U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549
                                    FORM 10-K

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the fiscal year ended APRIL 30, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the transition period from ________________ to ________________

                          Commission file number 0-1684

                        GYRODYNE COMPANY OF AMERICA, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

                NEW YORK                                  11-1688021
                --------                                  ----------
    (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                   Identification No.)

 1 FLOWERFIELD, SUITE 24, ST. JAMES, NY                     11780
 --------------------------------------                     -----
 (Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (631) 584-5400


Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK,
$1.00 PAR VALUE

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of voting common stock held by non-affiliates of the
registrant on October 31, 2005 was $45,912,158. The aggregate market value was
computed by reference to the closing price of the common stock, on such date, on
the NASDAQ system.

On July 15, 2006, 1,237,219 shares of the Registrant's common stock, par value
$1 per share, were outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


                                       1
<PAGE>

                               INDEX TO FORM 10-K
                                FISCAL YEAR 2006


ITEM #                                                                      PAGE
------                                                                      ----

PART I
         1 -Business                                                         3
        1A -Risk Factors                                                     5
        1B -Unresolved Staff Comments                                        9
         2 -Properties                                                       9
         3 -Legal Proceedings                                                10
         4 -Submission of Matters to a Vote of Security Holders              10

PART II
         5 -Market for Registrant's Common Equity, Related
            Stockholder Matters and Issuer Purchases of
            Equity Securities                                                10
         6 -Selected Financial Data                                          12
         7 -Management's Discussion and Analysis of Financial
            Condition and Results of Operation                               13
        7A -Quantitative and Qualitative Disclosures About Market Risk       18
         8 -Financial Statements and Supplementary Data                      18
         9 -Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                              19
        9A -Controls and Procedures                                          19
        9B -Other Information                                                19

PART III
        10 -Directors and Executive Officers of the Registrant               19
        11 -Executive Compensation                                           21
        12 -Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters                       24
        13 -Certain Relationships and Related Transactions                   26
        14 -Principal Accountant Fees and Services                           27

PART IV
        15 -Exhibits and Financial Statement Schedules                       27
           -Signatures


                                       2
<PAGE>

                                     PART I

Item 1 Business

The statements made in this Form 10-K that are not historical facts contain
"forward-looking information" within the meaning of the Private Securities
Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, both as amended, which can
be identified by the use of forward-looking terminology such as "may," "will,"
"anticipates," "expects," "projects," "estimates," "believes," "seeks," "could,"
"should," or "continue," the negative thereof, other variations or comparable
terminology. Important factors, including certain risks and uncertainties, with
respect to such forward-looking statements that could cause actual results to
differ materially from those reflected in such forward-looking statements
include, but are not limited to, the effect of economic and business conditions,
including risks inherent in the Long Island, New York and Palm Beach County,
Florida real estate markets, the ability to obtain additional capital in order
to develop the existing real estate and other risks detailed from time to time
in the Company's SEC reports. The Company assumes no obligation to update the
information in this Form 10-K.

Business Development
--------------------

Gyrodyne Company of America, Inc. (the "Company") was organized in 1946 as a
corporation under the laws of the State of New York. The Company's headquarters
are located at 1 Flowerfield, Suite 24, St. James, New York 11780. Its main
phone number is (631) 584-5400. The Company maintains a website at
www.gyrodyne.com.

The Company was, from its inception and for the next 25 years, engaged in
design, testing, development, and production of coaxial helicopters primarily
for the U.S. Navy. Following a sharp reduction in the Company's helicopter
manufacturing business and its elimination by 1975, the Company began converting
its vacant manufacturing facilities and established its rental property
operation. The Company has since concentrated its efforts on the development of
its real estate holdings in St. James, New York. The converted buildings consist
of approximately 127,392 rentable square feet housing 48 tenants in space
suitable for office, engineering, manufacturing, and warehouse use. The
property, which is known as Flowerfield, consists of 68 acres. Approximately 10
acres are utilized for the rental property and the balance of 58 remains
undeveloped.

In 1965, the Company acquired a 20% limited partnership interest in
Callery-Judge Grove, L.P., a New York limited partnership, which owns a 3,500+
acre citrus grove located in Palm Beach County, Florida, for a purchase price of
$1.1 million. The Company's percentage interest has since been diluted to
approximately 10.93%. The investment has yielded distributions of approximately
$5.5 million in the aggregate. Over the last several years, real estate values
have escalated in Palm Beach County, Florida, and the property is the subject of
a plan for a mixed use of residential, commercial, and industrial development
which is under review by state and local municipal authorities.

On June 17, 2005, the Company retained the investment banking firm of Coady
Diemar Partners to assist management and the Board of Directors in reviewing the
Company's strategic options. On December 9, 2005, the Company presented at its
2005 annual shareholders meeting a strategic plan for the future direction of
the Company. The objective of the plan is to position the Company so that it is
best able to achieve one or more shareholder liquidity events in a reasonable
period of time that would put the maximum amount of cash or marketable
securities in the hands of the Company's shareholders in a tax efficient manner.
The plan calls for achieving this objective by pursuing a conversion to a real
estate investment trust ("REIT"), disposition and redeployment of the assets of
the Company in a tax efficient manner, maximization of the value for the
remaining 68 acres at Flowerfield, and vigorous pursuit of maximum value from
the State of New York for the portion of Flowerfield taken by eminent domain. If
the Company converts to a REIT, the Company generally will not be subject to New
York State and U.S. federal corporate income taxes on income and gain generated
after the date May 1, 2006 from investments in real estate that the Company
distributes to its shareholders, thereby reducing the Company's corporate-level
taxes and substantially eliminating the double taxation on income and gain that
usually results in the case of distributions under Gyrodyne's current status as
a C corporation.

On November 2, 2005, the State University of New York at Stony Brook (the
"University") filed an acquisition map with the Suffolk County Clerk's office
and vested title in approximately 245.5 acres of the Flowerfield Property
pursuant to the New York Eminent Domain Procedure Law (the "EDPL"). On March 27,
2006, the Company received payment from the State of New York in the amount of
$26,315,000, which the Company had previously elected under the EDPL to accept
as an advance payment for the property. Under the EDPL, both the advance payment
and any additional award from the Court of Claims bear interest at the current
statutory rate of 9% simple interest from the date of the taking through the
date of payment subject to the courts discretion.


                                       3
<PAGE>

On May 1, 2006, the Company filed a Notice of Claim with the Court of Claims of
the State of New York seeking $158 million in damages from the State of New York
resulting from the eminent domain taking by the University of the 245.5 acres of
the Flowerfield property. See "Legal Proceedings".

The Company invested $26,315,000 in short term U.S. Government securities and
interest bearing deposits which were valued at $26,184,383 and $238,593,
respectively, as of April 30, 2006. Subsequently, upon maturity, approximately
$22,000,000 was invested in securitized U.S. Government Agency issues with an
effective duration of between two and three years and are qualified REIT
investments. The balance of the funds were placed in short term U.S. Government
securities and interest bearing deposits.

Neither the Company nor any of its subsidiaries have ever been in any
bankruptcy, receivership or similar proceeding.

References to the Company contained herein include its wholly owned
subsidiaries, except where the context otherwise requires.

Description of the Company's Business
-------------------------------------

The Company manages its real estate operations and is a passive investor as a
limited partner in the Callery Judge Grove, L.P., which owns a large citrus
grove in Palm Beach County, Florida. The Company currently has a total of 8 full
time employees involved in support of the real estate operation and development
plans. Competition among industrial and office rental properties on Long Island
is intense. There are numerous commercial properties that compete with the
Company in attracting tenants, many of which are substantially larger than the
Company. See Item 1A, "Risk Factors" for a discussion of risk factors, and Item
2, "Properties" for a discussion regarding dependence on major tenants.

Real Estate
-----------

Gyrodyne owns a 68 acre site, primarily zoned for light industry, which is
located approximately 50 miles east of New York City on the north shore of Long
Island. Flowerfield's location also places it in hydrological zone VIII, one of
the most liberal with respect to effluent discharge rates.

The Company currently has 127,392 square feet of rentable space located on
approximately 10 acres of developed property. As of April 30, 2006, there were
48 tenants renting space with an annual base rent of $1,176,485. The majority of
the Company's leases, 43 out of 48, are one year leases and represent
approximately 66.5% of the total annual rent.

The Flowerfield property is located in Smithtown Township. Environmental studies
have been updated and numerous other studies including archeological,
ecological, and traffic have been conducted in connection with development plans
-- all with no significant adverse findings. The Company believes that it does
not incur material costs in connection with compliance with environmental laws.
During the fiscal year ended April 30, 2006 ("Fiscal Year 2006"), the Company
had no material expenses related to environmental issues.

Limited Partnership Investment in Callery-Judge  Grove, L.P. (the "Grove")
-----------------------------------------------  -------------------------

The Company's initial participation in the Grove through its wholly owned
subsidiary, Flowerfield Properties, Inc., represented a 20% limited partner's
interest in the Grove. Based on three subsequent capital infusions in which the
Company did not participate, the Company's share is now approximately 10.93%.

The original limited partner investment of $1.1 million, which was made in 1965,
has since yielded distributions of approximately $5.5 million in the aggregate.
Due to recurring losses of the Grove, the investment is carried on the books of
the Company at $0 as a result of recording the Company's pro-rata share of
losses under the equity method of accounting. In fiscal 2000, when the Company's
share of losses equaled the carrying value of the investment, the equity method
of accounting was suspended, and no additional losses have been charged to
operations.

Competition
-----------

All of the rental properties owned by the Company are located in St. James, New
York on the North Shore of Long Island in Smithtown Township. The Company
competes in the leasing of office, engineering, manufacturing and warehouse
space with a considerable number of other real estate companies, some of which
may have greater marketing and financial resources than the Company. Principal
factors of competition in the Company's rental property business are: the
quality of properties, leasing terms (including rent and other charges and
allowances for tenant improvements), attractiveness and convenience of location,
the quality and breadth of tenant services provided and reputation as an owner


                                       4
<PAGE>

and operator of quality office properties in its relevant market. Additionally,
the Company's ability to compete depends upon, among other factors, trends in
the national and local economies, investment alternatives, financial condition
and operating results of current and prospective tenants, availability and cost
of capital, construction and renovation costs, taxes, governmental regulations,
legislation and population trends. The Company believes that the attractive
location of its rental properties in St. James, New York gives it a competitive
advantage.

Environmental Matters
---------------------

The Company believes that each of its properties is in compliance, in all
material respects, with federal, state and local regulations regarding hazardous
waste and other environmental matters and is not aware of any environmental
contamination at any of its properties that would require any material capital
expenditure by the Company for the remediation thereof. No assurance can be
given, however, that environmental regulations will not in the future have a
materially adverse effect on the Company's operations.

Insurance
---------

The Company carries comprehensive liability, property and umbrella insurance
coverage which includes fire and business interruption insurance and covers all
of its rental properties. The Company believes the policy specifications,
insurance limits and deductibles are appropriate given the relative risk of
loss, the cost of the coverage and industry practice and, in the opinion of the
company's management, its rental properties are adequately insured.

Major Customers
---------------

For the year ended April 30, 2006, rental income from the three largest tenants
represented 11%, 9% and 9% of total rental income.
For the year ended April 30, 2005, rental income from the three largest tenants
represented 14%, 13% and 10% of total rental income. For the year ended April
30, 2004, rental income from the three largest tenants represented 17%, 13% and
12% of total rental income.

Item 1A Risk Factors

An investment in the Company's common stock involves various risks. All
investors should carefully consider the following risk factors in conjunction
with the other information contained in this Annual Report before trading in the
Company's securities. If any of these risks actually occur, the business,
operating results, prospects and financial condition could be harmed.

RISKS ASSOCIATED WITH THE COMPANY'S REAL PROPERTY BUSINESS GENERALLY

The Company's real property business is subject to General Risks Associated With
Ownership of Real Property for Investment

The Company is subject to all of the risks inherent in investing in real estate,
which may include, without limitation, neighborhood property values, general and
local economic and social conditions, financial resources of tenants, vacancies,
rent strikes, changes in tax, zoning, building, environmental and other
applicable laws, federal and local rent control laws, real property tax rates,
changes in interest rates and the availability of mortgage funds which may
render the sale of properties difficult or unattractive. Such risks also include
fluctuations in occupancy rates, rent schedules and operating expenses which
could adversely affect the value of our real property interests. There can be no
assurance of profitable operations from the ownership and management of the
Company's real property interests.

Illiquidity of real estate investments and the tax effect of dispositions could
significantly impede the Company's ability to sell assets or to respond to
favorable or adverse changes in the performance of its property.

Because real estate investments are relatively illiquid, the Company's ability
to sell promptly all or any portion of its Flowerfield property in response to
changing economic, financial and investment conditions may be limited.

The Company may sell some of its properties from time to time in the future.
However, the Company cannot predict whether it will be able to sell any property
for the price or on the terms it sets, or whether any price or other terms
offered by a prospective purchaser would be acceptable to the Company. The
Company also cannot predict the length of time needed to find a willing
purchaser and to close the sale of a property.

Certain of the Company's properties have low tax bases relative to their fair
market value, and accordingly, the sale of such assets would generate
significant gains which would generally be recognized for tax purposes unless
the assets were sold under a non-recognition provision of the Code that allows a
taxpayer, in effect, to defer the recognition of gain from a sale.


                                       5
<PAGE>

RISKS ASSOCIATED WITH THE COMPANY'S RENTAL PROPERTY OPERATIONS

Costs of operating the Company's properties can rise faster than its ability to
increase rental income.

Costs of operating the Company's properties, such as real estate taxes,
utilities, insurance, maintenance and other costs, can rise faster than its
ability to increase rental income. While the Company does receive some
additional rent from its tenants that is based on recovering a portion of the
operating expenses, generally increased operating expenses will negatively
impact the Company's net operating income from the properties. The Company's
revenues and expense recoveries are subject to leases and may not be quickly
increased sufficient to recover an increase in operating costs and expenses. As
leases expire, the Company tries either to relet the space to the existing
tenant or attract a new tenant to occupy the space. In either case, the Company
likely will incur significant costs in the process, including potentially
substantial tenant improvement expense or lease incentives. In addition, if
market rents have declined since the time the expiring lease was executed, the
terms of any new lease signed likely will not be as favorable to the Company as
the terms of the expiring lease, thereby reducing the rental revenue earned from
that space.

The profitability of the Company's rental operations could be materially
impacted by the financial health of the regional economy generally.

All of the Company's rental properties are located on Long Island in St. James,
New York. The concentration of all the Company's rental properties in one
location exposes it to greater economic risks than if it owned properties in
several geographic regions. The Company is susceptible to the potential for
adverse developments in the Long Island economy (such as business layoffs or
downsizing, industry slowdowns, relocations of businesses, changing
demographics, increased telecommuting, infrastructure quality, New York state
budgetary constraints and priorities, increases in real estate and other taxes,
costs of complying with government regulations or increased regulation and other
factors) and the national and New York regional office space market (such as
oversupply of or reduced demand for office space). The State of New York in
general, and Long Island in particular, is also generally regarded as more
litigious and more highly regulated and taxed than many states, which may reduce
demand for office space in New York. Long Island is also characterized by a
recognized shortage of affordable workforce housing, which could adversely
impact the location decisions of businesses. Any adverse economic or real estate
developments on Long Island, or any decrease in demand for office space
resulting from New York's regulatory environment or business climate, could
adversely impact the Company's financial condition, results of operations, cash
flow, and the per share trading price of its common stock. The Company cannot
assure you of the continued growth of the Long Island economy or the Company's
future growth rate.

The Company is subject to Federal, state and local laws and regulations that
could impact its operations and profitability.

There are a number of government regulations, including zoning, tax and
accessibility laws that apply to the ownership and operation of real estate
properties. Compliance with existing and newly adopted regulations may require
the Company to incur significant costs on its properties. Federal, state and
local laws and regulations relating to the protection of the environment may
require an owner or operator of real property to investigate and clean up
hazardous or toxic substances or petroleum product releases at the property. The
clean up can be costly. The presence of or failure to clean up contamination may
adversely affect the Company's ability to sell or lease a property or to borrow
funds using a property as collateral.

The market for commercial rental space is highly competitive.

An oversupply of space in the Company's geographic market would typically cause
rental rates and occupancies to decline, making it more difficult for the
Company to lease space at attractive rental rates. In order to maintain the
quality of its rental properties and successfully compete against other rental
properties, the Company periodically spends money to maintain, repair and
renovate its rental properties. If the Company's properties are not as
attractive to tenants (in terms of rents, services, condition or location) as
other properties that compete with it, the Company could lose tenants to those
properties or receive lower rental rates.

RISKS ASSOCIATED WITH THE COMPANY'S INVESTMENT IN CALLERY-JUDGE GROVE, L.P.

The Company owns a 10.93% limited partnership interest in Callery-Judge Grove,
L.P., a New York limited partnership (the "Partnership"), which owns a 3,500+
acre citrus grove located in Palm Beach County, Florida. The property is the
subject of a plan for a mixed use of residential, commercial, and industrial
development which is under review by state and local municipal authorities. The
Company faces several risks inherent in ownership of a minority interest in a
limited partnership.


                                       6
<PAGE>

The Company is limited in its ability to transfer its interest in the
Partnership.

Interests in the Partnership are not freely transferable. They can only be
assigned or transferred upon the terms and conditions set forth in the limited
partnership agreement. Those restrictions may at times preclude a transfer of
the Company's interest. The Company may not transfer its interest without prior
written notice to, and receiving consent, in writing and at the sole discretion,
of the Partnership's managing partner. The transferee must also provide the
Partnership's general partner with an opinion of counsel that the transfer will
not violate any securities, tax or other laws or rules and will not affect the
tax status or treatment of the Partnership. No public market for the
Partnership's interests exists or is contemplated in the foreseeable future.

Since limited partners do not participate in management of the Partnership's
business, the Company must rely on the Managing Partner to adequately manage the
Partnership's affairs.

The Company does not participate in the management or control of the Partnership
or the conduct of its business. The Company has only limited voting rights with
respect to the Partnership's affairs. The Company must rely upon the fiduciary
responsibility and judgment of the managing partner of the Partnership to manage
the Partnership's affairs in the best interests of the limited partners.

The Partnership may terminate early, which could disrupt the Company's overall
investment portfolio plan.

Unforeseen circumstances, including withdrawal of the Partnership's general
partner, could cause the Partnership to terminate prior to its stated
termination date of October 14, 2019. Early termination of the Partnership could
disrupt the Company's overall investment portfolio plan.

RISKS ASSOCIATED WITH THE COMPANY'S INVESTMENT IN AGENCY HYBRID MORTGAGE-BACKED
SECURITIES

Changes in interest rates could negatively affect the value of the Company's
mortgage-backed securities, which could result in reduced earnings or losses and
negatively affect the cash available for distribution to the Company's
shareholders under a REIT structure.

The Company invests in agency hybrid mortgage-backed securities and it currently
intends to continue this investment strategy. Under a normal yield curve, an
investment in mortgage-backed securities will decline in value if long-term
interest rates increase. Despite Fannie Mae, Freddie Mac or Ginnie Mae
guarantees of the mortgage-backed securities the Company owns, those guarantees
do not protect the Company from declines in market value caused by changes in
interest rates. Declines in market value may ultimately reduce earnings or
result in losses to the Company, which may negatively affect cash available for
distribution to the shareholders under a REIT structure.

Market values of mortgage-backed securities may decline without any general
increase in interest rates for a number of reasons, such as increases in
defaults, increases in voluntary prepayments and widening of credit spreads.

Increased levels of prepayments from mortgage-backed securities may decrease the
Company's net interest income.

Pools of mortgage loans underlie the mortgage-backed securities that the Company
acquires. The Company generally receives payments from principal payments that
are made on these underlying mortgage loans. When borrowers prepay their
mortgage loans faster than expected, this results in repayments of principal
that are faster than expected on the mortgage-backed securities. Faster than
expected prepayments could harm the Company's profitability. Prepayment rates
generally increase when interest rates fall and decrease when interest rates
rise, but changes in prepayment rates are difficult to predict. Prepayment rates
also may be affected by conditions in the housing and financial markets, general
economic conditions and the relative interest rates on fixed-rate and
adjustable-rate mortgage loans.

While the Company seeks to minimize prepayment risk to the extent practical, in
selecting investments the Company must balance prepayment risk against other
risks and the potential returns of each investment. No strategy can completely
insulate the Company from prepayment risk.

RISKS RELATING TO THE COMPANY'S REAL ESTATE INVESTMENT TRUST (REIT) CONVERSION
STRATEGY

If the Company fails to qualify as a REIT or fails to remain qualified as a
REIT, it will have reduced funds available for distribution to its shareholders
and the Company's income will be subject to taxation at regular corporate rates.


                                       7
<PAGE>

The Company may be unsuccessful in its efforts to qualify as a REIT.

The Company's board of directors has authorized it to take the steps necessary
to elect to be taxed as a REIT. Currently, the Company plans on electing REIT
status on December 31, 2006, effective as of May 1, 2006. There can be no
assurance that the Company will be organized in conformity with the requirements
for qualification as a REIT under the Internal Revenue Code of 1986, as amended,
or the Code, or that the Company's proposed method of operation will enable it
to meet the requirements for qualification and taxation as a REIT. Given the
highly complex nature of the rules governing REITs, the ongoing importance of
factual determinations, and the possibility of future changes in the Company's
circumstances, no assurance can be given that the Company will so qualify for
any particular year. The Company does not intend to request a ruling from the
Internal Revenue Service as to its qualification as a REIT.

Furthermore, the Company's qualification as a REIT will depend on its
satisfaction of certain asset, income, organizational, distribution, shareholder
ownership and other requirements on a continuing basis. The Company's ability to
satisfy the asset tests will depend upon its analysis of the fair market values
of its assets, some of which are not susceptible to a precise determination. The
Company's compliance with the REIT income and quarterly asset requirements also
depends upon its ability to manage successfully the composition of its income
and assets on an ongoing basis.

The Company's management team has never operated a REIT, which may result in
additional administrative costs.

Although the Company's management team has significant experience relating to
the ownership and management of real property, no member of its management team
has prior experience managing or operating a REIT. The federal income tax laws
impose numerous constraints on the operations of REITs. The Company's management
team's lack of experience in managing a portfolio of assets under such
constraints may hinder its ability to manage the Company as a REIT successfully
without the engagement of additional expertise. In addition, maintaining the
REIT qualification will limit the types of investments or business expansions
the Company will be able to make.

Legislative or other actions affecting REITs could have a negative effect on the
Company's business and its stock price.

The rules dealing with federal income taxation are constantly under review by
persons involved in the legislative process and by the IRS and the U.S.
Department of the Treasury. Changes to the tax laws affecting REITs, which may
have retroactive application, could adversely affect the Company's investors or
the Company. The Company cannot predict how changes in the tax laws might affect
its investors or the Company. Accordingly, the Company cannot assure you that
new legislation, Treasury regulations, administrative interpretations or court
decisions will not significantly affect the Company's ability to qualify as a
REIT or the federal income tax consequences of such qualification.

Future acquisitions of properties may fail to perform in accordance with the
Company's expectations and may require development and renovation costs
exceeding its estimates.

On March 27, 2006, the Company received payment from the State of New York in
the amount of $26,315,000, which the Company had previously elected to accept as
an advance payment for property condemned by the State University of New York.
See Note 18 to the consolidated financial statements. The Company plans to
invest these proceeds in securities and other assets, including real estate,
consistent with its objective of qualifying as a REIT under the Internal Revenue
Code of 1986. Changing market conditions may diminish the Company's
opportunities for making attractive investments. Once made, the Company's
investments may fail to perform in accordance with its expectations.

RISKS ASSOCIATED WITH ANTITAKEOVER PROVISIONS

Because provisions contained in New York law, the Company's charter and
shareholder rights plan may have an anti-takeover effect, investors may be
prevented from receiving a "control premium" for their shares.

Provisions contained in the Company's charter and shareholder rights plan as
well as under New York Business Corporation Law may have anti-takeover effects
that delay, defer or prevent a takeover attempt, and thereby prevent
shareholders from receiving a "control premium" for their shares. For example,
these provisions may defer or prevent tender offers for the Company's Common
Stock or purchases of large blocks of its Common Stock, thus limiting the
opportunities for its shareholders to receive a premium for their Common Stock
over then-prevailing market prices. These provisions include the following:

     o    Staggered board. The Company's Board of Directors is divided into
          three classes. As a result, each director generally serves for a
          three-year term. This staggering of the Board may discourage offers
          for the Company or make an acquisition of the Company more difficult,
          even when an acquisition is in the best interest of its shareholders.


                                       8
<PAGE>

     o    New York anti-takeover statute. Under New York's anti-takeover
          statute, any person who acquires 20% or more of the Company's common
          stock is prohibited from engaging in a business combination with the
          Company for five years unless the Board has approved (i) the
          particular business combination or (ii) the stock purchase that put
          the shareholder over the 20% threshold.

     o    Dilutive effect of shareholder rights plan. The Company has in effect
          a shareholder rights plan, which is currently scheduled to expire on
          August 11, 2014, and is designed to deter a hostile takeover by
          increasing the takeover cost. As a result, the plan could discourage
          offers for the Company or make an acquisition of the Company more
          difficult, even when an acquisition is in the best interest of its
          shareholders. The rights plan should not interfere with any merger or
          other business combination the Board of Directors approves since the
          Company may generally terminate the plan at any time at nominal cost.

Item 1B Unresolved Staff Comments

None

Item 2 Properties

The executive office of the Company is located at 1 Flowerfield, Suite 24, St.
James, New York and consists of approximately 3,256 square feet.

The Company owns a 68 acre tract of land located on the north shore of Suffolk
County, Long Island, New York. The Company currently has approximately 127,392
square feet of rental space and has 48 tenants.

The land is carried on the Company's balance sheet at cost in the amount of
$561,483 while the buildings and improvements are carried at a depreciated cost
of $493,498. The Company has a secured revolving line of credit in the amount of
$1,750,000. The outstanding balance was zero as of April 30, 2006 and 2005.
Collateral for the credit line consists of Building #7 and the surrounding 6 1/2
acres.

The average age of all the buildings is approximately 46 years and the
facilities continually undergo maintenance repair cycles for roofs, paved areas,
and building exteriors. The general condition of internal infrastructure, HVAC,
electrical, and plumbing is considered above average for facilities of this age.
The grounds feature extensive landscaping, are neatly groomed and well
maintained.

There are four main buildings with rental unit sizes ranging from 105 to 12,980
square feet. Given the location and size of rental units, the Flowerfield
Industrial Park attracts many smaller companies that are not dependent on
extensive material or product handling.

The Company currently maintains a $100 million dollar liability umbrella policy
and has insured certain buildings and rent receipts predicated on an analysis of
risk, exposure, and loss history. It is Management's opinion that the premises
are adequately insured.

The following table sets forth certain information as of April 30, 2006 for the
total Company property:

<TABLE>
<CAPTION>
                                                        Annual                   Number Of
                                                         Base                   Tenants Who
                   Rentable                Annual        Rent       Number       Occupy 10%
                    Square     Percent      Base      Per Leased      Of         Or More Of
     Property        Feet      Leased       Rent       SQ. FT.     Tenants    Rentable Sq. Ft.
     --------        ----      ------       ----       -------     -------    ----------------
<S>                <C>           <C>     <C>            <C>           <C>            <C>
 St. James, N.Y.   127,392       77%     $1,176,485     $12.07        48             1
</TABLE>

The Company has one tenant with over 10% of the rentable square footage. The
principal nature of this tenants business is providing day care for pre-school
children. The principal provisions of their lease include the rental of 12,980
square feet of space with an annual base rent of $181,720, expiring March 31,
2020.

The following table sets forth the Company's lease expiration table as of April
30, 2006:


                                       9
<PAGE>

                      Number of    Square      Total     % of Gross Annual
                       Leases       Feet       Annual    Rental Represented
   Fiscal Year End    Expiring    Expiring      Rent       By Such Leases
   ---------------    --------    --------      ----       --------------
         2007            43        63,984     $782,842         66.54%
         2008             2         1,150      $14,640          1.24%
         2009             1         1,243      $92,400          7.85%
         2011             1         8,864     $104,883          8.92%
         2020             1        12,980     $181,720         15.45%

The Company's property is primarily zoned for light industrial use and is
located in the hamlet of St. James, New York.

Item 3 Legal Proceedings

On November 2, 2005, the State University of New York at Stony Brook (the
"University") filed an acquisition map with the Suffolk County Clerk's office
and vested title in approximately 245.5 acres of the Company's property known as
Flowerfield (the "Property") pursuant to the New York Eminent Domain Procedure
Law (the "EDPL"). On March 27, 2006, the Company received payment from the State
of New York in the amount of $26,315,000, which the Company had previously
elected under the EDPL to accept as an advance payment for the Property. Under
the EDPL, both the advance payment and any additional award from the Court of
Claims bear interest at the current statutory rate of 9% simple interest from
the date of the taking through the date of payment.

On May 1, 2006, the Company filed a Notice of Claim with the Court of Claims of
the State of New York seeking $158 million in damages from the University
resulting from the condemnation of the Property. While the Company believes that
a credible case for substantial additional compensation can be made, it is
possible that the Company may be awarded a different amount than is being
requested, including no compensation, or an amount that is substantially lower
than the Company's claim for $158 million. It is also possible that the Court of
Claims could ultimately permit the State to recoup part of its advance payment
to the Company.

In addition, 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 the aggregate loss, if any, will
not be material.

Item 4 Submission of Matters to a Vote of Security Holders

       No matters were submitted to a vote of security holders during the
                       fourth quarter of Fiscal Year 2006.

                                     PART II

Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

(a)  Market information

The Company's Common Stock, $1 Par Value (symbol: "GYRO") is traded in the
NASDAQ Small-Cap Market. Since June 10, 1948, the NASDAQ Small-Cap Market has
been the principal market in which the Company's stock is publicly traded. Set
forth below are the high and low bid quotations for the Company's stock for each
full quarter within the two most recent fiscal years:

          --------------------------------------------------------
                  Quarter Ended              Low            High
          --------------------------------------------------------
                   Fiscal 2005
          --------------------------------------------------------
          July 31, 2004                     $27.00         $35.15
          --------------------------------------------------------
          October 31, 2004                  $30.00         $36.90
          --------------------------------------------------------
          January 31, 2005                  $34.00         $39.75
          --------------------------------------------------------
          April 30, 2005                    $34.00         $44.00
          --------------------------------------------------------
                   Fiscal 2006
          --------------------------------------------------------
          July 31, 2005                     $38.80         $45.00
          --------------------------------------------------------
          October 31, 2005                  $43.01         $47.95
          --------------------------------------------------------
          January 31, 2006                  $41.75         $45.52
          --------------------------------------------------------
          April 30, 2006                    $42.00         $50.00
          --------------------------------------------------------


                                       10
<PAGE>

(b)  Approximate number of equity security holders, including shares held in
     street name by brokers.

                                               Number of Holders of Record
          Title of Class                           as of July 15, 2006
          ----------------------------------------------------------------
          Common Stock, $1.00 Par Value                   833

(c)  There were no cash dividends declared on the Company's Common Stock in the
     fiscal years ended April 30, 2006 and April 30, 2005. On December 9, 2005,
     the Board of Directors of the Company announced a plan to convert the
     Company to a real estate investment trust or REIT. The advantage of
     operating as a REIT is that REITs generally will not be subject to New York
     State and U.S. federal corporate income taxes on income and gain from
     investments in real estate that it distributes to its shareholders, thereby
     reducing its corporate-level taxes and substantially eliminating the double
     taxation on income and gain that usually results in the case of a
     distribution by a C corporation. If the Company successfully converts to a
     REIT, it expects to pay dividends on most of its net income and gain from
     investments in real estate.

(d)  Equity Compensation Plan Information.

     The following table gives information about the Company's shares of Common
Stock that may be issued under its equity compensation plans.

<TABLE>
<CAPTION>
                                                  (a)                      (b)                     (c)
                                                                                          Number of securities
                                                                                         remaining available for
                                                                                          future issuance under
                                                                                           equity compensation
                                        Number of securities to     Weighted-average        plans (excluding
                                        be issued upon exercise     exercise price of    securities reflected in
                                         of outstanding options    outstanding options         column (a))
<S>                                              <C>                     <C>                        <C>
Equity compensation plans approved
    by security holders                          67,105                  $16.42                     0
Equity compensation plans not
    approved by security holders                      0                       0                     0
----------------------------------------------------------------------------------------------------------------
    Total                                        67,105                  $16.42                     0
</TABLE>

There were no options granted in fiscal year ending April 30, 2006.


                                       11
<PAGE>

Item 6 Selected Financial Data

The following selected consolidated financial data should be read in conjunction
with the Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operation"
appearing elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                              For Fiscal Years Ended
                                                    ----------------------------------------------------------------------------
                                                        2006            2005            2004            2003            2002
                                                    ------------    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Statement of Operations Data:
Revenue from Rental Property                        $  1,626,651    $  2,039,170    $  2,086,687    $  2,344,396    $  2,608,005
                                                    ------------    ------------    ------------    ------------    ------------

Rental Property Expense:
   Real estate taxes                                     208,104         155,196         143,333         295,198         428,031
   Operating and Maintenance                             447,057         793,200         567,401         519,173         642,758
   Interest expense                                            -          35,217          38,850          56,611          61,520
   Depreciation                                           62,196          72,835          78,176          85,509         107,394
                                                    ------------    ------------    ------------    ------------    ------------
Total Rental Property Expense                            717,357       1,056,448         827,760         956,491       1,239,703
                                                    ------------    ------------    ------------    ------------    ------------

Income from Rental Property                              909,294         982,722       1,258,927       1,387,905       1,368,302

General and Administrative (Expenses) and
Other Income (Expense):
   General and Administrative (expenses)              (2,373,223)     (1,764,183)     (1,574,353)     (1,426,521)     (1,375,774)
   Gain on condemnation of property                   20,710,339               -               -               -               -
   Gain on sale of real estate                         1,136,705         437,195               -       3,124,307               -
   Gain on sale of equipment                                   -          12,000               -               -           7,124
   Lease termination (expense), net                            -               -               -               -         (28,443)
   Interest income                                     1,084,106         102,852         111,721          87,121          48,971
                                                    ------------    ------------    ------------    ------------    ------------
Total General and Administrative (Expenses) and
Other Income (Expense)                                20,557,927      (1,212,136)     (1,462,632)      1,784,907      (1,348,122)
                                                    ------------    ------------    ------------    ------------    ------------

Income (Loss) Before Income Taxes                     21,467,221        (229,414)       (203,705)      3,172,812          20,180
Provision (Benefit) for Income Taxes                   8,351,904         (91,766)        (90,239)      1,403,144          (1,465)
                                                    ------------    ------------    ------------    ------------    ------------
Net Income (Loss)                                   $ 13,115,317    $   (137,648)   $   (113,466)   $  1,769,668    $     21,645
                                                    ============    ============    ============    ============    ============

Net Income (Loss) Per Common Share:
   Basic                                            $      10.67    $      (0.12)   $      (0.10)   $       1.59    $       0.02
                                                    ============    ============    ============    ============    ============
   Diluted                                          $      10.29    $      (0.12)   $      (0.10)   $       1.58    $       0.02
                                                    ============    ============    ============    ============    ============

Weighted Average Shares Outstanding:
   Basic                                               1,229,582       1,180,469       1,133,896       1,114,422       1,218,076
                                                    ============    ============    ============    ============    ============
   Diluted                                             1,274,034       1,180,469       1,133,896       1,121,465       1,225,452
                                                    ============    ============    ============    ============    ============

Balance Sheet Data:
Total assets                                        $ 30,580,359    $  9,523,349    $ 10,271,370    $ 10,053,468    $  6,623,291
Long-term liabilities                               $  9,358,000    $  2,753,439    $  4,008,332    $  4,086,722    $  1,832,364
Cash dividends declared                             $          0    $          0    $          0    $          0    $          0
</TABLE>

Certain reclassifications have been made to the consolidated financial
statements for fiscal years April 30, 2005, 2004, 2003, and 2002 to conform to
the classification used in the current fiscal year.


                                       12
<PAGE>

Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operation

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATION

The statements made in this Form 10-K that are not historical facts contain
"forward-looking information" within the meaning of the Private Securities
Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, both as amended, which can
be identified by the use of forward-looking terminology such as "may," "will,"
"anticipates," "expects," "projects," "estimates," "believes," "seeks," "could,"
"should," or "continue," the negative thereof, other variations or comparable
terminology. Important factors, including certain risks and uncertainties, with
respect to such forward-looking statements that could cause actual results to
differ materially from those reflected in such forward-looking statements
include, but are not limited to, the effect of economic and business conditions,
including risks inherent in the Long Island, New York and Palm Beach County,
Florida real estate markets, the ability to obtain additional capital in order
to develop the existing real estate and other risks detailed from time to time
in the Company's SEC reports. The Company assumes no obligation to update the
information in this Form 10-K.

Critical Accounting Policies
----------------------------

The consolidated financial statements of the Company include accounts of the
Company and all majority-owned and controlled subsidiaries. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States ("GAAP") requires management to make estimates and
assumptions in certain circumstances that affect amounts reported in the
Company's consolidated financial statements and related notes. In preparing
these financial statements, management has utilized information available
including its past history, industry standards and the current economic
environment, among other factors, in forming its estimates and judgments of
certain amounts included in the consolidated financial statements, giving due
consideration to materiality. It is possible that the ultimate outcome as
anticipated by management in formulating its estimates inherent in these
financial statements might not materialize. However, application of the critical
accounting policies below involves the exercise of judgment and use of
assumptions as to future uncertainties and, as a result, actual results could
differ from these estimates. In addition, other companies may utilize different
estimates, which may impact comparability of the Company's results of operations
to those of companies in similar businesses.

Revenue Recognition
-------------------

Minimum revenues from rental property are recognized on a straight-line basis
over the terms of the related leases. The excess of rents recognized over
amounts contractually due, if any, are included in deferred rents receivable on
the Company's balance sheets. Certain leases also provide for tenant
reimbursements of common area maintenance and other operating expenses and real
estate taxes. Ancillary and other property related income is recognized in the
period earned.

Real Estate
-----------

Rental real estate assets, including land, buildings and improvements,
furniture, fixtures and equipment, are recorded at cost and reported net of
accumulated depreciation and amortization. Tenant improvements, which are
included in buildings and improvements, are also stated at cost. Expenditures
for ordinary maintenance and repairs are expensed to operations as they are
incurred. Renovations and/or replacements, which improve or extend the life of
the asset are capitalized and depreciated over their estimated useful lives.

Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to thirty years for buildings and improvements and three to
twenty years for machinery and equipment.

The Company is required to make subjective assessments as to the useful lives of
its properties for purposes of determining the amount of depreciation to reflect
on an annual basis with respect to those properties. These assessments have a
direct impact on the Company's net income. Should the Company lengthen the
expected useful life of a particular asset, it would be depreciated over more
years, and result in less depreciation expense and higher annual net income.

Real estate held for development is stated at the lower of cost or net
realizable value.

Net realizable value represents estimates, based on management's present plans
and intentions, of sale price less development and disposition cost, assuming
that disposition occurs in the normal course of business.


                                       13
<PAGE>

Long Lived Assets
-----------------

On a periodic basis, management assesses whether there are any indicators that
the value of the real estate properties may be impaired. A property's value is
impaired only if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. Such cash flows consider factors
such as expected future operating income, trends and prospects, as well as the
effects of demand, competition and other factors. To the extent impairment
occurs, the loss will be measured as the excess of the carrying amount of the
property over the fair value of the property.

The Company is required to make subjective assessments as to whether there are
impairments in the value of its real estate properties and other investments.
These assessments have a direct impact on the Company's net income, since an
impairment charge results in an immediate negative adjustment to net income. In
determining impairment, if any, the Company applies Financial Accounting
Standards Board ("FASB") Statement No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets."

Stock-Based Compensation
------------------------

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, to account for stock-based employee
compensation plans and reports pro forma disclosures in its Form 10-K filings by
estimating the fair value of options issued and the related expense in
accordance with SFAS No. 123. Under this method, compensation cost is recognized
for awards of shares of common stock or stock options to directors, officers and
employees of the Company only if the quoted market price of the stock at the
grant date (or other measurement date, if later) is greater than the amount the
grantee must pay to acquire the stock.

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123(R), "Accounting for Stock-Based Compensation" ("SFAS No. 123(R)"). SFAS
No. 123(R) establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services. This statement
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. SFAS No. 123(R) requires
that the fair value of such equity instruments be recognized as an expense in
the historical financial statements as services are performed. Prior to SFAS No.
123(R), only certain pro forma disclosures of fair value were required. The
provisions of this statement are effective for the first annual reporting period
that begins after June 15, 2005. On March 29, 2005, the SEC issued Staff
Accounting Bulletin No. 107 ("SAB No. 107"), which provides the Staff's views
regarding interactions between SFAS No. 123R and certain SEC rules and
regulations and provides interpretations of the valuation of share-based
payments for public companies. If the Company had included the cost of employee
stock option compensation in its financial statements it would not have had a
material effect on our net income for the years ended April 30, 2006 and 2005.
There would have been a material effect on our net income for the year ended
April 30, 2004. See Note 1 to the consolidated financial statements.

             RESULTS OF OPERATIONS FOR THE YEAR ENDED APRIL 30, 2006
                  AS COMPARED TO THE YEAR ENDED APRIL 30, 2005

The Company is reporting net income of $13,115,317 for the year ended April 30,
2006 compared to a net loss of $137,648 for the prior year. Diluted per share
earnings amounted to $10.29 for the current year and a per share loss of $0.12
for fiscal 2005.

The results for 2006 include two nonrecurring events which served to bolster the
Company's earnings. The recognition of the deferred gain resulting from receipt
of a final payment on a $1.8 million mortgage which was due and payable in
August 2005 and held in connection with the 2002 sale of certain land and
buildings on the Flowerfield property. The second event impacting this year's
result was the condemnation of 245.5 acres at Flowerfield by the State
University of New York at Stony Brook. This taking of our property, which was
executed under the authority of New York's Eminent Domain Procedural Law
("EDPL"), occurred in November 2005 and resulted in a payment of $26,315,000
received by the Company in March 2006, which the Company had elected to treat as
an Advance Payment for the property under the EDPL. A gain of $20,710,339 was
recognized as a result of the receipt of the Advance Payment. More detailed
disclosure is included further on in this report.

Revenue from rental property declined significantly, amounting to $1,626,651 for
2006. This represents a decrease of $412,519 from the prior year when revenues
amounted to $2,039,170. The major contributing factor to this loss of revenue
was the aforementioned condemnation which included one of the larger buildings
at Flowerfield, occupied by two major tenants. The total impact of the eminent
domain taking resulted in a decrease of $291,088 in rental income and accounts
for 71% of the decline. The balance of the decline in rental revenues, $121,431,
is the net result of a number of terminated leases and new tenancies at
Flowerfield. The largest termination accounted for $93,347 of the variance.


                                       14
<PAGE>

Rental property expenses reflect a decrease of $339,091 for the year, amounting
to $717,357 compared to $1,056,448 for the prior year. While this reduction in
expenses helped in offsetting a major portion of the lost revenue stream,
several of the contributing factors are non-recurring in nature. Salaries and
benefits decreased by $105,965 as a result of our continuing efforts to shrink
staffing levels. However, $26,830 of the decrease is attributable to a severance
payment during the prior year and will not be replicated going forward. Fees for
outside services relating to storm drain improvements amounted to $57,719 during
the prior year and property and casualty insurance premiums were reduced by
$38,381; we do not anticipate similar reductions for the coming year. Property
and casualty insurance reimbursements of $61,338, which pertained to a prior
period, were received from tenants pursuant to lease terms during this fiscal
year. In addition to these non-recurring items, maintenance and repair expenses
declined by $28,409, plant security services decreased by $33,820, and
reflecting a milder winter climate, fuel oil expenses decreased by $21,517.
Interest expense was also reduced by $35,217 as a direct result of the total pay
down of borrowings on the Company's revolving credit line. Additionally,
reflecting the fact that certain buildings and improvements were part of the
condemnation, depreciation expense decreased by $10,639. The only significant
increase in expenses also resulted from the condemnation. As a result of our
having filed development plans for Flowerfield in 2002, real estate taxes on the
undeveloped acreage were capitalized. That accounting treatment is no longer
applicable and the taxes on the balance of Gyrodyne's undeveloped property, from
the date of the condemnation forward, increased over the prior year by $52,908.
Rental property expenses as a percentage of revenues amounted to 44% and 52% for
2006 and 2005, respectively, and we anticipate this ratio will approximate 51%
for 2007.

As a result, income from rental property amounted to $909,294, representing a
$73,428 or 7.5% decline from the prior year result which totaled $982,722.

General and administrative expenses increased during the current reporting
period, amounting to $2,373,223. This represents an increase of $609,040 or 35%
over the 2005 total of $1,764,183. Specifically, expenses associated with the
condemnation accounted for $235,108, legal and consulting fees increased by
$228,351, and costs attributable to developing the Company's strategic plan
totaled $150,242. Contributing factors to the increase in legal and consulting
fees included $82,864 in costs associated with the Company's decision to pursue
conversion to a Real Estate Investment Trust (REIT), $34,305 in fees to our
investment bankers, $64,987 in legal research on behalf of Board committees,
$35,268 in costs associated with the remaining Flowerfield acreage, and $14,198
in connection with the Company's limited partnership investment in the
Callery-Judge Grove. In addition, salaries and benefits increased by $48,169 and
Directors fees, which reflect both an expanded number of Board members and an
increase in the frequency of meetings, increased by $32,412. The Company also
experienced an increase in insurance premiums of $34,840. Bad debt and pension
expense decreased by $33,000 and $110,080, respectively.

OTHER INCOME

As previously mentioned, the Company received the balance due on a $1.8 million
mortgage and recognized a gain amounting to $1,136,705 during the current
reporting period. Also, the Company received during Fiscal Year 2006 proceeds
from the condemnation of Flowerfield acreage totaling $26,315,000, which the
Company elected to treat as an advance payment pursuant to the EDPL (the Company
has filed a Notice of Claim seeking additional compensation in the New York
State Court of Claims).

In conjunction with that payment, interest at the current statutory rate of 9%,
which totals $921,385, has been accrued as of April 30, 2006. Thus far, the
Company has received $589,008 of the total accrual without explanation from the
State of New York as to why the full amount was not processed. The receivable
was subsequently reduced to $332,377. The Company's attorneys are in active
discussion with the attorney general's office to rectify this difference. An
additional $111,877 of interest was earned through April 30, 2006 from the
investment of the advance payment proceeds. Based on the carrying value and
accumulated capitalized expenses relating to the subject property, the Company
is reporting a gain of $20,710,339 from the condemnation. Other interest income
amounts to $50,844 and $102,852 for fiscal 2006 and 2005, respectively. As a
result, interest income totaled $1,084,106 in 2006 compared to $102,852 during
the prior year.

             RESULTS OF OPERATIONS FOR THE YEAR ENDED APRIL 30, 2005
                  AS COMPARED TO THE YEAR ENDED APRIL 30, 2004

The Company reported a net loss of $137,648 for the year ended April 30, 2005
compared to a net loss of $113,466 for the prior year. Diluted per share losses
amounted to ($0.12) and ($ 0.10) for fiscal 2005 and 2004, respectively.

Revenue from rental property amounted to $2,039,170, a 2% decline of $47,517 to
the $2,086,687 posted during the prior year. Both periods were impacted by
renegotiated terms with two major tenants. Those adjustments, which reduced the
2005 results by $125,684, were partially mitigated by new tenant leases and
annual incremental adjustments totaling $78,167. Rental property expenses
increased by $228,688 or 28%, amounting to $1,056,448 in fiscal 2005. The prior
year expenses amounted to $827,760. Of that total increase, $225,799 is
attributable to operating and maintenance costs. Salaries and benefits,
including nonrecurring expenses of $26,830 associated with an early retirement


                                       15
<PAGE>

package, increased by $52,037. Real estate taxes and the cost of fuel oil
increased by $11,863 and $22,910, respectively. In addition, the Company
experienced a $93,030 increase in property and casualty insurance premiums and a
$59,585 expense associated with remedial treatment of our septic and storm
drainage systems. A number of other operating expenses, including utilities,
building, grounds, and equipment maintenance, reflected decreases totaling
$11,567; the largest contributing factor was a decrease in utility expense of
$7,628 for the year.

As a result, income from rental property amounted to $982,722, representing a
$276,205 or 22% decline when compared to the prior year total of $1,258,927.
Based on the fact that some of the contributing factors to the decline this year
were nonrecurring in nature, we anticipate that income from our rental property
operation will be restored to the fiscal 2004 levels.

General and administrative expenses reflect an increase of 12% for the current
reporting period, amounting to $1,764,183 compared to $1,574,353 for the prior
year; an increase of $189,830. Corporate governance expenses, which totaled
$330,374 for the year, increased by $208,833 for the reporting period. A major
portion of this increase is attributable to the establishment of a Shareholders
Rights Plan which accounted for $130,345. Other issues relating to shareholder
filings and SEC requirements for publicly traded companies accounted for $34,666
and $43,822 of the increase, respectively. Other increases included Directors
fees and bad debt expense which increased by $9,794 and $9,000, respectively.
Finally, as activities surrounding the Company's investment in the Florida grove
property increased, so too did our need to incur additional travel expense and
make regular visits to the area. In an effort to keep abreast of developments in
the industry, management also attended several corporate governance and real
estate related seminars. The cost of all of these activities accounted for
$21,927 of the increased expenses. Offsetting some of the increase in general
and administrative expenses was an overall decrease in salaries and benefits and
costs associated with the Company's pension plan. Salaries and benefits
decreased by $46,620, reflecting the fact that there was no stock option expense
in the current period; in fiscal 2004, that expense amounted to $76,606. The
Company's pension expense, which amounted to $226,109 in fiscal 2005, decreased
by $10,761 when compared to the prior year. We anticipate that the cost
associated with the plan will be reduced by an additional $100,000 for the
fiscal 2006 period.

Other income increased by $440,326, amounting to $552,047 and $111,721 for
fiscal 2005 and 2004, respectively. The major contributing factor to this
increase was the recognition of principal prepayments to a $1.8 million mortgage
held by the Company which amounted to $437,194. The balance of the mortgage,
$1.3 million as of April 30, 2005, matures in August 2005.

As a result of the foregoing, the Company experienced a loss before taxes of
$229,414 for the period ending April 30, 2005, compared to a loss of $203,705
for the prior year.

                         LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $24,032,174 in fiscal 2006. This
activity during the current fiscal year was primarily related to the receipt of
condemnation proceeds of $25,718,925, net of proceeds from the condemnation of
the rental property of $596,075. Net cash used in operating activities was
$1,130,127 and $1,067,419 in fiscal 2005 and 2004, respectively. The principal
use of cash in both periods was funds used in connection with planning and
pre-construction costs associated with land development plans for the
residential golf course community. The Company also incurred costs included in
the capitalized land development costs pertaining to legal, and communication
costs to shareholders and the community regarding the potential condemnation of
the Company's property by the University.

Net cash provided by (used in) investing activities was $1,817,091, $449,042 and
($29,754) in fiscal 2006, 2005 and 2004, respectively. The cash provided by
investing activities in fiscal 2006 consisted of the receipt of $1,300,000 on
the Company's mortgage receivable as well as proceeds from the condemnation of
rental property of $596,075. Fiscal 2005 was primarily related to the receipt of
the aforementioned mortgage receivable in the amount of $500,000 as well as
proceeds from the sale of heavy equipment for $12,000. The use of cash in all
three periods was for capital expenditures.

Net cash provided by (used in) financing activities was $319,018, ($37,153) and
$428,499 in fiscal 2006, 2005 and 2004, respectively. The net cash provided
during the three year period was primarily the result of proceeds from the
exercise of stock options. The fiscal 2004 period results also reflect the
refinancing of mortgage debt on the Flowerfield property. The net cash (used in)
all three periods were a result of the Company's repayment of loans payable. The
Company has a $1,750,000 revolving credit line with a bank, bearing interest at
a rate of prime plus one percent which was 8.75% at April 30, 2006. The unused
portion of the credit line, which is the total line of $1,750,000, enhances the
Company's financial position and liquidity and is available, if needed, to fund
any unforeseen expenses.

As of April 30, 2006, the Company had cash and cash equivalents of $27,012,688
and anticipates having the capacity to fund normal operating and administrative
expenses and its regular debt service requirements. Working capital, which is
the total of current assets less current liabilities as shown in the


                                       16
<PAGE>

accompanying chart, amounted to $27,219,392 at April 30, 2006. Net prepaid
expenses and other assets shown in the accompanying chart does not include
$31,035 and $76,657 of furniture and fixtures and loan origination fees for the
twelve months ended April 30, 2006 and 2005, respectively.

The following table presents the Company's working capital for the fiscal years
2006 and 2005:

                                                          April 30,
                                                 ---------------------------
                                                     2006           2005
                                                 ------------   ------------

Current assets:
   Cash and cash equivalents                      $27,012,688       $844,405
   Rent receivable, net                                93,173         62,309
   Interest receivable                                921,385              0
   Mortgage receivable                                      0      1,300,000
   Net prepaid expenses and other assets              277,326        106,464
                                                 ------------   ------------
     Total current assets                          28,304,572      2,313,178
                                                 ------------   ------------

Current liabilities:
   Accounts payable and accrued expenses              921,294        204,782
   Tenant security deposits payable                   163,886        229,284
   Current portion of loans payable                         0          7,411
                                                 ------------   ------------
     Total current liabilities                      1,085,180        441,477
                                                 ------------   ------------

Working capital                                   $27,219,392     $1,871,701
                                                 ============   ============

During fiscal 2004, the Company restructured an outstanding mortgage loan on the
Flowerfield property. That loan was satisfied and incorporated into a newly
established revolving credit line in the amount of $1,750,000 at prime plus one
percent. At April 30, 2006 and 2005, the Company had no outstanding indebtedness
against this credit facility. Additionally, the Company held a $1.8 million
purchase money mortgage loan in connection with the sale of certain buildings
and 12 acres during fiscal 2003. The mortgage loan accrued interest at a rate of
5% and was fully paid with interest in August, 2005.

The following table presents the Company's expected cash requirements for
contractual obligations outstanding as of April 30, 2006:

<TABLE>
<CAPTION>
                                                     Payments Due By Period

Contractual Obligation                        Less than 1      1-3          3-5        More than
                                     Total        Year        Years        Years        5 Years
<S>                                 <C>          <C>            <C>          <C>          <C>
Consulting Agreement                $100,000     $100,000            -            -            -
Accrued Expense                       11,734       $7,411       $4,323            -            -
                                  ----------   ----------   ----------   ----------   ----------
Total Contractual Obligations       $111,734     $107,411       $4,323            -            -
                                  ==========   ==========   ==========   ==========   ==========
</TABLE>

LIMITED PARTNERSHIP INVESTMENT

The Company has a limited partnership investment in the Callery-Judge Grove
located in Palm Beach County, Florida. The investment represents a 10.93%
limited partnership interest in a limited partnership that owns a 3,500+ acre
citrus grove. The property is the subject of a plan for a mixed use of
residential, commercial, and industrial development which is under review by the
local municipal and state authorities. The Company is accounting for the
investment under the equity method. As of April 30, 2006, the carrying value of
the Company's investment was $0. Based upon the most recent independent third
party appraisal, which was conducted by Pinel Appraisal Services, Inc. in June
2005, the Company's investment, strictly on a pro-rata basis, has a current
estimated fair value of approximately $18.0 million without adjustment for
minority interest and lack of marketability discount. In the latter part of
2003, the Scripps Research Institute headquartered in La Jolla, California,
announced that it would be developing a major east coast center on property
located in the general vicinity of the Callery-Judge Grove. Although the Company
believes, based on press reports, that this announcement has been the catalyst
behind the


                                       17
<PAGE>

sale of thousands of acres of land to national developers in the general
vicinity of the Grove, it has no current forecast of the likelihood of, or the
timing required to achieve approvals for, the development of the Grove.

DEVELOPMENT OF FLOWERFIELD PROPERTY

The Company is a party to two contractual agreements dated April 9, 2002 with
Landmark National ("Landmark") pursuant to which Landmark was to design and
develop an 18 hole championship golf course community with 336 home sites on the
Company's Flowerfield property located in Stony Brook / Saint James, New York, a
substantial portion of which has since been condemned by the State University of
New York (the "University"). Those contractual agreements were exhibited in the
Company's April 30, 2002 10-KSB filing. The golf course agreement calls for
monthly payments of $5,000 with a maximum total of $150,000. As of April 30,
2005, the Company had paid this obligation in full. Additionally, there is a
one-time fee of $100,000 for a grading report on the course layout, which was
completed and paid during fiscal 2003. The residential land planning and design
contract includes monthly payments of $10,000 with a maximum payment totaling
$300,000. As of April 30, 2005, the Company had also paid this obligation in
full. Landmark is also entitled to a construction management fee of 4.5% of
construction costs. Inasmuch as the condemnation has negated the pursuit of a
golf course community development, this management fee will not be payable. The
balance of Landmark's compensation was an incentive fee of 10% of pre-tax net
income from the residential golf course development. Additionally, in a separate
agreement for the future, Landmark is under contract to manage the completed
golf and clubhouse facilities under a long-term management agreement. The annual
fee for such service is $100,000 commencing upon completion of the golf and
clubhouse facilities. The residential land planning and design contract also
provides for a termination fee amounting to $500,000, which is more clearly
defined in Note 12 to the consolidated financial statements. The Company has
accrued a $500,000 termination fee pursuant to the contract. Following the
University's condemnation of the Flowerfield property, the Company was advised
by Landmark that it believes it is entitled to 10% of all condemnation proceeds
pursuant to the 10% incentive fee provision referred to above. The Company does
not believe that the condemnation triggers the incentive fee and believes that
Landmark's position is based upon an erroneous interpretation of the incentive
fee provision.

                         OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.

Item 7A Quantitative and Qualitative Disclosures about Market Risk

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and cash equivalents and longer-term
investments. The Company places its temporary cash investments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure in any one financial institution. At times the Company maintains bank
account balances, which exceed FDIC limits. 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 exists
at April 30, 2006, 2005 and 2004. As of April 30, 2006, the Company's
investments in U.S. Government securities were considered cash equivalents
because of the short term nature of the maturities. Subsequent to the close of
fiscal 2006, the Company invested approximately $22,000,000 in securitized U.S.
Government Agencies with an effective duration of between two and three years.
The potential risks associated with this type of investment are more fully
discussed in Item 1A.

Item 8 Financial Statements and Supplementary Data

See Consolidated Financial Statements and accompanying Notes to Consolidated
Financial Statements commencing on the Contents page followed by Page F-1.

Consolidated Financial Statements include:
     (1)  Report of Independent Registered Public Accounting Firm
     (2)  Consolidated Balance Sheets as of April 30, 2006 and April 30, 2005
     (3)  Consolidated Statements of Operations for the years ended April 30,
          2006, April 30, 2005 and April 30, 2004
     (4)  Consolidated Statement of Stockholders' Equity for the years ended
          April 30, 2006, April 30, 2005 and April 30, 2004
     (5)  Consolidated Statements of Cash Flows for the years ended April 30,
          2006, April 30, 2005 and April 30, 2004
     (6)  Notes to Consolidated Financial Statements
     (7)  Schedules
              Schedule II - Valuation and Qualifying Accounts


                                       18
<PAGE>

              All other information required by the following schedules has
              been included in the consolidated financial statements, is not
              applicable, or not required:
              Schedule I, III, IV, V, VI, VII, VIII, IX, X, XI, XII and XIII.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

None

Item 9A Controls and Procedures

The Company's management, including the Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the design and operation
of the Company's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
report. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer has concluded that the disclosure controls and
procedures as of April 30, 2006 are effective to ensure that information
required to be disclosed in the reports the Company files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and that such information is
accumulated and communicated to the Company's management, including the Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding disclosure.

There have been no significant changes in the Company's internal control over
financial reporting identified in connection with the evaluation that occurred
during the Company's last fiscal quarter that have materially affected, or that
are reasonably likely to materially affect, the Company's internal controls over
financial reporting.

Item 9B Other Information

     None.

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                                    PART III

Item 10 Directors and Executive Officers of the Registrant

(a)  The following table lists the names, ages and positions of all executive
     officers and directors and all persons nominated or chosen to become such.
     Each director has been elected to the term indicated. Directors whose term
     of office ends in 2006 shall serve until the next Annual Meeting of
     Stockholders or until their successors are elected and qualified.

<TABLE>
<CAPTION>
                 Name & Principal Occupation or Employment                       Age      First Became a   Current Board
                                                                                             Director       Term Expires
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>          <C>              <C>
Stephen V. Maroney                                                                64           1996             2007
President, CEO, CFO, Treasurer, and Director of the Company

Peter Pitsiokos                                                                   47           ---
COO, Secretary and Chief Compliance Officer of the Company

Frank D'Alessandro                                                                60           ---
Controller of the Company

Paul L. Lamb                                                                      60           1997             2006
Partner of Lamb & Barnosky, LLP
Chairman of the Board of Directors of the Company

Robert H. Beyer                                                                   73           1977             2008
Consultant
Director of the Company
</TABLE>


                                       19
<PAGE>

<TABLE>
<S>                                                                               <C>          <C>              <C>
Philip F. Palmedo                                                                 72           1996             2007
Chairman of International Resources Group
Director of the Company

Elliot H. Levine                                                                  53           2004             2008
CPA and Senior Member of Levine & Seltzer, LLP
Director of the Company

Richard B. Smith                                                                  51           2002             2006
Vice President, Commercial Banking Division, First National Bank of L. I.
Director of the Company

Ronald J. Macklin                                                                 44           2003             2007
Assistant General Counsel for KeySpan Corporate Services
Director of the Company
</TABLE>

(b)  Business Experience

Stephen V. Maroney, age 64, was initially engaged by the Company as an outside
consultant in June 1996 and elected to the Board of Directors in July of that
same year. Mr. Maroney is the former President of Extebank, a Long Island based
commercial bank with a presence in Nassau and Suffolk Counties and New York
City. Prior to that appointment, he served as Extebank's Chief Financial
Officer. Mr. Maroney was appointed to the position of President, CEO and
Treasurer by the Gyrodyne Board of Directors on March 14, 1999. His career on
Long Island spans a period of over 40 years and includes involvement in numerous
civic, charitable and professional organizations.

Peter Pitsiokos, age 47, joined the Company in July 1992 as its Assistant
Secretary and General Counsel and has been the Company's Chief Operating Officer
and Chief Compliance Officer since 2004. He has also been Secretary of the
Company for over five years. Mr. Pitsiokos was formerly the Executive Assistant
District Attorney in Suffolk County, New York. He also served as the Assistant
Director of Economic Development and the Director of Water Resources in the Town
of Brookhaven. He holds a Law degree from Villanova University and a BA degree
from the State University of New York at Stony Brook.

Frank D'Alessandro, age 60, joined the Company in March 1997 as its Controller.
Prior to joining the Company, he was Controller of Cornucopia Pet Foods Inc., a
distributor of all natural pet foods. Previous to that he spent many years in
various financial positions. Mr. D'Alessandro holds an MBA degree in Finance as
well as a BBA in Accounting, both from Hofstra University.

Paul L. Lamb, age 60, has been a Director since 1997 and became Chairman of the
Board on March 14, 1999. He is a founding partner in the law firm of Lamb &
Barnosky, LLP; a past President of the Suffolk County Bar Association; and a
Dean of the Suffolk Academy of Law. He holds a B.A. from Tulane University, a
J.D. from the University of Kentucky and an LL.M. from the University of London,
England.

Robert Beyer, age 73, has been a Director of the company since November 1977. He
is also a Director of the Company's subsidiaries. He retired from the United
States Naval Reserve in 1993 with the rank of Captain. He retired from his
position as Senior Inertial Systems Engineer with the Naval Air Systems Command
in 1998. He has an electrical engineering degree from New York University and a
graduate degree in International Business from Sophia University in Tokyo,
Japan. Mr. Beyer was employed by Gyrodyne from 1962-1973. He was stationed in
Japan as a Technical Representative for the Company's remotely piloted
helicopters from 1963 to 1970.

Philip F. Palmedo, age 72, was appointed to the Board of Directors in July 1996.
Mr. Palmedo is Chairman of International Resources Group and former President of
the Long Island Research Institute. He has shepherded numerous fledgling
businesses into the financial and technological markets completing several
financing and joint venture technology agreements. He has M.S. and Ph.D. degrees
from M.I.T.


                                       20
<PAGE>

Elliot H. Levine, age 53, was appointed to the Board of Directors in October
2004. Mr. Levine is a founding member of the accounting firm Levine & Seltzer,
LLP Certified Public Accountants, a graduate (1975) of Queens College, City
University of New York. He became a member of the American Institute of
Certified Public Accountants in February, 1978. Mr. Levine's work experience
includes five years at Arthur Young, ten and a half years as partner and
director of taxes of Leslie Sufrin & Co. P.C., a one year tenure as senior tax
manager at Margolin, Winer & Evans CPAs and 12 years as senior member of Levine
& Seltzer.

Richard B. Smith, age 51, was appointed to the Board of Directors in November
2002. Mr. Smith is currently a Vice President in the Commercial Banking Division
of the First National Bank of Long Island. He previously served as Senior Vice
President for Private Banking at Suffolk County National Bank until February,
2005. Previously, he worked for 10 years at Key Bank (Dime Savings Bank) and for
3 years at L.I. Trust/Apple Bank. He received an MBA in Finance from SUNY Albany
in 1983. Mr. Smith serves as the Mayor of the Incorporated Village of
Nissequogue and as a Trustee of the Smithtown Historical Society and also serves
as a Trustee for St. Catherine's Medical Center in Smithtown, NY.

Ronald J. Macklin, age 44, was appointed to the Board of Directors in June 2003.
Mr. Macklin currently serves as Assistant General Counsel for KeySpan Corporate
Services where he has held various positions within the Office of General
Counsel from 1991 to present. Previously, he was associated with the law firms
of Roseman & Colin and Cullen & Dykman. He received a B.A. degree from Stony
Brook University and his Juris Doctorate from Union University's Albany Law
School.

(c)  Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires that the Company directors, executive
officers, and any person holding more than ten percent ("10% Holder") of
Gyrodyne Common Stock, $1.00 par value per share, file with the SEC reports of
ownership changes, and that such individuals furnish the Company with copies of
the reports.

Based solely on the Company's review of copies of Forms 3 and 4 and amendments
thereto received by it during fiscal 2006 and Forms 5 and amendments thereto
received by the Company with respect to fiscal 2006 and any written
representations from certain reporting persons that no Form 5 is required,
Gyrodyne believes that none of the Company's executive officers, directors or
10% Holders failed to file on a timely basis reports required by section 16(a)
of the Exchange Act during fiscal 2006 or prior fiscal years.

(d)  Audit Committee Financial Expert

The Board of Directors has a separately-designated Audit Committee established
in accordance with section 3(a)(58)(a) of the Exchange Act, which currently
consists of Messrs. Smith, Levine and Macklin. All members are "financially
literate" and have been determined to be "independent" within the meaning of SEC
regulations and NASDAQ rules. The Board of Directors has determined that at
least one member, Mr. Levine, a CPA, qualifies as an "audit committee financial
expert" as a result of relevant experience as a partner in the accounting firm
of Levine & Seltzer, LLP. In addition, Mr. Levine has 10.5 years of accounting
experience as a partner and director of taxes at Leslie Sufrin & CO. P.C. as
well as several other years of experience in the field of public accounting.

(e)  Code of Ethics

The Company has adopted a written Code of Ethics that applies to all of its
directors, officers and employees. It is available on the Company's website at
www.gyrodyne.com and any person may obtain without charge a paper copy by
writing to the Secretary at the address set forth on page 1. Any amendments to
the Code of Ethics, or waiver thereof, will be disclosed on the website promptly
after such amendment.

Item 11 Executive Compensation

(a)  Executive Compensation

During the fiscal years ended April 30, 2006, April 30, 2005, and April 30,
2004, two directors or officers received remuneration in excess of $100,000 in
such capacity. The following table sets forth the total compensation paid or
accrued by the Company for services rendered during the years ended April 30,
2006, 2005 and 2004 to each of the Company's Chief Executive Officer and Chief
Operating Officer.


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                 SUMMARY COMPENSATION TABLE

                                                                                Long term Compensation
                                                                          -----------------------------------
                                             Annual Compensation                   Awards             Payouts
                                   --------------------------------------------------------------------------
                                                                                        Securities
                                                              Other Annual  Restricted  Underlying     LTIP
       Name and                       Salary         Bonus    Compensation    Stock    Options/SARs   Payouts   All Other
  Principal Position       Year         ($)           ($)         ($)       Awards ($)     (#)          ($)    Compensation
---------------------------------------------------------------------------------------------------------------------------
<S>                        <C>       <C>            <C>        <C>              <C>       <C>            <C>        <C>
Stephen V. Maroney
President & CEO            2006      213,207        11,000     41,685 (A)       0              0         0          0

                           2005      209,500             0     29,688 (A)       0              0         0          0

                           2004      209,500             0     49,628 (A)       0         17,500         0          0
Peter Pitsiokos
COO, and Secretary         2006      155,370         8,290          0           0              0         0          0

                           2005      152,500        10,000          0           0              0         0          0

                           2004      152,500             0     70,188 (B)       0         13,500         0          0
</TABLE>

(A) In FY 06 and in FY 05, Mr. Maroney exercised 1,375 director options and
received an equal number of shares with a value of $41,685 and $29,688,
respectively. In FY 04, Mr. Maroney exercised 4,125 director options and
received an equal number of shares with a value of $49,628. The Registrant has
concluded that aggregate amounts of perquisites and other personal benefits,
securities or property to any of the current executives does not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonuses reported
above for such named executive officers, and that the information set forth in
tabular form above is not rendered materially misleading by virtue of the
omission of such personal benefits.

(B) In FY 04, Mr. Pitsiokos exercised 6,600 options with SAR's and received
2,922 shares with a value of $70,188.

During the fiscal year ended April 30, 2006, there were no Option/SAR Grants
issued to any directors or officers.

<TABLE>
<CAPTION>
                            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                            ---------------------------------------------------
                                       AND FY-END OPTION/SAR VALUES
                                       ----------------------------

                                                       Number of Securities          Value of Unexercised
                                                      Underlying Unexercised             In-the-Money
                             Shares                      Options/SAR's at              Options/SAR's at
                          Acquired on     Value           April 30, 2006              April 30, 2006 ($)
      Name                 Exercise     Realized    Exercisable/Unexercisable    Exercisable/Unexercisable
      ----                 --------     --------    -------------------------    -------------------------
<S>                          <C>         <C>                 <C>                        <C>
Stephen V. Maroney           12,925      $385,586            51,605/0                   $1,608,608/$0
President and CEO
</TABLE>

(b)  Compensation of Directors

Each Director is entitled to receive a fee of $12,000 a year, $1,000 per Board
meeting attended and $500 for each Committee meeting attended and is reimbursed
for travel and Company business related expenses. In addition, the Chairman of
the Board is entitled to receive a Chairman's fee of $24,000 a year which
commenced in September, 2004. The Company continued its policy which states that
Directors who are also employees of the Company do not receive any additional
compensation for their services as Directors.

(c)  Employment Contracts and Change-in-Control Arrangements

Effective January 23, 2003, the Company entered into an amended and restated
employment agreement with Stephen V. Maroney as President, Chief Executive
Officer, and Treasurer and Peter Pitsiokos as Executive Vice President,
Secretary, and General Counsel. Their annual salaries are currently at $220,000
and $160,790, respectively. The terms of the agreements were extended from one
to three years, contain evergreen provisions, and provide for a severance
payment equivalent to three years salary in the event of a change in control.
Both agreements were attached as Exhibit 10, Material Contracts, in the 10-QSB
dated January 31, 2003.

The Company has an incentive compensation plan, which was established in 1999
and amended in 2004, for all full-time employees and members of the Board in
order to promote shareholder value. The benefits of the incentive compensation
plan are realized only upon a change in control of the Company. Change in


                                       22
<PAGE>

control is defined as the accumulation by any person, entity or group of 30% or
more of the combined voting power of the Company's voting stock or the
occurrence of certain other specified events. In the event of a change in
control, the Company's plan provides for a cash payment equal to the difference
between the plan's "establishment date" price of $15.39 per share and the per
share price of the Common Stock on the closing date, equivalent to 100,000
shares of Common Stock, such number of shares and "establishment date" price per
share subject to adjustments to reflect changes in capitalization. The payment
amount would be distributed to eligible participants based upon their respective
weighted percentages (ranging from 0.5% to 18.5%).

(d)  Compensation Committee Interlocks and Insider Participation

The Committee's members are currently Mr. Levine (Chairman), Mr. Palmedo and Mr.
Macklin. No member of the Committee is or was formerly an officer or employee of
the Company or any of its subsidiaries. No member of the Committee had any
relationship requiring disclosure by the Company under any paragraph of Item 404
of Regulation S-K.

(e)  Report of the Compensation Committee

The Compensation Committee of the Company's Board of Directors consists of
directors Elliot Levine (Chairman), Ronald Macklin and Philip Palmedo, all of
whom the Board has determined are independent pursuant to NASDAQ rules. This
report shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by virtue of any general
statement in such filing incorporating this Form 10-K by reference, except to
the extent that the Company specifically incorporates the information contained
in this section by reference, and shall not otherwise be deemed filed under
either the Securities Act or the Exchange Act.

The Compensation Committee oversees and administers the Company's executive
compensation programs and is therefore responsible for establishing guidelines
and approving all compensation paid to executive officers. The Company's
compensation policies for executives are intended to further the interests of
the Company and its shareholders by encouraging growth of its business through
securing, retaining and motivating management employees of high caliber who
possess the skills necessary for the development and growth of the Company.

The Company's executive compensation program consists of two principal elements:
a base salary and the potential to earn a performance-based annual bonus. In the
past, a third component included a stock option plan that expired in October
2003. The program is designed to motivate and retain key executives to manage
the business affairs of the Company in the best long term interests of the
Company and its shareholders.

The Committee recognizes that a variety of events and circumstances might
influence an individual's performance or that of the Company itself. As a
result, the Committee carefully considers all relevant events and circumstances
in making its compensation decisions in order to ensure that the appropriate
relationship exists between executive compensation and corporate performance.

The Committee also negotiates the terms of all employment contracts with
executive officers which include compensation arrangements designed to reward
management for achieving certain performance goals and which are revisited on an
as needed basis.

In setting and adjusting base salary levels for each individual executive, the
Compensation Committee considers factors such as the executive's scope of
responsibility, the executive's performance, the performance of the Company,
future potential, and benchmarks of comparable positions at other companies. In
making salary decisions, the Compensation Committee exercises its best judgment
using no specific weights for the previously discussed factors.

The Company maintains the option to supplement base compensation with awards of
performance bonuses in the form of cash to reward efforts undertaken by its key
executive officers which are extraordinary in nature.

In order to evaluate the appropriate levels of compensation for the Company's
executive officers, the Committee reviews a number of factors, including
performance and progress towards achieving established goals. The Committee also
takes into consideration other contributing factors to the officers overall
compensation which may include past performance, anticipated contributions to
future success, additional responsibilities, and vulnerability to recruitment by
other companies.

As of January 1, 2006, the Board approved, based primarily upon the
recommendation of the Compensation Committee, base salary for the Company's two
executive officers, Stephen Maroney and Peter Pitsiokos, in the amount of
$220,000 and $160,262, respectively, and cash bonuses of $11,000 and $8,262 for
Mr. Maroney and Mr. Pitsiokos, respectively, which were paid on or prior to
February 15, 2006.


                                       23
<PAGE>

Members of the Compensation Committee
Elliot Levine, Chairman
Ronald Macklin
Philip Palmedo

(f)  Performance Graph

The following graph compares total stockholder returns from April 30, 2001
through April 30, 2006 to the Standard & Poor's 500 Index ("S&P 500") and to the
Dow Jones U.S. Real Estate Index Fund ("DJ Real Estate Index"). The graph
assumes that the value of the investment in the Company's Common Stock and in
the S&P 500 and DJ Real Estate Index indices was $100 at April 30, 2001 and that
all dividends were reinvested. The price of the Company's Common Stock on April
30, 2001 (on which the graph is based) was $16.70. The stockholder return shown
on the following graph is not necessarily indicative of future performance.

                 Comparison of Five Year Cumulative Total Return
                        Fiscal Year Ended April 30, 2006

                                [GRAPHIC OMITTED]

<TABLE>
<CAPTION>
                                                  Period Ending
                         ---------------------------------------------------------------
Index                    04/30/01   04/30/02   04/30/03   04/30/04   04/30/05   04/30/06
---------------------    --------   --------   --------   --------   --------   --------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>
Gyrodyne                   100.00     101.44     101.20     164.64     243.88     283.68
S&P 500                    100.00      87.37      75.75      93.07      98.97     114.23
DJ Real Estate Index       100.00     110.75     103.17     120.62     153.90     183.97
</TABLE>

Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

(a) The following table sets forth certain information as of July 15, 2006
regarding the beneficial ownership of the Company's common shares by (i) each
person who the Company believes to be beneficial owner of more than 5% of its
outstanding common shares, (ii) each present director, (iii) each person listed
in the Summary Compensation Table under "Executive Compensation," and (iv) all
of the Company's present executive officers and directors as a group.


                                       24
<PAGE>

                                                  Number of
              Name and Address               Shares Beneficially     Percent of
             Of Beneficial Owner                    Owned             Class (9)
             -------------------             -------------------     ----------

          More Than 5% Shareholders
-------------------------------------------
Opportunity Partners, LP                           206,964(1)           16.73
60 Heritage Drive
Pleasantville, NY 10570

Bruce Sherman                                      110,837               8.96
8889 Pelican Bay Blvd., Suite 500
Naples, Florida 34108

Gerard Scollan                                     101,776(2)            8.23
80 Browns River Road
Sayville, NY 11782

      Directors and Executive Officers
-------------------------------------------
                                                    92,894(3)            7.21
Stephen V. Maroney
c/o Gyrodyne Company of America, Inc.
1 Flowerfield, Suite 24
St. James, NY 11780

Peter Pitsiokos                                     35,205(4)            2.85
c/o Gyrodyne Company of America, Inc.
1 Flowerfield, Suite 24
St. James, NY 11780

Paul L. Lamb                                        23,164(5)            1.87
c/o Lamb & Barnosky, LLP
534 Broadhollow Road
Melville, NY 11747

Robert H. Beyer                                     14,211(6)            1.15
10505 Indigo Lane
Fairfax, Virginia 22032

Philip F. Palmedo                                   12,749(7)            1.03
4 Piper Lane
St. James, NY 11780

Richard B. Smith                                     1,000                (8)
111 Boney Lane
Nissequogue, NY 11780

Ronald J. Macklin                                      200                (8)
c/o Keyspan
175 E. Old Country Road
Hicksville, NY 11801

Elliot H. Levine                                         0                (8)
c/o Levine & Seltzer, LLP
150 East 52nd Street
New York, NY 10022

All executive officers and                         179,423              14.20
directors as a group (8 persons)


                                       25
<PAGE>

(1) On March 29, 2006, Opportunity Partners LP filed a joint Schedule 13D/A with
the Securities and Exchange Commission stating that Bulldog Investors, a group
of investment funds, Phillip Goldstein and Andrew Dakos beneficially own an
aggregate of 206,964 shares of Gyrodyne stock. Mr. Phillip Goldstein is deemed
to be the beneficial owner of 172,314 shares of Gyrodyne stock. Mr. Dakos is
deemed to be the beneficial owner of 129,754 shares. Power to dispose of
securities resides solely with Mr. Goldstein for 77,210 shares. Power to vote
securities resides solely with Mr. Goldstein for 41,060 shares and jointly for
1,600 shares. Power to vote securities resides solely with Mr. Dakos for 129,754
shares and power to dispose securities resides solely with Mr. Dakos for 34,650
shares. Power to dispose securities resides jointly with Mr. Goldstein and Mr.
Dakos for 95,104 shares.

(2) Includes 99,241 shares of Company stock held by Lovin Oven Catering of
Suffolk, Inc., of which Mr. Scollan is the majority shareholder.

(3) Includes 51,605 shares issuable upon the exercise of stock options to
purchase Company Stock which are exercisable within 60 days of April 30, 2006.

(4) Does not include his wife's and minor children's ownership of 1,089 shares
in which he denies any beneficial interest.

(5) Includes 13,747 shares held by Lamb & Barnosky, LLP Profit Sharing Trust and
300 shares held by the Paul L. Lamb, P.C. Defined Benefit Plan. Mr. Lamb is a
trustee of the Profit Sharing Trust and the Defined Benefit Plan. Includes 1,375
shares issuable upon the exercise of stock options to purchase Company Stock
which are exercisable within 60 days of April 30, 2006.

(6) Does not include his wife's ownership of 1,801 shares in which he denies any
beneficial interest. Includes 1,375 shares issuable upon the exercise of stock
options to purchase Company Stock which are exercisable within 60 days of April
30, 2006.

(7) Does not include his wife's ownership of 4,125 shares in which he denies any
beneficial interest. Includes 1,375 shares issuable upon the exercise of stock
options to purchase Company Stock which are exercisable within 60 days of April
30, 2006.

(8) Less than 1%.

(9) The percent of class is calculated on the basis of the number of shares
outstanding, which is 1,237,219 as of July 15, 2006 plus, for each person or
group, any shares that person or group has the right to acquire within 60 days
of April 30, 2006 pursuant to options, warrants, conversion privileges or other
rights.

Item 13 Certain Relationships and Related Transactions

The Company had a mortgage receivable in the original amount of $1,800,000 due
from Sco Properties, Inc. which was paid in full in August, 2005. Mr. Scollan,
president of Sco Properties, Inc., is considered a principal shareholder of the
Company because he has beneficial ownership of 8.23% of the Company shares. The
terms of the mortgage are described in greater detail in Note 3 of the
consolidated financial statements. The Company believes that the terms of the
mortgage were no less favorable to the Company than could have been obtained
from an unaffiliated third party. The Company received $15,459 in interest
during fiscal 2006 and $86,361 in the prior fiscal year. Interest payments
received in fiscal 2006 were lower than in fiscal 2005 as the result of the
prepayment of the remainder of the principal.

The Company had engaged the firm of Lamb & Barnosky, LLP as primary outside
legal counsel until December 31, 2004. Director Lamb is a partner in the firm to
which Gyrodyne incurred legal fees of $7,309, $109,550 and $228,962 in FY 2006,
FY 2005 and FY 2004, respectively. As of January 1, 2005 the aforementioned law
firm is no longer primary outside legal counsel.

No loans were made to any officer, director, or any member of their immediate
families during the fiscal year just ended, nor were any loan amounts due and
owing the Company or its subsidiaries from those parties at fiscal year end.


                                       26
<PAGE>

Item 14 Principal Accounting Fees and Services

The following is a summary of the fees billed to the Company by Holtz Rubenstein
Reminick LLP, its independent auditors, for professional services rendered for
the fiscal years ended April 30, 2006, 2005 and 2004:

--------------------------------------------------------------------------------
     Fee Category      Fiscal 2006 Fees    Fiscal 2005 Fees    Fiscal 2004 Fees
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Audit Fees (1)                  $51,600             $43,100             $40,000
--------------------------------------------------------------------------------
Audit-Related Fees (2)            3,500              17,444               8,800
--------------------------------------------------------------------------------
Tax Fees (3)                     29,000              22,900              13,100
--------------------------------------------------------------------------------
All Other Fees (4)                    -                   -                   -
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Total Fees                      $84,100             $83,444             $61,900
--------------------------------------------------------------------------------

(1) Audit Fees consist of aggregate fees billed for professional services
rendered for the audit of the Company's annual financial statements and review
of the interim financial statements included in quarterly reports for services
that are normally provided by the independent auditors in connection with
statutory and regulatory filings or engagements for the fiscal years ended April
30, 2006, 2005 and 2004, respectively.

(2) Audit-Related Fees consist of aggregate fees billed for assurance and
related services that are reasonably related to the performance of the audit or
review of the Company's financial statements and are not reported under "Audit
Fees."

(3) Tax Fees consist of aggregate fees billed for professional services rendered
by the Company's principal accountant for tax compliance, tax advice and tax
planning. The amounts disclosed consist of fees paid for the preparation of
federal and state income tax returns.

(4) All Other Fees consist of aggregate fees billed for products and services
provided by Holtz Rubenstein Reminick LLP, the Company's principal accountants,
other than those disclosed above.

The Audit Committee is responsible for the appointment, compensation and
oversight of the work of the independent auditors and approves in advance any
services to be performed by the independent auditors, whether audit-related or
not. The Audit Committee reviews each proposed engagement to determine whether
the provision of services is compatible with maintaining the independence of the
independent auditors. The Audit Committee has determined not to adopt any
blanket pre-approval policies or procedures. All of the fees shown above were
pre-approved by the Audit Committee.

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                                     PART IV

Item 15 Exhibits and Financial Statement Schedules

     Exhibits. The following Exhibits are either filed as part of this report or
are incorporated herein by reference:

        3.1     Restated Certificate of Incorporation of Gyrodyne Company of
                America, Inc. (1)

        3.2     Restated Bylaws of Gyrodyne Company of America, Inc. (2)

        4.1     Form of Stock Certificate of Gyrodyne Company of America,
                Inc.(1)

        4.2     Rights Agreement, dated as of August 10, 2004, by and between
                Gyrodyne Company of America, Inc. and Registrar and Transfer
                Company, as Rights Agent, including as Exhibit B the forms of
                Right Certificate and of Election to Exercise. (3)

        10.1    1993 Stock Incentive Plan. (1)

        10.2    1996 Non-Employee Directors' Stock Option Plan. (1)


                                       27
<PAGE>

        10.3    Carco Group, Inc. Lease Amendment, dated May 3, 1999. (1)

        10.4    Amendment No. 1 to Lease Agreement with Carin Perez and Luis
                Perez, dated October 7, 1997. (1)

        10.5    Incentive Compensation Plan. (1)

        10.6    Amended and Restated Agreement of Limited Partnership of
                Callery-Judge Grove, dated as of May 8, 1995, by and among CJG
                Management, Ltd., as the general partner and those persons and
                entities whose names and addresses appear on the books and
                records of the Partnership as partners. (1)

        10.7    Amended and Restated Employment Agreement, with Stephen V.
                Maroney, dated January 23, 2003. (4)

        10.8    Amended and Restated Employment Agreement, with Peter Pitsiokos,
                dated January 23, 2003. (4)

        10.9    Asset Management Agreement with DPMG, Inc. dba Landmark
                National, dated April 9, 2002. (5)

        10.10   Golf Operating Agreement with DPMG, INC., dated April 9, 2002.
                (5)

        10.11   Second Amended and Restated Agreement of Limited Partnership of
                Callery-Judge Grove, dated as of February 9, 2005, by and among
                CJG Management, Ltd., as the general partner and those persons
                and entities whose names and addresses appear on the books and
                records of the Partnership as partners. (6)

        21.1    List of all subsidiaries. (1)

        31.1    Rule 13a-15(e)/15d-15(e) Certifications. (7)

        32.1    CEO/CFO Certifications Pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002. (7)

        (1)  Incorporated herein by reference to the Annual Report on Form
             10-KSB/A, filed with the Securities and Exchange Commission on
             September 5, 2001.

        (2)  Incorporated herein by reference to Form 8-K, filed with the
             Securities and Exchange Commission on May 2, 2006.

        (3)  Incorporated herein by reference to Form 8-K, filed with the
             Securities and Exchange Commission on August 13, 2004.

        (4)  Incorporated herein by reference to the Quarterly Report on Form
             10-QSB, filed with the Securities and Exchange Commission on
             March 12, 2003.

        (5)  Incorporated herein by reference to the Annual Report on Form
             10-KSB, filed with the Securities and Exchange Commission on July
             26, 2002.

        (6)  Incorporated herein by reference to the Annual Report on Form
             10-KSB, filed with the Securities and Exchange Commission on July
             5, 2005.

        (7)  Filed as part of this Report.


                                       28
<PAGE>

                                   SIGNATURES

In accordance with the requirements of Section 13 or 15 (d) of the Exchange Act,
the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                        GYRODYNE COMPANY OF AMERICA, INC.

     /S/ Stephen V. Maroney
     ------------------------------------------------------------------------
     Stephen V. Maroney, President, Treasurer and Principal Executive Officer
     Date:  July 25, 2006

     /S/ Frank D'Alessandro
     ------------------------------------------------------------------------
     Frank D'Alessandro, Controller
     Date:  July 25, 2006

                              ********************

In accordance with the requirements of the Exchange Act, this report has been
signed below by the following on behalf of the Registrant and in the capacities
and on the dates indicated.


     /S/ Richard B. Smith
     ------------------------------------------------------------------------
     Richard B. Smith, Director
     Date:  July 25, 2006

     /S/ Elliot H. Levine
     ------------------------------------------------------------------------
     Elliot H. Levine, Director
     Date:  July 25, 2006

     /S/ Ronald J. Macklin
     ------------------------------------------------------------------------
     Ronald J. Macklin, Director
     Date:  July 25, 2006

     /S/ Stephen V. Maroney
     ------------------------------------------------------------------------
     Stephen V. Maroney, Director
     Date:  July 25, 2006


                                       29
<PAGE>



                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES
                         -------------------------------------------------------
                                                REPORT ON AUDITS OF CONSOLIDATED
                                                            FINANCIAL STATEMENTS

                                       Years Ended April 30, 2006, 2005 and 2004


<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES


Contents
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004                               Pages
--------------------------------------------------------------------------------

Report of Independent Registered Public Accounting Firm                  F-1

Consolidated Balance Sheets                                              F-2

Consolidated Statements of Operations                                    F-3

Consolidated Statement of Stockholders' Equity                           F-4

Consolidated Statements of Cash Flows                                    F-5

Notes to Consolidated Financial Statements                            F-6 - F-19

<PAGE>

Report of Independent Registered Public Accounting Firm


Board of Directors and Stockholders
Gyrodyne Company of America, Inc.
St. James, New York

We have audited the accompanying consolidated balance sheets of Gyrodyne Company
of America, Inc. and Subsidiaries (the "Company") as of April 30, 2006 and 2005
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended April 30, 2006, 2005 and 2004. We have also
audited the schedule listed in Item 8 (7) of this Form 10-K for the years ended
April 30, 2006, 2005, and 2004. These consolidated financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and schedule
based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Gyrodyne Company of
America, Inc. and Subsidiaries as of April 30, 2006 and 2005 and the results of
their operations and their cash flows for the years ended April 30, 2006, 2005
and 2004 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related consolidated
financial statement schedule for the years ended April 30, 2006, 2005 and 2004
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.


Melville, New York
June 16, 2006

<PAGE>

<TABLE>
<CAPTION>
                                                              GYRODYNE COMPANY OF AMERICA, INC.
                                                                               AND SUBSIDIARIES

Consolidated Balance Sheets
-----------------------------------------------------------------------------------------------
April 30,                                                             2006            2005
-----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>
Assets

Real Estate:
  Rental property:
    Land                                                          $      3,017    $      4,250
    Building and improvements                                        2,876,087       3,955,011
    Machinery and equipment                                            157,797         146,842
                                                                -------------------------------
                                                                     3,036,901       4,106,103
Less Accumulated Depreciation                                        2,492,819       3,397,082
                                                                -------------------------------
                                                                       544,082         709,021
                                                                -------------------------------
  Land held for development:
    Land                                                               558,466         792,201
    Land development costs                                               8,707       4,432,766
                                                                -------------------------------
                                                                       567,173       5,224,967
                                                                -------------------------------
Total Real Estate, net                                               1,111,255       5,933,988

Cash and Cash Equivalents                                           27,012,688         844,405
Rent Receivable, net of allowance for doubtful
  accounts of $30,000 and $37,000, respectively                         93,173          62,309
Interest Receivable                                                    921,385               -
Mortgage Receivable                                                          -       1,300,000
Prepaid Expenses and Other Assets                                      308,361         183,121
Prepaid Pension Costs                                                1,133,497       1,199,526
                                                                -------------------------------
Total Assets                                                      $ 30,580,359    $  9,523,349
                                                                ===============================

Liabilities and Stockholders' Equity

Liabilities:
  Accounts payable and accrued expenses                           $    921,294    $    204,782
  Deferred gain on sale of real estate                                       -       1,136,705
  Tenant security deposits payable                                     163,886         229,284
  Loans payable                                                              -          19,145
  Deferred income taxes                                              9,358,000       1,605,000
                                                                -------------------------------
Total Liabilities                                                   10,443,180       3,194,916
                                                                -------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Common stock, $1 par value; authorized 4,000,000
    shares; 1,531,086 shares issued                                  1,531,086       1,531,086
  Additional paid-in capital                                         8,399,134       7,841,066
  Retained earnings (deficit)                                       12,047,445      (1,067,872)
                                                                -------------------------------
                                                                    21,977,665       8,304,280
Less Cost of Shares of Common Stock Held in Treasury; 293,867
  and 317,408 shares, respectively                                  (1,840,486)     (1,975,847)
                                                                -------------------------------
Total Stockholders' Equity                                          20,137,179       6,328,433
                                                                -------------------------------
Total Liabilities and Stockholders' Equity                        $ 30,580,359    $  9,523,349
                                                                ===============================

-----------------------------------------------------------------------------------------------
See notes to consolidated financial statements.                                             F-2
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                      GYRODYNE COMPANY OF AMERICA, INC.
                                                                                       AND SUBSIDIARIES

Consolidated Statements of Operations
-------------------------------------------------------------------------------------------------------
Years Ended April 30,                                          2006            2005            2004
-------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>
Revenue from Rental Property                              $  1,626,651    $  2,039,170    $  2,086,687
                                                         ----------------------------------------------

Rental Property Expense:
  Real estate taxes                                            208,104         155,196         143,333
  Operating and maintenance                                    447,057         793,200         567,401
  Interest expense                                                   -          35,217          38,850
  Depreciation                                                  62,196          72,835          78,176
                                                         ----------------------------------------------
Total Rental Property Expense                                  717,357       1,056,448         827,760
                                                         ----------------------------------------------

Income from Rental Property                                    909,294         982,722       1,258,927

General and Administrative
  (Expenses) and Other Income:
  General and administrative (expenses)                     (2,373,223)     (1,764,183)     (1,574,353)
  Gain on condemnation of rental property                   20,710,339               -               -
  Gain on sale of real estate                                1,136,705         437,195               -
  Gain on sale of equipment                                          -          12,000               -
  Interest income                                            1,084,106         102,852         111,721
                                                         ----------------------------------------------
Total General and Administrative
  (Expenses) and Other Income                               20,557,927      (1,212,136)     (1,462,632)
                                                         ----------------------------------------------

Income (Loss) Before Income Taxes                           21,467,221        (229,414)       (203,705)
Provision (Benefit) for Income Taxes                         8,351,904         (91,766)        (90,239)
                                                         ----------------------------------------------
Net Income (Loss)                                         $ 13,115,317    $   (137,648)   $   (113,466)
                                                         ==============================================

Net Income (Loss) Per Common Share:
  Basic                                                   $      10.67    $      (0.12)   $      (0.10)
                                                         ==============================================

  Diluted                                                 $      10.29    $      (0.12)   $      (0.10)
                                                         ==============================================

Weighted Average Number of Common Shares Outstanding:
  Basic                                                      1,229,582       1,180,469       1,133,896
                                                         ==============================================

  Diluted                                                    1,274,034       1,180,469       1,133,896
                                                         ==============================================


-------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.                                                     F-3
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  GYRODYNE COMPANY OF AMERICA, INC.
                                                                                                                   AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
-----------------------------------------------------------------------------------------------------------------------------------

                                  $1 Par Value
                                  Common Stock                                                Treasury Stock
                           ---------------------------    Additional                   ----------------------------
                                               Par          Paid in        Income                                          Total
                              Shares          Value         Capital       (Deficit)       Shares           Cost           Equity
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------
<S>                           <C>         <C>            <C>            <C>                 <C>        <C>             <C>
Balance, May 1, 2003          1,531,086   $  1,531,086   $  7,278,191   $   (816,758)       414,024    $ (2,531,389)   $  5,461,130
Exercise of Stock Options             -              -        227,122              -        (38,670)        222,353         449,475
Net Loss                              -              -              -       (113,466)             -               -        (113,466)
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------
Balance, April 30, 2004       1,531,086      1,531,086      7,505,313       (930,224)       375,354      (2,309,036)      5,797,139
Exercise of Stock Options             -              -        335,753              -        (57,946)        333,189         668,942
Net Loss                              -              -              -       (137,648)             -               -        (137,648)
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------
Balance, April 30, 2005       1,531,086      1,531,086      7,841,066     (1,067,872)       317,408      (1,975,847)      6,328,433
Exercise of Stock Options             -              -        191,068              -        (23,541)        135,361         326,429
Tax Benefit from Exercise
 of Stock Options                     -              -        367,000              -              -               -         367,000
Net Income                            -              -              -     13,115,317              -               -      13,115,317
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------
Balance, April 30, 2006       1,531,086   $  1,531,086   $  8,399,134   $ 12,047,445        293,867    $ (1,840,486)   $ 20,137,179
                           ============   ============   ============   ============   ============    ============    ============




-----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.                                                                                 F-4
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                         GYRODYNE COMPANY OF AMERICA, INC.
                                                                                          AND SUBSIDIARIES

Consolidated Statements of Cash Flows
----------------------------------------------------------------------------------------------------------
Years Ended April 30,                                            2006            2005            2004
----------------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>             <C>
Cash Flows from Operating Activities:
  Net income (loss)                                          $ 13,115,317    $   (137,648)   $   (113,466)
                                                            ----------------------------------------------
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                               105,861         115,607         119,945
      Bad debt expense                                             24,000          57,000          48,000
      Deferred income tax provision (benefit)                   7,947,000        (114,000)       (142,000)
      Stock based compensation                                          -               -          76,606
      Net periodic pension benefit cost                           116,029         226,109         236,870
      Gain on condemnation of rental property                    (414,349)              -               -
      Gain on sale of equipment                                         -         (12,000)              -
      Gain on sale of rental real estate                       (1,136,705)       (437,195)              -
      Changes in operating assets and liabilities:
        Decrease (increase) in assets:
          Land development costs                                4,657,794        (798,453)     (1,189,659)
          Accounts receivable                                     (54,864)        (26,227)        (69,645)
          Interest receivable                                    (921,385)              -               -
          Prepaid expenses and other assets                         4,096          18,705          (2,333)
          Prepaid pension costs                                   (50,000)              -               -
        Increase (decrease) in liabilities:
          Accounts payable and accrued expenses                   704,778         (28,027)        (16,815)
          Income taxes payable                                          -         (28,306)         28,306
          Tenant security deposits                                (65,398)         34,308         (43,228)
                                                            ----------------------------------------------
  Total adjustments                                            10,916,857        (992,479)       (953,953)
                                                            ----------------------------------------------
Net Cash Provided by (Used in) Operating Activities            24,032,174      (1,130,127)     (1,067,419)
                                                            ----------------------------------------------

Cash Flows from Investing Activities:
  Acquisition of property, plant and equipment                    (78,984)        (62,958)        (29,754)
  Proceeds on condemnation of rental property                     596,075               -               -
  Proceeds from sale of equipment                                       -          12,000               -
  Proceeds from mortgage receivable                             1,300,000         500,000               -
                                                            ----------------------------------------------
Net Cash Provided by (Used in) Investing Activities             1,817,091         449,042         (29,754)
                                                            ----------------------------------------------

Cash Flows from Financing Activities:
  Repayment of loans payable                                       (7,411)       (706,095)        (17,889)
  Loan origination fees                                                 -               -          73,519
Proceeds from exercise of stock options                           326,429         668,942         372,869
                                                            ----------------------------------------------
Net Cash Provided by (Used in) Financing Activities               319,018         (37,153)        428,499
                                                            ----------------------------------------------

Net Increase (Decrease) in Cash and Cash Equivalents           26,168,283        (718,238)       (668,674)
Cash and Cash Equivalents, beginning of year                      844,405       1,562,643       2,231,317
                                                            ----------------------------------------------
Cash and Cash Equivalents, end of year                       $ 27,012,688    $    844,405    $  1,562,643
                                                            ==============================================


----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.                                                        F-5
</TABLE>
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

1.   Summary of Significant Accounting Policies

     Organization and nature of operations - Gyrodyne Company of America, Inc.
     and Subsidiaries (the "Company") is primarily a lessor of industrial and
     commercial real estate to unrelated diversified entities located in Long
     Island, New York, and is also pursuing development plans of its real estate
     holdings.

     The State University of New York at Stony Brook has acquired part of the
     Company's real estate property located in Stony Brook/St. James, New York
     through eminent domain. See Note 18.

     Principles of consolidation - The accompanying consolidated financial
     statements include the accounts of Gyrodyne Company of America, Inc.
     ("GCA") and all majority owned subsidiaries. Investments in affiliates in
     which the Company has the ability to exercise significant influence, but
     not control, would be accounted for under the equity method. Investment
     interests in excess of 5% in limited partnerships are accounted for under
     the equity method.

     All consolidated subsidiaries are wholly owned. All significant
     inter-company transactions have been eliminated.

     Rental real estate - Rental real estate assets, including land, buildings
     and improvements, furniture, fixtures and equipment, are stated at cost,
     and reported net of accumulated depreciation and amortization. Tenant
     improvements, which are included in buildings and improvements, are also
     stated at cost. Expenditures for ordinary maintenance and repairs are
     expensed to operations as they are incurred. Renovations and or
     replacements, which improve or extend the life of the asset are capitalized
     and depreciated over their estimated useful lives.

     Real estate held for development - Real estate held for development is
     stated at the lower of cost or net realizable value. In addition to land,
     land development and construction costs, real estate held for development
     includes interest, real estate taxes and related development and
     construction overhead costs which are capitalized during the development
     and construction period.

     Net realizable value represents estimates, based on management's present
     plans and intentions, of sale price less development and disposition cost,
     assuming that disposition occurs in the normal course of business.

     Long-lived assets - On a periodic basis, management assesses whether there
     are any indicators that the value of the real estate properties may be
     impaired. A property's value is impaired only if management's estimate of
     the aggregate future cash flows (undiscounted and without interest charges)
     to be generated by the property are less than the carrying value of the
     property. Such cash flows consider factors such as expected future
     operating income, trends and prospects, as well as the effects of demand,
     competition and other factors. To the extent impairment occurs, the loss
     will be measured as the excess of the carrying amount of the property over
     the fair value of the property.

     The Company is required to make subjective assessments as to whether there
     are impairments in the value of its real estate properties and other
     investments. These assessments have a direct impact on the Company's net
     income, since an impairment charge results in an immediate negative
     adjustment to net income.

     Depreciation and amortization - Depreciation and amortization are provided
     on the straight-line method over the estimated useful lives of the assets,
     as follows:

     Buildings and Improvements                                10 to 30 years
     Machinery and Equipment                                   3 to 20 years


                                                                             F-6
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     Expenditures for maintenance and repairs are charged to operations as
     incurred. Significant renovations are capitalized.

     Revenue recognition - Minimum revenues from rental property are recognized
     on a straight-line basis over the terms of the related leases. The excess
     of rents recognized over amounts contractually due, if any, are included in
     deferred rents receivable on the Company's balance sheets. Certain leases
     also provide for tenant reimbursements of common area maintenance and other
     operating expenses and real estate taxes. Ancillary and other property
     related income is recognized in the period earned.

     Allowance for doubtful accounts - Management must make estimates of the
     uncollectability of accounts receivable. Management specifically analyzes
     accounts receivable and analyzes historical bad debts, customer
     concentrations, customer credit-worthiness, current economic trends and
     changes in customer payment terms when evaluating the adequacy of the
     allowance for doubtful accounts.

     Investments - The Company has a 10.93% limited partnership interest in
     Callery-Judge Grove, L.P. (the "Grove") that owns a 3500+ acre citrus grove
     in Palm Beach County, Florida. The Company is accounting for this
     investment under the equity method in accordance with Emerging Issue Task
     Force ("EITF") Topic D-46 "Accounting for Limited Partnership Investments"
     and the guidance in paragraph 8 of AICPA Statement of Position ("SOP")
     78-9, "Accounting for Investments in Real Estate Ventures."

     Cash equivalents - The Company considers all highly liquid debt instruments
     purchased with maturities of three months or less to be cash equivalents.

     Net income (loss) per common share and per common equivalent share - The
     reconciliations for the years ended April 30, 2006, 2005 and 2004 are as
     follows:

<TABLE>
<CAPTION>
     Year Ended April 30, 2006                                    Income         Shares       Per Share
     ----------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>         <C>
     Basic EPS                                                $ 13,115,317       1,229,582   $      10.67
     Effect of Dilutive Securities - common stock options                -          44,452           (.38)
                                                              ------------    ------------   ------------
     Diluted EPS                                              $ 13,115,317       1,274,034   $      10.29
                                                              ============    ============   ============

     Year Ended April 30, 2005                                     Loss          Shares       Per Share
     ----------------------------------------------------------------------------------------------------

     Basic EPS                                                $   (137,648)      1,180,469   $       (.12)
     Effect of Dilutive Securities - common stock options                -               -              -
                                                              ------------    ------------   ------------
     Diluted EPS                                              $   (137,648)      1,180,469   $       (.12)
                                                              ============    ============   ============

     Year Ended April 30, 2004                                    Income         Shares       Per Share
     ----------------------------------------------------------------------------------------------------

     Basic EPS                                                $   (113,466)      1,133,896   $       (.10)
     Effect of Dilutive Securities - common stock options                -               -              -
                                                              ------------    ------------   ------------
     Diluted EPS                                              $   (113,466)      1,133,896   $       (.10)
                                                              ============    ============   ============
</TABLE>

     Income taxes - Deferred tax assets and liabilities are determined based on
     differences between financial reporting and tax bases of assets and
     liabilities, and are measured using the enacted tax rates and laws that
     will be in effect when the differences are expected to reverse.


                                                                             F-7
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     Stock-based compensation - The Company applies Accounting Principles Board
     ("APB") Opinion No. 25 and related interpretations in accounting for
     stock-based compensation to employees. Stock compensation to non-employees
     is accounted for at fair value in accordance with Statement of Financial
     Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based
     Compensation."

     In accordance with APB Opinion No. 25, no compensation expense has been
     recognized for the employee stock option plans. Had the Company recorded
     compensation expense for the employee stock options based on the fair value
     at the grant date for awards in the years ended April 30, 2006, 2005 and
     2004 consistent with the provisions of SFAS No. 123, the Company's net
     income (loss) and net income (loss) per share would have been adjusted to
     the following pro forma amounts:

<TABLE>
<CAPTION>
                                                          2006            2005            2004
     ---------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
     Net Income (Loss), as reported                  $ 13,115,317    $  (137,648)    $   (113,466)
     Net Income (Loss), pro forma                      13,115,317       (138,648)        (230,466)
     Basic Income (Loss) Per Share, as reported             10.67           (.12)            (.10)
     Basic Income (Loss) Per Share, pro forma               10.67           (.12)            (.20)
     Diluted Income (Loss) Per Share, as reported           10.29           (.12)            (.10)
     Diluted Income (Loss) Per Share, pro forma             10.29           (.12)            (.20)
</TABLE>

     For the purposes of the pro forma presentation, the fair value of each
     option grant is estimated on the date of grant using the Black-Scholes
     option-pricing model. The following range of weighted-average assumptions
     were used for grants during the fiscal year ended April 30, 2004. There
     were no stock options granted during the fiscal years ended April 30, 2006
     and 2005.

<TABLE>
<CAPTION>
     Years Ended April 30,                                2006            2005            2004
     ---------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
     Dividend Yield                                        -               -                0.0%
     Volatility                                            -               -               32.0%
     Risk-Free Interest Rate                               -               -                2.0%
     Expected Life                                         -               -             5 Years
</TABLE>

     Use of estimates - The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates. The most significant assumptions and estimates relate to
     depreciable lives and the valuation of real estate.

     New accounting pronouncements - In December 2004, the Financial Accounting
     Standards Board ("FASB") issued SFAS No. 123(R), ("SFAS 123(R)")
     "Share-Based Payment". This statement replaces SFAS No. 123, "Accounting
     for Stock-Based Compensation", and supersedes APB Opinion No. 25,
     "Accounting for Stock Issued to Employees". SFAS 123(R) establishes
     standards for the accounting for transactions in which an entity exchanges
     its equity instruments for goods or services. This statement focuses
     primarily on accounting for transactions in which an entity obtains
     employee services in share-based payment transactions. SFAS 123(R) requires
     that the fair value of such equity instruments be recognized as an expense
     in the historical financial statements as services are performed. Prior to
     SFAS 123(R), only certain pro forma disclosures of fair value were
     required. The provisions of this statement are effective for the first
     annual reporting period that begins after June 15, 2005.


                                                                             F-8
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     On March 29, 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB
     No. 107"), which provides the Staff's views regarding interactions between
     SFAS 123(R) and certain SEC rules and regulations and provides
     interpretations of the valuation of share-based payments for public
     companies. If the Company had included the cost of employee stock option
     compensation in its financial statements it would not have had a material
     effect on the net income for the years ended April 30, 2006 and 2005. There
     would have been a material effect on the Company's net income for the year
     ended April 30, 2004. The pro forma effect on net income is shown above.

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
     Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3"
     ("SFAS No. 154"). SFAS No. 154 requires the retrospective application to
     prior periods' financial statements of changes in accounting principle,
     unless it is impracticable to determine either the period-specific effects
     or cumulative effect of the accounting change. SFAS No. 154 also requires
     that a change in depreciation, amortization, or depletion method for
     long-lived non-financial assets be accounted for as a change in accounting
     estimate affected by a change in accounting principle. SFAS No. 154 is
     effective for accounting changes and corrections of errors made in fiscal
     years beginning after December 15, 2005.

     In February 2006, the Financial Accounting Standards Board ("FASB") issued
     SFAS No. 155, Accounting for Certain Hybrid Financial Instruments - An
     Amendment of FASB No. 133 and 140. The purpose of SFAS Statement No. 155 is
     to simplify the accounting for certain hybrid financial instruments by
     permitting fair value re-measurement for any hybrid financial instrument
     that contains an embedded derivative that otherwise would require
     bifurcation. SFAS No. 155 also eliminates the restriction on passive
     derivative instruments that a qualifying special-purpose entity may hold.
     SFAS No. 155 is effective for all financial instruments acquired or issued
     after the beginning of any entity's first fiscal year beginning after
     September 15, 2006. The Company does not believe that the adoption of this
     standard on May 1, 2007 will have a material effect on its consolidated
     financial statements.

     In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
     Financial Assets, an Amendment of SFAS No. 140. SFAS No. 156 requires
     separate recognition of a servicing asset and a servicing liability each
     time an entity undertakes an obligation to service a financial asset by
     entering into a servicing contract. This statement also requires that
     servicing assets and liabilities be initially recorded at fair value and
     subsequently adjusted to the fair value at the end of each reporting
     period. This statement is effective in fiscal years beginning after
     September 15, 2006. The Company does not believe that the adoption of this
     standard on May 1, 2007 will have a material effect on its consolidated
     financial statements.

     Reclassifications - Certain reclassifications have been made to the
     consolidated financial statements for the years ended April 30, 2005 and
     2004 to conform to the classification used in the current fiscal year.

2.   Interest Receivable

     In connection with the condemnation of the Flowerfield property, the
     Company has accrued interest commencing with the date Stony Brook
     University took title to the property, in November 2005, until the time the
     Company received the advance payment, in March 2006. Pursuant to the New
     York State Eminent Domain Procedure Law, both the advance payment and any
     additional award from the Court of Claims bear interest at the current
     statutory rate of 9% simple interest from the date of the taking. See Note
     18.


                                                                             F-9
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

3.   Mortgage Receivable

     A mortgage receivable in the original principal amount of $1,800,000 was
     due from a former tenant in connection with sale of real estate. See Note
     9. The mortgage bore interest at 5% per annum with interest only payments
     due quarterly, commencing in November 2002. The remaining principal and any
     unpaid interest was paid in August 2005.

4.   Investment in Grove Partnership

     The Company has a 10.93% limited partnership interest in the Callery-Judge
     Grove, L.P. (the "Grove"). As of April 30, 2006, 2005 and 2004, the
     carrying value of the Company's investment was $0.

     The Grove has reported to its limited partners that in June 2005 it
     received an independent appraisal report of the citrus grove property,
     which is now the subject of development applications. Based upon the
     appraised value of the citrus grove operations and property, at April 30,
     2006, strictly on a pro-rata basis, the estimated fair value of the
     Company's interest in the Grove would be approximately $18,000,000 without
     adjustment for minority interest and lack of marketability discount. The
     Company cannot predict what, if any, value it will ultimately realize from
     this investment.

     The fiscal year end of the Grove is June 30. Summarized financial
     information of the Grove as of June 30, 2005, 2004 and 2003 is as follows:

     Years Ended June 30,               2005           2004            2003
     ---------------------------------------------------------------------------
                                  (in thousands) (in thousands)  (in thousands)

     Total Current Assets          $      5,226   $      5,662    $      7,970
     Total Assets                        20,419         20,917          23,048
     Total Current Liabilities            1,708          3,071           2,495
     Total Liabilities                   17,729         19,076          20,012
     Total Partners' Capital              2,690          1,841           3,036
     Total Revenues                       5,915          3,213           8,827
     Net Income (Loss)                      849         (1,195)         (1,586)

5.   Income Taxes

     The Company files a consolidated U.S. federal income tax return that
     includes all 100% owned subsidiaries. State tax returns are filed on a
     consolidated or separate basis, depending on the applicable laws.

     The provision (benefit) for income taxes is comprised of the following:

     Years Ended April 30,              2006           2005            2004
     ---------------------------------------------------------------------------
     Current:
        Federal                    $    318,905    $          -    $    101,203
        State                            85,999          22,234         (49,442)
                                   ------------    ------------    ------------
                                        404,904          22,234          51,761
                                   ------------    ------------    ------------
     Deferred:
        Federal                       5,997,000         (96,000)       (103,000)
        State                         1,950,000         (18,000)        (39,000)
                                   ------------    ------------    ------------
                                      7,947,000        (114,000)       (142,000)
                                   ------------    ------------    ------------
                                   $  8,351,904    $    (91,766)   $    (90,239)
                                   ============    ============    ============


                                                                            F-10
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     The components of the net deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
     April 30,                                                 2006           2005
     ---------------------------------------------------------------------------------
<S>                                                       <C>             <C>
     Deferred Tax Assets:
        Stock compensation                                $    192,000    $      3,000
        Accrued sick and vacation                               20,000          14,000
        Provision for bad debt                                  10,000          15,000
        Tax loss carryforwards                                       -          27,000
        Contribution carryforwards                                   -           3,000
                                                          ------------    ------------
     Total Deferred Tax Assets                                 222,000          62,000

     Deferred Tax Liabilities:
        Prepaid pension costs                                 (464,000)       (490,000)
        Unrealized gain on investment in Citrus Grove         (654,000)       (569,000)
        Gain on condemnation (a)                            (8,462,000)              -
        Land development costs                                       -        (600,000)
        Accumulated depreciation                                     -          (8,000)
                                                          ------------    ------------
     Total Deferred Tax Liabilities                         (9,580,000)     (1,667,000)
                                                          ------------    ------------
     Net Deferred Income Taxes                            $ (9,358,000)   $ (1,605,000)
                                                          ============    ============
</TABLE>

     The Company had federal net operating loss carryforwards of approximately
     $78,000, all of which was utilized in the current year to offset taxable
     income.

     (a)  In accordance with Section 1033 of the Internal Revenue Code, the
          Company has deferred recognition of the gain on the condemnation of
          its real property for income tax purposes. If the Company replaces the
          condemned property with like kind property within three years (or such
          extended period if requested and approved by the Internal Revenue
          Service at its discretion) after April 30, 2006, recognition of the
          gain is deferred until the newly acquired property is disposed of.

     A reconciliation of the federal statutory rate to the Company's effective
     tax rate is as follows:

<TABLE>
<CAPTION>
     Years Ended April 30,                              2006          2005         2004
     -------------------------------------------------------------------------------------
<S>                                                      <C>           <C>          <C>
     U.S. Federal Statutory Income Rate                  34.0%         34.0%        34.0%
     State Income Tax, net of federal tax benefits        7.5%          7.5%         7.5%
     Other Differences, net                             (2.6)%        (1.5)%         2.8%
                                                     ----------    ----------   ----------
                                                         38.9%         40.0%        44.3%
                                                     ==========    ==========   ==========
</TABLE>

6.   Retirement Plans

     The Company has a noncontributory defined benefit pension plan covering
     substantially all of its employees. The benefits are based on annual
     average earnings for the highest sixty (60) months (whether or not
     continuous) immediately preceding the Participant's termination date.
     Annual contributions to the plan are at least equal to the minimum amount,
     if any, required by the Employee Retirement Income Security Act of 1974 but
     no greater than the maximum amount that can be deducted for federal income
     tax purposes. Contributions are intended to provide not only for benefits
     attributed to service to date but also those expected to be earned in the
     future. During the years ended April 30, 2006, 2005 and 2004, the Company
     made $50,000, $0 and $0 contributions to the Plan, respectively. The
     Company has no minimum required contribution for the April 30, 2007 plan
     year.


                                                                            F-11
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     The following tables provide a reconciliation of the changes in the plan's
     benefit obligations and fair value of assets over the two-year period
     ending April 30, 2006, and a statement of the funded status as of April 30
     for all years presented:

     April 30,                                          2006            2005
     ---------------------------------------------------------------------------
     Pension Benefits
     Reconciliation of Benefit Obligation:
        Obligation                                 $  2,362,367    $  1,996,981
        Service cost                                    138,426         129,967
        Interest cost                                   125,276         129,160
        Actuarial (gain) loss                          (235,783)        269,299
        Benefit payments                               (331,982)       (163,040)
                                                   ------------    ------------
     Obligation, April 30                          $  2,058,304    $  2,362,367
                                                   ============    ============

     April 30,                                          2006            2005
     ---------------------------------------------------------------------------
     Reconciliation at Fair Value of Plan Assets:
        Fair value of plan assets, May 1           $  2,938,625    $  2,163,701
        Actual return on plan assets                    383,143         937,964
        Employer Contributions                           50,000               -
        Benefit payments                               (331,982)       (163,040)
                                                   ------------    ------------
     Fair Value of Plan Assets, April 30              3,039,786       2,938,625
                                                   ------------    ------------

     Funded Status:
        Funded status, April 30                         981,482         576,258
        Unrecognized prior-service cost                  40,230         112,968
        Unrecognized loss                               111,785         510,300
                                                   ------------    ------------
     Net Amount Recognized                         $  1,133,497    $  1,199,526
                                                   ============    ============

     The accumulated benefit obligation was $1,779,044 and $1,993,167 as of
     April 30, 2006 and 2005, respectively.

     The following table provides the components of net periodic benefit cost
     for the plans for fiscal years 2006, 2005 and 2004:

<TABLE>
<CAPTION>
     April 30,                                   2006            2005           2004
     -----------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>
     Pension Benefits
     Service Cost                           $    138,426    $    129,967    $     86,717
     Interest Cost                               125,276         129,160         119,220
     Expected Return on Plan Assets             (228,225)       (165,830)       (126,166)
     Amortization of Prior-Service Cost           72,738          72,738          72,738
     Amortization of Net Loss                      7,814          60,074          84,361
                                            ------------    ------------    ------------
     Net Periodic Benefit Cost After
        Curtailments and Settlements        $    116,029    $    226,109    $    236,870
                                            ============    ============    ============
</TABLE>


                                                                            F-12
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     The prior-service costs are amortized on a straight-line basis over the
     average remaining service period of active participants. Gains and losses
     in excess of 10% of the greater of the benefit obligation and the
     market-related value of assets are amortized over the average remaining
     service period of active participants.

     The Plan's expected return on plan assets assumption is derived from a
     detailed periodic review conducted by the Plan's actuaries and the Plan's
     asset management group. The review includes an analysis of the asset
     allocation strategy, anticipated future long-term performance of individual
     asset classes, risks and correlations for each of the asset classes that
     comprise the funds' asset mix. While the review gives appropriate
     consideration to recent fund performance and historical returns, the
     assumption is primarily a long-term, prospective rate.

     The assumptions used in the measurement of the Company's benefit obligation
     are shown in the following table:

<TABLE>
<CAPTION>
     April 30,                                                 2006            2005
     ----------------------------------------------------------------------------------
<S>                                                               <C>             <C>
     Pension Benefits
     Weighted-Average Assumptions as of April 30:
        Discount rate                                             6.21%           5.75%
        Expected return on plan assets                            8.00%           8.00%
        Rate of compensation increase                             5.00%           5.00%
</TABLE>

     The Plan's investment objectives are expected to be achieved through a
     portfolio mix of Company stock and cash and cash equivalents which reflect
     the Plan's desire for investment return while controlling total portfolio
     risk to an acceptable level.

     The defined benefit plan had the following asset allocations as of their
     respective measurement dates:

<TABLE>
<CAPTION>
     April 30,                                                 2006            2005
     ----------------------------------------------------------------------------------
<S>                                                              <C>             <C>
     Common Stock - Gyrodyne Company of America, Inc.             94.5%           93.7%
     United States Government Securities                             -             1.1%
     Corporate Equity Securities                                     -             0.3%
     Other Funds                                                   5.5%            4.9%
                                                          ------------    ------------
     Total                                                       100.0%          100.0%
                                                          ============    ============
</TABLE>

     Securities of the Company included in plan assets are as follows:

<TABLE>
<CAPTION>
     April 30,                                                 2006            2005
     ----------------------------------------------------------------------------------
<S>                                                       <C>            <C>

     Number of Shares                                           60,580         67,580
     Market Value                                         $  2,871,492   $  2,753,885
</TABLE>


                                                                            F-13
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     Expected approximate future benefit payments are as follows:

     Years Ending April 30,                                             Amount
     ---------------------------------------------------------------------------

     2007                                                            $   150,186
     2008                                                                164,018
     2009                                                                160,168
     2010                                                                150,344
     2011                                                                140,736
     2012 - 2016                                                         730,327

7.   Stock Option Plans

     Incentive Stock Option Plan - The Company had a stock option plan (the
     "Plan") which expired in October 2003, under which participants were
     granted Incentive Stock Options ("ISOs"), Non-Qualified Stock Options
     ("NQSOs") or Stock Grants. The purpose of the Plan was to promote the
     overall financial objectives of the Company and its shareholders by
     motivating those persons selected to participate in the Plan to achieve
     long-term growth in shareholder equity in the Company and by retaining the
     association of those individuals who were instrumental in achieving this
     growth. Such options or grants became exercisable at various intervals
     based upon vesting schedules as determined by the Compensation Committee.
     The options expire between April 2007 and May 2008.

     The ISOs were granted to employees and consultants of the Company at a
     price not less than the fair market value on the date of grant. All such
     options were authorized and approved by the Board of Directors, based on
     recommendations of the Compensation Committee.

     ISOs were granted along with Stock Appreciation Rights, which permitted the
     holder to tender the option to the Company in exchange for stock, at no
     cost to the optionee, that represented the difference between the option
     price and the fair market value on date of exercise. NQSOs were issued with
     Limited Stock Appreciation Rights, which were exercisable, for cash, in the
     event of a change of control. In addition, an incentive kicker was provided
     for Stock Grants, ISOs and NQSOs, which increased the number of grants or
     options based on the market price of the shares at exercise versus the
     option price.

     Non-Employee Director Stock Option Plan - The Company adopted a
     non-qualified stock option plan for all non-employee Directors of the
     Company in October 1996. The plan expired in September 2000. Each
     non-employee Director was granted an initial 2,500 options on the date of
     adoption of the plan. These options are exercisable in three equal annual
     installments commencing on the first anniversary date subsequent to the
     grant. Additionally, each non-employee Director was granted 1,250 options
     on each January 1, 1997 through 2000, respectively. These additional
     options are exercisable in full on the first anniversary date subsequent to
     the date of grant. The options expire in January 2007.


                                                                            F-14
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     A summary of the Company's various fixed stock option plans as of April 30,
     2006, 2005 and 2004, and changes during the years then ended is presented
     below:

<TABLE>
<CAPTION>
     Years Ended April 30,                           2006                      2005                      2004
     -----------------------------------------------------------------------------------------------------------------
                                                          Weighted                  Weighted                  Weighted
                                                          Average                   Average                   Average
                                                          Exercise                  Exercise                  Exercise
     Fixed Stock Options                      Shares       Price       Shares        Price        Shares       Price
     -----------------------------------------------------------------------------------------------------------------
<S>                                            <C>        <C>          <C>          <C>          <C>          <C>
     Outstanding, beginning of year            91,030     $ 15.87      164,650      $ 16.30      174,740      $ 15.28
     Granted                                        -           -            -            -       38,500        16.87
     Exercised                                (23,541)      14.36      (57,946)       16.92      (38,670)       12.62
     Forfeited                                   (384)      13.46      (15,674)       16.50            -            -
     Canceled                                       -           -            -            -       (9,920)       14.91
                                             --------                 --------                  --------
     Outstanding, end of year                  67,105       16.42       91,030        15.87      164,650        16.30
                                             ========                 ========                  ========
     Options Exercisable, year end             67,105       16.42       91,030        15.87      164,650        16.30
                                             ========                 ========                  ========
     Weighted-Average Fair Values of
         Options Granted During Year                      $     -                   $     -                   $  5.31
</TABLE>

     The following table summarizes information about stock options outstanding
     at April 30, 2006:

<TABLE>
<CAPTION>
                               Options Outstanding                     Options Exercisable
                   -------------------------------------------  ---------------------------------
                                     Weighted
                                      Average       Weighted                           Weighted
                                     Remaining       Average                           Average
       Exercise        Number       Contractual     Exercise           Number          Exercise
        Price       Outstanding        Life           Price         Outstanding         Price
     ---------------------------------------------------------  ---------------------------------
<S>                    <C>             <C>           <C>              <C>              <C>
        $15.68         22,055          1.50          $15.68           22,055           $15.68
        $15.94          3,300          1.28          $15.94            3,300           $15.94
        $16.16         13,750           .94          $16.16           13,750           $16.16
        $16.87         22,500          2.04          $16.87           22,500           $16.87
        $18.44          5,500           .67          $18.44            5,500           $18.44
</TABLE>

     Shares reserved for future issuance at April 30, 2006 are comprised of the
     following:

     Shares issuable upon exercise of stock options under the
         Company's Non-Employee Director Stock Option Plan                5,500

     Shares issuable upon exercise of stock options under the
         Company's stock incentive plan                                  61,605
                                                                    ------------
                                                                         67,105
                                                                    ============

     Incentive Compensation Plan - The Company has an incentive compensation
     plan for all full-time employees and members of the Board in order to
     promote shareholder value. The benefits of the incentive compensation plan
     are realized only upon a change in control of the Company. Change in
     control is defined as the accumulation by any person, entity or group of
     30% or more of the combined voting power of the Company's voting stock or
     the occurrence of certain other specified events. In the event of a change
     in control, the Company's plan provides for a cash payment equal to the
     difference between the plan's "establishment date" price of $15.39 per
     share and the per share price of the Company's common stock on the closing
     date, equivalent to 100,000 shares of Company common stock, such number of


                                                                            F-15
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

     shares and "establishment date" price per share subject to adjustments to
     reflect changes in capitalization. The payment amount would be distributed
     to eligible participants based upon their respective weighted percentages
     (ranging from .5% to 18.5%).

8.   Revolving Credit Line

     The Company's line of credit has a maximum borrowing limit of $1,750,000,
     bears interest at the lending institution's prime-lending rate (7.75% at
     April 30, 2006) plus 1%, and is subject to certain financial covenants. The
     line is secured by certain real estate and expires on June 1, 2009. As of
     April 30, 2006 and 2005, $1,750,000 was available under this agreement and
     the Company was in compliance with the financial covenants.

9.   Sale of Real Estate

     On August 8, 2002, the Company sold approximately twelve acres of property
     and certain buildings with a carrying value of approximately $559,000 to an
     existing tenant. The contract of sale amounted to $5,370,000 under which
     the Company received a cash payment of approximately $3,600,000 and a
     three-year mortgage for $1,800,000 with interest at 5%. The profit on the
     sale of the land and buildings was $4,700,000 net of transaction costs of
     approximately $113,000. Pursuant to SFAS No. 66, approximately $1,570,000
     of the gain on this sale was deferred. The deferred gain was recognized
     upon collection of the entire related mortgage receivable in August 2005.

     During the fiscal year ended April 30, 2006, the Company received cash
     payments from its mortgage receivable totaling $1,300,000 and recognized a
     gain on the sale of real estate of approximately $1,137,000.

10.  Concentration of Credit Risk

     Financial instruments, which potentially subject the Company to
     concentrations of credit risk, consist principally of cash and cash
     equivalents and U.S. Government securities. The Company places its
     temporary cash investments with high credit quality financial institutions
     and generally limits the amount of credit exposure in any one financial
     institution. At times the Company maintains bank account balances, which
     exceed FDIC limits. 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 exists at
     April 30, 2006, 2005 and 2004.

11.  Supplemental Disclosures of Cash Flow Information

     Cash paid during the year for:

     Years Ended April 30,                2006           2005           2004
     --------------------------------------------------------------------------

     Interest                        $          -   $     35,217   $     38,850
                                     ============   ============   ============

     Income Taxes                    $    400,085   $     30,000   $    204,768
                                     ============   ============   ============


                                                                            F-16
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

12.  Commitments

     Lease commitments - The future minimum revenues from rental property under
     the terms of all noncancellable tenant leases, assuming no new or
     renegotiated leases are executed for such premises, for future years are
     approximately as follows:

     Years Ending April 30,                                          Amount
     ---------------------------------------------------------------------------

     2007                                                      $      1,075,000
     2008                                                               458,000
     2009                                                               336,000
     2010                                                               288,000
     2011                                                               201,000
     Thereafter                                                       1,634,000
                                                               -----------------
                                                               $      3,992,000
                                                               =================

     The Company was leasing office space in St. James, New York on a
     month-to-month basis through April 30, 2006. Rental expense approximated
     $55,000, $54,000 and $57,000 for the years ended April 30, 2006, 2005 and
     2004, respectively.

     Employment agreements - Effective January 23, 2003, the Company amended the
     existing employment contracts with two officers, which provide for annual
     salaries aggregating approximately $381,000. The terms of the agreements
     were extended from one to three years and provide for a severance payment
     equivalent to three years salary in the event of a change in control.

     Land development contract - The Company entered into a Golf Operating and
     Asset Management Agreement (the "Agreement") with Landmark National
     ("Landmark") for the design and development of an 18-hole championship golf
     course community. As a result of the University's condemnation of the
     Flowerfield property, the Company has accrued a $500,000 termination fee
     pursuant to the contract. The Company was advised by Landmark that it
     believes that it is entitled to 10% of all condemnation proceeds pursuant
     to the 10% incentive fee provision. The Company does not believe that the
     condemnation triggers the incentive fee and believes that Landmark's
     position is based upon an erroneous interpretation of the incentive fee
     provision.

13.  Fair Value of Financial Instruments

     The methods and assumptions used to estimate the fair value of the
     following classes of financial instruments were:

     The carrying amount of cash, receivables and payables and certain other
     short-term financial instruments approximate their fair value.

     The estimated fair value of the Company's investment in the Callery Judge
     Grove Partnership at April 30, 2006, based upon an independent third party
     appraisal report, is approximately $18,000,000 without adjustment for
     minority and lack of marketability discount, based on the Company's
     ownership percentage.

14.  Related Party Transactions

     A law firm related to a director provided legal services to the Company for
     which it was compensated approximately $7,000, $110,000 and $229,000 for
     the years ended April 30, 2006, 2005 and 2004, respectively. As of January
     1, 2005, the aforementioned law firm is no longer primary outside legal
     counsel to the Company.


                                                                            F-17
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

15.  Major Customers

     For the year ended April 30, 2006 rental income from the three largest
     tenants represented 11%, 9% and 9% of total rental income.

     For the year ended April 30, 2005 rental income from the three largest
     tenants represented 14%, 13% and 10% of total rental income.

     For the year ended April 30, 2004 rental income from the three largest
     tenants represented 17%, 13% and 12% of total rental income.

16.  Supplementary Information - Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
     2006                                       First          Second          Third           Fourth
     ---------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>             <C>
     Revenue from Rental Property           $    494,534    $    486,166    $    332,477    $    313,474
     Rental Property Expense                    (148,068)       (151,713)       (228,948)       (188,628)
                                            ------------    ------------    ------------    ------------
     Income from Rental Property                 346,466         334,453         103,529         124,846
                                            ------------    ------------    ------------    ------------
     Net Income                             $    111,697    $    475,461    $ 12,427,569    $    100,590
                                            ============    ============    ============    ============

     Net Income Per Common Share
         Basic                              $       0.09    $       0.39    $      10.08    $       0.08
                                            ============    ============    ============    ============
         Diluted                            $       0.09    $       0.37    $       9.75    $       0.08
                                            ============    ============    ============    ============

     2005                                       First          Second          Third           Fourth
     ---------------------------------------------------------------------------------------------------

     Revenue from Rental Property           $    499,922    $    527,622    $    506,771    $    504,855
     Rental Property Expense                    (214,482)       (237,241)       (265,586)       (339,139)
                                            ------------    ------------    ------------    ------------
     Income from Rental Property                 285,440         290,381         241,185         165,716
                                            ------------    ------------    ------------    ------------
     Net (Loss) Income                      $    (52,786)   $    (35,634)   $    (88,141)   $     38,913
                                            ============    ============    ============    ============

     Net (Loss) Income Per Common Share
         Basic                              $      (0.05)   $      (0.03)   $      (0.07)   $       0.03
                                            ============    ============    ============    ============
         Diluted                            $      (0.05)   $      (0.03)   $      (0.07)   $       0.03
                                            ============    ============    ============    ============
</TABLE>

     Certain reclassifications between rental property expenses and general and
     administrative expenses were made in fiscal 2005 to conform to the
     classification used in the current fiscal year.

17.  Interest Income

     Interest income consists of the following:

<TABLE>
<CAPTION>
     Years Ended April 30,                           2006           2005           2004
     -------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
     Interest on Condemnation Advance Payment   $    921,385   $          -   $          -
     Interest Income on Investments                  111,877              -              -
     Interest Income - Other                          50,844        102,852        111,721
                                                ------------   ------------   ------------
                                                $  1,084,106   $    102,852   $    111,721
                                                ============   ============   ============
</TABLE>


                                                                            F-18
<PAGE>

                                               GYRODYNE COMPANY OF AMERICA, INC.
                                                                AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
Years Ended April 30, 2006, 2005 and 2004
--------------------------------------------------------------------------------

18.  Contingencies

     On November 2, 2005, the State University of New York at Stony Brook (the
     "University") filed an acquisition map with the Suffolk County Clerk's
     office and vested title in 245.5 acres of the Company's Flowerfield
     Property pursuant to the New York Eminent Domain Procedure Law (the
     "EDPL"). On March 27, 2006, the Company received payment from the State of
     New York in the amount of $26,315,000, which the Company had previously
     elected under the EDPL to accept as an advance payment for the property.
     Under the EDPL, both the advance payment and any additional award from the
     Court of Claims bear interest at the current statutory rate of 9% simple
     interest from the date of the taking through the date of payment.

     On May 1, 2006, the Company filed a Notice of Claim with the Court of
     Claims of the State of New York seeking $158 million in damages from the
     University resulting from the condemnation of the 245.5 acres of the
     Company's Flowerfield property. While the Company believes that a credible
     case for substantial additional compensation can be made, it is possible
     that the Company may be awarded a different amount than is being requested,
     including no compensation, or an amount that is substantially lower than
     the Company's claim for $158 million. It is also possible that the Court of
     Claims could ultimately permit the State to recoup part of its advance
     payment to the Company.



                                                                            F-19
<PAGE>

Schedule II - Valuation and Qualifying Accounts
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  Additions
                                                        ----------------------------
                                         Balance at                                                        Balance at
                                         Beginning      Charged to      Charged to                            End
                                         of Period       Expenses     Other Accounts       Deductions      of Period
                                        -----------     -----------   --------------     -------------    -----------
<S>                                       <C>             <C>                  <C>        <C>               <C>
Year End April 30, 2006

Allowance for Doubtful Accounts (a)       $ 36,934        $ 24,000             $0         $ 30,803 (b)      $ 30,131
                                        ===========     ===========      ==========      =============    ===========

Year End April 30, 2005

Allowance for Doubtful Accounts (a)       $ 71,261        $ 57,000             $0         $ 91,327 (b)      $ 36,934
                                        ===========     ===========      ==========      =============    ===========

Year End April 30, 2004

Allowance for Doubtful Accounts (a)       $ 40,861        $ 48,000             $0         $ 17,600 (b)      $ 71,261
                                        ===========     ===========      ==========      =============    ===========
</TABLE>

(a) - Deducted from accounts receivable.
(b) - Uncollectible accounts receivable charged against allowance.