What changed in this filing

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Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 91 added, 116 removed, 679 unchanged (23% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF NET ASSETS

AS OF MARCH 31, 2024 (UNAUDITED) AND DECEMBER 31, 2023

AS OF JUNE 30, 2024 (UNAUDITED) AND DECEMBER 31, 2023

(Liquidation Basis)

14 unchanged sentences

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

FOR THE THREE-MONTHS ENDED MARCH 31, 2024

FOR THE SIX-MONTHS ENDED JUNE 30, 2024

(Liquidation Basis)

5 unchanged sentences

Net increase in liquidation value

Net assets in liquidation, as of March 31, 2024

Net assets in liquidation, as of June 30, 2024

See notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS) FOR THE THREE-MONTHS ENDED MARCH 31, 2024 (unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS) FOR THE SIX-MONTHS ENDED JUNE 30, 2024 (unaudited)

Strategic Overview

12 unchanged sentences

James-Head of the Harbor Neighborhood Preservation Coalition, Inc., (ii) granted the Motions as to the remaining twenty (20) individual Petitioners and the Village of Head of the Harbor, (iii) denied the branch of Gyrodyne’s motion alleging that Petitioners failed to state a claim.

The parties will submit their respective briefs on the merits of the remaining Petitioners’ contentions.

The parties submitted their respective briefs on the merits of the remaining Petitioners’ contentions and are awaiting the judge’s decision.

The Article 78 Proceeding could take an additional six months or more for a decision given the impact the pandemic has had on the court system with additional time needed for an appeal, if one is filed.

4 unchanged sentences

Pursuant to the adopted MOD, Gyrodyne received designation for total density of 154,000 square feet to be comprised of 150,000 square feet of medical use and 4,000 square feet of retail use.

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, labor shortages and environmental concerns.

Nevertheless, we will continue to market the properties and, although there can be no assurances, the Company believes subdivision approval will be received in the second half of 2024 for Flowerfield, and could be received for Cortlandt Manor in mid-2025, contingent on the timing for entering contracts (which we anticipate will include closing terms conditioned upon receiving subdivision (if requested) and site plan approval which the Company believes can be pursued simultaneously rather than sequentially).

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, zoning authority labor shortages and environmental concerns.

Nevertheless, we will continue to market the properties and, although there can be no assurances, the Company believes subdivision approval will be received in late 2024 for Flowerfield, and could be received for Cortlandt Manor in mid-2025, contingent on the timing for entering contracts (which we anticipate will include closing terms conditioned upon receiving subdivision (if requested) and site plan approval which the Company believes can be pursued simultaneously rather than sequentially).

Although Gyrodyne believes that selling individual lots will maximize value, it is also pursuing prospective purchasers who may be willing to pay purchase prices for the entire undivided Flowerfield or Cortlandt Manor property, or for the entire company itself, that Gyrodyne finds more attractive from a timing and value perspective.

17 unchanged sentences

The accompanying interim quarterly financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

The consolidated financial statements of the Company included herein have been prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the three-months ended March 31, 2024.

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;

24 unchanged sentences

The Company is in the process of pursuing entitlements and density approvals, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers.

The process has involved extensive analysis at the government entity level, as well as between government entities such as town planning departments and Gyrodyne and or purchasers, and will continue up until such time as entitlement and density decisions are made by the relevant government entities.

The Company hopes to secure favorable decisions on entitlements and density so that we can then seek the sale of our remaining properties with increased development flexibility.

1 unchanged sentence

The Company believes the process of negotiating purchase agreements, securing final approvals and consummating the sale of our properties will culminate by year-end 2025.

The Company intends to aggressively market its properties and negotiate contracts in an effort to complete the process as soon as practicable with the ultimate timeline being largely dependent on factors outside the Company’s control, including without limitation the Article 78 Proceeding and delays in securing final regulatory approvals caused by the ongoing backlog of land use applications, government labor shortages and the pandemic.

Consequently, there can be no assurance that the Company will be able to meet our formal stated deadline of December 2025.

8 unchanged sentences

Estimated Distributions per Share – Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of March 31, 2024, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of June 30, 2024, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Statements of Net Assets in Liquidation

Net assets as of March 31, 2024 and December 31, 2023 would result in estimated liquidating distributions of $ 35,386,711 and $ 30,721,034 , or approximately $ 16.09 and $ 19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Note 12 – Rights Offering).

The increase of $ 4,665,677 is mainly attributable to the rights offering that closed on March 7, 2024.

Approximately $ 3.39 per share of the reduction in net assets per share was driven by the issuance (stemming from the Rights Offering) of 625,000 shares at $ 8 per share (reflecting a discount of $ 8.12 per share to the proforma net assets as of December 31, 2023).

Net assets as of June 30, 2024 and December 31, 2023 would result in estimated liquidating distributions of $ 35,387,309 and $ 30,721,034 , respectively, or approximately $ 16.09 and $ 19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Note 12– Rights Offering).

The increase of $ 4,666,275 in estimated liquidating distributions is mainly attributable to the rights offering (net proceeds of $ 4,418,380 ) that closed on March 7, 2024.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2025, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on adjustments for the following items which are estimated through December 31, 2025:

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Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location, local supply and demand observations and no sewage treatment plants.

To the extent the Company underestimates or overestimates forecasted cash outflows (capital improvements, excluding any costs for sewage treatment plants, lease commissions and operating costs) or overestimates or underestimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated or understated.

The Company estimates that it will incur approximately $ 1,156,000 (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of receipts, (see Note 5) in land entitlement costs from April 2024 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2025, in an effort to obtain entitlements, including special permits.

To the extent the Company underestimates or overestimates forecasted cash outflows (capital improvements, excluding any costs for sewage treatment plants, lease commissions and operating costs) or overestimates or underestimates forecasted cash inflows (rental revenue rates) or other unfavorable or favorable variances of the aforementioned assumptions, the estimated net realizable value of its real estate assets could be overstated or understated.

The Company estimates that it will incur approximately $ 1,035,000 in land entitlement costs (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of receipts, (see Note 5)) from July 2024 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2025, in an effort to obtain entitlements, including special permits.

The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the aggregate Flowerfield and Cortlandt Manor property values and resulting distributions.

During the three months ended March 31, 2024, the Company incurred approximately $ 55,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

During the six months ended June 30, 2024, the Company incurred approximately $ 176,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $ 1,035,000 (inclusive of real estate taxes of $ 212,000 and regulatory fees of $ 372,500 ) will be incurred from April 2024 through the end of the liquidation period.

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During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes itself.

The value of the real estate reported in the statement of net assets as of March 31, 2024 includes some but not all of the potential value impact that may result from the land entitlement efforts.

The value of the real estate reported in the statement of net assets as of June 30, 2024 includes some but not all of the potential value impact that may result from the land entitlement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The net assets as of March 31, 2024 ($ 35,386,711 ) and December 31, 2023 ($ 30,721,034 ) results in estimated distributions of approximately $ 16.09 and $ 19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Note 12– Rights Offering), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated distributions as of March 31, 2024 and December 31, 2023 because the amount of such additional value that may result from such efforts are too difficult to predict with sufficient certainty.

The net assets as of June 30, 2024 ($ 35,387,309 ) and December 31, 2023 ($ 30,721,034 ) results in estimated distributions of approximately $ 16.09 and $ 19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Note 12– Rights Offering), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated distributions as of June 30, 2024 and December 31, 2023 because the amount of such additional value, if any, that may result from such efforts are too difficult to predict with sufficient certainty.

The Company believes the land entitlement efforts will ultimately enhance estimated distributions per share through the improved aggregate values (some but not all of which has already been included in the reported value for real estate held for sale) from the sales of the Flowerfield and Cortlandt Manor properties net of the costs to achieve the entitlements and other expenses.

6 unchanged sentences

These costs are estimated and are anticipated to be paid during the remaining liquidation period.

The change in the liability for estimated costs in excess of estimated receipts during liquidation from January 1, 2024 through March 31, 2024 is as follows:

The change in the liability for estimated costs in excess of estimated receipts during liquidation from January 1, 2024 through June 30, 2024 is as follows:

January 1, 2024

Expenditures/

1 unchanged sentence

Assets and Liabilities

March 31, 2024

June 30, 2024

Estimated rents and reimbursements

14 unchanged sentences

The loan will mature on April 30, 2028.

The outstanding balance as of March 31, 2024 was $ 1,975,608 .

The outstanding balance as of June 30, 2024 was $ 1,955,312 .

To secure access to additional working capital through the final sale date of the Flowerfield industrial buildings, the Company secured a second loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $ 3,000,000 , which closed on January 24, 2019.

3 unchanged sentences

The loan will mature on May 20, 2028.

The outstanding balance as of March 31, 2024 was $ 2,703,369 .

The outstanding balance as of June 30, 2024 was $ 2,675,780 .

Both lines are secured by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases.

As of March 31, 2024, the Company is in compliance with the loan covenants.

As of June 30, 2024, the Company is in compliance with the loan covenants.

The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain secured by the two subdivided industrial park lots only.

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On December 14, 2023, the FDIC transferred the Mortgage Loan to SIG CRE 2023 Venture LLC, which is now the holder of the Mortgage Loan.

The outstanding balance as of March 31, 2024 was $ 4,730,403 .

The outstanding balance as of June 30, 2024 was $ 4,706,888 .

The Mortgage Loan is secured by the Cortlandt Manor property located at 1985 Crompond Road ( 5.01 acres).

10 unchanged sentences

The total debt payable mature as follows:

Years Ending March 31,

Years Ending June 30,

Accounts payable and Accrued Liabilities

1 unchanged sentence

Accrued Liabilities

March 31, 2024

June 30, 2024

Current accounts payable

3 unchanged sentences

Represents amount of deferred fees pursuant to informal agreements the Company reached with certain service vendors to defer payment until certain dates, some of which include the closing of the first property lot sale that is the subject of either the Flowerfield or Cortlandt Manor subdivision, respectively.

The director fees and interest accrued under the deferred Compensation Plan where each director elected to defer 100% of his fees for 2024, 2023, 2022, 2021 and 2020.

This amount also includes the deferred compensation of a former Board advisor per an agreement to defer payments due under an advisor agreement.

In February 2024, an agreement was made with one vendor who previously agreed to defer 50 % of their fees to pay $ 200,000 and to convert the remaining balance of $ 477,829 to an interest-bearing loan (see Note 6 – Loans Payable).

The director fees and interest accrued under the deferred Compensation Plan where most directors elected to defer 100% of their fees for 2024, 2023, 2022, 2021 and 2020 excluding Jan Loeb who was nominated to the Board on July 28, 2023, and elected to a three-year term at the annual shareholder meeting on October 12, 2023.

This amount also includes the deferred compensation of a former Board advisor per an agreement to defer payments due under an advisor agreement and two previous Board members.

As a limited liability company, Gyrodyne is not subject to an entity level income tax but rather is treated as a partnership for tax purposes, with its items of income, gain, deduction, loss and credit being reported on the Company’s information return, on Form 1065, and allocated annually on Schedule K-1 to its members pro rata.

10 unchanged sentences

In accordance with generally accepted accounting principles, the Company identifies high risk collectibles, records them on a cash basis and does not include them in revenue or accounts receivable.

As of March 31, 2024 and December 31, 2023, the Company had a zero balance in its allowance for doubtful accounts.

As of June 30, 2024 and December 31, 2023, the Company had a zero balance in its allowance for doubtful accounts.

Concentration of Credit Risk

3 unchanged sentences

The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash.

Management does not believe significant credit risk existed on March 31, 2024 and December 31, 2023.

Management does not believe significant credit risk existed on June 30, 2024 and December 31, 2023.

As the Company executes on the sale of its assets, its regional concentration in tenants will increase thereby resulting in the increased credit risk from exposure of the local economies.

For the three months ended March 31, 2024 rental income from the Company’s three largest tenants represented approximately 25 %, 22 % and 9 % of total rental income.

The three largest tenants by revenue as of March 31, 2024 consist of New York Presbyterian Medical Group located in the Cortlandt Manor Medical Center, Stony Brook University Hospital located in the industrial park and an athletic facility in the industrial park.

For the six months ended June 30, 2024 rental income from the Company’s three largest tenants represented approximately 26 %, 21 % and 9 % of total rental income.

The three largest tenants by revenue as of June 30, 2024 consist of New York Presbyterian Medical Group located in the Cortlandt Manor Medical Center, Stony Brook University Hospital located in the industrial park and an athletic facility in the industrial park.

There can be no assurance that the Company’s leases will renew for the same square footage, at favorable rates net of tenant improvements, if at all.

As of March 31, 2024, other commitments and contingencies are summarized in the below table:

As of June 30, 2024, other commitments and contingencies are summarized in the below table:

Management employment agreements with bonus* and severance commitment contingencies

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The officer discretionary amount will be allocated to the officers within the discretion of the Board.

Under the Plan, there were no payments made during the three months ended March 31, 2024.

Under the Plan, there were no payments made during the six months ended June 30, 2024.

Restricted Stock Award Plan – The Gyrodyne, LLC Restricted Stock Award Plan (the “Stock Plan”) was approved by the Board on September 5, 2023 and by the shareholders of the Company on October 12, 2023 and became effective on October 12, 2023.

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Under the Settlement, Gyrodyne agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their appraised values as of 2014.

As of March 31, 2024 and December 31, 2023, the value of the remaining unsold properties exceeded the respective 2014 appraised values.

As of June 30, 2024 and December 31, 2023, the value of the remaining unsold properties exceeded the respective 2014 appraised values.

Article 78 Proceeding –

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The parties will submit their respective briefs on the merits of the remaining Petitioners’ contentions.

The parties submitted their respective briefs on the merits of the remaining Petitioners’ contentions and are awaiting the judge’s ruling.

In the normal course of business, the Company is a party to various legal proceedings.

19 unchanged sentences

To the extent, the Company underestimates or overestimates forecasted cash outflows (capital improvements, excluding any costs for sewage treatment plants, lease commissions and operating costs) or overestimates or understates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated or understated.

To the extent, the Company underestimates or overestimates forecasted cash outflows (capital improvements, excluding any costs for sewage treatment plants, lease commissions and operating costs) or overestimates or understates forecasted cash inflows (rental revenue rates) or other unfavorable or favorable variances of the aforementioned assumptions, the estimated net realizable value of its real estate assets could be overstated or understated.

Pandemic and Macroeconomics

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In response, market interest rates have increased significantly during this time.

The extent of the impact of these public health and macroeconomic risks on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on current and future developments, including the residual effects of the COVID-19 pandemic and the extent to which interest rate hikes to combat inflation adversely impact the real estate industry or have a recessionary effect generally.

The extent of the continuing impact of these public health and macroeconomic risks on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on current and future developments, including the residual effects of the COVID-19 pandemic and the extent to which persistently high interest rates continue to have an adverse impact on the real estate industry or have a recessionary effect generally.

As a result of the foregoing developments, we are unable to determine what the ultimate impact of general economic conditions will be on our timeline for seeking entitlements and selling properties, and ultimately on the amount proceeds and distributions from those sales.

6 unchanged sentences

April 2022-Dec 2027

During the three months ended March 31, 2024, the Company received rental revenue of $ 13,540 .

The independent members of the Board of the Company approved all of the leasing transactions described above.

During the six months ended June 30, 2024, the Company received rental revenue of $ 27,080 from the aforementioned lease.

The independent members of the Board of the Company approved the leasing transaction described above.

The Chairman is also a partner of the firm LambZankel, LLP that provided pro bono legal representation to the aforementioned not-for-profit corporation on the lease.

2 unchanged sentences

References to “common shares” in this report refer to Gyrodyne, LLC’s common shares representing limited liability company interests.

References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the three-months ended March 31, 2024.

References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the six-months ended June 30, 2024.

Cautionary Statements Concerning Forward – Looking Statements

The statements made in this Form 10-Q, other materials the Company has filed or may file with the Securities and Exchange Commission, in each case 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, and other variations or comparable terminology as well as statements regarding the evaluation of strategic alternatives and liquidation contingencies.

The statements made in this Form 10-Q and in other materials the Company has filed or may file with the Securities and Exchange Commission, in each case 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, and other variations or comparable terminology as well as statements regarding the evaluation of liquidation contingencies.

These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements.

Such risks and uncertainties include, but are not limited to, risks and uncertainties relating to our efforts to enhance the values of our remaining properties and seek the orderly, strategic sale of such properties as soon as reasonably practicable, risks associated with the Article 78 Proceeding against the Company and any other litigation that may develop in connection with our efforts to enhance the value of and sell our properties, ongoing community activism, risks associated with proxy contests and other actions of activist shareholders, risks related to the recent banking crisis and closure of two major banks (including one with whom we indirectly had a mortgage loan which the FDIC transferred in December 2023 to a new holder following the banks closure), regulatory enforcement, risks inherent in the real estate markets of Suffolk and Westchester Counties in New York, the potential residual effects of the COVID-19 pandemic, the risk of inflation, rising interest rates, recession and supply chain constraints or disruptions and other risks detailed from time to time in the Company’s SEC reports.

Such risks and uncertainties include, but are not limited to, risks and uncertainties generally relating to our efforts to enhance the values of our remaining properties and seek the orderly, strategic sale of such properties as soon as reasonably practicable, risks associated with the Article 78 Proceeding against the Company and any other litigation that may develop in connection with our efforts to enhance the value of and sell our properties, ongoing community activism, risks associated with proxy contests and other actions of activist shareholders, continuing risks related to the 2023 banking crisis and closure of two major banks (including one with whom we indirectly had a mortgage loan which the FDIC transferred in December 2023 to a new holder following the banks closure), regulatory enforcement, risks inherent in the real estate markets of Suffolk and Westchester Counties in New York, the potential residual effects of the COVID-19 pandemic, ongoing inflation risk, ongoing interest rate uncertainty, recession uncertainty and supply chain constraints or disruptions and other risks detailed from time to time in the Company’s SEC reports.

These and other matters the Company discuss in this Report, or in the documents it incorporates by reference into this Report, may cause actual results to differ from those the Company describes.

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In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

In particular, it is difficult to fully assess the residual effects of the COVID-19 pandemic, the risk of inflation, rising interest rates, the banking crisis and possible recession at this time.

In particular, it is difficult to fully assess the risks of persistent inflation, high interest rates and possible recession at this time.

The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

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The Board believes the aforementioned strategy will increase the aggregate value for such properties as a whole.

The value of the real estate reported in the consolidated statement of net assets as of March 31, 2024 and December 31, 2023 includes some, but not all of the potential value impact that may result from such value enhancement efforts.

The value of the real estate reported in the consolidated statement of net assets as of June 30, 2024 and December 31, 2023 includes some, but not all of the potential value impact that may result from such value enhancement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

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focusing use of capital by the Company to preserve or improve the market value of the real estate portfolio;

ensuring sufficient capital to fortify our cash position to ensure we are operating through a position of strength through the duration of the liquidation to negotiate and enforce purchase agreements and defend our property rights in the Article 78 Proceeding and in any other such proceeding that may arise;

ensuring sufficient capital to operate through a position of strength through the duration of the liquidation to negotiate and enforce purchase agreements and defend our property rights in the Article 78 Proceeding and in any other such proceeding that may arise;

balancing working capital and funds available for the entitlement process.

1 unchanged sentence

The Company believes the aforementioned dual strategy will increase the aggregate value for such properties as a whole.

The value of the real estate reported in the consolidated statement of net assets as of March 31, 2024 includes some but not all of the potential value impact that may result from such value enhancement efforts.

The value of the real estate reported in the consolidated statement of net assets as of June 30, 2024 includes some but not all of the potential value impact that may result from such value enhancement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

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The parties will submit their respective briefs on the merits of the remaining Petitioners’ contentions.

The parties submitted their respective briefs on the merits of the remaining Petitioners’ contentions and are awaiting the judge’s decision.

3 unchanged sentences

On March 20, 2023, the Town of Cortlandt Town Board adopted the SEQRA findings statement and approved local law establishing the Medical Oriented Zoning District (the “MOD”) which includes Gyrodyne’s Cortlandt Manor property.

Pursuant to the adopted MOD, Gyrodyne received designation for total density of 154,000 square feet to be comprised of 150,000 square feet of medical use and 4,000 square feet of retail use (lot lines and their respective density could change until formal subdivision occurs).

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, labor shortages and environmental concerns.

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, zoning authority labor shortages and environmental concerns.

The Company believes that standard market terms for real property transactions in both Cortlandt Manor and the Town of Smithtown would include, as conditions to closing, final subdivision approval, final unappealable site plan approval and the resolution of the Article 78 Proceeding.

Based on the aforementioned factors, the Company believes the process of negotiating purchase agreements, securing final approvals and consummating the sale of our properties will culminate by year-end 2025.

Consequently, there can be no assurance that the Company will be able to meet our formal stated deadline of December 2025.

1 unchanged sentence

Such cash would equate to future distributions of $16.09 per share based on Gyrodyne having 2,199,308 common shares outstanding.

These estimated distributions are based on values as of March 31, 2024 and include some but not all of the potential value that may be derived from the entitlement efforts.

These estimated distributions are based on values as of June 30, 2024 and include some but not all of the potential value that may be derived from the entitlement efforts.

The Consolidated Statements of Net Assets are based on certain estimates.

1 unchanged sentence

Land entitlement costs, claims, liabilities and expenses from operations, including operating costs, salaries, real estate taxes, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred during our process of seeking entitlements and selling assets, which includes certain enhancement efforts.

Such expenses, if beyond our estimates, will reduce the amount of assets available for ultimate distribution to shareholders, and, while a precise estimate of those expenses cannot currently be made, management and our Board believe that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims (including contingent liabilities).

Such expenses, if exceeding our estimates, will reduce the amount of assets available for ultimate distribution to shareholders, and, while a precise estimate of those expenses cannot currently be made, management and our Board believe that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims (including contingent liabilities).

However, no assurances can be given that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims and to make cash distributions to shareholders.

3 unchanged sentences

The Company is pursuing entitlements to increase the development flexibility of its Flowerfield and Cortlandt Manor properties.

During the three months ended March 31, 2024, the Company incurred approximately $55,000 of land entitlement costs, consisting primarily of engineering costs, legal fees and real estate taxes to support the Company’s respective entitlement efforts.

We estimate that the Company may incur approximately $1,156,000 in additional land entitlement costs through December 31, 2025 in pursuit of entitlements (approximately $329,000 in Cortlandt Manor and $827,000 in Flowerfield).

During the six months ended June 30, 2024, the Company incurred approximately $176,000 of land entitlement costs, consisting primarily of engineering costs, legal fees and real estate taxes to support the Company’s respective entitlement efforts.

We estimate that the Company may incur approximately $1,035,000 in additional land entitlement costs through December 31, 2025 in pursuit of entitlements.

The Company is focusing its resources on positioning the properties to be sold with all entitlements to achieve increased development flexibility in the shortest period of time with the least amount of risk to the Company.

58 unchanged sentences

The Company believes, contingent on the timing for entering contracts (which we anticipate will include closing terms conditioned upon receiving site plan approval), the subdivision and site plan approval could be received in mid-2025.

The entitlement costs for the three months ended March 31, 2024 associated with the ownership and development of this property were approximately $10,600.

The entitlement costs for the six months ended June 30, 2024 associated with the ownership and development of this property were approximately $23,700.

Flowerfield .

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In March 2017, the Company filed a pre-subdivision application with the Town of Smithtown (the “Pre-application”) for the Flowerfield property along with the previously sold (2002) catering hall facility for an eight-lot subdivision which the Town of Smithtown initially determined must be processed as a nine-lot subdivision in response to certain comments received from the planning department.

The final approved (in 2021) FEIS included an eight-lot subdivision.

The final accepted FEIS (in 2021) included an eight-lot subdivision.

In June 2017, the Company filed a subdivision application with the Town of Smithtown based on feedback provided by the Town of Smithtown staff in the pre-application process.

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Technical comments on the Final Subdivision Plans received from the Suffolk County Department of Health Services on April 28, 2023, Suffolk County Department of Public Works, New York State Department of Environmental Conservation on January 31, 2023, and New York State Department of Transportation on July 7, 2023 are being addressed and prepared for resubmission to each agency for their final review and approvals.

Final Subdivision approval is expected in the second half of 2024.

The entitlement costs for the three months ended March 31, 2024 associated with the ownership and development of this property consisting of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys were approximately $44,200.

Final Subdivision approval is expected in late 2024.

The entitlement costs for the six months ended June 30, 2024 associated with the ownership and development of this property consisting of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys were approximately $152,100.

While we cannot predict the outcome of the subdivision application, we undertook to subdivide the Flowerfield property in a manner that we believed will result in increased development flexibility in the shortest amount of time and limited risk (i.e., included in our subdivision application is the separation of the existing industrial buildings into two separate lots which upon resolution of the Article 78 Proceeding and final subdivision approval will allow us to sell the two lots together or separately, without any site plan approval).

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The following discussion is intended to provide shareholders with certain information regarding the impacts of the COVID-19 pandemic on the Company’s business and management’s efforts to respond to those impacts.

Unless otherwise specified, the statistical and other information regarding the Company’s properties and tenants are estimates based on information currently available to the Company, may change, potentially significantly, going forward, and may not be indicative of the actual residual impact of the COVID-19 pandemic on the Company’s business, operations, cash flows and financial condition for the three months ended March 31, 2024 and future periods.

The COVID-19 pandemic has adversely impacted, and may continue to impact adversely, the timeliness of local government in granting required approvals, as state and local staff charged with processing our subdivision applications all postponed activity due to work-from-home transitions.

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In response, market interest rates have increased significantly during this time.

The extent of the impact of these public health and macroeconomic risks on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on current and future developments, including the residual effects of the COVID-19 pandemic and the extent to which interest rate hikes to combat inflation will have an adverse impact on the real estate industry and a recessionary effect generally.

As a result of the foregoing developments, we are unable to determine what the ultimate impact will be on our timeline for seeking entitlements and selling properties, and ultimately on the amount of proceeds and distributions from those sales.

Transaction Summary for the Three-Months Ended March 31, 2024

The following summarizes our significant transactions and other activity during the three-months ended March 31, 2024.

Transaction Summary for the Six-Months Ended June 30, 2024

The following summarizes our significant transactions and other activity during the six-months ended June 30, 2024.

Rights Offering.

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Leasing Activity.

During the three-months ended March 31, 2024, the Company executed three renewals comprising approximately 1,700 square feet, annual revenue of approximately $25,000 and total commitments of approximately $49,000.

There were four terminations comprising approximately 5,300 square feet and approximately $46,000 in annual revenue.

During the six-months ended June 30, 2024, the Company executed one new lease and six renewals comprising approximately 8,000 square feet, annual revenue of approximately $130,000 and total commitments of approximately $241,000.

There were five terminations comprising approximately 6,900 square feet and approximately $64,000 in annual revenue.

Loan Payable.

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In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by December 31, 2025.

The Company hopes to secure favorable decisions on entitlements, and density so that we can then seek the sale of our remaining properties with increased development flexibility.

Any deviation in use or density between what we are pursuing in our entitlement efforts and what is ultimately permitted could have a material impact on value.

On March 30, 2022, the Town of Smithtown Planning Board (the “Planning Board”) unanimously granted Gyrodyne’s application for preliminary approval to divide the Flowerfield property into eight lots, subject to certain conditions (the “Flowerfield Subdivision Application”).

On April 26, 2022, the Incorporated Village of Head of the Harbor and certain other parties commenced a special proceeding (the “Article 78 Proceeding”) against the Town of Smithtown and certain other parties, including the Company, seeking to annul the Planning Board’s determinations relating to the Flowerfield Subdivision Application.

The Article 78 Proceeding was commenced by the filing of a petition (the “Petition”) in the Supreme Court of the State of New York, Suffolk County, pursuant to Article 78 of New York’s Civil Practice Law and Rules (“Article 78”).

Specifically, the Petition seeks to annul the Planning Board’s (i) approval of a findings statement, pursuant to the SEQRA, dated September 16, 2021, and adopted by the Planning Board on March 30, 2022, concerning the Flowerfield Subdivision Application, and (ii) preliminary approval on March 30, 2022, of the Flowerfield Subdivision Application.

The arguments made in the Petition are substantially similar to those made by opponents of the Flowerfield Subdivision Application during the SEQRA and subdivision process.

The Company and the Town of Smithtown are vigorously defending the Planning Board’s determinations against the Petition.

In June 2022, Gyrodyne and the Town of Smithtown filed motions to dismiss the Petition.

During the third quarter of 2023, the Article 78 Proceeding was re-assigned to a different judge for the second time.

On February 6, 2024, the Supreme Court of the State of New York, Suffolk County issued an order (the “Order”), denying the Motions in part and granting them in part.

Specifically, the Order (i) denied the Motions as to three individual Petitioners and the St.

The parties will submit their respective briefs on the merits of the remaining Petitioners’ contentions.

Nevertheless, the Company remains confident that the process of negotiating purchase agreements, securing final subdivision approval and final unappealable site plan approval and consummating the sale of our properties will culminate by year-end 2025, although there can be no assurance that the Company and the Town of Smithtown will be successful in the defense of the Planning Board’s determinations against the Petition or that other factors beyond our control (i.e., potential contract contingencies including site plan approval (excluding the existing industrial buildings situated on two separate lots which can be sold together or separately upon the resolution of the Article 78 Proceeding and the conclusion of the subdivision, without any site plan approvals)) will necessitate an extension of the timeline.

The Flowerfield subdivision will remain subject to the Article 78 Proceeding unless Gyrodyne and the Town of Smithtown prevail in their defense of the Planning Board’s determinations against the Petition.

Nevertheless, the Company will continue its efforts to identify one or more purchasers for Flowerfield and execute purchase agreements, and it is unclear at this time what impact, if any, the Article 78 Proceeding will have on such efforts.

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, labor shortages and environmental concerns.

Nevertheless, we will continue to market the properties and, although there can be no assurances, the Company believes subdivision approval will be received in the second half of 2024 for Flowerfield, and for Cortlandt Manor, contingent on the timing for entering contracts (which we anticipate will include closing terms conditioned upon receiving site plan approval), the subdivision and site plan approval could be received by mid-2025 and that we will generally be able to seek to identify purchasers for such properties after subdivision approval is received.

The Company believes that standard market terms for real property transactions in both Cortlandt Manor and the Town of Smithtown would include final subdivision approval, final unappealable site plan approval and the resolution of the Article 78 Proceeding as conditions to closing.

The Company intends to aggressively market its properties and negotiate contracts in an effort to complete the process as soon as practicable with the ultimate timeline being largely dependent on factors outside the Company’s control, and therefore, there can be no assurance that the Company will be able to meet our formal stated deadline of December 2025.

The Company’s assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement costs, litigation fees, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by December 31, 2025.

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Estimated Distributions per Share – Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets by the number of shares outstanding.

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of March 31, 2024, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of June 30, 2024, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Discussion of the Statements of Net Assets

Net assets as of March 31, 2024 and December 31, 2023 would result in estimated liquidating distributions of $35,386,711 and $30,721,034, or approximately $16.09 and $19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Rights Offering under Transaction Summary above).

The increase of $4,665,677 is mainly attributable to the rights offering that closed on March 7, 2024.

Approximately $3.39 per share of the reduction in net assets per share was driven by the issuance (stemming from the Rights Offering) of 625,000 shares at $8 per share (reflecting a discount of $8.12 per share to the proforma net assets as of December 31, 2023).

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2025, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the March 31, 2024 cash balance of $7.53 million plus adjustments for the following items which are estimated through December 31, 2025:

Net assets as of June 30, 2024 and December 31, 2023 would result in estimated liquidating distributions of $35,387,309 and $30,721,034, respectively, or approximately $16.09 and $19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Rights Offering under Transaction Summary above).

The increase of $4,666,275 in estimated liquidating distributions is mainly attributable to the rights offering (net proceeds of $4,418,380) that closed on March 7, 2024.

Approximately $3.39 per share of the reduction in net assets in liquidation per share was driven by the issuance (stemming from the Rights Offering) of 625,000 shares at $8 per share (reflecting a discount of $8.12 per share to the proforma net assets as of December 31, 2023).

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2025, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the June 30, 2024 cash balance of $6.91 million plus adjustments for the following items which are estimated through December 31, 2025:

The estimated cash receipts from the operation of the properties net of rental property related expenditures as well as costs expected to be incurred to preserve or improve the net realizable value of the property at their estimated gross sales proceeds.

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The Company estimates that it will incur approximately $1,156,000 (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of receipts) in land entitlement costs from April 2024 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2025, in an effort to obtain entitlements, including special permits.

To the extent the Company underestimates or overestimates forecasted cash outflows (capital improvements, excluding any costs for sewage treatment plants, lease commissions and operating costs) or overestimates or underestimates forecasted cash inflows (rental revenue rates) or other unfavorable or favorable variances of the aforementioned assumptions, the estimated net realizable value of its real estate assets could be overstated or understated.

The Company estimates that it will incur approximately $1,035,000 in land entitlement costs (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of receipts) from July 2024 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2025, in an effort to obtain entitlements, including special permits.

During the three-months ended March 31, 2024, the Company incurred approximately $55,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $1,156,000 (inclusive of real estate taxes of $251,000 and regulatory fees of $373,500) will be incurred from April 2024 through the end of the liquidation period.

During the six-months ended June 30, 2024, the Company incurred approximately $176,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $1,035,000 (inclusive of real estate taxes of $212,000 and regulatory fees of $372,500) will be incurred from July 2024 through the end of the liquidation period.

The Company does not intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve increased development flexibility.

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The value of the real estate reported in the statement of net assets as of March 31, 2024 includes some but not all of the potential value impact that may result from the land entitlement efforts.

The value of the real estate reported in the statement of net assets as of June 30, 2024 includes some but not all of the potential value impact that may result from the land entitlement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The net assets as of March 31, 2024 ($35,386,711) and December 31, 2023 ($30,721,034) results in estimated distributions of approximately $16.09 and $19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Rights Offering under Transaction Summary above), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

The net assets as of June 30, 2024 ($35,387,309) and December 31, 2023 ($30,721,034) results in estimated distributions of approximately $16.09 and $19.51 per common share, respectively, based on 2,199,308 and 1,574,308 shares outstanding, respectively (see Rights Offering under Transaction Summary above), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

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There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, change in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or resulting from the land entitlement efforts) net of any bonuses, favorable or unfavorable changes in the land entitlement costs, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows.

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of March 31, 2024 (dollars are in millions).

March 31, 2024 cash and cash equivalents balance

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of June 30, 2024 (dollars are in millions).

June 30, 2024 cash and cash equivalents balance

Principal payments on loan

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Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pays distributions to holders of Gyrodyne common shares.

Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the three-months ended March 31, 2024 of which is discussed below:

Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the six-months ended June 30, 2024 of which is discussed below:

Net assets in liquidation on January 1, 2024

Changes in net assets in liquidation from January 1 through March 31, 2024:

Changes in net assets in liquidation from January 1 through June 30, 2024:

Change in liquidation value of real estate

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Total increase in net assets in liquidation

Net assets in liquidation on March 31, 2024

Net assets in liquidation on June 30, 2024

Liquidity and Capital Resources

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All DCP benefits will be paid in a single lump sum cash payment on December 15, 2026, unless a Plan of Liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP ( See Deferred Compensation Plan above) .

As of March 31, 2024, the Company had cash and cash equivalents totaling approximately $7.53 million.

As of June 30, 2024, the Company had cash and cash equivalents totaling approximately $6.91 million.

The Company anticipates that its current cash and cash equivalent balance will be adequate to fund its process of seeking entitlements and selling assets and subsequent dissolution.

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The Company is estimating and reporting in the consolidated statements of net assets total gross cash proceeds from the sale of its assets of approximately $53.78 million.

Based on the Company’s current cash balance and the above forecast, the Company estimates distributable cash stemming from the liquidation of the Company of approximately $35.39 million.

Based on the Company’s current cash balance and the above forecast (including the estimated liquidation and operating costs net of estimated receipts), the Company estimates distributable cash stemming from the liquidation of the Company of approximately $35.39 million.

The Company’s primary sources of funds are as follows:

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In addition, the Company has and will continue to review operating activities for possible cost reductions and additional capital/credit needs throughout the liquidation process.

Major elements of the Company’s cashflows for the three-months ended March 31, 2024 were as follows:

Major elements of the Company’s cashflows for the six-months ended June 30, 2024 were as follows:

Operating cashflows

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements