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 JANUARY 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1684
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:
1,054,904 COMMON $1 P.V. AS OF JANUARY 31, 1998
INDEX TO QUARTERLY REPORT
QUARTER ENDED JANUARY 31, 1998
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. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED BALANCE SHEET Item 1(a) (1)
(UNAUDITED)
January 31,1998
ASSETS (NOTE 1)
CURRENT ASSETS:
Cash and cash equivalents $755,066
Accounts receivable, less allowance for
doubtful accounts of $12,000 (Note 3) 58,143
Prepaid expenses and other current assets 197,572
---------
Total current assets 1,010,781
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,585,104
PROPERTY, PLANT AND EQUIPMENT-NET (Note 5) 2,684,409
PREPAID PENSION COSTS (Note 2) 1,581,750
OTHER ASSETS 12,101
==========
TOTAL ASSETS $6,874,145
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $191,007
Loans payable - short term portion (Note 7) 70,000
---------
Total Current Liabilities 261,007
---------
LOANS PAYABLE - LONG TERM PORTION (Note 7) 828,027
DEFERRED INCOME TAXES 919,515
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share
authorized 4,000,000 shares, 1,531,086 shares
issued at January 31, 1998 (including 475,485
sharesheld in treasury) 1,531,086
Capital in excess of par value 6,652,778
Deficit (583,108)
---------
7,600,756
Less cost of shares of common stock
held in treasury (2,735,160)
---------
Total stockholders' equity` 4,865,596
---------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $6,874,145
=========
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>
Nine Months Ended Three Months Ended
January 31, January 31,
REVENUE: 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Rental income $1,579,230 $1,503,409 $529,907 12,407
Aerospace income 110,494 104,606 50,000 10,000
---------- ---------- -------- --------
Total Revenue from Operations 1,689,724 1,608,015 579,907 522,407
---------- ---------- -------- --------
COSTS AND EXPENSES:
Cost of maintaining rental property 985,079 1,044,902 320,679 370,158
Aerospace net expense 93,938 76,191 30,418 18,865
General and administrative 792,378 784,780 195,207 231,840
---------- ---------- -------- --------
Total costs and expenses 1,871,395 1,905,873 546,304 620,863
---------- ---------- -------- --------
GROSS OPERATING MARGIN (181,671) (297,858) 33,603 (98,456)
OTHER INCOME AND (EXPENSES):
Equity in earnings of Oil and Gas (Note 4) 57,214 91,589 30,015 39,908
Interest & Dividend Income 24,227 27,917 7,872 7,894
Pension Expense (Note 2) (88,189) (56,062) (34,892) (26,019)
Interest Expense (74,729) (78,442) (24,476) (25,837)
---------- ---------- -------- --------
Total Other Income\(Expense) (81,477) (14,998) (21,481) (4,054)
---------- ---------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES (263,148) (312,856) 12,122 (102,510)
Income tax (benefit) provision (104,488) (122,839) 5,620 (40,954)
---------- ---------- -------- --------
NET (LOSS) INCOME ($158,660) ($190,017) $6,502 ($61,556)
========== ========== ========= ========
WEIGHTED AVG. NO. OF COMMON
SHARES OUTSTANDING 1,040,634 1,006,485 1,047,323 1,006,485
========== ========== ========= =========
WEIGHTED AVG. NO. OF COMMON
SHARES OUTSTANDING
ASSUMING DILUTION 1,045,720 1,006,485 1,062,583 1,006,485
========== ========== ========= =========
PER SHARE INFORMATION:
(Loss)/Earnings per share
of common stock (Note 6) ($0.15) ($0.19) $0.01 ($0.06)
========== ========== ========= ========
(Loss)/Earnings per share
of common stock assuming dilution ($0.15) ($0.19) $0.01 ($0.06)
========== ========== ========= ========
(Note 6)
</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>
NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ($158,660) ($190,017)
--------- --------
Adjustments to reconcile net (loss) to net
cash provided by/(used in) operating activities:
Depreciation and amortization of plant and equipment 81,428 77,796
Deferred income tax (benefit) (104,488) 0
Pension expense 88,189 56,061
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 32,929 345,058
Prepaid expenses and other assets (150,877) (64,898)
Other assets 4,330 180,980
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (60,083) (90,616)
--------- --------
Total adjustments (108,572) 504,381
--------- --------
Net cash (used in)/provided by operating activities (267,232) 314,364
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 0 189,716
Increase in property, plant and equipment (209,884) (553,031)
--------- --------
Net cash (used in) investment activities (209,884) (363,315)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (56,896) (54,949)
Stock option exercise 380,068 152,287
--------- --------
Net cash provided by financing activities 323,172 97,338
--------- --------
Net (decrease) increase in cash and cash equivalents (153,944) 48,387
Cash and cash equivalents at beginning of period 909,010 713,228
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $755,066 $761,615
========= ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited Consolidated Statements of Operations for the nine month
periods ended January 31, 1998 and January 31, 1997 and the Consolidated
Balance Sheet as of January 31, 1998 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 nine
month periods ended January 31, 1998 and 1997 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 $88,189 of net periodic pension
expense for the nine month period ended January 31, 1998 and $56,062 of
net periodic pension expense for the comparable period in the prior year.
The full year expense for FY 1998 will be $123,081 vs. $82,080 for FY
1997.
3. As of January 31, 1998, $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 $24.35 a barrel to $19.12, a decrease of $5.23. Operating
expenses stayed essentially the same. The effect on the Profit and Loss
Statement is highlighted below
<TABLE>
<CAPTION>
Nine months ended Third Quarter Ended
January 31, January 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales of Oil $148,874 $180,046 $53,175 $69,205
Operating expenses 91,660 88,457 23,160 29,297
INCOME FROM OPERATIONS $57,214 $91,589 $30,015 $39,908
</TABLE>
5. Property, Plant and Equipment increased $209,884 in the first nine
months primarily as a result of work-in-progress on the Master Plan and
other capital projects.
6. In February 1997, the Financial Accounting Standards Board (FASB)
issued FAS 128 relating to Earnings Per Share (EPS). FAS 128 became
effective for financial statements issued from 12/15/97 onward. The
Company adopted FAS 128 for the quarter ended 1/31/98. All prior periods
have been restated to reflect this adoption.
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
January 31, 1998 was $892,500. The remainder of the principal will be paid
as follows:
Fiscal Year 1998 $17,500
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
-------
892,500
Vehicle term loan bearing 10.9% interest 5,527
maturing August 1999
-------
898,027
less current portion 70,000
-------
Long term debt $828,027
=======
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(A) NOT APPLICABLE
(B) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As noted in a prior report, the Company has entered formal contract
negotiations with two separate end users for inclusion as initial projects
in the Master Plan development of the Flowerfield property in St. James,
N.Y. A third end user has opened substantive talks on a use unrelated to
those cited above. 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 prior quarter, and in connection with the Flowerfield Master
Plan, the Company finalized its estimates for the sewage treatment plant and
made substantial progress in quantifying infrastructure costs and qualifying
common area definitions. A draft proposal for a set of design standards
applicable to the entire development has now been circulated to our
consultants for final comment. The Approved Design Standards (ADS) will be
an integral part of the leasing process and must be finalized before
individual contracts can be consummated.
The Gross Operating Margin for real estate operations for the quarter ended
January 31, 1998 was higher than the same quarter for the previous year
primarily as a result of lower maintenance and fuel costs associated with an
extremely mild winter. Increased activity in the implementation of the
Master Plan led to a higher percentage of capitalized administrative
expenses which is reflected in the reduced amount of General and
Administrative expense recognized during the quarter.
Gyrodyne's largest tenant, Lovin' Oven Celebrations, has broken ground on a
new catering facility. The project includes extensive renovations to an
existing 12,000 square foot indoor tropical reception area. Construction is
on schedule, and the facility is scheduled to reopen to functions by May
1st.
The outlook for the general real estate market on Long Island continues to
indicate strength for the remainder of 1998. New construction has commenced
on several projects since the beginning of the year with more slated during
the balance of the year. There is still little speculative building on Long
Island at this time leading to a conclusion that the realty market should
continue to be robust for some time.
Aerospace gross operating margin for the current quarter was higher than the
same quarter for the previous year primarily due to the receipt of $50,000
in income from Dorneir GmbH of Germany in accordance the revised Technology
Transfer Agreement. Expenses rose reflecting increased activity related to
the technical transfers to Dornier and Rotorcycle 2000. In addition,
research and development on a new composite rotor blade for the company's
single place helicopter continued.
The audited financial statements for the Callery-Judge Grove for the 12
months ended June 30, 1997 show a loss of $2,025,222 before a change in
depreciation accounting. The change had two impacts: it essentially halved
the reported loss to $1,048, 681 and did away with the practice of
estimating culture care costs based on the remaining fruit on the trees at
December 31. By implementing straight line depreciation to account for
inventory, 83% of which is attributable to fruit, the Grove better aligns
costs and inventory. In addition, the change to a FYE June 30 allows the
Grove to accrue culture care expenses from January 1 to June 30 and allocate
them to the following year's harvest.
The unaudited income statement for the Grove for the seven months ended
January 31, 1998 showed a net loss of $552,664 compared to a net profit for
the same period last year of $77,614. It should be noted that last year's
figures included nonoperating income of approximately $2,000,000 related to
the sale of 40 acres of land. The sale masked an improvement in this year's
income from operations. The full year production projection for FYE June
30, 1998 is expected to reach 1,043,000 total field boxes compared to
852,456 field boxes for the FYE June 30, 1997.
The realty market along the east coast of Florida continues quite strong and
future development prospects at the Grove are being enhanced with the
state's completion of new infrastructure projects. The citrus industry's
cyclical nature continues to buffet results, however, trends are beginning
to emerge which auger better intermediate term prospects. More productive
acreage is coming online as immature trees recover from a leaf infestation
that retarded growth and maturity of young trees only, markets for specialty
fruit remain comparatively firm and culture care issues are being attended
to. A caveat, the wild gyrations in the weather patterns ascribed to "El
Nino" and next year to "La Nina" are wild cards. Excessive rain fall caused
extensive fruit discoloration in 1994/5 which resulted in sharply lower
yields.
At January 31, 1998, the Company's financial ratios remained strong with the
quick and current ratios in excess of 3:1 and 3.8:1 respectively. 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. The Company's cash balance coupled with prepaid
expenses and modest accounts payable resulted in its favorable ratios. From
all sources, the total dilution to date has been approximately 6.6% which
has been offset by the growth of the Company's market capitalization.
For the nine month period ending January 31, 1998, the Company is reporting
an after tax loss of ($158,660) or ($0.15) per share and a profit of $6,502
or $.01 per share for the quarter. This compares to a loss of ($190,017) or
($.19) per share and ($61,556) or ($.06) per share for the prior year and
quarter respectively. Results for the current period are not necessarily
indicative of nor should they be used to project full year results.
PART II OTHER INFORMATION
Items 1 through 4 are not applicable to the November 1, 1997 through January
31, 1998 period.
ITEM 5. OTHER INFORMATION
Between September 11, 1997 and December 2, 1997, Polk Bros. Foundation
Inc. disposed of a total of 17,200 shares of Gyrodyne Common Stock in a
series of open market sales at an average price of $21.94 per share.
This reduced their number of shares outstanding as of 1/31/98 from
91,848 to 74,648 as well as their market share from 8.84% to 7.08%.
ITEM 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
third 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: March 17, 1998
SGD/ DIMITRI P. PAPADAKOS
Dimitri P. Papadakos
President, Treasurer and Principal Executive Officer
Date: March 17, 1998
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> JAN-31-1998
<CASH> 755,066
<SECURITIES> 0
<RECEIVABLES> 70,143
<ALLOWANCES> (12,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,010,781
<PP&E> 6,155,642
<DEPRECIATION> (3,471,233)
<TOTAL-ASSETS> 6,874,145
<CURRENT-LIABILITIES> 261,007
<BONDS> 828,027
0
0
<COMMON> 1,531,086
<OTHER-SE> 3,334,510
<TOTAL-LIABILITY-AND-EQUITY> 6,874,145
<SALES> 1,689,724
<TOTAL-REVENUES> 1,771,165
<CGS> 0
<TOTAL-COSTS> 1,959,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (74,729)
<INCOME-PRETAX> (263,148)
<INCOME-TAX> (104,488)
<INCOME-CONTINUING> (158,660)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,660)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
