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, 2003
|_| 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 11-1688021
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
102 Flowerfield, St. James, N.Y. 11780
(Address of principal executive offices)
(631) 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: 1,140,505 shares of common stock, par
value $1.00 per share, as of December 01, 2003 Transitional Small Business
Disclosure Format (Check One): Yes |_| No |X|
Seq. Page 1
INDEX TO QUARTERLY REPORT
QUARTER ENDED OCTOBER 31, 2003
Seq. Page
Form 10-QSB Cover 1
Index to Form 10-QSB 2
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Footnotes to Consolidated Financial Statements 6
Management's Discussion and Analysis or Plan of Operation 7
Part II - Other Information 11
Signatures 11
Exhibit 31.1 Certification 12
Exhibit 32.1 Certification 13
Seq. Page 2
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS October 31,
2003
------------
REAL ESTATE
Rental property:
Land $ 4,250
Building and improvements 3,925,421
Machinery and equipment 156,292
------------
4,085,963
Less accumulated depreciation 3,308,066
------------
777,897
------------
Land held for development:
Land 792,201
Land development costs 2,879,274
------------
3,671,475
------------
Total real estate, net 4,449,372
CASH AND CASH EQUIVALENTS 2,099,555
RENT RECEIVABLE, net of allowance for doubtful accounts of $42,862 149,007
MORTGAGE RECEIVABLE 1,800,000
PREPAID EXPENSES AND OTHER ASSETS 294,724
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,585,104
PREPAID PENSION COSTS 1,544,070
------------
$ 11,921,832
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 183,863
Deferred gain on sale of real estate 1,573,900
Tenant security deposits payable 238,160
Loans payable 731,343
Deferred income taxes 2,396,042
------------
Total liabilities 5,123,308
------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; authorized 4,000,000 shares;
1,531,086 shares issued and outstanding 1,531,086
Additional paid-in capital 7,447,707
Retained earnings 216,323
------------
9,195,116
Less cost of shares of common stock held in treasury (2,396,592)
------------
Total stockholders' equity 6,798,524
------------
$ 11,921,832
============
See notes to consolidated financial statements
Seq. Page 3
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
October 31, October 31,
2003 2002 2003 2002
----------- ---------- ----------- -----------
REVENUE FROM RENTAL PROPERTY $1,100,753 $1,222,763 $542,569 $557,596
----------- ---------- ----------- -----------
RENTAL PROPERTY EXPENSES:
Real estate taxes 69,119 199,614 34,560 87,856
Operating and maintenance 228,100 180,097 115,027 96,093
Interest expense 21,250 31,569 8,897 16,971
Depreciation 38,919 44,890 19,486 18,895
----------- ---------- ----------- -----------
357,388 456,170 177,970 219,815
----------- ---------- ----------- -----------
INCOME FROM RENTAL PROPERTY 743,365 766,593 364,599 337,781
----------- ---------- ----------- -----------
GENERAL AND ADMINISTRATIVE 793,340 709,178 433,574 362,903
----------- ---------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS (49,975) 57,415 (68,975) (25,122)
----------- ---------- ----------- -----------
OTHER INCOME:
Gain on sale of real estate 0 3,124,307 0 3,124,307
Interest income 54,938 29,390 27,549 27,496
----------- ---------- ----------- -----------
54,938 3,153,697 27,549 3,151,803
----------- ---------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX 4,963 3,211,112 (41,426) 3,126,681
PROVISION (BENEFIT) FOR INCOME TAXES 1,985 1,284,445 (16,570) 1,250,673
----------- ---------- ----------- -----------
NET INCOME (LOSS) $2,978 $1,926,667 ($24,856) $1,876,008
----------- ---------- ----------- -----------
NET INCOME (LOSS) PER COMMON SHARE:
Basic $0.00 $1.73 ($0.02) $1.69
----------- ---------- ----------- -----------
Diluted $0.00 $1.71 ($0.02) $1.67
----------- ---------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 1,120,980 1,112,149 1,124,960 1,112,402
----------- ---------- ----------- -----------
Diluted 1,142,633 1,126,235 1,124,960 1,125,242
----------- ---------- ----------- -----------
See notes to consolidated financial statements
Seq. Page 4
GYRODYNE COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
October 31,
----------------------------
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,978 $ 1,926,667
----------- -----------
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 58,785 53,156
Bad debt expense 2,000 40,862
Deferred income tax provision (19,958) 1,284,445
Stock compensation 76,606 54,331
Pension expense 118,435 129,940
Gain on sale of real estate 0 (3,124,307)
Changes in operating assets and liabilities:
Increase in assets:
Land development costs (434,620) (552,451)
Accounts receivable (79,570) (73,259)
Prepaid expenses and other assets (54,496) (187,194)
Prepaid pension costs 0 (186,473)
Decrease in liabilities:
Accounts payable and accrued expenses (65,761) (183,590)
Tenant security deposits (44) (15,512)
----------- -----------
Total adjustments (398,623) (2,760,052)
----------- -----------
Net cash used in operating activities (395,645) (833,385)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate 0 2,523,625
Acquisition of property, plant and equipment (25,557) (20,414)
----------- -----------
Net cash (used in) provided by investment activities (25,557) 2,503,211
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans payable (11,786) (31,207)
Loan origination fees 73,519 0
Proceeds from exercise of stock options 227,707 5,364
----------- -----------
Net cash provided by (used in) financing activities 289,440 (25,843)
Net (decrease) increase in cash and cash equivalents (131,762) 1,643,983
Cash and cash equivalents at beginning of period 2,231,317 1,105,790
----------- -----------
Cash and cash equivalents at end of period $ 2,099,555 $ 2,749,773
=========== ===========
See notes to consolidated financial statements
Seq. Page 5
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Quarterly Presentations:
The accompanying quarterly financial statements have been prepared in conformity
with accounting principles generally accepted in the United States ("GAAP"). 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 six month periods ended October
31, 2003 and 2002.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with GAAP 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, 2003.
The results of operations for the three and six month periods ended October 31,
2003, and 2002 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 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 following is a reconciliation of the weighted average shares:
Six months ended Three Months Ended
October 31, October 31,
2003 2002 2003 2002
--------------------------------------------------------------------------------
Basic 1,120,980 1,112,149 1,124,960 1,112,402
--------------------------------------------------------------------------------
Effect of dilutive securities 21,653 14,086 0 12,840
--------------------------------------------------------------------------------
Diluted 1,142,633 1,126,235 1,124,960 1,125,242
-----------------------------------=============================================
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. Revolving Credit Note:
On May 29, 2003, the Company restructured its only outstanding mortgage debt on
the Flowerfield property. That amortizing loan, which had a balance of $622,868
at an average interest rate of 8.04% during fiscal 2003, was satisfied and
incorporated into a newly established revolving credit line in the amount of
$1,750,000 at prime plus one percent, currently 5.00%. The line is secured by
certain real estate and expires on June 1, 2006.
6. Stock Options:
We have elected the disclosure only provisions of Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in accounting for our employee stock options. Accordingly, no compensation
expense has been recognized. Had we recorded compensation expense for the stock
options based on the fair value at the grant date for awards in the six months
ended October 31, 2003 and 2002 consistent with the provisions of SFAS 123, our
net income (loss) and net income (loss) per share would have been adjusted as
follows:
Seq. Page 6
Six Months Ended Three Months Ended
October 31, October 31,
---------------------- ----------------------
2003 2002 2003 2002
-------- ---------- -------- ----------
Net income (loss), as reported $ 2,978 $1,926,667 $(24,856) $1,876,008
Deduct: Total stock-based employee
compensation expense determined under
fair value based method, net of related tax
effects (95,000) (132,000) (1,000) (131,000)
-------- ---------- -------- ----------
Pro forma net (loss) income $(92,022) $1,794,667 $(25,856) 1,745,008
======== ========== ======== ==========
Net income (loss) per share:
Basic - as reported $ 0.00 $ 1.73 $ (0.02) $ 1.69
-------- ---------- -------- ----------
Basic - pro forma $ (0.08) $ 1.61 $ (0.02) $ 1.57
-------- ---------- -------- ----------
Diluted - as reported $ 0.00 $ 1.71 $ (0.02) $ 1.67
-------- ---------- -------- ----------
Diluted - pro forma $ (0.08) $ 1.59 $ (0.02) $ 1.55
-------- ---------- -------- ----------
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
The statements made in this Form 10-QSB that are not historical facts contain
"forward-looking information" within the meaning of the Private Securities
Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, both as amended, which can
be identified by the use of forward-looking terminology such as "may," "will,"
"anticipates," "expects," "projects," "estimates," "believes," "seeks," "could,"
"should," or "continue," the negative thereof, other variations or comparable
terminology. Important factors, including certain risks and uncertainties with
respect to such forward-looking statements that could cause actual results to
differ materially from those reflected in such forward looking statements
include, but are not limited, to the effect of economic and business conditions,
including risk inherent in the Long Island, New York real estate market, the
ability to obtain additional capital and other risks detailed from time to time
in our SEC reports. We assume no obligation to update the information in this
Form 10-QSB.
Critical Accounting Policies
The consolidated financial statements of the Company include accounts of the
Company and all majority-owned and controlled subsidiaries. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States ("GAAP") requires management to make estimates and
assumptions in certain circumstances that affect amounts reported in the
Company's consolidated financial statements and related notes. In preparing
these financial statements, management has utilized information available
including its past history, industry standards and the current economic
environment, among other factors, in forming its estimates and judgments of
certain amounts included in the consolidated financial statements, giving due
consideration to materiality. It is possible that the ultimate outcome as
anticipated by management in formulating its estimates inherent in these
financial statements might not materialize. However, application of the critical
accounting policies below involves the exercise of judgment and use of
assumptions as to future uncertainties and, as a result, actual results could
differ from these estimates. In addition, other companies may utilize different
estimates, which may impact comparability of the Company's results of operations
to those of companies in similar businesses.
Seq. Page 7
Revenue Recognition
Rental revenue is recognized on a straight-line basis, which averages minimum
rents over the terms of the leases. The excess of rents recognized over amounts
contractually due, if any, are included in deferred rents receivable on the
Company's balance sheets. Certain leases also provide for tenant reimbursements
of common area maintenance and other operating expenses and real estate taxes.
Ancillary and other property related income is recognized in the period earned.
Real Estate
Rental real estate assets, including land, buildings and improvements,
furniture, fixtures and equipment are recorded at cost. Tenant improvements,
which are included in buildings and improvements, are also stated at cost.
Expenditures for ordinary maintenance and repairs are expensed to operations as
they are incurred. Renovations and/or replacements, which improve or extend the
life of the asset, are capitalized and depreciated over their estimated useful
lives.
Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to thirty years for buildings and improvements and three to
twenty years for machinery and equipment.
The Company is required to make subjective assessments as to the useful lives of
its properties for purposes of determining the amount of depreciation to reflect
on an annual basis with respect to those properties. These assessments have a
direct impact on the Company's net income. Should the Company lengthen the
expected useful life of a particular asset, it would be depreciated over more
years, and result in less depreciation expense and higher annual net income.
Real estate held for development is stated at the lower of cost or net
realizable value. In addition to land, land development and construction costs,
real estate held for development includes interest, real estate taxes and
related development and construction overhead costs which are capitalized during
the development and construction period.
Net realizable value represents estimates, based on management's present plans
and intentions, of sale price less development and disposition cost, assuming
that disposition occurs in the normal course of business.
Long Lived Assets
On a periodic basis, management assesses whether there are any indicators that
the value of the real estate properties may be impaired. A property's value is
impaired only if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. Such cash flows consider factors
such as expected future operating income, trends and prospects, as well as the
effects of demand, competition and other factors. To the extent impairment
occurs, the loss will be measured as the excess of the carrying amount of the
property over the fair value of the property.
The Company is required to make subjective assessments as to whether there are
impairments in the value of its real estate properties and other investments.
These assessments have a direct impact on the Company's net income, since an
impairment charge results in an immediate negative adjustment to net income. In
determining impairment, if any, the Company has adopted Financial Accounting
Standards Board ("FASB") Statement No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets."
Stock-Based Compensation
The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, to account for stock-based employee
compensation plans and reports pro forma disclosures in its Form 10-KSB filings
by estimating the fair value of options issued and the related expense in
accordance with SFAS No. 123. Under this method, compensation cost is recognized
for awards of shares of common stock or stock options to directors, officers and
employees of the Company only if the quoted market price of the stock at the
grant date (or other measurement date, if later) is greater than the amount the
grantee must pay to acquire the stock.
RESULTS OF OPERATIONS FOR THE SIX MONTHS AND QUARTER ENDED OCTOBER 31, 2003
AS COMPARED TO THE SIX MONTHS AND QUARTER ENDED OCTOBER 31, 2002
The Company is reporting a net loss of $24,856 for the quarter ending October
31, 2003 compared to net income of $1,876,008 for the same period last year and
net income of $2,978 and $1,926,667 for the six month periods ending October 31,
2003 and 2002, respectively. The major contributing factor to this substantive
variance between periods was the nonrecurring $3,124,307 pre-tax profit on the
sale of certain properties which occurred and was previously reported during the
quarter ending October 31, 2002.
Seq. Page 8
Diluted per share earnings amounted to ($0.02) and $1.67 for the three months
ending October 31, 2003 and 2002, respectively, and $0.00 and $1.71 for the six
month periods of 2003 and 2002, respectively.
Revenue from rental property, which amounted to $542,569 for the reporting
period, reflects a $15,027 decline compared to the same quarter last year when
revenues totaled $557,596. For the six months ending October 31, 2003, revenue
from rental property amounted to $1,100,753, a decrease of $122,010 from the
$1,222,763 posted for the same period last year. In both cases, the decline is
attributable to the loss of rental income associated with the sale of certain
rental buildings in August 2002. This resulted in a reduction in rental income
of $10,202 and $117,347 for the three and six months ended October 31.
Rental property expenses amounted to $177,970 for the current reporting period,
a decrease of $41,845 from the $219,815 posted for the same three month period
in the previous year. Contributing factors to these savings are a $67,287
reduction in real estate taxes attributed to capitalizing real estate taxes on
the undeveloped acreage associated with our planned residential golf course
community on the Company's Flowerfield property. This was partially offset by
increased real estate taxes in the current period of $9,188. As a result of
restructuring our debt, interest expense was reduced by $8,074 and a reduction
in staffing levels resulted in a decrease in salaries and benefits of $15,193.
These various expense reductions were partially offset by increases in building
and equipment maintenance of $17,653 and a timing difference in the billing
cycle to tenants for fuel and electric charges totaling $17,156. For the six
month period ending October 31, 2003, rental property expenses decreased from
the prior year total by $98,782, totaling $357,388 for the current year and
$456,170 for the 2002 period. As in the case of the three month results,
expenses were reduced for the capitalized portion of real estate taxes amounting
to $134,575 and a reduction in real estate taxes relating to the sold premises
of $19,099 when compared to the prior year. Once again, these reductions were
impacted by increased real estate taxes in the current period for $18,375.
Salaries and benefits decreased by $40,583 due to the reduced staff requirements
and interest expense declined by $10,319 as a result of our debt restructuring.
These savings were partially offset by a prior year nonrecurring utility refund
of $64,968, an increase in building and equipment maintenance of $19,882 and a
timing difference in fuel and electric charges of $7,549.
As a result of the foregoing, income from rental property increased for the
three months ending October 31, 2003 by $26,818 and decreased by $23,228 for the
six months then ended. For the three month period, income from rental property
totaled $364,599 and $337,781 for 2003 and 2002, respectively and $743,365 and
$766,593 for the six months ending October 31, 2003 and 2002, respectively.
General and administrative expenses increased in both the three and six month
periods by $70,671 and $84,162, respectively. Expenses for the quarter ending
October 31, 2003 amounted to $433,574 compared to $362,903 during the prior
year. For the six month period, general and administrative expenses increased
from $709,178 in 2002 to $793,340 for the current reporting period. Salaries and
benefits increased by $24,865 and $36,536 during the three and six months ending
October 31,2003 with both periods reflecting a $22,274 increase in non-cash
stock option expense with the balance brought about by salary increases. Bad
debt expense is $38,500 over the prior year quarterly results due to a $38,000
reversal of expense in the earlier period with the six month figures being
virtually the same. Director's fees increased for the three and six month
periods by $27,681 and $45,618, respectively, reflecting the expansion of the
Board by two Directors and the need to have more frequently scheduled Board
meetings. Rental expense for the Company offices for the three and six month
periods amounted to $13,125 and $30,625, respectively. This rental expense is a
new charge in the current year for which there is no corresponding amount in the
prior year periods. The above increases for the quarter and six month periods
were partially offset by reductions in legal and consulting fees of $19,138 and
$11,865, respectively. Stockholder expense also decreased by $9,880 and $9,714
for the three and six month reporting periods, respectively, and are the result
of having two shareholder meetings during the prior year. Pension expense
declined by $5,753 and $11,505 for the three and six months ended October
31,2003, respectively.
Reflecting the above, the Company is reporting a loss from operations for both
the three and six month periods ending October 31, 2003. For the quarter, the
loss from operations increased by $43,853, amounting to $68,975, compared to a
loss of $25,122 in the prior year. For the six month period ending October 31,
2003, the loss from operations amounted to $49,975 which is a variance of
$107,390 compared to the same period last year when the Company recorded income
from operations of $57,415.
Last year, other income reflected the nonrecurring partial proceeds from the
sale of certain properties, in both the three and six month periods, totaling
$3,124,307. As a result, other income decreased by $3,124,254 and $3,098,759 for
the three and six month reporting periods, respectively. The remaining component
of other income, interest income remained virtually the same at $27,549 for the
three months ending October 31, 2003 and increased by $25,548 to a total of
$54,938 for the six months then ended. The increase is due primarily to interest
income on the 5%, $1,800,000 mortgage note associated with the property sale,
maturing in August 2005, which is $24,250 above the prior year six month period.
This variance is attributable to the fact that the sale took place in August,
2002, thereby creating three months of interest income last year versus six
months during the current fiscal year.
For the three months ending October 31, 2003, the Company is reporting a loss
before tax of $41,426, compared to income before tax of $3,126,681 during the
prior year. For the six months then ended, income before tax amounted to $4,963
compared to the $3,211,112 posted during the same period last year.
Seq. Page 9
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $395,645 and $833,385 during the six
months ended October 31, 2003 and 2002, respectively. The principal use of cash
in both periods were funds used in connection with planning and pre-construction
costs associated with land development plans for the golf course community.
Net cash (used in) provided by investing activities was $(25,557) and $2,503,211
during the six months ended October 31, 2003 and 2002, respectively. The use of
cash during the current period was for the acquisition of equipment. During the
six months ended October 31, 2002, the Company purchased equipment in the amount
of $20,414 and received proceeds from the sale of real estate totaling
$2,523,625.
Net cash provided by (used in) financing activities was $289,440 and $(25,843)
during the six months ended October 31, 2003 and 2002, respectively. The net
cash proceeds during the current period were primarily the result of the
restructuring of mortgage debt on the Flowerfield property. That amortizing
loan, which had a balance of $622,868 at an average interest rate of 8.04%
during fiscal 2003, was satisfied and incorporated into a newly established
revolving credit line in the amount of $1,750,000 at prime plus one percent,
currently 5.00 %. The unused portion of the credit-line will enhance our
financial position and liquidity and be available, if needed, to fund any
unforeseen expenses associated with the Company's development plan. Also during
the six months ended October 31, 2003, the Company received $227,707 in cash
proceeds from the exercise of stock options. During the six months ended October
31, 2002, funds were used to repay the aforementioned amortizing loan.
As of October 31, 2003, the Company had cash and cash equivalents of $2,099,555
and anticipates having the capacity to fund normal operating and administrative
expenses, its regular debt service requirements and the remaining predevelopment
expenses related to securing entitlements for the planned residential golf
course community. To date, expenses associated with the development of the
Flowerfield property, which have been capitalized, total $2,879,274. As of
October 31, 2003, the portion of those expenses attributable to the residential
golf course community amount to $1,415,370. Working capital, which is the total
of current assets less current liabilities as shown in the accompanying chart,
amounted to $1,991,666 at October 31, 2003.
October 31,
---------------------------
2003 2002
---------------------------
Current assets:
Cash and cash equivalents $2,099,555 $2,749,773
Rent receivable, net 149,007 62,476
Net prepaid expenses and other assets 177,333 257,419
---------------------------
Total current assets 2,425,895 3,069,668
---------------------------
Current liabilities:
Accounts payable and accrued expenses 183,863 225,766
Tenant security deposits payable 238,160 238,366
Current portion of loans payable 12,206 63,820
---------------------------
Total current liabilities 434,229 527,952
---------------------------
Working capital $1,991,666 $2,541,716
===========================
Our limited partnership investment in the Callery Judge Grove continues to be
carried on the Company's balance sheet at $1,585,104. This represents a 10.93%
ownership in a 3,500-acre citrus grove in Palm Beach County, Florida. The land
is currently part of a 65,000-acre master planned community, which is under
review by local regulatory authorities. We have no current forecast as to the
likelihood of, or the timing required to achieve appropriate entitlements that
might impact the Grove's value.
On November 7, 2003, the Company issued an announcement that according to
published reports in The Palm Beach Post (www.palmbeachpost.com) and a news
release issued by Scripps Research Institute ("Scripps") of La Jolla, California
(www.scripps.edu/news), Scripps confirmed its plans to establish a major science
center in Palm Beach County Florida within five miles of the Callery-Judge Grove
in Loxahatchee, Florida.
Seq. Page 10
Item 3 CONTROLS AND PROCEDURES
Management, including the Company's President, Chief Executive Officer and
Treasurer and Controller, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(e)) as of the end of the period covered by this report. Based upon
that evaluation, the President, Chief Executive Officer and Treasurer and
Controller concluded that the disclosure controls and procedures were effective,
in all material respects, to ensure that information required to be disclosed in
the reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
There have been no significant changes in the Company's internal controls over
financial reporting identified in connection with the evaluation that occurred
during the Company's last fiscal quarter that has materially affected, or that
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
Part II Other Information
Items 1 through 4 are not applicable to the August 1, 2003, through October 31,
2003, period.
Item 5 Other Information
The Company's Chief Executive Officer and Chief Financial Officer has furnished
a statement relating to its Form 10-QSB for the quarter ended October 31, 2003
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. The statement is attached hereto as Exhibit 31.1.
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits:
31.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 302 of The Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 of The Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K.
On September 15, 2003, the Company filed a Form 8-K furnishing, under Items 5
and 7, a press release announcing that its annual meeting of shareholders will
be held on Tuesday, December 9, 2003. The Company also announced that the Board
of Directors fixed the close of business on November 7, 2003 as a record date
for the determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting. The Board also announced the three nominees for director.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GYRODYNE COMPANY OF AMERICA, INC.
(Registrant)
Date: December 10, 2003 /S/ Stephen V. Maroney
-----------------------
Stephen V. Maroney
President, Chief Executive Officer and
Treasurer
Date: December 10, 2003 /S/ Frank D'Alessandro
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Frank D'Alessandro
Controller
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