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 March 31, 2006
                                           --------------

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

            For the transition period from ____________ to ____________

            Commission file number 0-21749

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

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

                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)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
                                                           Yes |X| No |_|

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

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
                                                           Yes |X| No |_|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 10,631,071 shares of common stock as
of May 12, 2006

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                   MOONEY AEROSPACE GROUP, LTD. AND SUBSIDIARY

                                      Index

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                    Number
<S>                                                                                 <C>
PART I.  FINANCIAL INFORMATION

         Item 1.   Financial Statements

                     Consolidated Balance Sheet as of March 31, 2006 (unaudited)       3

                     Consolidated Statements of Operations for the
                         Three months ended March 31, 2006 and 2005 (unaudited)        4

                     Consolidated Statements of Cash Flows for the
                         Three months ended March 31, 2006 and 2005 (unaudited)        5

                     Note to Consolidated Financial Statements                         6

         Item 2.   Management's Discussion and Analysis or Plan of Operations          7

         Item 3.   Controls and Procedures                                             14

PART II. OTHER INFORMATION

         Item 1.   Legal Proceedings                                                   15

         Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds         16

         Item 3.   Defaults Upon Senior Securities                                     16

         Item 4.   Submission of Matters to a Vote of Security Holders                 16

         Item 5.   Other Information                                                   16

         Item 6.   Exhibits and Reports on Form 8-K                                    17

SIGNATURES                                                                             18

EXHIBIT INDEX                                                                          19
</TABLE>


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                   Mooney Aerospace Group, Ltd. and Subsidiary
                           Consolidated Balance Sheet

                                 March 31, 2006

<TABLE>
<CAPTION>
                                     ASSETS

                                                                               2006
                                                                           -------------
<S>                                                                        <C>
Current Assets
     Cash and cash equivalents                                             $      67,000
     Accounts receivable                                                         451,000
     Inventory                                                                13,785,000
     Prepaid expenses and other current assets                                 1,282,000
                                                                           -------------
         Total current assets                                                 15,585,000
                                                                           -------------

Property and Equipment - at cost, net of accumulated
     depreciation and amortization                                             4,597,000

Trade Name                                                                     1,802,000
Other Assets                                                                     241,000
                                                                           -------------
                                                                               6,640,000
                                                                           -------------
                                                                           $  22,225,000
                                                                           =============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities
     Accounts payable                                                      $   1,546,000
     Accrued taxes and expenses                                                4,030,000
     Accrued interest and penalties                                            5,695,000
     Notes payable, current portion                                            6,015,000
     Note payable, revolver                                                    6,250,000
     Loans from stockholders                                                  10,484,000
     Secured debentures                                                       19,534,000
                                                                           -------------
Total current liabilities                                                     53,554,000
                                                                           -------------

Notes Payable                                                                  7,860,000

Environmental Cleanup Liability                                                   69,000

Stockholders' Deficiency
     Common stock, $0.0001 par value; 50,000,000 shares authorized;
         shares issued and outstanding 10,631,071                                  1,000
     Additional paid in capital                                              131,035,000
     Accumulated deficit                                                    (170,294,000)
                                                                           -------------
                                                                             (39,258,000)
                                                                           -------------
                                                                           $  22,225,000
                                                                           =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>

                   Mooney Aerospace Group, Ltd. and Subsidiary
                      Consolidated Statements of Operations

                   Three Months Ended March 31, 2006 and 2005

<TABLE>
<CAPTION>

                                                          2006             2005
                                                      ------------     ------------
<S>                                                   <C>              <C>
Net Sales                                             $ 10,333,000     $  9,385,000

Cost of Sales                                            9,363,000        8,035,000
                                                      ------------     ------------
Gross Profit                                               970,000        1,350,000
                                                      ------------     ------------

Operating Expense
     Research and development expenses                     321,000          292,000
     Selling and support expenses                          905,000        1,274,000
     General and administrative expenses                 2,123,000        1,488,000
                                                      ------------     ------------
                                                         3,349,000        3,054,000
                                                      ------------     ------------
Loss from Operations                                    (2,379,000)      (1,704,000)
                                                      ------------     ------------

Other Income (Expense)
     Other income (expense), net                             6,000           14,000
     Amortization of debt issue costs and discount          (3,000)              --
     Interest expense                                     (932,000)      (1,047,000)
     Gain on sale of fixed asset                                --            2,000
                                                      ------------     ------------
                                                          (929,000)      (1,031,000)
                                                      ------------     ------------

Loss Before Provision for Income Taxes                  (3,308,000)      (2,735,000)

Provision for Income Taxes                                      --               --
                                                      ------------     ------------
Net Loss                                              $ (3,308,000)    $ (2,735,000)
                                                      ============     ============
Net Loss Per Share - Basic and Diluted                $      (0.31)    $      (0.27)
                                                      ============     ============
Weighted Average Shares Outstanding
     Basic                                              10,631,071       10,095,151
                                                      ============     ============
     Diluted                                            10,631,071       10,095,151
                                                      ============     ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                   Mooney Aerospace Group, Ltd. and Subsidiary
                      Consolidated Statements of Cash Flows

                   Three Months Ended March 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                2006             2005
                                                            -----------      -----------
<S>                                                         <C>              <C>
CASH FLOW FROM OPERATING ACTIVITIES:
     Net loss                                               $(3,308,000)     $(2,735,000)
     Adjustment to reconcile net loss to net cash
         used in operating activities:
              Depreciation and amortization expense             326,000          220,000
     Changes in operating assets and liabilities:
         Accounts and other receivables                         578,000          146,000
         Inventory                                              125,000         (440,000)
         Prepaid expenses and other current assets              512,000               --
         Other assets                                             2,000          143,000
         Accounts payable                                       257,000         (615,000)
         Accrued taxes and expenses                             317,000           91,000
         Accrued interest and penalties                         822,000          960,000
         Environmental cleanup liability                       (196,000)              --
                                                            -----------      -----------
              Net cash used in operating activities            (565,000)      (2,230,000)
                                                            -----------      -----------

CASH FLOW FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                        (394,000)        (195,000)
                                                            -----------      -----------
              Net cash used in investing activities            (394,000)        (195,000)
                                                            -----------      -----------

CASH FLOW FROM FINANCING ACTIVITIES:
     Proceeds from issuance of notes payable                         --        6,942,000
     Proceeds from stockholder loans                            800,000               --
     Payments on notes payable                                 (411,000)      (3,459,000)
                                                            -----------      -----------
              Net cash provided by financing activities         389,000        3,483,000
                                                            -----------      -----------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                          (570,000)       1,058,000

CASH AND CASH EQUIVALENTS, Beginning of year                    637,000           59,000
                                                            -----------      -----------

CASH AND CASH EQUIVALENTS, End of period                    $    67,000      $ 1,117,000
                                                            ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Interest paid                                          $   110,000      $    87,000
                                                            ===========      ===========
     Income taxes paid                                      $        --      $        --
                                                            ===========      ===========
</TABLE>

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

There were no non-cash investing or financing activities during the three months
ended March, 2006. During the three months ended March, 2005, holders of the
Company's convertible debentures converted $1,126,199 of convertible debentures
into 507,298 shares of common stock.

   The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

Mooney Aerospace Group, LTD
Note to the Consolidated Financial Statements

NOTE 1 - BASIS OF PRESENTATION

The unaudited financial statements have been prepared by Mooney Aerospace Group,
Ltd. (together with its wholly-owned subsidiary Mooney Airplane Company, Inc.,
the "Company"), pursuant to the rules and regulations of the Securities and
Exchange Commission "SEC". 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, 2005 included in the Company's Annual
Report on Form 10-KSB. The results of the three months ended March 31, 2006 are
not necessarily indicative of the results to be expected for the full year
ending December 31, 2006.


                                       6
<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, 2005
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.

Unless otherwise noted or required by the context, references to "we", "our",
"us" or the "Company" mean Mooney Aerospace Group Ltd. together with its
wholly-owned subsidiary, Mooney Airplane Company, Inc.

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.

During 2006 we intend to focus our efforts on the following:

      o     Restructuring and strengthening our balance sheet in order to reduce
            or eliminate our working capital deficit;

      o     Expanding our marketing efforts for the anticipated launch of our
            new model;

      o     Reduction of manufacturing costs;

      o     Product development

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. When
we prepare these consolidated 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 consolidated 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.

Revenue Recognition - As a routine matter aircraft are paid for on delivery
date. We recognize revenue on substantially all aircraft sales and parts and
service sales when each of the following four criteria is met: 1) a contract or
sales arrangement exists; 2) products have been shipped or services have been
rendered; 3) the price of the products or services is fixed or determinable; and
4) collectibility is reasonably assured.


                                       7
<PAGE>

Inventory Obsolescence - We provide an inventory excess and obsolescence
allowance for any portion of any inventory item valued at cost that has not been
used for three years. This allowance has been decreasing over time as sales
volumes have increased and we anticipate that trend to continue.

Valuation of Inventory - Inventory consists of raw materials, work in process
and finished goods and is stated at the lower of cost or market value.

For further information regarding the significant accounting policies that we
use in preparing our consolidated financial statements see our December 31, 2005
consolidated financial statements contained in our Form 10-KSB for 2005.

Results of Operations

Comparison of the Three Months Ended March 31, 2006 to the Three Months Ended
March 31, 2005:

Net Sales

We derive revenue from the sale of aircraft, parts and service. During the first
quarter of 2006, our net sales increased by $948,000 or 10.1%, to $10,333,000
from $9,385,000 during the first quarter of 2005. The increase in net sales was
primarily due to increases in revenues attributable to sales of new aircraft.
Revenues from new aircraft sales increased primarily due to an improved product
sales mix, lower sales discounts and higher average sales prices. We delivered
20 aircraft in both the first quarter of 2006 and the first quarter of 2005.

Cost of Sales

During the first quarter of 2006, cost of sales increased by $1,328,000, or
16.5%, to $9,363,000 from $8,035,000 during the first quarter of 2005. As a
percentage of net sales, cost of sales increased to 90.6% of net sales in 2006
compared to 85.6% of net sales in 2005. The increase in cost of sales was
primarily due to an increase in the number of manufacturing employees associated
with the higher levels of production capacity, increases in the cost of
materials used in the production of aircraft and a change in product sales mix
toward aircraft that have a higher manufacturing cost.

Gross Profit

During the first quarter of 2006, our gross profit decreased by $380,000, or
28.1%, to $970,000 from $1,350,000 during the first quarter of 2005. The
decrease in gross profit was due to higher cost of sales partially offset by
higher net sales. Gross profit was 9.4% of net sales in 2006 compared with 14.4%
of net sales in 2005.

Research and Development

Research and development expenses increased by $29,000, or 9.9%, to $321,000 in
the first quarter of 2006 from $292,000 in the first quarter of 2005. Research
and development expenses were 3.1% of net sales in both periods.

Selling and Support

During the first quarter of 2006, selling and support expenses decreased by
$369,000, or 29.0%, to $905,000 from $1,274,000 during the first quarter of
2005. Selling and support expenses were 8.8% of net sales in 2006 compared to
13.6% of net sales in the first quarter of 2005. The decrease in selling and
support expenses was primarily due to lower marketing and trade show expenses.


                                       8
<PAGE>

General and Administrative

General and administrative expenses increased by $635,000, or 42.7%, to
$2,123,000 during the first quarter of 2006 from $1,488,000 during the first
quarter of 2005. General and administrative expenses were 20.5% of net sales in
the first quarter of 2006 compared with 15.9% of net sales during the first
quarter of 2005. The increase in general and administrative expenses in the
first quarter of 2006 is primarily attributable to an increase in product
liability insurance costs and professional fees incurred in connection with a
review and evaluation of our balance sheet and capital structure and
improvements to our manufacturing process.

Interest Expense

Interest expense decreased by $115,000, or 11.0%, to $932,000 during the first
quarter of 2006 from $1,047,000 in the first quarter of 2005. During the twelve
months ended December 31, 2005 and the three months ended March 31, 2006, our
stockholders loaned us $9,684,000 and $800,000 respectively. The terms of these
loans are in the process of being determined and may include an option to
convert into equity.

Net Loss

The Company's net loss increased by $573,000, or 21.0%, to $3,308,000 during the
first quarter of 2006 from $2,735,000 in the first quarter of 2005 primarily due
to lower gross profit and higher general and administrative expenses partially
offset by lower selling and support expenses.

Liquidity and Capital Resources:

Net cash used in operating activities decreased to $565,000 in the first quarter
of 2006 from $2,230,000 in the first quarter of 2005. The improvement was
primarily due to the decrease in working capital during the first quarter of
2006 compared with the first quarter of 2005 partially offset by the increase in
the Company's net loss.

During the first quarter of 2006, the Company used $394,000 of cash in investing
activities for the purchase of property and equipment compared with $195,000 in
the first quarter of 2005.

Net cash provided by financing activities decreased to $389,000 in the first
quarter of 2006 compared with $3,483,000 in the first quarter of 2005. The net
cash provided by financing activities in 2006 was primarily attributable to
additional stockholder loans offset by payments on a loan incurred in connection
with the financing of insurance premiums.

Our balance sheet is highly leveraged. As of March 31, 2006, we had
approximately $50.1 million of indebtedness and were in default of several of
our debt agreements. To date, our lenders have not demanded payment. Although we
are negotiating with them to cure the defaults or restructure the debt, there
can be no assurance that we will be able to reach an agreement. A demand for
payment by our lenders would likely result in insolvency and an inability to
continue operations. Our high level of debt may make it more difficult or
impossible to obtain additional financing for working capital, capital
expenditures and other purposes.

We have substantial liquidity needs in the operation of our business. Because
substantially all of our assets are encumbered and some of our existing debt
agreements contain restrictions against additional borrowing, the options
available to us for additional financing are limited. We will need to obtain
additional financing to continue the production of new aircraft and spare parts
and to develop the business in general. Failure to obtain such additional
financing would have a material adverse effect on our business and prospects and
could require that we severely limit or cease our operations. Additional
financing may not be available on acceptable terms or at all.


                                       9
<PAGE>
Risk Factors

We have a substantial amount of debt and are in default of several of our debt
agreements; a demand for payment by our lenders would likely result in
insolvency.

The Company is highly leveraged. As of March 31, 2006, we had approximately
$50.1 million of indebtedness and were in default of several of our debt
agreements. To date, the lenders have not demanded payment. We are negotiating
with them to cure the defaults or restructure the debt; there can be no
assurance that we will be able to reach an agreement . A demand for payment by
our lenders would likely result in insolvency and an inability to continue
operations. Our high level of debt may make it more difficult or impossible to
obtain additional financing for working capital, capital expenditures and other
purposes. The Company may be more highly leveraged than its competitors thereby
placing it at a competitive disadvantage. Our high degree of leverage makes us
more vulnerable to a downturn in our business or the economy generally.

Risk of low-price stocks, including limitations on market liquidity.

The Securities and Exchange Commission classifies our Common Stock as a "penny
stock". This classification severely and adversely affects the market liquidity
for our Common Stock. Commission regulations define a "penny stock" to be any
non-NASDAQ equity security that has a market price of less than $5.00 per share
or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery prior to any transaction in a penny stock a disclosure
schedule prepared by the Commission relating to the penny stock market.
Disclosure is required to be made about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to disclose recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.

As a "penny stock" shares of our common stock are subject to Rule 15g-9 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
imposes additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
prior written consent to the transaction. Consequently, the rule may adversely
affect the ability of broker-dealers to sell our securities and may adversely
affect the ability of holders of our securities to sell such securities in the
secondary market.

We have accumulated a substantial deficit; we have a history of losses and
continued lack of profitability could lead to a cessation of operations.

To date, we have incurred significant losses. At March 31, 2006, we had an
accumulated deficit of approximately $170,294,000. We incurred net losses of
$13,553,000 in 2005, and $3,308,000 in the first quarter of 2006. Losses prior
to 2004 resulted principally from significant costs associated with the
development of the Jetcruzer 500 and the acquisition of Mooney. We expect to
incur further losses in the future due to significant costs associated with
manufacturing our aircraft, maintaining the necessary regulatory approvals, and
marketing and selling our aircraft. There can be no assurance that sales of our
aircraft will generate sufficient revenues to fund our continuing operations,
that we will generate positive cash flow from our operations, or that we will
attain or thereafter sustain profitability in any future period. If we do not
begin to generate profits, we may be forced to cease or curtail our operations.

We will need additional financing; failure to obtain financing could lead to a
cessation or curtailment of our operations.

We have substantial liquidity needs in the operation of our business. Because
substantially all of our assets are encumbered and some of our existing debt
agreements contain restrictions against additional borrowing, the options
available to us for additional financing are limited. We will need to obtain
additional financing to continue the production of new aircraft and spare parts
and to develop the business in general. Failure to obtain such additional
financing would have a material adverse effect on our business and prospects and
could require that we severely limit or cease our operations. Additional
financing may not be available on acceptable terms or at all.

During the twelve months ended December 31, 2005 and the three months ended
March 31, 2006, our stockholders loaned us $9,684,000 and $800,000,
respectively. The terms of these loans are in the process of being determined
and may include the option of converting into equity. No interest has been
recorded on these loans. Therefore, any interest payable will increase our net
loss and our stockholders' deficit.


                                       10
<PAGE>

Regulatory uncertainty could result in additional costs or liabilities.

Our aircraft and our operations are also subject to the risk of modification,
suspension or revocation of any FAA certificate. A modification, suspension, or
revocation could occur if, in the FAA's judgment, compliance with airworthiness
or safety standards by us was in doubt. If the FAA suspended or revoked our type
or production certificate for an aircraft model, sales of that model would be
adversely affected or terminated. If, in the FAA's judgment, an unsafe condition
developed or was discovered after one or more of our aircraft had entered
service, the FAA could issue an Airworthiness Directive, which could result in a
requirement that we develop appropriate design changes at our expense. Foreign
authorities could impose similar obligations upon us as to aircraft within their
jurisdiction. Any or all of these occurrences could expose us to substantial
additional costs and liabilities.

Limited product line; fluctuations in sales of aircraft may result in periodic
material reductions in revenue and profitability.

If there is a downturn in the market for general aviation aircraft due to
economic, political or other reasons, we would not be able to rely on sales of
other products to offset the downturn. It is possible that sales of business
aircraft could decline in the future for reasons beyond our control.
Furthermore, if a potential purchaser is experiencing an economic downturn or is
for any other reason seeking to limit its capital expenditures, the high unit
selling price of a new aircraft may result in such potential purchaser deferring
its purchase or electing to purchase a pre-owned aircraft or a lower priced
aircraft. Further, since we intend to rely on the sale of a relatively small
number of high unit selling price aircraft to provide substantially all of its
revenue, small decreases in the number of aircraft delivered in any year may
have a material negative effect on the results of operations for that year. In
addition, small changes in the number and timing of deliveries of, and receipt
of payments on, new aircraft may have a material effect on our liquidity.

We face numerous competitors, many of whom have greater resources; competition
may improve or develop competitive products.

Our aircraft compete with other aircraft that have comparable characteristics
and capabilities. Many of our competitors, including Cirrus Design (Cirrus),
Columbia Corporation (Columbia), Textron Lycoming (Cessna Aircraft Company),
Raytheon Aircraft Company (Beechcraft) and New Piper Aircraft Corporation are
substantially larger in size and have greater financial, technical, marketing,
and other resources than we do. Certain of our actual and potential competitors
have greater financial and other resources that may allow them to modify
existing aircraft or develop alternative new aircraft that could compete with
our aircraft. Our ability to compete effectively may be adversely affected by
the ability of these competitors to devote greater resources to the sale and
marketing of their products than are available to us. Future technological
advances may result in competitive aircraft with improved characteristics and
capabilities that could adversely affect our business. Our aircraft may also
compete with used aircraft that become available in the resale market at prices
sufficiently lower to offset deficits in performance, if any, as compared to our
aircraft.

Reliance on single source suppliers; problems with supplies could reduce revenue
or increase costs.

We are dependent on certain suppliers of products in order to manufacture our
aircraft. Should our ability to obtain the requisite components be limited for
any lengthy period of time or the cost of the components increase, our ability
to produce and sell aircraft could be materially and adversely affected.
Securing acceptable pricing and terms from suppliers of the bankrupt MACorp has
been difficult because of financial difficulties caused by bankruptcy and damage
to the reputation of MACorp as a customer. In addition, the possible failure of
suppliers or subcontractors to meet our performance specifications, quality
standards or delivery standards or schedules could have a material adverse
effect on our operations. Moreover, our ability to significantly increase our
production rate could be limited by the ability or willingness of key suppliers
to increase their delivery rates; and, over time, the prices to obtain materials
and components may change and a number of suppliers may need to be replaced. Our
inability to obtain supplies to manufacture our products would have a material
adverse effect on our business prospects, operations and financial condition.


                                       11
<PAGE>

Insurance and product liability exposure increased premiums and damage awards
could increase costs.

Because the failure of an aircraft manufactured by us or any other mishap
involving such an aircraft may result in physical injury or death to the
occupants of the aircraft or others, we could be subject to lawsuits involving
product liability claims, which lawsuits may involve claims for substantial
sums. Although we have obtained product liability insurance, such insurance is
expensive and subject to various coverage exclusions and may not be obtainable
by us in the future on acceptable terms or at all. Further, should we become
involved in product liability litigation, the expenses and damages awarded could
be large, and the scope of any coverage may be inadequate. Increased insurance
costs and/or liability costs could require an increase in the price of our
aircraft and therefore could have a negative impact on sales.

Fluctuations in quarterly operating results may be caused by large unit prices.

We expect to derive a substantial portion of our revenues from the sale of a
relatively small number of aircraft. As a result, a small reduction in the
number of aircraft shipped in a quarter due to, for example, unanticipated
shipment re-scheduling or cancellations, supplier delays in the delivery of
component parts or unexpected manufacturing difficulties could have a material
and adverse effect on our financial position and results of operations for that
quarter.

Risks of international operations, including changes in tariffs and duties and
currency exchange losses, may increase costs.

We also intend to market and sell our aircraft to foreign customers.
Accordingly, we will be subject to all of the risks inherent in international
operations, including work stoppages, transportation delays and interruptions,
political instability or conflict between countries in which we may do business,
foreign currency fluctuations, economic disruptions, differences in
airworthiness and certification standards imposed by foreign authorities, the
imposition of tariffs and import and export controls, changes in governmental
policies (including United States trade policy) and other factors, including
other foreign laws and regulations, which could have an adverse effect on our
business. With respect to international sales that are denominated in U.S.
dollars, an increase in the value of the U.S. dollar relative to foreign
currencies can increase the effective price of, and reduce demand for, our
products relative to competitive products priced in the local currency. These
international trade factors may, under certain circumstances, materially and
adversely impact demand for our products or our ability to sell aircraft in
particular countries or deliver products in a timely manner or at a competitive
price, which in turn may have an adverse impact on our relationships with its
customers. In addition, foreign certification or equivalent approval is required
prior to importing an aircraft into a foreign country, and we may not receive
such certification or equivalent approval in any country. Our success will
depend in part upon our ability to obtain and maintain foreign certifications or
equivalent approvals and manage international marketing, sales and service
operations.

Dependence on key personnel; failure to hire or retain personnel could result in
a reduction of revenues and earnings.

The results of our operations will depend in large part on the skills and
efforts of our executive team and our skilled factory workers. Our future
success will depend to a significant extent on our ability to hire certain other
key employees and additional skilled factory workers on a timely basis.
Competition for highly skilled business, product development, technical and
other personnel is intense, and there can be no assurance that we will be
successful in recruiting new personnel or in retaining our existing personnel.
We will experience increased costs in order to retain and attract skilled
employees. Our failure to attract additional qualified employees on a timely
basis or to retain the services of key personnel would have a material adverse
effect on our operating results and financial condition.

Planned growth may be limited by constraints on human and financial resources.

We significantly expanded our operations in 2005 which placed a significant
strain on our limited personnel, financial and other resources. We continue to
develop the manufacturing capabilities of our Mooney subsidiary and to
manufacture Mooney aircraft. Our efforts to conduct manufacturing activities may
not be successful, and we may not be able to satisfy commercial scale production
requirements on a timely and cost-effective basis We may not be able to find
qualified personnel or be able to manage this larger organization successfully.
We may also seek to acquire additional aircraft product lines that will place
additional demands on our limited resources.


                                       12
<PAGE>

Limitation on officers' and directors' liabilities under Delaware law may reduce
damages available for breach of duty by directors.

Pursuant to our certificate of incorporation, and as authorized under applicable
Delaware law, our directors and officers are not liable for monetary damages for
breach of fiduciary duty, except (i) in connection with a breach of the duty of
loyalty, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for dividend
payments or stock repurchases illegal under Delaware law or (iv) for any
transaction in which a director has derived an improper personal benefit. These
provisions may limit the ability of our stockholders to obtain damages from our
directors, either directly or on a derivative basis, for breach of fiduciary
duty.

Possibility of dilution arising from shares available for future sale may result
in lower stock prices.

Future sales of common stock by existing stockholders pursuant to Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), or otherwise,
could have an adverse effect on the price of our securities. As of March 31,
2006, Mooney had 10,631,071 outstanding shares of Common Stock, plus loans
issued under various agreements convertible into shares of common stock. Sales
of common stock, or the possibility of such sales, in the public market may
adversely affect the market price of the securities offered hereby.

Our common stock trades on the OTC Bulletin Board, which may result in reduced
volume of trading and increased volatility in the market price of our common
stock.

Our common stock trades on the OTC Bulletin Board an exchange operated by
NASDAQ. Consequently, the liquidity of our securities is less than if it was
listed on an exchange, not only by the number of securities which can be bought
and sold, but also through delays in the timing of the market transactions,
reductions in the number and quality of security analysts' and the news media's
coverage of us, and volatility in the market price of our common stock

No dividends.

We have paid no dividends to our stockholders since our inception and do not
plan to pay dividends in the foreseeable future. We intend to reinvest earnings,
if any, in the development and expansion of our business.

Volatility of stock market.

The stock market from time to time experiences significant price and volume
fluctuations, some of which are unrelated to the operating performance of
particular companies. We believe that a number of factors can cause the price of
our common stock to fluctuate, perhaps substantially. These factors include,
among others:

      o     Announcements of financial results and other developments relating
            to our business;
      o     Changes in the general state of the economy; and
      o     Changes in market analyst estimates and recommendations for our
            common stock.


                                       13

<PAGE>

Item 3. Controls and Procedures

As required by SEC rules, we have evaluated the effectiveness of the design and
operation of the Company's 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 its management, including the
principal executive officer and principal financial officer. Based on this
evaluation, the Company has concluded that the design and operation of our
disclosure controls and procedures are not effective. This determination was
made due to the following factors:

      o     the number of employees of the Company has increased from 168 at the
            start of the 2003 fiscal year to 378 at the end of March 2006, and
      o     the corporate ERP system was replaced in 2005.

It is therefore the belief of the management of the Company that the internal
controls needed to be reevaluated and updated to meet its current needs.
However, there is no evidence that any material misstatements occurred as a
result of the need to update its internal controls. The specific weakness found
involved the segregation of duties within the Company's finance department.
Accordingly, the Company begun reorganizing the functions of the finance
department during 2005 and will continue this process during 2006. In addition,
the Company has retained outside consultants with expertise in internal controls
to assist with the update and implementation of control procedures.

Disclosure controls and procedures are our controls and other procedures that
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.

There was no change in the Company's internal control over financial reporting
during the first quarter that has materially affected the Company's internal
controls over financial reporting.


                                       14
<PAGE>

                           Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The company has the following legal matters pending.

On March 28, 2005, Milisa K. Riser, M.D., Administrator of the Estate of
Franklin M. Rizer, M.D. filed a complaint in the Court of Common Pleas of
Trumbull County in Warren, Ohio against Mooney Aerospace Group Limited, its
wholly-owned subsidiary, Mooney Airplane Company, Inc. and others. The plaintiff
has asserted claims of strict liability, negligence and breach of warranty and
is seeking compensatory and punitive damages in connection with an airplane
crash in which Mr. Rizer died. The case is in the early stages of discovery and
while the Company believes that it has meritorious defenses, no assurance can be
given of a favorable outcome. In the event of an unfavorable outcome, some of
the damages may not be covered by insurance. If insurance coverage is limited or
not available or if the damages significantly exceed the amount of insurance
that is available, an unfavorable outcome would have a material adverse effect
on the Company's operating results and financial condition.

A lawsuit is pending in the Circuit Court of Clinton County, Michigan; Chad
Collins and Colleen Denise Collins, Plaintiffs, v. Mooney Aircraft Corporation,
Mooney Airplane Company, Inc., et al., involving a breach of warranty and bodily
injury claim for an aircraft purchased in 2001, prior to the Mooney Airplane
Company Inc. asset purchase. Management believes that the likelihood of an
adverse judgment is remote.

Two consolidated lawsuits are pending in the Civil District court of the Parish
of New Orleans, LA.; Lester A. Bautista, et al., Plaintiffs, v. Mooney Airplane
Company, Inc. The case involves an aircraft purchased in 1992, prior to Mooney
Airplane Company, Inc.'s asset purchase. Management believes that the likelihood
of an adverse judgment is remote.

Two lawsuits are pending (i) in the U.S. District Court of the Southern District
of New York; Alfreda Smith Ovesen, Personal representative of Svend A. Ovesen
and Crucian International, Inc. v. Mitsubishi Heavy Industry Ltd. Et al., and
(ii) Alfreda Smith Ovesen, Personal representative of Svend A. Ovesen and
Crucian International, Inc. v. Mitsubishi Heavy Industry Ltd. involving an MU-2
purchased in 1972. The likelihood of an adverse judgment is remote.

A lawsuit entitled Advance Aerodynamics & Structures, Inc. et al., v. AVAQ
Group, Inc. and Paul S. Dopp was filed in the Western District of Texas, San
Antonio Division. The action alleges affirmative claims for declaratory relief
made by the company and two of its present or former officers against defendants
for alleged claims arising out of the acquisition of the assets of Mooney
Aircraft Corporation. Judgment was rendered denying all claims. Paul Dopp
subsequently filed pleadings in the Mooney Aircraft Corporation chapter 7
bankruptcy case in San Antonio alleging fraud by former management during the
bankruptcy proceedings. The court in a letter dated August 26, 2004, referred
the allegations of Mr. Dopp to the appropriate governmental agencies for
investigation. To date, there has been no communications regarding this matter
to Mooney by the governmental agencies.

                                       15
<PAGE>

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the twelve months ended December 31, 2005 and the three months ended
March 31, 2006, our stockholders loaned us $9,684,000 and $800,000,
respectively. The terms of these loans are in the process of being determined
and may include an option to convert into equity.

Item 3. Defaults Upon Senior Securities

Under the terms of its debt agreement with Business Loan Express ("BLX") the
Company is required to maintain a minimum current ratio of at least 1.25 to 1.
In addition, the Company's debt to equity ratio cannot exceed 7 to 1. Although
the Company is current on payments of principal and interest, it is in default
of the current and debt to equity ratios. At March 31, 2006, the balance
outstanding on the BLX note was $4.8 million.

At March 31, 2006, the Company was in default of the $1.0 non-interest bearing
note payable to Libra Finance. The note was due February 7, 2005. The Company
was also in default on the payment of principal and interest on the note payable
to Guarantee & Finance that was due April 5, 2005. At March 31, 2005,
approximately $1.2 million was owed to Guarantee & Finance for principal and
interest.

On March 7, 2005, the holders of the Company's 17.5% notes payable called the
notes for payment. The Company was unable to pay the principal and interest then
due. At March 31, 2006, principal and accrued interest totaled approximately
$4.8 million. As a result of cross default provisions, the Company was in
default of its senior secured debentures, 8% notes payable and revolving credit
agreements. At March 31, 2006, outstanding principal and accrued interest under
these agreements totaled approximately $33.5 million.

The Company is negotiating with its lenders to cure the defaults.

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

None

Item 5. Other Information

      Unresolved Staff Comments

On May 12, 2005, the Company received a comment letter from the staff of the
Division of Corporation Finance of the Securities and Exchange Commission in
connection with its review of our Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2004. In July 2005 we responded to the staff's comments
and filed an amended Form 10-KSB for the fiscal year ended December 31, 2004.

On October 26, 2005, we received a second letter from the SEC informing us that
they had reviewed our Quarterly Report on Form 10-QSB for the period ended June
30, 2005 and our responses to their May 12, 2005 letter and had additional
comments. In December 2005 we responded to the comments included in the SEC's
second letter. On March 23, 2006 we received a third letter from the SEC
notifying us that they had reviewed our responses to their previous letter as
well as our Quarterly Report on Form 10-QSB for the period ended September 30,
2005.


                                       16
<PAGE>

The substance of the SEC's comments is summarized as follows:

      o     The staff has asked us to explain why we did not utilize "fresh
            start" accounting in accordance with Statement of Position 90-7,
            "Financial Reporting by Entities in Reorganization Under the
            Bankruptcy Code" at the time the we emerged from bankruptcy in
            December 2004.

      o     In December 2004, we recorded a gain on forgiveness of debt of
            $1,033,000 based upon the new shares of common stock that were
            issued at the time we emerged from bankruptcy. The staff has asked
            us to provide them with details of the components of the gain and to
            disclose the components in the footnotes to our financial
            statements.

      o     In May 2004 we transferred our ownership interest in Mooney Airplane
            Company ("MAC") to Allen Holding & Finance Ltd. ("AHF"). In December
            2004 we re-acquired MAC from AHF. The staff has asked us to provide
            them with additional information regarding the transfer and
            re-acquisition of MAC.

The SEC has requested that we amend our prior filings where appropriate with
respect to the preceding matters. We are in the process of responding to the
comments contained in the SEC's latest letter.

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

The Exhibits listed in the Exhibit Index immediately preceding such Exhibits are
filed with or incorporated by reference in this report.


                                       17
<PAGE>

                                   SIGNATURES

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


                                     MOONEY AEROSPACE GROUP, LTD.

Date:  May 15, 2006                  By:  /s/ Gretchen L. Jahn
                                          --------------------------------------
                                          Gretchen L. Jahn
                                          President and Chief Executive Officer

Date:  May 15, 2006                  By:  /s/ Barry Hodkin
                                          --------------------------------------
                                          Barry Hodkin
                                          Chief Financial Officer, Secretary
                                          and Treasurer


                                       18
<PAGE>

                                  EXHIBIT INDEX

Exhibit
   No.        Description
-------       -----------
31.1          Certification of the Chief Executive Officer pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002.

31.2          Certification of the Chief Financial Officer pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002.

32.1          Certification of the Chief Executive Officer pursuant to 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

32.2          Certification of the Chief Financial Officer pursuant to 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.


                                       19