<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

           For the transition period from ____________ to ____________

                                    000-21749
                            (Commission file number)

                          MOONEY AEROSPACE GROUP, LTD.
        (Exact name of small business issuer as specified in its charter)

              DELAWARE                                          95-4257380
    (State or other jurisdiction                               (IRS Employer
  of incorporation or organization)                         Identification No.)

                165 AL MOONEY ROAD NORTH, KERRVILLE, TEXAS 78028
                    (Address of principal executive offices)

                                 (830) 896-6000
                           (Issuer's telephone number)

                                       N/A
              (Former name, former address and former fiscal year,
                         if changed since last report)

     State the number of shares outstanding of each of the issuer's classes
     of common equity, as of the latest practicable date: As of October 25,
                    2004 - 644,392,511 shares of common stock

    Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]



<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                                      INDEX

                                                                          Page
                                                                         Number
                                                                         ------

PART I.    FINANCIAL INFORMATION                                            2

Item 1.    Financial Statements                                             2

           Balance Sheet as of September 30, 2004 (unaudited)               2

           Statements of Operations for the three and nine months
           ended September 30, 2004 and 2003 (unaudited)                    3

           Statements of Cash Flows for the nine months ended
           September 30, 2004 and 2003 (unaudited)                          4

           Notes to Financial Statements (unaudited)                        6

Item 2.    Management's Discussion and Analysis or Plan of Operations      11

Item 3.    Controls and Procedures                                         15

PART II.   OTHER INFORMATION                                               16

Item 1.    Legal Proceedings                                               16

Item 2.    Change in Securities                                            17

Item 3.    Defaults Upon Senior Securities                                 17

Item 4.    Submission of Matters to a Vote of Security Holders             18

Item 5.    Other Information                                               18

Item 6.    Exhibits and Reports on Form 8-K                                18

SIGNATURES                                                                 19

CERTIFICATIONS

                                        1
<PAGE>

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

<TABLE>

                                   MOONEY AEROSPACE GROUP LTD
                                   MASG DEBTOR IN POSSESSION
                                         BALANCE SHEETS
<CAPTION>

                                                                   SEPTEMBER 30,  DECEMBER 31,
                                                                       2004            2003
                                                                   -------------  -------------
                                                                     UNAUDITED
<S>                                                                <C>            <C>
                                             ASSETS
     Current Assets
          Cash and Cash Equivalents                                      45,000      1,175,000
          Accounts Receivable, net of allowance
            for doubtful accounts                                             0        128,000
          Inventory, net of oblsolence reserves                               0      8,666,000
          Debt Issuance costs                                                 0        379,000
          Prepaid expenses and other current assets                           0        183,000
                                                                   -------------  -------------

     SUBTOTAL CURRENT ASSETS                                             45,000     10,531,000

     Other Current Assets
          Other Accounts Receivable, retainage attorneys                  9,000              0
                                                                   -------------  -------------

     Total Other Current Assets                                           9,000              0
                                                                   -------------  -------------

TOTAL CURRENTS ASSETS                                                    54,000     10,531,000

FIXED ASSETS
     Property and Equipment, net                                              0      3,993,000
     Building 23 Pear St, Trenton NJ                                    151,000              0
     Trade Name                                                               0      1,802,000
     Debt Issuance Cost                                                       0      1,487,000
                                                                   -------------  -------------

                                                                   -------------  -------------
TOTAL FIXED ASSETS                                                      151,000      7,282,000
                                                                   -------------  -------------

TOTAL ASSETS                                                            205,000     17,813,000
                                                                   =============  =============

                            LIABILITIES AND STOCKHOLDERS' DEFICIENCY

                                          LIABILITIES
     Current Liabilities
          Accounts Payable                                               24,000              0

     Other Current Liabilities
          Accounts Payable,  prior to bankruptcy                      1,241,000      2,984,000
          Accrued Expenses                                            1,245,000      2,731,000
          Notes Payable, current portion                                547,000        529,000
          Building Rent Obligation Bankruptcy, abandoned property    10,315,000     14,099,000
          Deferred Compensation                                         150,000              0
          Deferred Liabilities                                         1,115,000      2,001,000
          Accrued Interest                                            4,148,000      3,748,000
          Payable to Mooney Airplane Company                              9,000              0
          Convertible Debentures, current portion                             0      2,376,000
                                                                   -------------  -------------
     Total Other Current Liabilities                                 18,770,000     28,468,000
                                                                   -------------  -------------

     Long Term Liabilities
          Convertible Debentures, less current portion               27,383,000     26,788,000
          Notes Payable, less current portion                                 0      5,033,000
          Note Payable, NJ House Note                                   148,000              0
                                                                   -------------  -------------
     Total Long Term Liabilities                                     27,531,000     31,821,000

TOTAL LIABILITIES                                                    46,325,000     60,289,000

                        STOCKHOLDERS'  DEFICIENCY
     Class A Common Stock, $0.0001 par value                             64,000         46,000
     Series A Cumulative Convertible Preferred Stock,
     $100 stated value per share                                      1,432,000      2,082,000
     Additional Paid In Capital                                      99,485,000     96,360,000
     Deficit                                                       (147,101,000)  (140,964,000)
                                                                   -------------  -------------
                                                                    (46,120,000)   (42,476,000)
                                                                   -------------  -------------
                                                                        205,000     17,813,000
                                                                   =============  =============

                      See accompanying notes to the financial statements.

                                               2
</TABLE>



<PAGE>
<TABLE>

                                         MOONEY AEROSPACE GROUP LTD
                                          MASG DEBTOR IN POSSESSION
                                                PROFIT & LOSS
                                                  UNAUDITED
<CAPTION>

                                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                                       Sept 2004     Sept 2003     Sept 2004      Sept 2003
                                                      ------------  ------------  ------------  ------------
<S>                                                   <C>           <C>           <C>           <C>
NET SALES                                                       0     6,356,000             0    10,868,000

COST OF SALES                                                   0     5,411,000             0     9,662,000
                                                      ------------  ------------  ------------  ------------

GROSS PROFIT (LOSS)                                             0       945,000             0     1,206,000
                                                      ------------  ------------  ------------  ------------

OPERATING EXPENSES
     General and Administration Expenses                  102,000     1,015,000       981,000     4,093,000
     Selling and Support Expenses                               0       618,000             0     1,379,000
     Research and Development Expenses                          0       130,000             0       377,000
                                                      ------------  ------------  ------------  ------------

     TOTAL OPERATING EXPENSES                             102,000     1,763,000       981,000     5,849,000

LOSS FROM OPERATIONS                                     (102,000)     (818,000)     (981,000)   (4,643,000)

OTHER INCOME (EXPENSE)
     Interest Income                                            0             0       294,000        10,000
     Other Income (Expense), net                         (102,000)        7,000      (898,000)     (507,000)
     Amortization of Debt Issue Cost and Discounts       (510,000)     (172,000)   (2,153,000)   (3,277,000)
     Interest Expense                                     (28,000)     (664,000)      (74,000)   (5,326,000)
                                                      ------------  ------------  ------------  ------------

     TOTAL OTHER INCOME (EXPENSE)                        (640,000)     (829,000)   (2,831,000)   (9,100,000)
                                                      ------------  ------------  ------------  ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                   (742,000)   (1,647,000)   (3,812,000)  (13,743,000)
                                                      ------------  ------------  ------------  ------------

PROVISION FOR INCOME TAXES                                      0             0             0             0
                                                      ------------  ------------  ------------  ------------

LOSS BEFORE DISCONTINUED OPERATIONS                      (742,000)   (1,647,000)   (3,812,000)  (13,743,000)
                                                      ------------  ------------  ------------  ------------

DISCONTINUED OPERATION
     Loss from Operations of Discontinued Operation      (377,000)     (241,000)   (1,885,000)   (1,972,000)
     Loss from Disposition of Discontinued Operation   (4,528,000)            0    (4,258,000)            0
                                                      ------------  ------------  ------------  ------------

     TOTAL DISCONTINUED OPERATION                      (4,905,000)     (241,000)   (6,143,000)   (1,972,000)
                                                      ------------  ------------  ------------  ------------

NET LOSS                                               (5,647,000)   (1,888,000)   (9,955,000)  (15,715,000)
                                                      ============  ============  ============  ============

NET LOSS PER SHARE - BASIC AND DILUTED
     Continuing Operations                                (0.0010)      (0.0100)      (0.0060)      (0.0400)
     Discontinued Operations                              (0.0080)      (0.0001)      (0.0100)      (0.0060)
                                                      ============  ============  ============  ============

                             See accompanying notes to the financial statements.

                                                      3
</TABLE>

<PAGE>
<TABLE>

                                         MOONEY AEROSPACE GROUP LTD
                                           (DEBTOR-IN-POSSESSION)
                                          Statements of Cash Flows
<CAPTION>

                                                                                     NINE MONTHS ENDED
                                                                                SEPT. 30 2004  SEPT. 30 2003
                                                                                 ------------  ------------
                                                                                  (UNAUDITED)   (UNAUDITED)
<S>                                                                              <C>           <C>
CASH FLOW FROM OPEERATING ACTIVITIES:
      Net Loss from continuing operations                                        $(3,812,000)  (13,743,000)
      Adjustment to reconcile net loss from continuing operations to net cash
        provided by (used) in operating activities of continuing operations:
           Noncash professional service expense                                      251,000             0
           Amortization of discount on convertible debentures                      1,245,000     2,968,000
           Amortization of debt issuance cost                                        908,000       309,000
           Common stock and warrants issued for services                                   0       237,000
           Depreciation and amortization expense                                       1,000       425,000
           Convertible debentures issued for services                                      0        88,000
      Changes in operating assets and liabilities:
           Accounts receivable                                                       128,000       (82,000)
           Inventory                                                               8,666,000    (1,547,000)
           Prepaid expenses and other current assets                                 562,000       104,000
           Accounts payable                                                       (1,743,000)    2,064,000
           Accrued expenses                                                       (1,486,000)    1,300,000
           Accrued interest and penalties                                            400,000     5,024,000
           Accrued settlement of abandoned lease                                  (3,784,000)            0
           Deferred liabilities                                                     (886,000)
           Accrued warrant liability                                                       0       498,000
           Advanced deposits                                                        (100,000)      193,000
                                                                                 ------------  ------------

Net cash provided by (used in) operating activities of continued operations          706,000    (2,162,000)
Net cash provided by (used in) operating activities of discontinued operations       (21,000)            0
Loss from disposition of discontinued operations                                  (3,698,000)
                                                                                 ------------  ------------
Net cash used in operation activities                                             (3,369,000)   (2,162,000)
                                                                                 ------------  ------------

CASH FLOW FROM INVESTING ACTIVITIES:
      Purchase of property and equipment                                            (151,000)      (37,000)
                                                                                 ------------  ------------
Net cash used in investing activities                                               (151,000)      (37,000)
                                                                                 ------------  ------------

CASH FLOW FROM FINANCING ACTIVITIES:
      Proceeds from issuance of convertible debentures                                     0       473,000
      Proceeds from issuance of notes payables                                       148,000     5,649,000
      Payments for debt issue costs                                                        0      (380,000)
      Payments on notes payable                                                     (251,000)   (4,560,000)
      Issuance of common stock                                                        18,000
      Additional paid-in capital                                                   3,125,000
      Conversion of cumulative convertible preferred stock                          (650,000)
                                                                                 ------------  ------------
Net cash provided by financing activities                                          2,390,000     1,182,000
                                                                                 ------------  ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (1,130,000)   (1,017,000)

CASH AND CASH EQUIVALENTS, Beginning of period                                     1,175,000     1,413,000
                                                                                 ------------  ------------

CASH AND CASH EQUIVALENTS, End of period                                         $    45,000       396,000
                                                                                 ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

      Interest paid                                                              $         0       280,000
                                                                                 ============  ============
      Income taxes paid                                                          $         0             0

                            See accompanying notes to the financial statements.

                                                     4
</TABLE>


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                      STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the three months ended September 30, 2004, the Company: 1) converted 0
shares of Series A preferred stock into 0 shares of Class A common stock valued
at $0, 2) converted $0 of convertible debentures into 0 shares of Class A common
stock, 3) converted $0 of accrued interest into shares of Class A common stock,
4) issued 1,396,734 shares of Class A common stock for accrued compensation of
$1,261, 5) issued 2,333,333 shares of Class A common stock for consulting fees
valued at $1,400, 6) issued 0shares of Class A common stock for a commitment fee
of $0, and 7) issued 2,486,702 shares of Class A common stock valued at $30,000
in full settlement for a legal claim.

During the nine months ended September 30, 2004, the Company: 1) converted 8373
shares of Series A preferred stock into 21,864,583 shares of Class A common
stock valued at $651,143, 2) converted $1,938,115 of convertible debentures into
87,109,468 shares of Class A common stock, 3) converted $101,197 of accrued
interest into 20,600,950 shares of Class A common stock, 4) issued 13,108,744
shares of Class A common stock for accrued compensation of $158,609, 5) issued
2,578,518 shares of Class A common stock for consulting fees valued at $4,211,
6) issued 17,391,304 shares of Class A common stock for a commitment fee of
$400,000, and 7) issued 24,510,512 shares of Class A common stock valued at
$450,000 in full settlement for legal claims.

During the three months ended September 30, 2003, the Company: 1) converted 2687
shares of Series A preferred stock into 6,997,049 shares of Class A common stock
valued at $506,000, 2) converted $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, 3) converted $224,459 of accrued
interest into 6,462,957 shares of Class A common stock, 4) In addition, the
Company issued 4,075,136 shares of Class A common stock for professional
services valued at $193,507.

During the nine months ended September 30, 2003, the Company converted: 1) 5345
shares of Series A preferred stock into 14,003,734 shares of Class A common
stock valued at $3,375,739, 2) $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, and 3) $303,133 of accrued interest
into 11,854,961 shares of Class A common stock. In addition, the Company issued
36,464,133 shares of Class A common stock for professional services valued at
$193,507.

              See accompanying notes to the financial statements.

                                       5


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The unaudited financial statements have been prepared by Mooney Aerospace Group,
Ltd. (the "Company"), pursuant to the rules and regulations of the Securities
and Exchange Commission. The information furnished herein reflects all
adjustments (consisting of normal recurring accruals and adjustments) that are,
in the opinion of management, necessary to fairly present the operating results
for the respective periods. Certain information and footnote disclosures
normally present in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the audited financial statements and
footnotes for the year ended December 31, 2003 included in the Company's Annual
Report on Form 10-KSB. The results of the nine months ended September 30, 2004
are not necessarily indicative of the results to be expected for the full year
ending December 31, 2004.

The interim unaudited financial statements have been prepared on a going concern
basis, which assumes continuity of operations and realization of assets and
satisfaction of liabilities in the ordinary course of business, and in
accordance with Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code." Accordingly, all
pre-petition liabilities subject to compromise have been segregated in the
unaudited balance sheets and classified as "liabilities subject to compromise,"
at the estimated amount of allowable claims. Liabilities not subject to
compromise are separately classified as current and non-current. Revenues,
expenses, realized gains and losses, and provisions for losses resulting from
the reorganization are reported separately as reorganization items, net in the
unaudited statements of operations. Cash used in reorganization items is
disclosed separately in the unaudited statements of cash flows.

Stock Options
-------------
The Company did not grant any new options and no options were cancelled or
exercised during the nine months ended September 30, 2004. As of June 30, 2004,
no options were outstanding under the Company Stock Option Plan (the "Plan"),
and 300,000 were options outstanding that were issued outside the Plan in July
2002 that were fully vested on that date. The pro forma information regarding
the effect on operations that is required by SFAS 123 and SFAS 148 has not been
presented since there is no pro forma expense to be shown for the nine months
ended September 30, 2004 and 2003.

NOTE 2 - EARNINGS PER SHARE

In 1997, the Financial Accounting Standard Boards ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. Basic earnings per
share is computed using the weighted-average number of common shares outstanding
during the period. Common equivalent shares are excluded from the computation if
their effect is anti-dilutive. (See Note 9 for per share information) The
following potential common shares have been excluded from the computation of
diluted net loss per share as of September 30, 2004 and 2003 because the effect
would have been anti-dilutive:

                                       6


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
                                                                           2004                 2003
                                                                     ----------------     ----------------
<S>                                                                    <C>                  <C>
                  Conversion of Series A preferred stock                  57,291,302           81,773,438
                  Conversion of convertible debentures                 1,449,523,010        1,439,694,010
                  Stock options issued to employees                          300,000              300,000
                  Warrants issued with equity line                         4,268,764            4,268,764
                  Warrants issued with severance package                   2,000,000            2,000,000
                  Warrants issued with acquisition of MAC                  3,623,189            3,623,189
                                                                     ----------------     ----------------
                                                                       1,517,006,265        1,531,659,401
                                                                     ================     ================
</TABLE>

NOTE 3 - DISCONTINUED OPERATIONS

On May 28, 2004, in order to preserve the value of its Mooney Airplane Company
("MAC") subsidiary, and avoid a cessation of operations, and the loss of jobs
and other economic dislocations, the Company entered into a Stock Purchase
Agreement ("Agreement") with Allen Holding & Finance Ltd., a corporation formed
and existing under the laws of Switzerland ("Allen"). The Company, in lieu of
foreclosure, voluntarily turned over its ownership of 100 shares of MAC common
stock, which represented all the issued and outstanding shares of MAC, to Allen
who is the designee of the secured convertible debenture holders. Pursuant to
the Agreement the Company sold its wholly owned subsidiary, MAC to Allen in
exchange for the assumption of approximately $21,000,000 of secured convertible
debentures. Although Allen assumed approximately $21,000,000 of debt, the
Company was not released of its obligation for this debt. The Company has
recognized a loss on the disposition of MAC in the amount of $4,258,000. The
historical financial statements have been restated to present MAC as a
discontinued operation.

Below is a summary of the operating results of MAC for the period of January 1,
2004 to May 28, 2004 and the six months ended June 30, 2003: There are no
operating results to report in the three months ended September 30, 2004.

                                                    2004                2003
                                              ---------------     --------------

                  Net sales                   $    5,415,254      $   4,512,357
                                              ===============     ==============
                  Gross profit (loss)         $     (340,990)     $     261,591
                                              ===============     ==============
                  Operating expenses          $    1,298,456      $   1,956,464
                                              ===============     ==============
                  Net loss                    $   (1,884,857)     $   1,730,171)
                                              ===============     ==============

NOTE 4 -  PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

On June 10, 2004 ("Petition Date"), Mooney Aerospace Group, Ltd filed voluntary
petitions for reorganization under Chapter 11 of the federal bankruptcy laws in
the United States Bankruptcy Court for the district of Delaware ("Court") under
case number 04-11733. The Company is currently operating its business as
debtors-in-possession pursuant to the Bankruptcy Code.

The Company seeks judicial reorganization based upon a judgment issued against
the Company by the Superior Court of the State of California, Los Angeles County
in excess of $23 million. As a debtor-in-possession, the Company is authorized
to continue to operate as an ongoing business, but may not engage in
transactions outside the ordinary course of business without the approval of the
Court, after notice and an opportunity for a hearing.

                                       7


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well
as most other pending litigation, are stayed and other contractual obligations
against the Company generally may not be enforced. Absent an order of the Court,
substantially all pre-petition liabilities are subject to settlement under a
plan of reorganization to be voted upon by creditors and equity holders and
approved by the Court.

The plan of reorganization, which has been submitted to the Court for approval
and is continuing to undergo revision and adjustments, provides for the
restructured company to repurchase MAC from Allen for 50% of the its outstanding
common stock, issue 46% of its common stock to unsecured creditors, issue 2% of
its common stock to the preferred stockholders and the remaining 2% would remain
with the current common stockholders. In addition, the restructured company
would still be liable for the secured convertible debentures.

NOTE 5 - LIABILITIES SUBJECT TO COMPROMISE

Under bankruptcy law, actions by creditors to collect indebtedness the Company
owes prior to the Petition Date are stayed. All pre-petition liabilities have
been classified as liabilities subject to compromise in the unaudited balance
sheet. Adjustments to the claims may result from negotiations, payments
authorized by Court order, additional rejection of executory contracts including
leases, or other events.

Pursuant to an order of the Court, we mailed notices to all known creditors that
the deadline for filing proofs of claim with the Court is November 30, 2004 on
behalf of creditors and December 15, 2004 on behalf of any governmental unit.
Amounts that we have recorded may be different than amounts filed by our
creditors. The number and amount of allowed claims cannot be presently
ascertained.

The following table summarizes the components of the liabilities classified as
liabilities subject to compromise in our unaudited balance sheet as of September
30, 2004:

                  Accounts payable                                $   1,241,298
                  Accrued expenses                                      841,322
                  Notes payable                                         547,287
                  Accrued interest                                    4,147,726
                  Airplane deposits                                   1,115,000
                  Legal judgment (bankruptcy claim) see page 17      10,315,524
                  Deferred compensation                                 150,131
                  Payable to Mooney Airplane Company                      8,847
                  Unsecured convertible debentures                    6,456,197
                                                                  --------------

                                                                  $  24,823,333
                                                                  ==============

NOTE 6 - PROPERTY AND EQUIPMENT

In June 2004, the Company purchased real estate in the state of New Jersey for
$152,000.

                                       8


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

NOTE 7 - NOTES PAYABLE

Notes payable at September 30, 2004 consisted of the following:

         Notes payable to individual, accrues interest at 8.5%
            per annum with monthly principal and interest
            payments of $1,138; secured by real estate
            purchased in New Jersey; due on June 8, 2034.               148,000
                                                                 ---------------

                                                                        148,000
                            Less current maturities                        (271)
                                                                 ---------------

                                                                 $      147,729
                                                                 ===============

NOTE 8 - COMMON STOCK

During the three months ended September 30, 2004, the Company: 1) converted 0
shares of Series A preferred stock into 0 shares of Class A common stock valued
at $0, 2) converted $0 of convertible debentures into 0 shares of Class A common
stock, 3) converted $0 of accrued interest into shares of Class A common stock,
4) issued 1,396,734 shares of Class A common stock for accrued compensation of
$1,261, 5) issued 2,333,333 shares of Class A common stock for consulting fees
valued at $1,400, 6) issued 0shares of Class A common stock for a commitment fee
of $0, and 7) issued 2,486,702 shares of Class A common stock valued at $30,000
in full settlement for a legal claim.

During the nine months ended September 30, 2004, the Company: 1) converted 8373
shares of Series A preferred stock into 21,864,583 shares of Class A common
stock valued at $651,143, 2) converted $1,938,115 of convertible debentures into
87,109,468 shares of Class A common stock, 3) converted $101,197 of accrued
interest into 20,600,950 shares of Class A common stock, 4) issued 13,108,744
shares of Class A common stock for accrued compensation of $158,609, 5) issued
2,578,518 shares of Class A common stock for consulting fees valued at $4,211,
6) issued 17,391,304 shares of Class A common stock for a commitment fee of
$400,000, and 7) issued 24,510,512 shares of Class A common stock valued at
$450,000 in full settlement for a legal claims.

During the three months ended September 30, 2003, the Company: 1) converted 2687
shares of Series A preferred stock into 6,997,049 shares of Class A common stock
valued at $506,000, 2) converted $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, 3) converted $224,459 of accrued
interest into 6,462,957 shares of Class A common stock, 4) In addition, the
Company issued 4,075,136 shares of Class A common stock for professional
services valued at $193,507.

During the nine months ended September 30, 2003, the Company converted: 1) 5345
shares of Series A preferred stock into 14,003,734 shares of Class A common
stock valued at $3,375,739, 2) $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, and 3) $303,133 of accrued interest
into 11,854,961 shares of Class A common stock. In addition, the Company issued
36,464,133 shares of Class A common stock for professional services valued at
$193,507.

                                       9


<PAGE>

                          MOONEY AEROSPACE GROUP, LTD.
                             (DEBTOR-IN-POSSESSION)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

NOTE 9 - PER SHARE INFORMATION

The Company calculates basic net loss per share as required by SFAS No. 128,
"EARNINGS PER SHARE." Basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities, and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. The following table sets forth the computation of
basic loss per share for the three and nine months ended September 30, 2004 and
2003:

<TABLE>
                                                    For the three months ended             For the six months ended
                                                    --------------------------            ------------------------
                                                            September 30,                        September 30,
                                                            -------------                        -------------
                                                       2004              2003               2004               2003
                                                  --------------    --------------     --------------     --------------
<S>                                               <C>               <C>                <C>                <C>
Numerator
  Loss before discontinued operations             $  (2,895,000)    $  (6,160,000)     $ (14,941,000)     $ (10,366,000)

  Amortization of discount on preferred stock                --           (14,000)                --            (53,000)

  Dividends in Arrears                                 (393,000)         (476,000)          (393,000)          (476,000)
                                                  --------------    --------------     --------------     --------------
Numerator for basic loss per share from
   continuing operations                          $  (3,288,000)    $  (6,650,000)     $ (15,334,000)     $ (10,895,000)
                                                  ==============    ==============     ==============     ==============
Numerator for basic loss per share from
   discontinued operation                         $  (4,635,000)    $  (1,119,000)     $  (6,143,000)     $  (1,730,000)
                                                  ==============    ==============     ==============     ==============

Denominator

  Weighted average shares of Class B shares           1,014,000         1,014,000          1,014,000          1,014,000

  Weighted average shares of Class A shares         641,352,433       163,362,000        594,097,491        133,400,000
                                                  --------------    --------------     --------------     --------------
Numerator for basic loss per share                  642,355,433       164,376,000        595,111,491        134,414,000
                                                  ==============    ==============     ==============     ==============

Basic loss per share from continuing
   Operations                                     $       (0.01)    $       (0.04)     $       (0.03)     $       (0.08)
                                                  ==============    ==============     ==============     ==============

Basic loss per share from discontinued
   Operation                                      $       (0.01)    $       (0.01)     $       (0.01)     $       (0.01)
                                                  ==============    ==============     ==============     ==============

There is no difference between the loss per common share amounts computed for
basic and dilutive purposes because the impact of convertible debt and preferred
stock, options and warrants would be anti-dilutive.

                                                           10
</TABLE>


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with our
financial statements and related footnotes for the year ended December 31, 2003
included in our Annual Report on Form 10-KSB. The discussion of results, causes
and trends should not be construed to imply any conclusion that such results or
trends will necessarily continue in the future.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB and the documents incorporated herein by
reference contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. This Act provides a "safe harbor" for
forward looking statements to encourage companies to provide prospective forward
looking information about themselves so long as they identify these statements
as forward looking and provide meaningful cautionary statements identifying
important factors that could cause actual results to differ from the projected
results. All statements other than statements of historical fact made in this
Quarterly Report on Form 10-QSB are forward looking. In particular, the
statements herein regarding industry prospects and future results of operations
or financial position are forward-looking statements. Forward-looking statements
reflect management's current expectations and are inherently uncertain. Our
actual results may differ significantly from management's expectations.

GENERAL

On February 8, 2002, we announced we had purchased Congress Financial
Corporation's ("Congress") position as senior secured creditor for Mooney
Aircraft Corporation of Kerrville, Texas ("MACorp"). On February 6th, the U.S.
Bankruptcy Court in San Antonio, Texas, approved an operating agreement that
allowed us to manage MACorp until a plan of reorganization was approved. The
Bankruptcy Court approved the sale of substantially all of the MACorp assets to
us on March 18, 2002 and on April 19, 2002 we completed the Mooney asset
acquisition.

MACorp was the world's leading supplier of high performance single engine
general aviation aircraft primarily serving business and owner-flown markets.
MACorp produced over 10,000 aircraft since its founding in 1947, and presently
has over 8,000 aircraft in operation in the US alone. We acquired substantially
all of MACorp's assets and intended to return to full production of the Mooney
aircraft line. MACorp's assets were held by our wholly owned subsidiary named
Mooney Airplane Company, Inc. ("MAC"). On July 23, 2002, we changed our name to
Mooney Aerospace Group, Ltd.

We believed that the acquisition of MACorp's assets would allow us to create a
dynamic general aviation company by returning Mooney to full production and
creating substantial potential for earnings growth for the Company and its
shareholders.

We commenced the commercial sale of aircraft, and we derive a substantial
portion of our revenues from the sale of a relatively small number of aircraft.
On June 27, 2002 MAC announced that we had received a Federal Aviation
Administration (FAA) production certificate that covers the: Eagle2 (Mooney
M20S), Ovation2 (Mooney M20R) and the Bravo2 (Mooney M20M).

On August 8, 2002 we announced that MAC had received FAA certification as a
repair station. The repair station is co-located with the MAC production
facility in Kerrville, Texas.

On May 28, 2004, in order to preserve the value of our MAC subsidiary, and avoid
a cessation of operations, and the loss of jobs and other economic dislocations,
we entered into a Stock Purchase Agreement with Allen Holding & Finance Ltd., a
corporation formed and existing under the laws of Switzerland. We, in lieu of

                                       11


<PAGE>

foreclosure, voluntarily turned over our ownership of 100 shares of MAC common
stock, which represented all the issued and outstanding shares of MAC, to Allen
who is the designee of the secured convertible debenture holders.

On June 10, 2004, we filed voluntary petitions for reorganization under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for the
district of Delaware under case number 04-11733. We are currently operating our
business as debtors-in-possession pursuant to the Bankruptcy Code.

CRITICAL ACCOUNTING POLICIES

We are currently operating our business as debtors-in-possession pursuant to the
Bankruptcy Code and in accordance with Statement of Position 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code."
Accordingly, all pre-petition liabilities subject to compromise have been
segregated in the unaudited balance sheets and classified as "liabilities
subject to compromise," at the estimated amount of allowable claims. Liabilities
not subject to compromise are separately classified as current and non-current.
Revenues, expenses, realized gains and losses, and provisions for losses
resulting from the reorganization are reported separately as reorganization
items, net in the unaudited statements of operations. Cash used in
reorganization items is disclosed separately in the unaudited statements of cash
flows.

When we prepare these financial statements, we are required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the 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. On an on-going basis, we evaluate our estimates and judgments,
including those related to investments, long-lived assets, deferred tax assets,
other liabilities and revenue recognition. We base our estimates and judgments
on historical experience and on various other factors that we believe to be
reasonable under the circumstances, the results of which form the basis for our
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

For further information regarding the accounting policies that we believe to be
critical accounting policies and that affect our more significant judgments and
estimates used in preparing our financial statements, see our December 31, 2003
financial statements in our annual report contained in our Form 10-KSB filed on
March 30, 2004.

DISCONTINUED OPERATIONS

On May 28, 2004, in order to preserve the value of our MAC subsidiary, and avoid
a cessation of operations, and the loss of jobs and other economic dislocations,
we entered into a Stock Purchase Agreement with Allen Holding & Finance Ltd., a
corporation formed and existing under the laws of Switzerland. We, in lieu of
foreclosure, voluntarily turned over our ownership of 100 shares of MAC common
stock, which represented all the issued and outstanding shares of MAC, to Allen
who is the designee of the secured convertible debenture holders. Pursuant to
the agreement we sold our wholly owned subsidiary, MAC to Allen in exchange for
the assumption of approximately $21,000,000 of secured convertible debentures.
Although Allen assumed approximately $21,000,000 of debt, we were not released
of our obligation for this debt. We recognized a loss on the disposition of MAC
in the amount of $4,258,000. The historical financial statements have been
restated to present MAC as a discontinued operation.

Below is a summary of the operating results of MAC for the period of January 1,
2004 to May 28, 2004 and the six months ended June 30, 2003:

                                       12


<PAGE>

                                                 2004                2003
                                           ---------------     ---------------

                  Net sales                $    5,415,254      $    4,512,357
                                           ===============     ===============
                  Gross profit (loss)      $     (340,990)     $      261,591
                                           ===============     ===============
                  Operating expenses       $    1,298,456      $    1,956,464
                                           ===============     ===============
                  Net loss                 $   (1,884,857)     $   (1,730,171)
                                           ===============     ===============

BANKRUPTCY

On June 10, 2004 we filed voluntary petitions for reorganization under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for the
district of Delaware under case number 04-11733. We seek judicial reorganization
based upon a judgment issued against us by the Superior Court of the State of
California, Los Angeles County in excess of $23 million. As a
debtor-in-possession, we are authorized to continue to operate as an ongoing
business, but may not engage in transactions outside the ordinary course of
business without the approval of the Court, after notice and an opportunity for
a hearing.

Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well
as most other pending litigation, are stayed and other contractual obligations
against us generally may not be enforced. Absent an order of the Court,
substantially all pre-petition liabilities are subject to settlement under a
plan of reorganization to be voted upon by creditors and equity holders and
approved by the Court.

The plan of reorganization, which has been submitted to the Court for approval
and is continuing to undergo revision and adjustments, provides for the
restructured company to repurchase MAC from Allen for 50% of the it's
outstanding common stock, issue 46% of its common stock to unsecured creditors,
issue 2% of its common stock to the preferred stockholders and the remaining 2%
would remain with the current common stockholders. In addition, the restructured
company would still be liable for the secured convertible debentures.

Pursuant to an order of the Court, we mailed notices to all known creditors that
the deadline for filing proofs of claim with the Court is December 15, 2004.
Amounts that we have recorded may be different than amounts filed by our
creditors. The number and amount of allowed claims cannot be presently
ascertained.

The following table summarizes the components of the liabilities classified as
liabilities subject to compromise in our unaudited balance sheet as of June 30,
2004:

                  Accounts payable                               $    1,241,299
                  Accrued expenses                                    1,253,938
                  Notes payable                                         697,417
                  Accrued interest                                    4,147,726
                  Airplane deposits                                   1,115,000
                  Legal judgment (bankruptcy claim) see page 17     10,315,5244
                  Unsecured convertible debentures                    6,456,198
                                                                 ---------------

                                                                 $   25,227,102
                                                                 ===============

                                       13


<PAGE>

RESULTS OF OPERATIONS

Nine months ended September 30, 2004 vs. September 30, 2003
-----------------------------------------------------------

General and administrative expenses for the three months ended September 30,
2004 decreased by $913,692 or 90% from $1,015,000 for the three months ended
September 30, 2003 compared to $101,307 for the same period in 2004. The
decrease is principally due to the removal of Mooney Airplane Company from the
consolidation due to the sale to Allen Holding & Finance LTD May 28, 2004.

Other income (expense) for the three months ended September 30, 2004 was $0 and
did not change for the three months ended June 30, 2003 for the same period in
2004. All warrants were canceled in June 2003, as a result there is no such
change in the warrant valuation for the three months ended June 30, 2004.

Amortization of debt issue costs and discounts for the three months ended
September 30, 2004 increased by $15,433 or 9% from $172,000 for the three months
ended September 30, 2003 compared to $187,433 for the same period in 2004. The
increase is due the write off of all debt issue costs for preferred stock due to
us filing bankruptcy.

Interest expense for the three months ended September 30, 2004 decreased by
$636,436 or 96% from $665,000 for the three months ended September 30, 2003
compared to $28,564 for the same period in 2004. For the three months ended
September 30, 2003, and as a result of the debt restructuring in the 2nd quarter
of 2003, the penalties were forgiven and future penalties were waived.

Nine months ended September 30, 2004 vs. September 30, 2003
-----------------------------------------------------------

General and administrative expenses for the nine months ended September 30, 2004
decreased by $3,112,475 or 76% from $4,092,993 for the nine months ended
September30, 2003 compared to $980,518 for the same period in 2004. The decrease
is principally due to the sale of Mooney Airplane Company on May 28, 2004 and
lower professional and consulting fees for Mooney Aerospace Group, Ltd.

There are no non-recurring expenses for the nine months ended September 30,
2004. . The Chapter XI reorganization filed June 10, 2004 has limited the amount
that can be claimed to 3 years rent and any associated charges accepted by the
bankruptcy court. The accrual for this litigation has been reduced to
$10,315,524 which is reflected in the balance sheet.

Other income (expense) for the nine months ended September 30, 2004 decreased by
$507,000 or 100% from other expense of $507,000 for the nine months ended
September 30, 2003 to other income of $0 for the same period in 2004. Other
expense for the nine months ended September 30, 2003 was related to the increase
in the fair value of detachable warrants associated with the convertible
debentures. All these warrants were canceled in June 2003, as a result there is
no such change in the warrant valuation for the nine months ended September 30,
2004.

Amortization of debt issue costs and discounts for the nine months ended
September 30, 2004 decreased by $ or 34% from $3,277,000 for the nine months
ended September 30, 2003 compared to $2,152,579 for the same period in 2004. The
decrease is due to the debt discounts being written off in the 2nd quarter of
2003 as a result of the debt restructuring. The amortization for the nine months
ended September 30, 2004 represents write off of all debt issue costs due to us
filing bankruptcy and the beneficial conversion feature of the revolver loan.

                                       14

<PAGE>

Interest expense for the nine months ended September 30, 2004 decreased by
$5,252,746 or 99% from $5,327,000 for the nine months ended September 30, 2003
compared to $74,254 for the same period in 2004. For the nine months ended
September 30, 2003, we accrued penalties related to the non-registration of the
shares underlying the convertible debentures. As a result of the debt
restructuring in the 2nd quarter of 2003, the penalties were forgiven and future
penalties were waived.

ITEM 3.    CONTROLS AND PROCEDURES

As required by SEC rules, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures at the end of the period
covered by this report. This evaluation was carried out under the supervision
and with the participation of our management, including our principal executive
officer and principal financial officer. Based on this evaluation, these
officers have concluded that the design and operation of our disclosure controls
and procedures are effective. There were no significant changes to our internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of their evaluation.

Our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our management,
including principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

L. PETER LARSON AND DALE RUHMEL V. MOONEY AEROSPACE GROUP, INC.
---------------------------------------------------------------

This cause of action was filed in Los Angeles County Superior Court on December
31, 2002. The initial complaint against the Company was filed by two former
executives, R. Peter Larson and Dale Ruhmel. The causes of action are for Breach
of Contract, Labor Code Violations, Intentional Misrepresentation, Slander and
Intentional Infliction of Emotional Distress in Violation of the California
Unfair Labor Code.

Peter Larson was employed as an Executive Vice President and Chief Financial
Officer of Mooney, Dale Ruhmel was Executive Vice President of Engineering and
became Chief Operating Officer. Both plaintiffs had entered into a written
employment agreement with the Company on or about January 8, 2002. Plaintiffs
were employed by the Company until the end of October 2002. Plaintiffs claim
that the Company breached their employment agreements by terminating their
employment without good cause and failing to pay severance payments as required
by the agreements. Plaintiffs also claim that at the time of the termination
they were not paid all of their vacation and wages owed as required by the
California Labor Code. Plaintiffs also claim that the Company misrepresented its
intentions to honor the agreements and that plaintiffs relied upon this to their
detriment. There were also allegations of intentional infliction of emotional
distress and slander.

                                       15


<PAGE>

The damages sought in the complaint include attorneys' fees, tort damages if
defamation or fraud can be proven, contractual damages (the contract provides
for a year's severance if terminated without cause or notice). The Company has
filed a cross-complaint against the two individuals. The Company has accrued
damages for this action as of June 30, 2004, for which a settlement agreement
was reached and completed in May 2004. This agreement calls for a settlement of
$200,000 paid out over six months from the proceeds of sales of Class A common
stock. Since the Company did not issue the common stock, the settlement amount
increased to $400,000. The $400,000 liability is shown in liabilities subject to
compromise.

WHITEFORD JET WINGS, LTD. v. MOONEY AEROSPACE GROUP, LTD. ET AL., Cal. Super.
Ct. (Los Angeles County, Long Beach District), Case No. NC033548 (filed January
21, 2003). This case was filed by a company that alleged it had signed an
agreement to be the exclusive regional distributor of Jetcruzer aircraft in
Illinois, Indiana, Kentucky, and Wisconsin, and that it had put down a deposit
of $390,000 for the first 39 aircraft it was to purchase. The suit sought return
of the $390,000 deposit on a variety of theories, including breach of contract,
account stated, and fraud. A settlement has been reached and the terms include
$200,000 from the issuance of 9,523,810 shares of Class A common stock and a
convertible note for the amount of $190,000, which is convertible into Class A
common stock at the conversion price of .021 cents per share, or 9,047,619
shares. The note carries an interest rate of 3% and is restricted to conversion
of no more than $50,000 in any 30 day period. The 9,523,810 shares of Class A
common stock were issued March 26, 2004. The liability of the convertible note
of $190,000 is subject to compromise in the Chapter XI Bankruptcy filing.

AP-LONG BEACH AIRPORT LLC V. MOONEY AEROSPACE GROUP, LTD.
---------------------------------------------------------

The Company leased approximately 10 acres of land located on the Long Beach
Airport in Long Beach, California. The lease commenced on January 14, 1998 and
had a term of 30 years with an option to renew for an additional 10 year term.
The lease contained options to lease other airport properties. The lease
contained incremental increases, which escalated the monthly rent to
approximately $15,600 after 5 years.

Pursuant to an Agreement dated May 19, 1999, the Company sold its leasehold
interest in real property located at 3205 Lakewood Boulevard, Long Beach,
California, together with the manufacturing hangar facility (approximately
205,000 square feet) and finished office space (approximately 22,000 square
feet) owned by the Company. The cash purchase price was $9,800,000. As part of
this transaction, the Company entered into an agreement to sublease the land and
lease the manufacturing hangar facility and finished office space for a term of
18 years, plus an option to extend the lease for an additional 10 years. The
$246,000 deferred gain on the sale of the facility was being amortized over the
18 year lease term and is now recorded in liabilities related to abandon
building.

AP Long Beach Airport, LLC ("AP"), the lessor, has filed a complaint in the Los
Angeles Superior Court, alleging breach of a Sublease Agreement by the Company
for failure to pay rent. Specifically, AP alleges that AP and the Company
entered into a Lease Agreement for the lease of real property located in Long
Beach, California to the Company for a thirty year term. AP and the Company
later entered into first, an Assignment and Assumption Agreement and then, a
Sublease Agreement wherein AP sublet the property to the Company for a term of
eighteen years at a monthly rent of $106,167. AP seeks to recover the fair
rental value of the property and base rent pursuant to the Lease and Sublease
Agreements in addition to its attorneys' fees and costs. On December 3, 2003, in
connection with the lawsuit in the Superior Court of the State of California for
the County of Los Angeles, South District, the Company and AP entered into a
stipulation regarding: Admission of Liability and Binding Arbitration of
Damages. Under the Stipulation, the Company admitted liability to all of AP's
claims, except that the Company and AP agreed to enter into binding arbitration
with respect to (i) the calculation of damages sought by AP and (ii) whether AP
properly mitigated its damages. On May 3, 2004, the Company and its former
landlord completed the arbitration proceedings. The arbitrator's Preliminary

                                       16


<PAGE>

Arbitration Award provides for the payment by the Company of $23,902,000 to
AP-Long Beach Airport LLC, plus attorney's fees to be determined at a later
date. On May 28, 2004 the Superior Court of the State of California, Los Angeles
County upheld the arbitrator's Arbitration Award. During the three months ended
March 31, 2004, the Company has accrued an additional $10,053,000 related to
this litigation, bringing the total accrual related to this litigation to
$24,152,000, the amount awarded by the arbitrator plus $250,000 in estimated
attorney fees. The filing of the Chapter XI reorganization has limited this
liability to an estimated $10,315,524 which represents the three years of rental
and additional cost requested to be allowed by the bankruptcy court. . The
liability of estimated $10,315,524 is subject to compromise in the Chapter XI
Bankruptcy filing.

ITEM 2.    CHANGE IN SECURITIES

During the three months ended September 30, 2004, the Company: 1) converted 0
shares of Series A preferred stock into 0 shares of Class A common stock valued
at $0, 2) converted $0 of convertible debentures into 0 shares of Class A common
stock, 3) converted $0 of accrued interest into shares of Class A common stock,
4) issued 1,396,734 shares of Class A common stock for accrued compensation of
$1,261, 5) issued 2,333,333 shares of Class A common stock for consulting fees
valued at $1,400, 6) issued 0shares of Class A common stock for a commitment fee
of $0, and 7) issued 2,486,702 shares of Class A common stock valued at $30,000
in full settlement for a legal claim.

During the nine months ended September 30, 2004, the Company: 1) converted 8373
shares of Series A preferred stock into 21,864,583 shares of Class A common
stock valued at $651,143, 2) converted $1,938,115 of convertible debentures into
87,109,468 shares of Class A common stock, 3) converted $101,197 of accrued
interest into 20,600,950 shares of Class A common stock, 4) issued 13,108,744
shares of Class A common stock for accrued compensation of $158,609, 5) issued
2,578,518 shares of Class A common stock for consulting fees valued at $4,211,
6) issued 17,391,304 shares of Class A common stock for a commitment fee of
$400,000, and 7) issued 24,510,512 shares of Class A common stock valued at
$450,000 in full settlement for a legal claims.

During the three months ended September 30, 2003, the Company: 1) converted 2687
shares of Series A preferred stock into 6,997,049 shares of Class A common stock
valued at $506,000, 2) converted $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, 3) converted $224,459 of accrued
interest into 6,462,957 shares of Class A common stock, 4) In addition, the
Company issued 4,075,136 shares of Class A common stock for professional
services valued at $193,507.

During the nine months ended September 30, 2003, the Company converted: 1) 5345
shares of Series A preferred stock into 14,003,734 shares of Class A common
stock valued at $3,375,739, 2) $1,385,204 of convertible debentures into
50,649,451 shares of Class A common stock, and 3) $303,133 of accrued interest
into 11,854,961 shares of Class A common stock. In addition, the Company issued
36,464,133 shares of Class A common stock for professional services valued at
$193,507.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

The Company was in default on its Secured Convertible Debentures and as a result
the Company, in lieu of foreclosure, voluntarily turned over its ownership of
100 shares of MAC common stock, which represented all the issued and outstanding
shares of MAC, to Allen who is the designee of the secured convertible debenture
holders.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

                                       17


<PAGE>

ITEM 5.    OTHER INFORMATION

Not applicable

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

31.1     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
         to Section 302 of the Sarbanes-Oxley Act of 2002

32.1     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002

(b)      Reports on Form 8-K

On May 10, 2004, the Company filed a Current Report on Form 8-K announcing that
on May 3, 2004, the Company and its former landlord AP-Long Beach Airport LLC
completed arbitration proceedings of a claim for alleged damages due to
termination by the Company of its lease at its former headquarters in Long
Beach, California. The arbitrator's Preliminary Arbitration Award provides for
the payment by the Company of $23,901,618 to AP-Long Beach Airport LLC, plus
attorney's fees to be determined at a later date.

On June 3, 2004, the Company filed a Current Report on Form 8-K announcing that
on May 28, 2004, the Company entered into a Stock Purchase Agreement with Allen
Holding & Finance Ltd., a private investment company, pursuant to which the
Company sold its wholly owned subsidiary Mooney Airplane Company to Allen. In
addition, the Company announced that on May 28, 2004, the Superior Court of the
State of California, Los Angeles County issued a judgment against the Company,
affirming a preliminary arbitration award providing for the payment by the
Company of $23,901,618 to AP-Long Beach Airport LLC, plus attorney's fees to be
determined at a later date. The judgment was issued in connection with
proceedings of a claim for alleged damages due to termination by the Company of
its lease at its former headquarters in Long Beach, California.

On September 24, 2004, the Company filed a Current Report on Form 8-K announcing
that on September 23, 2004, the Company terminated the services of Stonefield
Josephson, Inc. effective that date. On September 16, 2004 the Company engaged
the services of Bernstein & Pinchuk, LLP (B&P) as its principal independent
accountant.

                                       18


<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        MOONEY AEROSPACE GROUP, LTD.

November 22, 2004                      By:   /s/ J. Nelson Happy
                                            ------------------------------------
                                              J. Nelson Happy
                                              Vice Chairman, President & Chief
                                              Financial Officer and Secretary
                                              (Principal Executive Financial and
                                              Accounting Officer)

                                       19