U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF
1934 for the fiscal year ended. APRIL 30, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period from ... to ...
Commission file number 0-1684
GYRODYNE COMPANY OF AMERICA, INC.
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(Name of small business issuer in its charter)
NEW YORK 11-1688021
- ---------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 FLOWERFIELD, SUITE 15
ST. JAMES, NY 11780-1550
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 584-5400
Securities registered under Section 12(b) of the Exchange Act:
Title of each class which registered: Name of each exchange on
which registered
- -------------------------------------- ------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE NASDAQ
Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the issuer (1) Filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such a
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 9 days. Yes.X. No...
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ x ]
The issuer's revenues for its most recent fiscal year were: $2,583,437.
The aggregate market value of the 516,820 shares of voting stock held by
non-affiliates of the registrant on July 3, 1996 was $7,107,275. The aggregate
market value was computed by reference to the average bid and asked prices of
the common stock, on such date, on the NASDAQ system.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the issuer's Common $1.00 par value stock
as of July 3, 1996 was 1,000,551.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy statement to be filed pursuant to regulation
14A for the FY 1996 annual meeting of Shareholders of the Company are
incorporated by reference into Part III hereof.
INDEX TO FORM 10-KSB
FISCAL YEAR 1996
ITEM #
PART I
1 -Business
2 -Properties
3 -Legal Proceedings
4 -Submission of Matters to a Vote of Security Holders
PART II
5 -Market for Registrant's Common Stock and Related Stockholders' Matters
6 -Management's Discussion and Analysis of Financial Position and Results of
Operations
7 -Financial Statements and Supplementary Data
Independent Auditors' Reports
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statement of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
8 -Disagreements on Accounting and Financial Data
PART III
9 -Directors and Executive Officers of Registrant
10 -Compensation of Executive Officers and Directors
11 -Security Ownership of Certain Beneficial Owners and Management
12 -Certain Relationships and Transactions
13 -Exhibits, Financial Statement Schedules, and Reports on Form 8K
Signatures
PART I
Item 1. Description of Business
(a) Business Development:
Incorporated in New York in August 1946, Gyrodyne Company of America, Inc.
(GCA) was engaged in the design, development, and manufacture of contra-
rotating coaxial helicopters. Although still maintaining an aerospace
presence, the Company's primary focus today is developing value in its real
estate assets. Gyrodyne Petroleum, Inc. (GPI), a wholly owned subsidiary, was
incorporated in Delaware in 1965 and was established primarily to invest in
oil and gas limited partnership interests. In 1966, Flowerfield Properties,
Inc. (FPI), a wholly owned subsidiary, was incorporated in New York to manage
investments in marketable securities and to participate in a citrus grove
limited partnership in Florida.
GCA since its inception and for the next 25 years was primarily engaged in
design, testing, development and production of coaxial helicopters. The
Company's 326 acre Flowerfield property in St. James, New York was originally
purchased in 1951 for use as a manufacturing facility and to provide
sufficient space for flight tests. In order to diversify away from sole
reliance on military contracts, the Company during the mid-sixties invested in
limited partnerships for oil and gas exploration and in the development of raw
land for citrus, the Callery-Judge Grove.
Substantially all aerospace work was conducted for the U.S.Navy, with a small
procurement by the Japanese Maritime Self-Defense Force. From the mid-fifties
to the early seventies, Gyrodyne manufactured and sold approximately 800
coaxial helicopters from its first small one-man helicopter, dubbed
Rotorcycle, through its remotely piloted models QH-50A through QH-50D, with
total sales amounting to approximately $200,000,000.00.
Following a sharp reduction in the Company's helicopter manufacturing business
by 1972, and the total elimination of it by 1975 (except for providing spare
parts), the Company began subdividing and renting out its idle manufacturing
facilities in order to derive income. Aerospace operations were essentially
halted until the mid-eighties when the Company negotiated two separate
technology transfer agreements: one with Dornier GmbH of Germany and the other
with Israel Aircraft Industries (IAI) of Israel. Although subjected to
extensive delays due to changing world conditions, each licensee continues to
show interest in the coaxial helicopter's future prospects.
From 1992-94, the Company was engaged in the manufacture of replacement rotor
blades for QH-50 helicopters still in service with the U.S. Navy. This was
the Company's first production contract in over twenty years. The Company
just recently completed the sale of two re-manufactured helicopter platforms
and is actively engaged in negotiations with its German licensee to modify its
Technology Transfer Agreement. The Company's assets include proprietary
manufacturing rights and an extensive parts inventory. There is no ready
market for the Company's specialized technology. The value of these assets is
subject to the availability of customers with suitable requirements.
Established in 1909, the Flowerfield property initially spanned one thousand
acres. Today the property is identified solely with the Company's 326 acre
parcel. Flowerfield increased to its present size in 1994 with the purchase
of five acres for approximately one half million dollars. Flowerfield is home
to approximately 202,000 square feet of buildings suitable for office,
engineering, manufacturing and warehouse space. Flowerfield is the Company's
single largest asset and primary focus.
Gyrodyne Petroleum, Inc. (GPI), was established primarily to invest in oil and
gas limited partnership interests. Beginning in 1965, the initial major
partners were Apache Oil and Austral Oil Company. During 1976, all Apache Oil
partnership interests were disposed of. The Austral limited partnership
assets through various acquisitions and mergers came under the management of
Mobil Oil Corporation in 1984. In January 1988, Mobil Oil Corporation, then
our general partner, divested itself of its interest in Rulison Field,
Colorado. Four non-affiliated firms acquired individual leases and became the
operators for our then segmented Rulison Field interest.
In 1991 Parker and Parsley purchased Mobil's entire interest in Ackerly Field,
Texas, and in 1992, Meridian Oil Inc. acquired Mobil's entire interest in the
Basin Dakota Field, New Mexico. The sale of Mobil's interests also signaled
the demise of Oil Participants Inc., the umbrella company which was the
vehicle for limited partnership investment by GPI. No longer a limited
partner, GPI became a working interest owner in these various properties. In
July 1995, the Company sold its interests in the Rulison and Basin Dakota
assets. The balance of the remaining oil assets, Ackerly Field, is not deemed
to be a significant portion of the Company's total assets.
In 1966, Flowerfield Properties, Inc. (FPI), was incorporated to manage
investments in marketable securities and to participate in a citrus grove
limited partnership in Florida. Active management of a securities portfolio
was phased out in the late seventies. The Callery-Judge Grove is located 16
miles west of Palm Beach, Florida with a portion lying in the Indian River
Basin. The Company's initial net investment position, after payout per the
partnership agreement, was 17.5% which today, subsequent to a new equity
offering, is 14.9%. In accordance with the partnership agreement, the Company
has no active voice in the Grove's management which authority rests solely
with the Managing Partner. The Grove interest is the Company's second largest
asset.
Neither the Company nor any of its subsidiaries have ever been in any
bankruptcy, receivership or similar proceeding.
(b) Business of Issuer:
The Company is currently involved in four business segments. The Company
manages its real estate and helicopter activities while it is a passive
investor in the citrus operation and maintains a working interest only in a
single oil property, Ackerly Field. Below is a summary of financial results by
business segment for FY 1996 and 1995.
Year Ended Year Ended
April 30, April 30,
1996 1995
Rental Income $1,879,287 $1,667,067
Aerospace Income 704,150 17,220
Less: Rental costs and expenses 1,430,192 1,167,325
Net Aerospace expense 83,908 78,482
--------- --------
Operating Income $1,069,337 $ 438,480
========== =========
Other Income/(Loss):
Citrus Grove Income (Note 1 & 7) $ 0 $(322,643)
Oil and Gas Income (Notes 1, 2, & 3) 220,571 (172,477)
Other Income (Net) (Notes 4 & 5) (91,909) (425)
--------- --------
Total Other Income $ 128,662 $(495,545)
========== =========
Identifiable Assets at Net Carrying Value
Real Estate Fixed Assets (Note 6) $2,078,147 $1,552,544
========== ==========
Note 1 - All inter-company transactions have been eliminated.
Note 2 - All company activity was within the United States of America.
Note 3 - See note number 3 of "NOTES TO CONSOLIDATED FINANCIALSTATEMENTS".
Note 4 - See Other Income discussion in Item 6 "Other Income".
Note 5 - See the Other Income section of "CONSOLIDATED STATEMENTS OF INCOME".
Note 6 - See note number 2 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS".
Note 7 - See note number 4 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS".
The Business Segments in the financial statements reflect the unconsolidated
real estate, aerospace and investment activities of Gyrodyne Company of
America, Inc. The oil and gas activity of Gyrodyne Petroleum, Inc. is carried
as investment income on the consolidated statements of income under the
heading "Other Income." Flowerfield Properties, Inc.'s Citrus Grove income
for FY 1995 is also carried under "Other Income". As noted later in this
report, effective FY 1996 the Company elected to switch to the cost method of
reporting changes in its Citrus Grove investment. Henceforth, changes in this
investment will only reflect capital returned and cash contributed and will
appear in the balance sheet only.
(1) Real Estate
The Company is not a real estate developer in the traditional sense.
Acquisition of additional real estate assets is solely for the purpose of
augmenting the development prospects of the Flowerfield property. Gyrodyne
owns a 326 acre site, primarily zoned for light industry, approximately 50
miles east of New York City on the north shore of Long Island. Purchased in
1951, the property was initially surrounded by farm land. Major residential
developments sprang up in the sixties, most notably, those constructed by the
Levitt Organization. In the early sixties the State of New York began
construction of a campus which today is the State University of New York
(SUNY) at Stony Brook. Covering over one thousand acres, Stony Brook
University is a major research center complete with tertiary care hospital and
veterans hospital. The University's High Technology Incubator already boasts
numerous graduates creating an on-going need for research and development
space.
There are two major industrially zoned parcels bracketing the University, one
to the east and Flowerfield to the west. The eastern parcel, located solely
in the township of Brookhaven, is approximately one hundred acres in size with
road accessibility provided by a four lane east-west route. Currently the
parcel is approximately sixty percent developed with the balance to be
completed in an estimated four to five years. Total build out is anticipated
at 1,000,000 square feet.
The Flowerfield property is bisected by the town lines of Smithtown and
Brookhaven Townships. The existing buildings and approximately 144 acres are
located in the town of St. James, Township of Smithtown, and the contiguous
balance of approximately 182 acres is located in the town of Stony Brook,
Township of Brookhaven.
The approximately 326 acres of land are zoned for use as shown below:
Approximate Acreage
Light Residential
Township Total Industry and/or Buffer
Smithtown 144 120 24
Brookhaven 182 173 9
--- ---- ---
Total 326 293 33
=== ==== ===
Flowerfield is the single largest undeveloped privately ownedindustrially
zoned parcel in the township of Smithtown. All of the acreage is contiguous.
However, the Port Jefferson Branch of the Long Island Railroad runs through
the property, with 73.5 acres lying to the north of the Railroad, and the
balance to the south.
The site has several additional positive features. Flowerfield's location
places it in hydrological zone VIII, one of the most liberal with respect to
effluent discharge rates. Flowerfield and Stony Brook University share
mirroring road frontage on a local secondary road which has become the basis
for a road/bridge link between the two campuses. The possible linkup could
provide a regional traffic solution. The pristine nature of the Flowerfield
property adds to planning flexibility thus permitting a wide range of
development plans such as corporate headquarters buildings, satellite
incubators and a conference center.
Improvements to Flowerfield over the years include nearly five miles of roads
and approximately ten acres of paved parking areas. There are five main
building groups with rental unit sizes ranging from 300 square feet to 25,000
square feet, with the 1,000 square foot units being most numerous. Where
practical, separate utilities have been provided for each suite. Given the
location and size of rental units, the Flowerfield Industrial Park attracts
small start-up companies that are not dependent on extensive material or
product handling. Flowerfield lies seven miles north of the Long Island
Expressway.
Mandated Infrastructure Improvements
Projected
Project(s) Agency or Mandate Completion
Industrial building public Suffolk County Department of
water backflow prevention Health
Suffolk County, New York on-going
Inspection, maintenance and/or N.Y.S. Department of
removal of in-ground oil tanks Environmental Control (DEC) on-going
Handicap access to facilities Americans With Disabilities Act on-going
Hazardous material disposal Environmental Protection Agency
(EPA) on-going
It is currently estimated that costs associated for compliance with government
regulations will cumulatively approach $200,000 over the next few years. It
must be noted that there may be additional compliance costs in the event that
proposed approaches to various projects are modified or nullified by pending
changes in regulations or adverse administrative interpretations.
The Company has undergone extensive reviews of development possibilities, and
in June 1996, the Board of Directors adopted a preliminary Master Plan for
Development. A broad range of efforts are now underway to further focus the
preliminary plan and garner community input and support. The adoption and
implementation of the development plan will be market driven and should not be
viewed as a short term project. Further marketing and technical surveys must
be conducted prior to the promulgation and submittal of a required
environmental impact statement to village, town and county officials.
With the exception of two individuals assigned to aerospace activities,
essentially all Company personnel are directly involved in support of real
estate operations. Depending on seasonal requirements, total full time
personnel vary between eighteen and twenty-five.
(2) Oil and Gas
As noted earlier, Parker and Parsley acquired Mobil Oil's interest in the
Ackerly Field, Texas property in 1991. As part of the arrangement, Mobil
contracted with Parker and Parsley for the purchase of the total field output
providing a guaranteed customer. GPI's interest is:
Name Location % Avg. Net
of-Field County/State - Gross Acreage Revenue - Interest
- -------- ---------------------------- -------------------
Ackerly Dawson, Texas - 6,540 Acres 4.5%
The estimated monthly output is roughly one thousand gallons per month with
gross revenues fluctuating with the spot price of oil, currently $21/bbl
(July 96). Expenses, ad valorem taxes and unscheduled maintenance reworks
average approximately $10,000 per month. GPI's initial acquisition of Ackerly
was as an operating field and as such, the field is well over thirty years
old. Environmental compliance expenses, particularly for casing leaks, have
tended to rise over time with oil output remaining essentially flat. Current
net returns are attractive but may fluctuate over time.
(3) Citrus Grove
From its inception in 1965, the net worth of the Grove Partnership, based on
its appraised value, has increased approximately 600% while cash distributions
to the partners have amounted to $31 million or 500% on a base investment of
$5.5 million. At the formation of the Partnership, the Company's interest was
20%. However, as provided in the Agreement, upon payout of each limited
partner's initial equity participation, the General Partner was granted a
12.5% share of Grove earnings and equity which effectively reduced the
Company's share of the Partnership to 17.5%. Based on the recent capital
infusion, in which the Company did not participate, the Company's share has
declined to 14.9%. During calendar year 1976, the Grove realized its first
profit from operations and by 1981 the Limited Partners had recouped their
original cash investment. To date Flowerfield Properties Inc. has received,
in cash, five times its $1.1 million original investment.
In 1995 the Company signed an amendment to the Partnership agreement which
extends the life of the Partnership from 1999 to 2019. In addition, it
provides greater flexibility to the General Partner in such areas as
financing, cash distribution and bonuses. In April of 1995, a $6 million
subscription program for additional capital was instituted by the Grove.
Existing Partners were given the opportunity to subscribe to this financing at
the same level as their current investment. Gyrodyne deferred and did not
participate in the offering. Although the Company's percent of ownership of
the Grove was reduced, the actual dilution of investment interest was
relatively insignificant.
The original Callery-Judge Grove prospectus envisioned the development of
nearly four thousand acres of marsh land into citrus producing acreage. With
the exception of the Indian River Basin acreage which was earmarked for
grapefruit due to the marketing cache of the area, the balance of the tract
was to be planted in commodity type citrus such as oranges and lemons. The
Grove's irrigation system of canals and pumping stations served the
development effort satisfactorily reclaiming the anticipated acreage. Today,
advanced techniques of laser leveling, efficient drainage tile design, and
automated water and nutrition management systems place the Grove at the
forefront in garnering higher per acre yields.
Economic pressures significantly changed the Grove's citrus mix. Affected by
successive large California lemon crops, the Grove first phased out lemons as
an unviable commodity in the early eighties. Continued success by direct
marketers of fresh fruit and the vagaries of the juice market due to Mexican
and South American imports, led the Grove to conclude that future profitability
lay with niche markets for specialty varieties of table fruit. The Grove
Management mapped out a three pronged plan: 1) replant with specialty
varieties, 2) develop in-house marketing capability and 3) vertically
integrate.
Following the canker scares of the mid-eighties, which precluded replanting
with outside stock for fear of contamination, the Grove began implementing its
plan in 1988 to reposition itself. Studies showed that, although short term
profitability would suffer from a major replanting, long term results would
ensure the viability of the Grove. Approximately forty percent of the Grove
has been completely replanted with an emphasis on specialty tangerine
varieties. The Grove's current mix includes a total of seventeen citrus
varieties. The Grove has now become the largest producer of tangerines in
Florida.
With a change in the Managing Partner in 1992, the Grove began aggressively
marketing not only the private Callery-Judge brand through direct sales to
institutions and individuals but also directly to Japan. Acquisition of
additional shares in the Ocean Spray Co-op have also helped stabilize the
juice-solids market as has participation in the new Tangerine Exchange that
mitigates the impact of dumping.
Vertical integration requires methods of controlling production, marketing and
distribution. The completion of the Grove's packing plant in October 1995
insures timely future packouts with maximum flexibility in meeting market
demands as well as the complete control of quality required of a premium fresh
fruit purveyor. A primary economic justification for the packing plant,
sharply reduced shipping costs, has been validated by early results.
Additionally, quick change over of fruit types should contribute to profits as
small high yield runs can be scheduled.
The Grove has been acknowledged by the press and academic community for being
a "green grower" by utilizing environmentally friendly methods. At any given
time, numerous pilot programs with the state's agriculture department and/or
the University of Florida are under way. There are no known significant
unresolved environmental issues outstanding following the completion of
construction of the packing plant.
Starting May 1, 1995 the Company changed from the equity method of accounting
to the cost method of accounting. Henceforth, the Company's investment in the
Grove will only change when capital distributions are received or when cash
payments are made to the Grove. There were no such transactions in FY 1996.
The Company's last cash receipt from the Grove was in calendar year 1991 and
amounted to $294,000. A more complete discussion can be found under Item 6.
Management's Discussion and Analysis.
(4) Aerospace:
The Company's primary aerospace product is the QH-50 model remotely piloted
coaxial helicopter. Although sold as an integrated package: engine, fuselage,
rotating controls, avionics, rotor blades, actuators, fuel tank(s) and
payloads to the U.S. Navy, Gyrodyne currently specializes in the assembly and
testing of dynamic platforms only. This consists of the fuselage, rotating
controls, rotor blades and fuel tank(s). All chemical testing and processing
is subcontracted, and therefore, there is no environmental exposure.
From the late forties through the sixties, the Company ushered in numerous
technological milestones including the world's first successful coaxial flight
test, first convert-a-plane, first free drone helicopter flight, and first
fully composite rotor blade. The Company's unique patented "tip brake" design
solved directional control problems inherent in the coaxial rotor system thus
fostering development. In 1993 the Company was granted a new patent on a
retractable tip brake which will permit the design of more efficient blades in
the future.
As a result of efforts during the 1980's, the Company negotiated two multi-
phased licensing agreements which cover both evaluation and manufacturing
stages for its QH-50 helicopters and derivatives. Dornier, GmbH, a subsidiary
of Daimler-Benz AG, Friedrichshafen, Germany, was awarded a license (1986) for
the European NATO countries while Israel Aircraft Industries Ltd./Technologies
Division (IAI), Ben-Gurion International Airport, Israel received a license
(1987) for Israel.
The agreements provide for Gyrodyne to furnish Dornier and IAI with technical
assistance and technical data in order for them to evaluate the suitability of
the Gyrodyne helicopter for their various applications. It is anticipated
that, if the evaluations provide favorable results, final licensing agreements
will be signed whereby Gyrodyne will furnish additional technical and
manufacturing data to enable each licensee to produce the remotely piloted
QH-50 helicopters.
It was initially anticipated that the evaluation phase of each licensing
contract would last approximately two and one half to three years. Numerous
extended delays have been encountered by each licensee with respect to the
promulgation of air vehicle requirements by their respective governments,
securing incremental development funding, and attracting third party
customers. Both licensees have opted to market the basic QH-50 configured
platform with modern customized electronics, updated software and a new power
plant. Each version of the QH-50 is capable of handling varied mission
requirements and/or integrating various payloads such as sensors, radars,
armaments, and communications gear.
For the evaluation phase, the Company received fees of $500,000. Should both
final agreements be executed, additional fees of approximately $3 million can
be anticipated. The licensing agreements would remain in effect in perpetuity
and provide for staged royalty payments. The primary sales territories for
Dornier are the NATO European nations and for IAI, Israel. To cover
uncommitted territories, there is the possibility that additional licensing
agreements may be signed in the future or the current agreements broadened to
encompass new areas. All licenses and sales are subject to the approval of the
U.S. Department of State.
On September 6, 1995, Gyrodyne signed a contract with Dornier GmbH for the
sale of two re-manufactured QH 50 helicopters for $700,000. The vehicles will
be used for the VTOL UAV Demonstrator Program being conducted for the German
government. The second platform was shipped to Dornier in April 1996 with the
on-site technical assistance portion of the agreement concluded in June 1996.
Gyrodyne and Dornier have begun negotiations to modify the existing Technical
Transfer Agreement to accommodate proposed changes requested by the German
government. It is anticipated that an accord will be reached by year end.
The existing agreement with IAI is set to expire on November 6, 1996.
Item 2. Description of Property
(c) Description of Real Estate and Operating Data
Gyrodyne Company of America, Inc. (Consolidated) owns, in fee, approximately
326 acres located on the north shore of Suffolk County, Long Island, New York
just west of the State University of New York at Stony Brook. The Company
currently has approximately 202,000 square feet of industrial building space
and maintains its corporate office and manufacturing facilities on site. In
1994, approximately 5 acres of land adjacent to the Company's property were
purchased. For a more detailed description, see Item 101. Description of
Business (b) (1) Real Estate
The land is carried on the Company's books at cost in the amount of $670,129,
while the 202,000 square feet of space is carried at a depreciated cost of
$1,233,366. At the current time, the property and buildings that are used by
the Real Estate segment of the business, except for Building #7 and the
surrounding 6 1/2 acres which are encumbered by a 10 year collateral mortgage
in the amount of $1,050,000, are entirely without financial encumbrances. The
balance of the mortgage as of April 30, 1996 is $1,015,000.
The average age of all the buildings is nearly thirty-six years, and the
facilities are undergoing continuous maintenance repair cycles for roofs,
paved areas, and building exteriors. The external appearance of all buildings
is that of well maintained mature properties. The general condition of
internal infrastructure HVAC, electrical and plumbing is above average for
facilities of this age. The grounds feature extensive landscaping and are
neatly groomed commensurate with other business parks.
A Phase I Environmental Study was conducted by Lockwood, Kessler & Bartlett,
Inc., September 1993, with the resulting assessment that "...there appear to
be no significant grounds for concern regarding hazardous materials use,
storage, or contamination at the subject site." For further discussion on
environmental issues, see Item 1. Description of Business (b) (1) Real Estate.
On June 13, 1996, the Board of Directors adopted a preliminary Master Plan for
the development of the Flowerfield property. The plan, generated by
consultants Henderson and Bodwell L.L.P. of Plainview, New York, is based on
a planned unit development concept. A more detailed discussion follows in
Item 6. Management's Discussion and Analysis.
The Company's official address is:
Gyrodyne Company of America, Inc.
17 Flowerfield Suite 15
St. James, New York 11780-1551
The Company currently maintains a $10 million dollar liability umbrella policy
and has selectively insured certain buildings and rent receipts predicated on
an analysis of risk, exposure, and loss history. Of the five large non-
contiguous industrial buildings: two, are constructed of prefabricated metal
panels; two, of cement blocks with metal deck roofing; and one, clay brick and
stucco with a gabled wood roof. One of the block buildings has an in-place
sprinkler system which is currently functional but not recognized for
insurance purposes. It is Management's opinion that the premises are
adequately insured.
Almost all available space has been subdivided and is available for rent,
except for approximately 18,000 square feet which has been reserved for
Company use. Of the 184,000 gross square footage available for rent,
approximately 15,000 square feet comprise common areas such as hallways,
foyers and rest rooms. A summary of operating results:
Fiscal Operating Occupancy Nominal
Year $Revenue $Expenses $Margin Rate in Pct. $Rate per sq ft*
- ------ --------- --------- --------- ----------- ----------------
1993 1,422,326 1,036,221 386,105 80 9.82
1994 1,495,952 1,172,028 323,924 80 9.77
1995 1,667,067 1,167,325 499,742 82 10.15
1996 1,879,287 1,430,192 449,095 86 11.35
*exclusive of land rentals
In FY 1996 three tenants individually exceeded 10% of total rental income,
representing an aggregate 45%, with one tenant exceeding 21%. Correspondingly,
in FY 1995, three tenants each exceeded 10% of total rental income for a 50%
aggregate total. The leases of these major tenants all contain periodic cost
of living escalators as well as various pass-through increases for such items
as real estate taxes, fuel oil increases, security services and building
insurance. For tenants with stand alone buildings, certain pass-throughs do
not apply because the associated service costs are fully assumed by the
tenants.
As of April 30, 1996, the Company had a 13.6% vacancy rate vs. 18.2% for the
same period last year. The primary catalyst for the improvement was the
addition of a major tenant which leased 11,630 sqft for an 11 year term. This
tenant operates a child's day care center and started operations in September
1995.
Most of the Company's tenants are start-up or small businesses that seek small
spaces and short term leases. The average square footage of tenants whose
leases expire within twelve months is less than 1,000 sqft. The Company's
exposure to short term market rental rate conditions is reflected in the
accompanying table. A summary of lease terms:
<TABLE>
<CAPTION>
FY 1996 Lease Summary
Balance of time # of Total Relative Pct Relative Pct Approximate
remaining on Tenants square of total of total dollar value
of lease footage rented space dollar value rentals
<S> <C> <C> <C> <C> <C>
Up to 1 year 65 63,604 40.1% 35.3% $ 663,000
From 1 to 2 yrs 10 14,819 9.4% 6.5% 123,000
from 2 to 5 yrs 6 80,039 50.5% 58.2% 1,093,000
----- -------- ------- ------ ----------
Total 81 158,462 100.0% 100.0% $1,879,000
===== ======= ====== ====== ==========
</TABLE>
A summary of occupancies at April 30 1996:
Type of Occupancy Square Footage Percent of Total
Office 29,277 18.5
Manufacturing/R & D 34,696 21.9
Service/Misc. 94,489 59.6
-------------- -----------------
Total 158,462 100.0
============= =================
Depending on the type of prospective occupancy, there are approximately 7,500
square feet of long term vacancies that require extensive renovation.
Management estimates that the cost of renovation will be approximately
$30/sqft. or $225,000. Upon securing viable tenants, the Company may seek
outside financing for such renovations. Rental units turned over in the
normal course of business are refurbished from internal cash flow.
Depreciable asset categories and rates are enumerated in Footnote 2 to the
Financial Statements. Real estate taxes paid to the township of Smithtown for
FY96 were $228,226.96 based on a rate of $99.45/$100 of assessed value. Real
estate taxes paid to the township of Brookhaven for FY96 were $109,230.40
based on a rate of $144.68/$100 of assessed value.
Item 3. Legal Proceedings
The Company is named as a defendant in a number of legal proceedings arising
in the normal course of business. Management, after reviewing all actions and
proceedings pending against or involving the Company considers that the
aggregate loss, if any, resulting from the final outcome of these proceedings
will not be material.
None of the Company's subsidiaries is party to, nor is any subsidiary-owned
property subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the vote of security holders during the fourth
quarter of either Fiscal Year 1995 or 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market information:
The Company's Common Stock $1 P.V. (symbol: "GYRO") is traded in the NASDAQ
Small-Cap Market. Set forth below are the high and low bid and asked prices
as reported by NASDAQ for the periods indicated. Such prices reflect
inter-dealer quotations, without retail mark-up, mark-down or commission, and
do not necessarily reflect actual transactions.
Quarter Ended* Bid Price Low Asked Price High
Fiscal 1995
July 31, 1994 $9.14 $11.57
October 31, 1994 $9.43 $12.14
January 31, 1995 $10.57 $12.50
April 30, 1995 $11.00 $15.00
Fiscal 1996
July 31, 1995 $13.50 $16.00
October 31, 1995 $15.00 $16.00
January 31, 1996 $14.00 $15.75
April 30, 1996 $12.00 $14.13
* Quotations prior to January 20, 1995 have been adjusted for the 7 for 4
stock split effective on that date.
(b) Approximate Number of Equity Security Holders, including shares held in
Street name by brokers.
Number of Holders
Title of Class as of July 03, 1996
- ------------------------------ -------------------
Common Stock, $1.00 Par Value 2,200
(c) There were no dividends declared in the current or prior fiscal year.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Revenues
Additional tenants along with higher rental rates combined to increase real
estate revenue by $212,000. Coupled with aerospace sales, total revenue for
the fiscal year ended April 30, 1996 increased $899,000 to $2,583,000 from the
previous year's $1,684,000.
Operating Costs
Nonrecurring costs elevated expenses over the prior year by $263,000.
Extensive renovations, road and roof repairs and a resurfaced building facade
contributed the major share. Additionally, new mandates on in-ground fuel
tanks led to accelerated remediation in FY 1996. Numerous tanks whose
scheduled testing cycle extends beyond the new 1997 cutoff must now be removed
regardless of serviceable condition. The most severe winter in decades also
contributed to elevated expenses for manpower, materials and equipment.
FY 1997 results should absorb the balance of deferred maintenance projects and
completion of fuel tank compliance expenses. In addition, expenses will
reflect a nonrecurring charge in excess of $100,000 for completion of land
improvements associated with the purchase of the five acre plot purchased in
1994. Wages, real estate taxes and utility expenses are budgeted to outpace
inflation again. It is projected that FY 1998 will benefit from sharply
reduced expenses.
Based on preliminary negotiations, rental revenue should again increase in FY
1997. Vacancy rates dropped from 18% to 14% in FY 1996. This trend should
continue in FY 1997. Net aerospace expense will reflect the final processing
costs on the sale of the two platforms to Dornier plus expenses related to
prototype development initiatives. The budgeted aerospace deficit is
approximately $100,000.
General and Administrative Expenses
On a consolidated basis for the year ended April 30, 1996, General and
Administrative expense was $865,236 versus $725,772 for the year ended April
30, 1995. For analysis purposes, the Company has divided General and
Administrative Expenses into four expense pools: 1) Remuneration, which
includes all compensation expenses related to executive and support staff;
2) Corporate Governance, which includes all expenses related to the Board of
Directors and its subcommittees, maintenance of stockholder records and NASDAQ
listing requirements, and long range strategic planning; 3) Overhead,
corporate overhead expenses for accounting services, depreciation, maintenance,
utility charges, insurance, etc., and 4) Special Projects, expenses related to
the Master Plan for the Flowerfield property, acquisitions, financing charges
and consulting expenses for project advisement. The FY 1995 expenses have been
adjusted to maintain comparability with FY 1996 results.
G&A Segments
G&A Expenses FY96 FY95
Remuneration $567,063 $499,396
Corporate Governance $95,483 $79,730
Overhead $150,196 $146,646
Special Projects $52,494 $0
-------- --------
Total $865,236 $725,772
======== ========
FY 1996 was the first year in which stock options issued under the 1993 Stock
Incentive Plan vested and were exercised. As a result, option recipients
recorded income, and the Company recognized a corresponding expense which
amounted to $77,000. Corporate Governance expenses rose reflecting the use of
outside legal consultants in long range planning. With each item contributing
roughly half the expense, Special Projects spending included bank fees and
closing costs on the $1,050,000 mortgage and architectural fees for the day
care center renovation.
Other Income and (Expense)
Continuing losses from gas production prompted the Company to sell its gas
assets. The Company realized net cash of $201,000 on a gross sale price of
$283,890 which resulted in a taxable gain of $172,176. Contributing to the
sharp contrast in the year-to-year comparison was the $153,964 slant well
write-off recognized in FY 1995. (Footnote 3 to the Financial Statements
provides a more detailed analysis.) The Company's remaining petroleum
interest is an oil investment which currently generates a net annual cash
flow of approximately $75,000.
As a result of a $6 million subscription program for additional capital
instituted by the Callery-Judge Grove last year, in which the Company did not
participate, the Company's investment percentage declined from 17.5% to 14.9%.
In addition earlier in the year, the Grove partners ratified a new partnership
agreement that reconstituted the partnership, substantially altered the
composition of the General Partner and extended the life of the partnership
for an additional twenty years to 2019. Continued timing differences for
financial reporting purposes between the Company's April 30 fiscal year and
the Grove's December 31 calendar year would be exacerbated if the Grove's
proposed June 30 fiscal year were approved by the IRS.
Ownership and elements of control are two basic criteria in determining the
accounting treatment of interests in varying forms of business ventures. By
legal definition, a limited partner in a partnership has no say in the
management of a partnership, and hence, has limited liability. Management
rests solely with the Managing Partner who is selected by the General Partner.
Further, a nominal threshold of 20% ownership in a business venture is
commonly utilized as a standard to determine the efficacy of consolidating
earnings for reporting purposes. For Fiscal Year 1996, the Company adopted
the cost method of accounting in favor of the equity method previously used.
Henceforth, only cash disbursed from Grove earnings will be recorded as income
in the period received. As a result of the accounting change, no earnings or
loss was reported for FY 1996 as compared to a loss of $322,643 in FY 1995.
There was no cash transactions during Fiscal Year 1996 and the Company does
not anticipate receiving income from the Grove in FY 1997.
Interest and dividend income edged lower by $8,900 due to a reduction in
investment funds. Expenditures for the day care center renovation prior to the
consolidation of an outstanding term loan and construction loan, led to a
reduction in working capital. With the execution of the mortgage agreement and
receipt of the first installment of the proceeds of the helicopter sale,
investment funds rose at the end of the period.
In 1990, the Company adopted the method of "Employers' Accounting for Pensions"
prescribed by the Financial Accounting Standards Board ("FASB") Statement
No. 87. The application of FASB 87 resulted in recognition of approximately
$38,000 of net periodic pension expense for the year ended April 30, 1996
compared to approximately $8,000 of net periodic pension income for the year
ended April 30, 1995. The shift from income to expense in FY 1996 reflects
the restructuring of the plan which increased benefits to plan participants.
No contributions to the plan by the Company were required during fiscal years
1996 or 1995.
Results from Operations
After giving effect to the exercise of stock options, results from operations
after taxes were a gain of $0.12 per share for the period ended April 30, 1996,
versus a loss of ($0.56) per share for the prior year. The pre-tax gain of
$276,076 generated an income tax expense of $159,773 and resulted in net income
of $116,303 compared to a loss of $563,060 in FY 1995. A net operating loss
carry forward from prior years offsets the tax on the current year's gain. The
major items effecting the current year gain were; the sale of two helicopters,
the sale of the Company's gas investments and the change in accounting
treatment for the Citrus Grove.
Liquidity and Capital Reserves
The Company's cash position increased $528,000 during the year as a result of
the sale of the Company's gas well interests and the receipt of half of the
funds from the helicopter sale. The balance of the proceeds from the
helicopter sale were received during the first quarter of FY 1997. The
$574,248 decrease in cash position at the end of FY 1995 essentially reflected
the purchase of five acres of land.
During the current year, the Company engaged McCarthy & Associates to develop,
predicated on budgeted forecasts, a financial plan suitable for presentation to
financial institutions. The Company also commissioned Henderson & Bodwell,
L.L.P. consulting engineers to draw up a preliminary Master Plan for the
development of the Company's Flowerfield property. In conjunction with these
efforts, the law firm of Cahn Wishod & Lamb was called upon to examine the
ramifications of alternate development scenarios. As a result of these joint
efforts, the Board of Directors adopted a preliminary Master Plan in June 1996.
As noted earlier in this report, certain additional specialists must be engaged
to provide qualified studies and opinions in diverse areas such as marketing,
traffic pattern studies, environmental impacts and community interface. The
Company has estimated in numerous prior reports that the cost of adopting a
presentation caliber Master Plan proposal would be at least $250,000. In
order to mitigate the effect of this large expense on cash reserves, the
Company has discussed arrangements to compensate certain consultants, in part,
with restricted investment type common stock.
The Company is forecasting heightened development activity for FY 1997. The
Brookhaven Industrial Development Agency has been designated a recipient of
a $25,000 New York State grant to oversee a feasibility study on a road link
between the Flowerfield and Stony Brook University sites. The contract has
been awarded to L.K. McLean, consulting engineers, with an anticipated
completion date of September 1996.
Other requirements that have been identified for additional financing during
the coming year are: construction of a day camp, new facilities at the
reception center, infrastructure improvements at the fair grounds and building
renovations. The extent to which external financing is available and the net
demands on working capital will determine the pace at which these projects will
progress. The Company expects, in a timely manner, to compete the required
land improvements secured by a $200,000 irrevocable letter of credit. Upon
satisfaction, the $200,000 will be returned to working capital.
Effects of Inflation
It is the Company's policy to have multi-year leases contain cost pass-through
provisions for increases in real estate taxes, fuel costs, building insurance,
cartage and security guard services, as applicable. The balance of the
Company's operations, including rental rates, income from the Grove and
petroleum revenue are subject to free market forces.
Item 7. Financial Statements and Supplementary Data
See following pages.
Auditors letter
HOLTZ RUBENSTEIN & CO., LLP
Certified Public Accountants
Business Advisers
Independent Auditors' Report
Board of Directors and Shareholders
Gvrodyne Company of America, Inc.
St. James, New York
We have audited the accompanying consolidated balance sheet of Gyrodyne
Company of America, Inc. and Subsidiaries as of April 30, 1996 and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the two years in the period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
1994 financial statement of the Callery-Judge Grove, a limited partnership
in which the Company had a 17.5% equity interest, which statement reflects a
net loss of $(1.211,081) for the year ended December 31, 1994 and the Company
has recorded its proportionate share of such loss in its consolidated income
statements. This statement has been audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to reported income
from this investment in 1995, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion,-based upon our audits and the report of other auditors with
respect to the Callery-Judge Grove as described above, the consolidated
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Gyrodyne Company of
America, Inc. and Subsidiaries as of April 30, 1996 and the results of their
operations and their cash flows for each of the two years in the period ended
April 30, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 4 to the financial statements, the Company changed its
method in accounting for its investment in the limited partnership in 1996.
SGD/HOLTZ RUBENSTEIN & CO., LLP
- ------------------------------
Melville, New York
June 12, 1996
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
APRIL 30, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 713,228
Short-term investments 189,716
Accounts receivable, less allowance
for doubtful accounts of $6,000 459,507
Prepaid expenses and other current assets 218,003
--------
Total current assets 1,580,454
=========
INVESTMENT IN OIL AND GAS PROPERTIES (Note 3) 0
INVESTMENT IN CITRUS GROVE PARTNERSHIP (Note 4 & 16) 1,585,104
PROPERTY, PLANT AND EQUIPMENT (Note 2) 2,078,147
PREPAID PENSION COSTS (Note 7) 1,752,019
OTHER ASSETS (Note 8) 215,289
----------
$7,211,013
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 346,675
Current portion of long term debt (Note 12) 70,000
Income taxes payable - Deferred (Note 6) 0
---------
Total current liabilities 416,675
---------
LONG TERM DEBT (Note 12) 958,675
DEFERRED INCOME TAXES (Note 6) 1,231,114
---------
2,189,789
=========
COMMITMENTS (Notes 13 & 15)
STOCKHOLDERS' EQUITY: (Notes 10 & 11)
Common Stock par value $1 per share
authorized 2,000,000 shares, 1,531,086 shares issue
(including 530,535 shares held in treasury) 1,531,086
Capital in excess of par value 6,172,311
Deficit (47,588)
----------
7,655,809
Less cost of shares of common stock held in treasury (3,051,260)
-----------
4,604,549
===========
$7,211,013
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended April 30,
1996 1995
---- ----
REVENUE:
Rental income (Note 5) $1,879,287 $1,667,067
Aerospace income 704,150 17,220
-------- ---------
2,583,437 1,684,287
--------- ---------
COSTS AND EXPENSES:
Cost of maintaining rental property 1,430,192 1,167,325
Aerospace expense 83,908 78,482
General and administrative 865,236 725,772
--------- ---------
2,379,336 1,971,579
--------- ---------
Gross Operating Income/(Loss) 204,101 (287,292)
OTHER INCOME AND (EXPENSES:)
Equity in gain/(loss) of oil and gas
investment (Note 3) 220,571 (172,477)
Equity in (loss) of Citrus Grove
Partnership (Note 4 &16) 0 (322,643)
Interest & dividend income 28,335 37,258
Pension (expense)/income (Note 7) (38,091) 7,678
Loss on pension settlements (Note 7) (56,687) 0
Interest expense (82,153) (45,361)
--------- --------
71,975 (495,545)
GAIN/(LOSS) BEFORE INCOME TAX 276,076 (782,837)
INCOME TAX EXPENSE/(BENEFIT) (Note 6) 159,773 (219,777)
-------- ---------
NET GAIN/(LOSS) $116,303 $(563,060)
======== =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (Note 10) 997,465 988,908
======== ========
GAIN/(LOSS) PER SHARE $ 0.12 $ (0.56)
See notes to consolidated financial statement
GYRODYNE COMPANY OF AMERICA, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
TWO YEARS ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
Common Stock Treasury Stock
-------------------- Capital in Retained ------------------------------------
Par Excess of Earnings/
Shares Value Par Value (Deficit) Shares Cost Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance April 30, 1994 1,107,268 $1,107,268 $6,518,069 $399,169 542,178 $(3,118,208) $4,906,298
Stock split (7 for 4) 423,818 423,818 (423,818) 0
Net (loss) (563,060) (563,060)
--------- ---------- ---------- --------- ------- ----------- ----------
Balance April 30, 1995 1,531,086 $1,531,086 $6,094,251 $(163,891) 542,178 $(3,118,208) $4,343,238
Stock option exercise 78,060 (11,643) 66,948 145,008
Net gain 116,303 116,303
--------- ---------- ---------- -------- ------- ----------- ----------
Balance April 30, 1996 1,531,086 $1,531,086 $6,172,311 $(47,588) 530,535 $(3,051,260) $4,604,549
========= ========== ========== ======== ======= =========== ==========
See notes to consolidated financial statements
</TABLE>
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain/(loss) $116,303 $(563,060)
---------- ---------
Adjustments to reconcile net gain/(loss)
to net cash used in operating activities:
Depreciation and amortization of oil and gas investments 139,840 118,468
Depreciation and amortization of plant and equipment 79,203 62,000
Loss on abandoned wells 0 153,964
Deferred income tax provision (benefit) 103,114 (28,204)
Pension expense/(income) 38,091 (7,678)
Loss on pension settlements 56,687 0
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (375,642) 14,111
Prepaid expenses and other (8,547) 169,621
Other assets 37,755 (199,348)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 100,906 (34,438)
------- --------
Total adjustments 171,407 248,496
------- --------
Net cash provided/(used) in operating activities 287,710 (314,564)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term government securities 111,210 93
Increase in oil and gas investments 0 (4,344)
Decrease in Citrus Grove investment 0 322,643
Increase in Fixed Assets (604,806) (458,076)
-------- --------
Net cash (used) by investment activities (493,596) (139,684)
CASH FLOWS (USED)/PROVIDED BY FINANCING ACTIVITIES:
New borrowings 1,266,000 0
Repayment of debt (677,324) (120,000)
--------- --------
Net cash from borrowings 588,676 (120,000)
Stock option exercise 145,008 0
--------- --------
Net cash from financing activities 733,684 (120,000)
Net (decrease)/increase in cash and cash equivalents 527,798 (574,248)
Cash and cash equivalents at beginning of year 185,430 759,678
-------- --------
Cash and cash equivalents at end of year $713,228 $185,430
======== ========
</TABLE>
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1996, AND 1995
1. Summary of Significant Accounting Policies:
a. Description of business
Gyrodyne Company of America, Inc. and Subsidiaries (the "Company") is
primarily a lessor of industrial and commercial real estate to unrelated
diversified entities located in Long Island, New York. The Company also has
investments in a citrus grove partnership and in oil and gas properties.
Prior to 1975, the Company's primary business was the design, testing,
development and production of coaxial helicopters. Although the Company
cannot be considered an active airframe manufacturer, it is involved in
certain licensing agreements that, if exercised, would enable the licensees to
produce the Gyrodyne coaxial helicopter.
b. Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Gyrodyne Company of America, Inc. ("GCA") and its wholly-owned subsidiaries.
All intercompany balances and transactions have been eliminated.
c. Investments
1. The Company accounts for its oil and gas investments under the equity
method. Its' investment in the oil and gas properties represents the
Company's proportionate share of drilling costs. Tangible assets are
depreciated using the 200% declining balance method with a 5 year class life
and intangible assets are amortized using the straight-line method over a
twelve year period. During the year the Company sold its investment in gas
producing wells and realized a net gain of $172,176.
2. The Company accounts for its investment in the citrus grove under the cost
method. Under this method any distributions by the citrus grove will be income
in the year of distribution and capital contributions by the Company will
increase the value of the investment. (See Note 4)
d. Depreciation and amortization
Substantially all property, plant and equipment is depreciated using
accelerated methods over the estimated useful lives of the related assets.
e. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents. Short term investments consist of U.S. Government treasury
bills and notes stated at cost, which approximates market. These investments
mature within the year.
f. Reclassifications
Certain reclassifications have been made in the 1995 financial statements to
conform to the presentation used in 1996.
g. Earnings per share
Earnings per common share are based on the weighted average number of common
shares outstanding during the year.
h. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Property, Plant and Equipment:
Property, plant and equipment as of April 30, 1996 consists of the following:
Estimated Allowance Net
Lives Cost for Deprec. Assets
Land - $ 670,129 $ 0 $ 670,129
Buildings and improvements 20-33 4,221,506 2,988,140 1,233,366
Machinery & Equipment and
Furniture & Fixtures 3-10 469,578 294,926 174,652
Total $5,361,213 $3,283,066 $2,078,147
Substantially all buildings and improvements are held for lease.
Approximately half of Tenant leases are for one or two years. Certain leases
serve as collateral for the Company's outstanding bank debt. On October 5,
1994 the Company purchased an adjacent parcel of land for $499,900. In
connection with this purchase, the Company delivered an irrevocable letter of
credit to the seller in the amount of $200,000 to secure the performance of
certain land improvements by the Company. The Company has until October 5,
1996 to perform these improvements. During the current fiscal year the
Company made approximately $500,000 in capital renovations to Building #7 for
a new tenant who is operating a child care center.
3. Investment in Oil and Gas Properties:
The results of operations from the Company's investment in oil and gas
properties are summarized as follows:
Year ended
April 30,
1996 1995
Sales of oil and gas $197,499 $ 265,147
Oil and gas production expenses 121,069 165,192
Amortization expense 27,722 82,043
Depreciation expense 313 36,425
Abandoned well costs 0 153,964
-------- --------
149,104 437,624
-------- --------
Gain\(Loss) from operations $ 48,395 $(172,477)
======== =========
Sale of gas investments $283,980 $ 0
Unamortized investment in gas 111,804 0
-------- ---------
Gain on sale of gas investments 172,176 0
-------- ---------
Gain\(Loss) before income tax $220,571 $(172,477)
======== =========
In the current fiscal year the Company finalized the sale of its gas
investments in Colorado and New Mexico. After deducting liabilities, the cash
flow from this transaction amounted to $201,000. The net gain after writing
off the balance of assets on the books amounted to $172,176.
In 1994 the Company invested approximately $160,000 as a working interest in
a developmental drilling project. During 1995, the well operators determined
that the project was not economically viable and plugged and abandoned the
well. As a result, the Company wrote off the unamortized balance of its
investment of $153,964.
4. Investment in Citrus Grove Partnership:
During 1995, the Company passed on the opportunity to contribute additional
capital in the form of a new subscription and thereby reduced its existing
ownership percentage from 17.5% to 14.9%. This reduction, coupled with other
factors including the lack of common date financial statements, resulted in
the Company adopting a change in accounting treatment for this investment.
Effective May 1, 1995, the Company changed from the equity method to the cost
method with any previously recorded income or loss remaining as part of the
book value of the investment as of that date.
5. Major Customers:
For the year ended April 30, 1996 rental income from three tenants represented
22%, 13% and 11% of total rental income.
For the year ended April 30, 1995 rental income from three tenants represented
20%, 14% and 12% of total rental income.
6. Income Tax Provision (Benefit):
The provision (benefit) for income taxes is comprised of the following:
Year ended
April 30,
1996 1995
Current:
Federal $37,081 $(202,020)
State 19,578 10,447
------- ---------
56,659 (191,573)
======= =========
Deferred:
Federal 113,696 (31,548)
State (10,582) 3,344
------- =========
103,114 (28,204)
------- =========
$159,773 $(219,777)
The Company files on a consolidated basis for Federal income and Florida State
franchise tax purposes. Flowerfield Properties Inc., Flowerfield Realty Inc.,
and Gyrodyne Company of America Inc. file separately for New York State
franchise tax purposes. Gyrodyne Petroleum Inc. files separately for
Colorado, New Mexico and Texas franchise taxes.
Deferred income taxes are comprised of the following elements:
April 30,
1996
Deferred tax liabilities:
Pension income $ 665,420
Depreciation of fixed assets 13,654
Investment income Citrus Grove 692,580
----------
Total deferred tax liabilities 1,371,654
----------
Deferred tax assets:
Tax loss carry forwards 210,000
Accounts receivable 2,580
Stock options 32,960
Valuation allowance for deferred tax assets (105,000)
----------
Total deferred tax assets 140,540
----------
Net deferred income taxes $1,231,114
==========
Deferred income taxes result principally from timing differences in the
recognition of income and expense between financial and income tax reporting.
A reconciliation of the federal statutory rate to the Company's effective tax
rate is as follows:
% of
Pre-Tax Earnings
1996 1995
U.S. Federal statutory income rate 34.0% (34.0%)
State income tax, net of federal tax benefits 1.5% 1.9%
Prior year tax adjustments 21.7% 0%
Other differences net .7% 4.0%
57.9% (28.0%)
7. Retirement Plans:
The Company has a noncontributory defined benefit pension plan covering
substantially all of its employees. The benefits are based on annual average
earnings for the highest sixty (60) consecutive months (whether or not
continuous) immediately preceding the Participants termination date. Annual
contributions to the plan are at least equal to the minimum amount, if any,
required by the Employee Retirement Income Security Act of 1974 but no greater
than the maximum amount that can be deducted for federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date but also those expected to be earned in the future. Due to
the overfunded status of the plan, no contributions have been made for each of
the two years in the period ended April 30, 1996
Net periodic pension income consists of the following components:
<TABLE>
<CAPTION>
Years ended April 30,
1996 1995
<S> <C> <C>
Service cost $(121,464) $(120,846)
Interest costs (230,050) (213,885)
Actual return on market related value of assets 193,498 237,713
Net Amortization 119,925 104,696
-------- ---------
Pension (expense)/income $ (38,091) $ 7,678
========= =========
Expense on pension settlements * $ (56,687) $ 0
========= =========
<NOTE>
* During the current fiscal year, two retiring employees elected to take lump
sum payouts.
</NOTE>
</TABLE>
<TABLE>
<CAPTION>
The plan's funded status is as follows:
1996 1995
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
-vested $(1,746,127) $(2,033,159)
-non vested (45,730) (191,679)
---------- -----------
- total $(1,791,857) $(2,224,838)
=========== ===========
Projected benefit obligation $(2,365,205) $(2,688,978)
Market related value of plan assets, primarily U.S.
bonds and the Company's stock 3,093,976 3,802,575
Unrecognized net transition asset (802,078) (1,143,260)
Unrecognized prior service cost 767,610 840,348
Unrecognized net loss 1,057,716 1,036,111
---------- ----------
Prepaid pension cost $1,752,019 $1,846,796
========== ==========
</TABLE>
Assumption used in accounting for the Company's defined benefit pension plan
are as follows:
Discount rate 8.0%
Rate of increase in compensation 8.0%
Expected long-term rate of return on plan assets 8.0%
8. Other Assets: -Restricted Cash
Included in Other Assets at April 30, 1996 is $200,000 of restricted cash
which is being held as collateral for the irrevocable letter of credit as
discussed in Note 2.
9. Technology transfer agreements
The Company was a party to an agreement with a foreign aircraft manufacturer
whereby the Company was to provide technological documentation and assistance
related to the Company's coaxial helicopters which would result in a
$2,000,000 payment for manufacturing rights. The Company has reached
agreement in principle with the licensee to restructure the accord by
modifying certain agreements and extending the contract terms. The Company
believes the new agreement will be in-place before FY 1997 year end.
In May 1987, the Company entered into a second agreement with another foreign
aircraft manufacturer whereby the Company will provide technological
documentation and assistance related to helicopters. The agreement consists
of an evaluation phase for which a $500,000 fee was received and contains an
option to purchase the technology through November 6, 1996. In the event the
option is exercised, the Company will receive a $1,000,000 fee and future
royalties based on sales using the technology.
10. Stock split
The Board of Directors on December 9, 1994 authorized a 7 for 4 Stock split
effected in the form of a stock dividend on January 20, 1995 to Stockholders
of record as of January 6, 1995. The $1 par value per share remains the same
and $423,818 was transferred from the Capital in Excess of Par value to Common
Stock. Based on the split, total shares outstanding increased from 565,090 to
988,908. On August 6, 1995 the exercise of stock options and grants of
incentive shares increased the shares outstanding by 11,643 bringing the total
outstanding shares to 1,000,551. The option and grant related shares were
taken from Treasury Stock.
11. Stock Options
The Company adopted a Stock Incentive Plan to grant options to employees.
Under the plan, the Company may grant stock in the form of stock awards,
options, incentive stock options (ISOs), non-qualified stock options with or
without reload options, stock appreciation rights (SARs) or limited stock
appreciation rights (LSARs), and stock awards to officers and other employees.
SARs entitle an optionee to surrender unexercised stock options equal to the
excess of the fair market value of the surrendered shares over the option
value of such shares if the stock has appreciated greater than 50% since the
date of the grant. Any shares that are available for awards that are not
utilized in a given year will be available for use in subsequent years. The
maximum number of shares that may be granted in fiscal year 1996 was 35,000
and 35,000 are available in fiscal year 1997. Options generally vest over a
three to four year period and all options not exercised expire five years
from date of grant.
Stock Options Number of Shares
Outstanding at April 30, 1995 35,000
Incentive awards at $9.89 per share 5,203
SARs at $9.8 94,108
Granted August 1995 at $15.625 per share 25,750
------
70,061
Less:
Exercised Options at $9.89 per share 6,910
Exercised Awards at $9.89 per share 3,160
Exercised SARs at $9.89 per share 1,573
SARs surrendered 2,535
Incentive Kicker surrendered 1,573
Options surrendered upon SARs exercised 2,713
------
Outstanding at April 30, 1996 51,597
======
Exercisable at April 30, 1996 438
======
12. Long Term Debt
In 1995 the Company secured a $1,050,000 ten year monthly installment bank
loan maturing October 2005. This loan was used to pay off the balance of the
prior loan and to finance the renovation of a portion of Building #7. The
loan has a fixed principle payment each month of $5,833.33 and interest at a
floating rate at 2% above the prime rate. The loan is secured by the
assignment of rents and a first collateral mortgage on Building #7 which is
situated on six and one half acres in St. James NY. The loan is also secured
by the guarantees of Gyrodyne Petroleum Inc. and Flowerfield Properties Inc..
The principal balance of the loan at April 30, 1996 was $1,015,000. The
remainder of the principal will be paid as follows:
Fiscal Year 1997 70,000
Fiscal Year 1998 70,000
Fiscal Year 1999 70,000
Fiscal Year 2000 70,000
Fiscal Year 200 170,000
Thereafter till October 2005 665,000
----------
$1,015,000
Vehicle term loan baring 10.9% interest, maturing August 1999 13,675
----------
1,028,675
Less current portion 70,000
----------
$ 958,675
==========
13. Off Balance Sheet Risk and Concentration of Credit
a. Credit risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, short-term
investments, and long-term investments. The Company places its temporary cash
investments with high credit quality financial institutions and, by policy,
limits the amount of credit exposure in any one financial institution. At
April 30, 1996 the Company held U.S. Government securities of $189,716 and
$713,228 in cash and cash equivalents. The Company is effected by the
economics of the Oil and the Citrus industries due to its investments therein.
Management does not believe significant credit risk exists at April 30, 1996.
14. Supplementary Information - "Statement of Cash Flows":
Year ended
April 30,
1996 1995
Cash paid during the year for:
- - Interest $82,153 $45,361
- - Income taxes $29,172 $ 3,942
15. Employment Contracts
On July 15, 1993 effective as of June 28, 1993, the Board of Directors through
its compensation committee entered into a restrictive five year employment
contract with the President and CEO, at a salary of $110,000 per year subject
to annual cost-of-living increases plus certain benefits. The contract also
contains a provision not to compete during the term of the contract or for a
period of two years following termination. In case of employee's death or
total incapacitation during the contract period, the contract provides for
compensation to continue for the unexpired term of the employment period or
any renewal period. In case of termination as a result of change in control,
merger, change in make-up of Board of Directors or discharge of employee by
the company for any reason other than death or incapacitation, his salary and
all other ancillary benefits to which the employee is entitled, shall be paid
for a period of five full years to the employee or in case of his death, to
his estate. On October 27, 1995 the Compensation Committee extended the
contract one year to expire July 15, 2000.
16. Fourth Quarter Adjustments
During the fourth quarter of 1995, the Company changed its method of
accounting for the investment in the Citrus Grove Partnership as discussed in
Note 4. This adjustment resulted in an increase of $458,000 in income. Of
this amount, the results of operations in the first, second and third quarters
would have reported an additional $132,000, $168,000, and $40,000 of income,
respectively.
17. Fair Value of Financial Instruments
In 1996, the Company adopted Financial Accounting Standards Board Statement
No. 107, which requires the disclosures about the fair value of the Company's
financial instruments. The methods and assumptions used to estimate the fair
value of the following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash, current
receivables and payables and certain other short term financial instruments
approximate their fair value.
The book value of the Company's long term debt, including the current portion,
approximates its fair value.
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
In connection with the audits for the three most recent years, there have been
no disagreements with Holtz Rubenstein & Co., LLP, on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedure.
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
(a) The following table lists the name, ages and positions of all directors
and executive officers and all persons nominated or chosen to become such.
Each director serves for a period of one year. The one year term of office
to which directors are elected ends with the next Annual Meeting of
Stockholders or when their successors are elected and qualified.
Name & Principal Occupation or Employment Age First Became a
Director
Dimitri P. Papadakos 51 1968 to 1976
President, CEO and Director of the Company 1992
Peter Pitsiokos 36 ---
Vice President & General Counsel of the Company
Josef Markowski 44 ---
Vice President, Operations of the Company
John A. Rohrs 62 ---
Controller of the Company
Joseph L. Dorn 81 1992
Former Secretary / Treasurer of the Company
Director of the Company
Nicholas Xanthaky 85 1948
Professor Emeritus Economics Salem State College
Director of the Company
Robert H. Beyer 63 1977
Sr. Inertial Guidance Engineer,
Naval Air Systems Command
Director of the Company
Nicholas Goudes Owner and Operator of 75 1992
Sharon View Country Club
Director of the Company
Peter P. Papadakos 33 1993
Secretary / Treasurer and Director,
Sa-Tu Corporation
Director of the Company
(b) Business Experience
Dimitri P. Papadakos, age 51, was appointed to the Board of Directors on
April 25, 1992. He was elected CEO and President on May 30, 1992. He is
also President and Director of all the Company's subsidiaries. He was employed
by Gyrodyne from 1972-1976 and served as Vice President of Flowerfield
Properties, Inc. and Secretary of Gyrodyne Petroleum, Inc. From 1976-1981
Mr. Papadakos was Administrative Director of the Seiskaya Organization, a
private arts group. In 1981, he rejoined Gyrodyne Company as Director of
Real Estate Operations. In 1983, he became Assistant Secretary of the
Gyrodyne Company and in 1988 became Vice President. In April 1992 he was
appointed to the Board of Directors of the Company and on May 30, 1992 was
elected CEO and President. Mr. Papadakos holds graduate degrees in both
business and communications from New York Institute of Technology.
Peter Pitsiokos, age 36, was elected to serve as Vice President on November
28, 1992, and had served as Assistant Secretary and General Counsel since
joining Gyrodyne Company of America, Inc., earlier in 1992. Mr. Pitsiokos
was formerly the Executive Assistant District Attorney in Suffolk County,
New York. He also served as the Assistant Director of Economic Development
and the Director of Water Resources in the Town of Brookhaven. He was an
associate attorney with the law firm Fragomen, Delrey & Bensen, New York,
New York, from 1984 to 1987. He holds a Law degree from Villanova University
and a BA degree from the State University of New York at Stony Brook.
Josef Markowski, age 44 has been Vice President of Operations since October
26, 1995. Prior to joining the Company he was President of Logical Device
Software (LDS), a company he started in 1988. LDS produced and marketed
software programs for accounting and production control, and in addition
wrote custom applications for a variety of fields. Prior to LDS he owned
and operated Star Steel Structures. This Company became prominent in the
construction, installation and manufacture of commercial greenhouse
structures and equipment in the Northeast. Mr. Markowski holds a degree in
Technical Electronics from SUNY Farmingdale.
John A. Rohrs, age 62 has been Controller of the Company since October 1989.
Prior to joining the Company he was Plant Controller for the Tandem Computer
Corporation a manufacturer of computers and local area networks. Previous to
that he spent 16 years in various financial positions in the recorded music
industry working for CBS, RCA and Polygram USA. He holds a BBA degree in
Accounting from St. John's University and an MBA from New York Institute of
Technology.
Joseph L. Dorn, age 81, Joined the Company in 1951 as Comptroller and in 1965
was elected Secretary and Assistant Treasurer. In April 1992 he was appointed
to the Board of Directors of the Company and on May 30, 1992 he was promoted
to Treasurer. Prior to joining Gyrodyne he worked for the Securities and
Exchange Commission and the United States Navy Cost Office. Mr. Dorn is a
Certified Public Accountant of the State of New York and is a graduate of
Georgetown University Mr. Dorn retired on February 1, 1996 but remains as a
Director of and consultant to the Company.
Nicholas Xanthaky, age 85, has been a Director since 1948. He is presently
Professor Emeritus - Economics at Salem State College, Salem, Massachusetts,
from which he also has received an honorary Doctorate. When he retired, he
was Associate Professor of Economics. From 1977 to June 1993 he was Treasurer
of the Salem State College Foundation. He is also a Director of all of
Gyrodyne's subsidiaries, and, from 1951 to 1956, he was employed by Gyrodyne
in various positions, including Secretary and Treasurer.
Robert Beyer, age 63, has been a Director of the company since November 28,
1977. He is also a Director of the Company's subsidiaries. He held the rank
of Captain in the United States Naval Reserve and last served on active duty
from September 1976 to October 1977. Mr. Beyer is presently a senior inertial
guidance systems engineer for the Naval Air Systems Command. Mr. Beyer was
employed by Gyrodyne from 1962-1973 as a Technical Representative for the
company's remotely piloted helicopters and was stationed in Japan from 1963
to 1970.
Nicholas T. Goudes, age 75, was appointed to the Board of Directors on
November 28, 1992. He was previously employed by Gyrodyne from 1950 to 1955
and served as a member of the finance committee. Between 1953 & 1957 he was
a Director and Vice President of Flowerfield Realty, Inc. and Helicopter
Securities, Inc. In 1957 Mr. Goudes moved to Charlotte, North Carolina
where he was a Director and Secretary/Treasurer of Piedmont Enterprises, a
recreational and food service company. In 1958 he founded the Sharon View
Country Club, a private recreational club, which he currently owns and
operates. From 1987 to 1991 Mr. Goudes served as a Director of North Carolina
State University Foundation.
Peter P. Papadakos, age 33, was appointed to the Board of Directors on October
30, 1993, increasing the board to six members. Mr. Papadakos is the son of
the late Chairman and founder of Gyrodyne Company of America, Inc. He
currently resides in Reno, Nevada and is Secetary/Treasurer and Board member
of the Sa-Tu Corporation of Nevada. He was previously employed by Gyrodyne
Company of America from August 1986 thru July 1987 in the capacity of
Assistant to the President and specialized in assembling a technical data
package in conjunction with the Company's foreign licensing agreements. Mr.
Papadakos holds a Bachelor of Science degree from the University of Nevada at
Reno.
(c) Compliance with Section 16(a) of the Exchange Act
A review of all Forms 3 & 4 filed with the Registrant indicates that only one
of the executive officers or directors were late in filing any required Forms
3 or Forms 4 with the Securities and Exchange Commission for fiscal year 1996.
A review of prior year filings indicates that no 10% holder of Gyrodyne Common
Stock $1 P.V. failed to file timely reports.
Item 10
Executive Compensation
(a)Executive Compensation
During the fiscal year ended April 30, 1996 only one executive received
remuneration in excess of $100,000 in such capacity. The Chief Executive
Officer's remuneration is specified below:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term Compensation
Annual Compensation Awards Payouts
Name and Salary Bonus Other Annual Restricted Securities LTIP All
Principal Position Year ($) ($) Compensation stock Underlying Payout Other
award($) Options/SARs ($) Comp.
(#)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dimitri P. Papadakos
President & CEO 1996 115,102 0 (A) $14,531 10,000 0
President & CEO 1995 112,122 0 (A) 0 17,500 0
President & CEO 1994 106,539 0 0 0 0
</TABLE>
(A)The Registrant has concluded that aggregate amounts of personal benefits to
any of the current executives does not exceed the lesser of $50,000 or 10% of
compensation and bonuses reported above for the named executive officers, and
that the information set forth in tabular form above is not rendered
materially misleading by virtues of the omission of such personal benefits.
(B) As of Fiscal Year ended April 30, 1996 and as of July 03, 1996, none of
the officers or directors received or were entitled to any long term
compensation payments. The options granted to Officers during Fiscal Year
1996 are listed in footnote 11 of "Footnotes to the Financial Statements".
As of July 03, 1996 none these options have been exercised or canceled. Of the
options granted in FY 1995 11,643 were exercised and 2,713 were surrendered
upon exercise of SARs.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN FISCAL YEAR
Number of % of Total
Options/LSARs Options/SAR Exercise Expiration
Name Granted Granted Price Date
<S> <C> <C> <C> <C>
Dimitri P. Papadakos (CEO) 10,000 39% $15.625 09/01/00
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of Value of
Unexercised Unexercised
Shares Options at Options at
Acquired on Value 4/30/96 4/30/96
Name Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Dimitri P. Papadakos (CEO) 6,910 $14,531 23,125 $0
</TABLE>
(b)Compensation of Directors
Effective February 1, 1995 the Directors annual fee of $7,500 per year will
be paid in stock. The stock for FY 1996 has not yet been issued, but $37,500
has been accrued at year end to cover this expense. Reimbursement for travel
and Company business related expenses will continue to be reimbursed in cash.
The Company continued its policy which states that Directors who are also
employees of the Company do not receive any additional compensation for their
service as Directors. There was no additional compensation paid by the
Company to any Director for Fiscal Years 1996 or 1995.
(c)Employment Contracts
(c-1) On July 15, 1993 effective as of June 28, 1993, the Board of Directors
by their compensation committee entered into a restrictive five year
employment contract with Dimitri P. Papadakos as President and CEO, at a
salary of $110,000 per year subject to annual cost-of-living increases
commencing July 1, 1994 based on the Consumer Price Index in effect for the
month of May preceding the July 1 in question for all Urban Consumers for the
New York, New York and Northeastern New Jersey Region (all items) published by
the Bureau of Labor Statistics, United States Department of Labor. He will be
eligible for all benefits offered to other executive employees. The company
is providing a $1,000,000 24-hour worldwide travel accident policy and a
$250,000 group travel accident policy with his estate as beneficiary. The
company will also provide the employee with an automobile and will cover all
operating costs associated therewith. The contract also contains a provision
not to compete during the term of the contract or for a period of two years
following termination. In case of employee's death or total incapacitation
during the contract period, the contract provides for compensation to continue
for the unexpired term of the employment period or any renewal period. In case
of termination as a result of change in control, merger, change in make-up of
Board of Directors or discharge of employee by company for any reason other
than death or incapacitation, his salary and all other ancillary benefits to
which the employee is entitled, shall be paid for a period of five full years
to the employee or in case of death, to his estate. During Fiscal Year 1996
Mr. Papadakos received an annualized cost of living increase of $3,218
bringing his annual salary to $115,340.
Item 11 Security Ownership of Certain Beneficial Owners and Management
(a) The following table sets forth as of June 15, 1996 those persons or
entities known by the Company to be Beneficial Owners of more than 5% of the
Company's Common Stock $1 P.V., its only equity security.
<TABLE>
<CAPTION>
Name and Address Type of Ownership Number of shares Percent of
Owned Class
<S> <C> <C> <C>
Gyrodyne Company of America, Inc.
St. James, NY 11780 (A) Beneficial 78,345 7.92
Polk Bros. Foundation
420 No. Wabash Ave
Chicago, IL 60611 Beneficial 91,848 9.29
Estate of Peter J. Papadakos
c/o Chase Manhattan Bank, NA(TTEE)
1211 Ave of the Americas
New York, NY 10036 Beneficial 369,920 37.41
</TABLE>
(a) As Gyrodyne has the authority to direct the Chase Manhattan Bank & Trust
Co., the Trustee of the Gyrodyne Pension Plan, to vote the securities of the
Company held by the Pension Fund, Gyrodyne Company of America, Inc. has been
listed above as the beneficial owner of the 78,345 shares held by the Chase
Manhattan Bank and Trust Co. as Trustee for the Gyrodyne Pension Fund.
(b) In addition, the following table as of June 15, 1996 includes the
outstanding voting securities beneficially owned by the executive officers
and the directors, and the number of shares owned by directors and executive
officers as a group.
<TABLE>
<CAPTION>
Name & Principal Occupation or Employment Shares of stock Pct. of Common
Beneficially Owned Stock Owned
<S> <C> <C> <C>
Dimitri P. Papadakos 19,483 (A) 1.95
President, CEO and Director of the Company
Peter Pitsiokos 1,681 (D) (B)
Vice President & General Counsel of the Company
Josef Markowski 203 (B)
Vice President, Operations
John A. Rohrs 0 (B)
Controller
Joseph L. Dorn 3,867 (B)
Director of the Company
Nicholas Xanthaky 5,844 (B)
Professor Emeritus Economics, Salem State College
Director of the Company
Robert H. Beyer 2,170 (C) (B)
Director of the Company
Nicholas Goudes 681 (B)
Owner and Operator of Sharon View Country Club
Director of the Company
Peter P. Papadakos 1,537 (E) (B)
Secretary/Treasurer Sa-Tu Corporation
Director of the Company
All Directors and Executive
Officers as a Group (7 persons) 35,466 3.54
</TABLE>
(A) Does not include his wife's and adult children's ownership of 11,513
Shares in which he denies beneficial interest.
(B) Less than 1%.
(C) Does not include his wife's ownership of 1,638 shares in which he denies
any beneficial interest.
(D) Does not include wife's and minor children's ownership of 187 shares in
which he denies any beneficial interest.
(E) Does not include wife's ownership of 14 shares in which he denies any
beneficial interest. Peter P. Papadakos is custodian f/b/o Alexander
Peter-Jee Papadakos, who owns directly and beneficially 1,456 shares in which
his father, Peter P. Papadakos denies any beneficial interest.
Item 12 Certain Relationships and Related Transactions
(a) Transactions with Management and Others
No officer or director or security holder named in answer to Item 12 or any
relative or spouse of the foregoing persons had any direct or indirect
interest in any transaction involving the Company or its subsidiaries which
exceeded $60,000.
(b) Certain Business Relationships
There were no material business relationships between the Company and its
subsidiaries and the directors, their spouses, relatives, or affiliated
business interests.
(c) Indebtedness of Management
No loans were made to any officer, director, or any member of their immediate
families during the fiscal year just ended. Nor were any amounts due and owing
the Company or its subsidiaries from those parties at fiscal year end.
Item 13 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements
(1) Independent Auditors' Reports
(2) Consolidated Balance Sheet April 30, 1996
(3) Consolidated Statements of Income for the Two Years
Ended April 30, 1996.
(4) Consolidated Statements of Cash Flows for the Two
Years Ended April 30, 1996
(5) Consolidated Statement of Stockholder's Equity
for Two Years Ended April 30, 1996
(6) Notes to Consolidated Financial Statements
(7) Schedules
(a) The information required by the following schedules has been
included in the financial statements, is not applicable, or not
required.
Schedule I, II, III, IV, V, VI, VII, VIII, IX, X, XI, X11
and XIII.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
last quarter of FY 1996.
(c) Exhibits
No. 99 Additional Exhibit
Callery Judge Grove opinion letter from their Certified Public
Accountants for their Financial Statements as of December 31,
1994, 1993, and 1992.
EXHIBIT NO.99
ARTHUR ANVERSEN LLP
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
Callery-Judge Grove:
We have audited the accompanying balance sheets of Callery-Judge Grove (a New
York limited partnership) as of December 31, 1994, 1993 and 1992, and the
related statements of operations, changes in partners' capital and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 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 audits provide 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 Callery1udge Grove as of
December 31,1994, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As explained in Note 2 to the financial statements, the Partnership changed its
method of accounting for certain grove replanting and cultural care costs
effective January 1,1992.
SGD/ARTHUR ANDERSEN LLP
- -----------------------
Tampa, Florida,
January 20, 1995
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.
GYRODYNE COMPANY OF AMERICA, INC.
SGD/ Dimitri P. Papadakos
- -------------------------------------------------------------------------
Dimitri P. Papadakos, President, Director and Principal Executive Officer
Date: July 28, 1996
SGD/ John A. Rohrs
- ------------------------------------------------------------------
John A. Rohrs, Treasurer, Controller and Principle Finance Officer
Date: July 28, 1996
********************
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following on
behalf of the Registrant and in the capacities and on the dates
indicated.
SGD/ Joseph L. Dorn
- --------------------
Nicholas Xanthaky*,
Director
Date: July 28, 1996
SGD/ Joseph L. Dorn
- --------------------
Robert H. Beyer*, Director,
Date: July 28, 1996
SGD/ Joseph L. Dorn
- -------------------
Joseph L. Dorn,
Director
Date: July 28, 1996
*by power of attorney
BOARD OF DIRECTORS
Dimitri P. Papadakos President and CEO
Joseph L. Dorn Retired
Nicholas Xanthaky Professor Emeritus, Economics Salem
State College
Robert H. Beyer Retired
Nicholas T. Goudes Owner, Sharon View Country Club
Peter P. Papadakos Secretary/Treasurer,
Sa-Tu Corporation
OFFICERS
Dimitri P. Papadakos President and CEO
Peter Pitsiokos Vice President, Secretary and
General Counsel
Josef Markowski Vice President of Operations
John A. Rohrs Treasurer, Controller and
Principle Finance Officer
AUDITORS
HOLTZ RUBENSTEIN & COMPANY, LLP
125 Baylis Road
Melville, New York 11747
TRANSFER AGENT AND REGISTRAR
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<CASH> 713,228
<SECURITIES> 189,716
<RECEIVABLES> 465,507
<ALLOWANCES> (6,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,580,454
<PP&E> 5,361,213
<DEPRECIATION> (3,283,066)
<TOTAL-ASSETS> 7,211,013
<CURRENT-LIABILITIES> 416,675
<BONDS> 958,675
0
0
<COMMON> 1,531,086
<OTHER-SE> 3,073,463
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<INCOME-PRETAX> 276,076
<INCOME-TAX> 159,773
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</TABLE>
