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US Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1999
[ ] 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: 1,103,947 Common $1 P.V. as of August 31, 1999
INDEX TO QUARTERLY REPORT
QUARTER ENDED JULY 31, 1999
Seq.
GYRODYNE COMPANY OF AMERICA, INC. |
AND SUBSIDIARIES |
(UNAUDITED) |
| ASSETS | July 31, |
| 1999 | |
| REAL ESTATE | |
| Rental property: | |
| Land | $4,746 |
| Building and improvements | 4,470,267 |
| Machinery and equipment | 337,998 |
| 4,813,011 | |
| Less accumulated depreciation | 3,396,382 |
| 1,416,629 | |
| Land held for development: | |
| Land | 803,592 |
| Land development costs | 1,073,530 |
| 1,877,122 | |
| Total real estate, net | 3,293,751 |
| CASH AND CASH EQUIVALENTS | 1,156,072 |
| RENT RECEIVABLE, net of allowance for doubtful accounts of $21,000 | 94,621 |
| PREPAID EXPENSES AND OTHER ASSETS | 257,640 |
| INVESTMENT IN CITRUS GROVE PARTNERSHIP | 1,585,104 |
| PREPAID PENSION COSTS | 1,624,816 |
| $ 8,012,004 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| LIABILITIES: | |
| Accounts payable and accrued expenses | $ 381,850 |
| Tenant security deposits payable | 216,069 |
| Loans payable | 838,255 |
| Deferred income taxes | 885,527 |
| 2,321,701 | |
| STOCKHOLDERS' EQUITY: | |
| Common stock, $1 par value; authorized 4,000,000
shares; 1,531,086 shares issued |
1,531,086 |
| Additional paid-in capital | 7,255,127 |
| Deficit | (595,717) |
| 8,190,496 | |
| Less cost of shares of common stock held in treasury | (2,500,193) |
| 5,690,303 | |
| $ 8,012,004 |
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC. |
AND SUBSIDIARIES |
(UNAUDITED) |
| Three Months Ended | ||
| July 31, | ||
| 1999 | 1998 | |
| REVENUE FROM RENTAL PROPERTY | $593,958 | $541,377 |
| RENTAL PROPERTY EXPENSES: | ||
| Real estate taxes | 91,593 | 86,459 |
| Operating and maintenance | 249,322 | 269,858 |
| Interest expense | 17,848 | 18,738 |
| Depreciation | 27,012 | 21,880 |
| 385,775 | 396,935 | |
| INCOME FROM RENTAL PROPERTY | 208,183 | 144,442 |
| GENERAL AND ADMINISTRATIVE | 282,934 | 226,398 |
| LOSS FROM OPERATIONS | (74,751) | (81,956) |
| OTHER INCOME (EXPENSE): | ||
| Aerospace (expense), net | (12,530) | (60,887) |
| Income from oil investment, net | 37,991 | 8,021 |
| Interest income and dividends | 8,574 | 7,497 |
| 34,035 | (45,369) | |
| (LOSS) BEFORE INCOME TAX | (40,716) | (127,325) |
| (BENEFIT) FOR INCOME TAXES | (14,821) | (50,225) |
| NET (LOSS) | ($25,895) | ($77,100) |
| NET (LOSS) PER COMMON SHARE: | ||
| Basic | ($0.02) | ($0.07) |
| Diluted | ($0.02) | ($0.07) |
| WEIGHTED AVERAGE NUMBER OF COMMON | ||
| SHARES OUTSTANDING: | ||
| Basic | 1,092,279 | 1,060,886 |
| Diluted | 1,092,279 | 1,060,886 |
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC. |
AND SUBSIDIARIES |
(UNAUDITED) |
| Three Months Ended | ||
| July 31, | ||
| 1999 | 1998 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net (loss) | ($25,895) | ($77,100) |
| Adjustments to reconcile net (loss) to net cash (used in) operating activities: | ||
| Depreciation and amortization | 27,012 | 21,880 |
| Bad debt expense | 3,000 | 935 |
| Deferred income tax (benefit) | (17,473) | (52,432) |
| Non-cash compensation | 24,021 | 28,707 |
| Pension (income) | (13,839) | (16,030) |
| Changes in operating assets and liabilities: | ||
| (Increase) decrease in assets: | ||
| Accounts receivable | (34,564) | (20,542) |
| Prepaid expenses and other assets | (138,001) | (105,609) |
| Increase (decrease) in liabilities: | ||
| Accounts payable and accrued expenses | 20,813 | 86,494 |
| Tenant security deposits | 6,912 | 23,696 |
| Total adjustments | (122,119) | (32,901) |
| Net cash (used in) operating activities | (148,014) | (110,001) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Acquisition of property, plant and equipment | (51,699) | (96,604) |
| Net cash (used in) investment activities | (51,699) | (96,604) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Repayment of loans payable | (12,856) | (11,842) |
| Proceeds from exercise of stock options | 39,486 | 4,814 |
| Net cash provided by (used in) financing activities | 26,630 | (7,028) |
| Net (decrease) in cash and cash equivalents | (173,083) | (213,633) |
| Cash and cash equivalents at beginning of period | 1,329,155 | 1,053,304 |
| Cash and cash equivalents at end of period | $1,156,072 | $839,671 |
See notes to consolidated financial statements
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Quarterly Presentations:
The accompanying quarterly financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements of the Registrant included herein have been prepared by the Registrant pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the three month periods ended July 31, 1999, and 1998.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.
This report should be read in conjunction with the financial statements and footnotes therein included in the audited annual report on Form 10-KSB as of April 30, 1999.
The results of operations for the three month periods ended July 31, 1999, and 1998 are not necessarily indicative of the results to be expected for the full year.
2. Principle 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.
3. Earnings Per Share:
Basic earnings per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Dilutive earnings per share give effect to stock options and warrants which are considered to be dilutive common stock equivalents. Treasury shares have been excluded from the weighted average number of shares.
The net loss for basic and dilutive computations were equivalent for all periods presented. As a result of these losses, there is no dilutive effect on the securities and both Basic and Diluted earnings per share are the same.
4. Income Taxes:
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
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
Results for the first quarter ending July 31, 1999, reflect a net loss of $25,895 as compared to a net loss of $77,100 for the same period last year. On a per share basis, the Company is reporting a loss of $0.02 versus a loss of $0.07 for those same periods, respectively.
Revenue from rental property amounted to $593,958 as of July 31, 1999, representing a 10% improvement over the previous year's first quarter results of $541,377. This increase of $52,581 is attributable to contractual increments in current leases and the rental of additional space by existing and new tenants at Flowerfield.
Complementing increased revenues, expenses relating to the operation of our rental property declined moderately amounting to $385,775 this quarter compared to $396,935 for the same period last year. As a result, income from rental property amounted to $208,183 and represents a 44 percent increase over the like period last year when income totaled $144,442.
Conversely, general and administrative expenses reflect an increase over the prior year results and amount to $282,934 compared to $226,398. Contributing factors include expenditures for salary and benefits and for legal fees which increased by $20,440 and $35,522, respectively. Salaries reflect disbursement of retroactive increases recognized during this quarter and are, therefore, nonrecurring by nature. Legal fees include expenses in connection with various matters including corporate governance, preparation for the sale of non-real estate assets, an outside review and analysis of leases, and other items related to the termination of the employment of the Company's former President.
As previously reported, the Company has embarked on an effort to divest itself of the aerospace division associated with the now defunct helicopter manufacturing business. Reflecting that decision, expenses relating to aerospace have been reduced from $60,887 last year to $12,530 for the current quarter.
Recent increases in the petroleum markets resulted in improvement in income from our oil investment which amounted to $37,991 compared to $8,021 for the same period last year while interest income remained virtually unchanged.
The Company's balance sheet as of July 31, 1999, reflects a stronger cash position to that of the same date the previous year increasing from $839,671 to $1,156,072. The current ratio stands at 2.27 as of this report compared to 1.63 on July 31, 1998.
As noted in our April 30, 1999 Report, the Company is pursuing the sale of certain assets unrelated to its real estate operation. Toward that end, a contract of sale agreement was executed relative to the Company's oil investment with proceeds of $360,000 realized on September 1, 1999.
Additionally, the Company recently executed a term sheet detailing its agreement with California based Aviodyne U.S.A., Inc. to acquire Gyrodyne's helicopter assets. Formal contracts are being prepared based on the foregoing and disposition is anticipated shortly. While this transaction does not represent a major financial windfall for the Company, it will bring closure to the Company's historical background, the design and manufacturing of helicopters for military use primarily in the 1950s and 60s. Based on the terms of the purchase agreement, the Company will continue to be the primary beneficiary of any subsequent payments due on the Technology Transfer Agreement with Dornier GmbH of Germany for which Aviodyne U.S.A., Inc. will fulfill all technical support functions.
Both of these actions are in keeping with the Company's commitment to focus on its real estate development plans for the Flowerfield property in St. James/Stony Brook, New York. Capitalized expenditures relating to the Master Plan development at Flowerfield amounted to $52,196 for the current quarter and now total $1,073,530 on a cumulative basis.
Year 2000 Compliance:
Many currently installed computer systems and software products are coded to accept only two digit entries to represent years. For example, the "1998" would be represented by "98". These systems and products will need to be able to accept four digit entries to distinguish years beginning with 2000 from prior years. As a result, systems and products that do not accept four digit year entries will need to be upgraded or replaced to comply with such "Year 2000" requirements. The Company believes that its internal systems are Year 2000 compliant or will be upgraded or replaced in connection with previously planned changes to information systems prior to the need to comply with Year 2000 requirements without material cost or expense. The anticipated costs of any Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated.
Items 1 through 5 are not applicable to the May 1, 1999, through July 31, 1999, period.
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 first quarter of FY 2000.
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: September 13, 1999 | SGD/ Stephen V. Maroney |
| Stephen V. Maroney | |
| President, Chief Executive Officer and Treasurer |
| Date: September 13, 1999 | SGD/ Frank D'Alessandro |
| Frank D'Alessandro | |
| Controller |
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