% in 2008 and 34% in 2007. The lower gross
margins realized in 2008 reflect both product mix (less lot sales as percentage
of total sales) and, with the reduced sales activity (24 lots and houses in
2008 compared to 126 in 2007), less efficient use of construction department
resources.
Real estate operating
expenses
not included in
costs of real estate sold
totaled $2.1 million in both 2008 and 2007. Cost increases
experienced in expanded rental pool operations, and increased homeowner
association subsidies were substantially offset by lower construction department
overhead costs.
Costs of golf merchandise
sold
totaled $0.2 million in both 2008 and 2007. As a percent
of sales, costs increased to 71% in 2008 from 63% in 2007, reflecting greater
discounts on merchandise to promote sales.
Costs of food and beverages sold
in 2008 was $0.3 million (47% of related sales), compared to costs of
$0.1 million (49% of related sales) in 2007, as a result of the new operation in
Maryland.
Golf operating expenses
totaled $2.2 million in 2008 compared to $1.9 million in
2007. Increased costs result primarily from the operating costs of
the new restaurant in Maryland beginning in May 2008.
Management and consulting payroll
and related expenses
totaled $4.2 million in 2008, compared to $3.9
million in 2007. The increased costs reflect primarily the personnel
costs of a new employee added in 2007, plus salary increases granted in December
2007 for officers and in April 2008 for other employees.
Depreciation and amortization
included in the company’s Consolidated Statement of Operations was $0.6 million
in both 2008 and 2007. The cost of intangible contract rights
acquired is amortized as revenue is received from those contracts and the
amortization of the cost was minimal in both 2008 and 2007.
General,
administrative and other expenses
General, administrative and other
expenses
totaled $2.0 million in 2008 and $2.5 million in
2007. This decrease reflects lower operating costs resulting from
less use of the corporate airplane and lower state franchise taxes in
Texas.
Other
income and expense
Equity in income (loss) of
unconsolidated affiliates
reflects the company’s share of the operating
income or loss of Landmark Developments of Spain, SL and Apes Hill in Barbados.
The Spanish company was organized in March 2003 and reported losses
through 2006 and again in 2008. The company’s 50% share of the
Spanish company’s 2008 loss was $0.2 million and its share of 2007 income was
$0.4 million. The Barbados company began operations in December 2005
and also reported losses until 2007 when it closed its first lot sales. The
company’s 33.3% share of the Barbados company’s income was $11.3 million and
$0.2 million in 2008 and 2007, respectively. Obviously, Apes Hill’s
operating results comprise a significant part of the company’s reported profits
in 2008 and are expected to do so for the next several years. While
the company anticipates continuing profit from this investment, such profits are
not assured and even if realized, may not be available for distribution until
Apes Hill’s development debt is repaid or refinanced, which the company projects
to be in 2010 or 2011.
Interest income
decreased to
approximately $53,000 in 2008 from over $0.2 million in 2007 primarily
reflecting the lower cash balances invested in overnight funds and the decline
in interest rates from a prime rate of 8% at the beginning of 2007 to 3.25% at
the end of 2008.
Interest expense
totaled $0.6
million in both 2008 and 2007. Although rates dropped dramatically in
2008, the company had higher debt related to unsold real estate inventory at
South Padre and, consequently, did not realize interest savings that might have
been expected.
Federal
and state income taxes
Effective
January 1, 2007, the company implemented Financial Accounting Standards Board
Interpretation (FIN) No. 48,
Accounting for Uncertainty in Income
Taxes.
Please see Note 14 to the Consolidated Financial
Statements for additional information on the effect of FIN No. 48 on the 2007
Consolidated Financial Statements.
The
company reported a profit before income taxes of $6.4 million for the year ended
December 31, 2008. Certain stock based compensation, airplane
expenses, and meals which cannot be deducted for income tax purposes, (permanent
differences in book and taxable income) and the decrease in the deferred tax
valuation allowance account for the difference in the $0.3 million tax provision
recognized and the amount that normally would have been recognized on the year’s
profit. See Note 14 to the Consolidated Financial Statements for
details of these differences. Separate returns are required for each
entity for the various states in which the company operates. Although
the company reported a loss in 2007, tax liabilities and benefits from the
different states cannot be offset against each other; consequently, there was a
net provision of less than $0.1 million for state taxes in 2007.
Critical
accounting policies and estimates
The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates. The critical
accounting policies and the possible effect of changes in estimates on our
financial results and statements are discussed below. Management discusses
the ongoing development and selection of these critical accounting policies with
the audit committee of the board of directors.
Income taxes
: 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. A
valuation allowance is recorded to reduce tax assets to an amount for which
realization is more likely than not. Obviously, the amount of the
valuation allowance required depends on future taxable income, the actual
amounts of which may vary significantly from management’s current
estimates.
The
estimated net future benefit available to the company from all its deferred tax
positions is approximately $47.8 million at December 31, 2008; however,
realization of that benefit is dependent on the company’s ability to generate
taxable income in the future. In view of historical earnings and the
company’s projections of future operating profits, the company has established a
valuation allowance against the asset in the approximate amount of $43.4
million, reducing the net benefit to $4.4 million included on the December 31,
2008 Consolidated Balance Sheet. At December 31, 2007 net future
tax benefits available to the company totaled approximately $50.1 million, the
valuation allowance was $45.4 million and the net deferred tax benefit reported
on the Consolidated Balance Sheet was $4.7 million. The valuation
allowance was adjusted in 2008 and will be adjusted in the future if changes in
circumstances cause a change in management’s judgment about the company’s likely
realization of the deferred tax assets. A change in the valuation
allowance could materially affect the tax benefit or provision reported in the
period of the change.
Impairment of long-lived
assets
: In accordance with SFAS No. 144,
Accounting for the Disposal of
Long-Lived Asset
s, management evaluates the company’s major assets to
determine whether events or changes in circumstances indicate that the carrying
value of the asset may be impaired. An impairment loss is recognized when the
asset’s carrying value is not recoverable and exceeds its fair
value. Recoverability is based upon the undiscounted estimated future
cash flows expected to result from the use of the asset, including
disposition. Projected cash flows are discounted for real estate held
for sale and undiscounted for real estate held for or under development and for
intangible assets. Cash flow estimates used in evaluating for
impairment represent management’s best estimates using appropriate assumptions
and projections at the time. There were no impairments recorded in
2008 or 2007.
For a
discussion of recent accounting pronouncements and their effect on the company’s
financial reporting, please see Note 17 to the Consolidated Financial
Statements.
Item 8.
Financial Statements
The
following financial statements of Landmark Land Company, Inc. are included in
this report on Form 10-K immediately following Part IV, Item 14 and immediately
preceding the Signatures pages of this report:
|
|
1.
|
Report
s
of Independent Registered Public
Accounting Firm
s.
|
|
|
2.
|
Consolidated
Balance Sheets as of December 31, 2008 and
2007.
|
|
|
3.
|
Consolidated
Statements of Operations for Years Ended December 31, 2008 and
2007.
|
|
|
4.
|
Consolidated
Statements of Comprehensive Income for the Years Ended December 31, 2008
and 2007.
|
|
|
5.
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended December 31, 2008
and 2007.
|
|
|
6.
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007.
|
|
|
7.
|
Notes
to Consolidated Financial
Statements.
|
|
Item 9.
Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosures
|
Aronson
& Company (“Aronson”) was previously the principal accountant for the
company. On January 20, 2009, the company dismissed Aronson as the
company’s principal accountant and engaged Reznick Group, P.C. (“Reznick”) as
the company’s principal accountant. The decision to dismiss Aronson
was approved by the Audit Committee of the Board of Directors of the
company.
Aronson’s
report on the Consolidated Financial Statements for the years ended December 31,
2007 and 2006 did not contain any adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope, or
accounting principles.
Except as
set forth below, during the company’s two most recent fiscal years and through
the date of this report, there were no disagreements with Aronson on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which disagreements, if not resolved to the
satisfaction of Aronson, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
In the
fourth quarter of 2008, a question arose regarding the company’s estimation of
future taxable income that may be available to utilize an existing deferred tax
asset; specifically, whether it is appropriate to include anticipated income
from a foreign affiliate whose income will be recognized in GAAP financial
statements when earned, but will be reported in US income tax returns only when
it is repatriated to the US or otherwise becomes subject to US income
tax. By mutual agreement, the company and Aronson jointly requested
guidance from the SEC Office of Chief Accountant and the issue was
resolved. The subject matter of this disagreement was discussed
between the Audit Committee of the company and Aronson, and the company
authorized Aronson to respond fully to the inquiries of the company’s successor
accountant concerning the subject matter of this disagreement.
During
the company’s two most recent fiscal years and through the date of this report,
the company did not consult Reznick regarding either the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the company’s
Consolidated Financial Statements, or any matter that was either the subject of
a disagreement with the former principal accountant or a reportable event which
would require disclosure pursuant to Item 304(a) of the
Act.
On
January 20, 2009, the company provided Aronson and Reznick with a copy of the
disclosures it made in response to Item 304(a) of the Securities
Act. The company requested that Aronson furnish it with a letter
addressed to the Securities and Exchange Commission stating whether it agreed
with the above statements, and if not, stating the respects in which it did not
agree. A copy of Aronson’s letter is filed as Exhibit 16 under Item
15 to this report. The company requested that Reznick review the
disclosures it made in response to Item 304(a) of the Securities Act and offered
Reznick the opportunity to furnish the company with a letter addressed to the
Securities and Exchange Commission containing any new information, clarification
of the company’s expression of its views or the respects in which it did not
agree with the statements by the company in response to Item
304(a). Reznick had no disagreement with the disclosures and
consequently declined the opportunity to furnish the company with such a
letter.
Item 9.A
. Controls and Procedures
We have
carried out an evaluation, under the supervision and with the participation of
our management including our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures, as that term is defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934, as amended. Based on that
evaluation, our principal executive officer and principal financial officer
concluded that as of December 31, 2008, which is the end of the period covered
by this Annual Report on Form 10-K, our disclosure controls and procedures were
effective.
Management’s
Report on Internal Control Over Financial Reporting
Management
of the company, together with its consolidated subsidiaries (we, us, or the
company), is responsible for establishing and maintaining adequate internal
controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Our internal control over
financial reporting is designed 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 (GAAP). Our internal control over financial reporting
includes those policies and procedures that:
|
|
(i)
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company;
|
|
|
(ii)
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company
are being made only in accordance with authorization of management and
directors of the company; and
|
|
|
(iii)
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could
have a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2008. In making this assessment, management used the
criteria described in the “Internal Control-Integrated Framework” set forth by
the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Based on
our assessment and those criteria, management has concluded that the company’s
internal control over financial reporting was effective as of December 31,
2008.
This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this annual report.
There
have been no changes in our internal control over financial reporting in the
year ended December 31, 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Item 9.B.
Other Information
Not
applicable.
PART
III
Item 10.
Directors and
Executive Officers of the Registrant
Set forth
below is certain information concerning each Director and executive officer of
the company.
|
Name
|
|
Age
|
|
Position
|
|
|
|
Gerald
G. Barton
|
|
|
77
|
|
Chairman
of the Board of Directors and Chief Executive Officer
|
|
|
|
Jim
L. Awtrey
|
|
|
65
|
|
Director
and Senior Vice President
|
|
|
|
Bernard
G. Ille
|
|
|
82
|
|
Director
|
|
|
|
David
A. Sislen
|
|
|
53
|
|
Director
|
|
|
|
Robert
W. White
|
|
|
79
|
|
Director
|
|
|
|
Harold
F. Zagunis
|
|
|
51
|
|
Director
|
|
|
|
William
W. Vaughan, III
|
|
|
56
|
|
Director,
President, General Counsel and Assistant Secretary
|
|
|
|
Joe
V. Olree
|
|
|
70
|
|
Senior
Vice President and Chief Financial Officer
|
|
|
|
James
C. Cole
|
|
|
59
|
|
Senior
Vice President
|
|
|
|
Gary
R. Kerney
|
|
|
66
|
|
Senior
Vice President
|
|
|
|
Gerald
D. Barton
|
|
|
50
|
|
Senior
Vice President
|
Mr.
Barton has been President and Chief Executive Officer since September
1971. He became Chairman of the Board of Directors during
1985. Mr. Barton's son-in-law, William W. Vaughan, III, was elected
President in 2004 and was and continues to be General Counsel and a Director of
the company. Mr. Barton's son, Gerald D. Barton became a Senior Vice President
in 2004. Mr. Gerald G. Barton was and continues to be Chief Executive
Officer of DPMG, Inc., a golf-oriented real estate development and management
concern acquired by the company during 2003.
Mr.
Awtrey was appointed as a Director in October 2006 and elected as a Senior Vice
President in November 2006. Mr. Awtrey was the Chief Executive
Officer of PGA of America from 1988 to 2005 and since retiring from the
organization had been consulting on a variety of golf related
matters.
Mr. Ille
became a Director in 1971. Mr. Ille is a principal of BML Consulting
Company, an insurance and financial consulting company and is a Director of LSB
Industries, Inc. Mr. Ille is also a Director of Quail Creek Bank,
Oklahoma City, Oklahoma.
Mr.
Sislen was appointed to the Board of Directors in March 2005. Mr.
Sislen is President of Bristol Capital Corporation, a diversified real estate
investment, management and advisory firm based in Bethesda,
Maryland.
Mr. White
was appointed by the Board of Directors as a Director in February
2003. Mr. White was formerly chairman and president of Cardinal Paper
Company, a wholesale paper distributor in Oklahoma City, Oklahoma and was
formerly Chairman Emeritus and a Director of Lincoln National Bank, Oklahoma
City, Oklahoma.
Mr.
Zagunis was appointed by the Board of Directors as a Director in August
2007. Mr. Zagunis is currently Chief Risk Officer and Managing
Director of Redwood Trust, Inc.; has served as a Vice President of Redwood
Trust, Inc. since 1995, and from 2000 to 2006, also served as Chief Financial
Officer, Controller, Treasurer, and Secretary of Redwood Trust,
Inc.
Mr.
Vaughan became President in 2004. Prior to 2004, Mr. Vaughan became
Vice President and General Counsel in June 1982 and a Director of the company in
December 1987. Mr. Vaughan was and continues to be Vice President and
General Counsel of DPMG, Inc.
Mr. Olree
became a Senior Vice President in 2004. Mr. Olree had been a Vice
President since September 1982. Mr. Olree was and continues to be
Chief Financial Officer of DPMG, Inc.
Mr. Cole
became a Senior Vice President in 2004 and is Director of Golf for the
company. Mr. Cole was and continues to be Director of Golf for DPMG,
Inc.
Mr.
Kerney became a Senior Vice President in 2004 and is Director of Real Estate
Development. Mr. Kerney was and continues to be Director of Real
Estate Development for DPMG, Inc.
Mr.
Gerald D. Barton became a Senior Vice President in 2004. Mr. Barton had been a
Vice President since September 1982. Mr. Barton was and continues to
be Director of International Development for the company and its
subsidiaries.
The
company has an audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act comprised of Directors Robert W. White, Bernard
G. Ille, David A. Sislen and Harold F. Zagunis. Mr. Ille is the audit
committee's independent financial expert and he is “independent” as defined in
the existing standards of the National Association of Securities Dealers, as
applicable on the date of this report.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
upon our review of the forms which we received with respect to the 2008 fiscal
year, the company believes that there were no late filings of any required Forms
3, Forms 4 and Forms 5 by the officers or Directors of the company with the
Securities and Exchange Commission for fiscal year 2008.
The
company has adopted a Code of Ethics that applies to the company's principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. The company
will provide any person, without charge upon request, a copy of such Code of
Ethics. Such request must be in writing addressed to the company's general
counsel at the location of the company's principal executive offices noted on
the first page of this annual report.
Item 11
. Executive Compensation
Compensation
of Officers. For fiscal years ended December 31, 2008 and December 31, 2007,
Gerald G. Barton, Jim L. Awtrey and Gary R. Kerney each received remuneration in
his respective capacity as follows:
|
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
Annual
Compensation
|
|
|
|
|
|
Salary
|
Bonus
|
Option
Awards (b)
|
All
Other
Compensation
(c)
|
Total
|
|
Name
and
|
|
|
Principal
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
Gerald
G. Barton
|
2008
|
313,424
|
-
|
-
|
8,396
|
321,820
|
|
Chairman
of Board,
|
2007
|
313,419
|
-
|
-
|
14,118(d)
|
327,537
|
|
President
and CEO (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim
L. Awtrey
|
2008
|
262,750
|
-
|
-
|
10,510
|
273,260
|
|
Senior
Vice President
|
2007
|
264,260
|
-
|
4,131
|
9,000
|
277,391
|
|
|
|
|
|
|
|
|
|
Gary
R. Kerney
|
2008
|
262,750
|
-
|
-
|
10,510
|
273,260
|
|
Senior
Vice President
|
2007
|
264,260
|
-
|
109
|
9,000
|
273,369
|
|
|
|
|
|
|
|
|
|
(a)
|
Amounts
paid as salary to Mr. Barton include consulting fees paid to an entity
wholly-owned by Mr. Barton and his wife.
|
|
|
|
|
(b)
|
A
discussion of the assumptions made in the valuation of the awards of the
stock options is set forth in Note 7 to the Consolidated Financial
Statements included in this Annual Report. Each of these
options was granted pursuant to the terms of The 2006 Landmark Land
Company, Inc. Incentive Stock Option Plan which is discussed in Item 12
below.
|
|
|
|
|
(c)
|
Includes
payments by the company to the 401(k) Plan accounts of the named
individuals.
|
|
|
|
|
(d)
|
Includes
$5,721 reimbursed during 2007 for the payment of taxes relating to
personal use of the corporate aircraft. The company takes the
position that there is no incremental cost to the company for personal use
of corporate aircraft, i.e., travel on a flight by a company executive’s
relatives or acquaintances, if the primary purpose of the flight is for
the company’s business purposes.
|
|
|
|
|
Outstanding
Equity Awards at Fiscal Year-End
|
|
Option
Awards
|
Stock
Awards
|
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying
Unexercised Options (#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock that have not Vested (#)
|
Market
Value of Shares or Units on Stock that have not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights that have not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights that have not Vested ($)
|
|
|
|
(a)
|
|
|
|
|
|
|
|
|
Gerald
G. Barton
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim
L. Awtrey
|
-
|
62,500
|
-
|
1.60
|
11/17/2016
(b)
|
-
|
-
|
-
|
-
|
|
|
|
30,000
|
|
2.85
|
05/22/2017
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Kerney
|
-
|
15,000
|
-
|
1.70
|
11/29/2017
(d)
|
-
|
-
|
-
|
-
|
|
(a)
|
A
discussion of The 2006 Landmark Land Company, Inc. Incentive Stock Option
Plan is set forth in Item 12 below.
|
|
|
|
|
(b)
|
This
option grant under The 2006 Landmark Land Company, Inc. Incentive Stock
Option Plan will vest on November 18, 2011.
|
|
|
|
|
(c)
|
This
option grant under The 2006 Landmark Land Company, Inc. Incentive Stock
Option Plan will vest on May 23, 2012.
|
|
|
|
|
(d)
|
This
option grant under The 2006 Landmark Land Company, Inc. Incentive Stock
Option Plan will vest on November 30,
2012.
|
Compensation of
Directors
.
|
Director
Compensation
|
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)
|
Option
Awards($)
|
Non-equity
Incentive Plan Compensation ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All
Other Compensation ($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Gerald
G. Barton (b)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Jim
L. Awtrey (b)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Bernard
G. Ille
|
9,000
|
-
|
(a)
|
-
|
-
|
-
|
9,000
|
|
|
|
|
|
|
|
|
|
|
David
G. Sislen
|
9,000
|
-
|
(a)
|
-
|
-
|
-
|
9,000
|
|
|
|
|
|
|
|
|
|
|
Robert
W. White
|
5,000
|
-
|
(a)
|
-
|
-
|
-
|
5,000
|
|
|
|
|
|
|
|
|
|
|
William
W. Vaughan, III (b) (c)
|
-
|
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Harold
F. Zagunis
|
9,000
|
-
|
(a)
|
-
|
-
|
-
|
9,000
|
|
|
|
|
|
|
|
|
|
|
(a)
|
As
of the end of 2008, each of the outside Directors had an outstanding
option to purchase 50,000 shares of the company’s common
stock. A discussion of these options is set forth in Item 12
below.
|
|
|
|
|
(b)
|
Mr.
Barton, Chairman and Chief Executive Officer of the company, Mr. Awtrey,
Senior Vice President and Mr. Vaughan, the President, General Counsel and
Assistant Secretary of the company, received no compensation during 2008
for services to the company as inside Directors. Mr. Awtrey’s
outstanding stock options are set forth in Item 11
above.
|
|
|
|
|
(c)
|
As
of December 31, 2008, Mr. Vaughan had an option to purchase 15,000 shares
of the company’s common stock at $1.70 per share. The option,
which was granted pursuant to The 2006 Landmark Land Company, Inc.
Incentive Stock Option Plan, will vest on November 30, 2012 and will
expire on November 29, 2017.
|
On August
1, 2002, the company adopted a policy of compensating outside Directors the sum
of $3,000 per calendar quarter. During October 2008, the Directors
resolved to defer the payment of all Directors’ fees until the company’s cash
flow improved. Mr. White declined to accept any Directors’ fees since
June 2008 and has notified the company that he will begin accepting such fees
once the company’s cash flow has improved.
Employment
Contracts. There are no employment, termination of employment or
change-in-control contracts between the company and any Director or
officer.
Item 12
. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
Stock
Options
|
Equity
Compensation Plan Information
|
|
|
Number
|
Weighted-
|
Number
of Securities
|
|
|
of
Securities
|
average
|
Remaining
Available for
|
|
|
to
be Issued
|
Exercise
|
Future
Issuance Under
|
|
|
Upon
Exercise
|
Price
of
|
Equity
Compensation
|
|
|
of
Outstanding
|
Outstanding
|
Plans
(excluding
|
|
|
Options,
Warrants
|
Options
|
securities
reflected
|
|
Plan
Category
|
and
Rights
|
and
Rights
|
in
column (a))
|
|
Equity
compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
Stock
option grants under The 2006 Landmark Land Company, Inc. Incentive Stock
Option Plan (a)
|
606,000
|
$2.06
per share
|
160,000
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
Stock
option grants to outside directors/ advisors (b)
|
300,000
|
$2.23
per share
|
-
|
|
|
|
|
|
|
Totals
|
906,000
|
$2.12
per share
|
160,000
|
|
(a)
|
The
2006 Landmark Land Company, Inc. Incentive Stock Option Plan (the “Plan”)
was approved by the Board of Directors effective April 29, 2006, subject
to the approval of the company’s shareholders. This approval
was granted at the November 18, 2006 Shareholders meeting and on January
9, 2007, the company filed a registration statement on Form S-8 for the
shares covered by the Plan. On June 2, 2006, the Board of
Directors granted stock option awards to 19 employees for an aggregate of
186,000 shares of the company’s common stock at a purchase price of $1.74
per share, which was the fair market value of the company’s shares as of
such date. On November 18, 2006, the Board of Directors granted a stock
option under the Plan for 62,500 shares of the company’s common stock to
Jim L. Awtrey at a purchase price of $1.60 per share, which was the fair
market value of the company’s shares as of such date. On May 23, 2007,
August 10, 2007 and November 30, 2007, the Board of Directors granted
stock option awards to 38 employees for an aggregate of 471,500 shares of
the company’s common stock at a purchase price of $2.85, $2.55, and $1.70
per share, respectively. Each of the options generally provides
that it (a) would not be exercisable on or before 5 years from the date of
the grant (unless otherwise determined by the Board of Directors), (b)
would lapse upon the employee’s termination of employment before the
expiration of 5 years from the date of grant, and (c) would terminate 10
years from the date of grant. Each of the options granted is
intended to be an incentive stock option under the provisions of Section
422 of the Internal Revenue Code. Of the options granted,
114,000 have been forfeited by individuals who are no longer employed by
the company.
|
|
|
|
|
(b)
|
On
May 1, 2006, the company granted each of Mr. Ille, Mr. Sislen, Mr. White
and Mr. Paul Fish (outside counsel to the company) stock options to
acquire 50,000 shares of the company’s common stock at a purchase price of
$2.00 per share until April 30, 2011, at which time the stock option
agreements expire. On May 23, 2007, the company granted Mrs.
Claudia Holliman, a former director of the company who resigned in
December, 2007, a stock option to acquire 50,000 shares of the company’s
common stock at a purchase price of $2.85 per share until its expiration
on May 23, 2012. On August 10, 2007, the company granted Mr.
Zagunis a stock option to acquire 50,000 shares of the company’s common
stock at a purchase price of $2.55 per share until its expiration on
August 10, 2012.
|
Security
Ownership of Certain Beneficial Owners
The table
below sets forth the beneficial ownership of the company’s common stock, par
value $0.50 per share, as of March 30, 2009 held by any persons known to the
company to be a beneficial owner of more than 5% of the company's common
stock. The percentages were calculated based upon the 7,567,530
shares of common stock of the company outstanding on March 30,
2009.
|
|
|
Title of Class
|
Name
and Address of
Beneficial Owner
|
Amount
and
Nature of Beneficial
Ownership
|
Percent of Class
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Gerald
G. Barton
2817
Crain Highway
Upper
Marlboro, MD 20774
|
1,962,078
|
25.93%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
William
W. Vaughan, III
2817
Crain Highway
Upper
Marlboro, MD 20774
|
503,207
|
6.65%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
G.
Douglas Barton
2817
Crain Highway
Upper
Marlboro, MD 20774
|
504,507
|
6.66%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Martha
B. Doherty
2817
Crain Highway
Upper
Marlboro, MD 20774
|
503,207
|
6.65%
|
Security
Ownership of Management
The table below sets forth the
beneficial ownership of the company’s common stock, par value $0.50 per share,
as of March 30, 2009 held by each of the company’s directors and executive
officers individually and all of the company’s directors and executive officers
as a group.
|
Title of Class
|
Name of Beneficial Owner
|
Amount
and
Nature of Beneficial
Ownership
|
Percent of Class
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Gerald
G. Barton
|
1,962,078
|
25.93%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Jim
L. Awtrey
|
0
|
Less
than 1%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Bernard
G. Ille (a)
|
51,000
|
Less
than 1%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
David
A. Sislen (a)
|
51,100
|
Less
than 1%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Robert
W. White (a)
|
87,186
|
1.15%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
William
W. Vaughan, III
|
503,207
|
6.65%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Harold
F. Zagunis (a)
|
56,200
|
Less
than 1%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
G.
Douglas Barton
|
504,507
|
6.66%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
James
C. Cole
|
228,810
|
3.02%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Gary
Kerney
|
376,615
|
4.98%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
Joe
V. Olree
|
229,010
|
3.03%
|
|
|
|
|
|
|
Par
$0.50 Common Stock
|
All
Directors and Executive Officers as a group
|
4,049,713
|
53.51%
|
|
(a)
|
Each
of the shareholdings reported for Mr. Ille, Mr. White, Mr. Sislen and Mr.
Zagunis includes 50,000 shares under stock options that are immediately
exercisable.
|
All
shares shown above are currently beneficially owned by the named individuals.
There are no arrangements in place involving the company, any of its
executive management or any third parties known to the company that would result
in a change in control of the company.
Item 13
. Certain Relationships and Related Transactions,
and Director Independence
Transactions
with Management and Control Persons
During
the company’s last two fiscal years, there were no transactions with Directors,
executive officers or persons who are known to be the beneficial owners of more
than 5% of the company's common stock, or their immediate families, in which the
company was, or is to be, a party, except as follows:
|
1.
|
As
of December 31, 2008, a subsidiary of the company, DPMG Inc., had an
obligation to pay an affiliate of Mr. Gerald G. Barton the full principal
sum of $333,599, together with accrued interest thereon (at the rate of
15% per annum) of $357,933. During 2008 and 2007, no principal
portion of the indebtedness was repaid, however, interest in the amount of
$20,000 and $80,000 was paid to Mr. Barton during such
years. The company acquired DPMG Inc. during
2003.
|
|
|
|
|
2.
|
On
December 31, 2008, a subsidiary of the company, South Padre Island
Development, LLC, had an obligation to pay an affiliate of Mr. Gerald G.
Barton the full principal sum of $558,475, together with accrued interest
thereon (at the rate of 12% per annum) of $430,562. During 2008
and 2007, no payments of principal or interest were made. The
company acquired South Padre Island Development, L.P. (now South Padre
Island Development, LLC) during 2004.
|
|
|
|
|
3.
|
During
September 2005, a subsidiary of the company, DPMG Inc., entered into an
agreement with Newco XXV, Inc. (“Newco”), an affiliate of Gerald G.
Barton, the company chairman, whereby DPMG Inc. agreed to provide
consulting services to Newco relating to the planning, design and
development of certain real property owned by Newco. The
agreement provides that these services are to be provided at rates which
are quoted by DPMG Inc. to non-affiliated third party
entities. During the fiscal years ended December 31, 2008 and
2007, no services were performed for Newco pursuant to such
agreement.
|
|
|
|
|
4.
|
On
December 12, 2008, a subsidiary of the company, DPMG, Inc. borrowed from
Newco the principal amount of $200,000, which sum bears interest at 10%
per annum, compounded annually and is due and payable in full on November
1, 2010. As of December 31, 2008, the loan had an accrued
interest balance of $1,056. No payments of principal
or interest were made on this loan during 2008. Newco has committed
up to $1.1 million additional funds in 2009 to fund anticipated operating
shortfalls.
|
|
|
|
|
5.
|
The
company and its subsidiaries have employment relationships with members of
the immediate family of Gerald G. Barton and Gary R. Kerney in which
compensation amounts exceeded $120,000. Mr. Barton’s
son-in-law, William W. Vaughan, III, is employed by the company as
President, Chief Operating Officer, General Counsel and Assistant
Secretary, with total compensation of $263,172 in 2008 and $263,172 in
2007. Mr. Barton’s son, G. Douglas Barton, is employed by the
company as Senior Vice President, with total compensation of $212,680 in
2008 and $203,146 in 2007; Mr. Barton’s daughter, Martha B. Doherty, is
employed by the company as Vice President, with total compensation of
$179,764 in 2008 and $148,563 in 2007. Mr. Kerney’s son,
Michael R. Kerney, is employed by the company as Vice President, with
total compensation of $194,584 in 2008 and $185,050 in
2007.
|
All
material related party transactions with the company or its subsidiaries are
subject to the approval of the full Board of Directors.
Director
Independence
The
company has an audit committee, nominating committee and compensation committee,
each of which is comprised of the company’s outside directors. These
directors are Robert W. White, Bernard J. Ille, David A. Sislen, and Harold F.
Zagunis, each of whom is independent as defined in the existing standards of the
National Association of Securities Dealers, as applicable on the date of this
report.
PART
IV
Item 14
. Principal Accounting Fees and Services
The
following table sets forth fees for services Aronson & Company provided in
2008 and 2007:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Audit
fees (1)
|
|
$
|
96,767
|
|
|
$
|
94,138
|
|
|
Audit-related
fee(2)
|
|
|
-
|
|
|
|
-
|
|
|
Tax
fees (3)
|
|
|
-
|
|
|
|
-
|
|
|
All
other fees (4)
|
|
|
-
|
|
|
|
11,248
|
|
|
Total
|
|
$
|
96,767
|
|
|
$
|
105,386
|
|
|
(1)
|
Represents
fees for professional services rendered by the principal accountant for
the audit of the company’s annual financial statements and review of
financial statements included in the company’s Form 10Q or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal
years.
|
|
(2)
|
Represents
fees for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit or review of the
company’s financial statements that are not reported as Audit fees
above.
|
|
(3)
|
Represents
fees for professional services rendered by the principal accountant for
tax compliance, tax advice and tax planning.
|
|
(4)
|
Represents
fees for products and services provided by the principal accountant other
than the services reported as Audit fees, Audit-related fees or Tax fees,
including for services relating to the auditor’s consent filed as an
exhibit to the company’s Form S8 filing on January 9, 2007 and for the
principal accountant’s review of a proposed acquisition which was not
consummated during 2007.
|
This
schedule includes only those fees billed by the accountants during the periods
shown. Since the Reznick Group was not engaged until January 2009,
their fees for the 2008 audit along with the final invoices from Aronson &
Co. billed in 2009 are not included in the amounts shown above.
The Audit
Committee approves in advance audit and non-audit services to be provided by the
independent accountant. In other cases, in accordance with Rule 2-01(c)(7) of
Securities and Exchange Commission Regulation S-X, the Audit Committee may
delegate pre-approval authority to the Chairman of the Audit Committee for
matters which arise or otherwise require approval between regularly scheduled
meetings of the Audit Committee, provided that the Chairman report such
approvals to the Audit Committee at the next regularly scheduled meeting of the
Audit Committee. The Audit Committee was formed on May 1, 2003 and
after such formation 100% of the services provided by the independent accountant
were pre-approved by the Audit Committee.
Item 15.
Exhibits, Financial Statement
Schedules
Financial
Statements
|
|
F-4
– F-5
|
|
|
F-6
|
|
|
F-7
|
|
|
F-8
|
|
|
F-9
|
|
|
F-10
– F-23
|
Exhibits
|
|
3.1
|
Certificate
of Incorporation (incorporated by reference to Form 10-KSB for the year
ended December 31, 2001 filed with the Commission on February 7,
2003)
|
|
|
3.2
|
Bylaws
of the Company (incorporated by reference to Form 10-KSB for the year
ended December 31, 2001 filed with the Commission on February 7,
2003)
|
|
|
10.1
|
The
2006 Landmark Land Company, Inc. Incentive Stock Option Plan (incorporated
by reference to Form S-8 dated January 4, 2007 and filed with the
Commission on January 9, 2007)
|
|
|
10.2
|
Form
of Stock Option Agreement for Outside Directors and Outside Counsel to the
Board (incorporated by reference to Form S-8 dated January 4, 2007 and
filed with the Commission on January 9,
2007)
|
|
|
10.3
|
Agreement
and Plan of Acquisition of shares of KES, Inc. entered into effective
August 31, 2003 (incorporated by reference to Form 8K dated August 26,
2003 filed with the Commission on September 10,
2003)
|
|
|
10.4
|
A
purchase agreement entered into on October 1, 2004 between DPMG Inc. and
New Delos Partners, L.P. to purchase South Padre Island Development, L.P.
(incorporated by reference to Form 8K dated October 1, 2004 and filed with
the Commission on October 7, 2004)
|
|
|
10.5
|
A
Member’s Agreement of Apes Hill Development SRL entered into between LML
Caribbean, Ltd. and C.O. Williams Investments, Inc. in December 2005
(incorporated by reference to Form 10KSB dated December 31, 2005 and filed
with the Commission on March 23,
2006)
|
|
|
10.6
|
An
agreement between DPMG Inc. and Gyrodyne Company of America, Inc.
providing for consulting services to Gyrodyne and terminating the Golf
Operating Agreement and the Asset Management Agreement (incorporated by
reference to Form 8K dated February 15, 2007 and filed with the Commission
on February 16, 2007)
|
|
|
10.7
|
Purchase
Agreement between Landmark Land Company, Inc. and Dixie South Texas
Holdings, Ltd. entered into on April 13, 2007 (incorporated by reference
to Form 8K dated April 13, 2007 filed with the Commission on April 17,
2007)
|
|
|
16
|
Letter
Regarding Change in Certifying Accountant (incorporated by reference to
Form 8-K dated January 20, 2009 and filed with the Commission
on January 23, 2009)
|
|
|
21.1*
|
Subsidiaries
of the Registrant
|
|
|
23.1*
|
Consent
of Reznick Group, P.C.
|
|
|
23.2*
|
Consent
of Aronson & Co.
|
|
|
31.1*
|
Certification
of the Chief Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
31.2*
|
Certification
of the Chief Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
32.1*
|
Certification
of the Chief Executive Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
32.2*
|
Certification
of the Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
__________________________
|
Landmark
Land Company, Inc.
Financial Statements
Table
of Contents
|
|
Page
|
|
|
|
|
Report
of Independent Registered Accounting Firms
|
F-2
– F-3
|
|
Consolidated
Financial Statements
|
|
|
|
|
F-4
- F-5
|
|
|
|
F-6
|
|
|
|
F-7
|
|
|
|
F-8
|
|
|
|
F-9
|
|
|
|
F-10
- F-28
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Landmark
Land Company, Inc. and Subsidiaries
We have
audited the accompanying Consolidated Balance Sheet of Landmark Land Company,
Inc. and Subsidiaries (the Company) as of December 31, 2008, and the related
Consolidated Statements of Operations, Comprehensive Income, Stockholders’
Equity and Cash Flows for the year then ended. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Landmark Land Company, Inc. and
Subsidiaries as of December 31, 2008, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements for the year ended December 31,
2008 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated financial
statements, there is an uncertainty regarding the Company’s ability to generate
sufficient cash flow to meet its future obligations. This uncertainty
raises substantial doubt about its ability to continue as a going
concern. Management’s plan in regard to this matter is described in
Note 2 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/
Reznick Group, P.C.
Reznick
Group, P.C.
Bethesda,
Maryland
April 15,
2009
Report
of Independent Registered Public Accounting Firm
Board of
Directors
Landmark
Land Company, Inc.
Upper
Marlboro, MD
We have
audited the accompanying Consolidated Balance Sheet of
Landmark Land Company, Inc. and
Subsidiaries
(the Company) as of December 31, 2007 and the related
Consolidated Statements of Operations, Comprehensive Income, Stockholders’
Equity, and Cash Flows for the year then ended. These financial statements are
the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of
Landmark Land Company, Inc. and
Subsidiaries
as of December 31, 2007 and the consolidated results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America.
As
discussed in Note 14 to the financial statements, the Company adopted Financial
Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109
, January 1,
2007.
/s/
Aronson & Company
Rockville,
Maryland
March 26,
2008
|
Landmark
Land Company, Inc.
|
|
|
Consolidated
Balance Sheets
|
|
|
December
31, 2008 and 2007
|
|
|
|
|
|
Assets
|
|
2008
|
|
|
2007
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
270,278
|
|
|
$
|
4,934,820
|
|
|
Accounts
receivable
|
|
|
302,804
|
|
|
|
315,932
|
|
|
Receivable
from affiliates
|
|
|
1,265,250
|
|
|
|
451,953
|
|
|
Inventories
|
|
|
118,441
|
|
|
|
117,028
|
|
|
Other
current assets
|
|
|
259,523
|
|
|
|
235,128
|
|
|
Total
current assets
|
|
|
2,216,296
|
|
|
|
6,054,861
|
|
|
|
|
|
Real estate and golf management
contract rights acquired,
net of
|
|
|
|
|
|
|
|
|
|
accumulated
amortization of $961,726 and $924,472 in 2008 and
|
|
|
|
|
|
|
|
|
|
2007,
respectively
|
|
|
2,323,861
|
|
|
|
2,361,115
|
|
|
|
|
|
|
|
|
|
|
|
|
R
Real estate
|
|
|
|
|
|
|
|
|
|
Real
estate held for sale
|
|
|
3,163,498
|
|
|
|
1,379,203
|
|
|
Real
estate held for or under development
|
|
|
12,366,236
|
|
|
|
14,477,550
|
|
|
Total
real estate
|
|
|
15,529,734
|
|
|
|
15,856,753
|
|
|
|
|
|
Property and equipment,
net of accumulated depreciation
|
|
|
|
|
|
|
|
|
|
of
$1,213,198 and $785,818 in 2008 and 2007, respectively
|
|
|
6,091,385
|
|
|
|
4,960,701
|
|
|
|
|
|
Other
assets
|
|
|
|
|
|
|
|
|
|
Investment
in unconsolidated affiliates
|
|
|
15,734,327
|
|
|
|
4,587,466
|
|
|
Receivable
from affiliates, non-current
|
|
|
548,551
|
|
|
|
281,818
|
|
|
Deposits
|
|
|
80,181
|
|
|
|
100,000
|
|
|
Deferred
tax assets, non-current
|
|
|
4,400,000
|
|
|
|
4,668,000
|
|
|
Total
other assets
|
|
|
20,763,059
|
|
|
|
9,637,284
|
|
|
|
|
|
Total
assets
|
|
$
|
46,924,335
|
|
|
$
|
38,870,714
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Consolidated
Balance Sheets
|
|
|
December
31, 2008 and 2007
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
2008
|
|
|
2007
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Current
portion of notes payable to others
|
|
$
|
13,644,621
|
|
|
$
|
8,353,641
|
|
|
Current
portion of liabilities to affiliates
|
|
|
1,192,074
|
|
|
|
1,192,074
|
|
|
Accounts
payable and accrued expenses
|
|
|
1,173,750
|
|
|
|
623,629
|
|
|
Accrued
payroll and related expenses
|
|
|
404,373
|
|
|
|
326,309
|
|
|
Accrued
interest due affiliates
|
|
|
971,905
|
|
|
|
845,845
|
|
|
Accrued
interest due others
|
|
|
367,082
|
|
|
|
300,168
|
|
|
Other
liabilities and deferred credits
|
|
|
97,947
|
|
|
|
311,393
|
|
|
Current
income taxes
|
|
|
5,061
|
|
|
|
76,000
|
|
|
Total
current liabilities
|
|
|
17,856,813
|
|
|
|
12,029,059
|
|
|
|
|
|
Liabilities
due after one year
|
|
|
|
|
|
|
|
|
|
Notes
payable to others due after one year
|
|
|
3,542,310
|
|
|
|
7,941,090
|
|
|
Notes
payable to affiliate due after one year
|
|
|
200,000
|
|
|
|
-
|
|
|
Total
liabilities due after one year
|
|
|
3,742,310
|
|
|
|
7,941.090
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
21,599,123
|
|
|
|
19,970,149
|
|
|
|
|
|
|
|
|
|
|
|
|
StStockholders’
equity
|
|
|
|
|
|
|
|
|
|
Preferred
stock, Series C, non-voting, $0.50 par value; $100
|
|
|
|
|
|
|
|
|
|
liquidation
value; $10 cumulative annual dividend; 50,000 shares
|
|
|
|
|
|
|
|
|
|
authorized;
20,000 and 10,000 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
in
2008 and 2007, respectively, stated at liquidation value
|
|
|
2,000,000
|
|
|
|
1,000,000
|
|
|
Common
stock, $0.50 par value; 20,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
8,804,468
shares issued; 7,567,530 shares outstanding
|
|
|
4,402,234
|
|
|
|
4,402,234
|
|
|
Additional
paid-in capital
|
|
|
30,449,470
|
|
|
|
30,424,367
|
|
|
Treasury
stock, at cost, 1,236,938 shares
|
|
|
(1,299,820
|
)
|
|
|
(1,299,820
|
)
|
|
Accumulated
deficit
|
|
|
(10,167,890
|
)
|
|
|
(15,560,779
|
)
|
|
Accumulated
other comprehensive loss
|
|
|
(58,782
|
)
|
|
|
(65,437
|
)
|
|
Total
stockholders’ equity
|
|
|
25,325,212
|
|
|
|
18,900,565
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
46,924,335
|
|
|
$
|
38,870,714
|
|
|
|
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Consolidated
Statements of
Operations
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Revenues
|
|
|
|
|
|
|
|
Real
estate sales
|
|
$
|
4,668,066
|
|
|
$
|
19,674,625
|
|
|
Golf
course revenue
|
|
|
1,148,630
|
|
|
|
1,264,805
|
|
|
Golf
merchandise sales
|
|
|
250,853
|
|
|
|
296,999
|
|
|
Food
and beverage sales revenue
|
|
|
687,408
|
|
|
|
304,727
|
|
|
Management
and consulting revenue
|
|
|
4,057,840
|
|
|
|
2,276,017
|
|
|
Reimbursement
of out-of-pocket expenses
|
|
|
1,435,858
|
|
|
|
1,755,063
|
|
|
Total
|
|
|
12,248,655
|
|
|
|
25,572,236
|
|
|
|
|
|
Costs
of revenues
|
|
|
|
|
|
|
|
|
|
Cost
of real estate sold
|
|
|
3,297,858
|
|
|
|
12,987,515
|
|
|
Real
estate operating expenses
|
|
|
2,123,100
|
|
|
|
2,113,180
|
|
|
Cost
of golf merchandise sold
|
|
|
178,320
|
|
|
|
188,543
|
|
|
Cost
of food and beverage sold
|
|
|
319,825
|
|
|
|
148,378
|
|
|
Golf
operating expenses
|
|
|
2,184,426
|
|
|
|
1,862,666
|
|
|
Out-of-pocket
expenses
|
|
|
1,435,858
|
|
|
|
1,755,063
|
|
|
Management
and consulting payroll and related expenses
|
|
|
4,161,169
|
|
|
|
3,923,672
|
|
|
Depreciation
and amortization
|
|
|
648,802
|
|
|
|
588,164
|
|
|
Total
|
|
|
14,349,358
|
|
|
|
23,567,181
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(2,100,703
|
)
|
|
|
2,005,055
|
|
|
|
|
|
General,
administrative and other expenses
|
|
|
(2,049,207
|
)
|
|
|
(2,457,401
|
)
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
Equity
in income of unconsolidated affiliates
|
|
|
11,082,678
|
|
|
|
600,736
|
|
|
Interest
income
|
|
|
52,905
|
|
|
|
248,731
|
|
|
Interest
expense
|
|
|
(628,590
|
)
|
|
|
(630,907
|
)
|
|
Total
other income (expenses)
|
|
|
10,506,993
|
|
|
|
218,560
|
|
|
|
|
|
Net
income (loss) before income taxes
|
|
|
6,357,083
|
|
|
|
(233,786
|
)
|
|
|
|
|
Federal
and state income taxes
|
|
|
(269,163
|
)
|
|
|
(66,718
|
)
|
|
|
|
|
Net
income (loss)
|
|
$
|
6,087,920
|
|
|
$
|
(300,504
|
)
|
|
|
|
|
Basic
income (loss) per common share
|
|
$
|
0.79
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
|
|
|
Diluted
income (loss) per common share
|
|
$
|
0.79
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
Diluted
weighted average shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Consolidated
Statements of Comprehensive
Income
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
6,087,920
|
|
|
$
|
(300,504
|
)
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
6,655
|
|
|
|
(15,745
|
)
|
|
|
|
|
Comprehensive
income (loss)
|
|
$
|
6,094,575
|
|
|
$
|
(316,249
|
)
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements.
|
Landmark
Land Company, Inc.
|
|
Consolidated
Statements of Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
Common
|
|
Preferred
|
|
Paid
In
|
|
Treasury
|
|
Accumulated
|
|
Comprehensive
|
|
|
Total
|
|
Stock
|
|
Stock
|
|
Capital
|
|
Stock
|
|
Deficit
|
|
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
$12,707,252
|
|
$4,402,234
|
|
$1,000,000
|
|
$30,304,044
|
|
$(1,299,820)
|
|
$(21,649,514)
|
|
$(49,692)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued to directors
|
67,686
|
|
-
|
|
-
|
|
67,686
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock compensation
|
52,637
|
|
-
|
|
-
|
|
52,637
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
impact of change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accounting
for uncertainties in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
6,867,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,867,000
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
(300,504)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(300,504)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared on common stock
|
(377,761)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(377,761)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared on preferred stock
|
(100,000)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(100,000)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
(15,745)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(15,745
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
18,900,565
|
|
4,402,234
|
|
1,000,000
|
|
30,424,367
|
|
(1,299,820)
|
|
(15,560,779)
|
|
(65,437
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock compensation
|
25,103
|
|
-
|
|
-
|
|
25,103
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, 10,000 shares sold
|
1,000,000
|
|
-
|
|
1,000,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period
|
6,087,920
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,087,920
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared on common stock
|
(567,565)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(567,565)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared on preferred stock
|
(127,466)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(127,466)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
6,655
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
$25,325,212
|
|
$4,402,234
|
|
$2,000,000
|
|
$30,449,470
|
|
$(1,299,820)
|
|
$(10,167,890)
|
|
$(58,782)
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
|
Consolidated
Statements of Cash
Flows
|
|
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
income (loss) for the period
|
|
$
|
6,087,920
|
|
|
$
|
(300,504
|
)
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
provided
(used) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
648,802
|
|
|
|
588,164
|
|
|
Stock
bonus and options expensed
|
|
|
25,103
|
|
|
|
120,323
|
|
|
Equity
in (income) of unconsolidated affiliates
|
|
|
(11,082,678
|
)
|
|
|
(600,736
|
)
|
|
(Increase)
decrease in
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(11,080
|
)
|
|
|
2,474,386
|
|
|
Receivable
from affiliates
|
|
|
(913,350
|
)
|
|
|
154,253
|
|
|
Inventories
|
|
|
(1,413
|
)
|
|
|
(21,487
|
)
|
|
Other
current assets
|
|
|
(24,395
|
)
|
|
|
26,598
|
|
|
Deposits
|
|
|
19,819
|
|
|
|
35,800
|
|
|
Deferred
tax assets
|
|
|
268,000
|
|
|
|
-
|
|
|
Increase
(decrease) in
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
550,121
|
|
|
|
(90,410
|
)
|
|
Accrued
payroll and related expenses
|
|
|
78,064
|
|
|
|
56,546
|
|
|
Accrued
interest
|
|
|
192,974
|
|
|
|
135,097
|
|
|
Other
liabilities and deferred credits
|
|
|
(213,446
|
)
|
|
|
(1,268,009
|
)
|
|
Current
income taxes
|
|
|
(70,939
|
)
|
|
|
(111,000
|
)
|
|
Net
cash (used) provided by operating activities
|
|
|
(4,446,498
|
)
|
|
|
1,199,021
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment, net
|
|
|
(249,736
|
)
|
|
|
(4,282,219
|
)
|
|
Purchase
and development of real estate inventory
|
|
|
(4,577,266
|
)
|
|
|
(16,643,774
|
)
|
|
Sale
of real estate inventory
|
|
|
3,411,790
|
|
|
|
13,245,719
|
|
|
Investment
in unconsolidated affiliate
|
|
|
-
|
|
|
|
(148,750
|
)
|
|
Net
cash (used) by investing activities
|
|
|
(1,415,212
|
)
|
|
|
(7,829,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from debt to others
|
|
|
3,764,488
|
|
|
|
19,572,018
|
|
|
Repayments
of debt to others
|
|
|
(2,872,289
|
)
|
|
|
(12,583,922
|
)
|
|
Sale
of preferred stock
|
|
|
1,000,000
|
|
|
|
-
|
|
|
Cash
dividends on common stock
|
|
|
(567,565
|
)
|
|
|
(760,459
|
)
|
|
Cash
dividends on preferred stock
|
|
|
(127,466
|
)
|
|
|
(100,000
|
)
|
|
Net
cash provided by financing activities
|
|
|
1,197,168
|
|
|
|
6,127,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) in cash during period
|
|
|
(4,664,542
|
)
|
|
|
(502,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
balance, beginning of period
|
|
|
4,934,820
|
|
|
|
5,437,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
balance, end of period
|
|
$
|
270,278
|
|
|
$
|
4,934,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest, including $20,000 paid to affiliates in
2008
|
|
|
|
|
|
|
|
|
|
|
and
$80,000 in 2007
|
|
$
|
956,099
|
|
|
$
|
1,151,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
73,702
|
|
|
$
|
178,960
|
|
The
accompanying Notes to Consolidated Financial Statments are an integral part of
these financial statements.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
1.
Organization
and significant accounting policies
(I)
Landmark Land Company, Inc. (the company)
Landmark
Land Company, Inc., a Delaware corporation, is in the business of developing and
managing real estate and golf projects throughout the world. At
various times in the past, the company has availed itself of the possibilities
of acquiring high quality developments that for various reasons had become
distressed. It was at these times that the company acquired well
known developments in the U.S. such as La Quinta, Mission Hills, Palm Beach
Polo, and Kiawah Island. In each case, the company was able to
re-plan, reposition, and reintroduce these quality developments to the
market. The economic conditions that we are now experiencing make it
extremely difficult to anticipate new resort developments commencing in the near
future. As a result, the company is focusing its experience and
talent on analyzing a number of the many distressed developments in the U.S. and
Caribbean markets which were commenced over the past several years, but which
are now currently dormant or in some form of financial
difficulty. Many of these opportunities are well located and well
planned, but lack the financing and/or market necessary for them to
continue. A good example of this type of opportunity is a world class
Jack Nicklaus resort development on the island of St. Lucia named Point
Hardy. The company recently entered into a management agreement with
the owners of this development and it is currently in negotiations with regard
to several other management and/or development agreements.
Prior to
October 1991, the company was in the business of real estate development and
sales, including owning and operating a number of resort golf courses and tennis
clubs, as well as owning a savings bank, a mortgage banking company, a life
insurance company, and other financial services companies. Substantially all of
the company's operations were owned and its businesses conducted, by
subsidiaries of Oak Tree Savings Bank, S.S.B. ("OTSB"), Landmark's savings bank
subsidiary headquartered in New Orleans, Louisiana.
In 1991,
as a result of regulations and requirements of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), the Office of Thrift
Supervision ("OTS") seized substantially all of the company's assets and
transferred them to a newly chartered federal thrift institution in which the
company and its shareholders had no interest. Subsequent to this
seizure, the company had little operational activity and extremely limited
capital resources and liquidity. Between 1991 and March 2002, the
company was essentially dormant, except for the pursuit of a lawsuit captioned
Landmark Land Company, Inc. v. United States (Case No. 95-502-C in the United
States Court of Federal Claims). The suit included claims by the
company for breach of contract, restitution, and deprivation of property without
just compensation or due process of law.
During
2000, the company was awarded a judgment of approximately $21 million against
the United States in the above-referenced suit, which judgment was affirmed on
appeal in July of 2001. A further appeal period expired during the
first quarter of 2002 without a further appeal being filed and the company
received the full amount of the judgment in March 2002. After
settling a number of outstanding claims, the company now pursues golf and real
estate management and development opportunities through the subsidiaries and
contracts discussed below.
(II)
Landmark of Spain, Inc. and Landmark Developments of Spain, SL
In
February 2003, the company formed Landmark of Spain, Inc., a Delaware
corporation owned 100% by the company. In March 2003, Landmark of
Spain, Inc. and a local Spanish entity formed a new Spanish company, Landmark
Developments of Spain, SL to pursue real estate development opportunities in
Spain and Portugal. Landmark of Spain, Inc. owns 50% of the Spanish
company and accounts for its investment on the equity method. Landmark
Developments of Spain, SL’s functional currency is the Euro (€).
The
company was obligated to fund 1.0 million € ($1.3 million at time of funding) to
the Spanish company during its first two years of operations. Through
December 31, 2008, the company’s 50% share of the Spanish company’s operating
losses totaled approximately $1.3 million, and exceeded its investment by
approximately $58,000. This excess loss has been deducted from its
receivable from this unconsolidated affiliate in the December 31, 2008
Consolidated Balance Sheet. At December 31, 2007, the company’s
share of the Spanish company’s accumulated deficit was $1.1
million resulting in net equity investment of $0.2 million. The
assets and liabilities of the company’s foreign operations are translated at
rates of exchange in effect at year end, and revenue, expenses, gains and losses
are translated at the average rates of exchange for the year
.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Landmark
Developments of Spain, SL reported the following condensed financial position
and profit (loss) for the periods ended December 31, 2008 and 2007, translated
into U.S. dollars.
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
672,381
|
|
|
$
|
1,036,976
|
|
|
Liabilities
|
|
|
787,441
|
|
|
|
726,037
|
|
|
Stockholders’
equity (deficit)
|
|
|
(115,060
|
)
|
|
|
310,939
|
|
|
Net
(loss) profit
|
|
|
(439,309
|
)
|
|
|
852,891
|
|
(III)
DPMG, Inc.
Effective
August 31, 2003, the company acquired all the outstanding stock of KES, Inc., an
Ohio corporation that owned directly or indirectly 100% of (1) DPMG, a Delaware
corporation formed in January 1996, (2) OTP, Inc., an Oklahoma corporation
formed in September 1994, (3) Delos Partners, Inc., an Ohio corporation formed
in December 1993, and (4) Landmark Hellas, Inc. (formerly Landmark International
Corp.), an Oklahoma corporation formed in December 1998. The primary
assets of the acquired companies consist of interests in undeveloped land and
golf and real estate management and development contracts.
Effective
June 30, 2004, KES, Inc., Landmark Hellas, Inc., Delos Partners, Inc., and OTP,
Inc. were merged into DPMG in a tax-free reorganization under Internal Revenue
Code Section 368.
(IV)
South Padre Island Development, LLC
On
October 1, 2004, the company’s wholly-owned subsidiary, DPMG purchased all the
limited partnership interest in South Padre Island Development, L.P., a Delaware
limited partnership and all the outstanding stock of SPID, Inc., a Delaware
corporation, its sole general partner (collectively, “South
Padre”). South Padre is the owner of South Padre Island Golf Club and
the related residential lot and housing development activities in the town of
Laguna Vista, Texas. DPMG had been managing the golf and real estate
development activities at South Padre since 1995. Effective June 1,
2006, South Padre Island Development, L.P. was converted from a limited
partnership to a limited liability company. Effective August 31,
2006, SPID, Inc., the former general partner of South Padre Island Development,
L.P., was merged into DPMG and DPMG transferred its 100% member interest in
South Padre Island Development, LLC to the company. SPIBS, LLC owns the liquor
license for food and beverage operations at the golf club which it operates
under a lease from South Padre. South Padre Island Realty, LLC was
formed in 2008 as a real estate brokerage company, but did not begin operations
until 2009.
(V)
LML Caribbean, Ltd. and Apes Hill Development SRL
On
November 25, 2005, the company organized LML Caribbean, Ltd. (“Caribbean”) under
the International Business Companies Act, 1999 of Saint Lucia, to pursue real
estate and golf development business in the Caribbean. The company owns 100% of
Caribbean.
In
December 2005, Caribbean and C. O. Williams Investments, Inc., a local Barbados
company (“Williams”), created Apes Hill Development SRL (“Apes Hill”), a society
incorporated under the provisions of Society With Restricted Liability Act Cap.
318B of the Laws of Barbados. Caribbean owns one-third and Williams
owns two-thirds of Apes Hill. Apes Hill is developing a golf course,
resort, and residential community on approximately 470 acres on the island of
Barbados. Apes Hill closed its first lot sales in the fourth quarter
of 2007 and expects to open the golf course in the fall of 2009. Apes
Hill has negotiated financing from a local lender in the amount of $60.7 million
for the development of the golf course, infrastructure, beach club, and initial
residential phases of the project, all of which were begun in 2006 and
2007. The loan bears interest at the lender’s prime rate (9.8% at
December 31, 2008) for advances denominated in Barbados dollars and 4% over
3-month LIBOR (5.44% at December 31, 2008) for advances denominated in U.S.
dollars. The loan is repayable from real estate sales proceeds and
must be repaid in full by May 4, 2011. At December 31, 2008, the
outstanding balance on Apes Hill’s development loan had been paid down to $44.2
million, and in addition, Apes Hill had cash in the amount of $13.4 million in
escrow with the lender which is to be used for future development purposes or
loan repayments. Debt covenants require lender approval for
borrower’s use of any funds in excess of the required loan
repayments.
Caribbean
accounts for its investment in Apes Hill on the equity method. Its
$4.0 million investment commitment to Apes Hill was funded in January 2006.
Caribbean’s share of Apes Hill’s profit in 2008 and 2007 was $11.3 million
and $0.2 million, respectively. At December 31, 2008 and 2007, the
company’s investment in Apes Hill totaled $15.0 million and $3.7 million,
respectively.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Caribbean’s
functional currency is the Eastern Caribbean dollar. Apes Hill’s
functional currency is the Barbados dollar. Conversions of Barbados dollars into
U.S. dollars and transfers of US dollars out of the country requires approval of
the Central Bank of Barbados (“Bank”). Therefore, the company’s
ability to repatriate profits and capital from Apes Hill may be limited or
delayed depending on the level of international reserves under the Bank’s
control at particular points in time. Apes Hill reported the
following condensed financial position and profit for the periods ended December
31, 2008 and 2007, translated into U.S. dollars at a rate of 2BD$ to
1US$.
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
105,316,142
|
|
|
$
|
79,013,098
|
|
|
Liabilities
|
|
|
60,213,062
|
|
|
|
67,817,013
|
|
|
Stockholders’
equity
|
|
|
45,103,080
|
|
|
|
11,196,085
|
|
|
Net
profit
|
|
|
33,906,995
|
|
|
|
559,847
|
|
(VI)
Presidential Golf Club, LLC
On
December 8, 2005, DPMG and V.O.B. Limited Partnership, a Maryland limited
partnership (“V.O.B.”), formed Presidential Golf Club, LLC, a Maryland limited
liability company (“Presidential”). Presidential has developed an
18-hole championship golf course on approximately 240 acres of land in Upper
Marlboro, Maryland.
During
the first quarter of 2008, DPMG and V.O.B. agreed to amendments to the
Presidential Golf Club, LLC operating agreement that restructured V.O.B.’s
contributions for the construction of the golf course and related facilities
effective July 31, 2007. Under the amended agreement, V.O.B. wrote
off a portion of the cost of the golf course against its surrounding real estate
development and converted the remainder of its funding from debt to
equity. In addition, DPMG’s ownership in Presidential was diluted
from 50% to 7.45%. The company accounts for its investment under the
cost method. Presidential opened its golf course for play on May 1,
2008.
(VII)
Consolidated entities
The
accompanying Consolidated Financial Statements include the accounts of Landmark
Land Company, Inc., Landmark of Spain, Inc., DPMG, Inc., South Padre Island
Development, LLC, SPIBS, LLC, Lake Presidential Beverage Company, Inc., and LML
Caribbean, Ltd., collectively referred to as “the companies”. All
material inter-company accounts and transactions have been eliminated in the
Consolidated Financial Statements.
(VIII)
Accounting policies
Use of
estimates:
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Significant estimates are used in the determination of the
deferred tax asset valuation allowance (see Note 14), and the possible
impairment of long-lived assets. Estimates are inherently subjective
in nature; actual results could differ from those estimates and such differences
could be material.
Cash
equivalents:
Cash equivalents consist of financial instruments
with original maturities of less than three months. The companies
maintain cash accounts that may exceed federally insured limits during the
year. The companies do not believe that this results in any
significant credit risk.
Merchandise
inventories:
Golf merchandise inventory is carried at the
lower of cost or market. Cost is determined by the weighted average
cost method. Inventory at both December 31, 2008 and 2007 totaled $0.1
million.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Accounts receivable and
concentrations of credit risk:
Accounts receivable are stated
at the amount the companies expect to collect. The companies maintain
allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. Management
considers the following factors when determining the collectibility of specific
customer accounts: customer credit worthiness, past transaction history with the
customer, current economic industry trends, and changes in customer payment
terms. If the financial condition of the companies’ customers were to
deteriorate, adversely affecting their ability to make payments, additional
allowances would be required. Based on management’s assessment, the
companies provide for estimated uncollectible amounts through a charge to
earnings and a credit to a valuation allowance. Balances that remain
outstanding after the companies have used reasonable collection efforts are
written off through a charge to the valuation allowance and a credit to accounts
receivable. The allowances for doubtful accounts totaled
approximately $43,000 and $27,000 at December 31, 2008 and 2007,
respectively.
Property and
equipment:
Property and equipment are recorded at
cost. Depreciation is computed based on the straight-line method over
the estimated useful lives of the related assets as follows:
|
Leasehold
improvements
|
Shorter
of estimated life or lease term
|
|
Furniture
and fixtures
|
7-10
years
|
|
Machinery
and equipment
|
3-8
years
|
|
Aircraft
|
10
years
|
|
Software
|
3
years
|
|
Buildings
|
40
years
|
Depreciation
expense totaled $0.6 million for both the years ended December 31, 2008 and
2007.
Real estate and golf management
contract rights:
The company, through its DPMG subsidiary,
owns management, development, and profit participation contract rights in
various real estate and golf properties in the United States and
Spain. At December 31, 2008 and 2007, these contracts were reflected
on the company’s Consolidated Balance Sheets as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Allocated
acquisition cost
|
|
$
|
3,285,587
|
|
|
$
|
3,285,587
|
|
|
Accumulated
amortization
|
|
|
(961,726
|
)
|
|
|
(924,472
|
)
|
|
Net
book value
|
|
|
2,323,861
|
|
|
$
|
2,361,115
|
|
Amortization
of golf management contracts is recognized on a straight-line basis over three
years. Amortization of real estate development and management
contracts is recorded on the gross revenue method over the expected life of each
contract of six to eighteen years. The principal contract with
remaining unamortized costs at December 31, 2008 is currently on hold, pending
zoning and development approval to start construction. Minimal
amortization was recorded in 2008 and none in 2007. Estimated
amortization for the next five years is as follows:
|
Year
Ending December 31,
|
|
Amount
|
|
|
|
|
|
|
|
2009
|
|
$
|
-
|
|
|
2010
|
|
|
-
|
|
|
2011
|
|
|
35,983
|
|
|
2012
|
|
|
163,818
|
|
|
2013
|
|
|
108,205
|
|
Recognition
of revenue:
Property
management:
Fees for property management and golf design are
recognized when earned under the related contracts, generally when the services
are performed. Revenue earned under construction supervision
contracts is earned on the percentage of completion method as construction costs
are incurred.
Land
development:
South Padre is engaged in the development of
various land parcels. The company’s accounting policies follow the
provisions of Financial Accounting Standards Board (FASB) Statement 66,
Accounting for Sales of Real
Estate
, which specifies minimum down payment requirements, financing
terms, and other reporting requirements for sales of real
estate. Sales are reported for financial reporting purposes when the
transaction is closed and title transfers.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Golf revenue:
Golf revenue is
recognized when rounds are played or merchandise is sold.
Real estate under
development:
Land costs include direct and indirect
acquisition costs, off-site and on-site improvements, and carrying charges for
projects under active development. Interest and other carrying costs on projects
not under development are charged to operations.
Improvement
costs and carrying charges not directly identified with specific properties are
allocated to development phases and to individual lots in proportion to their
estimated fair value. At the time sales are recognized, accumulated costs
are relieved from land inventory and charged to cost of sales based on the cost
accumulations and allocations. Real estate held for development and sale is
carried at the lower of cost or fair value, with periodic evaluations of
possible impairment as discussed in the “Impairment of long-lived assets”
paragraph below.
Income
taxes:
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. A valuation allowance is recorded to reduce tax
assets to an amount for which realization is more likely than
not. The effect of changes in tax rates is recognized in the period
in which the rate change occurs.
Marketing
costs:
The company’s policy is to expense marketing costs as
incurred. Marketing expense included in the Consolidated Statements
of Operations for each of the years ended December 31, 2008 and 2007 was $0.5
million.
Foreign currency
translation:
The assets and liabilities of the company’s
foreign operations are translated at rates of exchange in effect at year end,
and revenue, expenses, gains, and losses are translated at the average rates of
exchange for the year. The aggregate foreign currency translation
gain included on the Consolidated Statement of Operations was minimal in 2007
and none in 2008. Unrealized gains and losses resulting from
translation of the foreign entity’s year-end balance sheet are accumulated as a
separate component of stockholders’ equity until the respective assets or
liabilities are liquidated.
Earnings per
share:
Earnings per share (EPS) are computed using weighted
average number of common shares outstanding during the year. Diluted
earnings per share reflect the common stock options granted to employees,
directors, and legal counsel. The following is a reconciliation of
the numerators and denominators used in the calculation of earnings per
share:
|
|
|
Year
Ending December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
6,087,920
|
|
|
$
|
(300,504
|
)
|
|
Less: Preferred
dividends
|
|
|
127,466
|
|
|
|
100,000
|
|
|
Net
income (loss) available to common stockholders
|
|
|
5,960,454
|
|
|
|
(400,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
Incremental
shares from assumed exercise of dilutive options
|
|
|
-
|
|
|
|
-
|
|
|
Diluted
weighted average common shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
Basic
income (loss) per common share
|
|
$
|
0.79
|
|
|
$
|
(0.05
|
)
|
|
Diluted
income (loss) per common share
|
|
$
|
0.79
|
|
|
$
|
(0.05
|
)
|
The
dilutive effect of the employees’ and directors’ stock options is reported using
the treasury stock method (i.e., the assumed proceeds received from exercise of
the options are assumed to be used to purchase treasury shares at the average
market price for the period). In accordance with Statement of
Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share
, if there
is a loss from continuing operations as the company experienced in 2007, the
common stock equivalents are deemed antidilutive and diluted earnings per share
is calculated in the same manner as basic earnings per share. During
2008, the average stock price was less than the exercise price for the options;
consequently, there is no dilution assumed for 2008 as well.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Impairment of long-lived
assets:
In accordance with SFAS No. 144,
Accounting for the Disposal of
Long-Lived Assets
, management evaluates real estate held for sale, real
estate held for or under development and its intangible assets whenever events
or changes in circumstances indicate that the carrying value of the asset may be
impaired. An impairment loss is recognized when the carrying value is
not recoverable and exceeds its fair value. Recoverability is based
upon the estimated future cash flows expected to result from the use of the
asset, including disposition. Projected cash flows are discounted for
real estate held for sale and undiscounted for real estate held for or under
development and for intangible assets. Cash flow projections and
impairment evaluations are necessarily based on estimates and actual results may
vary from those estimates. Generally, the company expects real estate
sales volume and prices to recover slowly from the current depressed
level. Interest rates should remain low compared to historic
averages, and stimulus incentives provided through government programs should
encourage buyers to return to the market. Management projections
assume that the company will be able to complete development and disposal of its
real estate properties in the ordinary course of business. Based on
the company’s cash flow projections, no provision for impairment of assets was
required in 2008 or 2007.
Fair value of financial
instruments:
The company measures its financial assets and
liabilities in accordance with SFAS No. 157 Fair Value
Measurements. The fair value of a financial instrument is generally
the amount at which the instrument could be exchanged in a current transaction
between willing parties. The fair value of cash, receivables, and
payables approximates cost due to the short period of time to
maturity.
Warranty
accruals:
The company’s subsidiary, South Padre, provides a
one-year latent defects warranty and a ten-year structural warranty on the
houses it builds. The accompanying Consolidated Financial Statements
include a provision for warranty expense calculated as 0.5% of gross house
sales. The summary of the warranty accruals for 2008 and 2007
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Warranty
accrual balance January 1
|
|
$
|
132,165
|
|
|
$
|
146,635
|
|
|
Provision
for warranty
|
|
|
21,130
|
|
|
|
85,384
|
|
|
Payments
|
|
|
(62,398
|
)
|
|
|
(99,854
|
)
|
|
Warranty
accrual balance December 31
|
|
$
|
90,897
|
|
|
$
|
132,165
|
|
Customer
deposits:
As part of the company’s homebuilding operations,
homebuyers are required to pay an upfront deposit with the company when a home
purchase contract is executed. The company records this deposit as a
liability until such time as the contract actually closes and title passes to
the purchasers. At December 31, 2008, the company held no customer
deposits and at December 31, 2007, deposits totaled less than $0.2
million. These deposits are included in other liabilities and
deferred credits on the company’s Consolidated Balance Sheets.
Out of pocket
expenses:
The company’s management, construction, and
development agreements require customers to pay a management fee plus
reimbursement for the out of pocket expenses incurred on behalf of the
customer. Consistent with EITF Topic 01-14, “Income Statement
Characterization of Reimbursements Received For Out of Pocket Expenses
Incurred”, the company recognizes this reimbursement as a separate component of
revenue and operating expenses on the Consolidated Statements of
Operations.
Reclassifications:
Certain
reclassifications have been made in the 2007 Consolidated Financial
Statements to conform to the 2008 presentation. These reclassifications
had no impact on previously reported net income.
2.
Liquidity and capital resources
Liquidity
needs in 2009
are expected
to exceed amounts available or committed to be available at December 31,
2008. The company’s Consolidated Balance Sheet at December 31, 2008
reports current assets totaling $2.2 million and current liabilities totaling
$17.9 million for a $15.7 million excess of current liabilities over current
assets. Approximately $12.7 million of the current liabilities is due
to two Texas banks that have funded the company’s South Padre real estate
development for the last ten years. Subsequent to December 31,
2008, both banks have agreed to renew the company’s lines of credit into 2010 on
substantially the same terms, except for a $1 million reduction in the maximum
amount, reducing the total lines available to $13.4 million. We do
not expect the change to have any significant impact on the company’s real
estate operations. Additionally, approximately $2.2 million of the
current liabilities is owed to affiliates who have previously advanced funds for
working capital and are not expected to demand repayment until the company’s
liquidity position improves. One of those affiliates has committed up
to $1.1 million additional funds in 2009 to fund anticipated operating
shortfalls.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
The
company expects profits from its Barbados affiliate in 2009, but expects losses
from its domestic operations. The profits in Barbados are projected
to be used to repay bank loans and/or to be reinvested in continuing development
of the Apes Hill property and accumulated profits are not expected to be
available for distribution to the owners until 2010 or 2011. To
reduce the anticipated 2009 cash flow shortfall from domestic operations, the
company has reduced operating expenses, including reductions in personnel and,
effective April 1, 2009, is deferring payment of 20% of company executives’
salaries until cash is available to pay the deferred amounts. Current
staffing levels remain adequate to service additional projects that the company
is pursuing. To meet the remaining cash flow shortfall, the
company has applied for new lines of credit from banks operating in the
Caribbean and expects funding from those banks before additional funds are
required to pay 2009 operating costs; however, there is no guarantee that such
commitments and funding will be received. If such loans are not
received, the company could be required to make further reductions in personnel
and to liquidate real estate or other assets at prices less than would be
expected under normal operating conditions. The Consolidated
Financial Statements do not reflect any adjustments that might result from the
outcome of these uncertainties.
The
accompanying Consolidated Financial Statements for the year ended December 31,
2008 were prepared under the assumption that the company will continue to
operate as a going concern, which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business. As
discussed in the previous paragraphs, the company faces various uncertainties
that raise substantial doubt about its ability to continue as a going
concern. These Consolidated Financial Statements do not include any
adjustments that may result from the outcome of these
uncertainties.
3.
Property and equipment
At
December 31, 2008 and 2007, property and equipment consist of the
following:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
216,154
|
|
|
|
-
|
|
|
Aircraft
|
|
|
4,047,280
|
|
|
$
|
4,047,280
|
|
|
Golf
course improvements
|
|
|
282,752
|
|
|
|
282,752
|
|
|
Buildings
|
|
|
1,758,032
|
|
|
|
562,925
|
|
|
Automobiles
|
|
|
53,017
|
|
|
|
50,831
|
|
|
Furniture,
machinery, and equipment
|
|
|
947,348
|
|
|
|
802,731
|
|
|
|
|
|
7,304,583
|
|
|
|
5,746,519
|
|
|
Less: Accumulated
depreciation
|
|
|
(1,213,198
|
)
|
|
|
(785,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
property and equipment
|
|
$
|
6,091,385
|
|
|
$
|
4,960,701
|
|
Increases
in land and buildings reflect the cost of the ten homes converted to rental
property at South Padre during 2008. The increase in furniture,
machinery, and equipment reflects the replacement of golf maintenance equipment
at South Padre. The equipment was acquired under a 48-month capital
lease financed by Deere Credit. At December 31, 2008, leased
equipment included above totaled $318,842 and accumulated depreciation on that
equipment totaled $15,942.
Property
and equipment is carried at cost, less accumulated depreciation.
4.
Real estate held for sale
The
company, through subsidiaries, owns the following interests in real estate held
for sale at December 31, 2008 and 2007:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Laguna
Vista, TX – developed single family lots
|
|
$
|
875,993
|
|
|
$
|
1,020,681
|
|
|
Laguna
Vista, TX – completed homes, including models
|
|
|
2,287,505
|
|
|
|
358,522
|
|
|
Total
real estate held for sale
|
|
$
|
3,163,498
|
|
|
$
|
1,379,203
|
|
The
increase in real estate held for sale reflects the completion of construction of
houses built on a speculative basis. Note the related decrease in
real estate held for or under development below.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
5.
Real estate held for or under development
At
December 31, 2008 and 2007, the company, through its subsidiaries, owns real
estate held for or under development in Texas and Hawaii as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Laguna
Vista, TX – developed lots for future home construction
|
|
$
|
1,161,250
|
|
|
$
|
1,633,670
|
|
|
Laguna
Vista, TX – home construction costs in progress
|
|
|
908,027
|
|
|
|
4,262,515
|
|
|
Laguna
Vista, TX – lot development costs in progress
|
|
|
3,884,399
|
|
|
|
2,280,776
|
|
|
Laguna
Vista, TX – vacant land
|
|
|
5,115,995
|
|
|
|
5,011,995
|
|
|
Total
real estate held for or under development at South Padre
|
|
|
11,069,671
|
|
|
|
13,188,956
|
|
|
|
|
|
|
|
|
|
|
|
|
Hana,
HI – 45% interest in approximately 128 acres
|
|
|
1,296,565
|
|
|
|
1,288,594
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
real estate held for or under development
|
|
$
|
12,366,236
|
|
|
$
|
14,477,550
|
|
The
decrease in real estate held for or under development reflects the completion of
construction of houses that are now held for sale as discussed in Note 4
above.
Real
estate held for or under development is valued at the lower of cost or fair
value. All of the real estate held for sale and real estate held for
or under development in Texas is pledged as collateral for development
loans. See Note 11 for details.
The
company capitalizes interest costs related to land development activities as the
land is prepared for its intended use. Capitalization ceases when the
development is substantially complete. Interest on debt associated
with operations and equipment is expensed as incurred. See Notes 10 and 11 for
details on debt and amounts of interest capitalized to real estate or expensed
to operations.
6.
Stockholders’ equity
Effective
January 1, 2007, the company implemented Financial Accounting Standards Board
Interpretation (FIN) No. 48,
Accounting for Uncertainty in Income
Taxes,
recognizing $6.9 million of deferred tax assets not previously
included on the balance sheet. The same amount was credited to
accumulated deficit
as described more
completely in Note 14, Income taxes.
The
company has declared dividends on common stock during the years 2008 and 2007 as
shown in the following table. In each case, the dividend was payable
on the first business day that was ten days after the record
date. The dividends paid represented a distribution of capital rather
than a distribution of earnings and profits.
|
Declaration Date
|
|
Amount Per Share
|
|
Record Date
|
|
|
|
|
|
|
|
7/14/08
|
|
$0.025
|
|
9/2/08
|
|
5/8/08
|
|
$0.025
|
|
6/3/08
|
|
2/13/08
|
|
$0.025
|
|
2/24/08
|
|
11/6/07
|
|
$0.025
|
|
11/22/07
|
|
8/10/07
|
|
$0.025
|
|
8/24/07
|
During
2007, the company granted additional stock purchase options to its outside
directors and certain employees as discussed in Note 7 Stock option
plans. The Company is accounting for the options using the grant date
fair value method. Using the Black Scholes Merton model, the grant to directors
on May 23, 2007 for 50,000 shares was valued at $0.73 per share and the grant on
August 10, 2007 for 50,000 shares at $0.63 per share. Since these
options are immediately exercisable, the total value of the options was charged
to expense and credited to paid-in capital in an amount less than $0.1 million
in 2007.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
The Black
Scholes Merton model was also used to value the options granted to employees
during 2007 as summarized in the following table:
|
Date of Grant
|
No. of Shares
|
Exercise
Price /
Share
|
Option Value / Share
|
|
|
|
|
|
|
5/23/07
|
199,000
|
$2.85
|
$1.03
|
|
8/10/07
|
2,500
|
$2.55
|
$0.87
|
|
11/30/07
|
270,000
|
$1.70
|
$0.43
|
Since the
employees’ options vest at the end of five years, the estimated option value is
being expensed over the five-year vesting period. The December 31,
2008 and 2007 Consolidated Financial Statements include minimal expense for the
employee options, with the same amounts credited to paid-in
capital.
In
September 2008, the company sold an additional 10,000 shares of Series C
preferred stock, $0.50 par value, $100 liquidation value with a $10 cumulative
annual dividend per share, for $1,000,000. Dividends on preferred
stock were paid in the approximate amount of $0.1 million in both 2008 and
2007.
7.
Stock option plans
On
December 31, 2008, the company had two share-based compensation plans, which are
described below. The compensation cost related to options granted,
based on the grant date fair value, was estimated in accordance with the
provisions of SFAS No. 123R. The costs charged to income and the
related effect on deferred tax benefits were minimal in 2008 and
2007.
Incentive
stock option plan
The 2006
Landmark Land Company, Inc. Incentive Stock Option Plan (“Plan”) was adopted by
the Board of Directors on April 29, 2006, and approved by shareholders on
November 18, 2006. The Plan permits the grant of stock options for up
to 766,000 shares of common stock to company employees. Option awards
are generally granted with an exercise price determined by the Board of
Directors pursuant to the Plan, but not less than the fair market value of the
company’s stock at the time of grant. Generally, options must be
granted within ten years of the plan adoption date with vesting five years from
date of grant and must be exercised within five years from date of
vesting.
The fair
value of each option award is estimated on the date of grant using a Black
Scholes Merton option valuation model that uses the assumptions noted in the
following table. Expected volatility is estimated based upon the
historical volatility of entities with characteristics (size, industry, etc.)
similar to the company and the company’s own historical
volatility. The expected term of the options granted represents the
period of time that options granted are expected to be
outstanding. The expected forfeiture rate represents the percentage
of options expected to be forfeited before vesting. The risk free
rate is based upon the U.S. Treasury constant maturity yield for a period
comparable to the expected term. The dividend rate is an estimate of
the expected yield on the company stock over the expected term.
|
Assumption
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Expected
volatility
|
|
No
|
|
43%
|
|
Expected
term (in years)
|
|
Options
|
|
7.5
|
|
Expected
forfeiture
|
|
Granted
|
|
10%
|
|
Risk
free rate
|
|
in
2008
|
|
3.64%-4.80%
|
|
Expected
dividends
|
|
|
|
3.50%-5.88%
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
A summary
of option activity under the Plan during 2007 and 2008 is presented
below:
|
|
|
|
|
Weighted
|
|
Weighted
Average
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
Grant-Date
|
|
Options
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2007
|
|
247,500
|
|
1.70
|
|
-
|
|
-
|
|
$0.56
|
|
Granted
|
|
471,500
|
|
2.19
|
|
-
|
|
-
|
|
$0.69
|
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Forfeited
or expired
|
|
(11,000)
|
|
1.71
|
|
-
|
|
-
|
|
$0.60
|
|
Outstanding
at December 31, 2007
|
|
708,000
|
|
2.03
|
|
9.3
years
|
|
-
|
|
$0.64
|
|
Exercisable
at December 31, 2007
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2008
|
|
708,000
|
|
2.03
|
|
9.3
years
|
|
-
|
|
$0.64
|
|
Granted
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Forfeited
or expired
|
|
(102,000)
|
|
1.84
|
|
-
|
|
-
|
|
$0.60
|
|
Outstanding
at December 31, 2008
|
|
606,000
|
|
2.06
|
|
8.4
years
|
|
|
|
$0.65
|
|
Exercisable
at December 31, 2008
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
As of
December 31, 2008 and 2007, there was $0.2 million and $0.4 million,
respectively, of total unrecognized compensation cost related to non-vested
share-based compensation arrangements granted under the Plan. The
December 31, 2008 cost is expected to be recognized over the remaining 3.9 years
vesting period for outstanding grants under the Plan.
Other
stock option agreements
The
company has entered into agreements with its outside directors and legal counsel
under which it granted options to purchase the company’s common
shares. On May 1, 2006, May 23, 2007 and August 10, 2007, six
individuals were granted options to purchase a total of 300,000
shares. The options were granted with an exercise price equal to the
fair market value at the time of grant. These options are immediately
vested and expire five years from the date of grant.
The fair
value of each option award is estimated on the date of grant using a Black
Scholes Merton option valuation model that uses the assumptions noted in the
following table. Expected volatility is estimated based upon the
historical volatility of entities with characteristics (size, industry, etc.)
similar to the company and the company’s own historical
volatility. The expected term of the options granted represents the
period of time that options are expected to be outstanding. The risk
free rate is based upon the U.S. Treasury constant maturity yield for a period
comparable to the expected term. The dividend rate is an estimate of
the expected yield on the company stock over the expected term.
|
Assumption
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Expected
volatility
|
|
No
Options
|
|
43%
|
|
Expected
term (in years)
|
|
Granted
|
|
2.5
|
|
Risk
free rate
|
|
In
2008
|
|
4.51%-4.79%
|
|
Expected
dividends
|
|
|
|
3.50%-3.92%
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
A summary
of option activity under the agreements during 2008 and 2007 is presented
below:
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1
|
|
300,000
|
|
2.23
|
|
3.7
years
|
|
-
|
|
200,000
|
|
2.00
|
|
-
|
|
-
|
|
Granted
|
|
-
|
|
-
|
|
-
|
|
-
|
|
100,000
|
|
2.70
|
|
-
|
|
-
|
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Forfeited
or expired
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Outstanding
at December 31
|
|
300,000
|
|
2.23
|
|
2.7
years
|
|
-
|
|
300,000
|
|
2.23
|
|
3.7
years
|
|
-
|
|
Exercisable
at December 31
|
|
300,000
|
|
2.23
|
|
2.7
years
|
|
-
|
|
300,000
|
|
2.23
|
|
3.7
years
|
|
-
|
The
company recognized less than $0.1 million as directors’ fees during 2007 related
to these agreements with directors and legal counsel. There was no
related unrecognized cost as of December 31, 2008 and 2007.
8.
Leasing activities
Real estate:
DPMG leases
offices in Upper Marlboro, Maryland and airplane hangar space in Easton,
Maryland, all on a month-to-month basis. South Padre leases office
space in Laguna Vista, Texas and, for a few months during 2008 leased a model
home. Rent expense, including minor setup costs, related to these
leases is included in general and administrative expenses and real estate
operating expenses in the approximate total amount of $0.1 million in both 2008
and 2007. Each of the real estate leases are classified as operating
leases.
Equipment:
DPMG
leases a mobile storage container on a month-to-month basis. South
Padre is obligated under operating leases for use of golf cars, golf maintenance
equipment, and construction equipment through November 2012. On a
month-to-month basis, South Padre also leases a mobile construction storage bin
and various construction equipment on short term rentals as
needed. South Padre also leases global positioning equipment
installed on the golf cars. Lease charges are based on a per-round usage fee,
billed monthly. The Consolidated Statements of Operations for 2008
and 2007 include lease expense for these operating leases and for miscellaneous
equipment rentals in the approximate total amount of $0.1 million each
year. In 2008, South Padre purchased golf maintenance equipment under
a lease purchase arrangement classified as a capital
lease. Accordingly, the purchased equipment is included on the
company’s December 31, 2008 Consolidated Balance Sheet as Property and equipment
(see Note 3) and the present value of the company’s minimum lease payments under
the lease is included in Notes payable to others (see Note
11). Minimum annual payments due under these leases in the future are
as follows:
|
Year
Ending December 31
|
|
Operating
Leases Total Amount
|
|
|
Capital
Lease Amount
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
60,684
|
|
|
$
|
78,287
|
|
|
2010
|
|
|
60,684
|
|
|
|
78,287
|
|
|
2011
|
|
|
60,684
|
|
|
|
78,287
|
|
|
2012
|
|
|
55,627
|
|
|
|
58,715
|
|
|
Total
minimum lease payments
|
|
$
|
237,679
|
|
|
|
293,576
|
|
|
Less
amount representing interest
|
|
|
|
|
|
|
31,541
|
|
|
Present
value of minimum lease payments
|
|
|
|
|
|
$
|
262,035
|
|
9.
Management agreements with unconsolidated affiliates
Landmark
of Spain, Inc. has a consulting agreement with Landmark Developments of Spain,
S.L. During 2008, the company recognized $0.3 million in fees from
this agreement and during 2007 refunded approximately $59,000 of fees recognized
in prior years. Fees and reimbursable expenses were due to the
company under this agreement in the amounts of $0.5 million at December 31, 2008
and $0.3 million at December 31, 2007. Amendments to the consulting
agreement are being negotiated to reflect the company’s reduced responsibilities
for the operating management of the Arcos Gardens project and its anticipated
role in future projects. The company owns 50% of Landmark
Developments of Spain, SL, as discussed in Note 1.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
In
December 2005, DPMG entered into management agreements with Presidential Golf
Club, LLC to provide golf course design, construction supervision, and golf
operations management for the 18-hole championship golf course that opened in
May 2008 near Upper Marlboro, Maryland. Fees earned under the contract totaled
$0.2 million in each of 2008 and 2007. The company owns 7.45% of
Presidential Golf Club, LLC as discussed in Note 1.
Also in
December 2005, DPMG entered into management agreements with Apes Hill
Development SRL to provide business plans, golf course design, project
management, construction management, marketing, and operations management for
its 470 acre development in Barbados. Fees earned under the contract totaled
$2.5 million and $1.3 million in 2008 and 2007, respectively. The
company owns 33.33% of Apes Hill Development SRL as discussed in Note
1.
In
September 2005, DPMG entered into an agreement with Newco XXV, Inc. (“Newco”),
an entity affiliated with Gerald G. Barton, the company’s chairman, whereby DPMG
agreed to provide consulting services to Newco relating to the planning, design,
and development of certain real property owned by Newco. The
agreement provides that these services are to be provided at the same rates
quoted by DPMG to non-affiliated third party entities. No fees were
earned under this contract during 2007 or 2008.
A summary
of receivables due from unconsolidated affiliates under these contracts at
December 31, 2008 and 2007 follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Landmark
Developments of Spain, S.L.
|
|
$
|
548,551
|
|
|
$
|
281,818
|
|
|
Presidential
Golf Club, LLC
|
|
|
123,977
|
|
|
|
6,040
|
|
|
Apes
Hill Development SRL
|
|
|
1,141,273
|
|
|
|
445,915
|
|
|
|
|
|
1,813,801
|
|
|
|
733,773
|
|
|
Less
amount not expected to be paid within one year
|
|
|
(548,551
|
)
|
|
|
(281,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Receivable
from affiliates, current
|
|
$
|
1,265,250
|
|
|
$
|
451,953
|
|
10.
Notes and advances payable to affiliates
The
companies have the following notes and advances payable to various affiliates as
of December 31, 2008 and 2007:
|
|
|
2008
|
|
|
2007
|
|
|
Advances
payable to Newco, an affiliate of the chairman and major stockholder of
the company, bearing interest at 15%,
|
|
|
|
|
|
|
|
payable
on demand. Accrued interest on these advances totaled $357,933
and $327,756 at December 31, 2008 and 2007, respectively
|
|
$
|
333,599
|
|
|
$
|
333,599
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances
payable to Newco, an affiliate of the chairman and major stockholder of
the company, bearing interest at 12%,
|
|
|
|
|
|
|
|
|
|
payable
on demand. Accrued interest on these advances totaled $430,562
and $363,361 at December 31, 2008 and 2007, respectively
|
|
|
558,475
|
|
|
|
558,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable to Newco, an affiliate of the chairman and major stockholder of
the company, bearing interest at 10%, payable November 1,
2010. Accrued interest on this note totaled $1,056 at December
31, 2008
|
|
|
200,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable to a stockholder of the company, bearing interest at the prime
rate plus 1%, due on demand. Accrued
|
|
|
|
|
|
|
|
|
|
interest
on these notes totaled $182,354 and $154,728 at December 31, 2008 and
2007, respectively. Interest is due and payable annually as it
accrues.
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes and advances payable to affiliates
|
|
|
1,392,074
|
|
|
|
1,192,074
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
portion due in one year
|
|
|
(1,192,074
|
)
|
|
|
(1,192,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable to affiliate, due after one year
|
|
$
|
200,000
|
|
|
$
|
-
|
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
The
company’s Consolidated Statements of Operations includes interest expense on
these notes and advances in the approximate amount of $146,000 and $155,000 in
2008 and 2007, respectively. Interest in the amount of $20,000 and
$80,000 was paid in cash to affiliates during 2008 and 2007,
respectively.
11.
Notes payable to others
Real estate development and
construction loans:
At December 31, 2008 and 2007, land acquisition,
development, and construction loans are payable to International Bank of
Commerce and Compass Bank in the total amount of $12.7 million and $11.9
million, respectively. The loans are secured by deeds of trust on
land and improvements at South Padre with an additional guaranty by the
company. Interest rates on loans outstanding at December 31, 2008
range from prime rate (3.25%) to prime plus 1% with a floor of
6%. The loans require principal payments as lots and houses are
settled and mature on various dates from May to August
2009. Subsequent to December 31, 2008, both lenders have agreed to
renew the company’s lines of credit into 2010 on substantially the same terms,
except for a $1 million reduction in the maximum amount, reducing the total
lines available to $13.4 million. We do not expect the change to have
any significant impact on our real estate operations.
Equipment loans:
On
January 11, 2007, the company borrowed $3.9 million from Key Equipment Finance
to purchase an Astra 1125 aircraft for corporate use. The note is
secured by a lien on the airplane with an additional guaranty by the
company. The note bears interest at 30-day LIBOR plus 1.51% and
requires 84 monthly payments of principal and interest beginning at $35,000 per
month with a balloon payment of approximately $2.5 million in March
2014. At December 31, 2008, the company owed $3.6 million on the
loan.
At
December 31, 2008, lease-purchase obligations on equipment at South Padre are
payable to Deere Credit in the principal amount of $0.3 million. Financing
rate was 6.06% with monthly payments of $6,524 extending to August
2012. The loans were secured by liens on the operating
equipment.
Operating capital note:
In
2002, DPMG executed a $600,000 note payable to a third party to fund its
operating needs. The unsecured note is due on demand and bears interest at the
prime rate plus 2% (5.25% at December 31, 2008). The note has an
outstanding principal balance of $0.6 million, plus accrued interest of $0.4
million and $0.3 million at December 31, 2008 and 2007,
respectively.
A summary
of notes payable to others with principal balances outstanding at December 31,
2008 and 2007 follows:
|
|
|
|
|
|
|
Funds
|
|
|
Principal
Outstanding
|
|
|
|
|
Interest
|
|
|
|
Available
at
|
|
|
December
31,
|
|
|
Lender
|
|
Rate
|
|
Maturity
|
|
12/31/2008
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate Development Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Int’l
Bank of Commerce
|
|
Prime
+ 1%, floor of 6%
|
|
7/24/09
|
|
$
|
861,002
|
|
|
$
|
6,330,032
|
|
|
$
|
5,000,107
|
|
|
Int’l
Bank of Commerce
|
|
Prime,
floor of 6%
|
|
8/29/09
|
|
|
-
|
|
|
|
4,365,931
|
|
|
|
4,365,931
|
|
|
Compass
Bank, formerly Texas State Bank
|
|
|
3.25%-6%
|
|
5/1/09
|
|
|
39,336
|
|
|
|
2,034,393
|
|
|
|
2,569,681
|
|
|
Subtotal
- real estate development loans
|
|
|
|
|
|
|
|
900,338
|
|
|
|
12,730,356
|
|
|
|
11,935,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
Equipment Finance
|
|
30-day
Libor +1.51%
|
|
3/01/14
|
|
|
-
|
|
|
|
3,594,540
|
|
|
|
3,759,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Capital Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRG,
Inc.
|
|
Prime
+ 2%
|
|
Demand
|
|
|
-
|
|
|
|
600,000
|
|
|
|
600,000
|
|
|
Total
notes payable to others, excluding capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
lease
obligations
|
|
|
|
|
|
|
|
|
|
|
|
16,924,896
|
|
|
|
16,294,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Lease Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deere
Credit, Inc. (present value of minimum lease
|
|
|
6.06%
|
|
8/15/12
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
payments
|
|
|
|
|
|
|
|
|
|
|
|
262,035
|
|
|
|
-
|
|
|
Total
notes payable to others
|
|
|
|
|
|
|
|
|
|
|
|
17,186,931
|
|
|
|
16,294,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
portion due in one year, including $64,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
lease obligation
|
|
|
|
|
|
|
|
|
|
|
|
(13,644,621
|
)
|
|
|
(8,353,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term notes payable to others
|
|
|
|
|
|
|
|
|
|
|
$
|
3,542,310
|
|
|
$
|
7,941,090
|
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
Interest
on these notes and advances for the years ended December 31, 2008 and 2007
totaled $1.0 million and $1.2 million, respectively. Interest
capitalized to real estate development totaled $0.5 million in 2008 and $0.7
million in 2007. Interest expensed to operations totaled $0.5 million
in both 2008 and 2007.
The prime
rate was 3.25% and 7.25% at December 31, 2008 and 2007,
respectively. The carrying amount of the loans reasonably
approximates the fair value as their terms are similar to what is currently
available from lenders.
Real
estate loans maturing in 2009 in the amount of $12.7 million have been approved
for renewal by both lenders, subsequent to December 31, 2008, with new
maturities in 2010. Although the working capital note from GRG is due
on demand, the lender is not expected to demand payment until the company’s
liquidity position improves. At December 31, 2008, future minimum
principal payments due under the loans, excluding the capital lease obligations,
were as listed below:
|
Year
Ending December 31,
|
|
Amount
|
|
|
|
|
|
|
|
2009
|
|
$
|
13,580,442
|
|
|
2010
|
|
|
268,777
|
|
|
2011
|
|
|
281,670
|
|
|
2012
|
|
|
294,810
|
|
|
2013
|
|
|
309,322
|
|
|
After
2013
|
|
|
2,189,875
|
|
|
Total
|
|
$
|
16,924,896
|
|
12.
Retirement plan
The
company sponsors a 401(k) defined contribution plan covering all eligible
employees effective July 1, 2001. Employees may elect to contribute
to the plan on a pre-tax basis, within certain percentage
limitations. Effective January 2006, the plan was amended to include
the South Padre employees and to provide for the company to match 100% of
employee elective contributions up to 3% of employee wages plus 50% of employee
elective contributions between 3% and 5%. Company contributions to
the plan totaled less than $0.2 million in each of the years 2008 and
2007.
13.
Commitments and contingencies
Litigation:
The
company and its subsidiaries have been named as defendant in various claims,
complaints, and other legal actions arising in the normal course of
business. In the opinion of management, the outcome of these matters
will not have a material adverse effect upon the financial condition, results of
operations, or cash flows of the company.
Backlog:
At December 31,
2008, South Padre had no contracts for lots and houses under
construction. At December 31, 2007, there were 4 contracts for lots
and houses under construction with a total sales value of $0.7
million.
14.
Income taxes
A
reconciliation of the expense for income taxes calculated at statutory rates to
the actual expense recognized in the Consolidated Financial Statements for the
years ended December 31, 2008 and 2007, is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Federal
income tax (benefit) computed at statutory rate
|
|
$
|
2,161,408
|
|
|
$
|
(79,487
|
)
|
|
Increase
(decrease) in income taxes:
|
|
|
|
|
|
|
|
|
|
State
income tax, current provision, net of federal benefit
|
|
|
768
|
|
|
|
50,160
|
|
|
State
income tax, deferred provision (benefit)
|
|
|
130,000
|
|
|
|
(1,000
|
)
|
|
Incentive
stock options
|
|
|
8,535
|
|
|
|
17,897
|
|
|
Personal
airplane usage
|
|
|
32,471
|
|
|
|
53,233
|
|
|
Non-deductible
meals
|
|
|
9,724
|
|
|
|
16,451
|
|
|
Valuation
allowance (decrease)
|
|
|
(2,073,000
|
)
|
|
|
-
|
|
|
Other
|
|
|
(743
|
)
|
|
|
9,464
|
|
|
Provision
for income taxes
|
|
$
|
269,163
|
|
|
$
|
66,718
|
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
The
company reported a profit before income taxes of $6.4 million for the year ended
December 31, 2008 and a loss before income taxes of $0.2 million for the year
ended December 31, 2007. Certain stock based compensation, airplane
expenses, and meals which cannot be deducted for income tax purposes, (permanent
differences in book and taxable income) and changes in the deferred tax
valuation allowance during the year account for the differences in the actual
provisions for each year and the amount of provision or benefit that would have
been recognized at statutory rates. The various entities included in
the company’s Consolidated Financial Statements and consolidated federal income
tax return are taxed separately in the various states in which they
operate. The current provisions for state income taxes shown above
represents the estimated state income tax payable on income reported in the
various states each year, less the 34% federal tax benefit of deducting such
taxes in the federal return. The deferred provisions or benefits for
state income taxes are based on an estimated effective state tax rate of 2% on
changes in temporary differences between book and tax income during each
year. During 2007, the company recorded approximately $7,000 for
penalties and interest related to underpayment of estimated 2006 Maryland income
tax.
Financial
Accounting Standards Board Interpretation (FIN) No. 48,
Accounting for Uncertainty in Income
Taxes
was issued in July 2006 and interprets SFAS No. 109,
Accounting for Income
Taxes
. FIN 48 requires all taxpayers to analyze all
material positions they have taken or plan to take in all tax returns that have
been filed or should have been filed with all taxing authorities for all years
still subject to challenge by those taxing authorities. If the
position taken is “more-likely-than-not” to be sustained by the taxing authority
on its technical merits and if there is more than a 50% likelihood that the
position would be sustained if challenged and considered by the highest court in
the relevant jurisdiction, the tax consequences of that position should be
reflected in the taxpayer’s GAAP financial statements. Earlier
proposed interpretations of SFAS 109 had recommended a “probable” standard for
recognition of tax consequences rather than the “more-likely-than-not” standard
finally adopted.
The
company was required to implement FIN 48 at the beginning of
2007. Consequently, the company analyzed its tax positions and
adjusted its balance sheet effective January 1, 2007 to recognize a deferred tax
benefit from tax positions that meet the “more-likely-than-not” standard but did
not meet the earlier “probable” standard for recognition in the GAAP financial
statements. The principal adjustment relates to the company’s net
operating loss reported in the 2002 federal and state tax returns upon final
resolution of the company’s litigation with the U. S. government as discussed in
Note 1. The adjustment increased deferred tax assets by $4.5 million
representing benefits to be realized in future years, reduced current tax
liabilities by $2.4 million representing the benefit utilized to offset taxable
income in the 2006 federal return and reduced the accumulated deficit by $6.9
million -- the total benefit recognized on the company’s Consolidated Balance
Sheet on January 1, 2007.
The
company had no material unrecognized tax benefits at December 31, 2008 nor does
it expect any significant change in that status during the next twelve
months. No accrued interest or penalties on uncertain tax positions
have been included on the Consolidated Statements of Operations or the
Consolidated Balance Sheets. Should the company adopt tax positions
for which it would be appropriate to accrue interest and penalties, such costs
would be reflected in the tax expense for the period in which such costs
accrued. The company is subject to U.S Federal income tax and to
several state and foreign jurisdictions. Returns filed for tax
periods ending after December 31, 2004 are still open to examination by those
relevant taxing authorities.
The
estimated net future benefit available to the company from all its deferred tax
positions is approximately $47.8 million at December 31, 2008; however,
realization of that benefit is dependent on the company’s ability to generate
taxable income in the future. In view of historical earnings, the
company has established a valuation allowance against the asset in the
approximate amount of $43.4 million, reducing the net benefit to $4.4 million
included on the December 31, 2008 balance sheet.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
The
components of the deferred income tax asset at December 31, 2008 and 2007, are
as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
52,093,000
|
|
|
$
|
50,384,000
|
|
|
Basis
difference in foreign operation, tax asset
|
|
|
450,000
|
|
|
|
470,000
|
|
|
Basis
difference in miscellaneous South Padre assets
|
|
|
77,000
|
|
|
|
90,000
|
|
|
Basis
difference in office building
|
|
|
11,000
|
|
|
|
-
|
|
|
Acquisition
costs capitalized for tax
|
|
|
43,000
|
|
|
|
43,000
|
|
|
Management
fees capitalized for tax
|
|
|
21,000
|
|
|
|
27,000
|
|
|
Warranty
reserve
|
|
|
31,000
|
|
|
|
45,000
|
|
|
Accrued
vacation
|
|
|
100,000
|
|
|
|
90,000
|
|
|
Depreciation,
book greater than tax
|
|
|
-
|
|
|
|
27,000
|
|
|
Accrued
interest
|
|
|
214,000
|
|
|
|
196,000
|
|
|
Allowance
for uncollectible accounts
|
|
|
15,000
|
|
|
|
10,000
|
|
|
Directors’
stock options
|
|
|
60,000
|
|
|
|
60,000
|
|
|
Gross
deferred tax asset
|
|
|
53,115,000
|
|
|
|
51,442,000
|
|
|
Valuation
allowance
|
|
|
(43,376,000
|
)
|
|
|
(45,449,000
|
)
|
|
Net
deferred tax asset
|
|
|
9,739,000
|
|
|
|
5,993,000
|
|
|
Basis
difference in foreign operation, tax liability
|
|
|
(3,968,000
|
)
|
|
|
-
|
|
|
Basis
difference in contract rights
|
|
|
(836,000
|
)
|
|
|
(850,000
|
)
|
|
Basis
difference in other real estate assets
|
|
|
(450,000
|
)
|
|
|
(450,000
|
)
|
|
Depreciation,
tax greater than book
|
|
|
(60,000
|
)
|
|
|
-
|
|
|
Basis
difference in South Padre golf improvements
|
|
|
(25,000
|
)
|
|
|
(25,000
|
)
|
|
Total
net deferred tax asset
|
|
|
4,400,000
|
|
|
|
4,668,000
|
|
|
Less
deferred tax asset, current
|
|
|
-
|
|
|
|
-
|
|
|
Deferred
tax asset, non-current
|
|
$
|
4,400,000
|
|
|
$
|
4,668,000
|
|
At
December 31, 2008, the company’s net operating loss carryovers available to
reduce future federal and state taxable income expires as follows:
|
Year
Ending December 31,
|
|
Amount
|
|
|
|
|
|
|
|
2021
|
|
$
|
144,768
|
|
|
2022
|
|
|
146,974,151
|
|
|
2023
|
|
|
14,693
|
|
|
2024
|
|
|
511,239
|
|
|
2027
|
|
|
471,610
|
|
|
2028
|
|
|
4,749,332
|
|
|
Total
|
|
$
|
152,865,793
|
|
Future
tax benefits from the net operating losses above may be subject to IRS
limitation as to timing and amount, based on the amount and character of the
loss carryovers, the expiration of the loss carryover periods, and the
availability of carryover benefits as a result of ownership
changes.
The
company will continue to provide income taxes for undistributed earnings of its
foreign equity investees that are not considered permanently reinvested in these
operations.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
15.
Geographical information
Operations
in geographical areas are summarized below for the years ended December 31, 2008
and 2007:
|
|
|
2008
|
|
|
2007
|
|
|
Total
revenue
|
|
|
|
|
|
|
|
United
States
|
|
$
|
8,027,965
|
|
|
$
|
23,050,520
|
|
|
Caribbean
|
|
|
3,898,580
|
|
|
|
2,572,729
|
|
|
Spain
(a)
|
|
|
322,110
|
|
|
|
(51,013
|
)
|
|
|
|
$
|
12,248,655
|
|
|
$
|
25,572,236
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
29,137,422
|
|
|
$
|
28,614,139
|
|
|
Caribbean
|
|
|
15,022,066
|
|
|
|
3,731,996
|
|
|
Spain
|
|
|
548,551
|
|
|
|
469,718
|
|
|
|
|
$
|
44,708,039
|
|
|
$
|
32,815,853
|
|
|
(a)
|
In
2007, the company refunded approximately $58,000 of fees charged to Spain
in the prior year. Negotiations continue on amendments the
company’s management agreement with Landmark Developments of Spain,
S.L. The proposed amendments reduce the level of services the
company will provide to the Spanish entity in the
future.
|
16.
Segment Information
The
company’s operations are comprised of four segments - real estate, golf,
management services, and corporate investments and
administration. The following table summarizes 2008 and 2007
operations by segment:
|
|
|
2008
|
|
|
|
|
Real
Estate
|
|
|
Golf
|
|
|
Management
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,668,066
|
|
|
$
|
2,086,891
|
|
|
$
|
5,493,698
|
|
|
$
|
-
|
|
|
$
|
12,248,655
|
|
|
Cost
of revenue
|
|
|
(5,420,958
|
)
|
|
|
(2,682,571
|
)
|
|
|
(5,597,027
|
)
|
|
|
-
|
|
|
|
(13,700,556
|
)
|
|
Depreciation
and amortization
|
|
|
(42,907
|
)
|
|
|
(132,620
|
)
|
|
|
(66,701
|
)
|
|
|
(406,574
|
)
|
|
|
(648,802
|
)
|
|
Operating
income (loss)
|
|
|
(795,799
|
)
|
|
|
(728,300
|
)
|
|
|
(170,030
|
)
|
|
|
(406,574
|
)
|
|
|
(2,100,703
|
)
|
|
General
and administrative expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,049,207
|
)
|
|
|
(2,049,207
|
)
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,506,993
|
|
|
|
10,506,993
|
|
|
Federal
& state income taxes (benefit)
|
|
|
293,199
|
|
|
|
268,330
|
|
|
|
62,645
|
|
|
|
(893,337
|
)
|
|
|
(269,163
|
)
|
|
Net
income (loss)
|
|
$
|
(502,600
|
)
|
|
$
|
(459,970
|
)
|
|
$
|
(107,385
|
)
|
|
$
|
7,157,875
|
|
|
$
|
6,087,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
$
|
16,916,173
|
|
|
$
|
1,701,488
|
|
|
$
|
5,273,500
|
|
|
$
|
20,816,878
|
|
|
$
|
44,708,039
|
|
|
Other
assets
|
|
|
528,586
|
|
|
|
254,471
|
|
|
|
1,380,627
|
|
|
|
52,612
|
|
|
|
2,216,296
|
|
|
Total
assets
|
|
$
|
17,444,759
|
|
|
$
|
1,955,959
|
|
|
$
|
6,654,127
|
|
|
$
|
20,869,490
|
|
|
$
|
46,924,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
Real
Estate
|
|
|
Golf
|
|
|
Management
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
19,674,625
|
|
|
$
|
1,866,531
|
|
|
$
|
4,031,080
|
|
|
$
|
-
|
|
|
$
|
25,572,236
|
|
|
Cost
of revenue
|
|
|
(15,100,695
|
)
|
|
|
(2,199,587
|
)
|
|
|
(5,678,735
|
)
|
|
|
-
|
|
|
|
(22,979,017
|
)
|
|
Depreciation
and amortization
|
|
|
(31,139
|
)
|
|
|
(119,661
|
)
|
|
|
(31,319
|
)
|
|
|
(406,045
|
)
|
|
|
(588,164
|
)
|
|
Operating
income (loss)
|
|
|
4,542,791
|
|
|
|
(452,717
|
)
|
|
|
(1,678,974
|
)
|
|
|
(406,045
|
)
|
|
|
2,005,055
|
|
|
General
and administrative expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,457,401
|
)
|
|
|
(2,457,401
|
)
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
218,560
|
|
|
|
218,560
|
|
|
Federal
& state income taxes (benefit)
|
|
|
(1,221,553
|
)
|
|
|
112,900
|
|
|
|
442,806
|
|
|
|
599,129
|
|
|
|
(66,718
|
)
|
|
Net
income (loss)
|
|
$
|
3,321,238
|
|
|
$
|
(339,817
|
)
|
|
$
|
(1,236,168
|
)
|
|
$
|
(2,045,757
|
)
|
|
$
|
(300,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
$
|
16,208,686
|
|
|
$
|
1,099,418
|
|
|
$
|
3,981,201
|
|
|
$
|
11,526,548
|
|
|
$
|
32,815,853
|
|
|
Other
assets
|
|
|
622,384
|
|
|
|
282,000
|
|
|
|
858,712
|
|
|
|
4,291,765
|
|
|
|
6,054,861
|
|
|
Total
assets
|
|
$
|
16,831,070
|
|
|
$
|
1,381,418
|
|
|
$
|
4,839,913
|
|
|
$
|
15,818,313
|
|
|
$
|
38,870,714
|
|
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
17.
Recent accounting pronouncements
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157,
Fair Value
Measurements
(FAS 157). This Statement defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. It applies to other accounting
pronouncements where the FASB requires or permits fair value measurements but
does not require any new fair value measurements. In February 2008,
the FASB issued FSP No. 157-2,
Effective Date of FASB Statement
No. 157
(FSP 157-2), which delayed the effective date of
FAS 157 for certain non-financial assets and non-financial liabilities to
fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. In October 2008, the FASB issued FSP No.
157-3,
Determining the Fair
Value of a Financial Asset in a Market That Is Not Active
(FSP 157-3).
FSP 157-3 clarifies the application of FAS 157 when the market for a
financial asset is inactive. The guidance in FSP 157-3 is
effective immediately and had no effect on our financial position, results of
operations, cash flows, or EPS. The company adopted FAS 157 for
financial assets and liabilities on January 1, 2008. The partial adoption
of FAS 157, as it relates to financial assets and liabilities, did not have
any impact on the company’s financial position, results of operations, or
cash flows. The company has deferred the adoption of FAS 157
with regards to non-financial assets and liabilities in accordance with FSP
No. 157-2. The company does not expect a significant impact on
our financial position, results of operations, or cash flows.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160,
The Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51
(FAS 160). FAS 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. FAS 160 clarifies that ownership interests in consolidated
subsidiaries held by parties other than the parent (noncontrolling interests)
should be reported as a component of equity in the consolidated financial
statements and requires disclosure, on the face of the consolidated statement of
operations, of the amounts of consolidated net income attributable to the parent
and to the noncontrolled interest. FAS 160 is effective beginning January
1, 2009, with early adoption not permitted. FAS 160 is to be applied
prospectively, except for the presentation and disclosure requirements, which
upon adoption will be applied retrospectively for all periods
presented. The company does not expect a significant impact on our
financial position, results of operations, or cash flows.
In
December 2007, the FASB issued a revision to Statement of Financial Accounting
Standard No. 141,
Business
Combinations
(FAS 141R). FAS 141R requires changes to the accounting for
transaction costs, certain contingent assets and liabilities, and other balances
in a business combination. In addition, in partial acquisitions, when control is
obtained, the acquiring company must measure and record all of the target’s
assets and liabilities, including goodwill, at fair value as if the entire
target company had been acquired. The company will apply the provisions of
FAS 141R to business combinations occurring after December 31, 2008. Adoption of
FAS 141R will not affect the company’s financial condition, results of
operations or cash flows, but may have an effect on our accounting for potential
future business combinations.
In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
Disclosures about Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No.
133
(FAS 161). FAS 161 amends and expands the disclosure requirements of
FAS 133 to provide greater transparency about how and why an entity uses
derivative instruments, how derivative instruments and related hedge items are
accounted for under FAS 133 and its related interpretations, and how derivative
instruments and related hedged items affect an entity’s financial position,
results of operations, and cash flows. To meet those objectives, FAS 161
requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value, amounts of gains and
losses on derivative instruments, and disclosures about credit risk related
contingent features in derivative agreements. FAS 161 is effective January 1,
2009, and early adoption is encouraged. The company does not expect a
significant impact on our financial position, results of operations, or cash
flows.
In June
2008, the FASB issued Staff Position EITF 03-6-1
, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(EITF 03-6-1). EITF 03-6-1 states that unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents are
“participating securities” as defined in EITF 03-6
, Participating Securities and the
Two-Class Method under FASB Statement No. 128
(EITF 03-6), and therefore
should be included in computing earnings per share using the two-class method.
According to EITF 03-6-1, a share-based payment award is a participating
security when the award includes nonforfeitable rights to dividends or dividend
equivalents. The rights result in a noncontingent transfer of value each
time an entity declares a dividend or dividend equivalent during the award’s
vesting period. However, the award would not be considered a participating
security if the holder forfeits the right to receive dividends or dividend
equivalents in the event that the award does not vest. EITF 03-6-1 is effective
for financial statements issued in fiscal years beginning after December 15,
2008, and interim periods within those years. When adopted, its
requirements are applied by recasting previously reported earnings per share
(EPS). The company does not expect a significant impact on our financial
position, results of operations, cash flows, or EPS.
Landmark
Land Company, Inc.
Notes
to Consolidated Financial Statements
In
November 2008, the FASB issued EITF Issue No. 08-6
,
Equity Method Investment Accounting
Considerations
(EITF 08-6). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for financial statements issued in
fiscal years beginning on or after December 15, 2008, and interim periods within
those years and is to be applied prospectively. The company does not
expect a significant impact on our financial position, results of operations,
cash flows, or EPS.
In
December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN
46(R)-8,
Disclosures by Public
Entities (Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities.
The FSP amends Statement 140 to
require public entities to provide additional disclosures about transferors’
continuing involvements with transferred financial assets. It also
amends Interpretation 46(R) to require public enterprises, including sponsors
that have a variable interest in a variable interest entity, to provide
additional disclosures about their involvement with variable interest
entities. The FSP also requires disclosures by a public enterprise
that is (a) a sponsor of a qualifying special purpose entity (SPE) that holds a
variable interest in the qualifying SPE but was not the transferor of financial
assets to the qualifying SPE and (b) a servicer of a qualifying SPE that holds a
significant variable interest in the qualifying SPE but was not the transferor
of financial assets to the qualifying SPE. The FSP is effective for
public companies in their first reporting period that ends after December 15,
2008. The company does not expect a significant impact on our
financial position, results of operations or cash flows.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
LANDMARK
LAND COMPANY, INC.
|
|
|
|
|
|
|
|
/s/
Gerald G. Barton
|
|
Gerald
G. Barton
|
|
Chief
Executive Officer
|
|
April 15,
2009
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
/s/ Gerald G. Barton
|
|
Chairman
of the Board of Directors
|
|
|
Gerald
G. Barton
|
|
Chief
Executive Officer
|
April 15,
2009
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Joe V. Olree
|
|
Senior
Vice President/Chief Financial Officer
|
April 15,
2009
|
|
Joe
V. Olree
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ William W. Vaughan, II
|
|
President/Assistant
Secretary/Director
|
April 15,
2009
|
|
William
W. Vaughan, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Jim L. Awtrey
|
|
Director
|
April 15,
2009
|
|
Jim
L. Awtrey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Bernard G. Ille
|
|
Director
|
April
15, 2009
|
|
Bernard
G. Ille
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ David A. Sislen
|
|
Director
|
April
15, 2009
|
|
David
A. Sislen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert W. White
|
|
Director
|
April
15, 2009
|
|
Robert
W. White
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Harold F. Zagunis
|
|
Director
|
April
15, 2009
|
|
Harold
F. Zagunis
|
|
|
|
|
|
|
|
|
LANDMARK
LAND COMPANY, INC.
FORM
10-K
EXHIBIT
INDEX
Exhibit
Number
|
3.1
|
Certificate
of Incorporation (incorporated by reference to Form 10-KSB for the year
ended December 31, 2001 filed with the Commission on February 7,
2003)
|
|
|
|
|
3.2
|
Bylaws
of the Company (incorporated by reference to Form 10-KSB for the year
ended December 31, 2001 filed with the Commission on February 7,
2003)
|
|
|
|
|
10.1
|
The
2006 Landmark Land Company, Inc. Incentive Stock Option Plan (incorporated
by reference to Form S-8 dated January 4, 2007 and filed with the
Commission on January 9, 2007)
|
|
|
|
|
10.2
|
Form
of Stock Option Agreement for Outside Directors and Outside Counsel to the
Board (incorporated by reference to Form S-8 dated January 4, 2007 and
filed with the Commission on January 9, 2007)
|
|
|
|
|
10.3
|
Agreement
and Plan of Acquisition of shares of KES, Inc. entered into effective
August 31, 2003 (incorporated by reference to Form 8K dated August 26,
2003 filed with the Commission on September 10, 2003
|
|
|
|
|
10.4
|
A
purchase agreement entered into on October 1, 2004 between DPMG Inc. and
New Delos Partners, L.P. to purchase South Padre Island Development, L.P.
(incorporated by reference to Form 8K dated October 1, 2004 and filed with
the Commission on October 7, 2004)
|
|
|
|
|
10.5
|
A
Member’s Agreement of Apes Hill Development SRL entered into between LML
Caribbean, Ltd. and C.O. Williams Investments, Inc. in December 2005
(incorporated by reference to Form 10KSB dated December 31, 2005 and filed
with the Commission on March 23, 2006)
|
|
|
|
|
10.6
|
An
agreement between DPMG Inc. and Gyrodyne Company of America, Inc.
providing for consulting services to Gyrodyne and terminating the Golf
Operating Agreement and the Asset Management Agreement (incorporated by
reference to Form 8K dated February 15, 2007 and filed with the Commission
on February 16, 2007)
|
|
|
|
|
10.7
|
Purchase
Agreement between Landmark Land Company, Inc. and Dixie South Texas
Holdings, Ltd. entered into on April 13, 2007 (incorporated by reference
to Form 8K dated April 13, 2007 filed with the Commission on April 17,
2007)
|
|
|
|
|
16
|
Letter
Regarding Change in Certifying Accountant (incorporated by reference to
Form 8-K dated January 20, 2009 and filed with the Commission on January
23, 2009
|
|
|
|
|
21.1*
|
Subsidiaries
of the Registrant
|
|
|
|
|
23.1*
|
Consent
of Reznick Group, P.C.
|
|
|
|
|
23.2*
|
Consent
of Aronson & Company
|
|
|
|
|
31.1*
|
Certification
of the Chief Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
|
|
31.2*
|
Certification
of the Chief Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
|
|
32.1*
|
Certification
of the Chief Executive Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
|
|
32.2*
|
Certification
of the Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
______________________
* Filed
herewith
Landmark Land (CE) (USOTC:LLND)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025
Landmark Land (CE) (USOTC:LLND)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025
