**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-KSB**





RANNUAL
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




**For
      the fiscal year ended June 30, 2007**





oTRANSITION
      REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from ______________ to________________





Commission
      file number 000-33173





**Moller
      International, Inc.**





California
            68-0006075(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





1222
      Research Park Drive, Davis, CA 95618


(530)
      756-5086





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





Securities
      registered under Section 12(g) of the Exchange Act:


Common
      Stock, No Par Value





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





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
R  No
      o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes
o  No
R




The
      issuer’s revenues for its most recent fiscal year ended June 30, 2007 are
      $82,299.




-i-







The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates is $17,115,262 with a total of 18,016,065 shares owned by
      non-affiliates as of September 18, 2007 and the closing price of such common
      equity of $0.95 per share on the OTC Bulletin Board on such date.





As
          of
          September 28, 2007, the Company had 45,684,334 common shares issued and
          outstanding


Transitional
      Small Business Disclosure Format:  Yes o   No
R






-ii-




**Page**PART
                  IItem
                  1.
              Description
                  of Business
              1Item
                  2.
              Description
                  of Property
              27Item
                  3.
              Legal
                  Proceedings
              27Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              28PART
                  IIItem
                  5.
              Market
                  for Registrant’s Common Equity, Related Stockholder
                  Matters and Small Business Issuer Purchases of Equity
                  Securities
              29Item
                  6.
              Management’s
                  Discussion and Analysis
              30Item
                  7.
              Financial
                  Statements
              33Item
                  8.
              Changes
                  In and Disagreements With Accountants on Accounting and
                  Financial Disclosure
              45Item
                  8A.
              Controls
                  and Procedures
              45PART
                  IIIItem
                  9.
              Directors
                  and Executive Officers of the
                  Registrant
              46Item
                  10.
              Executive
                  Compensation
              48Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              48Item
                  12.
              Certain
                  Relationships and Related
                  Transactions
              49Item
                  13.
              Exhibits
              50Item
                  14.
              Principal
                  Accountant Fees and Services
              50






-iii--




PART
                I




Item
      1. DESCRIPTION OF BUSINESS




OUR
      COMPANY





Moller
      International, Inc. was incorporated April 19, 1983 in California for the
      purpose of designing, developing, manufacturing and marketing a line of Vertical
      Take-off and Landing ("VTOL") aircraft. Our flagship model, the M400 Skycar(R)
      is currently under development and testing and is projected to be a 4-passenger
      aircraft that will combine the cruise performance of an airplane with the
      vertical-flight capabilities of a helicopter. It is designated the "M400
      Skycar(R)." A related product we are developing is the Aerobot(R) line of
      unmanned aerial vehicles. While certain engineering problems remain to be solved
      before we can deliver a production aircraft meeting our design performance
      specifications, we have been able to conduct flight tests on a production
      prototype since 2002, including approximately 30 unmanned, tethered tests of
      the
      vehicle’s vertical takeoff and landing capabilities.





The
      M200X,
      a vehicle that was developed in the 1970s and demonstrated in approximately
      150
      manned flights up until the early 1990s, is now being readied for
      market.  With an anticipated production volume of 12 to 40 units in
      2008, the M200-based products could be the first vehicles that the company
      brings to market.





Since
      our
      inception, we have not been subject to a receivership, bankruptcy or similar
      proceeding, nor have we been involved in any material reclassification, merger,
      acquisition, or purchase or sale of a significant amount of our
      assets.





On
      March
      31, 2001, Moller International distributed its 95% ownership of the shares
      of
      its (former) subsidiary, Freedom Motors, Inc. to the shareholders of Moller
      International in a tax-free reorganization.






-1-








OUR
      PRODUCTS





We
      currently have no products that are ready to go to market, although we
      anticipate availability of M200-based products within the next 12-to-18
      months.  We are in the latter stages of development of a number of
      other innovative aviation products that we hope to launch in the coming
      years.  Our founder, Dr. Paul S. Moller, has for more than thirty-five
      years been engaged in research and development activities aimed at designing
      and
      producing an aircraft that combines the speed and efficiency advantages of
      the
      fixed-wing airplane with the vertical take-off and landing and hovering
      capabilities of the helicopter. We believe that such an innovation will deliver
      to a wide range of conventional aircraft operators a new level of utility and
      economy for a variety of aerial applications. By-products of our aircraft
      development activities, in particular the Moller Rotary Engine and the Aerobot
      remotely-flown air-borne vehicle, should become important products in their
      own
      right and could account for an important segment of our overall sales once
      production commences. As of the date of this filing, however, it remains
      uncertain when, if ever, we will enter commercial production of any of our
      products.





The
      Skycar
      and Aerobot are products we plan to offer in the future.  They are
      based upon fundamental research and on earlier prototypes developed by Moller
      International.  The Skycar concept is through the detail design stage
      and we have a prototype undergoing testing at this point.  There are
      significant technical issues that remain unproven and may preclude us from
      meeting the design objectives for the Skycar. The Aerobot is a
      limited-production vehicle, with twelve prototypes built, tested and delivered
      to end-users.  Neither vehicle is ready for volume production at this
      time, nor is there any guarantee that they will ever reach a point where they
      are viable products.





*M400
      Skycar*





Our
      principal product will be the M400 Skycar vertical take-off and landing (“VTOL”)
      aircraft. The concept of the Skycar as a personal transportation vehicle is
      that
      it would be so practical and affordable that it could become a preferred mode
      of
      transport, replacing at once the automobile and the private or commercial
      airplane for many trips. Should we succeed in achieving a production aircraft
      design meeting our target specifications, we believe the M400 will support
      such
      a degree of usefulness.






-2-















Moller
      M400 “Skycar” prototype





Following
      are our current target design and performance specifications for the M400
      4-passenger (including pilot) aircraft:




Passengers
              4
              Dimensions
                  (LxWxH)  19.5'x 8.5'x 7.5'Cruise
                  speed @ 20,000’
              275
                  mph
              Takeoff
                  and landing area
              35-ft
                  diaTop
                  speed @ 13,200’
              375
                  mph
              Noise
                  level at 500 ft (goal)
              65
                  dbaMaximum
                  rate of climb
              6,000
                  fpm
              Critical
                  failure components
              noneMaximum
                  range
              750
                  mi
              Complex
                  moving parts
              fewPayload
                  excluding fuel
              750
                  lbs
              Piloting
                  difficulty
              lowFuel
                  consumption
              20
                  mpg
              Vertical
                  takeoff and landing
              yesOperational
                  ceiling
              36,000
                  ft
              Garage
                  parking/roadability
              yesGross
                  weight
              2,400
                  lbs
              Uses
                  non-fossil fuel (ethanol)
              yesEngine
                  power (2 min rating)
              1200
                  hp
              Emergency
                  parachutes
              yes




Earlier
      performance numbers vary somewhat from the number shown above.  We
      continuously revise the performance projections to reflect the results of
      ongoing analysis and changes to the design characteristics of various
      components.  Recent decreases in projected range were the result of a
      change to ethanol fuel. Installed horsepower has changed due the projected
      use
      of a multi-stage, compound rotary engines of our design, and the on-board
      stabilization electronics have been redesigned to be faster and more
      reliable.





We
      believe
      that if we succeed in achieving the above cruising speeds, altitudes, payloads,
      and fuel economy per passenger mile in a production model aircraft, the Skycar
      will compare favorably with today’s light twin-engine and turbo-prop airplanes.
      But the M400 should offer the additional advantage of needing no runway for
      take-off and landing, since it will be able to hover and take-off vertically
      like a helicopter. But because the M400’s VTOL capability will be provided by
      our proprietary “ducted fan” technology rather than ahelicopter-type
      system of main and anti-torque rotors, maintenance and repair costs should
      be
      significantly less and safety should be considerably enhanced.




-3-





It
      is
      important to recognize that the above design specifications are theoretical,
      based on research, engineering, and flight- and wind tunnel-testing of various
      components. They have not yet been demonstrated to be achievable in a production
      model aircraft.





The
      following table compares certain of the target performance specifications of
      the
      M400 to a current production model helicopter and fixed-wing airplane that
      we
      believe might be potential competitors for production model M400
      customers:





**Powered-Lift**
            **Helicopter**
            **Airplane****Moller
                International**
              **M400
                Skycar**®
            **McDonnell
                Douglas**
              **MD
                520 N**
            **Socata
                TMB S.A.**
              **TBM
                700***Performance*High
                Speed Cruise
              Maximum
                Speed
              Operational
                Ceiling (ft)
              Maximum
                range
              Rate
                of Climb
              Vertical
                takeoff
              and
                landing
            330
                mph
              375
                mph
              35,000
              750
                mi
              4,900
                fpm
              yes
            155
                mph
              175
                mph
              16,300
              267
                mi
              2,069
                fpm
              yes
            335
                mph
              345
                mph
              30,000
              1,796
                mi
              2,380
                fpm
              noPayload
                and CapacityPassengers
              Gross
                Weight
              Maximum
                Net Payload
            4
              2,400
                lbs
              750
                lbs
            3
                to
                4
              1,591
                lbs
              1,106
                lbs
            6
              4,685
                lbs
              805
                lbsSafetyCritical
                failure
              components
              Complex
                moving components
            None
              Few
            Several
              Many
            One
              FewOtherMaintenance
                costs
              Piloting
                difficulty
              Garage
                parking / roadability
            Low
              Low
              Yes
            Very
                high
              Very
                high
              No
            Moderate
              High
              No*Price*
            $995,000
            $1,010,000
            $2,697,000




The
      above
      figures represent the actual manufacturers’ performance specifications for the
      helicopter and airplane models listed, and our theoretical specifications for
      the Skycar M400.  They are presented here to illustrate the
      comparative utility of the three types of aircraft. However, it is not yet
      certain that we will indeed achieve our target specifications, nor will we
      know
      the actual values for the Skycar until we have completed further development.
      Also, the $995,000 selling price for the Skycar is estimated, based on numerous
      assumptions that may or may not bear out over time. The actual selling price
      may
      be more or less than $995,000.




-4-




We
      believe that certain specific design
      features of the Skycar®  will
      further facilitate its eventual acceptance as an alternative vehicle of mass
      transportation. These features will include:





·
            Computer-augmented
                flight stabilization system




·
            Fly-by-wire
                control systems (electrical wires take the place of mechanical cables)
                and
                on-board computers which can interface with and be controlled by
                remote
                ATC system computer and navigation
                resources




·
            High-speed
                capability, which maximizes the benefits of personalized air
                travel.




·
            Hover
                or low speed capability, which provides the ability to cue up for
                entry to
                or exit from highly controlled air
                lanes.




·
            Ability
                to climb, descend, accelerate and decelerate rapidly to enter and
                exit
                air-lanes quickly




·
            Relative
                insensitivity to gusts and wind shear that makes tightly constrained
                flight possible




·
            VTOL
                ability to land anywhere which allows emergency exit from
                air-lanes




·
            Small
                size which reduces required vertiport infrastructure
                dimensions







Notwithstanding
      these design features, the utility of the Skycar in mass transportation will
      be
      limited by existing laws and regulations. For example, Federal Aviation
      Regulations (“FARs”) prohibit operation of civil aircraft within certain
      airspace, and require minimum altitudes above, and horizontal separation from,
      obstacles on the ground and in other airspace. In addition, much of the airspace
      in and around major metropolitan areas requires that pilots operating in such
      areas hold special qualifications. And although we intend that the Skycar have
      the capability to travel from “garage to garage,” in urban and suburban areas
      existing laws and regulations will preclude most such “off-airport”
operations.





Moreover,
      mass transportation using the Skycar would likely have to rely on some future
      navigation system such as NASA’s (National Aeronautics and Space Administration,
      an agency of the federal government) proposed Small Aircraft Transportation
      System (“SATS”), which is funded with public funds. NASA predicts demonstration
      of a “Highway in the Sky” system by the year 2008, and had a partial
      demonstration of the system during the first quarter of 2005.








*Environmental
      Noise Issues*





The
      theoretically achievable noise level of the M400 Skycar with conventional
      muffling and noise abatement technologies would allow it to fly with somewhat
      lower noise levels than present fixed-wing aircraft.  It should be
      considerably quieter than a helicopter because of the enclosed fans instead
      of
      the open rotor blades. Use of urban area vertiports is unlikely due to city
      noise abatement laws unless the Skycar were to employ some degree of mutual
      noise cancellation.  Tests to date by other researchers suggest that a
      15-decibel drop in noise is achievable with mutual noise
      cancellation.  If so, it would be possible for the Skycar to operate
      from most locations except the user’s home, where a 30-decibel drop in noise may
      be required by noise abatement laws.  To achieve this reduction in
      noise level as needed for such a flight originating from a residence,
      three-dimensional mutual noise cancellation would be required.  There
      is no assurance that such a reduced level of noise can be achieved for the
      noise
      spectrum generated by the Skycar.




-5-




*Further
      Skycar Development Stages*





The
      company is currently preparing the M400 Skycar prototype, now designated the
      M400X, for an anticipated manned, untethered flight test.   The
      current configuration of the M400X is equipped with experimental single-rotor
      rotary engines.  These single-rotor engines are being replaced with
      more powerful twin-rotor engines.





Since
      July
      12, 2002, MI has been successfully conducting demonstration hover flights with
      this Skycar prototype.  The aircraft has flown several times and at
      altitudes up to forty feet above ground level in stable, controlled
      flight.  While an overhead safety line is used during the flights, it
      has remained slack during the majority of the flight and never used to support
      or stabilize the vehicle.  The aircraft has been flown by remote
      control from the ground and has flown without an onboard pilot through this
      stage of the testing.  Success at this stage has depended upon
      demonstration of a controlled hovering flight, which has now been achieved
      and
      documented for the four-passenger M400 Skycar model as it was on several
      occasions for an earlier 2-passenger model.  Success at the next stage
      will be to demonstrate the same level of controlled flight while the aircraft
      is
      under the control of an on-board pilot.  In addition, payload
      objectives will be tested with an increasing payload weight, up to the full
      payload of 750 pounds if possible.





The
      previous unmanned hover tests are complete, and many of the required components
      for the engine upgrade are already fabricated.  The purpose of the
      engine change is to allow the M400 Skycar to undertake “maneuvering” tests at
      low speed with the safety of significantly higher reserve
      power.  (“Maneuvering” in this context, means lateral and vertical
      movement at a modest speed where lift remains entirely dependent upon the thrust
      from the engines (non-aerodynamic lift.)) The cost for these extended tests
      is
      expected to be between $1.5 and $2 million.  The risk at this stage
      centers almost entirely around the reliability of the various aircraft
      systems.  These flights are to be carried out over water at altitudes
      up to 50 feet to lessen the damage to the Skycar should a system fail and to
      reduce the risk of fire to the aircraft and injury to the pilot.





The
      third
      phase of the Skycar test program involves flight speeds sufficiently high so
      that direct lift from the ducts is replaced by aerodynamic lift generated on
      the
      wing surfaces, referred to as “transition” testing.  This segment of
      the flight where the aircraft transitions from one mode of flight to the other
      is considered the most technically challenging, and historically is the most
      dangerous. Wind-tunnel tests indicate that the Skycar is capable of completing
      this transition, however a number of factors are present in free flight that
      cannot be accounted for in a wind tunnel.  Therefore there is no
      assurance that these tests will be successful without incidents that risk both
      the aircraft and the pilot.  Achieving even one successful
      transitioning flight would establish the overall viability of the Skycar
      approach to this historically difficult aspect of VTOL aircraft
      design.




-6-




While
      the
      Skycar is marketable during the entire period, a successful demonstration of
      transition to forward flight may provide the catalyst for credibility of the
      design and promote capital investments that would allow us to enter into an
      initial low rate of production. We continue to actively market the vehicle
      to
      military and selected non-military clients. Military sales projections are
      based
      on the level of interest expressed by military representatives visiting our
      facilities over the years.  While such interest does not constitute a
      legally binding commitment, we believe it provides us with some indication
      of
      future sales potential.  Other near-term potential sales could be to
      individuals who have contacted us and requested to purchase a Skycar and have
      subsequently been issued a delivery position.  Approximately 100
      delivery positions have been assigned.  (A delivery position is a
      right to purchase, but not an obligation to purchase.) Sales, if any, prior
      to
      the end of 2005 would likely be limited to sophisticated clients who have
      evaluated the technical data and arrived at a conclusion about the potential
      of
      the aircraft without the added “proof” of a transitioning flight.





Reliability
      and production feasibility under FAA “airworthiness” standards will next become
      the company’s objective.  Tooling up for limited production of an
      airworthy vehicle for military use will require approximately $25 million and
      is
      expected to take 12 to 15 months.  This military model is expected to
      be developed under military contracts.  However there is no assurance
      that a mass-producible model will result from a limited number of sales to
      the
      military or that the military will in fact act upon their current
      interests.




*Aerobot
      Remotely-operated Aerial Vehicles*





Aerobot®
      is our design for a line of remotely piloted VTOL vehicles. The principal
      advantage of these craft is the ability to hover at a fixed point in space,
      which we believe makes them suitable for payloads such as video cameras and
      other sensors for data acquisition and inspection.  The Aerobot is
      intended to carry a wide variety of customer supplied mission specific payload
      packages. Payload requirements are model-specific and there are restrictions
      on
      weight, size and location. We have incorporated video camera technology, and
      believe other technologies such as sensors and transmitters are within the
      Aerobot’s payload capabilities, although we cannot guarantee that any payload
      within weight and size limitations will perform as desired or allow the Aerobot
      to function properly. Moller has developed and demonstrated both electric-
      and
      fuel-powered Aerobots® for commercial and military applications, although we
      have not commenced commercial marketing of them.





The
      electric-powered Aerobot®, which employs an umbilical cord to transmit power,
      data and control signals, can stay aloft for extended periods (8-12 hours or
      to
      the limitation of ground-supplied electrical power) at heights of up to 250
      feet.  The fuel-powered Aerobot® utilizes Moller’s rotary engines,
      which produce greater than 2 horsepower per pound of engine weight.  A
      high power-to-weight ratio, a lightweight airframe, and a patented system for
      automatic stabilization and control are key design elements of both types of
      Aerobot®.




-7-





The
      demonstrated performance specifications for the two Aerobot models are set
      forth
      in the following table:








**Electric-Powered**
              **ES20-9**
            **Fuel-Powered**
              **FS24-50****Payload
                (including fuel)**
            15
                lbs
            65
                lbs**Empty
                weight**
            40
                lbs
            90
                lbs**Hover
                time**
            8-12
                hours*
            1.5
                hrs**Hover
                ceiling**
            250
                ft
            2,500
                ft***Forward
                speed***
            —
            50
                mph**Size**
            26”L
                x 26” W x 14” H
            30”L
                x 30”W x 16”H


*
      Flight
      duration is calculated based on estimated run-time of ground-based electrical
      generator.








We
      expect
      to continue to solicit and execute contracts for government use of our
      Aerobots.  As in the past and for the next 18 months, these contracts
      are expected to be for one-off demonstration vehicles.  The $200,000
      to $300,000 price of these one-off Aerobots will remain 200-to-300% higher
      than
      the desired target price of approximately $100,000 as long as volume is
      insufficient to establish quantity discounts for its components. This may
      restrict initial sales to those clients, if any, to whom price is less important
      than the functional characteristics of the Aerobot.  However, if
      expressed interest translates into increased sales, the production price could
      reduce to a point where civilian, paramilitary and military use could be
      broadened, resulting in increased sales.  However at this time there
      is no assurance that volume sales of the company’s Aerobots can be
      achieved.








*Moller
      Rotary Engine*





Moller
      has
      acquired and developed proprietary technology enabling the Company to
      manufacture a high performance, low-cost rotary engine that produces more than
      2
      horsepower per pound of engine weight.  Key design characteristics and
      the resulting attributes of Moller’s engines are outlined below and are applied
      to its intended use as a ducted fan power plant:




-8-




Design
                  Feature
              Attributes--------------------
              -------------Air-cooled
                  or charge-cooled rotor
              Light
                  WeightAluminum
                  housingsSimplified
                  Lubrication SystemFew
                  moving parts
              Low
                  cost + ReliabilityPerfect
                  dynamic balance
              High
                  propulsiveLow
                  vibration
              efficiencySolid
                  engine mountsSmall
                  fan tip clearanceFour-stroke
                  combustion cycle
              Good
                  fuel economy + Low emissions +Low
                  noise





We
      believe
      that Moller’s rotary engine, called the Rotapower engine, will be advantageous
      for ducted fan VTOL applications such as those required by the Skycar® and Aerobot® product
      lines.  The engine’s round shape and small size will allow it to be
      hidden in the center of the duct behind the fan hub.  Furthermore, the
      engine’s power-to-weight ratio should enhance performance in VTOL applications,
      where all of the required lift must be provided by the engine/fan unit without
      benefit of a wing surface as in a rolling take-off or landing.





Moller
      International granted Freedom Motors a license to manufacture, market and
      distribute the Rotapower engine for all applications except for aviation and
      use
      in ducted fans. In return for this license, Freedom Motors agreed to pay Moller
      International a 5% royalty on all sales of the Rotapower engine.  See
      Note G and Note K for additional details.





Moller’s
      unique engine design is based on a rotary engine that was mass-produced by
      Outboard Marine Corporation (“OMC”) from 1972 to 1976.  In 1985,
      Moller purchased the OMC drawings, production routing sheets and engineering
      support man-hours.  The Company subsequently hired the key OMC
      engineers who had developed the engine, participated in the production
      engineering process and contributed to the establishment of the service
      organization.





Using
      the
      OMC single-rotor engine as a starting point, Moller created a high-performance,
      modular design engine.  The Company added electronic fuel injection
      and thermal barrier coatings, and introduced unique seal, lubrication and
      cooling systems.  In all, Moller has made more than 25 major engine
      design improvements, of which eight are deemed patentable and two are patented
      and one is patent pending.  Prior to entering production, Moller
      expects to have applied for patents on all key elements.








-9-














Specifications
      of Moller’s high-performance engines are as follows:





**High
                Performance****Single-Rotor**
            **Two-Rotor****Specifications**
              ****Weight
              Dimensions
                (L, Diameter)
              Displacement
            55
                lb
              14
                in, 11 in
              530cc
            85
                lb
              19
                in, 11 in
              1060cc**Performance**
              Rated
                Power
              Rated
                Speed
              Maximum
                Speed
              Idle
                Speed
              Porting
            80
                hp
              7000
                RPM
              7500
                RPM
              1800
                RPM
              Radial
            160
                hp
              7000
                RPM
              7500
                RPM
              1800
                RPM
              Radial**General**
            All
                engines can operate on regular grade gasoline





To
      demonstrate the significance of Moller’s rotary engine technology for aircraft
      applications, the following table and graphs compare the high performance
      two-rotor engine to a standard piston engine of similar horsepower.




-10-






**MOLLER
                ROTARY(1)**
            **STANDARD
                PISTON(2)****POWER**
            160
                hp
            180
                hp**WEIGHT**
            85
                lbs
            260
                lbs**VOLUME**
            1.0
                ft3
            8.6
                ft3**FRONTAL
                AREA**
            0.8
                ft2
            3
                ft2





Horsepower
                per Pound
              Horsepower
                per Cubic Foot
              Horsepower
                per Square FootOf
                Engine
                Weight
              of
                Engine
                Volume
              of
                Engine Frontal Area




**200****160****2.0****0.7****40****15**




Moller
                Standard
            Moller  Standard
            Moller   StandardRotary(1)
                Piston(2)
            Rotary(1)
                Piston(2)
            Rotary(1)  Piston(2)**Moller
                Advantage:  3:1**
            **Moller
                Advantage:  11:1**
            **Moller
                Advantage:  5:1**




(1)Two
      rotor,
      530cc/rotor


(2)Avco
      Lycoming
      0-360-A






*Comparison
      of Moller rotary and Standard Piston Engines*





Our
      Rotapower engine is in very limited production. It has been installed in a
      number of non-aircraft products for field-testing.  The company is
      presently under contract to develop a diesel-fueled version of its
      engine.  To date the company has demonstrated the ability to operate
      its engine on diesel fuel at about 60% of the power it can generate on
      gasoline.





Because
      of
      the military’s interest in lightweight engine running on diesel or jet fuel the
      company has previously received government support to achieve its present level
      of success.  Presently the company is testing its engine for long-term
      durability that means establishing a time between overhauls of at least 1000
      hours.  It has successfully completed an FAA-type engine durability
      test of running the engine on gasoline for 150 hours at maximum
      power.  If a 1000-hour-plus test can be achieved with diesel fuel the
      potential for military and civilian sales of an aircraft Rotapower engine is
      likely to increase.  There is no assurance at this time that this
      endurance test will be successful.  The company intends to license the
      production of the engines to a firm with the resources it believes will be
      adequate for the task.  As part of these negotiations, the company
      hopes to retain a favorable position for the procurement of these engines for
      its own incorporation into potential products as well as continued testing
      and
      development.




-11-




*Liability
      Insurance*





Frank
      Crystal & Co. has provided us with a comprehensive insurance plan dated July
      20, 2000. This plan outlines a Product Liability Proposal for an estimated
      initial product exposure of $6,250,000 in annual engine sales. (We estimated
      our
      annual sales for the purpose of obtaining the insurance quote and planning
      our
      operating costs – we have no particular basis for projecting such volume of
      sales as of any specific date in the future.) The cost identified in this
      proposal was an initial deposit of $25,000 per annum with an audit adjustable
      rate of $4.00 per $1,000 of sales below $6,250,000 and $3.00 per $1,000 of
      sales
      above $6,250,000. We did not accept the insurance proposal, but believe the
      premiums quoted (adjusted for inflation) to be representative of our costs
      to
      insure ourselves against product liability issued in the near-term. There is
      no
      guarantee that these rates will remain effective or apply to the Rotapower
      engine when actually needed. Higher costs could adversely impact our ability
      to
      produce and market an economically competitive engine.




*Regulation
      of Aerobots and Engines*





The
      Aerobot’s use is controlled by the FAA if it is untethered, except for military
      use.  No federal, state or local approval is required at this time
      regarding the design or construction of either the engine or the
      Aerobot.  However there is no assurance that such regulations will not
      come into existence in the future.




PATENTS




The
      current status of Moller International’s U.S. and Foreign Patents and Trademarks
      is listed below:





Name
            Patent/Application
                Number
            CountryDiesel/Otto
                Cycle Multi-Fuel
            60/874,398
            USDiesel/Otto
                Cycle Multi-Fuel
            60/918,130
            USImproved
                Vertical Takeoff & Landing
            6808140
            USImproved
                Vertical Takeoff & Landing
            2004/254553
            AustraliaImproved
                Vertical Takeoff & Landing
            2006/532279
            JapanImproved
                Vertical Takeoff & Landing
            2514777
            CanadaImproved
                Vertical Takeoff & Landing
            303730
            InternationalImproved
                Vertical Takeoff & Landing
            2004/002796
            InternationalResonator
                Type Mufflers
            18,324,82
            JapanRobotic
                or Remotely
            279391
            EuropeRobotic
                or Remotely
            4795111
            USRotary
                Engine Having
            3385273
            JapanRotary
                Engine Having
            6325603
            USRotary
                Engine Having
            6164942
            USRotary
                Engine Having
            999630924
            EuropeRotary
                Engine Having
            9827045
            InternationalRotary
                Engine Having
            99/29821
            InternationalStabilizing
                Control
            1144249
            EuropeStabilizing
                Control
            6,450,445
            USStabilizing
                Control
            99/30392
            InternationalTrademark
                Aerobot
            326,708
            CanadaTrademark
                Aerobot
            1,367,510
            USTrademark
                Rotapower
            2,101,936
            USTrademark
                Skycar
            1,739,687
            USTrademark
                Skycar
            1,964,355
            USTrademark
                Skycar
            2000/14455
            South
                AfricaTrademark
                Skycar
            2000/14454
            South
                AfricaTrademark
                Skycar
            76,066,387
            USVertical
                Takeoff & Landing
            D498201
            USVertical
                Takeoff & Landing
            3709001.6
            EuropeVertical
                Takeoff & Landing
            266,288
            FranceVertical
                Takeoff & Landing
            000243464-0001/0004
            EuropeVTOL
                Aircraft
            5115996
            USVTOL
                Aircraft
            512345
            EuropeVTOL
                Aircraft
            91/00247
            International






-12-


OUR
      MARKETS





Due
      to the
      innovative nature of the Moller Skycar, we cannot be certain of any level of
      market acceptance for the product. The following discussion of potential markets
      for our Skycar and Aerobot products is based upon: 1) our observations and
      understanding of the ways various owners and operators of conventional
      fixed-wing and rotary-wing aircraft have used those vehicles; 2) our assumptions
      as to how the proposed design capabilities of our products may prove more
      efficient, utilitarian, or cost-effective features in those same or similar
      applications; and 3) anecdotal data from a small number of potential customers
      who have visited our facilities and expressed interest in the Skycar. However,
      until we can manufacture and deliver production model aircraft, we cannot be
      certain that operators will indeed realize benefits by employing our products
      in
      place of conventional aircraft employing significantly dissimilar technologies.
      Our ability to successfully market our Skycar and Aerobot products will depend
      in large part on the ability of those products to deliver a realizable benefit
      to users.





In
      October
      1993 Moller International obtained general, infrastructure, environmental,
      public safety and communications statistical data that we combined with our
      own
      research to aid in producing our marketing forecasts. We have continued to
      develop, update and maintain this data with input from Shephard’s Unmanned
      Vehicles and other publications from the public domain.








*Skycar*





Prior
      to
      full FAA certification (See “Regulation – Airworthiness Certificate
      Requirements” below), we hope to be able to sell our products to certain
      operators who are exempt from the civil aviation certification
      requirements.  These may include:




-13-





·
            military
                and para-military (rescue, drug enforcement, and border
                patrol)


·
            wealthy
                individuals, for use within their own property in the U.S., Australia,
                Canada, etc.


·
            foreign
                countries where FAA certification is not
                mandatory





No
      such
      customers have made any binding commitments with regard to our
      products.








*Market
      Segments*





Although
      there is no assurance we will be successful, we will attempt to develop markets
      for the Skycar®
      within the following aircraft operator segments:





**General
              Aviation**
            **Military**Private
              Individuals
            SurveillanceCorporations
            Air
              utility vehicleCharter
              and Rental Services
            RescueAviation
              Schools
            Medical
              EvacuationUtilitiesNews
              GatheringPolice/Fire/Rescue/AmbulanceDrug
              EnforcementExpress
              DeliveryBorder
              Patrol




We
      have
      relied upon our own research and anecdotal data from a small number of potential
      customers who have visited our facilities and expressed interest in the Skycar
      to support our belief that operators in the above categories will be interested
      in purchasing Skycars.  Individual fixed- and winged-aircraft owners,
      charter and rental service owners, corporate officers, and a variety of other
      interested parties have given us their input on the suitability and desirability
      of the aircraft within these fields of use.  However, such subjective
      input does not necessarily indicate that an economically viable market exists
      for the Skycar.  Further, the above listing of potential market
      segments does not imply that Moller has contacted or received an expression
      of
      interest from each such market segment.





-14-





*Competition*





Today,
      there is no company that we are aware of offering a vehicle that is
      substantially similar to the Skycar®.  Companies
      periodically emerge with preliminary designs, but to date none has succeeded
      in
      demonstrating a working model, owing presumably to the high cost of developing
      the required technologies.  Moller has test-flown an experimental
      vehicle and is completing the construction of a production
      prototype.  Moreover, we have applied for and obtained patents on many
      key aspects of the Skycar, which we expect will stave off direct competition
      to
      some extent, although there can be no assurance of our ability to successfully
      defend our patents against infringement.  The nearest competition,
      insofar as we are aware, appears to be the six to nine passenger tilt-rotor
      BA
      609 (Bell-Augusta) which is in development.  Its announced price of
      $10 million, however, will likely constrain it to a different market than the
      target market for the Skycar®.





If
      we are
      able to successfully demonstrate the Skycar’s flight characteristics, we expect
      that such success will generate renewed competitive interest.  Primary
      competition is expected to come from large aircraft manufacturers because they
      have the resources necessary to enter the personal VTOL market.  Given
      adequate financing, however, any of a number of existing small and large
      aircraft manufacturers could develop competitive products. We believe we have
      one advantage that will prove difficult for potential competitors to overcome,
      however, and that is our rotary engine and ducted fan propulsion
      technology.  The advantage, however, may depend upon our future
      ability to successfully defend our intellectual property rights against
      infringement, of which we cannot be certain.





It
      is
      difficult for us to predict the precise sources of competition for our products,
      or our competitive position in the marketplace, owing to the fundamental
      dissimilarities between our products and the products that historically have
      been used in the roles for which our products are intended. Although we may
      surmise significant benefits to customers in switching to our products, because
      they represent a unique and innovative technology there is no historical basis
      for believing that customers will in fact switch.





In
      marketing the Skycar as a vehicle for personal transportation, we will have
      to
      compete against the sundry existing forms of transportation with which people
      are already familiar and comfortable.  These include the automobile,
      railroads, buses, commercial aviation, and general aviation, among others.
      Each
      mode of transportation offers a unique set of advantages and disadvantages,
      relating to cost, convenience, comfort, safety, and perhaps other
      considerations.  In order for the Skycar to gain acceptance as a mode
      of personal transportation, prospective users will have to conclude that its
      particular advantages justify its cost. There is no assurance that sufficient
      numbers of people will perceive such advantages as to create a viable market
      for
      Skycar.


AEROBOTS®





Many
      of
      the potential markets for air-borne remotely flown vehicles (Aerobot®) are currently
      addressed by manned helicopters and airplanes, both of which in our opinion
      represent significantly less economical solutions.  In addition, the
      unmanned Aerobot® can operate
      in areas
      that are prohibitively dangerous for manned aircraft.  Furthermore,
      the Aerobot®’s
      ducted fan design is well suited for operation in confined quarters where the
      exposed propeller or rotor blades of alternative solutions (both manned and
      unmanned) pose significant risks to people nearby and to the aircraft
      itself.





-15-





*Market
      Segments*





We
      believe
      the Aerobot® is
      suitable for a variety of commercial and military applications:




**Commercial**
              **Military**Bridge
                  and utility line inspection
              Battle
                  damage assessmentBuilding
                  heat loss detection
              Electronic
                  counter measuresSmoke
                  stack air quality testing
              Target
                  acquisitionElectronic
                  news gathering
              SurveillanceSports
                  event reporting
              Communications
                  relayHazardous
                  waste detection
              Decoy
                  operationsNatural
                  disaster damage assessmentLaw
                  enforcementFire
                  surveillance





*Competition*





There
      are
      a number of unmanned aerial vehicles (“UAVs”) in production today worldwide;
      however none of these, so far as we are aware, possesses characteristics
      substantially similar to the Aerobot. The most similar is the CYPHER, developed
      by United Technologies. The CYPHER is not capable of transitioning to
      significant aerodynamic flight, is much larger than the Aerobot and is
      considerably more expensive than the Aerobot.  The Cipher’s design is
      very similar to a helicopter and the price is expected to be roughly equivalent
      to a small helicopter at $500,000 or more per vehicle.





The
      applications identified above in “Market Segments” have been compiled from lists
      of functions for existing UAVs.   For example, the US Air Force
      has defined the roles and missions for a UAV with VTOL
      characteristics.  This information is published on a publicly
      available web site
      (http://www.edwards.af.mil/articles98/docs_html/splash/may98/cover/future.htm).  The
      US Navy’s needs and requirements have been described in several articles, one of
      which is “Autonomous Vehicles and the Net-Centric Battlespace”, by Barbara
      Fletcher, Space and Naval Warfare Systems Center, San Diego.  In her
      paper dated April 24, 2000, Ms. Fletcher describes the potential role of UAVs
      in
      communications and control scenarios and specifically discusses the features
      of
      the Cypher VTOL UAV.  In information describing the
      Cypher  (http://users.chariot.net.au/~theburfs/URcypher.html) the
      company is reported to claim its product’s non-defense roles outnumber potential
      military missions for the UAV, including counter-narcotics, ordnance disposal,
      forestry, law enforcement and search and rescue.  We believe that if a
      less costly alternative with substantially the same performance characteristics
      to the Cypher were available, it would be considered by several government
      agencies.




-16-





Model
      helicopters are also competitors but are dangerous and very difficult to fly.
      Since both these competitors rely principally on direct lift their range and
      endurance are both limited compared to a transition-capable
      Aerobot.





The
      main
      advantage of the non-transitioning Aerobot is safety, size, ease of control,
      and
      low relative cost even at modest volumes.  However the political and
      financial resources of companies like United Technologies are such that the
      Aerobot’s superior performance does not guarantee it an economically viable
      market.








REGULATION





*Airworthiness
      Certification Requirements*





The
      Federal Aviation Act of 1958, as amended, vests in the Federal Aviation
      Administration (commonly, the “FAA”) the authority to regulate virtually all
      aspects of civil (i.e., non-military) aviation within the United States,
      including pilot certification, airspace usage, and the certification of
      aircraft. The FAA exercises its authority primarily through the issue and
      enforcement of regulations, known as the Federal Aviation Regulations (or
“FAR”s), which are codified in Title 14 of the Code of Federal Regulations.
      Among other things, the FARs set forth the type certification requirements
      (known as “airworthiness standards”) for aircraft designs, the requirements for
      manufacturers’ production quality control systems, the requirements for
      airworthiness certification of individual aircraft, and the operations and
      maintenance rules for air carriers and repair facilities.





The
      Aircraft Certification Service (designated “AIR” by FAA) is the department
      within the FAA that develops and administers safety standards for aircraft
      and
      related products that are manufactured in the United States or are used by
      operators of aircraft registered in the United States. Related products include
      engines, propellers, equipment, and replacement parts. As a regulatory function,
      AIR’s mission priorities are:





1.
            Continued
                airworthiness and other activities related to continued operational
                safety;


2.
            Rulemaking
                and policy development; and


3.
            Certification.





Continued
      airworthiness is given the highest priority because these activities have the
      greatest impact on the safety of operating aircraft and because they promote
      the
      continued satisfactory performance of approved systems, such as manufacturers’
approved quality control systems. Rulemaking and policy development are
      considered to be a higher priority than issuing new certificates because the
      integrity of the certification program depends on the currency of applicable
      rules and policies.





One
      of the
      key goals of the certification and continued airworthiness standards is that
      each safety-critical system have a reliability of at least 0.999999999 per
      flight hour, which is another way of saying that a particular safety-critical
      component or system should have no more than a one-in-one-billion chance of
      failure for each flight hour. In pursuit of this goal, the regulations address
      a
      combination of requirements for design, analysis, test, inspection, maintenance,
      and operations. To permit design innovation, the regulations for the most part
      avoid specifying details such as materials, structural concepts, etc.; instead,
      designers are given a free hand as long as they accept the responsibility for
      showing that systems with innovative design features meet the FAA’s stringent
      reliability standards.




-17-




The
      cornerstone of AIR’s certification process is the “airworthiness certificate,”
issued for each individual aircraft. Generally, regulations prohibit operating
      an aircraft without an airworthiness certificate, or in violation of any
      limitation or restriction of its airworthiness
      certificate.  Certificates may be issued as either “standard” or
“special.” Aircraft certificated in the Standard category are subject only to
      the same operating restrictions as most other production aircraft, that is,
      that
      they be operated within the manufacturers’ approved design limitations for the
      particular type. “Special” category aircraft might include experimental designs
      or homebuilt aircraft, for example, and may be subject to various operational
      restrictions, such as a prohibition against carrying non-crewmember passengers,
      or operating over densely populated areas.





For
      a
      civil aircraft to receive an airworthiness certificate, the FAA must determine
      that the aircraft conforms in detail to an FAA-approved type design and is
      in
      safe operating condition. Similar requirements exist for engines, propellers,
      and certain materials, parts and equipment installed on certificated
      aircraft.  The first step in the certification of a new design is to
      establish which body of standards will apply. Because the original aircraft
      classifications of “airplane,” “airship,” “rotorcraft,” etc. would not
      accommodate the radical design of the Moller 400 Skycar® (and a couple
      of
      other VTOL designs in development by other companies), the FAA in the early
      1990s established a new category and class of
      aircraft:  “Powered-lift  -- Normal Category,” and set about
      developing an airworthiness criteria manual that would serve as the basis for
      certification.  As of this filing, the manual has not been finalized,
      but we expect that the draft will suffice for us to proceed with initial testing
      toward certification. In fact, the FAA has indicated to us that because of
      the
      uniqueness of the Skycar®, they expect
      to
      develop the final airworthiness criteria as we progress through the test
      program.





Once
      the
      company has been issued a “Type Certificate” for a particular design, each
      production aircraft we manufacture to those same specifications will be entitled
      to a “standard” airworthiness certificate. Even after the Type Certificate is
      issued, however, AIR has the authority to order us to make design changes if
      it
      determines that safety so requires.





-18-





*Establishment
      of Skycar Certification Criteria*





In
      1990
      Mr. Jack Allison, formerly a vice president and a director of Moller
      International, began working with the FAA with the goal of identifying the
      appropriate airworthiness criteria for certification in a newly-established
      aircraft category designated “powered lift – normal category,” in which the M400
      Skycar is classified. The first meeting was to organize the effort to complete
      the airworthiness criteria manual, and was attended by about 75 representatives
      from seven foreign and domestic aircraft and aerospace manufacturing companies,
      and members of the press. As a result of that meeting, Mr. Allison was appointed
      to the “technical issues panel” charged with responsibility for the primary
      flight systems. Other panels handled powerplants, avionics, and the airframe.
      A
      draft of the manual was issued and is now available.





The
      FAA
      has recently informed us that of the original seven firms involved in the
      effort, Moller appears to be the only one moving toward certification. The
      FAA
      has displayed what we regard as a very cooperative attitude through all of
      our
      preparatory work.





On
      May 19,
      1999, Mr. Allison provided an informational briefing at Edwards Air Force Base
      on the Skycar. In attendance were a consortium of (1) test pilots from the
      Air
      Force stationed at Edwards AFB, (2) scientists and engineers from NASA Dryden,
      and (3) flight instructors and aircraft inspectors from the National Test Pilots
      School. As a consequence of this meeting, Moller received a proposal from this
      consortium that outlined a combined certification and airworthiness program
      for
      the Skycar, whereby the flight certification documentation would be written
      in
      parallel with the flight-testing. This procedure would accelerate the process
      of
      identifying certification criteria and reduce the time necessary to achieve
      production-oriented procedures and processes. The consortium estimates that
      the
      proposal would require Moller to budget $1.2 million for the program with a
      time
      frame of approximately three years to define the requirements for FAA
      certification. The FAA has not approved or disapproved the proposal, nor is
      it
      the agency’s function to do so. The objective of this activity is to provide
      suggested appropriate additions to what we feel is the currently immature
      language of the FAA’s regulations regarding the issuance of Airworthiness
      Criteria for Powered Lift Normal Category aircraft.








*Effect
      of Certification Requirements On Our Operations*





An
      aircraft’s airworthiness certification bears on its usefulness to its owner or
      operator. In particular, the value to a prospective purchaser of an
      un-certificated or “special” certificated aircraft may be affected to some
      extent by the corresponding operational restrictions, which can prevent them
      from taking full advantage of the aircraft’s design
      capabilities.  Certain operators, however, are exempt from the
      airworthiness requirements to varying degrees, and we expect that such operators
      may provide a market for our products prior to final FAA
      certification.  See “Marketing Strategy” below.





Certification
      testing will be a recurring expense for us as we bring our products to market,
      and incorporate design improvements into previously certificated
      models.  The initial type certification testing on each aircraft
      design will encompass design approvals for materials, spare parts, and other
      equipment to be installed. Therefore, if we or any of our potential strategic
      partners should choose to make a major modification in a model, such as an
      airframe re-design or changing a safety-related onboard system, the change
      may
      have to undergo additional testing to prove the new system’s
      reliability.




-19-




As
      a
      future aircraft manufacturer, we will undertake an ongoing obligation to monitor
      the serviceability and safety of the aircraft we expect to build and
      sell.  We intend to establish and maintain, at our expense, a system
      of feedback and reporting whereby maintenance mechanics and inspectors can
      report back to us any and all failures, excessive or unpredicted wear,
      malfunctions, and flight safety issues of any kind that arise or are detected
      during maintenance and repair activities. Where appropriate, we will issue
      “service bulletins” to owners and operators of the affected model, detailing the
      problem and our recommendation for correction.  Where the problem may
      potentially affect the safety of flight operations, we may recommend to the
      FAA
      that they issue an Airworthiness Directive (commonly called an “AD”) making the
      correction mandatory for every operator.





It
      is
      impossible to predict the future costs to us of ongoing compliance with federal
      airworthiness regulations; however, we expect that the costs will be manageable
      and that we will be able to absorb them in our pricing structure.








*Pre-production
      Test Flight Program*





Tethered
      flight tests have been conducted with the M200X aircraft using the same number
      of rotary engines (eight) and a forerunner of the type of electronic control
      and
      stabilization system as is employed on the M400 Skycar®. We have
      conducted
      extensive ground tests of all of the M400’s systems and have now completed the
      initial tethered flight tests and hover demonstration.





We
      began
      test flying the pre-production model of the M400 in late 2002. The aircraft
      was
      flown tethered so we could test and de-bug the stabilization and control
      electronics. These flight tests first explored systems functions in the safest
      portions of the flight envelope then expanded the envelope. We expect the entire
      test program, involving many hours of powered tests on the ground and in
      tethered flight, and several hundred hours of free flight tests, to extend
      until
      we achieve FAA “Experimental” certification, hopefully within the next 12
      months. However, this forecast is based upon the assumptions that (a) the
      Company will succeed in raising sufficient capital to cover the costs of flight
      testing, (b) a number of remaining engineering problems will be resolved through
      further development, and (c) that the FAA will establish certification criteria
      for the Skycar that are within our technical capabilities. All of these
      assumptions remain highly uncertain as of the date of filing of this
      registration statement.





-20-





*Pilot
      Requirements*





Initially,
      a private pilot’s license will be required to pilot the Skycar®, primarily
      to ensure
      adequate flight management and navigational skills.  To obtain a
      license, the prospective pilot must pass a flight test administered by a
      licensed flight instructor in order to demonstrate familiarity with its
      simplified controls.  The Skycar® is not piloted
      like
      a traditional fixed-wing airplane and has only two hand control sticks that
      the
      pilot uses to inform the redundant computer control systems of his or her
      desired flight maneuvers.  The Company plans to have its own pilot
      training program until the Skycar® is FAA
      certified.  Once the Skycar® is certified,
      it is
      expected that all training programs will be provided by private and/or military
      aircraft flight training schools.  The FAA has begun awarding “Powered
      Lift” pilot’s licenses.




MARKETING
      STRATEGY





In
      the
      early stages of sales development, we plan to market primarily through direct
      selling by Company sales specialists to individual customers within our target
      markets. Brand exposure may be accomplished through displays at trade shows
      and
      industry exhibitions, direct mail, advertisements in aviation publications,
      and
      cooperation with the news media. For at least three decades the news media
      has
      followed the progress of Paul Moller’s VTOL research and experimentation,
      underscoring the public’s perennial fascination with the promise of convenient
      and affordable air travel made as personal and individualized as automobile
      travel has been.  We expect, but cannot be certain, that the Skycar
      will continue to receive periodic media coverage as we approach our first
      delivery schedules.








*M400
      Skycar®*





Although
      sales of the Skycar® into most
      civilian
      markets will require that we be able to deliver an FAA certificated aircraft,
      the regulations permit certain types of operations by certain defined operators
      to be conducted without the standard airworthiness certification
      requirement.  These markets include:





*Government*  --
      domestic and foreign agencies including:





Police
      departments


Border
      Patrol


Forest
      Service


Drug
      Enforcement agencies


Medical
      services





Initially,
      we anticipate that most sales to this segment will consist of Skycars® for test
      and
      evaluation. The craft’s capabilities should make drug enforcement agencies and
      Border Patrol viable candidates for early purchases. However, we have not
      received any commitments from those agencies to make any such
      purchases.





-21-





*Military*  --
      Initial sales to domestic and foreign military organizations will likely be
      for
      test and evaluation purposes.  We anticipate that military
      organizations will utilize the Skycar® in critical
      applications for which competing aircraft are ill suited.  For
      example, the Skycar® is expected
      to have
      superior speed, range and VTOL capability for the rescue of crews of downed
      aircraft with minimal risks.  In addition, military subcontractors may
      wish to use the Skycar® as a platform
      for
      autonomous aircraft programs, one of the fastest growing areas of military
      spending. Autonomous aircraft applications currently utilize un-manned aircraft
      piloted by infrequent remote control commands or under the control of a
      monitoring computer. Such aircraft are currently in use by the military as
      remote data gathering platforms that feed information via radio or other
      communication links back to a flight control center. Moller expects that
      military organizations will wish to use Skycars® in a broader
      range
      of applications if volume production reduces manufacturing costs and overall
      pricing.  Eventually, we believe the Skycar® has the
      potential to
      become the aerial counterpart of the “HMMWV,” the military’s current ground
      utility vehicle.





*Corporations*—
      Moller intends to sell the M400 Skycar® to corporations
      for
      use in the airspace above their property and we plan to specifically target
      companies in industries such as timber and oil that have survey and exploration
      needs.  The Company also expects that it will be able to address a
      broader range of commercial applications in some foreign markets due to fewer
      legal restrictions than in the United States.





Assuming
      that the Skycar eventually receives full airworthiness certification, we will
      consider augmenting our sales efforts with retail dealerships, either existing
      or newly-franchised.  Further, we intend to establish a network of
      regional maintenance and repair facilities, either Company-owned or partnered
      with existing service facilities, to handle routine maintenance and repair
      services for non-military Skycars.





-22-





*MANUFACTURING*





*Skycars®*





We
      believe
      that the long-term success of any aircraft manufacturer is dependent on the
      quality of the vehicle produced.  The quality of both the design and
      manufacturing processes is important.  Moller expects to purchase or
      contract out the major Skycar® components
      that
      require capital intensive equipment, subject to Moller’s rigid specifications
      and stringent quality assurances and testing requirements.  We expect
      that some components and parts will be finish-machined in Moller' s facilities
      when they have proprietary technological content, require special finishing,
      or
      are small custom parts with little tooling required.  Moller plans to
      perform quality control, assembly and final test work at its own
      facilities.  During 2002 and 2003, any manufacturing work will
      necessarily be executed using low volume techniques.  Special tooling
      and manufacturing processes are expected to be developed for higher volume
      production in the future.





Airframe
      manufacture encompasses the assembly of the major airframe components (fuselage,
      wing and nacelles) and installation of fuel and oil tanks, parachutes, seats,
      canopy, landing gear, and the vertical thrust vane system.  Moller
      anticipates that a key strategic partner will be required in order to complete
      composite airframe construction. Moller will require a complete test of all
      systems through an extensive flight test program before final
      release.





Important
      electronic systems include computer stabilization, pilot controls, display,
      power regulation and engine controls.  Electronics manufacture will
      include the following activities:





-
            Assembly
                of electronic sub-systems


-
            Burn-in
                of electronic components


-
            Mounting
                of printed circuit boards


-
            Fabrication
                of electronic enclosures


-
            Interconnection
                of components and wiring


-
            Installation
                of equipment in airframe





While
      no
      specific firm has been identified at this point, we expect to work with one
      or
      two key strategic partners to provide electronics and avionics systems for
      the
      Skycar®.





The
      quality control department will be an autonomous organization carefully
      integrated into every aspect of the production operation.  Every
      employee will play a part in assuring the highest possible level of quality
      and
      performance.








*Aerobots®*





Both
      electric-powered and fuel-powered Aerobots can be produced in the present Moller
      facility in volumes of up to four per week, which is sufficient for currently
      projected production.  The electric-powered Aerobots consists of
      off-the-shelf components and high performance motors, electronic control boards,
      and a composite frame manufactured by Moller.  Both individual
      components and final assembly are inspected to assure product
      quality.  The fuel-powered Aerobots utilizes the Moller rotary engine
      (single-rotor) and thus requires more extensive facilities.  The frame
      of the fuel-powered Aerobots is of welded construction; the fuel tank, duct
      and
      cowling are composites.  Some component and subassembly tests will
      supplement the basic assembly quality control.  Costs of manufacture
      are expected to decrease for both Aerobots as production volumes increase.
      However, no specific amount or rate of decrease can be projected at this
      time.





-23-


In
      most
      cases, customers require a complete operating system, not just a
      vehicle.  Moller plans to supply the radio control system and, in some
      cases, install the interface for the payload sensor system.




Engine





We
      expect
      that our Freedom Motors affiliate will supply most of the primary engine
      components necessary to generate a FAA certified Rotapower®
engine.  For that reason various elements are already incorporated
      into the basic engine design to satisfy future requirement for FAA
      certification.  For example, dual spark plugs and an appropriate
      thrust load carrying bearing are already part of the basic
      design.  Moller will inspect, assemble, and test completed engines
      prior to their sale or incorporation in Skycars® and Aerobots®.




*EMPLOYEES*





We
      currently have 7 full-time employees and 4 part-time employees, including 5
      management and executive management personnel. We have no specific plans for
      a
      significant increase or decrease in the number of our
      employees.  Future staffing needs will depend in large part on any
      partnering or out-sourcing arrangements we may make for manufacturing of
      components and sub-systems.




*NEED
      TO RAISE ADDITIONAL CAPITAL TO COMPLETE DEVELOPMENT AND FLIGHT
      TESTING*





We
      estimate a cost of $26 million to demonstrate a flight worthy pre-production
      model of the M400 Skycar.  If we are successful, we believe that the
      M400 Skycar would generate interest within the U. S. military in the larger
      M600
      Skycar.  It may require an additional $40 million to complete an
      FAA-approved production facility that would allow the production of two M400
      Skycars per day.  Additional capital of $20 to $30 million will be
      required for start-up and inventory costs.  Mass production of a
      civilian aircraft has never occurred but assuming success at a modest production
      level we anticipate that both military and civilian interest would justify
      the
      very large amount of capital (automobile-level production costs) necessary
      to
      achieve volume production of the Skycar.  Such a level of production
      would be most likely to occur by means of a licensing arrangement or a strategic
      partnership with an established and well-capitalized company.





We
      anticipate that that if we successfully demonstrate translational flight
      capability in early 2008, the credibility of the company’s technology will be
      greatly improved.  We believe that such credibility, if realized,
      should provide a business basis for an initial public offering of the Company’s
      common stock to raise the approximately $90 to $100 million required to support
      a modest Skycar production rate of 2 vehicles per day by the end of year 2010.
      Depending upon the advice of financial consultants we expect to engage, it
      may
      be necessary to seek the required capital in two or more stages and from both
      public and private sources. However, there can be no assurance that we will
      be
      able to raise the required capital for such limited production.





-24-


If
      translational flight capability is delayed or prevented for any reason, we
      may
      be unable to raise sufficient capital to support future development or
      production. In that event, the Company may be unable to continue its
      operations.







*RISK
      FACTORS*





Business
      Viability





We
      are
      still in the process of developing our products, and have yet to produce any
      meaningful level of sales or any profits from these products. There is no clear
      basis for judging our viability as a business enterprise, or our management’s
      ability to develop the company to profitability.




Limited
      Experience





Our
      management has limited experience in aircraft manufacturing.  While
      our management has considerable general business and management experience,
      and
      some specialized knowledge and experience in the in the aircraft industry,
      none
      of our current management has significant experience managing a business that
      manufactures and markets aircraft. Accordingly, our success will depend in
      large
      part on our ability to recruit or to contract individuals with specialized
      skills and knowledge relating to aircraft manufacturing and marketing without
      adversely impacting the overall budget for employee compensation. There is
      no
      assurance that we will be successful in retaining such specialists.




Need
      for
      Additional Capital





We
      will
      have to raise substantial amounts of capital before we can produce meaningful
      revenues from sales of our products with no assurance as to when or at what
      level revenues will commence. We estimate that we will need about $26 million
      to
      demonstrate a fully-functional, pre-production prototype Skycar, and an
      additional $40 - $90 million to complete FAA certification and begin initial
      production of certified aircraft. Should we be unsuccessful in raising the
      needed capital, we may never develop into a viable business enterprise. At
      this
      time, we have no specific arrangements with any underwriters for the placement
      of our shares, nor any binding commitments from any person to invest in the
      Company.





-25-





Dilution
      of Share Value





We
      will
      likely sell shares of our stock to raise capital needed to fund future
      operations. Any such sales will have the effect of reducing the proportionate
      ownership of existing shareholders.




Impact
      of
      Emerging Technologies





Evolving
      technologies may force us to alter or even abandon our product designs, or
      may
      render our proprietary technologies obsolete or
      non-competitive.  Although we believe strongly in the existence of a
      substantial market for our products, new technologies are being developed and
      deployed at a rapid rate.  It is possible that as time goes on,
      technological advances in such areas as power plants, propulsion systems,
      airframe materials, manufacturing systems, and perhaps others, will require
      us
      to make costly changes in our strategy or additional investments in equipment
      and in research and development in order to become or remain
      competitive.




Impact
      of
      Potential Product Liability Claims





The
      Company may expend an inordinate amount of its resources in litigating product
      liability claims.  Historically, manufacturers of aircraft have been
      held by the courts to be liable for injuries suffered by crewmembers,
      passengers, and others where some design deficiency or manufacturing defect
      was
      found to have contributed to the injury. Although we intend to take all
      reasonable precautions in the design and manufacture of our products to ensure
      that they can be operated safely and without undue risk to life, health, or
      property, and we intend to purchase insurance against potential product
      liability claims, it is nevertheless possible that our operations could be
      adversely affected by the costs and disruptions of answering such
      claims.




Impacts
      related to Sarbanes-Oxley Act of 2002





We
      may be
      exposed to potential risks relating to our disclosure controls including our
      internal controls over financial reporting and our ability to have those
      controls attested to by our independent registered public accounting firm.
      Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404") requires public
      companies to include a report of management on the company's internal controls
      over financial reporting in their annual reports, including Form 10-KSB. In
      addition, the independent registered public accounting firm auditing a company’s
      financial statements must also attest to and report on management's assessment
      of the effectiveness of the company's internal controls over financial reporting
      as well as the operating effectiveness of the company’s internal
      controls.





We
      will be
      required to evaluate our internal control systems in order to allow our
      management to report on, and our independent auditors attest to, our internal
      controls, as a required part of our Annual Report on Form 10-KSB beginning
      with
      our report for the fiscal year ending June 30, 2007. While we expect to expend
      significant resources over the next year in developing the necessary
      documentation and testing procedures required by SOX 404, there is a risk that
      we will not comply with all of the requirements imposed thereby. At present,
      there is no precedent available with which to measure compliance adequacy.
      Accordingly, there can be no positive assurance that we will receive a positive
      attestation from our independent auditors.




-26-




In
      the event we identify significant deficiencies or material
      weaknesses in our internal controls that we cannot correct in a timely manner
      or
      we are unable to receive a positive attestation from our independent auditors
      with respect to our internal controls, investors and others may lose confidence
      in the reliability of our financial statements and our ability to obtain equity
      or debt financing could suffer.





In
      addition to the above, in the event that our independent auditors are unable
      to
      rely on our internal controls in connection with their audit of our financial
      statements, and in the further event that they are able to unable to devise
      alternative procedures in order to satisfy themselves as to the material
      accuracy of our financial statements and related disclosures, it is possible
      that we would receive a qualified or adverse audit opinion on those financial
      statements and investors and others may lose confidence in the reliability
      of
      our financial statements and our ability to obtain equity or debt financing
      could suffer.




Item
      2. DESCRIPTION OF PROPERTY





We
      currently lease and occupy a 34,500 square foot building located in Davis,
      California, which is owned by Dr. Paul S. Moller, the majority shareholder
      of
      Moller International. (see Note I to the financial statements)




Item
      3. LEGAL PROCEEDINGS





**Houlihan
      v. Moller International, Inc., et al.**





Moller
      International, Inc. was sued in January 2004. The lawsuit alleged that the
      defendants violated certain federal and state securities laws and failed to
      disclose pertinent information at the time the plaintiff purchased his shares
      of
      common stock.  The plaintiff alleged damages of $490,000 plus
      interest. The case was settled November 2006 and expensed during the quarter
      ended December 31, 2006.





**J.F.
      Wilson & Associates Ltd. v. Estate of Percy Symens, et
      al.**





Moller
      International is named as a defendant in this lawsuit pending in Yolo County,
      California Superior Court. The complaint, filed in April 2005, alleges that
      MI
      unlawfully discharged solvents into the environment while doing business at
      203
      J Street and 920 Third Street in Davis, California during 1968 to
      1980.  The complaint seeks injunctive relief and damages of an
      unspecified amount.  The Company's Answer, which denies the
      allegations in the complaint, was filed in June of 2005, and initial discovery
      commenced in August of 2005.  The case has not been set for
      trial.





In
      a
      related administrative proceeding initiated on September 26, 2006, the
      California Central Valley Regional Water Quality Control Board (RWQCB) issued
      a
      draft Cleanup and Abatement Order (CAO) in connection with the property at
      920
      Third Street.  MI was named as one of the responsible parties in the
      draft CAO, and intends to challenge the characterization of MI as a discharger
      of environmental contaminants, while also complying with the orders of the
      RWQCB.  MI and other parties have submitted comments, and the RWQCB
      has indicated that it will issue a final CAO within the next several
      months.  In conjunction with finalizing the CAO, it is expected that a
      schedule will be established by the parties subject to the CAO, and approved
      by
      the RWQCB, for preparation, submission and implementation of a workplan for
      investigating and characterizing soil and groundwater contamination at this
      property.




-27-




MI
      fileda Joint Case Management Conference Statement with the court
      for the Case Management Conference (CMC) held on September 10,
      2007.  At the CMC, counsel updated the court on the status f the Water
      Board actions at 203 J Street and 920 Third Street.  Counsel also
      jointly suggested to the court (as was done at the CMC on January 25, 2007)
      that
      it would make the best use of the parties’ resources and the court’s resources
      to continue to focus on the site investigations rather than on formal discovery,
      motions or other activities that involve significant litigation transaction
      costs without increasing understanding of site conditions or moving the matter
      significantly forward to resolution.  The court agreed with this
      approach, and set another CMC for June 23, 2008.  In the meantime, the
      court expects that the parties will proceed with the site investigations at
      920
      Third Street and 203 J Street.





At
      June
      30, 2006, MI estimated it’s probable loss at this time to be in the range of
      $200,000 to $1,000,000.  MI has accrued its minimal estimated cleanup
      obligation of $200,000.  There was no change during the year ended
      June 30, 2007 to cause us to revise our estimates.  It is reasonably
      possible that these estimates may be revised in the near term as the site
      investigation and other research and analysis proceeds.








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





During
      the
      2006 Annual Shareholders meeting held on 21 October 2006, the following
      individuals were elected to the MI Board of Directors by unanimous vote of
      shareholders present:  Paul S. Moller, Faulkner White, Umesh Khimji,
      Jim Toreson, and Mike Shanley.





-28-


PARTII





Item
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS





Moller
      International common stock is being publicly traded on the OTC-BB stock market.
      According to NASDAQ Financial data, the average adjusted closing price has
      ranged from a low of $0.29 to a high of $1.25 per share during this reporting
      period with a trading volume of 30,557 shares per trading day (as of 19
      September 2007).





The
      following table is a summary of Moller International stock performance by
      calendar quarter since being listed by the OTC market in August
      2002.





High
            
            
            Low2002-Q3
                (28 Aug to 30 Sep 2002)
            
            $
            7.50
            
            
            $
            4.152002-Q4
                (1 Oct 2002 to 31 Dec, 2002)
            
            $
            6.50
            
            
            $
            2.002003-Q1
                (1 Jan 2003 to 31 Mar 2003)
            
            $
            2.20
            
            
            $
            0.702003-Q2
                (1 Apr 2003 to 27 Jun 2003)
            
            $
            1.00
            
            
            $
            0.342003-Q3
                (1 Jul 2003 to 30 Sep 2003)
            
            $
            0.90
            
            
            $
            0.502003-Q4
                (1 Oct 2003 to 30 Dec 2003)
            
            $
            2.30
            
            
            $
            0.652004-Q1
                (1 Jan 2004 to 31 Mar 2004)
            
            $
            1.50
            
            
            $
            0.952004-Q2
                (1 Apr 2004 to 30 Jun 2004)
            
            $
            1.45
            
            
            $
            1.302004-Q3
                (1 July 2004 to 30 Sep 2004)
            
            $
            2.12
            
            
            $
            0.952004-Q4
                (1 Oct 2004 to 31 Dec 2004)
            
            $
            1.50
            
            
            $
            1.252005-Q1
                (1 Jan 2005 to 31 Mar 2005)
            
            $
            1.30
            
            
            $
            0.782005-Q2
                (1 Apr 2005 to 30 Jun 2005)
            
            $
            1.20
            
            
            $
            0.822005-Q3
                (1 July 2005 to 30 Sep 2005)
            
            $
            1.15
            
            
            $
            0.932005-Q4
                (1 Oct 2005 to 30 Dec 2005)
            
            $
            1.40
            
            
            $
            0.602006-Q1
                (1 Jan 2006 to 31 Mar 2006)
            
            $
            1.01
            
            
            $
            0.752006-Q2
                (1 Apr 2006 to 30 Jun 2006)
            
            $
            1.00
            
            
            $
            0.532006-Q3
              (1 Jul 2006 to 30 Sep 2006)
            
            $
            0.75
            
            
            $
            0.382006-Q4
              (1 Oct 2006 to 31 Dec 2006)
            
            $
            0.65
            
            
            $
            0.322007-Q1
              (1 Jan 2007 to 31 Mar 2007)
            
            $
            0.48
            
            
            $
            0.312007-Q2
              (1 Apr 2007 to 30 Jun 2007)
            
            $
            1.01
            
            
            $
            0.37





Shareholders
      of Record


As
      of
      September 18, 2007 there are 625 shareholders of record for common shares of
      Moller International.





Dividends





The
      holders of our common stock have equal ratable rights to dividends from funds
      legally available for dividend payments when, as and if declared by the Board
      of
      Directors of the Company.





To
      date we
      have not paid or declared any dividends and we have no intention of declaring
      or
      paying any dividends in the foreseeable future.





If
      we
      decide to pay dividends, that decision will be made by our Board of Directors,
      which will likely consider, among other things, our earnings, our capital
      requirements and our financial condition, as well as other relevant
      factors.  Our Board of Directors may declare and pay dividends to the
      Company's shareholders in the form of bonus shares.  The shareholders
      would receive bonus shares in lieu of cash dividends, if any, declared and
      paid
      by the Company.





-29-





Item
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS





Year
      Ended
      June 30, 2007





Moller
      International continues its research and development activities on the Skycar
      project with the objective of improving flight duration and range of the
      aircraft. These efforts are an extension of successful flights throughout the
      previous years and extensive ongoing engine tests, which we believe, will result
      in incremental improvements to the existing prototype, future prototypes and/or
      production aircraft, should we continue to operate. In addition, the Company
      continued its efforts to help Freedom Motors promote the Rotapower engine and
      assisted in discussions that resulted in Freedom Motor receiving two contracts
      for engine sales and development. Staffing levels decreased slightly as the
      company continues to reduce labor costs in an effort to conserve available
      operating funds.  Management was successful in keeping Administrative
      salaries and wages significantly below the prior year’s
      level.  Seeking additional funding remains a top priority for the
      company. The Company is in the initial stages of low-volume production for
      variations of its M200X, an earlier prototype volantor.  Although
      there is no assurance that this vehicle will meet with success in the market
      place, the Company is actively seeking support for the program and, if found,
      may choose to move more rapidly into the production of these
      vehicles.








Fiscal
      2007 compared to 2006





Results
      of
      operations for the 2007 fiscal year varied significantly from 2006. We incurred
      net losses of $2,676,261 and $6,902,166 in fiscal 2007 and 2006
      respectively.





Consolidated
          loss per share was $.06 and $.15 for the 2007 and 2006 fiscal years,
          respectively. We generated no significant amount of revenue in either fiscal
          year. We are currently using cash to fund operations at an approximate
          rate of
          $117,000 per month, net of engineering revenue received, with the significant
          non-cash charges being depreciation and amortization of approximately $30,000
          per year, the deferral of certain executive salaries at an annual rate
          of
          $250,000, the deferral of building rent of $496,800 per year and the recognition
          of compensation expense related to the fair market value of stock issued
          for
          services and stock options granted to our employees of $178,106 in fiscal
          2007.
 
 Cash
          salaries and wages, including benefits, remained relatively constant,
          representing 28% and 11% of total expenses for the 2007 and 2006 fiscal
          years,
          respectively.  With the company continuing to conserve cash on hand,
          some employees voluntarily consented to defer pay, resulting in a total
          of $
          141,458 of accumulated short-term deferred payroll excluding accrued interest
          as
          of June 30, 2007.  Interest expense decreased by $85,321 over the
          prior year primarily as a result of the accrual of interest on our loans
          from
          Milk Farm Associates and from Dr. Moller.  Milk Farm is a related
          entity because Dr. Moller is the general partner in Milk Farm and has a
          32%
          ownership interest.  The loan from Milk Farm is unsecured. It is due
          on demand and accrues interest at 7%.  At the fiscal year-end 2006,
          the outstanding principal amount was $1,783,472.  Loans from Dr.
          Moller are also unsecured and carry a 10% annual interest rate.  At
          June 30, 2007, the outstanding principal amount was
          $2,574,804.


-30-


As
      of June
      30, 2007, Dr. Moller had a balance of $375,000 in deferred wages along with
      accrued interest.





Revenues
      increased by $8,475 in 2007.  Contract revenues from our affiliated
      entity, Freedom Motors increased $61,126.  Miscellaneous revenues
      decreased by $52,651 due to reduced speaking engagements and, display and rental
      fees. These increases are not indicative of any meaningful revenue
      trends.





Going
      Concern





MI
      has a
      net loss of $2,676,261 for fiscal 2007 and has an equity deficit of $9,252,494
      MI currently has no revenue-producing products and is continuing its development
      of products in both the Skycar and Rotary engine programs.  Successful
      completion of product development activities for either or both of these
      programs will require significant additional sources of
      capital.  Continuation as a going concern is dependent upon the
      Company’s ability to obtain additional financing sufficient to complete product
      development activities and provide working capital to fund the manufacture
      and
      sale of MI’s products. These factors raise substantial doubt as to MI’s ability
      to continue as a going concern.





Management
      is currently pursuing additional sources of capital in quantities sufficient
      to
      fund product development and manufacturing and sales activities.





The
      majority shareholder of MI is providing funds received from the refinance of
      both real property owned by him personally and real property owned by a limited
      partnership of which he is the general partner, in the form of short-term,
      interest-bearing demand loans to MI.  As of June 30, 2007, a total of
      $2,574,804 has been loaned to MI from these transactions. In addition, he has
      deferred payment of current year building rent owed by MI of approximately
      $342,200.  The total deferred rent owing to Dr. Moller at June 30,
      2007 is $1,529,109.





There
      can
      be no assurance that this majority shareholder will continue to have the ability
      to continue to make such short-term loans to MI in the future.  Dr.
      Moller is under no legal obligation to provide additional loans to the
      company.  In the event that he cannot continue to make such loans, or
      that MI does not receive funds from other sources, MI may be unable to continue
      to operate as a going concern.





There
      is
      no assurance that the funds generated from these activities or other sources
      will be sufficient to provide MI with the capital needed to continue as a going
      concern.  The financial statements do not include any adjustments that
      might result from the outcome of these uncertainties.





CRITICAL
      ACCOUNTING POLICIES





Our
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principals generally accepted in the United States. The preparation
      of these financial statements requires us to make estimates and judgments that
      affect the reported amounts of assets, liabilities, revenues and expenses,
      and
      related disclosure of any contingent assets and liabilities. On an on-going
      basis, we evaluate our estimates. We base our estimates on various assumptions
      that we believe to be reasonable under the circumstances, the results of which
      form the basis for making judgments about 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.





-31-


We
      believe
      the following critical accounting policies affect our more significant judgments
      and estimates used in the preparation of our financial statements:




Revenue
      Recognition




We
      recognize revenue based on the four principles established in GAAP. Those
      principles state that revenue generally is realized or realizable and earned
      when all of the following criteria are met:




1.
      Persuasive evidence of an arrangement exists,




2.
      Delivery has occurred or services have been rendered,




3.
      The
      seller's price to the buyer is fixed or determinable, and,




4.
      Collectibility is reasonably assured.





Revenue
      generated from our former subsidiary, Freedom Motors, under the Technology
      agreement is only recognized to the extent amounts are collected.




Stock
      Based Compensation





In
      December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No.
      123R establishes standards for the accounting for transactions in which an
      entity exchanges its equity instruments for goods or services. This Statement
      focuses primarily on accounting for transactions in which and entity obtains
      employee services in share-based payment transactions. SFAS No. 123R requires
      that the fair value of such equity instruments be recognized as expense in
      the
      historical financial statements as services are performed. Prior to SFAS No.
      123R, only certain pro forma disclosures of fair value were required. We adopted
      SFAS No. 123R on January 1, 2006 the impact of the adoption of this new
      accounting pronouncement is included in the footnotes to the financial
      statements.





-32-





Item
      7. FINANCIAL STATEMENTS




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Shareholders of


Moller
      International, Inc.


Davis,
      California





We
      have
      audited the accompanying consolidated balance sheet of Moller International,
      Inc. as of June 30,2007, and the related consolidated statementsof operations,
      stockholders' deficit, and cash flows for the years ended June 30,2007 and 2006.
      These consolidated financialstatements are the responsibility of theCompany's management.
      Our
      responsibility is to express an opinion on theseconsolidated financial
      statements based on our audits.





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





In
      our
      opinion, the financial statements referred to above present fairly, inall material respects,
      the
      financial position of Moller International, Inc. asof June 30, 2007, and
      the
      results of operations and cash flows for the yearsended
      June 30, 2007 and 2006, inconformity with accounting principles generally acceptedin the United
      States of
      America.





The
      accompanying financial statements have been prepared assuming that MollerInternational, Inc. will
      continue as a going concern. As discussed in Note B tothe financial statements,
      Moller International, Inc. suffered recurring lossesfrom operations and has
      a
      working capital deficiency, which raises substantialdoubt about its ability
      to
      continue as a going concern. Management's plansregarding those matters
      also are described in Note B. The financial statementsdo not include any
      adjustments that might result from
      the outcome ofthis uncertainty.





MALONE
      & BAILEY, PC


www.malone-bailey.com


Houston,
      Texas


September
      27, 2007





-33-


**MOLLER
                    INTERNATIONAL, INC.****CONSOLIDATED
                    BALANCE SHEET****June
                    30, 2007*****ASSETS***CURRENT
                    ASSETSCash
                
                $
                5,715Accounts
                    receivable, employees
                
                
                42,513Total
                    current assets
                
                $
                48,228PROPERTY
                    AND EQUIPMENT, net of accumulated depreciation
                
                $
                11,863OTHER
                    ASSETSPatent
                    costs
                
                $
                72,529Advance
                    to Freedom Motors
                
                
                23,957Workers'
                    compensation deposit
                
                
                1,059Total
                    other assets
                
                $
                97,545$
                157,636***LIABILITIES
                    AND DEFICIT IN STOCKHOLDERS' DEFICIT***CURRENT
                    LIABILITIESAccounts
                    payable, trade
                
                $
                349,192Accrued
                    liabilities
                
                
                408,716Accrued
                    liabilities-related parties
                
                
                288,626Accrued
                    liabilities-majority shareholder
                
                
                2,108,357Notes
                    payable-other
                
                
                532,968Note
                    payable - majority shareholder
                
                
                2,574,804Notes
                    payable - minority shareholders
                
                
                318,730Notes
                    payable - related parties
                
                
                1,783,472Deferred
                    wages - employees
                
                
                173,080Customer
                    deposits
                
                
                409,767Total
                    current liabilities
                
                $
                8,947,712LONG
                    TERM LIABILITIESDeferred
                    wages and interest-majority shareholder
                
                $
                462,418Total
                    long term liabilities
                
                $
                462,418Total
                    liabilities
                
                $
                9,410,130STOCKHOLDERS'
                    DEFICITCommon
                    stock, authorized, 150,000,000 shares, no par value,
                    issuedand
                    outstanding, 45,725,979 shares at June 30, 2007
                
                $
                31,233,662Accumulated
                    deficit
                
                
                (40,486,156
                )Total
                    stockholders' deficit
                
                $
                (9,252,494
                )$
                157,636
 See
          summary of significant accounting policies and notes to financial
          statements
  
 -34-


**MOLLER
                INTERNATIONAL, INC.****CONSOLIDATED
                STATEMENTS OF OPERATIONS****Year
                Ended June 30,:****2007**
            
            
            **2006**INCOMERevenues
            
            $
            73,726
            
            
            $
            12,600Miscellaneous
            
            
            8,573
            
            
            
            61,224Total
                income
            
            $
            82,299
            
            
            $
            73,824EXPENSESAdministrative
                salaries and wages
            
            $
            691,136
            
            
            $
            3,877,003Building
                expenses
            
            
            50,537
            
            
            
            45,541Depreciation
                expense
            
            
            1,545
            
            
            
            11,878Direct
                project expenses
            
            
            251,540
            
            
            
            274,866Employee
                benefits and payroll taxes
            
            
            139,949
            
            
            
            125,843Legal,
                accounting, and professional fees
            
            
            186,452
            
            
            
            319,279Office
                supplies and expense
            
            
            152,318
            
            
            
            30,354Other
                expenses
            
            
            53,878
            
            
            
            (26,259
            )Patent
                expense
            
            
            8,815
            
            
            
            -Settlement
                expenses
            
            
            225,714
            
            
            
            -Bad
                Debt Expense
            
            
            -
            
            
            
            1,241,692Rent
                expense to majority shareholder
            
            
            532,743
            
            
            
            526,539Total
                expenses
            
            $
            2,294,627
            
            
            $
            6,426,736Loss
                from operations
            
            $
            (2,212,328
            )
            
            $
            (6,352,912
            )OTHER
                EXPENSEInterest
            
            $
            463,933
            
            
            $
            549,254Total
                other expense
            
            
            463,933
            
            
            
            549,254NET
                LOSS
            
            $
            (2,676,261
            )
            
            $
            (6,902,166
            )Loss
                per common share, basic and diluted
            
            $
            (0.06
            )
            
            $
            (0.15
            )Basic
                and Diluted Weighted average common shares outstanding
            
            $
            45,634,698
            
            
            $
            45,204,585




-35-





See
      summary of significant accounting
      policies**and
      notes to financial
      statements


**MOLLER
                INTERNATIONAL, INC.****CONSOLIDATED
                STATEMENT OF STOCKHOLDERS' DEFICIT****FOR
                THE YEARS ENDED JUNE 30, 2007 AND 2006**Common
                Stock
            
            
            Accumulated
            
            
            Related
                PartyShares
            
            
            Amount
            
            
            Deficit
            
            
            Receivable
            
            
            Total**Balances
                at June 30, 2005**
            
            
            44,650,281
            
            
            $
            25,422,447
            
            
            $
            (30,907,729
            )
            
            $
            (1,256,048
            )
            
            $
            (6,741,330
            )Shares
                issued for services
            
            
            291,251
            
            
            
            269,542
            
            
            
            
            
            
            
            
            
            
            
            269,542Shares
                issued for deferred compensation
            
            
            315,532
            
            
            
            320,842
            
            
            
            
            
            
            
            
            
            
            
            320,842Shares
                issued for settlement of debt
            
            
            269,757
            
            
            
            285,942
            
            
            
            
            
            
            
            
            
            
            
            285,942Decrease
                in receivable from related party
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            14,356
            
            
            
            14,356Fair
                value of employee stock options
            
            
            
            
            
            
            205,928
            
            
            
            
            
            
            
            
            
            
            
            205,928Fair
                value of executive stock options
            
            
            
            
            
            
            3,034,172
            
            
            
            
            
            
            
            
            
            
            
            3,034,172Write
                off balance due from affiliate
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,241,692
            
            
            
            1,241,692Net
                loss For the Year
            
            
            
            
            
            
            
            
            
            
            (6,902,166
            )
            
            
            
            
            
            
            (6,902,166
            )**Balances
                at June 30, 2006**
            
            
            45,526,821
            
            
            $
            29,538,873
            
            
            $
            (37,809,895
            )
            
            $
            -
            
            
            $
            (8,271,022
            )Shares
                issued for services
            
            
            197,344
            
            
            
            85,070
            
            
            
            
            
            
            
            
            
            
            
            85,070Fair
                value of employee stock options
            
            
            
            
            
            
            178,106
            
            
            
            
            
            
            
            
            
            
            
            178,106Fair
                value of executive stock options
            
            
            
            
            
            
            4,601
            
            
            
            
            
            
            
            
            
            
            
            4,601Debt
                forgiveness
            
            
            
            
            
            
            1,449,248
            
            
            
            
            
            
            
            
            
            
            
            1,449,248Canceled
                shares
            
            
            (3,186
            )
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -Exercise
                of stock options
            
            
            5,000
            
            
            
            2,050
            
            
            
            
            
            
            
            
            
            
            
            2,050Repurchase
                of shares
            
            
            
            
            
            
            (24,286
            )
            
            
            
            
            
            
            
            
            
            
            (24,286
            )Net
                Loss For the Year
            
            
            
            
            
            
            
            
            
            
            (2,676,261
            )
            
            
            
            
            
            
            (2,676,261
            )**Balance
                at June 30, 2007**
            
            
            45,725,979
            
            
            $
            31,233,662
            
            
            $
            (40,486,156
            )
            
            $
            -
            
            
            $
            (9,252,494
            )





See
      summary of significant accounting
      policiesand notes to
      financial statements








-36-




**MOLLER
                  INTERNATIONAL, INC.****CONSOLIDATED
                  STATEMENT OF CASH FLOWS****FOR
                  THE YEARS ENDING JUNE 30, 2007 AND 2006**2007
              
              
              2006Cash
                  Flows From Operating ActivitiesNet
                  loss
              
              $
              (2,676,261
              )
              
              $
              (6,902,166
              )Adjustments
                  to Reconcile Net Lossto
                  Net Cash Used:Depreciation
                  expense
              
              
              1,545
              
              
              
              11,878Stock
                  based compensation
              
              
              267,777
              
              
              
              3,509,642Bad
                  debt expense
              
              
              -
              
              
              
              1,241,692Change
                  in assets and liabilities:Accounts
                  receivable
              
              
              37,432
              
              
              
              22,885Accounts
                  payable
              
              
              79,017
              
              
              
              112,660Accrued
                  liabilities
              
              
              665,791
              
              
              
              728,027Customer
                  deposits
              
              
              (32,500
              )
              
              
              (5,374
              )Other
                  assets
              
              
              (25,016
              )Deferred
                  wages and accruedinterest-majority
                  shareholder
              
              $
              270,679
              
              
              
              432,126Due
                  from affiliate
              
              
              
              
              
              
              14,356Net
                  Cash Used in Operating Activities
              
              $
              (1,411,536
              )
              
              $
              (834,274
              )Cash
                  Used in Investing ActivitiesPurchase
                  of equipment
              
              
              (2,222
              )
              
              
              -Purchase
                  of other assets
              
              
              (20,981
              )
              
              
              (51,548
              )Net
                  Cash Used in investing Activities
              
              $
              (23,203
              )
              
              $
              (51,548
              )Cash
                  Flows Provided from Financing ActivitiesExercise
                  of stock options
              
              
              2,050
              
              
              
              -Borrowing
                  from related party debt
              
              
              1,809,007
              
              
              
              1,228,139Payments
                  related party note payable
              
              
              (135,033
              )
              
              
              -Payment
                  on accrued settlement
              
              
              (225,000
              )
              
              
              -Principal
                  payments on long term debt
              
              
              (12,000
              )
              
              
              (367,899
              )Net
                  Cash Provided from Financing Activities
              
              $
              1,439,024
              
              
              $
              860,240Net
                  Increase (Decrease) In Cash
              
              $
              4,284
              
              
              $
              (25,582
              )Cash
                  Balance at Beginning of Period
              
              $
              5,715
              
              
              $
              1,431Cash
                  Balance at End of Period
              
              $
              1,431
              
              
              $
              27,013Schedule
                  of Non-cash Operating and Financing Activities:Shares
                  issued for accrued liabilities
              
              $
              -
              
              
              $
              320,842Shares
                  issued for notes payable- majority shareholder
              
              $
              -
              
              
              $
              285,942Debt
                  forgiveness contributed capital
              
              $
              1,449,248
              
              
              $
              -Market
                  value of shares to be repurchased under settlement
              
              $
              24,286
              
              
              $
              -Cash
                  Paid During the Period for:Interest
              
              $
              58,137
              
              
              $
              123,870Income
                  tax
              
              $
              -
              
              
              $
              -


See
      summary of significant accounting policies and notes to financial
      statements




-37-




**MOLLER
      INTERNATIONAL, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**








**NOTE
      A – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES**





MI
      has
      historically entered into several lines of revenue-producing business activities
      including the design and development of rotary engines, remotely controlled
      flying vehicles, automotive mufflers and vertical takeoff and landing aircraft.
      MI has for the past fifteen years devoted most of its efforts to the design
      and
      development of a Vertical Takeoff and Landing (VTOL) vehicle known as the
      Skycar.  The Skycar program is still in the development stage at this
      point.





Moller
      International Inc., (MI) consolidates the accounts of its wholly owned, inactive
      subsidiaries, Aerobotics Inc. (AI)and Moller Corporation (MC). All intercompany
      transactions and balances have been eliminated.





Dr.
      Paul
      S. Moller the majority shareholder of MI.





**Cash
      and Cash Equivalents**





MI
      considers all highly liquid debt instruments with an initial maturity date
      of 90
      days or less to be cash equivalents.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenditures/expenses during the reporting
      periods.  Actual results could differ from those
      estimates.




**Loss
      Per Share (LPS)**





Basic
      LPS
      excludes dilution and is computed by dividing the loss attributable to common
      stockholders by the weighted average number of common shares outstanding for
      the
      period.  Diluted LPS reflects the potential dilution that could occur
      if securities or other contracts to issue common stock were exercised or
      converted into common stock or resulted in the issuance of common stock that
      shared in the earnings of the entity. Diluted LPS is the same as basic LPS
      for
      all periods presented because all potentially dilutive securities have an
      anti-dilutive effect on LPS due to the net losses incurred.  At June
      30, 2007, the total number of shares of common stock relating to outstanding
      stock options and other potentially dilutive securities that have been excluded
      from the LPS calculation because their effect would be anti-dilutive
      approximated 13,227,589
      shares.





**Property
      and Equipment**





Property
      and Equipment is recorded at cost and is depreciated over its estimated service
      life on a straight-line basis.  Estimated service lives range from
      five to fifteen years.





-38-





June
                30, 2007Production
                and R&D Equipment
            
            $
            393,158Computer
                equipment and software
            
            
            420,099Furniture
                and fixtures
            
            
            75,650888,907Less
                accumulated depreciation
            
            
            (877,044
            )$
            11,863




**Revenue
      Recognition**




MI
      recognizes revenue when persuasive evidence of an arrangement exists, services
      have been rendered, the sales price is fixed or determinable, and collectibility
      is reasonably assured




In
      the
      case of MI’s recognition of revenue from engineering services provided to
      Freedom Motors, an affiliated entity and former subsidiary, which shares common
      ownership with some of the existing shareholders of MI, the arrangement is
      the
      Technology Development and License Agreement entered into between Freedom Motors
      and Moller International in 1998 (previously filed as Exhibit 10 to the
      Company's Form 10-SB, filed on EDGAR September 21, 2001).  Under this
      agreement, Moller International committed to providing engineering services,
      as
      deemed reasonable, to perform scientific and engineering technical support
      for
      the rotary engine. The support is generally in the form of labor using the
      expertise of MI’s employees, and temporary use of a portion of MI’s facilities
      or equipment.





Delivery
      is considered complete when a specific defined task or milestone is completed,
      as demonstrated by the issuance of engineering documents (procedures, drawings,
      models, prototypes, etc.) and provided to Freedom Motors or its
      assigns.  The date the information or material is provided to Freedom
      Motors is considered the delivery date.




The
      final
      criterion, Collectibility, is determined by Freedom Motors’ ability and
      willingness to pay its debts. Since Freedom Motors is itself a startup company,
      it has not been in a position to pay until it acquired contracts and received
      revenue from those contracts.  When Freedom Motors received revenue
      during this reporting period, they notified Moller International and stated
      their intent to pay a portion of fees accumulated for services
      rendered.  When the payment for services is received by Moller
      International, then management recognizes and records revenue that is equal
      to
      the fees received.





Miscellaneous
      revenue derived from the sale of t-shirts, model cars, information packets
      and
      other items is recognized at the time of sale.  Additional contract
      revenues are generated from the leasing of a full-scale Skycar model for various
      exhibitions.  Revenue from the leasing of the Skycar model is
      recognized over the term of the contract
      period.  Miscellaneous  and leasing revenues are considered
      to be insignificant and not critical to the goal of achieving profitable
      operations.





-39-


The
      company performs contract services for its former subsidiary, Freedom Motors
      (FM).  In accordance with the Technology Development and License
      Agreement between MI and FM dated October 28, 1999, MI provides FM the personnel
      and facilities as required to adapt its Rotapower engine to applications where
      the potential exists for high volume production.  MI also handles FM's
      bookkeeping and other administrative functions.    From the
      date of the spin-off, April 1, 2001, forward, due to the uncertainty of FM’s
      ability to pay amounts owed, MI does not recognize any revenue related to these
      transactions with until it receives payment from FM. Accumulated billings to
      FM
      for the period from April 1, 2001 to June 30, 2006 totaled
      $5,973,869.  For the year ended June 30, 2007, contract services
      billed to FM totaled $1,348,330, resulting in accumulated billings of
      $6,458,044.  The amounts of these billings have been fully
      reserved.





For
      the
      year ended June 30, 2007, FM remitted a total of $73,726 in payments to MI,
      which has been recognized as contract revenues in the statement of operations
      for the year ended June 30, 2007.  In addition, in prior years, FM had
      remitted a total of $943,917 in payments to MI.  Those amounts had
      been previously classified as a reduction in the A/R from affiliate receivable
      between the two companies.





**Research
      and Development Costs**





All
      research and development costs are expensed as incurred.





**NOTE
      B – GOING CONCERN**





MI
      has a
      net loss of $2,676,261 for fiscal 2007 and has an accumulated
      deficit.  MI currently has no revenue-producing products and is
      continuing its development of products in both the Skycar and Rotary engine
      programs.  Successful completion of product development activities for
      either or both of these programs will require significant additional sources
      of
      capital.  Continuation as a going concern is dependent upon the
      Company’s ability to obtain additional financing sufficient to complete product
      development activities and provide working capital to fund the manufacture
      and
      sale of MI’s products. These factors raise substantial doubt as to MI’s ability
      to continue as a going concern.





Management
      is currently pursuing additional sources of capital in quantities sufficient
      to
      fund product development and manufacturing and sales activities.





The
      majority shareholder of MI is providing funds received from the refinance of
      both real property owned by him personally and real property owned by a limited
      partnership of which he is the general partner, in the form of short-term,
      interest-bearing demand loans to MI.  As of June 30, 2007, a total of
      $2,574,804 has been loaned to MI from these transactions. In addition, he has
      deferred payment of current year building rent owed by MI of approximately
      $342,200.  The total deferred rent owing to Dr. Moller at June 30,
      2007 is $1,529,109.





There
      can
      be no assurance that this majority shareholder will continue to have the ability
      to continue to make such short-term loans to MI in the future.  Dr.
      Moller is under no legal obligation to provide additional loans to the
      company.  In the event that he cannot continue to make such loans, or
      that MI does not receive funds from other sources, MI may be unable to continue
      to operate as a going concern.




-40-




There
      is
      no assurance that the funds generated from these activities or other sources
      will be sufficient to provide MI with the capital needed to continue as a going
      concern.  The financial statements do not include any adjustments that
      might result from the outcome of these uncertainties.




**NOTE
      C - Stock-Based Compensation**




Effective
      January 1, 2006, MI adopted Statement of Financial Accounting Standard No.
      123(R) and applied the provisions of the Securities and Exchange Commission
      Staff Accounting Bulletin No. 107 using the modified – prospective transition
      method.  During the year ended June 30, 2007, MI issued 189,577
      options to employees with contract terms ranging from one to two years and
      exercise prices ranging from $0.35 to $1.00 and 20,000 options to board
      members.  Compensation expense of $45,511 was recognized during the
      year ended June 30, 2007 as these options immediately vested during
      2007.  There was no unamortized amount at June 30, 2007.





The
      compensation cost was recognized for the fair value of the stock options
      granted, which was estimated using the Black Scholes method, based on
      assumptions including (1) risk-free interest rates ranging from 4.80% to 4.97%,
      (2) an estimated expected term approximately one year based on the “plain
      vanilla” method allowed under SAB 107 and SFAS 123R, (3) no dividend rate and
      (4) computed volatility rates ranging from 155.98% to 158.77% on the underlying
      stock.





During
      June 30, 2006, MI granted 3,988,914 options to employees and the majority
      shareholder with contract terms ranging from three months to ten years and
      exercise prices ranging from $0.86 to $1.03.  Of these options,
      3,194,762 were granted to the majority sharholder.  Compensation
      expense of $3,240,101 was recognized during 2006 related to these
      options.  The unamortized amount of compensation expense at June 30,
      2006 was $$411,589.


During
      June 30, 2007, amortization of these stock options totaled
      $137,196.





During
      the
      year ended June 30, 2007, MI issued 197,344 shares for services to outside
      consultants and estimated the value of these shares at the market value on
      the
      date of issuance of $85,070.





**NOTE
      D – CUSTOMER DEPOSITS**





Customer
      deposits are payments made to MI, generally at $10,000 per unit, for the purpose
      of reserving specific delivery positions for Skycars when they become available
      for sale to the public.  Deposits are refundable at any time upon
      request.




**NOTE
      E – DEFERRED WAGES**





The
      annual
      salary of the president $250,000 is being deferred until MI has reached a
      consistent level of profitability.





-41-


The
      president is aware and has expressly agreed to defer any accrued wages until
      such time that the company becomes profitable.  The President expects
      profitability of MI to be greater than a one-year time frame.  At of
      June 30, 2007, as a result of these expectations, has classified the accrued
      wages of $375,000 along with the accrued interest of $87,418 as
      non-current.





At
      of June
      30, 2007, members of management and other employees have deferred $141,459
      of
      wages along with accrued interest of $31,622.





**NOTE
      F – NOTES PAYABLE**





**MAJORITY
      SHAREHOLDER**





At
          June
          30, 2007, notes payable to the majority shareholder, Dr. Paul S. Moller,
          are
          unsecured, and due on demand. There are two separate notes, one for $2,294,004
          which bears interest at $10% per annum, and another note for $280,800 that
          is
          non-interest bearing.  During fiscal 2007, Moller loaned MI an
          additional $551,491, representing an increase in the interest bearing loan
          balance. Accrued interest on this loan aggregated $589,248 at June 30,
          2007.


**MINORITY
      SHAREHOLDER**





Notes
      payable to minority shareholders, at June 30, 2007 consisted of short-term
      borrowings, all due on demand with an interest rate of 10% per
      annum.  The aggregate balance outstanding at June 30, 2006, was
      $318,730.





**RELATED
      PARTY**





During
      the
      year ended June 30, 2007, MI repaid $50,093 in loans and borrowed an additional
      $1,186,500 had a $1,783,472 balance owed to Milk Farm and a related
      entity.  The note is unsecured and bears a 7% interest
      rate.  Accrued interest on this loan totaled $288,626 at
      June 30, 2007.





**OTHER
      NOTES - Pelican Ventures**





In
      2001,
      Pelican Ventures LLC loaned $500,000 to MI for the development of a
      diesel-powered rotary engine.  The loan carries interest at 9%, is
      secured by substantially all assets, and was originally due in
      2002.





Pelican
      canceled the agreement in June 2002 and the dispute has not been
      resolved.  MI ceased accruing interest in August 2002.




**NOTE
      G – COMMON STOCK TRANSACTIONS**





During
      the
      year ended June 30, 2007, MI issued 197,344 shares of common stock to certain
      individuals in recognition of various services provided MI recorded compensation
      expense of $85,070 based on a fair market value per share of $0.32 to $0.56,
      determined by taking the closing price for the stock at the dates the services
      were provided.




-42-


**NOTE
      H – LEASE COMMITMENT**





MI’s
      operations are housed in one 34,500 square foot building, which is leased from
      Dr. Moller.  The term of the current lease is for ten years ending
      June 30, 2013, at $41,400 per month with a provision for an adjustment in the
      monthly rent in 2008.  MI remains liable for all property taxes and
      insurance on the leased property.  The minimum rental commitment
      remaining on the leased property is $496,800 per year.





Rent
      expense charged to operations under this lease, including property taxes,
      aggregated $532,743 and $526,539 for fiscal 2007 and 2006,
      respectively.




**NOTE
      I – STOCK OPTION PLANS**




On
        January
        21, 2004, MI adopted its 2004 Stock, Option and Restricted Stock Benefit
        Plan.  The total shares available for grant under the plan aggregate
        7,500,000.
 
 Previously,
        MI had its 1991 Stock Option Plan that allowed for the granting of Non-qualified
        Stock Options to employees and consultants and Incentive Stock Options to
        employees.  The total shares available for grant under that plan were
        7,500,000.
  Compensation
        of Directors





Our
      employee directors do not receive any compensation for their services as
      directors.  Non-employee directors are entitled to standardized stock
      option grants on the first day of a directorship year which begins on the date
      of election to the board. It is pro-rated for a new director appointed after
      a
      board year has begun. Non-employee directors receive a grant of 5,000 options
      to
      purchase common stock at an exercise price equal to the closing price on the
      date of appointment.





Option
      activity for the years ended June 30, 2007 and 2006 is as follows:




WeightedRange
                  of
              
              
              
              
              
              AverageTotal
              
              
              Option
              
              
              Total
              
              
              ExerciseGranted
              
              
              Prices
              
              
              vested
              
              
              PriceBalance
                  at June 30, 2005
              
              
              
              9,085,293
              
              
              
              
              
              
              
              
              $
              1.579,060,293
              
              
              $
              1.57Granted
              
              
              
              3,988,919
              
              
              $
              0.86
                  to $1.03
              
              
              
              
              
              
              $
              0.85Exercised
              
              
              
              -Balance
                  at June 30, 2006
              
              
              
              13,074,21213,074,212Granted
              
              
              
              189,577
              
              
              $
              0.38
                  to $1.00
              
              
              
              
              
              
              $
              0.48Exercised
              
              
              
              (5,000
              )Forfeited
              
              
              
              (31,200
              )Balance
                  at June 30, 2007
              
              
              
              13,227,589Vested
                  at June 30, 2007
              
              
              
              
              
              
              
              
              
              
              
              13,227,589


-43-
 
  Additional
                      option information for the year ended June 30, 2007, is as
                      follows:WeightedAverageWeighted
                  
                  
                  Remaining
                  
                  
                  
                  
                  
                  
                  WeightedAverage
                  
                  
                  Life
                      in
                  
                  
                  
                  
                  
                  
                  AveragePrice
                      Range
                  
                  
                  Outstanding
                  
                  
                  Price
                  
                  
                  Years
                  
                  
                  Exercisable
                  
                  
                  Price$
                  .81
                      to $1.35
                  
                  
                  
                  6,141,880
                  
                  
                  $
                  1.15
                  
                  
                  
                  3.17
                  
                  
                  
                  6,116,880
                  
                  
                  $
                  1.15$
                  1.72
                      to $2.67
                  
                  
                  
                  2,459,644
                  
                  
                  $
                  2.16
                  
                  
                  
                  0.75
                  
                  
                  
                  2,459,644
                  
                  
                  $
                  2.15$
                  3.24
                      to $5.50
                  
                  
                  
                  483,769
                  
                  
                  $
                  3.94
                  
                  
                  
                  9.17
                  
                  
                  
                  483,769
                  
                  
                  $
                  3.94$
                  .86
                      to $1.03
                  
                  
                  
                  3,967,719
                  
                  
                  $
                  0.86
                  
                  
                  
                  7.53
                  
                  
                  
                  3,967,719$
                  .38
                      to $1.00
                  
                  
                  
                  184,577
                  
                  
                  $
                  0.48
                  
                  
                  
                  
                  
                  
                  
                  184,577
                  
                  
                  $
                  0.4813,227,589
                  
                  
                  $
                  1.57
                  
                  
                  
                  
                  
                  
                  
                  13,227,589
                  
                  
                  $
                  1.57


**NOTE
      J – INCOME TAXES**





At
      June
      30, 2007, MI had $13,536,602 in net operating loss (NOL) carryforwards to offset
      future federal taxable income, resulting in a deferred tax asset of
      $4,737,811.  In view of the uncertainty over MI’s ability to generate
      sufficient taxable income in future years to utilize the NOLs, a full valuation
      allowance of $4,737,811 million has been recorded to offset the deferred tax
      asset, resulting in no net deferred tax asset or liability.




**NOTE
      K – LEGAL PROCEEDINGS**




**J.F.
      Wilson & Associates Ltd. v. Estate of Percy Symens, et
      a**l.





Moller
      International is named as a defendant in this lawsuit pending in Yolo County,
      California Superior Court. The complaint, filed in April 2005, alleges that
      MI
      unlawfully discharged solvents into the environment while doing business at
      203
      J Street and 920 Third Street in Davis, California during 1968 to
      1980.  The complaint seeks injunctive relief and damages of an
      unspecified amount.  The Company's Answer, which denies the
      allegations in the complaint, was filed in June of 2005, and initial discovery
      commenced in August of 2005.  The case has not been set for
      trial.





In
      a
      related administrative proceeding initiated on September 26, 2006, the
      California Central Valley Regional Water Quality Control Board (RWQCB) issued
      a
      draft Cleanup and Abatement Order (CAO) in connection with the property at
      920
      Third Street.  MI was named as one of the responsible parties in the
      draft CAO, and intends to challenge the characterization of MI as a discharger
      of environmental contaminants, while also complying with the orders of the
      RWQCB.  MI and other parties have submitted comments, and the RWQCB
      has indicated that it will issue a final CAO within the next several
      months.  In conjunction with finalizing the CAO, it is expected that a
      schedule will be established by the parties subject to the CAO, and approved
      by
      the RWQCB, for preparation, submission and implementation of a workplan for
      investigating and characterizing soil and groundwater contamination at this
      property.





MI
      filed a
      Joint Case Management Conference Statement with the court for the Case
      Management Conference (CMC) held on September 10, 2007.  At the CMC,
      counsel updated the court on the status f the Water Board actions at 203 J
      Street and 920 Third Street.  Counsel also jointly suggested to the
      court (as was done at the CMC on January 25, 2007) that it would make the best
      use of the parties’ resources and the court’s resources to continue to focus on
      the site investigations rather than on formal discovery, motions or other
      activities that involve significant litigation transaction costs without
      increasing understanding of site conditions or moving the matter significantly
      forward to resolution.  The court agreed with this approach, and set
      another CMC for June 23, 2008.  In the meantime, the court expects
      that the parties will proceed with the site investigations at 920 Third Street
      and 203 J Street.





-44-


At
      June30, 2006, MI estimated it’s probable loss at this time to be
      in the range of $200,000 to $1,000,000.  MI has accrued its minimal
      estimated cleanup obligation of $200,000.  There was no change during
      the year ended June 30, 2007 to cause us to revise our estimates.  IT
      is reasonably possible that these estimates may be revised in the near term
      as
      the site investigation and other research and analysis proceeds.





**Houlihan
      v. Moller International, Inc., et al.**





Moller
      International, Inc. was sued in January 2004. The lawsuit alleged that the
      defendants violated certain federal and state securities laws and failed to
      disclose pertinent information at the time the plaintiff purchased his shares
      of
      common stock.  The plaintiff alleged damages of $490,000 plus
      interest. The case was settled November 2006 and expensed during the quarter
      ended December 31, 2006.





**NOTE
      L – DEBT FORGIVENESS**





As
      of June
      30, 2006, Dr. Moller was owed $1,640,987 in deferred wages plus accrued
      interest. During the year ended June 30, 2007, Dr. Moller forfeited
      his right to collect payment of $1,449,248 of the total amount shown as payable
      to him. This amount was treated as a capital contribution and was included
      as an
      increase in capital.




**NOTE
      M – SUBSEQUENT EVENTS**





See
      items
      already discussed in Note M.




Item
      8.
      Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure.


None.


Item
      8A. Controls and Procedures





Our
      Chief
      Financial Officer (the "Certifying Officer"), is responsible for establishing
      and maintaining disclosure controls and procedures for the Company. The
      Certifying Officer has designed such disclosure controls and procedures to
      ensure that material information is made known to him, particularly during
      the
      period in which this report was prepared. The Certifying Officer has evaluated
      the effectiveness of our disclosure controls and procedures as of the date
      of
      this report and believes that the disclosure controls and procedures are not
      effective based on the required evaluation.  Our auditors discovered
      various accounting adjustments during their audit of these financial
      statements.    We believe this is due to the limited
      resources devoted to accounting and financial reporting during this reporting
      period and the Company will continue to remedy the shortfall by hiring
      additional personnel to address its accounting and financial reporting
      functions.





-45-


There
      have been no significant changes in internal controls or in
      other factors that could significantly affect internal controls subsequent
      to
      the date of their evaluation, including any corrective actions with regard
      to
      significant deficiencies and material weaknesses.





Audit
      Committee





We
      have an
      audit committee consisting of a representative of the Board of Directors and
      two
      others that meets the definition of “audit committee” set forth in Section
      3a(58)(A) of the Exchange Act. The Audit Committee maintains an active role
      in
      communication with the Company’s independent auditors and with the management of
      the Company and performs its duties and responsibilities. The Audit Committee
      for this report period consisted of the following non-employees: Faulkner White
      and Charles Guenther, and the Moller International General Manager, Bruce
      Calkins. The members currently serving on the Audit Committee are expected
      to
      continue to serve on the Audit Committee until the next annual meeting of the
      Board of Directors following our Annual Meeting of Shareholders.




PART
      III





Item
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
                ACT





The
      following information is provided for current members of the Board of Directors
      who served during this reporting period:




Director
            Age
            Current
                Term of Office
            Director/Officer
                in any other SEC-reporting CompanyPaul
                Moller
            70
            10/2005
                – 10/2006
            NoFaulkner
                White
            56
            10/2005
                – 10/2006
            NoJim
                Toreson
            65
            10/2005
                – 10/2006
            NoMike
                Shanley
            58
            10/2005
                – 10/2006
            No




Resumes
      of
      Board of Directors





Paul
      Moller, Chairman of the Board--Dr. Moller founded the Company and has served
      as
      the company's President since its formation. He holds a Masters in Engineering
      and Ph.D. from McGill University. Dr. Moller was a professor of Mechanical
      and
      Aeronautical Engineering at the University of California, Davis, from 1963
      to
      1975, where he developed the Aeronautical Engineering program. In 1972 he
      founded SuperTrapp Industries and was Chief Executive Officer as SuperTrapp
      became the most recognized international name in high-performance engine
      silencing systems. SuperTrapp Industries was sold in 1988. In 1983 he founded
      Moller International to develop powered lift aircraft. Under his direction
      Moller International completed contracts with NASA, NOSC, DARPA, NRL, Harry
      Diamond Labs, Hughes Aircraft Company, California Department of Transportation
      and the U.S. Army, Navy, and Air force. These contracts included the development
      and deployment of numerous unmanned aerial vehicles and Wankel based engines.
      Dr. Moller has received 43 patents including the first U.S. patent on a
      fundamentally new form of powered lift aircraft. In 1980 he developed the Davis
      Research Park, a 38-acre industrial-research complex within the city of Davis,
      CA in which Moller International is located.




-46-




Faulkner
      White, Director--Mr. White received his B.A. in Psychology (Distinction) with
      a
      minor in Computer Science from Dartmouth College in 1972. He has consulted
      for
      Apple Computer, Motorola and McDonnell Douglas. In 1995 Mr. White collaborated
      in the development of a new type of breast biopsy gun for Biopsys Medical Inc.,
      developing software to track the efficacy of the new design for the FDA, and
      subsequently for the customers themselves. He is currently developing Customer
      Relationship Management software for the laser eye surgery and cosmetic surgery
      markets. Mr. White is also a certified DBA in Oracle database
      technology.





Jim
      Toreson, Director--Dr. Toreson has over 16 years experience as a chief
      executive, and over 20 years experience in manufacturing, including quality
      control, materials management, JIT production, process control, and
      manufacturing engineering.  Eight years of experience in flexible
      automation, statistical process control (SPC), and quality system including
      ISO
      9000 and Six Sigma programs.  More recently as the founder of ONSHORE,
      a management consulting firm specializing in technology-intensive products
      and
      services he has acted as the CEO of Chineseinvestors.com, an Internet portal
      serving the world-wide ethnic Chinese marketplace for financial services; VP
      of
      Marketing and Sales of APPIANT Technology, Inc., a NASDAQ company providing
      ASP
      services for speech recognition; and VP of Business Development for eSpaces,
      a
      company providing physically secure and cyber-secure work spaces.  Dr.
      Toreson has a BSEE and MSEE from the University of Michigan, a Dr. of Science
      from the University of Nevada, and has completed coursework for his PhD EE
      at
      the University of Pennsylvania.





Mike
      Shanley, Director—Mr. Shanley has been a pilot since 1969, serving with the
      Royal Australian Air Force in Vietnam in 1971 and has been an enthusiastic
      supporter of the Skycar project since 1987. Mr. Shanley has a BA in English
      Literature from the University of Queensland, Australia, is the author of the
      novel “Strela” and was a magazine publisher and editor from 1987 to 1996. He is
      presently co-director of a security company based in the United Kingdom
      providing security at Heathrow, Gatwick, Manchester and Stansted airports,
      with
      company revenue in excess of $3m US. Mr. Shanley is also Chairman of Shanley
      International Ltd., a company set up specifically to facilitate trade with
      China.





-47-





Item
      10. EXECUTIVE COMPENSATION





The
      following table sets forth a summary of compensation received by each of our
      officers and directors who received compensation from the Company during the
      past fiscal year.


Name
                & Principal Position
            Year
            
            Salary
                ($)
            
            
            Bonus
                ($)
            
            
            Stock
                Awards ($)
            
            
            Option
                Awards ($)
            
            
            Non-equity
                Incentive Plan Compensation ($)
            
            Change
                in Pension Value and Nonqualified Deferred Compensation Earnings
                ($)
            
            All
                Other Compensation ($)
            
            
            Total
                ($)Paul
                Moller, President
            2007
            
            $
            250,000
            (1)
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            
            $
            0
            
            
            $
            250,000
            (1)Faulkner
                White
            2007
            
            $
            0
            
            
            $
            0
            
            
            $
            1,150
            
            
            $
            0
            
            
            $
            0
            
            
            
            $
            0
            
            
            $
            1,150Jim
                Toreson
            2007
            
            $
            0
            
            
            $
            0
            
            
            $
            1,150
            
            
            $
            0
            
            
            $
            0
            
            
            
            $
            0
            
            
            $
            1,150Mike
                Shanley
            2007
            
            $
            0
            
            
            $
            0
            
            
            $
            1,150
            
            
            $
            0
            
            
            $
            0
            
            
            
            $
            0
            
            
            $
            1,150




(1)$250,000
      of this amount shown is deferred at the election of the Executive, not as part
      of any plan.


(2)
      Each
      member of the Board of Directors (with the exclusion of Paul Moller) was issued
      options for 5,000 shares of Moller International stock as compensation for
      service on the Board for the 12-month term of office.




ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT AND RELATED STOCKHOLDER
                MATTERS





The
      following are all of the individuals or groups known by the company to be the
      beneficial owner of more than five (5) percent of any class of the issuer's
      securities as of September 1, 2007:




Name
                  and Address of
              Amount
                  & Nature of
              PercentTitle
                  of Class
              Beneficial
                  Owner
              Beneficial
                  Ownership
              of
                  Class
 Common
                  Stock(1)
              Paul
                  S. Moller  (1) (2)
              26,298,755
              48.53%
                  (3)9350
                  Currey RdDixon,
                  CA  95620





(1)
            Has
                options to purchase 9,194,762
                shares.


(2)
            Total
                includes 25,819,909 shares beneficially owned by Moller Corp., a
                California corporation controlled by Paul S.
                Moller.


(3)
            63.98%
                of class if all existing options are
                exercised.




Paul
      S.
      Moller, President, Director and Chairman of the Board of Directors is the sole
      shareholder of Moller Corp. Moller Corporation holds legal title to 25,319,909
      of the shares of Common stock listed above as beneficially owned by Paul S.
      Moller. Rosa Maria Moller, the spouse of Paul S. Moller, owns 547,848 shares
      of
      Common stock, which are included in the figure above, although she holds them
      as
      separate property in her name alone.





-48-


The
      followingare all of our officers and directors who held office
      during the fiscal year ending June 30, 2007 and who are beneficial owners of
      our
      securities:





Title
                of Class
            Name
                and Address of Beneficial Owner
            Amount
                & Nature of Beneficial Ownership
            
            Percent
                of Class (3)Common
                Stock
            Paul
                S. Moller  (1) (2)
            34,945,669
                (D,I)
            
            
            59.27
            %9350
                Currey RdDixon,
                CA  95620Common
                Stock
            Faulkner
                White
            187,280
                (D)
            
            
            00.32
            %51
                PinewoodIrvine,
                CA 92604Common
                Stock
            Umesh
                Khimji
            1,540,717
                (D,I)
            
            
            02.62
            %PO
                Box 144Muscat,
                Sultanate of OmanCommon
                Stock
            Jim
                Toreson
            25,000
                (D)
            
            
            00.05
            %HCR61
                Box 51Alamo,
                NV 89001Common
                Stock
            Mike
                Shanley
            7,583  (D)
            
            
            00.02
            %Bradfield
                Close WorkingSurrey
                GU22 7RE, UK








(1)
            Total
                include options to purchase 9,194,762
                shares.


(2)
            Total
                includes 25,819,909 shares beneficially owned by Moller Corp., a
                California corporation controlled by Paul S.
                Moller


(3)
            Percentage
                of class based on 56,111,131 potential shares
                outstanding.




ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS.





We
      currently lease and occupy a 34,500 square foot building located in Davis,
      California, which is owned by Dr. Paul S. Moller, the majority shareholder
      of
      Moller International. (see Note I to the financial statements)





Notes
      payable to the majority shareholder, Dr. Paul S. Moller (Moller)are unsecured,
      and  due on demand. There are two separate notes, one for $2,294,004
      which bears interest at $10% per annum, and another note for $280,800 that
      is
      non-interest bearing. (see Note E to the financial statements)





During
      the
      year ended June 30, 2007, the Company repaid $50,093 in loans and had a
      $1,783,472 balance owed to the Milk Farm Associates (Milk Farm), a limited
      partnership, and a related entity.  Dr. Moller is the general partner
      in Milk Farm and has a 32% ownership interest. (see Note F to the financial
      statements)





-49-





ITEM
      13. EXHIBITS AND REPORTS ON FORM8-K.





(a.)
            Exhibits




Exhibit
                  No.
              DescriptionExhibit
                  31.1
              Certification
                  of CEO / CFOExhibit
                  32.1
              Certification
                  of CEO / CFO(b.)Reports
                  on Form 8-K


The
      following reports were filed on Form 8-K during the period ending 30 June
      2007:





The
      Company filed:


(1)
            Form
                8-K accepted on 22 September 2006 stating that Paul S. Moller had
                forfeit
                a portion of his accumulated deferred pay and interest to the amount
                of
                $1,449,247.63.   The sum represented $1,303,861.43 in wages
                and $145,386.20 in interest on those wages accrued as of 31 December
                2005.




(2)
            Form
                8-K accepted on 17 October stating the Company was not able to file
                its
                Form 10-KSB by the prescribed extended filing date without unreasonable
                effort and expense. The Company anticipated that it would be able
                to file
                the Form 10-KSB on or before October 20,
                2006.




(3)
            Form
                8-K accepted on 25 October 2006 stating that on October 24, 2006
                Moller
                International had received a letter dated October 16, 2006 from NASD
                stating that we had not filed our SEC Form 10-K within the prescribed
                period for filing and as a result were identified on the NASD Daily
                List
                as delinquent effective October 16, 2006.  In addition, a fifth
                character “E” was appended to the company’s securities symbol as of the
                first business day after the delinquency notification appeared on
                the
                Daily List.




(4)
            Form
                8-K accepted on 24 April 2007 stating that effective immediately,
                Mr.
                Umesh Khimji had resigned from the Board of Directors.  It also
                stated that the Board was currently reviewing candidates to fill
                the open
                position on the Board.




ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




Year
                ended June 30,2007
            
            
            2006Audit
                and Quarterly Review Fees for 2007
            
            $
            54,949
            
            
            $
            38,750Audit-related
                Fees
            
            
            
            
            
            
            0Tax
                Fees
            
            
            11,783
            
            
            
            9,475All
                Other Fees
            
            
            0
            
            
            
            0Total
                Fees
            
            $
            102,482
            
            
            $
            43,475




-50-


SIGNATURES





Pursuant
      to the requirements of Section 12 of the Securities Exchange Act of 1934, the
      registrant has duly caused this registration statement to be signed on its
      behalf by the undersigned, thereunto duly authorized.




**MOLLER
              INTERNATIONAL, INC.**September
                27, 2007
            By:
            /s/ Dr.
              Paul S. MollerDr.
              Paul S. MollerPresident, Director


Pursuant
      to the requirements of the Securities Exchange Act of 1934 this report is signed
      below by the following persons on behalf of the Company and in the capacities
      and on the dates indicated.





Signature
            
            Title
            
            Date/s/
                Dr. Paul S. Moller
            
            CEO,
                President, Director
            
            9/27/07Dr.
                Paul S. Moller/s/
                Faulkner White
            
            Director
            
            9/27/07Faulkner
                White/s/
                Jim Toreson
            
            Director
            
            9/27/07Jim
                Toreson/s/
              Mike Stanley
            
            Director
            
            9/27/07





-51-


CERTIFICATION
      OF CEO PURSUANT TO RULES 13A-14 AND 15D-14 OF THE SECURITIES EXCHANGE ACT OF
      1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
      ACT
      OF 2002




I,
      Paul S.
      Moller, certify that:




1.
      I have
      reviewed this annual report on Form 10-KSB of Moller International;




2.
      Based
      on my knowledge, this annual report does not contain any untrue statement of
      a
      material fact or omit to state a material fact necessary to make the statements
      made, in light of the circumstances under which such statements were made,
      not
      misleading with respect to the period covered by this annual
      report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this annual report;




4.
      The
      registrant's other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-14 and 15d-14) for the registrant and we have:




a)
                designed such disclosure controls and procedures to ensure that material
                information relating to the registrant, including its consolidated
                subsidiaries, is made known to us by others within those entities,
                particularly during the period in which this annual report is being
                prepared;




b)
                evaluated the effectiveness of the registrant's disclosure controls
                and
                procedures as of a date within 90 days prior to the filing date of
                this
                annual report (the "Evaluation Date");
                and




c)
                presented in this annual report our conclusions about the effectiveness
                of
                the disclosure controls and procedures based on our evaluation as
                of the
                Evaluation Date;




5.
      The
      registrant's other certifying officers and I have disclosed, based on our most
      recent evaluation, to the registrant's auditors and the audit committee of
      registrant's board of directors (or persons performing the equivalent
      function):




a)
                all significant deficiencies in the design or operation of internal
                controls which could adversely affect the registrant's ability to
                record,
                process, summarize and report financial data and have identified
                for the
                registrant's auditors any material weaknesses in internal controls;
                and




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b)
                any fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant's internal
                controls; and




6.
      The
      registrant's other certifying officers and I have indicated in this annual
      report whether or not there were significant changes in internal controls or
      in
      other factors that could significantly affect internal controls subsequent
      to
      the date of our most recent evaluation, including any corrective actions with
      regard to significant deficiencies and material weaknesses.






Date:
      September 27, 2007




/s/
      Paul S. Moller




CEO
      and
      President






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CERTIFICATION
      OF CFO PURSUANT TO RULES 13A-14 AND 15D-14 OF THE SECURITIES EXCHANGE ACT OF
      1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
      ACT
      OF 2002




I,
      Paul S.
      Moller, certify that:




1.
      I have
      reviewed this annual report on Form 10-KSB of Moller International;




2.
      Based
      on my knowledge, this annual report does not contain any untrue statement of
      a
      material fact or omit to state a material fact necessary to make the statements
      made, in light of the circumstances under which such statements were made,
      not
      misleading with respect to the period covered by this annual
      report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all
      material  respects the financial condition, results of operations and
      cash flows of the registrant as of, and for, the periods presented in this
      annual report;




4.
      The
      registrant's other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-14 and 15d-14) for the registrant and we have:




a)
                designed such disclosure controls and procedures to ensure that material
                information relating to the registrant, including its consolidated
                subsidiaries, is made known to us by others within those entities,
                particularly during the period in which this annual report is being
                prepared;




b)
                evaluated the effectiveness of the registrant's disclosure controls
                and
                procedures as of a date within 90 days prior to the filing date of
                this
                annual report (the "Evaluation Date");
                and




c)
                presented in this annual report our conclusions about the effectiveness
                of
                the disclosure controls and procedures based on our evaluation as
                of the
                Evaluation Date;




5.
      The
      registrant's other certifying officers and I have disclosed, based on our most
      recent evaluation, to the registrant's auditors and the audit committee of
      registrant's board of directors (or persons performing the equivalent
      function):




a)
                all significant deficiencies in the design or operation of internal
                controls which could adversely affect the registrant's ability to
                record,
                process, summarize and report financial data and have identified
                for the
                registrant's auditors any material weaknesses in internal controls;
                and




b)
                any fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant's internal
                controls; and




-54-




6.
      The
      registrant's other certifying officers and I have indicated in this annual
      report whether or not there were significant changes in internal controls or
      in
      other factors that could significantly affect internal controls subsequent
      to
      the date of our most recent evaluation, including any corrective actions with
      regard to significant deficiencies and material weaknesses.




Date:
      September 27, 2007




/s/
      Paul S. Moller




Chief
      Financial Officer






-55-




CERTIFICATION
      OF CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
      OF
      THE SARBANES-OXLEY ACT OF 2002




In
      connection with the Annual Report of Moller International (the "Company") on
      Form 10-KSB for the year ended June 30, 2007 as filed with the Securities and
      Exchange commission on the date hereof (the "Report), Paul S. Moller, as Chief
      Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
      to
      the Best of his knowledge, that:




(1)
      The
      Report fully complies with the requirements of section 13(a) of the Securities
      Exchange Act of 1934; and




(2)
      The
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the Company.




Date: September
      27, 2007




Signed:




/s/
      Paul S. Moller




CEO
      and
      President






-56-




CERTIFICATION
      OF CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
      OF
      THE SARBANES-OXLEY ACT OF 2002




In
      connection with the Annual Report of Moller International (the "Company") on
      Form 10-KSB for the year ended June 30, 2007 as filed with the Securities and
      Exchange commission on the date hereof (the "Report), Paul S. Moller, as Chief
      Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
      to
      the Best of his knowledge, that:




(1)
      The
      Report fully complies with the requirements of section 13(a) of the Securities
      Exchange Act of 1934; and




(2)
      The
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the Company.




Date: September
      27, 2007




Signed:






/s/
      Paul S. Moller






Chief
      Financial Officer




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