US Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number0-1684
GYRODYNE COMPANY OF AMERICA, INC.
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEW YORK
- --------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
11-1688021
- ---------------------------------
(IRS Employer Identification No.)
7 FLOWERFIELD, SUITE 28, ST. JAMES, N.Y. 11780
- ----------------------------------------
(Address of principal executive offices)
(516) 584-5400
- ---------------------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes. .X . No. . .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12,13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes. . No. .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,043,291 COMMON
$1 P.V. AS OF OCTOBER 31, 1997
INDEX TO QUARTERLY REPORT
QUARTER ENDED OCTOBER 31, 1997
Form 10-QSB Cover
Index to Form 10-QSB
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Footnotes to Financial Statements
Management's Discussion and Analysis or Plan of Operation
Part II - Other Information
Signatures
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET Item 1 (a) (1)
(UNAUDITED)
<TABLE>
<CAPTION>
October
31, 1997
ASSETS (NOTE 1)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $816,390
Accounts receivable, less allowance for
doubtful accounts of $12,000 (Note 3) 57,148
Prepaid expenses and other current assets 191,891
Total current assets 1,065,429
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,585,104
PROPERTY, PLANT AND EQUIPMENT-NET (Note 5) 2,583,379
PREPAID PENSION COSTS (Note 2) 1,616,642
OTHER ASSETS 14,388
TOTAL ASSETS $6,864,942
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses
$359,091
Loans payable - short term portion (Note 7) 70,000
Total Current Liabilities 429,091
LONG TERM LIABILITIES
Loans payable - long term portion (Note 7) 846,910
DEFERRED INCOME TAXES 1,028,000
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share
authorized 4,000,000 shares, 1,531,086 shares
issued at October 31, 1997 (including 487,098 shares
held in treasury) 1,531,086
Capital in excess of par value 6,451,064
Deficit (589,610)
7,392,540
Less cost of shares of common stock
held in treasury (2,831,599)
Total stockholders' equity` 4,560,941
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $6,864,942
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED STATEMENTS OF OPERATIONS Item 1 (a) (2)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
October 31, October 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE:
Rental income $1,049,323 $991,002 $524,598 $501,758
Aerospace income 60,494 94,606 20,494 88,606
Total Revenue from Operations 1,109,817 1,085,608 545,092 590,364
COSTS AND EXPENSES:
Cost of maintaining rental property 664,400 674,744 324,556 299,690
Aerospace net expense 63,520 57,326 37,667 31,709
General and administrative 597,171 552,940 300,009 330,993
Total costs and expenses 1,325,091 1,285,010 662,232 662,392
GROSS OPERATING MARGIN (215,274) (199,402) (117,140) (72,028)
OTHER INCOME AND EXPENSES:
Equity in earnings of Oil and Gas
(Note 4) 27,199 51,681 14,694 22,055
Interest & Dividend Income 16,355 20,023 7,945 10,076
Pension Expense (Note 2) (53,297) (30,043) (28,297) (20,520)
Interest Expense (50,253) (52,605) (25,058) (26,212)
Total Other Income\(Expense) (59,996) (10,944) (30,716) (14,601)
(LOSS) BEFORE INCOME TAX (275,270) (210,346) (147,856) (86,629)
Income tax benefit (Note 6) (110,108) (81,885) (56,969) (32,177)
NET (LOSS) ($165,162) ($128,461) ($90,887) ($54,452)
WEIGHTED AVG. NO. OF COMMON
SHARES OUTSTANDING 1,036,592 1,010,744 1,036,592 1,010,774
PER SHARE INFORMATION:
(Loss) per share of common stock ($0.16) ($0.13) ($0.09) ($0.05)
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED STATEMENTS OF CASH FLOWS Item 1(a) (3)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ($165,162) ($128,461)
Adjustments to reconcile net (loss) to net
cash provided by/(used) in operating activities:
Depreciation and amortization of plant and equipment 54,285 48,408
Pension expense/(income) 53,297 30,043
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 33,924 331,702
Prepaid expenses and other assets (141,199) 28,173
Other assets 2,043 181,246
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 108,002 (50,437)
Total adjustments 110,352 569,135
Net cash (used)/provided by operating activities (54,810) 440,674
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in property, plant and equipment (81,712) (553,865)
Net cash (used) in by investment activities (81,712) (553,865)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (38,013) (36,171)
Stock option exercise 81,915 124,773
Net cash provided by financing activities 43,902 88,602
Net (decrease) in cash and cash equivalents (92,620) (24,589)
Cash and cash equivalents at beginning of period 909,010 713,228
CASH AND CASH EQUIVALENTS AT END OF PERIOD $816,390 $688,639
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10-QSB
Part 1
Item 1 (a) (4)
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited Consolidated Statements of Income for the six month
periods ended October 31, 1997 and October 31, 1996 and the Consolidated
Balance Sheet as of October 31, 1997 reflect all adjustments which, in the
opinion of Management, are necessary for the fair representation of
results of such periods. The financial statements should be read in
conjunction with the summary of significant accounting policies and notes
to financial statements included in the Company*s Form 10-KSB for the
fiscal year ended April 30, 1997. The results of operations for the six
month periods ended October 31, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full year.
2. The application of FASB 87 resulted in the Company's recognition, on
the basis of annual Actuarial reports, of $53,297 of net periodic pension
expense for the six month period ended October 31, 1997 and $30,043 of net
periodic pension expense for the comparable period in the prior year. The
projected full year expense, which reflects current actuarial assumptions,
for FY 1998 will be $123,081 vs. $82,080 for FY 1997.
3. At October 31, 1997, $12,000 had been provided as a reasonable reserve
for uncollectible accounts receivable. This reserve reflects a $6,000
increase during the second quarter of FY 1998.
4. Proceeds from the sale of oil decreased in the current quarter as a
result of a price decline in oil prices from the previous year from
approximately $22.20 a barrel to $18.70, a decrease of $3.50. Operating
expenses stayed essentially the same. The effect on the Profit and Loss
Statement is highlighted below.
<TABLE>
<CAPTION>
Six months ended Second Quarter Ended
October 31, October 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales of Oil $95,699 $110,841 $47,894 $57,217
Operating expenses 68,500 59,160 33,200 35,162
INCOME FROM OPERATIONS $27,199 $51,681 $14,694 $22,055
</TABLE>
5. Property, Plant and Equipment increased $81,712 in the first six
months primarily as a result of work-in-progress on various capital
projects which include the Master Plan and the Summer Camp.
6. The calculation for the provision of current year taxes is based on
the actual gain or loss year-to-date. In the case of losses, an estimated
refund is calculated to offset a pretax loss. To date, in the current
year, the Company is reporting a pretax loss, which in turn is producing a
potential tax refund. For balance sheet presentation, this negative tax
accrual has been reclassified to the "Prepaid expenses and other current
assets" category in the asset section of the balance sheet.
7. In the second quarter of FY 1996 the company secured a $1,050,000 ten
year mortgage maturing in October 2005. This loan was used to pay off the
balance of the prior term loan and to finance the renovation of a portion
of Building #7. The loan has a fixed principal 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
October 31, 1997 was $910,000. The remainder of the principal will be paid
as follows:
<TABLE>
<CAPTION>
<S> <C>
FISCAL YEAR 1998 $35,000
FISCAL YEAR 1999 70,000
FISCAL YEAR 2000 70,000
FISCAL YEAR 2001 70,000
FISCAL YEAR 2002 70,000
THEREAFTER TILL OCTOBER 2005 595,000
-------
910,000
VEHICLE TERM LOAN BEARING 6,910
10.9% INTEREST MATURING AUGUST 1999
-------
916,910
LESS CURRENT PORTION 70,000
-------
LONG TERM DEBT $846,910
=======
</TABLE>
10-QSB
Part 1
Item 2
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(A) NOT APPLICABLE
(B) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTSOF OPERATIONS
The Company continues to solicit and receive proposals for the various
communities envisioned in its Master Plan for the Development of
Flowerfield. As a result of those solicitations, the Company has entered
formal contract negotiations with two separate end users for differing
uses. Although substantial accord has been reached, numerous details and
representations must be passed on by the respective counsels. Based on
any possible constraints, business considerations may oblige the Company
to look at new alternate proposals. The timing of any final decision can
not be predicted with any certainty at this time.
During the quarter, the Company finalized its estimates for the sewage
treatment plant and made substantial progress in quantifying
infrastructure costs and qualifying common area definitions. Work
continues on these projects in addition to the development of a set of
design standards applicable to the entire development.
Gross Operating Margin for real estate operations for the comparable
quarters ended October 31, 1997 and 1996, respectively, were essentially
unchanged. Net Aerospace Operating Income declined by approximately
$74.1, reflecting lower income and an increase in expenses. General and
Administrative Expense also declined in the current quarter due to
timing differences associated with the rendering of vendor invoices.
The current real estate market on Long Island continues to remain firm
permitting rental rates to edge upwards. The oversupply of industrial
space has been exhausted with new construction commencing on several
projects. There is very little speculative building on Long Island at
this time leading to a conclusion that the realty market should continue
to be robust through 1998.
A report received from the Managing Partner of the Callery-Judge Grove
dated December 1, 1997 indicates an improvement in results over prior
periods. Improved culture care incorporating a more aggressive
fertilization program, modified tree trimming regimen, engagement of a
professional pest scouting service, and selection of hardier root stocks
has lead to a substantial reduction in nonproductive trees and an
increase in yields. Volume of harvestable fruit for the 1997-98 year is
estimated to be approximately 18% greater than the 850,000 field boxes
harvested during the 1996-1997 growing year.
The Grove Management reports that, relative to the past two years, there
has been a noticeable improvement in the exterior quality of harvested
fruit. For example, in White Grapefruits the packout jumped 50% on a
year-to-year comparison. Although less dramatic, numerous other
varieties are showing relative yield improvements. In addition, packing
house efficiency has risen as the Grove moves down the learning curve in
its second year of operation. The Grove anticipates that by season*s
end, if current estimates remain on target, the packing house will
experience a 50% increase in overall volume.
During August 1997, the Grove closed on a refinancing package of $16
million in long term debt. Additionally, it was reported that $3.3
million of a $5.0 supplemental equity offering has been subscribed to.
Efforts are still underway to secure the additional funds. Real estate
development efforts at the Grove will be subject to new guidelines in
1998 as Palm Beach County redefines the parameters under which it will
issue permits for land use plans. At this juncture, it is premature to
gauge any potential impact.
In its preliminary financial statements for the fiscal year ended June
30, 1997 after giving effect for an accounting change for depreciation
of approximately $419,000, the Grove reported a net loss of $1,072,750
on sales of $12,540,144. The June 30, 1997 fiscal year was a
transitional six month period reflecting a change from a calendar to
fiscal year reporting period.
The Company continues to view the long term prospects for the
Callery-Judge Grove favorably. Improving results from current
operations, firming market trends, and the long awaited positive effect
on harvestable fruit from maturing young trees should bolster prospects
for a return to profitability.
At October 31, 1997, the Company*s financial ratios remained strong with
the quick ratio in excess of 2:1 and the current ratio at 2.5:1. Based
on the lag time between the conceptual phase of a realty project and the
actual receipt of monies in a realty transaction, the Company adopted
the policy of remunerating certain consultants partially in the
Company*s common stock in order to preserve cash. In addition, the
shareholders adopted the 1993 Stock Incentive Plan, 1995 Non-Employee
Director*s Compensation Plan, and Non-Employee Director*s Stock Option
Plan which provide remuneration denominated in the Company*s common
stock. From all sources, the total dilution to date has been
approximately 5.5% which has been offset by the continued growth of the
Company*s market capitalization.
For the six month period and the quarter ending October 31, 1997, the
Company is reporting an after tax loss of $165,162 or $0.16 per share and
$90,887 or $.09 per share, respectively. This compares to a loss of $128,461
or $.13 per share and $54,452 or $.05 per share for the prior periods.
Results for the current period are not necessarily indicative of nor should
they be used to project full year results.
Part II
Item 1-6
PART II OTHER INFORMATION
Items 1 through 4 are not applicable to the August 1, 1997 through October
31, 1997 period.
ITEM 5. OTHER INFORMATION
The following Directors: Paul L. Lamb, Nicholas T. Goudes and John H.
Marburger III were elected at the Annual Meeting of Stockholders on October
31, 1997 held at the Company's Flowerfield Complex. Their terms will expire
at the Shareholders meeting in the year 2000. In addition, the stockholders
approved the following amendments and propositions:
To ratify the engagement of Holtz Rubenstein & Company, LLP as independent
auditors for Fiscal Year 1998.
6. Exhibits and Reports on Form 8-K
(a) Exhibits required - None
(b) Reports on Form 8-K - None were filed by the Company for
the second quarter of FY 1998
SIGNATURES
Pursuant to the requirements 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.
(REGISTRANT)
Date: December 12, 1997 SGD/ DIMITRI P.PAPADAKOS
Dimitri P. Papadakos
President, Treasurer and
Principal Executive Officer
Date: December 12, 1997 SGD/ FRANK D*ALESSANDRO
Frank D*Alessandro
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> OCT-31-1997
<CASH> 816,390
<SECURITIES> 0
<RECEIVABLES> 69,148
<ALLOWANCES> (12,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,065,429
<PP&E> 6,027,469
<DEPRECIATION> (3,444,090)
<TOTAL-ASSETS> 6,864,942
<CURRENT-LIABILITIES> 429,091
<BONDS> 846,910
0
0
<COMMON> 1,531,086
<OTHER-SE> 3,029,855
<TOTAL-LIABILITY-AND-EQUITY> 6,864,942
<SALES> 1,109,817
<TOTAL-REVENUES> 1,153,371
<CGS> 0
<TOTAL-COSTS> 1,378,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50,253)
<INCOME-PRETAX> (275,270)
<INCOME-TAX> (110,108)
<INCOME-CONTINUING> (165,162)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,162)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
