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, 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:
1,086,989 COMMON $1 P.V. AS OF MARCH 1, 1999
INDEX TO QUARTERLY REPORT
QUARTER ENDED JANUARY 31, 1999
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
UNAUDITED)
10QSB
Part 1
Item 1 (a) (1)
January 31, 1999
ASSETS (NOTE 1)
CURRENT ASSETS:
Cash and cash equivalents $1,142,194
Accounts receivable, less allowance for
doubtful accounts of $15,000 71,248
Prepaid expenses and other current assets 157,604
----------
Total current assets 1,371,046
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,585,104
PROPERTY, PLANT AND EQUIPMENT-NET 3,168,905
PREPAID PENSION COSTS 1,594,947
OTHER ASSETS 23,861
----------
TOTAL ASSETS $7,743,863
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $325,248
Loans payable - short term portion 46,471
----------
Total Current Liabilities 371,719
==========
LONG TERM DEBT 804,393
DEFERRED INCOME TAXES 987,053
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share
authorized 4,000,000 shares, 1,531,086 shares
issued at January 31, 1999 (including 444,097 shares
held in treasury) 1,531,086
Additional paid in capital 7,136,208
Deficit (518,315)
----------
8,148,979
Less cost of shares of common stock held in treasury (2,568,281)
----------
Total stockholders' equity 5,580,698
----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $7,743,863
==========
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
10-QSB
Part 1
Item 1 (a) (2)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
January 31, January 31,
REVENUE: 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Rental income $1,614,760 $1,579,230 $552,004 $529,907
Aerospace income 760,000 110,494 760,000 50,000
---------- ---------- ---------- --------
Total Revenue from Operations 2,374,760 1,689,724 $1,312,004 579,907
---------- ---------- ---------- --------
COSTS AND EXPENSES:
Cost of maintaining rental property 927,506 985,079 316,653 320,679
Aerospace expense 95,908 93,938 36,617 30,418
General and administrative 723,554 880,567 237,896 230,099
Aerospace research and development 125,315 0 10,451 0
---------- ---------- ---------- --------
Total costs and expenses 1,872,283 1,959,584 601,617 581,196
---------- ---------- ---------- --------
OPERATING MARGIN 502,477 (269,860) 710,387 (1,289)
OTHER INCOME AND (EXPENSES):
Gain on Oil and Gas Investment 20,477 57,214 5,180 30,015
Interest Income 22,908 24,227 9,119 7,872
Interest Expense (56,182) (74,729) (18,659) (24,476)
---------- ---------- ---------- --------
Total Other Income/(Expense) (12,797) 6,712 (4,360) 13,411
---------- ---------- ---------- --------
Income /(Loss) before income taxes 489,680 (263,148) 706,027 12,122
Income tax (benefit) provision 196,627 (104,488) 282,453 5,620
---------- ---------- ---------- --------
NET INCOME/(LOSS) $293,053 ($158,660) $423,574 $6,502
========== ========== ========== ========
NET INCOME (LOSS) PER COMMON
SHARE:
BASIC $.27 ($0.15) $.39 $.01
========== ========== ========== ========
DILUTED $.27 ($0.15) $.39 $.01
========== ========== ========== ========
WEIGHTED AVG. NO. OF COMMON
SHARES OUTSTANDING:
BASIC 1,070,280 1,040,634 1,078,155 1,047,323
========== ========== ========== =========
DILUTED 1,074,540 1,045,720 1,090,936 1,062,583
========== ========== ========== =========
</TABLE>
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
10-QSB
Part 1
Item 1 (a) (3)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $293,053 ($158,660)
---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by/(used in) operating activities:
Depreciation and amortization 84,799 81,428
Deferred income tax (benefit) 194,230 (104,488)
Pension (income) expense (48,089) 88,189
Non cash compensation 387,888 380,068
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (1,363) 32,929
Prepaid expenses and other assets (66,179) (150,877)
Other assets (14,487) 4,330
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (33,795) (60,083)
---------- ----------
Total adjustments 503,004 271,496
---------- ----------
Net cash provided by/(used in) operating activities 796,057 112,836
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in property, plant and equipment (504,090) (209,884)
---------- ----------
Net cash (used in) investment activities (504,090) (209,884)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (34,319) (56,896)
---------- ----------
Net cash (used in) financing activities (34,319) (56,896)
---------- ----------
Net increase (decrease) in cash and cash equivalents 257,648 (153,944)
Cash and cash equivalents at beginning of period 884,546 909,010
---------- ----------
Cash and cash equivalents at end of period $1,142,194 $755,066
========== ==========
</TABLE>
See notes to consolidated financial statements
10-QSB
Part 1
Item 1 (a) (4)
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 and nine month periods ended January 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, 1998.
The results of operations for the three and nine-month periods ended
January 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.
Net earnings for basic and dilutive computations were equivalent for all
periods presented. The following is a reconciliation of the weighted
average shares:
<TABLE>
<CAPTION>
Nine months ended Three Months Ended
January 31, January 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Basic 1,070,280 1,040,634 1,078,155 1,047,323
Effect of dilutive securities 4,260 5,086 12,781 15,260
Diluted 1,074,540 1,045,720 1,090,936 1,062,583
</TABLE>
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.
5. Research and Development:
Research and development costs, consisting of salaries and materials related
to the development of a YRON blade, are expensed as incurred.
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 RESULTS
OF OPERATIONS
Net income after tax amounted to $423,574 for the quarter and $293,053 for
the nine months ending January 31, 1999. On a per share basis, earnings
amount to $.39 and $.27, respectively. The major contributing factor for
these results was the November receipt of the initial installment of
$760,000 in connection with the Company's Technology Transfer Agreement
with Dornier GmbH of Germany. As previously reported, this Agreement is
valued at $2,000,000 plus potential royalties and requires that we provide
continued technical support throughout the remainder of the evaluation
phase which is now anticipated to conclude on December 31, 2000.
This payment has served to bolster the Company's cash position and had the
related positive impact to the current and quick balance sheet ratios which
were 3.69 and 3.26, respectively, as of January 31, 1999.
On a comparative basis for the nine months ending January 31, 1999, after
tax income amounted to $293,053 compared to a loss of $158,660 for the same
period last year, an improvement of $451,713. Translating those results of
operations to earnings per share, the Company generated $.27 in 1999 versus
a loss of $0.15 in 1998. Although the nonrecurring payment from Dornier GmbH
was the major catalyst for the improved earnings, other factors contributed
as well. Rental income increased $35,530 and was complemented by reductions
in both the cost of maintaining the property totaling $57,573 and $157,013
in general and administrative expenses which were primarily a result of
pension income of $48,089 for the nine months ended vs. pension expense of
$88,189 for the same period last year. The total cost reduction was
$136,278. As previously reported, a separate line item was established
earlier this year to capture aerospace research and development costs which
amounted to $125,315 for the nine months ending January 31, 1999. Standard
aerospace expenses increased slightly by $1,970 during the same period.
Other income and expenses reflected a continuing decline in earnings from
the Company's oil and gas investments totaling $36,737 which was somewhat
offset by a reduction of $18,547 in interest expense primarily due to
restructuring existing debt.
Also reflecting the impact of the Dornier payment, net income for the quarter
ending January 31, 1999 amounted to $423,574 compared to $6,502 for the same
period last year. Earnings per share were $.39 versus $.01, respectively.
With the exception of general and administrative expenses which increased by
$7,797, similar trends to those experienced in the nine month period also
occurred during the quarter ending January 31, 1999 when compared to the same
period in 1998. Rental income increased by $22,097 while the cost of
maintaining the property declined slightly by $4,026. Aerospace expense and
the related research and development costs increased by $6,199 and $10,451,
respectively. For the quarter, earnings from oil and gas investments showed
a more dramatic decline of $24,835 while a decrease in interest expense
coupled with an increase in interest income accounted for a $7,064
improvement.
Work continues on the Master Plan for the development of the Company's
Flowerfield property on Long Island. As indicated in prior reports, various
impact studies have been completed in preparation for the pre submittal stage
of the filing process to rezone Flowerfield for a mixed use build-out. Site
plan meetings with Trammel Crow Residential MidAtlantic/NE Properties, Inc.
have continued to take place on an ongoing basis. In addition, a rezoning
application for the Marriott Senior Living Services project including the
requisite impact studies was formally filed with the Town of Brookhaven on
February 18, 1999. That application included the relocation of our Stony
Brook Road entrance to Flowerfield which was incorporated as an improved site
line for north/southbound traffic.
Engineering drawings have been completed on the proposed Route 25A entry to
the summer day camp and represents the final requirement for site plan
submission to the Town of Smithtown.
A preliminary draft of a sewer treatment plant with a capacity of 500,000
gallons per day to service the Flowerfield property was recently reviewed
with the appropriate regulatory authorities. The Company has also had
substantive discussions and gained initial governmental support for the
establishment of a separate Flowerfield sewer district for the portion of
the property (182 acres) which lies in the Town of Brookhaven. This should
pave the way for more efficient and economical funding.
Expenses associated with the development of the Master Plan amounted to
$414,238 during the first nine months of fiscal 1999.
The Company's limited partnership position in the Callery Judge Grove remains
at the 12.74% level. Recent developments indicate a serious threat in the
form of Asian Strain Citrus Canker infestation which has been detected in the
general area of the Grove. According to a memorandum from the Grove manager,
this infestation could have a substantial financial impact on the Grove
operation and might ultimately lead to destroying any effected trees thereby
creating a need for a costly replanting.
As previously noted in this and other reports, the services of various
professionals and organizations have been and continue to be required for the
development of the Flowerfield Master Plan. Some have elected to receive a
portion of their payment in the form of Gyrodyne Common Stock. The result of
this arrangement, which allows the Company to preserve cash, and other
contributing factors has created a total dilution of 9.6% and 6.6% at January
31, 1999 and 1998, respectively.
The results of operations for both the nine month period and the quarter
ending January 31, 1999 are not necessarily indicative of nor should they be
used to project full year results.
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.
10-QSB
Part II
Item 1-6
Part II Other Information
Items 1 through 4 are not applicable to the November 1, 1998 through January
31, 1999 period.
Item 5. Other Information
On March 15,1999, Gyrodyne Company of America Inc. announced that Stephen V.
Maroney was elected Chief Executive Officer, President and Treasurer of the
Company. Mr. Maroney previously held the position of Managing Director of
Real Estate Development and has been a member of the Board of Directors since
1996. Prior to joining the Company, he served as the president of Extebank.
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 1999.
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, 1999 SGD/STEPHEN V. MARONEY
Stephen V. Maroney
President, Chief Executive Officer and Treasurer
Date: March 17, 1999 SGD/FRANK D'ALESSANDRO
Frank D'Alessandro
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 1,142,194
<SECURITIES> 0
<RECEIVABLES> 86,248
<ALLOWANCES> (15,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,371,046
<PP&E> 6,752,080
<DEPRECIATION> (3,583,175)
<TOTAL-ASSETS> 7,743,863
<CURRENT-LIABILITIES> 371,719
<BONDS> 804,393
0
0
<COMMON> 1,531,086
<OTHER-SE> 4,049,612
<TOTAL-LIABILITY-AND-EQUITY> 7,743,863
<SALES> 2,374,760
<TOTAL-REVENUES> 2,418,145
<CGS> 0
<TOTAL-COSTS> 1,872,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (56,182)
<INCOME-PRETAX> 489,680
<INCOME-TAX> 196,627
<INCOME-CONTINUING> 293,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293,053
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
