What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-19 compared with 2024-08-09 · 125 added, 102 removed, 668 unchanged (25% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF NET ASSETS

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

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

(Liquidation Basis)

September 30,

Real estate held for sale

13 unchanged sentences

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

FOR THE SIX-MONTHS ENDED JUNE 30, 2024

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2024

(Liquidation Basis)

4 unchanged sentences

Remeasurement of assets and liabilities

Net increase in liquidation value

Net assets in liquidation, as of June 30, 2024

Net decrease in liquidation value

Net assets in liquidation, as of September 30, 2024

See notes to consolidated financial statements

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

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

Strategic Overview

3 unchanged sentences

The COVID-19 pandemic caused significant delays in the regulatory approval process, as state, county and local staff charged with processing our subdivision applications all postponed activity due to work-from-home transitions.

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 March 30, 2022, the Town of Smithtown Planning Board (the “Planning Board”) voted four to zero with one abstention to grant 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 (collectively, the “Petitioners”), commenced a special proceeding under Article 78 of New York’s Civil Practice Law & Rules (the “Article 78 Proceeding”) against the Town of Smithtown and certain other parties, including Gyrodyne, seeking to annul the Planning Board’s determinations relating to the Flowerfield Subdivision Application.

6 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 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.

Nevertheless, Gyrodyne 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 could still culminate by year-end 2025, although there can be no assurance that Gyrodyne 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 for the undeveloped portion of Flowerfield (the developed portion, situated on two separate lots may 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 not 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.

On October 11, 2024, the Supreme Court of the State of New York issued a ruling in favor of the Company dismissing the Article 78 petition in its entirety.

On October 28, 2024, the Company received a notice of appeal filed by the petitioners in this proceeding seeking to appeal the court’s dismissal of the Article 78 petition, citing as grounds for appeal “whether the court erred in denying the petition and dismissed the Article 78 proceeding, and any and all other issues which may arise upon further review of the record on appeal”.

On November 12, 2024, the petitioners filed a notice of motion to renew and reargue, seeking to have the court direct the respondents to undertake a supplemental environmental impact statement to address retaining of storm water at the property being developed in light of a recent storm, and to annul the resolution approving the preliminary site plan.

Pleadings filed in the Article 78 Proceeding may be accessed through a link (and related instructions) to the New York State Unified Court System which appears on the Company’s website at https://www.gyrodyne.com.

An Article 78 Proceeding could take up to two years or more to run its course given the likelihood of appeals and other motions.

Nevertheless, Gyrodyne remains confident in its defense of the appeal and the motion to renew and reargue.

Due to the anticipated time it may take for the appeal and any other motions in the Article 78 Proceeding to be finally resolved.

Gyrodyne believes that the process of negotiating purchase agreements, securing final subdivision approval and final unappealable site plan approval and consummating the sale of our properties could extend into 2026, although there can be no assurance that Gyrodyne and the Town of Smithtown will be successful in the defense of the appeal and any other motions or that other factors beyond our control will not necessitate a further extension of the timeline.

The developed portion, situated on two separate lots, may be sold together or separately upon the resolution of the Article 78 Proceeding and the filing of the final subdivision map without site plan approval.

The foregoing extension of the estimated timeline assumes that Flowerfield is not sold until the culmination of the Article 78 Proceeding.

Although Gyrodyne believes that selling individual lots will maximize value, it is also pursuing prospective purchasers who may be willing to purchase all of Flowerfield as an undivided parcel for terms that Gyrodyne finds more attractive from a timing and value perspective and which may allow for a sale before 2026.

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.

1 unchanged sentence

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).

Nevertheless, we will continue to market the properties and, although there can be no assurances, the Company believes subdivision approval will be received in early 2025 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 six-months ended June 30, 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;

22 unchanged sentences

These differences may be material.

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.

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 in 2026.

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.

2 unchanged sentences

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 values.

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 believes the process of negotiating purchase agreements, securing final approvals and consummating the sale of our properties will culminate in 2026.

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, zoning authority labor shortages and environmental concerns.

Consequently, 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, 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.

Consequently, there can be no assurance that the Company will be able to meet our formal stated deadline of 2026.

On an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update respective information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

6 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 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.

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of September 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 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.

Net assets as of September 30, 2024 and December 31, 2023 would result in estimated liquidating distributions of $ 30,520,272 and $ 30,721,034 , respectively, or approximately $ 13.88 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 decrease of $ 200,762 in estimated liquidating distributions is mainly attributable to the decrease in real estate value of $ 3,480,000 and the increased costs associated with the timeline extension of one year ($ 1,692,000 ) offset by the cash raised in the rights offering (net proceeds of $ 4,418,380 ) that closed on March 7, 2024 and other savings (approximately $ 530,000 inclusive of approximately $ 350,000 in savings directly attributable to the decreased real estate value).

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 in liquidation 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 adjustments for the following items which are estimated through December 31, 2025:

The cash balance at the end of the liquidation period (currently estimated to be in 2026, 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 2026:

The estimated cash receipts from the operation of the Company’s 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 properties at their estimated gross sales proceeds.

11 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 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 estimates that it will incur approximately $ 1,251,000 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 October 2024 through the end of the liquidation period, currently estimated to conclude in 2026, 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 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.

During the nine months ended September 30, 2024, the Company incurred approximately $ 318,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $ 1,251,000 (inclusive of real estate taxes of $ 307,000 and regulatory fees of $ 395,000 ) will be incurred from October 2024 through the end of the liquidation period.

The Company does not intend on developing the properties but rather positioning the properties for increased development flexibility in the shortest period of time with the least amount of risk to the Company.

2 unchanged sentences

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 June 30, 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 September 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 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.

The net assets as of September 30, 2024 ($ 30,520,272 ) and December 31, 2023 ($ 30,721,034 ) results in estimated distributions of approximately $ 13.88 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.

This estimate of distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation.

5 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 June 30, 2024 is as follows:

January 1, 2024

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

Expenditures/

1 unchanged sentence

Assets and Liabilities

June 30, 2024

September 30,

Estimated rents and reimbursements

5 unchanged sentences

Selling costs on real estate assets

Retention bonus payments to directors, officers and employees*

Retention bonus payments to officers and employees*

Liability for estimated liquidation and operating costs net of estimated receipts

6 unchanged sentences

The loan will mature on April 30, 2028.

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

The outstanding balance as of September 30, 2024 was $ 1,934,813 .

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 June 30, 2024 was $ 2,675,780 .

The outstanding balance as of September 30, 2024 was $ 2,647,918 .

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

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

As of September 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.

1 unchanged sentence

The term of the Mortgage Loan is five years with an option to extend for an additional five years (the “Extension Period”).

Until the initial maturity date, the Mortgage Loan bears interest at an annual rate equal to 3.75 %.

Until the initial maturity date (September 14, 2026), the Mortgage Loan bears interest at an annual rate equal to 3.75 %.

If the maturity date is extended for the Extension Period, the rate of interest on the Mortgage Loan will adjust and be fixed for the Extension Period to the greater of (i) 3.75 % or (ii) 275 basis points in excess of the weekly average yield on United States Treasury Securities adjusted to a constant maturity of five years as most recently made available by the Federal Reserve Board as of thirty days prior to the first day of the Extension Period.

11 unchanged sentences

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 June 30, 2024 was $ 4,706,888 .

The outstanding balance as of September 30, 2024 was $ 4,683,145 .

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 June 30,

Years Ending September 30,

Accounts payable and Accrued Liabilities

1 unchanged sentence

Accrued Liabilities

June 30, 2024

September 30, 2024

December 31, 2023

September 30, 2024

December 31, 2023

Current accounts payable

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

As of September 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 June 30, 2024 and December 31, 2023.

Management does not believe significant credit risk existed on September 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 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.

For the nine months ended September 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 September 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 June 30, 2024, other commitments and contingencies are summarized in the below table:

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

Management employment agreements with bonus* and severance commitment contingencies

32 unchanged sentences

Early sale incentive :

If any property is sold on or before June 30, 2024, the bonus pool for employee participants will be funded with an additional 1 % of net sale price.

If any property is sold on or before September 30, 2024, the bonus pool for employee participants will be funded with an additional 1 % of net sale price.

Removal of price floor :

3 unchanged sentences

Amendment No.

5 RSP approved

Board Members(a)

7 unchanged sentences

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 six months ended June 30, 2024.

Under the Plan, there were no payments made during the nine months ended September 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.

17 unchanged sentences

All shares issued in connection with a grant are subject to the terms, conditions, and restrictions set forth in the Company’s articles of organization, amended and restated limited liability company agreement, or other governing documents of the Company, as amended.

Vesting of shares issued under the Stock Plan occurs (i) in equal one-third tranches on each of the first three anniversaries of the grant date, and (ii) at such time as a liquidating distribution is made to the shareholders of the Company, subject to acceleration upon a liquidating distribution.

Unvested Stock Plan shares will be forfeited by a participant if such participant is no longer serving on the Board at or prior to such time that liquidating distributions are paid to the shareholders other than as a result of death, disability or failure to be reelected.

24 unchanged sentences

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

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

Article 78 Proceeding –

10 unchanged sentences

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

On October 11, 2024, the Supreme Court of the State of New York issued a ruling in favor of the Company dismissing the Article 78 petition in its entirety.

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

After reviewing all actions and proceedings pending against or involving the Company, management considers that any loss resulting from such proceedings individually or in the aggregate will not be material to the Company’s financial statements.

The Company reports its financial statements under the liquidation basis of accounting which reflects real estate value at net realizable value (predicated on current asset values).

As of September 30, 2024, the Company determined to reduce the net realizable value of our real estate held for sale by $ 3,480,000 , from $ 53,780,000 as of June 30, 2024 to $ 50,300,000 .

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques.

The decrease in net realizable value was primarily driven by the current status of entitlement uses and market conditions.

Fair Value of Financial Instruments

22 unchanged sentences

Due to increased inflation, the U.S.

Federal Reserve raised the federal funds rate a total of four times in 2023.

Federal Reserve raised the benchmark federal funds rate a total of four times in 2023.

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

In September 2024, the Federal Reserve cut its benchmark federal funds rate by 50 basis points to a range of 4.75% - 5.0%, the first cut in interest rates since the Federal Reserve's emergency response to the outbreak of COVID-19 in March 2020.

On November 7, 2024, the Federal Reserve cut its benchmark interest rate by an additional 25 basis points.

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.

7 unchanged sentences

April 2022-Dec 2027

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

During the nine months ended September 30, 2024, the Company received rental revenue of $ 40,620 from the aforementioned lease.

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

3 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 six-months ended June 30, 2024.

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

Cautionary Statements Concerning Forward – Looking Statements

5 unchanged sentences

New factors emerge from time to time, and it is not possible for us to predict which factors will affect future results.

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 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, including the timeline to complete the liquidation, to differ materially from those contained in any forward-looking statement.

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

5 unchanged sentences

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 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.

The value of the real estate reported in the consolidated statement of net assets as of September 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.

24 unchanged sentences

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 June 30, 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 September 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.

5 unchanged sentences

The prices at which the various assets may be sold depend largely on factors beyond our control, including, without limitation, the condition of financial and real estate markets, the availability of financing to prospective purchasers of the assets, regulatory approvals, public market perceptions, and limitations on transferability of certain assets.

On April 26, 2022, the Incorporated Village of Head of the Harbor and certain other parties (collectively, the “Petitioners”) commenced a special proceeding under Article 78 of New York’s Civil Practice Law & Rules (the “Article 78 Proceeding”) against the Town of Smithtown and certain other parties, including Gyrodyne, seeking to annul the Planning Board’s determinations relating to the Flowerfield Subdivision Application.

7 unchanged sentences

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

Nevertheless, Gyrodyne 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 Gyrodyne 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 for the undeveloped portion of Flowerfield (the developed portion, situated on two separate lots may 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 not necessitate an extension of the timeline.

On October 11, 2024, the Supreme Court of the State of New York issued a ruling in favor of the Company dismissing the Article 78 petition in its entirety.

An Article 78 Proceeding could take up to two years or more to run its course given the likelihood of appeals and other motions.

Nevertheless, Gyrodyne remains confident in its defense of the appeal and the motion to renew and reargue.

Due to the anticipated time it may take for the appeal and any other motions in the Article 78 Proceeding to be finally resolved.

The foregoing extension of the estimated timeline assumes that Flowerfield is not sold until the culmination of the Article 78 Proceeding.

1 unchanged sentence

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.

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 in 2026.

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

Assuming the process of seeking entitlements and selling assets is completed by December 31, 2025 and giving effect to the estimated cash flows from the operation of our existing properties, we expect that Gyrodyne will have a cash balance on December 31, 2025 of approximately $35.39 million, prior to any future special distributions based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets.

Consequently, there can be no assurance that the Company will be able to meet our formal stated deadline of 2026.

Assuming the process of seeking entitlements and selling assets is completed in 2026 and giving effect to the estimated cash flows from the operation of our existing properties, we expect that Gyrodyne will have a cash balance of approximately $30.52 million, prior to any future special distributions based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets.

Such cash would equate to future distributions of $13.88 per share based on Gyrodyne having 2,199,308 common shares outstanding.

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.

These estimated distributions are based on values as of September 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.

Uncertainties as to the precise value of our non-cash assets, which include some but not all of the estimated potential additional value from the efforts to maximize value of Flowerfield and Cortlandt Manor and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation.

Uncertainties as to the precise value of our non-cash assets and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation.

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.

5 unchanged sentences

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

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.

During the nine months ended September 30, 2024, the Company incurred approximately $318,000 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 $1,251,000 in additional land entitlement costs through 2026 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 six months ended June 30, 2024 associated with the ownership and development of this property were approximately $23,700.

The entitlement costs for the nine months ended September 30, 2024 associated with the ownership and development of this property were approximately $33,800.

Flowerfield .

32 unchanged sentences

On September 20, 2021, the Town of Smithtown Conservation Board voted unanimously to recommend the Town of Smithtown Planning Board issue a SEQRA Negative Declaration, Determination of Non -Significance (an environmental Impact Statement is not necessary based on certain stated reasons and approve the Subdivision Application (eight lots inclusive of the lot for the proposed sewage treatment plant).

On March 30, 2022, the Smithtown Planning Board voted unanimously to adopt the Findings Statement by resolution, closing SEQR and held a public hearing for the approval of the Preliminary Subdivision at the same meeting.

On March 30, 2022, the Smithtown Planning Board voted four to zero with one abstentation to adopt the Findings Statement by resolution, closing SEQR and held a public hearing for the approval of the Preliminary Subdivision at the same meeting.

Approval of the Preliminary Subdivision was granted at that meeting.

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 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.

Final Subdivision approval is expected in early 2025.

The entitlement costs for the nine months ended September 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 $284,200.

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).

12 unchanged sentences

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 six months ended June 30, 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.

2 unchanged sentences

Due to increased inflation, the U.S.

Federal Reserve raised the federal funds rate a total of four times in 2023.

Federal Reserve raised the benchmark federal funds rate a total of four times in 2023.

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

On November 7, 2024, the Federal Reserve cut its benchmark interest rate by an additional 25 basis points.

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 Six-Months Ended June 30, 2024

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

Transaction Summary for the Nine-Months Ended September 30, 2024

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

Rights Offering.

10 unchanged sentences

Leasing Activity.

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.

During the nine-months ended September 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 six terminations comprising approximately 7,900 square feet and approximately $76,500 in annual revenue.

Loan Payable.

23 unchanged sentences

These differences may be material.

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’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.

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 in 2026.

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 in 2026.

As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update relevant information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

9 unchanged sentences

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 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.

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of September 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 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:

Net assets as of September 30, 2024 and December 31, 2023 would result in estimated liquidating distributions of $30,520,272 and $30,721,034, respectively, or approximately $13.88 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 decrease of $200,762 in estimated liquidating distributions is mainly attributable to the decrease in real estate value of $3,480,000 and the costs associated with the timeline extension of one year ($1,692,000) offset by the cash received in the rights offering (net proceeds of $4,418,380) that closed on March 7, 2024 and other savings (approximately $530,000 inclusive of approximately $350,000 in savings directly attributable to the decreased real estate value).

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 in liquidation as of December 31, 2023).

The cash balance at the end of the liquidation period (currently estimated to be in 2026, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the September 30, 2024 cash balance of $6.7 million plus adjustments for the following items which are estimated through 2026:

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.

11 unchanged sentences

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.

The Company estimates that it will incur approximately $1,251,000 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 October 2024 through the end of the liquidation period, currently estimated to conclude in 2026, in an effort to obtain entitlements, including special permits.

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.

During the nine-months ended September 30, 2024, the Company incurred approximately $318,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $1,251,000 (inclusive of real estate taxes of $307,000 and regulatory fees of $395,000) will be incurred from October 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.

2 unchanged sentences

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 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.

The net assets as of September 30, 2024 ($30,520,272) and December 31, 2023 ($30,721,034) results in estimated distributions of approximately $13.88 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.

This estimate of distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation.

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 June 30, 2024 (dollars are in millions).

June 30, 2024 cash and cash equivalents balance

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

September 30, 2024 cash and cash equivalents balance

Principal payments on loan

14 unchanged sentences

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 six-months ended June 30, 2024 of which is discussed below:

Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the nine-months ended September 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 June 30, 2024:

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

Change in liquidation value of real estate

Issuance of common shares, net

Change in real estate value

Remeasurement of assets and liabilities in liquidation

Total increase in net assets in liquidation

Net assets in liquidation on June 30, 2024

Total decrease in net assets in liquidation

Net assets in liquidation on September 30, 2024

Liquidity and Capital Resources

11 unchanged sentences

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

As of September 30, 2024, the Company had cash and cash equivalents totaling approximately $6.7 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.

10 unchanged sentences

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 six-months ended June 30, 2024 were as follows:

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

Operating cashflows

11 unchanged sentences

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