SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

                 Annual Report Pursuant to Section 15(d) of the
                         Securities Exchange Act of 1934

                     For the Fiscal Year Ended June 30, 2000
                         Commission File Number 0-18958

                          Groen Brothers Aviation, Inc.
                        --------------------------------
             (Exact name of Registrant as specified in its charter)


          Utah                                         87-0376766
-------------------------------           -------------------------------------
(State or other jurisdiction of           I.R.S. Employer Identification Number
Incorporation or organization)

          2640 W. California Ave. Ste A, Salt Lake City, UT 84104-4593
          ------------------------------------------------------------
                    (Address of principal executive offices)

Company's telephone number, including area code:  (801) 973-0177

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock (No Par Value)
                     --------------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 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 such
filing requirements for the past 90 days.
                               Yes XX        No

         As of June 30, 2000, the Registrant had outstanding  72,445,064  shares
of common stock, no par value per share, which is the Registrant's only class of
common stock.

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                    Documents Incorporated by Reference: None

Note:  Exhibit index required by item 601 of Regulation S-K appears on page 11.




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                                     PART I
                                     ------

Item 1.     Business
--------------------

THE COMPANY

         Groen Brothers  Aviation,  Inc. ("the Company") was incorporated in the
State of Utah on July 28, 1980. On September 18, 1990, the Company  exchanged 80
percent of its common  stock for 100  percent of the common  stock of Sego Tool,
Inc.,  a Utah  Corporation.  This was in  effect a  reverse  acquisition  of the
Company by the owners of Sego Tool.  The Company  changed its name from New Wave
Energy to Groen Brothers  Aviation on October 3, 1990. Prior to July 1, 1993 the
Company's  intent was to lease the  technology to other  entities to develop the
gyroplane, and the Company would receive royalties on its technology.  Effective
July 1, 1993,  the Company  determined  that it would complete  development  and
manufacture  the gyroplane by itself.  Because of this change in business focus,
the Company  became a development  stage business on July 1, 1993 under SFAS No.
7.

         The Company, through its now wholly-owned subsidiary,  Sego Tool, Inc.,
is developing for manufacture the Hawk Gyroplane.  The Company's only operations
are through its wholly-owned subsidiary.  Hereafter, "the Company" will refer to
the  operations of Groen  Brothers  Aviation,  Inc.  (GBA) and its  wholly-owned
subsidiary, Sego Tool, Inc.

         In an effort to pursue an easy-to-fly and cost-efficient gyroplane that
could  effectively  compete in the general aviation  market,  the Groen brothers
(Jay and David) had first to build a  proof-of-concept  aircraft.  They formed a
private  company and spent their own money to test their  design of a collective
pitch   controlled   rotor  system.   In  1987,   the  Groen   Brothers'   first
proof-of-concept  prototype  flew  successfully.  With the  support  of  private
investors  they  soon  after  began  the  development  of the Hawk 1 (one  seat)
prototype.  In 1990,  Groen Brothers  Aviation became a  fully-reporting  public
corporation  (stock symbol  "GNBA") to facilitate  the raising of capital and to
give minority shareholders the flexibility of owning publicly traded stock.

         When the Hawk 1 successfully  flew in December 1992, the Groen Brothers
had moved much closer toward achieving their ultimate goals and objectives.  The
development of the Hawk 2 followed,  and in February 1997, their third prototype
achieved a vertical  takeoff at a world  record  breaking  density  altitude for
gyroplanes.  Today,  after having spent more than fourteen  years bringing their
idea to fruition, enthusiasm for the GBA Hawk within the aviation community runs
high.  The Company has  experienced  significant  interest from law  enforcement
agencies,  commercial  flying entities,  and individuals in the U.S. and abroad,
which has  helped  position  the  Company to attract  the  investment  needed to
accelerate the current transition into production.

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<PAGE>

THE PRODUCT

What is a Gyroplane?

         Gyroplane  is an  official  term  designated  by the  Federal  Aviation
Administration (FAA) describing an aircraft that gets its lift from rotor blades
and its  thrust  from an  engine-driven  propeller.  Historically,  this type of
aircraft  was known as the  autogiro  and/or  the  gyrocopter,  which  were both
trademark names. A gyroplane's rotor blades turn freely in flight and are tilted
back to catch the air. The rushing air spins the rotor as the aircraft is thrust
forward by its propeller.  Early gyroplanes were powered in a tractor  (pulling)
configuration.   The  Hawk  4  uses  a  pusher  propeller,  giving  unobstructed
visibility.

         Since the rotor blades on gyroplanes  are powered in flight only by the
onrushing air  (autorotation),  much like a windmill,  there is no torque to the
system, and therefore no need for a tail rotor. The gyroplane is a stable flying
platform.  This is not so with  helicopters,  which  pull the air  down  through
engine-powered  rotor  blades  making it possible to hover,  but also making the
aircraft  unstable,  mechanically  complicated  and difficult to fly. Due to the
inherent  simplicity  of  gyroplanes,  they are easier to operate  and much less
expensive to maintain than helicopters.

         The single  attraction of helicopters  over gyroplanes is their ability
to hover, which is necessary in some situations such as sea rescue or sling-load
work.  Even so,  the  percentage  of today's  helicopter  market  that  requires
hovering is rather small,  perhaps no more than 10 percent.  In air surveillance
and point-to-point flying, the inability to hover is not a disadvantage, because
the Hawk can take off and land vertically  without having to hover.  Helicopters
at low altitude,  out of ground effect, avoid hovering whenever possible.  It is
too dangerous. In a low level surveillance roll, such as law enforcement, border
patrol,  traffic control, etc., proper procedure for all rotorcraft is to circle
in a slow orbit, something the Hawk can do efficiently and safely.

         Gyroplanes in flight, being in constant autorotation, are much safer in
low and  slow  flight  than  helicopters  and  airplanes.  If  power  fails in a
gyroplane,  the autorotation  continues and the aircraft can be guided softly to
the ground from any altitude.  When power fails in a helicopter,  the pilot must
convert  from  powered  flight to  autorotative  flight to keep the rotor blades
turning. This is an unforgiving process,  requiring split second reaction by the
pilot, and requiring a minimum altitude and/or airspeed.  If a helicopter is too
low and too slow  during a power  failure,  a  condition  shown on graphs in the
helicopter's  flight manual (known as the "dead man's curve"),  the pilot cannot
avoid a crash landing.  Airplanes  flying low and slow risk a stall/spin  crash,
which cannot happen in a gyroplane.

Interrupted History of the Gyroplane

                                       4
<PAGE>

         Autorotative  flight was developed in 1919 by Spanish aviator,  Juan de
la Cierva,  who named his invention the "autogiro,"  which means "self turning."
His intention was to eliminate the risk of stalling,  as in an airplane.  In the
1920s and  1930s an  American,  Harold  Pitcairn,  under  license  from  Cierva,
designed and built many gyroplanes which  eventually made vertical  takeoffs and
landings.  Wallace  Kellett,  a colleague  of Pitcairn,  was another  well-known
American designer who added to our knowledge of this form of flight.

         The  autogiro  concept  was  proven  commercially  successful  in  many
applications  during the 1930s and early 1940s.  An outstanding  example was its
use by the U.S. Postal Service for nearly ten years,  for mail delivery from the
roofs of post offices.  Thousands of flights carrying millions of pieces of mail
were   performed   by  Kellett  and  Pitcairn   gyroplanes   flying  in  Camden,
Philadelphia, Chicago, New Orleans, Washington, D.C., and other cities.

         By the 1940s the private  aircraft  market had collapsed with the Great
Depression,  and the main source of  investment  in aviation  came from the U.S.
military.  At the time, Igor Sikorsky was supplying the government with a number
of different  transport airplanes of his own design. He then decided to design a
helicopter,  and he began by licensing rotor  technology from Pitcairn.  He then
convinced  the  U.S.  military  to  invest  in the  helicopter  rather  than the
gyroplane,  which  effectively  shelved  the  gyroplane.  To the  military,  the
helicopter  appeared to be the next logical step in the evolution of rotorcraft.
Apparently the economy and safety of gyroplanes did not count for much,  because
the helicopter promised more versatility for military purposes.

         Helicopter  flight  proved  more  difficult  than  the  military  first
imagined.  The promise of the helicopter was not fully realized until the middle
of the Vietnam  War,  thirty years  later,  during the early 1970s.  It was only
after  billions of tax dollars were spent  adapting and upgrading  expensive jet
turbine  engines,  that  payload  weights  were  increased  enough to move large
numbers of soldiers and their equipment into and out of the jungle.  The Vietnam
War clearly  demonstrated the versatility of vertical flight, but the helicopter
had proved too expensive for widespread civilian use.

         During the late 1950s and early 1960s three commercial  gyroplanes were
developed and FAA certified by private  companies.  The Umbaugh (later the Air &
Space 18A),  the Avian (a Canadian  design of that same period that  reached FAA
certification, but was never produced), and the McCulloch J-2. Each of the above
gyroplanes  had  only  two  seats.  In  every  case,  as  an  expedient  to  FAA
certification,  the designers adapted helicopter rotors and blades, and thus did
not fully use the gyroplane technology created by their 1930s predecessors. As a
result,  none of these  gyroplanes  performed well and the companies failed (the
Air & Space 18A and the McCulloch each delivered  about 100 units).  Also during
the 1950s,  Igor  Benson,  a  colleague  of  Sikorsky,  developed  a  home-built
gyroplane kit for  amateurs.  He called it the  "gyrocopter."  His idea for this

                                       5
<PAGE>

open-frame model came from a German observation gyroplane,  towed behind U-boats
during the war.  Home-built kits, most of which seat one person,  continue to be
popular today with more than a dozen small manufacturers now in the market.

         Large  aviation   companies   capable  of  developing  and  bringing  a
commercial-sized  gyroplane to market,  such as Boeing and Bell, have had tunnel
vision regarding the helicopter, mainly because of lucrative military contracts.
The civilian side of helicopter  production has not been highly profitable.  Yet
there is no doubt  that  major  aviation  companies  understand  the  commercial
potential  of  vertical  takeoff  and  landing  (VTOL)  as  evidenced  by  their
continuing investment into the development of aircraft targeted for the civilian
market, including a civilian tilt-rotor. Over the years the helicopter companies
have committed  large capital outlays toward  improving the helicopter,  are now
developing tilt-rotor technology, and until GBA's gyroplanes are flying in large
numbers,  are not  likely to pursue a product  type  that  competes  with  their
current product lines. In addition,  under a climate of reduced  military sales,
the helicopter  companies have much less  discretionary  budget for research and
development.


GBA Hawk Series

         GBA is now in the  process  of  developing  for  manufacture  two basic
models of high  performance  gyroplanes,  the Hawk 4 (four seat) and Hawk 6 (six
seat).  A Hawk 8 (eight  seat) is planned to  follow.  The Hawk  series is being
designed and built to conform to FAA  regulations  for rotorcraft (FAR Part 27).
The primary technical  difference  between the Hawk and the gyroplanes that came
before it, is that the Hawk has an infinitely  variable collective pitch control
(collective  pitch is the blade's angle of attack to the relative wind) that can
be operated  between two extreme  settings.  This means that during  flight,  by
moving a  collective  pitch  control  lever,  the pilot can  change,  in varying
degrees,  the pitch of the rotor blades  collectively (both at the same time and
in equal  amounts).  The ideal amount of pitch needed to fly at a given airspeed
and given operational weight can differ slightly under changing conditions.  The
patented  Hawk rotor head allows the pilot to optimize  the rotor blade pitch to
the existing  conditions  (minimize drag and maximize lift).  The variable pitch
rotor makes possible a smoothly controlled  vertical takeoff and landing.  Early
vertical  takeoff  gyroplanes  employed a two-position  pitch control rotor head
that was  pre-rotated at flat pitch and then released  suddenly into fixed pitch
for flying.  This  produced a vertical  takeoff,  but it was a rather  startling
"jump,"  with no  control  over the amount of pitch in the rotor nor the rate at
which the pitch was increased.

         The GBA Hawk series models will all be capable of vertical takeoffs and
landings, eliminating the need for runways. The first of the series, the Hawk 4,
uses a pre-rotator to spin the rotor blades at flat pitch to approximately  140%
of in-flight  rotor RPM.  The pilot then  increases  collective  pitch using the

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<PAGE>

excess inertia in the spinning rotor to takeoff vertically. Just before liftoff,
the power to the rotor is disengaged,  and there is no need for antitorque force
(tail  rotor) in flight.  On the  ground,  during  spin-up the wheels and brakes
counteract the torque. This procedure, originally called the "jump takeoff," was
first done in the 1930s in the Pitcairn PA-36. A two-position  rotor was spun up
at flat pitch. When the proper RPM was reached,  the prerotator was disconnected
and the rotor  was  suddenly  locked  into a fixed  flight  pitch,  causing  the
gyroplane to jump off the ground.

         The Hawk 4, with its  variable  pitch  rotor,  is capable of a smoothly
controlled  vertical  takeoff  using  a  prerotation  technique.  The  Hawk  4's
Rolls-Royce  Model 450 Series 450 shp gas turbine  engine  provides  prerotation
power and thrust following liftoff. The main powerplants for both the Hawk 6 and
Hawk 8 will be jet  turboprops.  Although  turbine  engines,  compared to piston
engines,  are expensive,  the cost per  passenger-mile of the Hawk series should
remain a fraction of a comparable helicopter.

         Vertical landing is normally a power-off, steep approach to the landing
site, followed by a slight pull back on the cyclic control stick and an increase
in collective pitch. With high inertia rotor blades,  there is a built-in safety
margin  during  landing.  A flare on final  approach,  started too high,  can be
corrected by adding more pitch than normal, which lets the Hawk settle softly to
the landing pad. Short rolling  takeoffs and landings are also possible with the
GBA gyroplanes, which all have wheeled landing gear instead of skids.


FAA Type Certificate

         Type  certification  is the process that  conforms  the Hawk  Gyroplane
engineering  and  flight   characteristics   to  FAA   requirements.   The  type
certification  process legally enables a U.S.  manufacturer to mass-produce  its
aircraft  "type,"  insuring  that each  gryoplane  that  flies  away from  Groen
Brothers'  factory meets  identical  safety and  performance  requirements.  The
regulations  governing  an FAA  Type  Certificate  for the  Hawk  Gyroplane  are
contained in Federal Aviation Rules (FAR) Part 27, which regulates certification
of helicopters  and  gyroplanes.  The FARs require the  manufacturer  to provide
drawings  and  engineering  data  for  every  component  of  the  aircraft.  The
engineering  data must show  precisely  what  stresses  will be  imposed  on the
component  during its  operational  life.  Its  capabilities  must exceed  these
stresses by a minimum of 50  percent.  The Hawk is  designed  with even  greater
margins of safety  when weight is not a penalty.  The quality of each  component
must also be shown to be repeatable during the manufacturing  process,  and when
GBA buys a part from  another  manufacturer,  the part must also be certified by
GBA, or under a specific "Technical Standard Order (TSO)" by the FAA.

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<PAGE>

         GBA's FAA  certification  plan is a detailed  description of the method
GBA is  using  to prove  compliance  with the  FARs.  The  Company  employs  FAA
Designated  Engineering  Representatives  (DERs - approve  the  engineering  and
drawings)  and FAA  Designated  Airworthiness  Representatives  (DARs  -  ensure
conformity  to  the  approved  engineering).   Our  DERs  and  DARs  are  highly
experienced in rotorcraft design and certification  and, in effect,  approve our
work as though they were the FAA.  Type  certifying  the Hawk series  gyroplanes
with the FAA is a tedious and expensive process, but once achieved,  in addition
to  guaranteeing  a high standard of quality,  becomes a significant  barrier to
competition.  A Type Certificate is the permanent  property of the manufacturer,
and is the core of an aircraft manufacturer's business assets.

         GBA held its Pre-Type  Certificate Board Meeting, on March 3, 1998, and
at that  meeting  submitted  to the  FAA its  formal  application  for the  Type
Certificate on the Hawk 4 Gyroplane.  An esteemed  gathering of aviation experts
met to conduct  the  Pre-Type  Certificate  Board  Meeting at the Salt Lake City
headquarters of Groen Brothers Aviation. The FAA board members came from several
regional directorates,  making up the highly competent government team necessary
to type certify Groen  Brothers'  21st century  version of the  gryoplane.  Also
attending were representatives of Continental Motors, ATI and Simula, as well as
a host of FAA DERs and FAA DARs (consulting  specialists approved by the FAA for
this work).  The  meeting is  historically  important  because GBA has added new
technology  and  capability  to a form of  flight  that  has  had no  commercial
significance for more than half a century.

         Never  has a  gyroplane,  or  helicopter,  had to meet  such  stringent
government regulations.  An example of the new regulatory climate is the seat in
the Hawk 4, which is being  supplied by Simula Inc., an  Arizona-based  company.
Simula has developed the seat  technology  for a pilot or passenger to survive a
vertical  impact of thirty Gs.  Although the gyroplane is a simple and safe form
of  rotorcraft,  it is the  history  of the  helicopter  that  led to  this  FAA
requirement for all new rotorcraft.  Modern government requirements have spawned
other specialized aircraft parts  manufacturers,  including rotor blade, landing
gear,  wheel and brake,  etc. GBA is relying heavily on FAA certified  suppliers
for these parts, because it reduces the time and cost of type certification.

Manufacturing and Materials Management

         GBA is  implementing  materials  management  procedures  to  guide  the
manufacturing process. In broad terms, materials management is an administrative
and  operational  function that directly  supports  manufacturing  activities in
providing  all the  materials  and  component  parts  that go into the  finished
product.  Materials  control will manage the Company's program to maintain parts
history files in accordance with FAA requirements.

         The manufacturing plan includes a transition period during which GBA is

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currently  assembling the first Hawk 4s in its Salt Lake City facility. A larger
manufacturing  plant will be planned.  The Company has developed a family of FAA
certified  suppliers for  subcontracting  the cutting,  machining and forming of
metal and composite components,  and the purchasing of off-the-shelf components,
such as  wheels,  instruments,  avionics,  switches,  etc.  Purchased  parts and
materials are scheduled to optimize quantity and timing of deliveries.  The need
to have readily  available  spare parts to meet the  requirements  of service to
customers,  as well as to replace parts scrapped in manufacturing,  dictates the
maintenance  of parts  inventories  at levels that satisfy  delivery of finished
product requirements. Close coordination with suppliers, engineering,  marketing
and sales is necessary and is taken into account in each department's long-range
plan.  Procedural  manuals have been developed for  requisitioning,  purchasing,
materials  control,  store  keeping,  parts lists,  raw  materials  controls and
accounting.

THE MARKET

         As helicopters  have become  commonplace,  many potential users of VTOL
aircraft  have realized how useful  vertical  flight would be if only they could
afford it. This demand for  affordable  vertical  flight should provide a market
for GBA gyroplanes that is much larger than the existing helicopter market.

Government and Commercial Aviation

         The  market  for the Hawk is large and  varied.  The  world has  become
dependent upon helicopters  where runways are not available or if slow flight is
required.  The Company  believes the Hawk is a low cost  alternative,  which can
perform competitively with helicopters and airplanes in many roles including the
following:

 1.      Law enforcement  (police,  sheriff,  border patrol,  customs,  and drug
         interdiction).
 2.      Public service organizations (fire patrol, medical transport,  wildlife
         and land management).
 3.      Military (courier, armed surveillance, VIP transport, forward artillery
         control, ground attack, unmanned aerial vehicle).
 4.      Commercial  (oil,  gas,  and power  line  patrol and  inspection,  land
         survey, aerial photography,  crop spraying,  herd management,  air taxi
         service, corporate transport, and flight training).
 5.      Private (commuting, sport flying, training).


Dealer Network

         Groen Brothers Aviation is presently establishing Authorized Dealers in
major  cities  across  the  United  States  and  Canada.  GBA  Dealers  will  be
responsible for sales,  service,  maintenance,  and flight training. To become a

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dealer,  aircraft  deposits  are  given  to  GBA  based  on  a  quota  for  each
metropolitan  statistical  area.  At present,  the Company has received 148 down
payment deposits from its dealers and private  individuals.  The dealers in turn
take  deposits from  customers as orders are  received.  Dealers will handle all
sales, including government agencies and fleet sales, except for military sales,
which will be made directly by GBA.

         During the past ten years of  developing  the Hawk  Gyroplane,  GBA has
received sales  inquiries from  thousands of potential  customers,  domestic and
foreign. In addition to establishing a USA dealer network, the Company is now in
discussion with several overseas companies about foreign dealerships. In support
of all  this,  the  Company  has  established  its own  internet  site  with two
addresses,  www.groenbros.com  and  www.gbagyros.com.  Each GBA  Dealer  will be
linked to the main GBA web site as well as having their own internet  site.  The
Company also makes available collateral printed materials and videos of the Hawk
Gyroplane.

         The Company  introduced the Hawk 4 Gyroplane at the world's largest air
show,  AirVenture  '99 in  Oshkosh,  Wisconsin  the last week of July 1999.  The
Company's booth and outside display were busy with visitors from across the U.S.
and around the world.  GBA dealers were also at the show. At the AirVenture 2000
show in July 2000,  the  Company  flew its  Rolls-Royce  turbine-powered  Hawk 4
Gyroplane.

Export Sales

         GBA has been  approached  by  companies  in more  than a dozen  foreign
countries on five continents  requesting to be dealers. At present,  the Company
is having detailed  discussions  with several  different  foreign  companies and
governments.  GBA has appointed to the position of International  Sales Manager,
an  individual  who  is a  specialist  in  selling  rotor-wing  aircraft  in the
international   market.  This  sales  professional  has  decades  of  successful
international  sales experience with a major helicopter  manufacturer and begins
full time employment with GBA in September 2000.

Patents

         GBA presently owns three U.S. patents and several international patents
which relate to collective pitch and flight controls.  The important  element of
these patents is collective pitch control on a semi-rigid,  teetering rotor head
for gyroplanes.  This is different from similar  sounding claims for helicopters
as this concept has never before been applied to  gyroplanes.  The patent claims
are written very broadly,  which makes it difficult to design  around them,  and
the patent process is ongoing.  The Company adds claims as improvements are made
to the rotor head,  which  extends the patent  life.  GBA's  patent  opportunity
existed because of a fifty-year  hiatus in development in gyroplane  technology.
The Company has filed for patent protection in nearly every country in the world
containing aircraft manufacturing  capability of any significance and with which

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the U.S. has reciprocal agreements on intellectual  property.  GBA's patents are
filed in Japan,  Korea,  Canada,  and  Brazil.  In  addition  to the three  U.S.
patents,  GBA has been  awarded  international  patents  in  Australia,  the EU,
Belgium, France, Germany, Italy, Netherlands,  Portugal, Spain, Switzerland, and
the United Kingdom.

Item 2.     Properties
----------------------

         The Company leases its Salt Lake City,  Utah facility of  approximately
25,000 square feet,  within which it is assembling the Hawk 4, and designing the
follow-on models. This interim development/manufacturing  facility is located at
2640 W. California Avenue, Suite A, Salt Lake City, UT 84104-4593.  In addition,
the  Company  leases  a  flight  facility  in  Buckeye  Airport,   Arizona,   of
approximately 12,000 square feet.

Item 3.     Legal Proceedings
-----------------------------

         The Company is a plaintiff in litigation in Germany. Pursuant to a loan
agreement with a German citizen and two European  banks,  the Company  delivered
four million  shares of common stock as  collateral  in July of 1993. A loan was
never  received on the  collateral  and in  December  of 1993 the Company  filed
criminal  charges  and  retained  a  law  firm  in  Germany  to  commence  civil
litigation.  In 1997, the German Courts judged  favorably for the Company on all
counts.  The defendant  appealed on a technicality and the appellate court ruled
in favor of the Company.  The Company  expects to have its stock returned during
this fiscal year.

Item 4.     Submission of Matters to a Vote of Security Holders
---------------------------------------------------------------

         At the Annual Meeting of  Shareholders,  May 20, 2000, the shareholders
voted on and approved the following items:

1.       Election of David L. Groen, H. Jay Groen,  and James P. Mayfield III as
         directors to hold office until the 2001 Annual Meeting of  Shareholders
         or until their successors shall have been duly elected and qualified.
2.       Ratify the Board of Directors'  appointment of Tanner + Co.,  Certified
         Public  Accountants,  as  independent  auditors  to the Company for its
         fiscal year ended June 30, 2001.
3.       Approve Amended and Restated Articles of Incorporation, that include an
         increase  in the  number  of  authorized  shares of the  Company  and a
         limitation on the liability of directors pursuant to Section 841 of the
         Utah Revised Business Corporations Act, as amended (the "Revised Act").
4.       Approve  th   number of shares  under the  Company's  2000 Stock Optio
         Plan.
5.       Approve  a voting  process whereby  shareholders can approve an action,
         without  holding  a meeting,  if a written  consent  setting  forth the
         action is signed by a majority of the shareholders  pursuant to Section

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         704 of the Revised Act (or such greater vote as may be required).


Item 5.     Market for the Registrant's Common Stock and
--------------------------------------------------------
            Related Security Holder Matters
            -------------------------------

         The Company's common stock, no par value,  traded Over The Counter,  is
listed on the OTC Bulletin  Board as GNBA. No cash  dividends have been paid for
the past four quarters.

             Quarterly Common Stock Bid Price Ranges (Calendar Year)

                           Year             Quarter           High           Low
                           ----             -------           ----           ---
                           1997             1st               1.88          1.25
                                            2nd               1.69           .94
                                            3rd               1.38          1.00
                                            4th               1.31           .50
                           1998             1st                .75           .41
                                            2nd               1.09           .35
                                            3rd                .72           .53
                                            4th                .81           .47
                           1999             1st                .78           .47
                                            2nd               1.68           .59
                                            3rd               2.63          1.06
                                            4th               1.31           .81
                           2000             1st               1.56           .75
                                            2nd               1.56          1.03

         The number of shareholders of record for the Company's  common stock as
of June 30, 2000,  were 1,202,  and the number of shares issued and  outstanding
were 72,445,064.

Item 6.     Management's Discussion and Analysis of Financial
-------------------------------------------------------------
            Condition and Results of Operations
            -----------------------------------

Results of Operations

         Revenue

         During 2000, total revenues  increased to $126,000,  compared to $4,000
in 1999. This was due to an increase in interest income. The majority of Company
revenue in 2000 and 1999 consisted of interest income.


                                       12
<PAGE>

         Costs and Expenses

         During 2000,  research and  development  costs increased to $6,451,000,
compared to $6,140,000 in 1999, a 5 percent  increase.  That increase took place
across the board as the  number of  employees  and  consultants  increased,  and
tooling and equipment costs went up by a  corresponding  multiple in preparation
for production of the Hawk 4.

         General  and  administrative  costs in 2000  increased  to  $2,272,000,
compared to $2,079,000  in 1999,  an increase of 9 percent.  The increase was in
support  of  the  continuing  FAA  certification  process  and  an  increase  in
personnel.

         Net Earnings

         During  2000 and 1999 the  Company  continued  to  record  losses as it
conducted flight tests,  built new models,  and made the transition  toward full
marketing and manufacturing of the Hawk Gyroplane series.

         Liquidity and Capital Resources

         The Company  estimates that capital  requirements  will continue at the
present pace over the next year. The Company is now making the  transition  into
manufacture  of the  Hawk  4.  The  actual  schedule  of the  planned  expansion
ultimately depends upon the Company's ability to attract capital.

         Over the past three  years the  Company  has raised  $14.7  million for
operations  through the sale of equity,  of which $7.4 million was raised during
the past fiscal  year.  In the past the Company has been  successful  in raising
capital as needed.  During the next fiscal  year the Company  will need to raise
approximately $9 million for operations at its current  development level. There
can be no  guarantee or assurance  that the Company  will be  successful  in its
ability to raise capital at favorable rates or at all.

         Sales of  gyroplanes,  which began in 1999, are providing an additional
source of capital in the form of cash from down payments.  It is common practice
in the aircraft industry to take down payments to establish  delivery  positions
on new aircraft  which may not be delivered for two years or more.  High capital
costs and the lack of  competition  resulting  from  strict FAA  regulation  are
responsible for this practice.

         Management  does not  anticipate  that  revenues  or  expenses  will be
materially affected by inflation over the next twelve months.

Item 7.     Financial Statements
--------------------------------
                                                                      Page
                                                                      ----

         Index to Consolidated Financial Statements

                                       13
<PAGE>

         Independent auditors' report of Tanner + Co.                 F-1

         Financial statements:

              Consolidated balance sheet, June, 30, 2000.             F-2

              Consolidated  statement of operations for
              the two years ended June 30, 2000 and 1999,
              and cumulative amounts.                                 F-3

              Consolidated  statement of stockholder's
              deficit for the two years ended June 30,
              2000 and 1999, and cumulative amounts.                  F-4

              Consolidated  statement of cash flows for
              the two years ended June 30, 2000 and 1999,
              and cumulative amounts.                                 F-7

              Notes to consolidated financial statements.             F-8





Groen Brothers Aviation
Consolidated Financial Statements
June 30, 2000




<PAGE>
<TABLE>
<CAPTION>



                                                                   GROEN BROTHERS AVIATION, INC.
                                                                   (A Development Stage Company)

                                                      Index to Consolidated Financial Statements

------------------------------------------------------------------------------------------------



                                                                                            Page
                                                                                            ----


<S>                                                                                         <C>
Independent auditors' report                                                                F-1


Consolidated balance sheet                                                                  F-2


Consolidated statement of operations                                                        F-3


Consolidated statement of stockholders' deficit                                             F-4


Consolidated statement of cash flows                                                        F-7


Notes to consolidated financial statements.                                                 F-8


------------------------------------------------------------------------------------------------
</TABLE>




<PAGE>



                                                    INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
of Groen Brothers Aviation, Inc.

We have audited the  accompanying  consolidated  balance sheet of Groen Brothers
Aviation, Inc., (the Company), a development stage company, as of June 30, 2000,
and the related consolidated statements of operations, stockholders' deficit and
cash flows for the two years ended June 30, 2000 and  cumulative  amounts  since
July 1, 1993 (date of commencement  of development  stage).  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. 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 Groen  Brothers
Aviation,  Inc., as of June 30, 2000,  and the results of their  operations  and
their cash flows for the two years ended June 30, 2000, and  cumulative  amounts
since July 1, 1993 (date of  commencement of development  stage),  in conformity
with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2 to the
consolidated  financial  statements,  the Company has suffered recurring losses,
has a  stockholders'  deficit and has a net working  capital  deficiency.  These
conditions  raise  substantial  doubt  about its  ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
note 2. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.



Salt Lake City, Utah
August 11, 2000 except for note 15, which
is dated September 26, 2000

                                                                             F-1

<PAGE>
<TABLE>
<CAPTION>



                                                                              GROEN BROTHERS AVIATION, INC.
                                                                              (A Development Stage Company)

                                                                                 Consolidated Balance Sheet

                                                                                              June 30, 2000
-----------------------------------------------------------------------------------------------------------


<S>                                                                                     <C>

              Assets
              ------

Current assets:
     Cash                                                                               $          174,000
     Related party receivables                                                                     119,000
     Prepaid expenses                                                                               56,000
                                                                                        ------------------

                  Current assets                                                                   349,000

Investment art held for sale                                                                     1,090,000
Property and equipment, net                                                                        964,000
                                                                                        ------------------

                  Total assets                                                          $        2,403,000
                                                                                        ------------------

----------------------------------------------------------------------------------------------------------

              Liabilities and Stockholders' Deficit
              -------------------------------------

Current liabilities:
     Accounts payable                                                                   $          489,000
     Accrued expenses                                                                            1,681,000
     Related party notes payable                                                                   450,000
     Current portion of long-term debt                                                             590,000
                                                                                        ------------------

                  Total current liabilities                                                      3,210,000

Long-term debt                                                                                     733,000
Deposits                                                                                         2,654,000
                                                                                        ------------------

                  Total liabilities                                                              6,597,000
                                                                                        ------------------

Commitments and contingencies                                                                            -

Stockholders' deficit:
     Preferred stock, no par value, 200,000,000 shares
       authorized; no shares outstanding                                                                 -
     Common stock, no par value, 200,000,000 shares
       authorized; 72,445,064 shares issued and outstanding                                     21,991,000
     Accumulated deficit                                                                       (26,185,000)
                                                                                        ------------------

                  Total stockholders' deficit                                                   (4,194,000)
                                                                                        ------------------

                  Total liabilities and stockholders' deficit                           $        2,403,000
                                                                                        ------------------

-----------------------------------------------------------------------------------------------------------

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


<PAGE>
<TABLE>
<CAPTION>


                                                                             GROEN BROTHERS AVIATION, INC.
                                                                             (A Development Stage Company)

                                                                      Consolidated Statement of Operations

                                                               Years Ended June 30, and Cumulative Amounts
----------------------------------------------------------------------------------------------------------




                                                                                            Cumulative
                                                           2000              1999            Amounts
                                                    ------------------------------------------------------
<S>                                                 <C>                  <C>               <C>

Revenues-
     interest and other                             $          126,000   $         4,000   $      166,000
                                                    ------------------------------------------------------

Costs and expenses:
     Research and development                                6,451,000         6,140,000       15,803,000
     General and administrative expenses                     2,272,000         2,079,000        7,909,000
     Interest expense                                          199,000           124,000          771,000
                                                    ------------------------------------------------------

                  Total costs and expenses                   8,922,000         8,343,000       24,483,000
                                                    ------------------------------------------------------

         Net loss before income taxes                       (8,796,000)       (8,339,000)     (24,317,000)

Provision for income taxes                                           -                 -                -
                                                    ------------------------------------------------------

                  Net loss                          $       (8,796,000)  $    (8,339,000)  $  (24,317,000)
                                                    ------------------------------------------------------

Net loss per share - basic and diluted              $             (.13)  $          (.17)  $         (.54)
                                                    ------------------------------------------------------

Weighted average common and common
  equivalent shares - basic and diluted                     70,186,000        50,471,000       44,742,000
                                                    ------------------------------------------------------




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

<PAGE>
<TABLE>
<CAPTION>


                                                                                        GROEN BROTHERS AVIATION, INC.
                                                                                        (A Development Stage Company)

                                                                      Consolidated Statement of Stockholders' Deficit

                                                            Years Ended June 30, 2000 and 1999 and Cumulative Amounts
---------------------------------------------------------------------------------------------------------------------






                                     Preferred Stock             Common Stock
                                 ---------------------------------------------------     Accumulated
                                    Shares      Amount      Shares         Amount          Deficit            Total
                                 -------------------------------------------------------------------------------------
<S>                              <C>         <C>         <C>          <C>              <C>              <C>

Balance, July 1, 1993                   -    $      -    27,153,509   $   1,074,000    $  (1,868,000)   $    (794,000)

Issuance of common stock for:
  Cash                                  -           -     1,083,611         280,000                -          280,000
  Collateral on a loan                  -           -     4,000,000               -                -                -
  Commissions                           -           -        40,857          10,000                -           10,000
  Debt                                  -           -       172,222          30,000                -           30,000
  Services                              -           -        63,185          15,000                -           15,000

Cancellation of shares previously
  issued                                -           -       (50,000)              -                -                -

Issuance of stock options at 50%
  of bid at option date                 -           -             -          10,000                -           10,000

Net loss                                -           -             -               -         (480,000)        (480,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1994                  -           -    32,463,384       1,419,000       (2,348,000)        (929,000)

Issuance of common stock for:
  Assets                                -           -         2,286           1,000                -            1,000
  Cash                                  -           -     1,028,923         432,000                -          432,000
  Commissions                           -           -        18,546           9,000                -            9,000
  Debt                                  -           -       487,027          55,000                -           55,000
  Services                              -           -       138,860          61,000                -           61,000

Net loss                                -           -             -               -         (710,000)        (710,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1995                  -           -    34,139,026       1,977,000       (3,058,000)      (1,081,000)

Issuance of common stock for:
  Assets                                -           -       100,000          51,000                -           51,000
  Cash                                  -           -     1,669,404         547,000                -          547,000
  Commissions                           -           -       124,719          41,000                -           41,000
  Debt                                  -           -        10,000           2,000                -            2,000
  Services                              -           -       686,708         168,000                -          168,000

Net loss                                -           -             -               -       (1,046,000)      (1,046,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1996                  -           -    36,729,857       2,786,000       (4,104,000)      (1,318,000)



---------------------------------------------------------------------------------------------------------------------

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

<PAGE>
<TABLE>
<CAPTION>


                                                                                        GROEN BROTHERS AVIATION, INC.
                                                                                        (A Development Stage Company)

                                                                      Consolidated Statement of Stockholders' Deficit

                                                                                                            Continued
---------------------------------------------------------------------------------------------------------------------






                                     Preferred Stock             Common Stock
                                 ---------------------------------------------------     Accumulated
                                    Shares      Amount      Shares         Amount          Deficit            Total
                                 -------------------------------------------------------------------------------------
<S>                              <C>         <C>         <C>          <C>              <C>              <C>


Issuance of common stock for:
  Assets                                -           -     2,500,000    2,201,000                   -        2,201,000
  Cash                                  -           -     1,359,442    1,216,000                   -        1,216,000
  Commissions                           -           -        11,607       13,000                   -           13,000
  Debt                                  -           -       689,802      477,000                   -          477,000
  Services                              -           -       468,003      267,000                   -          267,000

Net loss                                -           -             -            -          (1,890,000)      (1,890,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1997                  -           -    41,758,711    6,960,000          (5,994,000)         966,000

Issuance of common stock for:
  Cash                                  -           -     1,613,622      803,000                   -          803,000
  Commission                            -           -       109,299       54,000                   -           54,000
  Services                              -           -        79,617       58,000                   -           58,000

Net loss                                -           -             -            -          (3,056,000)      (3,056,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1998                  -           -    43,561,000    7,875,000          (9,050,000)      (1,175,000)

Issuance of common stock for:
  Assets                                -           -     2,954,944    1,226,000                   -        1,226,000
  Cash                                  -           -     9,458,124    4,607,000                   -        4,607,000
  Commission                            -           -     1,574,216      686,000                   -          686,000
  Debt                                  -           -       194,935       74,000                   -           74,000
  Services                              -           -       101,333       41,000                   -           41,000

Issuance of common stock options for:
  Cash                                  -           -             -       50,000                   -           50,000
  Services                              -           -             -        4,000                   -            4,000

Net loss                                -           -             -            -          (8,339,000)      (8,339,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 1999                  -           -    57,844,801   14,563,000         (17,389,000)      (2,826,000)



---------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

                                                                                                                  F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                                        GROEN BROTHERS AVIATION, INC.
                                                                                        (A Development Stage Company)

                                                                      Consolidated Statement of Stockholders' Deficit

                                                                                                            Continued
---------------------------------------------------------------------------------------------------------------------






                                     Preferred Stock             Common Stock
                                 ---------------------------------------------------     Accumulated
                                    Shares      Amount      Shares         Amount          Deficit            Total
                                 -------------------------------------------------------------------------------------
<S>                              <C>         <C>         <C>          <C>              <C>              <C>

Issuance of common stock for:
  Cash                                  -           -    12,776,233       6,686,000                -        6,686,000
  Investment art                        -           -       100,000          70,000                -           70,000
  Property and equipment                -           -        58,410          34,000                -           34,000
  Accounts payable                      -           -       303,883         147,000                -          147,000
  Accrued expenses                      -           -       212,734         177,000                -          177,000
  Long-term debt                        -           -     1,090,010         537,000                -          537,000
  Services                              -           -        15,146          16,000                -           16,000
  Interest expense                      -           -        43,847          31,000                -           31,000

Issuance of common stock options for:
  Cash                                  -           -             -           5,000                -            5,000
  Property and equipment                -           -             -          13,000                -           13,000
  Accounts payable                      -           -             -           7,000                -            7,000

Cancellation of stock options in
  exchange for deposits                 -           -             -        (295,000)                         (295,000)

Net loss                                -           -             -               -       (8,796,000)      (8,796,000)
                                 ------------------------------------------------------------------------------------

Balance, June 30, 2000           $      -    $      -    72,445,064   $  21,991,000    $ (26,185,000)   $  (4,194,000)
                                 ------------------------------------------------------------------------------------



---------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.
                                                                                                                  F-6
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                             GROEN BROTHERS AVIATION, INC.
                                                                             (A Development Stage Company)

                                                                   Consolidated Statement of Cash Flows

                                                               Years Ended June 30, and Cumulative Amounts
----------------------------------------------------------------------------------------------------------



                                                                                            Cumulative
                                                            2000             1999            Amounts
                                                     -----------------------------------------------------

<S>                                                  <C>                 <C>               <C>

Cash flows from operating activities:
   Net loss                                          $    (8,796,000)    $    (8,339,000)  $   (24,317,000)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     Depreciation and amortization expense                   331,000             191,000           829,000
     Common stock issued for services                         16,000             727,000         1,446,000
     Common stock issued for interest                         31,000                   -            31,000
     Stock options issued for services                             -               4,000            14,000
     Loss on disposal of assets                               18,000                   -            44,000
     (Increase) decrease in:
         Accounts receivable                                       -                   -                 -
         Prepaid expense                                     260,000            (156,000)           (6,000)
     Increase (decrease) in:
         Accounts payable                                   (971,000)          1,483,000           625,000
         Accrued liabilities                                 600,000             229,000         1,671,000
         Deposits                                          1,816,000              30,000         1,816,000
                                                     -----------------------------------------------------

              Net cash used in
              operating activities                        (6,695,000)         (5,831,000)      (17,847,000)
                                                     -----------------------------------------------------

Cash flows from investing activities:
   Purchase of property and equipment                       (403,000)           (339,000)         (977,000)
   Sale of property and equipment                             12,000                   -         2,212,000
   Increase in note receivable                               (94,000)            (24,000)         (124,000)
   Collections on notes receivable and advances                    -                   -             6,000
   Proceeds from art sale                                     37,000               2,000            39,000
                                                     -----------------------------------------------------

              Net cash (used in) provided by
              investing activities                          (448,000)           (361,000)        1,156,000
                                                     -----------------------------------------------------

Cash flows from financing activities:
   Proceeds from long-term debt                                    -           1,080,000         1,362,000
   Reduction of long-term debt                              (130,000)            (50,000)         (251,000)
   Increase in capital lease obligation                      339,000             887,000         1,226,000
   Reduction of capital  lease obligation                   (341,000)           (134,000)         (747,000)
   Proceeds from related party debt                          270,000                   -           759,000
   Reduction of related party debt                                 -                   -          (117,000)
   Proceeds from issuance of common stock                  6,686,000           4,607,000        14,572,000
   Proceeds from issuance of options                           5,000              50,000            55,000
                                                     -----------------------------------------------------

              Net cash provided by
              financing activities                         6,829,000           6,440,000        16,859,000
                                                     -----------------------------------------------------

              Net increase (decrease) in cash               (314,000)            248,000           168,000

Cash, beginning of period                                    488,000             240,000             6,000
                                                     -----------------------------------------------------

Cash, end of period                                  $       174,000     $       488,000   $       174,000
                                                     -----------------------------------------------------

----------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.
                                                                                                       F-7

</TABLE>
<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)

                                      Notes to Consolidated Financial Statements

                                                                   June 30, 2000
--------------------------------------------------------------------------------


1.   Organization           Organization
     and                    The  financial  statements  include  those  of Groen
     Summary of             Brothers  Aviation,   Inc.,  and  its  wholly  owned
     Significant            subsidiary  Sego  Tool,  Inc.  (the  Company).   The
     Accounting             primary  business  purpose  of  the  Company  is the
     Policies               manufacturing and marketing of the "gyroplane."


                            Development Stage Company
                            Effective  July 1, 1993, the Company is considered a
                            development  stage  Company as defined in SFAS No.7.
                            The Company's  development stage activities consists
                            of the development and FAA certification of the Hawk
                            Gyroplane.    Sources   of   financing   for   these
                            development  stage  activities  have been  primarily
                            debt and equity  financing.  The Company has, at the
                            present  time,   not  paid  any  dividends  and  any
                            dividends that may be paid in the future will depend
                            upon the financial  requirements  of the Company and
                            other relevant factors.


                            Principles of Consolidation
                            The consolidated  financial  statements  include the
                            accounts of the  Company,  and its  subsidiary.  All
                            significant  intercompany  balances and transactions
                            have been eliminated.


                            Concentration of Credit
                            The  Company is in the  business of  developing  and
                            manufacturing   the  gyroplane.   Substantially  all
                            operations relate to this business.


                            The  Company  maintains  its  cash in  bank  deposit
                            accounts  which,  at  times,  may  exceed  federally
                            insured limits.  The Company has not experienced any
                            losses in such accounts.  The Company believes it is
                            not exposed to any  significant  credit risk on cash
                            and cash equivalents.


                            Cash and Cash Equivalents
                            For  purposes of the  statement  of cash flows,  the
                            Company considers all highly liquid debt instruments
                            with a maturity  of three  months or less to be cash
                            equivalents.


--------------------------------------------------------------------------------
                                                                             F-8

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



1.   Organization           Property and Equipment
     and                    Property  and  equipment  are carried at cost,  less
     Summary of             accumulated  depreciation.  Depreciation is computed
     Significant            under an  accelerated  method based on the estimated
     Accounting             useful lives of the assets.  When assets are retired
     Policies               or  otherwise  disposed  of,  the cost  and  related
     Continued              accumulated   depreciation   are   removed  and  any
                            resulting  gain or loss is  recognized in operations
                            for the period.  The cost of maintenance and repairs
                            is charged to  operations  as incurred;  significant
                            renewals and betterments are capitalized.


                            Investment Art Held For Resale
                            During the years ended June 30,  2000 and 1999,  the
                            Company  acquired  investment  art which is held for
                            resale.  The Company  carries the  investment art at
                            the lower of cost or market.

                            Deposits
                            Deposits  consist of amounts received on aircraft in
                            anticipation   of   full-scale   production  of  the
                            Company's  gyroplane.  The  deposit  guarantees  the
                            depositor a delivery  sequence number and represents
                            a percentage of the total purchase price.


                            Income Taxes
                            The Company  accounts  for its income taxes based on
                            the  provisions  of SFAS  No.  109  "Accounting  for
                            Income  Taxes."  The  asset  and  liability   method
                            requires the  recognition  of deferred tax liability
                            and assets for the expected future tax  consequences
                            of  temporary  differences  between  tax  bases  and
                            financial   reporting  bases  of  other  assets  and
                            liabilities.


                            Revenue
                            Revenue  consists  primarily  of  interest,  and  is
                            recognized when earned.


                            Loss Per Common and Common Equivalent Share
                            The  computation  of basic loss per common  share is
                            computed using the weighted average number of common
                            shares outstanding during the period.


--------------------------------------------------------------------------------

                                                                             F-9

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



1.   Organization           Loss  Per  Common  and  Common  Equivalent  Share  -
     and                    Continued
     Summary of             The  computation of diluted loss per common share is
     Significant            based  on the  weighted  average  number  of  shares
     Accounting             outstanding  during the  period  plus  common  stock
     Policies               equivalents  which would arise from the  exercise of
     Continued              stock  options and  warrants  outstanding  using the
                            treasury  stock method and the average  market price
                            per  share   during   the   period.   Common   stock
                            equivalents are not included in the diluted loss per
                            share calculation when their effect is antidilutive.


                            Accounting 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.


                            Reclassifcation
                            Certain amounts in the financial statements for 1999
                            have been  reclassified  to conform with the current
                            year  presentation.   A  reclassification  was  made
                            related to the change in the Company's  common stock
                            from a $.005 par value to a no par value.


2.   Going                  The  accompanying  financial  statements  have  been
     Concern                prepared  assuming that the Company will continue as
                            a going  concern.  Because  of  recurring  operating
                            losses,  the  excess  of  current  liabilities  over
                            current  assets,  the  stockholders'   deficit,  and
                            negative cash flows from  operations,  the Company's
                            ability to continue as a going  concern is dependent
                            on   attaining   future    profitable    operations,
                            restructuring   its  financing   arrangements,   and
                            obtaining  additional outside financing.  Management
                            anticipates  that the Company will be able to obtain
                            additional  financing  sufficient to fund operations
                            during the next fiscal year,  however,  there can be
                            no assurance they will be successful.  The financial
                            statements do not include any adjustments that might
                            result from the outcome of this uncertainty.



--------------------------------------------------------------------------------

                                                                            F-10

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



3.   Related Party          Related  party  receivables   consist  primarily  of
     Receivables            unsecured,  non-interest  bearing  receivables  from
                            officers/shareholders.   The   amounts  are  due  on
                            demand.


4.   Property               Property and equipment consists of the following:
     and
     Equipment              Aircraft                        $     88,000
                            Office equipment                     318,000
                            Shop equipment and tools             992,000
                            Furniture                             70,000
                            Leasehold improvements                54,000
                            Vehicles                              39,000
                            Computer equipment                   280,000
                                                            ------------
                                                               1,841,000

                            Less accumulated depreciation and
                              amortization                      (877,000)
                                                            ------------

                                                            $    964,000
                                                            ------------
--------------------------------------------------------------------------------

                                                                            F-11

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



5.   Related
     Party Notes
     Payable

                            Related  party  notes  payable is  comprised  of the
                            following:


                            Unsecured note payable to an entity which is
                            owned by some of the members of senior
                            management.  The note bears interest at 12%
                            and is due on demand                     $   180,000

                            Unsecured note payable to a shareholder with
                            interest at 18%. The note is due on demand   250,000

                            Unsecured note payable to a shareholder with
                            interest at 12%.  The note is due on demand   20,000
                                                                     -----------

                                                                     $   450,000
                                                                     -----------




--------------------------------------------------------------------------------

                                                                            F-12

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



6.   Long-Term              Long-term debt is comprised of the following:
     Debt
                            Unsecured notes payable to a local
                            governmental agency, including interest
                            at the prime rate plus 2% (9.5% at June 30,
                            2000).  After principal  amount is
                            paid,  monthly  installments  of 3% of
                            monthly gross revenues  are due until an
                            additional $150,000 is paid (see note 14).
                            At June 30, 2000, the notes are in default
                            and are due on demand. Subsequent to June
                            30, 2000,  this  obligation  was satisfied
                            (see note 15).                           $  150,000

                            Unsecured notes payable to a governmental
                            sponsored organization due in monthly
                            installments of 3% of gross monthly
                            revenues, including interest at prime rate
                            plus 2% (9.5% at June 30, 2000).            100,000

                            Unsecured note payable to a company with
                            interest at 15%, due on demand.              10,000

                            Capital lease obligations (see note 7)    1,063,000
                                                                     -----------

                                                                      1,323,000


                            Less current portion                       (590,000)
                                                                     -----------

                                                                     $  733,000
                                                                     -----------


--------------------------------------------------------------------------------

                                                                            F-13

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------




6.   Long-Term             Future maturities of long-term debt are as follows:
     Debt
     Continued             Years Ending June 30:                  Amount
                           ---------------------                  ------

                           2001                           $         590,000
                           2002                                     358,000
                           2003                                     247,000
                           2004                                      83,000
                           2005                                      45,000
                                                          -----------------

                                                          $       1,323,000
                                                          -----------------


7.   Capital                The   Company  has  entered   into   capital   lease
     Lease                  agreements with financial  institutions  for certain
     Obligations            property and  equipment.  The assets under lease are
                            secured by property and  equipment  and research and
                            development  components.  Assets held under  capital
                            lease and included in property and  equipment are as
                            follows:


                            Shop equipment and tools      $         266,000
                            Accumulated amortization                (38,000)
                                                          -----------------

                                                          $         228,000
                                                          -----------------


                            Future minimum lease payments are as follows:

                            Years Ending June 30:                  Amount
                            ---------------------                  ------


                                  2001                    $         432,000
                                  2002                              421,000
                                  2003                              273,000
                                  2004                               93,000
                                  2005                               48,000
                                                          -----------------

                            Total minimum lease payments          1,267,000

                            Less amount representing
                              interest                             (204,000)
                                                          -----------------

                            Present value of minimum
                              lease payments              $       1,063,000
                                                          -----------------


--------------------------------------------------------------------------------


                                                                            F-14

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



7.   Capital                The Company has entered into an  arrangement  with a
     Lease                  third  party in which the  person  has the option to
     Obligations            make the  payments on one of the  capital  leases on
     Continued              behalf  of  the   Company  in  a   dollar-for-dollar
                            exchange for stock valued at $.40 per share. At June
                            30, 2000,  the number of shares under this option is
                            approximately  887,500  shares,  none of which  have
                            been exercised.


8.   Income                 The benefit for income taxes differs from the amount
     Taxes                  computed at the federal statutory rate as follows:

                                  Years Ended June 30,        Cumulative
                             -------------------------------
                                  2000            1999          Amounts
                             ----------------------------------------------

Income tax benefit at
  federal statutory rate     $     2,990,000  $    2,835,000  $   8,903,000
Change in valuation
  allowance                       (2,990,000)     (2,835,000)    (8,903,000)
                             ----------------------------------------------

                             $             -  $            -  $          -
                             ----------------------------------------------


                            Deferred tax assets (liabilities) are as follows:


                            Net operating loss carryforwards   $   8,903,000
                            Valuation allowance                   (8,903,000)
                                                               -------------

                                                               $          -
                                                               -------------


                            At June 30, 2000, the Company has net operating loss
                            carryforwards  available  to offset  future  taxable
                            income of approximately $26,185,000 which will begin
                            to  expire  in  2006.  The  utilization  of the  net
                            operating loss  carryforwards  is dependent upon the
                            tax laws in  effect  at the  time the net  operating
                            loss carryforwards can be utilized.


                            Due to uncertainties  surrounding the utilization of
                            the net operating  loss  carryforwards,  a valuation
                            allowance  has  been   established   to  offset  the
                            deferred  income tax asset  resulting  from such net
                            operating loss carryforwards.


--------------------------------------------------------------------------------

                                                                            F-15

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



9.   Related                Included in accrued  expenses is payroll  payable to
     Party                  officers/shareholders  totaling $952,000 and accrued
     Transactions           interest  of $122,000  related to the related  party
                            notes payable (see note 5).


                            The Company has certain  receivables and payables to
                            related parties (see notes 3 and 5).


10.  Supplemental           During the year ended June 30, 2000:
     Cash Flow
     Information            o The Company  issued 100,000 shares of common stock
                              in exchange for investment art valued at $70,000.

                            o The Company  issued  40,110 shares of common stock
                              and exchanged investment art valued at $80,000 for
                              property and equipment of $96,000.

                            o The Company  acquired  property  and  equipment in
                              exchange for long-term debt of $152,000.

                            o The Company  issued  18,300 shares of common stock
                              in exchange for property and  equipment  valued at
                              $18,000.

                            o The  Company  issued  1,393,893  shares  of common
                              stock to retire  long-term  debt of  $537,000  and
                              accounts payable of $147,000.

                            o The Company  issued stock  options in exchange for
                              property and equipment of $13,000.

                            o The  Company  recorded  deposits  of  $295,000  in
                              exchange for the cancellation of stock options.

                            o The Company  issued stock options in  satisfaction
                              of accounts payable of $7,000.

                            o The Company  issued 212,734 shares of common stock
                              in satisfaction of accrued expenses of $177,000.

                            o The Company  recorded  deposits in satisfaction of
                              long-term debt of $513,000.

--------------------------------------------------------------------------------

                                                                            F-16

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



10.  Supplemental           During the year ended June 30, 1999:
     Cash Flow
     Information            o The Company  issued  common  stock in exchange for
     Continued                investment art valued at $1,201,000.

                            o The  Company  prepaid   advertising   expenses  in
                              exchange for investment art valued at $50,000.

                            o The Company  issued  common  stock in exchange for
                              property and equipment of $25,000.

                            o The Company  acquired  property  and  equipment in
                              exchange   for  capital   lease   obligations   of
                              $865,000.

                            o The Company  issued  common  stock in exchange for
                              debt of $74,000.

                            Actual amounts of cash paid for:


                                       Years Ended                Cumulative
                           -----------------------------------
                                 2000              1999            Amounts
                           -----------------------------------------------------

     Interest              $         168,000  $        19,000    $     289,000
                           -----------------------------------------------------

     Income taxes          $               -  $             -    $          -
                           -----------------------------------------------------



11.  Preferred              The Company has authorized preferred stock having no
     Stock                  par value. The rights, terms, and preferences are to
                            be set by the board of directors at such time as any
                            shares are issued. As of June 30, 2000, no preferred
                            stock had been issued.



--------------------------------------------------------------------------------
                                                                            F-17

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



12.  Stock                      A summary of the stock options are as follows:
     Options
     and Stock-
     Based
     Compensation
                                          Number             Range of
                                        of Options       Exercise Prices
                                    ---------------------------------------

Outstanding at July 1, 1998                   7,429,806      $   .09 - 2.00
     Granted                                  7,419,114          .35 - 2.00
     Exercised                               (1,021,889)         .23 -  .39
                                    ---------------------------------------
Outstanding at June 30, 1999                 13,827,031          .09 - 2.00
     Granted                                  1,128,176          .40 - 1.41
     Exercised                                 (184,236)         .22 -  .55
     Expired                                    (71,250)              (.40)
                                    ---------------------------------------
Outstanding at June 30, 2000                 14,699,721      $   .09 - 2.00
                                    ---------------------------------------

                            The  Company   has   adopted   the   disclosure-only
                            provisions  of  Statement  of  Financial  Accounting
                            Standards (SFAS) No. 123, Accounting for Stock-Based
                            Compensation.  Accordingly, no compensation cost has
                            been  recognized  in the  financial  statements  for
                            stock options granted to employees. Had compensation
                            cost  for the  Company's  stock  option  plans  been
                            determined based on the fair value at the grant date
                            consistent  with the provisions of SFAS No. 123, the
                            Company's  net loss and loss per  share  would  have
                            been as indicated below:


                                   Years Ended June 30,          Cumulative
                            ---------------------------------------------------
                                  2000             1999            Amounts
                            ---------------------------------------------------

Net loss - as reported      $      (8,796,000) $     (8,339,000)  $ (24,317,000)
Net loss - pro forma        $      (8,910,000) $    (12,903,000)  $ (29,731,000)
Loss per share -
as reported                 $            (.13) $           (.17)  $        (.54)
Loss per share -
pro forma                   $            (.13) $           (.26)  $        (.66)
                            ---------------------------------------------------



--------------------------------------------------------------------------------

                                                                            F-18

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------




12.  Stock Options          The fair value of each option  granted is  estimated
     and Stock-             on the date of grant using the Black-Scholes  option
     Based                  pricing model with the following assumptions:
     Compensation
     Continued

                                                         June 30,
                                            -----------------------------------
                                                   2000             1999
                                            -----------------------------------

Expected dividend yield                     $           -      $             -
Expected stock price volatility                        150 %              152 %
Risk-free interest rate                                5.0 %              5.0 %
Expected life of options                           3 - 5 years     .5 - 5 years
                                            -----------------------------------


                            The weighted  average fair value of options  granted
                            during   2000  and   1999   was   $.87   and   $.62,
                            respectively.


                            The following  table  summarizes  information  about
                            stock options outstanding at June 30, 2000:


                        Options Outstanding              Options Exercisable
              ------------------------------------------------------------------
                             Weighted
                              Average
                             Remaining    Weighted                   Weighted
   Range of                 Contractual    Average                   Average
   Exercise      Number        Life       Exercise      Number       Exercise
    Prices     Outstanding    (Years)       Price     Exercisable     Price
--------------------------------------------------------------------------------

$  .09 to  .22   5,102,500    3.04     $       .09    5,102,500     $        .09
   .25 to  .50   4,280,714    2.70             .42    4,280,714              .42
  1.00 to 2.00   5,316,507    2.75            1.21    5,316,507             1.21
--------------------------------------------------------------------------------

$  .09 to 2.00  14,699,721    2.84     $       .59   14,699,721     $        .59
--------------------------------------------------------------------------------


13.  Fair Value of          The Company's financial instruments consist of cash,
     Financial              receivables,   payables,   and  notes  payable.  The
     Instruments            carrying  amount of cash,  receivables  and payables
                            approximates  fair value  because of the  short-term
                            nature of these items. The aggregate carrying amount
                            of the notes payable  approximates fair value as the
                            individual   borrowings   bear  interest  at  market
                            interest rates.



--------------------------------------------------------------------------------

                                                                            F-19

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------



14.  Commitments            As part of the  conditions  in  obtaining  financing
                            from a local  government  agency,  the  Company  has
                            agreed to pay royalties to the agency. The royalties
                            will be 3% of the monthly  revenues until a total of
                            $150,000  has been  paid.  No  royalties  have  been
                            earned or paid as of June 30,  2000.  Subsequent  to
                            the year ended June 30, 2000, the Company  satisfied
                            the royalty obligation (see note 15).


                            In  addition,  in order to obtain  financing  from a
                            government sponsored  organization,  the Company has
                            agreed to assume a  royalty  agreement  of a company
                            related  by common  ownership,  previously  licensed
                            with  the  autogyro  technology.  The  terms  of the
                            agreement  state that the  Company  must pay monthly
                            royalties of 3% of its gross  revenues up to a total
                            of $149,000.  No royalties  have been earned or paid
                            as of June 30, 2000.


                            The Company leases  certain  property and facilities
                            under   noncancellable   operating  leases.   Future
                            minimum rental payments  required under these leases
                            are as follows:


                            Year Ending June 30,               Amount
                            --------------------          -----------------

                                2001                      $         216,000
                                2002                                125,000
                                                          -----------------

                                                          $         341,000
                                                          -----------------



                            Rental expenses for noncancellable  operating leases
                            were  $209,000 and $119,000 for the years ended June
                            30, 2000 and 1999, respectively.


                            The Company has entered into  employment  agreements
                            with certain officers of the Company. The employment
                            agreements  can  be  terminated  at any  time.  Upon
                            termination,  the Company  retains all rights to the
                            gyroplane  and  the  relating   technology  and  the
                            officers have a covenant not to compete for a period
                            of three years.  Royalty payments of 1% of the gross
                            sales price of the  gyroplane  are to be paid to the
                            inventors who are also officers of the Company.



--------------------------------------------------------------------------------

                                                                            F-20

<PAGE>


                                                   GROEN BROTHERS AVIATION, INC.
                                                   (A Development Stage Company)


                                      Notes to Consolidated Financial Statements
                                                                       Continued

--------------------------------------------------------------------------------


15.  Subsequent             On  September  26,  2000,   the  Company   satisfied
     Events                 obligations  to a government  agency in exchange for
                            investment art. The obligations  consisted of a note
                            payable of $150,000  (see note 6),  related  accrued
                            interest of  $123,000  and a royalty  obligation  of
                            $150,000  (see note 14). The Company also  satisfied
                            accrued  liabilities  of  $73,000  in  exchange  for
                            investment art.


                            Also on September  26, 2000,  the Company  exchanged
                            investment  art of $20,000 for 44,861  shares of the
                            Company's common stock.



--------------------------------------------------------------------------------
                                                                            F-21

<PAGE>



Item 8.     Changes in and Disagreements with Accountants on
------------------------------------------------------------
            Accounting and Financial Disclosure
            -----------------------------------

         There has been no change of accountants or reporting  disagreements  on
any matter of accounting principle,  practice, financial statement disclosure or
auditing scope or procedure.

Item 9.     Directors and Executive Officers of the Registrant
--------------------------------------------------------------


                                       14
<PAGE>


         The following  table contains the names and ages of all Directors;  all
positions and offices with the Registrant held by each such person.

         Name                          Age               Positions
         ----                          ---               ---------
         David L. Groen                49            Director and President
         H. Jay Groen                  56            Director
         James P. Mayfield             52            Director and Vice-President

Term of Office

         The terms of service of Messrs.  Groen,  and Mayfield as members of the
Board of Directors  continue until the next annual meeting of the  stockholders.
These persons'  respective  appointments were adopted,  ratified and approved by
the  stockholders  at a  meeting  for that  purpose  on May 20,  2000.  With the
exception  of  compliance  with the  duties  of a  director  as set forth in the
Articles of  Incorporation  or By-laws of the Registrant or in the provisions of
the Utah Business  Corporation Act, there are no arrangements or  understandings
pursuant to which any of the  foregoing  persons  were  selected to serve on the
Board of Directors of the Registrant. Each of the foregoing persons consented to
serve as a director of the Registrant prior to their  designation and subsequent
election as such.

Family Relationships

         H. Jay Groen and David L. Groen are brothers.

Background on Directors and Officers

         David  Groen is  President  & CEO,  Treasurer,  and a  Director  of the
Registrant.  Immediately prior to forming Groen Brothers  Aviation,  David Groen
was a founding partner and Chief Financial  Officer (CFO) for Seagull  Recycling
Company.  Previously, he has held numerous executive positions in the helicopter
industry with Sales and Marketing,  Safety Officer,  Branch  Manager,  and Chief
Pilot  responsibilities.  Having extensive military and commercial experience in
helicopters,  Mr.  Groen has logged  more than  7,000  hours in  rotor-wing  and
fixed-wing  aircraft.  Mr. Groen received his  Certificate of Graduation in 1970
from the U.S. Army Warrant  Officer  Flight  Training  School,  was awarded Army
Aviator  Wings  and  promoted  to the  rank  of  Warrant  Officer.  As a  combat
helicopter pilot and Aircraft  Commander in Vietnam,  he flew hundreds of combat
missions  and was awarded the Air Medal and Bronze  Star.  He is  qualified as a
pilot in most  American and French  helicopters,  and has attended  Aerospatiale
factory  schools  on the  SA315B  Lama and the  SA316  and  SA319  Alouette  III
helicopters. Over the years, Mr. Groen's numerous commercial helicopter missions
have  involved  such  work  as  EMS  (emergency  medical  service  hospital  air
ambulance),  power line construction and patrol,  topographical survey, USGS map
making,  forest fire fighting,  long line seismic oil  exploration,  and wildcat
on-shore and off-shore oil drilling operations.  David Groen is co-author, along
with his brother Jay, of a best selling novel entitled Huey.

                                       15
<PAGE>

         H. Jay Groen, Chairman, is a Director of the Registrant. Before joining
GBA, Jay Groen  co-founded  Seagull  Recycling  Company,  an  organization  that
developed an original  supply of secondary  paper fiber for sale to domestic and
Far East markets.  Prior to this business venture, he was the President of China
West, Inc., a Washington D.C. based organization  representing U.S. firms in the
Peoples  Republic of China. In this role, Mr. Groen negotiated joint venture and
trade  agreements  in such diverse  industries as machine  building,  petroleum,
coal, agriculture, light manufacturing,  handicrafts, and forest products. Early
in his  career,  Mr.  Groen  spent ten  years as an  Economist  for the  Central
Intelligence  Agency (CIA) doing  original  research on Asia,  with a particular
interest on the People's Republic of China. As part of his responsibilities with
the CIA,  Mr. Groen  prepared  written and oral briefs for the White House staff
and members of Congress,  and  lectured at the  National War College.  Mr. Groen
served in the U.S. Air Force as a Chinese Linguist in Vietnam and Asia,  logging
more than 100 combat  missions.  He is the co-  author,  along with his  brother
David,  of a best selling book entitled Huey, a novel about the Vietnam War. Mr.
Groen has also  published  several other writings  including:  1) "The Sweet and
Sour China  Market",  China  Under Four  Modernizations;  and,  2) "Buying  from
China",  U.S.-China Economic Relations: A reappraisal.  Mr. Groen has an M.A. in
Economics  from Virginia  Polytechnic  Institute,  a B.A. in Economics  from the
University  of Utah and a Language  Certificate  in Mandarin  Chinese  from Yale
University.  A private pilot with a practical background in aeronautical design,
Mr. Groen has added much innovation to the Hawk Gyroplane.

         James P.  Mayfield  III, is Vice  President,  Chief  Operating  Officer
(COO),  Chief of Flight  Operations,  and a Director  of the  Registrant.  James
Mayfield,  one of only a handful of individuals  certified as a gyroplane  pilot
examiner  by the FAA,  brings to GBA more  than  3,300  hours of flight  time in
gyroplanes.  As GBA's Chief Test Pilot,  Mr.  Mayfield was  recently  honored by
being  inducted  into  "The  Society  of  Experimental  Test  Pilots,"  an elite
world-wide  organization of only 1,800 pilots,  whose  distinguished  membership
include Chuck Yeager, Deke Slayton, Scott Crossfield and Jimmy Doolittle II. Mr.
Mayfield  has logged more than  14,900  total  hours  flight time that  includes
extensive  experience test flying a wide range of aircraft. A career U.S. Marine
Corps officer, Mr. Mayfield retired from the Marines in 1989 following nearly 25
years of  distinguished  service.  His last  tour of duty was in the  Operations
Department  at  Camp  Pendleton,  California,  responsible  for the  safety  and
security of Special  Weapons in the Pacific  region.  With a staff of 400 people
reporting to him, he was  responsible for training,  outfitting,  and evaluating
the First Marine Division  (30,000  Marines) in Special  Weapons  employment and
defense. Mr. Mayfield has two baccalaureate  degrees,  psychology and sociology,
bestowed by the University of New York.


Item 10.  Executive Compensation
--------------------------------

         No  director  or  executive  officer of the  Registrant  received  cash
compensation  in excess of $100,000  during the past fiscal year.  Jay Groen and
David  Groen each  holds  options  of  2,475,000  shares at $.09 per share to be
purchased by 2003,  each holds  options of 25,000 shares at $.50 per share to be

                                       16
<PAGE>

purchased by 2003,  and each holds options of 2,000,000 at $1.00 per share to be
purchased by 2003.  Jim  Mayfield  holds  options of 500,000  shares at $.50 per
share to be purchased by 2003,  and options of 525,000  shares at $.50 per share
to be purchased by 2004. JoRene Bishop holds options of 10,000 shares at $.50 to
be purchased by 2004.

Item 11.  Security Ownership of Certain Beneficial Owners and
-------------------------------------------------------------
          Management
          ----------

         The  following  shows the shares of common  stock  owned as of June 30,
2000,  by all  the  Directors  and  Officers  individually  and as a  group.  No
individual investors,  other than those shown, own more than five percent of the
outstanding  common  stock.  Each  individual  has sole  voting  power  and sole
investment power with respect to the number of shares beneficially owned.

Name  and  Address                         Amount of                  Percent
of Beneficial Owner                        Ownership                  of Class
-------------------                        ---------                  --------

David Groen, President                    9,942,184                    13.72
2640 California Avenue
Salt Lake City, UT 84104

Jay Groen, Director                       5,623,791                     7.76
2640 California Avenue
Salt Lake City, UT 84104

James P. Mayfield, Vice President            70,760                     0.01
2640 W. California Avenue
Salt Lake City, UT 84104

JoRene Bishop, Secretary                    209,731                     0.29
2640 W. California Avenue
Salt Lake City, UT 84104

All Officers and Directors               15,846,466                    21.87

Lyle Campbell                             4,425,660                     6.11
c/o Chapman & Cuttler
111 W. Monroe Street
Chicago, IL 60603

                                       17
<PAGE>

         The above does not  include  options  by David  Groen,  Jay Groen,  Jim
Mayfield,  and JoRene Bishop to purchase  4,500,000  shares,  4,500,000  shares,
1,025,000, and 10,000 shares respectively.  If such shares were purchased, their
ownership  would equal 17.51  percent,  12.27  percent,  1.33 percent,  and 0.27
percent respectively.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The Company owes $180,000, plus accrued interest, to a company owned by
Directors Jay and David Groen.

Item 13.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

(a) (1)       The following financial statements are included in Part II: Report
              of Independent Certified Public Accountants

                                                                          Page
                                                                          ----

         Independent auditors' report of Tanner + Co.                     F-1

         Financial statements:

              Consolidated balance sheet, June 30, 2000.                  F-2

              Consolidated  statement of operations for
              the two years ended June 30, 2000and 1999,
              and cumulative amounts.                                     F-3

              Consolidated  statement of stockholder's
              equity (deficit) for the two years ended
              June 30, 2000 and 1999, and cumulative amounts.             F-4

              Consolidated  statement of cash flows for
              the two years ended June 30, 2000 and 1999,
              and cumulative amounts.                                     F-7

              Notes to consolidated financial statements.                 F-8


                                       18
<PAGE>

                                   Signatures
                                   ----------

         Pursuant  to the  requirements  of Section or 15 (d) of the  Securities
Exchange Act of 1934, Groen Brothers Aviation,  Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized:



                          Groen Brothers Aviation, Inc.



          /s/David L. Groen                          Date:     October 5, 2000
         -------------------------                   -------------------------
         David L. Groen, President



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated:


          /s/H. Jay Groen                            Date:     October 5, 2000
         -------------------------                   ---------------------------
         H. Jay Groen, Director


          /s/David L. Groen                          Date:     October 5, 2000
         -------------------------                   ---------------------------
         David L. Groen, Director


          /s/James P. Mayfield                       Date:     October 5, 2000
         -------------------------                   ---------------------------
         James P. Mayfield, Director



                                       19
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