ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three months Ended December 31, 2012 and December 31, 2011:

For the three-months ended December 31, 2012, we had a net loss of $367,498 or $0.01 loss per share as compared to a net loss of $414,421 or $0.01 loss per share for the same period of 2011. The decreased loss relates, primarily to decreased marketing costs and professional services costs. We continue to pursue the development activities on the Skycar, Rotapower engine project, primarily in the areas of its flight control system (FCS) and the performance advantages of introducing a hybrid approach to generating the high power required to take off and land. 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 into the production of these vehicles.

Six months Ended December 31, 2012 and December 31, 2011:

For the six-months ended December 31, 2012, we had a net loss of $772,017 or $0.02 loss per share as compared to a net loss of $697,245 or $0.01 loss per share for the same period of 2011. The increased loss relates, primarily to interest expense on the companies promissory notes, and other interest bearing agreements. Also, we incurred a derivative loss associated with our convertible notes payables (see Note C to the Consolidated Financial Statements). We continue to pursue the development activities on the Skycar, Rotapower engine project, primarily in the areas of its flight control system (FCS) and the performance advantages of introducing a hybrid approach to generating the high power required to take off and land. 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 into the production of these vehicles.
Going Concern and Liquidity

As of December 31, 2012, MI had an accumulated deficit of $51,377,818 and a working capital deficit of $12,425,329. In addition, MI is currently in the development stage of the Skycar and Rotapower engine programs, and has no revenue producing products. Successful completion of product development activities for either or both of these programs will require significant additional sources of capital. These conditions raise substantial doubt as to our ability to continue as a going concern. Historically, funding was provided by certain shareholders, including the majority shareholder, in the form of short-term notes payable. In addition, the majority shareholder granted us a deferral on the payment of rent for our building. There is no assurance that we will continue to receive funding from shareholders, particularly our major shareholder given he has filed for protection under the federal Chapter 11 reorganization provisions of the federal bankruptcy law. Consequently, we are evaluating several alternatives to raise the additional capital through debt or equity transactions. There is no assurance that our efforts will be successful, however, and the financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.