Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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

When we use the terms "Gyrodyne," the "Company," "we," "us," and "our," we mean Gyrodyne, LLC and all entities owned or controlled by us, including non-consolidated entities. References to "common shares" in this report refer to Gyrodyne, LLC's common shares representing limited liability company interests. References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the nine-months ended September 30, 2026.

Cautionary Statements Concerning Forward-Looking Statements

The statements made in this Form 10-Q and in other materials the Company has filed or may file with the Securities and Exchange Commission, in each case that are not historical facts, contain "forward-looking information" within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, which can be identified by the use of forward-looking terminology such as "may," "will," "anticipates," "expects," "projects," "estimates," "believes," "seeks," "could," "should," or "continue," the negative thereof, and other variations or comparable terminology as well as statements regarding the evaluation of liquidation contingencies. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties include, but are not limited to, risks and uncertainties generally relating to our efforts to enhance the values of our remaining properties and seek the orderly, strategic sale of such properties as soon as reasonably practicable, relating to the Company's efforts to secure additional capital to properly fund operations through the end of 2028 absent sufficient working capital raised through the combination of property sales or the modification of its existing credit facilities and or new credit facilities, risks associated with the Article 78 Proceeding against the Company and any other litigation that may develop in connection with our efforts to enhance the value of and sell our properties, risks relating to our national marketing campaign led by JLL for the sale of our Flowerfield and Cortlandt Manor properties, risks associated with our purchase and sale agreement with B2K, including whether B2K will agree to terminate such agreement on acceptable terms or at all, risks relating to the proposed sale of the undeveloped portion of Flowerfield to the State of New York, including whether a definitive agreement will be executed, the State's acquisition and approval process, and the timing of any closing, risks relating to the visual easement rights of Flowerfield Celebrations, risks relating to the increased interest rate and debt service on the extended Cortlandt Manor mortgage loan (and future purchase and sale agreements for our remaining properties that may be contingent on years-long regulatory contingencies) in light of our financial condition, risks relating to the recent termination of employment of our Chief Operating Officer and the Company's resulting reliance on a single full-time employee to complete the entitlement, marketing, sale and liquidation process, community activism risk, proxy contests and other actions of activist shareholders, regulatory enforcement risk, risks inherent in the real estate markets of Suffolk and Westchester Counties in New York, the potential residual effects of the COVID-19 pandemic, lingering risks relating to the 2023 banking crisis and closure of two major banks (including one with whom we indirectly had a mortgage loan which the FDIC transferred in December 2023 to a new holder following the banks closure), ongoing inflation risk, ongoing interest rate uncertainty, recession uncertainty and supply chain constraints or disruptions and other risks detailed from time to time in the Company's SEC reports. These and other matters the Company discuss in this Report, or in the documents it incorporates by reference into this Report, may cause actual results to differ from those the Company describes. The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

New factors emerge from time to time, and it is not possible for us to predict which factors will affect future results. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results, including the timeline to complete the liquidation, to differ materially from those contained in any forward-looking statement. In particular, it is difficult to fully assess the risks of persistent inflation, high interest rates and possible recession at this time. The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Overview

Gyrodyne, LLC (including its subsidiaries, "Gyrodyne", the "Company" or the "Registrant") is a limited liability company formed under the laws of the State of New York whose primary business is the management of a portfolio of medical office and industrial properties and the pursuit of entitlements on such properties located in Suffolk ("Flowerfield") and Westchester ("Cortlandt Manor") Counties, New York.

Substantially all of our developed properties are subject to leases in which the tenant reimburses the Company for a portion, all of or substantially all of the costs and/or cost increases for utilities, insurance, repairs, maintenance and real estate taxes. Certain leases provide that the Company is responsible for certain operating expenses.

Gyrodyne's corporate strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities to provide purchasers increased development flexibility, and by enhancing the value of our leases. The Board and Management believe the aforementioned strategy will increase the aggregate value for such properties as a whole. The value of the real estate reported in the consolidated statement of net assets as of September 30, 2026 and December 31, 2025 includes some, but not all of the potential value impact that may result from such value enhancement efforts. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pay distributions to holders of Gyrodyne common shares. The process of seeking entitlements and the amount and timing of distributions from proceeds of asset sales involve risks and uncertainties. As such, it is impossible at this time to determine with certainty the ultimate amount of proceeds that will actually be distributed to our shareholders or the timing of such payments. Accordingly, no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in our consolidated statements of net assets. The actual nature, amount and timing of all distributions will be determined by Gyrodyne's Board in its sole discretion and will depend in part upon the Company's ability to convert our remaining assets into cash in compliance with our obligations under the Stipulation entered into in connection with a class action lawsuit settled in 2015 and satisfy our remaining liabilities and obligations. Under Gyrodyne's Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"), such dissolution may be effected upon an election to dissolve the Company by the Board that is approved by the vote of holders of a majority of Gyrodyne common shares or, in the Board's sole discretion and without any separate approval by the holders of Gyrodyne common shares, at any time the value of Gyrodyne's assets, as determined by the Board in good faith, is less than $1,000,000.

We remain committed to (1) enhancing the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders, (2) completing the disposition of our assets, (3) making timely distributions to our shareholders, (4) managing capital and liquidity, (5) mitigating risks relating to interest rates and real estate cycles and (6) completing the liquidation of the Company.

The Company's two remaining real estate properties, each of which is held in a single asset limited liability company wholly owned by the Company, consist of:

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Cortlandt Manor:13.8 acres in Cortlandt Manor, New York, consisting of the 31,000 square foot Cortlandt Manor Medical Center; and

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Flowerfield: 63 acres in St. James, New York, including a 14-acre multi-tenanted industrial park comprising 135,000 rentable square feet.

Strategic Plan to Enhance Property Values, Liquidate, Distribute Proceeds and Dissolve

Our corporate strategy is to pursue entitlements on our two remaining properties so that they can be sold to one or more developers with increased development flexibility and thus maximize value and distributions to our shareholders. Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pay liquidating distributions to holders of Gyrodyne common shares. We are unable to predict the precise nature, amount or timing of such distributions. To accomplish our goal of maximizing asset values and distributions to our shareholders, the Company's plan consists of:

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managing the real estate portfolio to improve operating cash flow while simultaneously increasing the market values of the underlying properties;

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managing the strategic sale of real estate assets;

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pursuing the entitlement efforts of the Flowerfield (subdivision will be required for the sale of the industrial park irrespective of whether the undeveloped property is sold to the State) and Cortlandt Manor properties, to increase development flexibility;

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

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

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balancing working capital and funds available for the entitlement process.

Gyrodyne's strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities to provide purchasers with increased development flexibility, and by enhancing the value of our leases. The Company believes the aforementioned strategy will increase the aggregate value for such properties as a whole. The value of the real estate reported in the consolidated statement of net assets as of September 30, 2026 includes some but not all of the potential value impact that may result from such value enhancement efforts. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all. Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve, in limited circumstances, strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Sales of properties by Gyrodyne could take the form of individual sales of assets, sales of groups of assets, a single sale of all or substantially all of the assets or some other form of sale. The assets may be sold to one or more purchasers in one or more transactions over a period of time.

A sale of substantially all of the assets of the Company would require shareholder approval under New York law. However, in the event of the sale of individual properties, that do not constitute substantially all of the Company's assets, it is not required or anticipated that any shareholder votes will be solicited. The prices at which the various assets may be sold depend largely on factors beyond our control, including, without limitation, the condition of financial and real estate markets, the availability of financing to prospective purchasers of the assets, regulatory approvals, public market perceptions, and limitations on transferability of certain assets.

On March 30, 2022, the Town of Smithtown Planning Board (the "Planning Board") voted four to zero with one abstention to grant Gyrodyne's application for preliminary approval to divide the Flowerfield property into eight lots, subject to certain conditions (the "Flowerfield Subdivision Application"). See, "Property Value Enhancement - Flowerfield" for a description of the subdivision application.

Gyrodyne believes that both the Article 78 Proceeding (see Part II, Item 1, Legal Proceedings, for a description of its current procedural status) and the process of negotiating purchase agreements, securing final subdivision approval and final unappealable site plan approval and consummating the sale of our properties will extend into 2028, although there can be no assurance that Gyrodyne and the Town of Smithtown will be successful in the defense of the appeal and any other motions or that other factors beyond our control will not necessitate a further extension of the timeline.

The estimated timeline assumes that the developed portion of Flowerfield is not sold until the culmination of the Article 78 Proceeding. The developed portion of Flowerfield, situated on two separate lots, may be sold together or separately upon the resolution of the Article 78 Proceeding and the filing of the final subdivision map without site plan approval. As discussed below, the Company does not currently expect the Article 78 Proceeding to have a material effect on the closing of the proposed sale of the undeveloped portion of Flowerfield to New York State (the "State").

On March 20, 2023, the Town of Cortlandt Town Board adopted the SEQRA CM findings statement and approved local law establishing the Medical Oriented Zoning District (the "MOD") which includes Gyrodyne's Cortlandt Manor property. Pursuant to the adopted MOD, Gyrodyne received designation for total density of 154,000 square feet to be comprised of 150,000 square feet of medical use and 4,000 square feet of retail use (lot lines and their respective density could change until formal subdivision, if any, occurs).

Based on an extensive marketing campaign the mixed-use plan that only includes medical and retail but not residential uses, as envisioned by the Town Board, has resulted in medical office development supply that significantly exceeds market demand. The Company is working with JLL and the Town of Cortlandt to develop an alternative mixed-use development and marketing strategy to navigate within these challenging regulatory and market conditions so as to close on the sale no later than the end of 2028 and potentially earlier contingent on when the Company enters into a Purchase and Sale Agreement and the time for such buyer to obtain site plan approval.

Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, zoning authority labor shortages, environmental concerns and whether the Company sells the undeveloped portion of the Flowerfield property (currently under contract with B2K) to the State and the respective closing date. Nevertheless, we will continue to market the properties and, although there can be no assurances, the Company believes final subdivision approval for Flowerfield will be received shortly after the closing of a sale of the undeveloped portion of Flowerfield to the State (as described be-low) or later if sold under the current agreement with B2K and subdivision approval for Cortlandt Manor in mid-2027.

On July 30, 2025, GSD Flowerfield LLC, a New York limited liability company ("GSD") wholly-owned by the Company, entered into a Purchase and Sale Agreement (as amended, the "B2K Agreement") for the sale of an approximate 49 acre parcel of vacant land to B2K Smithtown LLC ("B2K"), an affiliate of B2K Development LLC, which property forms a portion of the Company's Flowerfield complex in St. James, New York, for a purchase price of between $24,000,000 and $28,740,000, subject to conditions and contingencies set forth in the B2K Agreement. Included among the conditions set forth in the B2K Agreement is receipt of subdivision and site plan approval. Based on the terms of the B2K Agreement, the Company previously estimated the gross value of the B2K Agreement at $28,740,000, contingent on approval of a pending site plan submission, which the Company no longer expects to be approved in its current form. Under the terms of the B2K Agreement, the Company would be required to issue B2K a credit at closing for the industrial park's proportionate share of costs for a sewer treatment plant ("STP") and on-site infrastructure costs aggregating $4,020,222. In light of the proposed termination of the B2K Agreement described below, this credit is no longer included in the Company's estimated costs in excess of receipts as of September 30, 2026.

Furthermore, B2K's progress toward satisfying the conditions precedent to closing has been delayed, in part because B2K and Flowerfield Celebrations have not reached agreement that B2K's proposed site plan is consistent with the visual easement rights held by Flowerfield Celebrations (whose lot borders the 49-acre parcel under contract to B2K). If these matters are not resolved, the Company believes there is a material risk that the B2K Agreement will not close by the end of 2028, if at all.

In light of the foregoing, the Company has been discussions regarding a sale of the undeveloped portion of Flowerfield to the State, which, if consummated, is expected to eliminate the requirement to construct a sewage treatment plant and to eliminate or mitigate the on-site and off-site infrastructure obligations that are conditions of the subdivision under the Findings Statement. The Company received a non-binding offer from the New York State Department of Environmental Conservation ("NYSDEC") to acquire this property for $21.3 million, subject to the negotiation and execution of a definitive purchase and sale agreement and the completion of the State's acquisition process, including required State, county and town approvals. The offer would permit the property to be subdivided without any investment by the Company in a sewage treatment plant or on-site or off-site infrastructure. The offer is not binding, and there can be no assurance that a definitive agreement will be entered into, or that a sale to the State will be consummated on the terms described or at all. The $21.3 million offer price is less than the $28,740,000 estimated gross value of the B2K Agreement, and the Company has reduced the estimated value of its real estate by $7,440,000 as of September 30, 2026 to reflect the offer price. Concurrently, the Company has been negotiating with B2K a termination of the B2K Agreement that will be contingent on the closing of a sale of the property to the State. The Company and B2K have reached an agreement in principle on the terms of a termination of the B2K Agreement, including the amount of the termination payment, which would be contingent on the closing of a sale of the property to the State and payable from the proceeds of that sale. The estimated termination payment is included in estimated selling costs as of September 30, 2026. The agreement in principle is not binding and remains subject to the negotiation and execution of definitive documentation and approval by the Company's Board. There can be no assurance that a definitive termination agreement will be executed on these terms or at all, or that B2K will not seek to enforce its rights under the B2K Agreement.

If the Company and the State enter into a definitive purchase and sale agreement by December 31, 2026, the Company currently anticipates that a closing could occur between late in the second quarter of 2027 and the end of 2027, subject to the completion of the State's acquisition process, including required State, county and town approvals. There can be no assurance that a definitive agreement will be executed or that a closing will occur within that time frame or at all. The Company will continue to market its properties and, although there can be no assurances, the Company believes final subdivision approval for Flowerfield would follow shortly after a closing with the State, and that subdivision approval for Cortlandt Manor would be obtained in mid-2027 (if a subdivision is ultimately pursued by the future buyer of that property).

We anticipate that future purchase agreements for Flowerfield (other than a sale to the State) or Cortlandt or any portions thereof will similarly identify receipt of subdivision approval. In addition, we anticipate the Cortlandt Manor property will be sold as a development deal that will also require site plan approval as conditions to closing which the Company believes can be pursued simultaneously rather than sequentially.

Consistent with the Company's plan of liquidation the Company continues to engage JLL to identify potential purchasers for the remaining Flowerfield and Cortlandt Manor properties as individual lots or combined. In addition, Gyrodyne would entertain offers for the acquisition of the Company itself if we believe such acquisition from a timing and value perspective would maximize the net assets in liquidation value for Gyrodyne's shareholders.

Assuming the process of seeking entitlements and selling assets is completed in 2028 and giving effect to the estimated cash flows from the operation of our existing properties, we expect that Gyrodyne will have a cash balance of approximately $23.64 million, prior to any future special distributions based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets. Such cash would equate to future distributions of $10.75 per share based on Gyrodyne having 2,199,308 common shares outstanding. These estimated distributions are based on values and outstanding share numbers effective as of September 30, 2026.

The Consolidated Statements of Net Assets are based on certain estimates. Uncertainties as to the precise value of our non-cash assets and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation. Land entitlement costs, claims, liabilities and expenses from operations, including, but not limited to, operating costs, salaries, real estate taxes, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred during our process of seeking entitlements and selling assets, which includes certain enhancement efforts. Such expenses, if exceeding our estimates, will reduce the amount of assets available for ultimate distribution to shareholders.

The Company modified and extended two of its existing loan facilities (see note 7) to strengthen its financial position through the end of 2028, the forecasted completion of the liquidation process. Absent closing on the sale of the undeveloped property to the State by the end of 2027, Management believes the Company will need additional capital to properly fund operations through the end of 2028 absent sufficient working capital raised through the combination of other property sales or the modification of its existing credit facilities and or new credit facilities, or other alternative capital raising strategies. There can be no assurance, however, that the Company will be successful in securing any such loan modification, new credit facility or alternative capital raising transaction on terms that are satisfactory to the Company or on any terms at all or achieve a timely closing on the sale of a property to address its working capital needs. If such available cash and amounts received on the sale of assets are not adequate to provide for our obligations, liabilities, expenses and claims, distributions of cash and other assets to our shareholders would be eliminated. In the event our shareholders receive distributions from Gyrodyne and there are insufficient funds to pay any creditors who seek payment of claims against Gyrodyne, shareholders could be held liable for payments made to them and could be required to return all or a part of the distributions made to them.

Property Value Enhancement

The Company is pursuing entitlements to increase the development flexibility of its Flowerfield (which recently was suspended while we pursue the sale of the undeveloped Flowerfield property to the State) and Cortlandt Manor properties. During the nine-months ended September 30, 2026, the Company incurred approximately $202,000 of land entitlement costs, consisting primarily of engineering costs, legal fees and real estate taxes to support the Company's respective entitlement efforts. We estimate that the Company may incur approximately $820,000 in additional land entitlement costs through December 31, 2028 in pursuit of entitlements (approximately $138,000 in Cortlandt Manor and $682,000 in Flowerfield). Until such time as we enter a Definitive Purchase and Sale Agreement with the State and agreement with FRE (a neighboring stakeholder in the subdivision), it is premature to conclude that the land entitlement fees will be reduced significantly, if at all.

The Company is focusing its resources on positioning the properties to be sold with all entitlements to achieve increased development flexibility in the shortest period of time with the least amount of risk to the Company. Because of the vagaries of the real estate market, however, there can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all. During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay prices for the properties on an "as is basis" that the Company finds more attractive from a timing or value perspective than values we believe may be reasonably achievable through completing the entitlement process ourselves.

Cortlandt Manor. On March 15, 2016, the Town of Cortlandt Manor (the "Town") adopted a 2016 Sustainable Comprehensive Plan (the "Plan") of which one key strategy was the recommendation of a MOD. The purpose of the proposed MOD is to expand the Town's existing medical infrastructure and encourage economic development, including capital investment, job creation and housing options. The MOD would allow for a continuum of care, i.e., independent living, assisted living and nursing/hospital care, within or in neighboring facilities by centralizing medical services and related activities. As a designated zoning district, the MOD could include hospital, ambulatory surgery, primary and urgent care, hospice, laboratories, social services, boutique hotels, retail and a wide range of housing.

The Company's existing 31,421 square foot Cortlandt Medical Center, situated on 13.8 acres, is located directly opposite New York Presbyterian's Hudson Valley Hospital Center and within the boundaries of the MOD. The Company has committed resources toward both market research and feasibility studies in support of achieving entitlements to maximize the value of the property. For approximately nine years the Company, along with its planner and engineers have been working closely with the Town to help plan the MOD, identify issues and solutions involved in creating the Plan and more specifically, the MOD.

On March 31, 2017, The Company filed an application with the Town to develop the Cortlandt Manor property, as follows:

SUBDIVISION LOT #	BUILDING SIZE/YIELD
Medical office	100,000 sft
Multi-family apartments	200 units
Retail	4,000 sft

In response to the extensive public comments and Town Board input received during the State Environmental Quality Review "(SEQR") Draft Generic Environmental Impact Statement ("DGEIS") public hearing process, the Company amended the site plan and subdivision application with the Town to develop the Cortlandt Manor property as follows:

SUBDIVISION LOT #	BUILDING SIZE/YIELD
Medical office Lot #1	100,000 sft
Retail (Lot #1)	4,000 sft
Medical Office Lot #2	84,600 sft

As a property owner with eligible parcels in this district, Gyrodyne submitted an Environmental Assessment Form to the Town of Cortlandt Planning Department in December 2017 to support its application to receive a MOD campus designation. Once designated, the parcels would be governed by the use, dimensional and other provisions of the MOD zoning regulations and MOD zoning would replace the existing zoning. While the MOD zoning had not been formally adopted, Gyrodyne was proposing a two-phase medical office campus with limited retail and has designed the site to function as part of a future "hamlet center" with streetscape improvements. The existing medical office space will remain operational until phase 2 is implemented.

In addition to the primary proposal noted above, an alternate mixed-use plan was submitted as part of the SEQRA process. The alternate mixed-use plan included the following:

SUBDIVISION LOT #	BUILDING SIZE/YIELD
Medical office Lot #1	83,500 sft
Retail (Lot #1)	1,500 sft
Multi-Family Residential Lot #2	160 Units

The alternate was reviewed for all categories of impacts in the SEQRA documentation similar to the primary proposal, and if approved as anticipated, would have allowed Gyrodyne the option to proceed with either program following MOD designation and subdivision. The alternate was not anticipated to impact the estimated timeline of approvals.

The Town of Cortlandt Planning Department hosted two public community outreach meetings in June and August 2018 where the Company presented its development plan for the Cortlandt Manor property. As anticipated, on August 7, 2018, the Town Board formally issued a "positive declaration" under the SEQRA, i.e., a declaration that the project may result in one or more significant environmental impacts and will require the preparation of an Environmental Impact Statement ("EIS"), the scope of which was also adopted. On August 28, 2018, the Town filed the Scope for a DGEIS with input from Gyrodyne for both the MOD zoning and the proposed uses so that upon adoption, minimal further SEQRA review (other than site plan review) should be required to develop the property. On September 17, 2019, the Town of Cortlandt Town Board as Lead Agency under SEQR adopted a resolution accepting the DGEIS as complete for public review. The Town of Cortlandt Town Board hosted two public hearings on the DGEIS on November 19, 2019 and January 14, 2020. The Town of Cortlandt Planning Board extended the public comment period 90 days with the next public hearing scheduled for April 14, 2020. As a result of the New York State's stay-at-home-order issued in March 2020, the April 14, 2020 public hearing was postponed to June 2020. The public hearing was then held on June 16, 2020 on a virtual platform. The Town closed the public comment period on June 30, 2020 and proceeded to review the public comments and prepare the Final GEIS ("FGEIS"). The FGEIS reflects the Cortlandt Manor property's proposed uses comprising 184,600 square feet of medical office space and 4,000 square feet of retail space (together with an Alternate Mixed-Use Plan). A Town Board work session was conducted March 7, 2022 for the primary purpose of having stakeholders present their current development programs for the benefit of the new Town Board members elected in November 2021. Although not required by SEQRA, the Town Board conducted another public hearing on May 2, 2022 and closed the hearing that evening while leaving the public comment period open for twenty days. The additional public comments were reviewed and required formal written responses by stakeholders including Gyrodyne. The Cortlandt Manor Town Board held a public work session on October 24, 2022. During late 2022, the Company's management team, based on discussions with the Town of Cortlandt, amended its mixed-use campus to reflect the following:

SUBDIVISION LOT #	BUILDING SIZE/YIELD
Medical office Lot #1	100,000 sft
Retail (Lot #1)	4,000 sft
Medical office (inclusive of the existing operating building) Lot #2	50,000 sft

*Lot lines could change until formal subdivision occurs.

On March 20, 2023, the Town of Cortlandt Town Board adopted the SEQRA Findings Statement and local law establishing the MOD designation for the property reflecting a total density of 154,000 square feet to be comprised of 150,000 square feet of medical use, inclusive of the existing medical office square footage but excluding non-rentable spaces, and 4,000 square feet of ancillary retail (lot lines and their respective density could change until formal subdivision occurs). The Company does not plan on developing the property. The Company believes contingent on the timing for entering contracts (which we anticipate will include closing terms conditioned upon receiving site plan approval), the subdivision and site plan approval could be received in mid-2027.

Based on an extensive marketing campaign the mixed-use plan that only includes medical and retail but not residential uses, as envisioned by the Town Board, has resulted in medical office development supply that significantly exceeds market demand. The Company is working with JLL and the Town of Cortlandt to develop an alternative mixed-use development and marketing strategy to navigate within these challenging regulatory and market conditions so as to close on the sale no later than the end of 2028 and potentially earlier contingent on when the Company enters into a Purchase and Sale Agreement and the time for such buyer to obtain site plan approval.

The entitlement costs for the nine-months ended September 30, 2026 associated with the ownership and development of this property were approximately $28,500 (80% of which is tax and insurance on the undeveloped property).

Flowerfield. Following market research and related feasibility studies, we identified the entitlements that we believe will maximize the value of Flowerfield in the shortest amount of time with the lowest amount of risk. The Company has been in discussions with the Town of Smithtown on the potential real estate development projects identified by the market research and feasibility studies, all of which currently fall within our "as of right to build" zoning. We are also exploring with the Town of Smithtown whether it would be amenable to certain entitlements or other concessions that would allow for the identified development projects.

In March 2017, the Company filed a pre-subdivision application with the Town of Smithtown (the "Pre-application") for the Flowerfield property along with the previously sold (2002) catering hall facility for an eight-lot subdivision which the Town of Smithtown initially determined must be processed as a nine-lot subdivision in response to certain comments received from the planning department. The final accepted FEIS (in 2021) included an eight-lot subdivision. In June 2017, the Company filed a subdivision application with the Town of Smithtown based on feedback provided by the Town of Smithtown staff in the pre-application process. Because of the property's location within 500 feet of a municipal boundary and a state road, the Town of Smithtown referred the Company's subdivision application to the Suffolk County Planning Commission as required by the Suffolk County Administrative Code and the New York State General Municipal Law.

On August 2, 2017, the Suffolk County Planning Commission voted 11-0 to approve Gyrodyne's subdivision application without conditions. Although the approval by the Suffolk County Planning Commission is not binding on the Town of Smithtown, the approval without conditions means that the requisite vote threshold for the application at the Town of Smithtown's Planning Board is a simple majority.

On November 15, 2017, the Town of Smithtown Planning Board conducted a public hearing in which the Company presented its subdivision plan for the Flowerfield property. On April 11, 2018, the Planning Board determined that the subdivision plan may result in one or more significant environmental impacts which will require the preparation of an EIS. As a result, at the April 11, 2018 Planning Board meeting, the Planning Board issued a SEQRA Positive Declaration, which was rescinded and re-issued by Planning Board Resolution dated May 9, 2018 that included a draft scope and a request for public comments on the scope (i.e., a public scoping process). The then current Town Planning Board Chairman communicated that a Positive Declaration would require up to one year to complete the SEQRA process. The Town issued the Final Scope on July 7, 2018. On August 15, 2018, the Company submitted the Draft EIS to the Town of Smithtown Planning Department prior to the public hearing. The Company received comments on its EIS at the end of the third quarter of 2018 and submitted its response to the Town of Smithtown Planning Department on February 15, 2019. On May 24, 2019, the Company received additional comments on its EIS and submitted its responses to the Town on June 4, 2019. On July 3, 2019, the Company received additional comments on its EIS and submitted its response to the Town of Smithtown Planning Department on August 28, 2019. On September 24, 2019, the Company received additional comments on its EIS and submitted its response to the Town of Smithtown Planning Department on October 25, 2019. The Town of Smithtown Planning Board as Lead Agency under SEQRA adopted a resolution accepting the DEIS as complete for public review on December 11, 2019 and announced a public comment period that closed on January 24, 2020. Furthermore, the Town Planning Board held and closed the public hearing for the DEIS on January 8, 2020. Following the closing of the public comment period, the Company received a copy of the public comments in February 2020. The Company reviewed the public comments and responded by submitting a Final EIS ("FEIS") on April 20, 2020. Following the receipt of additional comments on May 29 and June 9, 2020, the Company filed its FEIS on July 24, 2020. Following State DOT comments received July 31, 2020 and Town comments dated August 21, 2020, the Company filed a revised FEIS on September 16, 2020 and received new comments on October 16, 2020. The Company filed a revised FEIS on October 29, 2020. Upon addressing final Town comments received December 4, 2020, the Company filed its Final FEIS on December 9, 2020 reflecting an eight-lot subdivision. The FEIS was accepted by the Town Planning Board on March 10, 2021. Following a public comment period that closed on March 31, 2021, the Town of Smithtown forwarded the public comments and the FEIS to the Suffolk County Planning Commission. On May 5, 2021, the Suffolk County Planning Commission voted 5 to 4 to approve the application as a matter for local determination. Based on the fact that less than a majority of the 18 total members (10 members needed) voted to either approve or deny the application, the application is deemed approved as a matter for local determination. Thus, the Smithtown Planning Board may act and approve the matter with a simple majority vote. On September 20, 2021, the Town of Smithtown Conservation Board voted unanimously to recommend the Town of Smithtown Planning Board issue a SEQRA Negative Declaration, Determination of Non -Significance (an environmental Impact Statement is not necessary based on certain stated reasons and approve the Subdivision Application (eight lots inclusive of the lot for the proposed sewage treatment plant). On March 30, 2022, the Smithtown Planning Board voted four to zero with one abstention to adopt the Findings Statement by resolution, closing SEQR and held a public hearing for the approval of the Preliminary Subdivision at the same meeting. Approval of the Preliminary Subdivision was granted at that meeting. The most recent responses to technical comments on the Final Subdivision Plans received from the Suffolk County Department of Health Services and Suffolk County Department of Public Works were submitted in March 2026, New York State Department of Environmental Conservation Wetland Permit was issued on October 28, 2024, and New York State Department of Transportation plans were submitted for NYS 25A-Stony Brook Road in March 2025 (no prior design comments).

Contingent on entering into a Definitive Purchase and Sale Agreement with the State, we would pursue the review and or approvals from certain agencies, including but not necessarily limited to New York State Department of Transportation, Suffolk County Department of Health and Suffolk County Department of Public Works. In conjunction with seeking the respective permits, we anticipate submitting an amended subdivision application which will require approval from the Town of Smithtown. Following such amended application, we anticipate submitting a final Town of Smithtown subdivision application in the second half of 2027 contingent on when the sale to the State closes. Once the Town of Smithtown application is filed, we expect to receive and respond to comments prior to scheduling a hearing with possible final approval shortly thereafter (assuming comments are received and responded to promptly), all of which are subject to and contingent on the remaining regulatory process.

The entitlement costs for the nine-months ended September 30, 2026 associated with the ownership and development of this property consisting of taxes, architectural and engineering costs, legal expenses, economic analysis, soil management and surveys were approximately $173,700 (approximately 60% of which was real estate tax).

While we cannot predict the outcome of the subdivision application, we undertook to subdivide the Flowerfield property in a manner that we believed will result in increased development flexibility in the shortest amount of time and limited risk (i.e., included in our subdivision application is the separation of the existing industrial buildings into two separate lots which upon resolution of the Article 78 Proceeding (See Article 78 Proceeding under Part II, Item 1, Legal Proceedings) and final subdivision approval will allow us to sell the two lots together or separately, without any site plan approval). There can be no assurance, however, that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all. The pandemic has negatively impacted demand for office (including medical office) and hotel development "on spec".

Healthcare Industry

The delivery of the majority of healthcare services requires real estate. The global outbreak of COVID-19 further validated this, as hospitals and other healthcare facilities during the pandemic were proven invaluable. As a consequence, healthcare providers depend on real estate to maintain and grow their businesses. We believe that the healthcare real estate market provides investment opportunities due to the:

●

compelling demographics driving the demand for health services;

●

specialized nature of healthcare real estate investing; and

●

consolidation of the fragmented healthcare real estate sector.

Our tenants in our Cortlandt Manor property are healthcare service providers. Furthermore, the Company's previous expansion of its leasing relationship with Stony Brook University ("SBU"), SBU Hospital and affiliates of SBU Hospital at our Flowerfield property increased its exposure to the healthcare industry. The healthcare industry is subject to substantial regulation and faces increased regulation particularly relating to fraud, waste and abuse, cost control and healthcare management. The healthcare industry may experience a significant expansion of applicable federal, state or local laws and regulations, previously enacted or future healthcare reform, new interpretations of existing laws and regulations or changes in enforcement priorities, all of which could materially impact the business and operations of our tenants and therefore the marketability of our properties.

Our healthcare tenants are subject to extensive federal, state, and local licensure laws, regulations and industry standards governing business operations, the physical plant and structure, patient rights and privacy and security of health information. Our tenants' failure to comply with any of these laws could result in loss of licensure, denial of reimbursement, imposition of fines or other penalties, suspension or exclusion from the government sponsored Medicare and Medicaid programs, loss of accreditation or certification, or closure of the facility. In addition, efforts by third-party payors, such as the Medicare and Medicaid programs and private insurance carriers, including health maintenance organizations and other health plans, impose greater discounts and more stringent cost controls upon healthcare provider operations (through changes in reimbursement rates and methodologies, discounted fee structures, the assumption by healthcare providers of all or a portion of the financial risk or otherwise). Our tenants may also face significant limits on the scope of services reimbursed and on reimbursement rates and fees, all of which could impact their ability to pay rent or other obligations to us. Referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients. Competition and loss of referrals could adversely affect our tenants' ability to make rental payments, which could adversely affect our rental revenues. Any reduction in rental revenues resulting from the inability of our medical office buildings and our tenants to compete successfully may have an adverse effect on our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Lingering Pandemic Effects and Macroeconomics

The COVID-19 pandemic has also adversely impacted, and may continue to impact adversely, the timeliness of local government in granting required approvals, as state and local staff charged with processing our subdivision applications all postponed activity due to work-from-home transitions. Accordingly, COVID-19 has caused, and may continue to cause, the completion of important stages in our efforts to secure entitlements to be delayed. The pandemic has also resulted in a significant shift toward commercial acceptance of remote working and telemedicine which has adversely impacted the occupancy rate and average rate per square foot, although medical office has faced less of a challenge from work-from-home shifts. Furthermore, the residual effects of the pandemic continue to negatively impact demand for real estate development projects "on spec".

We are affected by the fiscal and monetary policies of the United States Government and its agencies, including the policies of the Federal Reserve, which regulates the supply of money and credit in the United States. The combination of elevated interest rates and persistent inflation (or the perception that any of these events may continue) has contributed to continued weakness in commercial real estate markets, including in those real estate markets in which we operate. Changes in fiscal and monetary policies are beyond our control and are difficult to predict. Although the Federal Reserve decreased the federal funds rate multiple times in 2024 and three times in 2025, the rate remains elevated. During 2026, the Federal Reserve increased the federal funds rate by 25 basis points and there can be no assurance that rates will not increase further in 2026 and beyond. Regulated lending institutions are adjusting their business models to increase capital requirements for direct loans to real estate and thus continue to be constrained in providing capital for commercial real estate properties. Changes in the federal funds rate as well as the other policies of the Federal Reserve affect interest rates, which have a significant impact on our financial condition.

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

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

Transaction Summary for the Nine-Months Ended September 30, 2026

The following summarizes our significant transactions and other activity during the nine-months ended September 30, 2026.

Employment. On August 7, 2026, the Company entered into a Separation Agreement (the "Separation Agreement") with Peter Pitsiokos, the Company's Chief Operating Officer, providing the terms for the termination of Mr. Pitsiokos' employment with the Company effective October 2, 2026 (the "Termination Date"). Pursuant to the Separation Agreement, the Company agreed to pay Mr. Pitsiokos his base salary through the Termination Date, as well as a six-months' severance payment of $100,000 as required under the terms of Mr. Pitsiokos' employment agreement for terminations without cause. Mr. Pitsiokos agreed to certain standard confidentiality and non-disparagement obligations and to deliver a general release to the Company following the Termination Date. Mr. Pitsiokos delivered the general release on October 19, 2026, and the $100,000 severance payment was paid in a single lump sum on October 22, 2026. Following the Termination Date, the Company will have one full-time employee remaining to complete the liquidation process, and the Company expects the termination of Mr. Pitsiokos' employment to result in approximately $620,000 of savings over the remaining liquidation timeline, which the Company currently expects to be completed by the end of 2028.

Leasing Activity. During the nine-months ended September 30, 2026, the Company executed three new lease and six renewals comprising approximately 13,500 square feet, annual revenue of approximately $230,000 and total commitments of approximately $180,000. There were three terminations comprising approximately 6,300 square feet and approximately $95,600 in annual revenue.

Tenant Default. During the nine-months ended September 30, 2026, one of the Company's three largest tenants, representing approximately 10% of rental income, a material portion of the Company's rental revenue, fell into default under its lease. Management is working with the tenant to restore compliance and believes it is probable that the matter will be resolved without eviction. Management has considered this contingency in its estimates of liquidation and operating costs and believes the current estimates remain adequate. See Note 11 (Concentration of Credit Risk) to the consolidated financial statements for a discussion of the Company's tenant concentration risk in connection with this default.

Critical Accounting Policies

Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pay distributions to holders of Gyrodyne common shares. Therefore, effective September 1, 2015 Gyrodyne adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the entity is "imminent", as defined in ASC 205-30, Presentation of Financial Statements Liquidation Basis of Accounting. Under the LLC Agreement, the Board may elect, in its sole discretion and without any separate approval by shareholders, to dissolve the Company at any time the value of the Company's assets, as determined by the Board in good faith, is less than $1 million. The LLC Agreement also provides that the Company will dissolve, and its affairs wound up upon the sale, exchange or other disposition of all the real properties of the Company. As a result, liquidation is "imminent" in accordance with the guidance provided in ASC 205-30.

Principles of consolidation - The consolidated financial statements include the accounts of Gyrodyne and all subsidiaries. All consolidated subsidiaries are wholly owned. All inter-company balances and transactions have been eliminated.

Basis of Presentation - Liquidation Basis of Accounting - Under the liquidation basis of accounting the consolidated balance sheet and consolidated statements of operations, equity, comprehensive income and cash flows are no longer presented. The consolidated statements of net assets and changes in net assets are the principal financial statements presented under the liquidation basis of accounting.

Under the liquidation basis of accounting, all the Company's assets have been stated at their estimated net realizable value, or liquidation value, (which represents the estimated amount of cash that Gyrodyne will collect on the disposal of assets (prior to any credits for contribution amounts which are reflected in the costs in excess of receipts) as it carries out the plan of liquidation), which is based on independent third-party appraisals, estimates and other indications of sales value. All liabilities of the Company, including those estimated costs associated with implementing the plan of liquidation, have been stated at their estimated settlement amounts. These amounts are presented in the accompanying statements of net assets. These estimates are periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the plan of liquidation. The actual values and costs associated with carrying out the plan of liquidation may differ from amounts reflected in the accompanying consolidated financial statements because of the plan's inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by December 31, 2028.

The Company (and B2K for the respective property lots pursuant to the B2K Agreement until such agreement is terminated) is in the process of pursuing entitlements and density approvals, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers. The process has involved extensive analysis at the government entity level, as well as between government entities such as town planning departments and Gyrodyne and or purchasers, and will continue up until such time as entitlement and density decisions (which may also include site plan approval of prospective purchasers) are made by the relevant government entities. The Company hopes to secure favorable decisions on entitlements and density so that we can then seek the sale of our remaining properties with increased development flexibility. Any deviation in use or density between what we are pursuing in our entitlement efforts and what is ultimately permitted could have a material impact on values.

The Company believes the process of negotiating purchase agreements, securing final approvals and consummating the sale of our properties will culminate in 2028 contingent on the termination of the B2K Agreement and the execution and consummation of a definitive agreement with the State. The Company is actively marketing its properties and intends to negotiate contracts in an effort to complete the process as soon as practicable with the ultimate timeline being largely dependent on factors outside the Company's control, including without limitation the Article 78 Proceeding and delays in securing final regulatory approvals caused by the ongoing backlog of land use applications, zoning authority labor shortages and environmental concerns. Consequently, there can be no assurance that the Company will be able to meet our formal stated target of 2028.

The Company's assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement costs, litigation fees, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by December 31, 2028. As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update relevant information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company's properties.

Management Estimates - In preparing the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") and the liquidation basis of accounting, management is required to make estimates and assumptions that affect the reported amounts of assets, including net assets in liquidation, and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of receipts and expenditures for the reporting period. Actual results could differ from those estimates. The real estate market is cyclical in nature. Property values are affected by, among other things, the availability of capital, occupancy rates, rental rates, interest rates and inflation rates. As a result, determining real estate values involves many assumptions. Amounts ultimately realized may vary significantly from the net assets in liquidation values presented. The Company's most significant accounting estimate relates to the determination of the value of net assets in liquidation.

Fair Value of Real Estate - The Company also considers in its valuation estimates the receipt of any expressions of interest/letters from perspective buyers adjusted to reflect the Company's best estimate of any contingent financial terms such as approved density and related site plans.

Fair Value Measurements - The Company believes the concepts for determining net realizable value are consistent with the guidance for measuring fair value. As a result, the Company follows the guidance of FASB Accounting Standards Codification, Fair Value Measurements and Disclosures to determine the fair value of financial and non-financial instruments. The guidance defines fair value, establishes a hierarchy framework for measuring fair value and expands disclosures related to the fair value. The guidance establishes a hierarchy breaking down observable and unobservable inputs into three levels: Level 1 - observable inputs in an active market on or around the measurement date, Level 2 - observable inputs that are based on prices not quoted on active markets but corroborated by market data and Level 3 - unobservable inputs utilized when no other data is available.

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

Industry Segments - Gyrodyne's corporate strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities to provide purchasers increased development flexibility, and by enhancing the value of our leases, and then selling our properties in an orderly manner at higher values. The Company manages this strategy on an aggregated, single segment basis for purposes of assessing performance and making decisions (inclusive of capital allocation, leasing, entitlements and sales). Therefore, the Company has only one reporting segment.

As reported in footnote three, the Company is on a liquidation basis of accounting. The detailed information regularly provided to the chief operating decision maker ("CODM"), President and CEO, is reported in footnote five in detail supporting the estimated liquidation and operating costs net of estimated receipts. This information allows the CODM to manage and forecast any impact the operations have on the estimated real estate value and in the aggregate allows the CODM to calculate estimated distributions. The net assets as of September 30, 2026 ($23,640,139) and December 31, 2025 ($25,858,997) results in estimated distributions of approximately $10.75 and $11.76 per common share, respectively, based on 2,199,308 shares outstanding.

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of September 30, 2026, and has concluded that they will not have a material impact on the Company's consolidated financial statements since the Company reports on a liquidation basis.

Discussion of the Statements of Net Assets

Net assets as of September 30, 2026 and December 31, 2025 would result in estimated liquidating distributions of $23,640,139 and $25,858,997, respectively, or approximately $10.75 and $11.76 per common share, respectively, based on 2,199,308 shares outstanding. The decrease of $2,218,858 in estimated liquidating distributions is mainly attributable to a decrease in the estimated selling price of real estate of $7,440,000 and an increase in estimated selling costs (inclusive of fees relating to the termination of the B2K Agreement), of approximately $900,000 partially offset by (i) savings in retention bonuses resulting from the decrease in real estate value of approximately $308,000, savings in land development including the B2K closing credit of $4,323,700, an increase in operating income mainly due to timing of sales and employee restructuring of $1,233,000, and a savings on the estimated prepayment penalty on the Cortlandt Manor loan of approximately $70,000.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2028, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the September 30, 2026 cash balance of $3.35 million plus adjustments for the following items which are estimated through December 31,2028:

1.

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

2.

Net proceeds from the sale of all the Company's real estate holdings.

3.

The general and administrative expenses and or liabilities associated with operations and the liquidation of the Company including severance, director and officer liability coverage including post liquidation tail policy coverage, and financial and legal fees (inclusive of the Article 78 Proceeding) to complete the liquidation.

4.

Costs for the pursuit of the entitlement of the Flowerfield and Cortlandt Manor properties.

5.

Retention bonus amounts.

6.

Debt service on the Company's credit facilities.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company may estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level 3 inputs, as defined under FASB ASC Topic No. 820, Fair Value Measurement. The Company also considers in its valuation estimates the receipt of any credible expressions of interest/letters from perspective buyers adjusted to reflect the Company's best estimate of any contingent financial terms such as approved density and related site plans. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted capital improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals and relevant Company experience with its current and previously owned properties. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location, local supply and demand observations and no sewage treatment plant. To the extent the Company underestimates or overestimates forecasted cash outflows (capital improvements, lease commissions, operating costs and credit costs) or overestimates or underestimates forecasted cash inflows (rental revenue rates) or other unfavorable or favorable variances of the aforementioned assumptions, the estimated net realizable value of its real estate assets could be overstated or understated.

The Company estimates that it will incur approximately $820,000 included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of receipts in land entitlement costs from October 2026 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2028, in an effort to obtain entitlements. The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the aggregate Flowerfield and Cortlandt Manor property values and resulting distributions. During the nine-months ended September 30, 2026, the Company incurred approximately $202,000 of land entitlement costs, consisting predominately of engineering fees, legal fees and real estate taxes. The Company believes the remaining balance of $820,000 (over half of which is real estate taxes and subdivision related regulatory fees) will be incurred from October 2026 through the end of the liquidation period. The Company does not intend to develop the properties but rather positioning the properties for increased development flexibility in the shortest period of time with the least amount of risk to the Company. The costs and time frame to achieve the entitlements could change due to a range of factors including a shift in the value of certain entitlements making it more profitable to pursue a different mix of entitlements and the dynamics of the real estate market. As a result, the Company has focused and will continue to focus its land entitlement efforts on achieving the highest and best use while considering the time and direct and indirect costs necessary to achieve such entitlements. During the process of pursuing such entitlements, the Company may entertain offers from potential buyers (which include but not limited to the sale to the State) who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes itself. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Net assets as of September 30, 2026 and December 31, 2025 would result in estimated liquidating distributions of $23,640,139 and $25,858,997, or approximately $10.75 and $11.76 per common share, respectively, based on 2,199,308 shares outstanding based on estimates and other indications of sales value. This estimate of distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, terms for the sale to the state and estimated termination fees associated with the B2K contract, change in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or resulting from the land entitlement efforts) net of any bonuses, favorable or unfavorable changes in the land entitlement costs, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows.

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of September 30, 2026 (dollars are in millions).

September 30, 2026 cash and cash equivalents balance		$	3.35
Principal payments on loan			(10.63	)
Free cash flow from rental operations			2.17		(i)
General and administrative expenses			(3.97	)	(ii)
Land entitlement costs in pursuit of the highest and best use			(0.82	)
Gross real estate proceeds			46.55
Selling costs on real estate			(3.88	)
Retention bonus plan for officers and employees			(1.93	)
Final liquidation and dissolution costs			(1.38	)	(iii)
Other			(5.82	)	(iv)
Net Assets		$	23.64

(i)

The Company estimates the cash proceeds from rental operations net commissions and rental costs, inclusive of expenditures to preserve the properties at its current estimated market value will total $2.17.

(ii)

The general and administrative expenses, excluding final liquidation costs, is estimated to be ($3.97).

(iii)

The costs represent all anticipated costs to liquidate the Company including D&O tail, severance and professional fees.

(iv)

The Company estimates interest income will be offset by interest expense and the settlement of its working capital accounts resulting in a balance of ($5.82).

Discussion of Changes in Net Assets

Gyrodyne's strategy is to enhance the value of Flowerfield and Cortlandt Manor, by pursuing various entitlement opportunities, which the Gyrodyne Board believes will improve the potential of obtaining better aggregate values for such properties as a whole. The pursuit of the highest and best use of Flowerfield and Cortlandt Manor may involve other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pays distributions to holders of Gyrodyne common shares. Because the Company reports on the liquidation basis of accounting, it no longer presents a statement of operations, and accordingly this discussion addresses changes in net assets in liquidation in lieu of a traditional discussion of results of operations. Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the nine-months ended September 30, 2026 of which is discussed below:

Net assets in liquidation on January 1, 2026		$	25,858,997
Changes in net assets in liquidation from January 1 through September 30, 2026:
Change in liquidation value of real estate			(7,440,000	)	(i)
Remeasurement of assets and liabilities in liquidation			5,221,142
Total decrease in net assets in liquidation			(2,218,858	)
Net assets in liquidation on September 30, 2026		$	23,640,139

(i)

The reduction in price is the variance between the gross value of the B2K Agreement of $28.74 million and the proposal from the State of $21.3 million.

The remeasurement of $5,221,142 in assets and liabilities in liquidation is mainly attributable to (i) savings in retention bonuses resulting from the decrease in real estate value of approximately $308,000, (ii) savings in land development costs including the elimination of the B2K closing credit of $4,323,700, (iii) an increase in operating income mainly due to the timing of sales and employee restructuring of $1,233,000, (iv) savings on the estimated prepayment penalty on the Cortlandt Manor loan of approximately $70,000, partially offset by selling costs inclusive of estimated fees relating to the termination of the B2K Agreement of approximately $900,000.

Liquidity and Capital Resources

Cash Flows:

As we pursue our plan to sell our properties strategically, including certain enhancement efforts, we believe that a main focus of management is to effectively manage our net assets through cash flow management of our tenant leases, maintaining or improving occupancy, and enhance the value of the Flowerfield and Cortlandt Manor properties via the pursuit of the associated change in entitlements.

As the Company executes on the liquidation plan, it will review its capital needs and make prudent distribution decisions regarding any excess cash. Upon completion of these activities, Gyrodyne will distribute the remaining cash to its shareholders and then proceed to complete the dissolution of the Company, delist its shares from Nasdaq or other exchange platform and terminate its registration and reporting obligations under the Securities Exchange Act of 1934, as Amended (the "Exchange Act"). Gyrodyne is required to make adequate provisions to satisfy its known and unknown liabilities which could substantially delay or limit its ability to make future distributions to shareholders. The process of accounting for liabilities, including those that are currently unknown or whose amounts are uncertain may involve difficult valuation decisions which could adversely impact the amount or timing of any future distributions.

We generally finance our operations through cash on hand. Critical to our cash management, certain of the Company's major vendors have informally agreed to defer payment on 50% of their fees until the first subdivided lot is sold. While these same vendors remain committed to deferring a large portion of their deferred fees (as disclosed in note 8), the extended timeline to the end of 2028 is resulting in economic pressure to provide for a yet to be determined partial payment, albeit expected to be less than half of the outstanding liability. These vendor fee deferrals are informal, unwritten arrangements and are not legally binding contractual obligations. As a result, there can be no assurance that any vendor will continue to honor its deferral, and any vendor could demand accelerated or full payment of its deferred fees on different terms than we have assumed, which would increase demands on our limited working capital and could result in disputes over the existence, amount, or terms of the deferral.

Additionally, on December 6, 2019, the Company's Board of Directors approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the "DCP") effective as of January 1, 2020. The plan is a non-qualified deferred compensation plan maintained for officers and directors of the Company. Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5% (per annum). All DCP benefits will be paid in a single lump sum cash payment on December 15, 2031, unless a Plan of Liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP (See Deferred Compensation Plan below).

As of September 30, 2026, the Company had cash and cash equivalents totaling approximately $3.35 million. The cash will be partially used to fund our efforts to generate the highest values for the Flowerfield and Cortlandt Manor properties while simultaneously pursuing the strategic sale of these properties. The pursuit of the highest values for Flowerfield and Cortlandt Manor may involve other investments and or other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. The Company is estimating and reporting in the consolidated statements of net assets total gross cash proceeds from the sale of its assets of approximately $46.55 million. Based on the Company's current cash balance and the above forecast, the Company estimates distributable cash stemming from the liquidation of the Company of approximately $23.64 million.

The Company modified and extended the two credit facilities that matured in 2026 allowing the Company to meet its working capital needs through the closing of the sale to the State. The closing of the sale of the undeveloped Flowerfield property to the State (and the termination of the B2K Agreement) would provide adequate additional working capital to fund a yet to be determined distribution to our shareholders and fund our process of seeking entitlements and selling the remaining assets through the forecasted liquidation completion date. Absent closing on the sale of the Flowerfield property by the end of 2027, Management believes the Company will need additional capital to properly fund operations through the end of 2028. Such capital needs may be met through the combination of other property sales or the modification of its existing credit facilities and or new credit facilities, or other alternative capital raising strategies. There can be no assurance, however, that the Company will be successful in securing any such loan modifications, new credit facilities or alternative capital raising transactions on terms that are satisfactory to the Company or on any terms at all or achieve a timely closing on the sale of a property to address its working capital needs. If such available cash and amounts received on the sale of assets are not adequate to provide for our obligations, liabilities, expenses and claims, distributions of cash and other assets to our shareholders would be eliminated. In the event our shareholders receive distributions from Gyrodyne and there are insufficient funds to pay any creditors who seek payment of claims against Gyrodyne, shareholders could be held liable for payments made to them and could be required to return all or a part of the distributions made to them.

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

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current cash and cash equivalents;

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rents and tenant reimbursements received on our remaining real estate operating assets; and

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sale of assets.

Excluding gross proceeds from the sale of assets, the Company's gross rents and tenant reimbursements net of rental expenses is less than the combined total annual general and administrative costs, capital expenditures and land entitlement costs creating a net use of cash on an annual basis through the liquidation process. The Company believes the cash and cash equivalents plus the proceeds from the sale of assets will exceed the costs to complete the liquidation of the Company. In addition, the Company has and will continue to review operating activities for possible cost reductions and additional capital/credit needs throughout the liquidation process.

Major elements of the Company's cashflows for the nine-months ended September 30, 2026 were as follows:

Operating Cashflows:

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$2,174,998 in rent and reimbursements.

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($1,488,290) in operating costs.

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$686,708 in net operating income.

Nonoperating Cashflows:

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($28,477) of land entitlement costs incurred for the Cortlandt Manor property.

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($173,726) of land entitlement costs incurred for the Flowerfield property.

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($89,811) of capital expenditures on the real estate portfolio excluding those costs incurred for land entitlement.

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($1,742,536) of corporate expenditures including interest expense.

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($233,585) of principal payments on our loans.

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$397,948 in changes in working capital.