UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2008
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 000-33173
Moller International, Inc.
(Exact name of registrant as specified in its charter)
California | 68-0006075 | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | |
1222 Research Park Drive, Davis CA | 95618 | |
(Address of Principal Executive Office) | (Zip Code) |
Registrant’s telephone number, including area code: (530) 756-5086
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | ||
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨ No x
At February 23, 2009, there were 45,965,247 shares of common stock outstanding.
TABLE OF CONTENTS | |
Page # | |
EXHIBITS | |
Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes Oxley Act | 10 |
Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes Oxley Act | 11 |
Exhibit 32.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act | 12 |
Exhibit 32.2 Certification Pursuant to Section 906 of the Sarbanes Oxley Act | 13 |
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PART I - FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
MOLLER INTERNATIONAL, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
Unaudited | ||||||||
December 31, 2008 | June 30, 2008 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 471 | $ | - | ||||
Advances to Employees | 485 | 363 | ||||||
Accounts Receivable Trade | 9,800 | 9,800 | ||||||
Accounts Receivable Other | 441 | 3,400 | ||||||
Total current assets | $ | 11,197 | $ | 13,563 | ||||
PROPERTY AND EQUIPMENT, net of accumulated depreciation | $ | 11,573 | $ | 11,933 | ||||
OTHER ASSETS | ||||||||
Patent costs | $ | 72,529 | $ | 72,529 | ||||
Advance to Freedom Motors | 6 | - | ||||||
Workers' compensation deposit | 353 | 1,167 | ||||||
Total other assets | $ | 72,888 | $ | 73,696 | ||||
$ | 95,658 | $ | 99,192 | |||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable, trade | $ | 531,249 | $ | 545,171 | ||||
Accrued liabilities | 447,924 | 433,448 | ||||||
Accrued liabilities-related parties | �� | 443,599 | 413,290 | |||||
Accrued liabilities-majority shareholder | 2,778,777 | 2,453,161 | ||||||
Notes payable-other | 969,854 | 958,078 | ||||||
Note payable - majority shareholder | 3,057,095 | 2,897,399 | ||||||
Notes payable - minority shareholders | 373,671 | 348,671 | ||||||
Notes payable - related parties | 1,742,159 | 1,737,596 | ||||||
Deferred wages - employees | 271,605 | 155,921 | ||||||
Customer deposits | 394,767 | 394,767 | ||||||
Total current liabilities | $ | 11,010,700 | $ | 10,337,502 | ||||
LONG TERM LIABILITIES | ||||||||
Deferred wages and interest-majority shareholder | $ | 918,482 | $ | 761,333 | ||||
Total long term liabilities | $ | 918,482 | $ | 761,333 | ||||
Total liabilities | $ | 11,929,182 | $ | 11,098,835 | ||||
STOCKHOLDERS' DEFICIT | ||||||||
Common stock, authorized, 150,000,000 shares, no par value, | ||||||||
45,965,247 and 45,684,334 issued and outstanding respectively | $ | 31,684,732 | $ | 31,491,068 | ||||
Accumulated deficit | (43,518,256 | ) | (42,490,711 | ) | ||||
Total stockholders' deficit | $ | (11,833,524 | ) | $ | (10,999,643 | ) | ||
$ | 95,658 | $ | 99,192 |
See accompanying notes to unaudited consolidated financial statements.
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MOLLER INTERNATIONAL, INC. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
Unaudited | ||||||||||||||||
For the Three Months Ended : | For the Six Months Ended: | |||||||||||||||
December 31, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | |||||||||||||
INCOME | ||||||||||||||||
Revenues Affiliate | $ | 123,745 | $ | 7,240 | $ | 126,596 | $ | 523,720 | ||||||||
Miscellaneous | 200 | 1,961 | 200 | 3,507 | ||||||||||||
Total income | 123,945 | 9,201 | 126,796 | 527,227 | ||||||||||||
EXPENSES | ||||||||||||||||
Administrative salaries and wages | $ | 139,541 | $ | 149,552 | $ | 274,903 | $ | 309,401 | ||||||||
Building expenses | 15,877 | 19,653 | 31,044 | 35,642 | ||||||||||||
Depreciation expense | 180 | 360 | 360 | 719 | ||||||||||||
Direct project expenses | 34,352 | 66,649 | 99,655 | 147,310 | ||||||||||||
Employee benefits and payroll taxes | 51,903 | 30,827 | 80,181 | 62,598 | ||||||||||||
Legal, accounting, and professional fees | 32,031 | 47,014 | 66,463 | 81,403 | ||||||||||||
Office supplies and expense | 28,734 | 13,119 | 83,882 | 20,986 | ||||||||||||
Other expenses | 8,174 | 26,711 | 23,723 | 35,225 | ||||||||||||
Patent expense | (5,925 | ) | 5,402 | (21,156 | ) | 8,668 | ||||||||||
Rent expense to majority shareholder | 132,037 | 131,848 | 264,073 | 263,694 | ||||||||||||
Total expenses | $ | 436,904 | $ | 491,135 | $ | 903,128 | $ | 965,646 | ||||||||
Operating Loss | $ | (312,959 | ) | $ | (481,934 | ) | $ | (776,332 | ) | $ | (438,419 | ) | ||||
OTHER EXPENSE | ||||||||||||||||
Interest | $ | 113,392 | $ | 126,781 | $ | 251,213 | $ | 251,367 | ||||||||
Total other expense | $ | 113,392 | $ | 126,781 | $ | 251,213 | $ | 251,367 | ||||||||
NET LOSS | $ | (426,351 | ) | $ | (608,715 | ) | $ | (1,027,545 | ) | $ | (689,786 | ) | ||||
Loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 45,812,228 | 45,691,026 | 45,774,858 | 45,706,022 |
See accompanying notes to unaudited consolidated financial statements.
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MOLLER INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
Unaudited | ||||||||
Six Months Ended | ||||||||
December 31, 2008 | December 31, 2007 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Loss | $ | (1,027,545 | ) | $ | (689,786 | ) | ||
Adjustments to Reconcile Net Loss | ||||||||
to Net Cash Used: | ||||||||
Depreciation Expense | 360 | 719 | ||||||
Stock Based Compensation | 193,664 | 95,065 | ||||||
Change in assets and liabilities: | ||||||||
Accounts Receivable | 2,831 | 2,266 | ||||||
Accounts Payable | (13,922 | ) | (10,498 | ) | ||||
Accrued Liabilities | 643,234 | 233,070 | ||||||
Customer Deposits | - | (5,000 | ) | |||||
Prepaid Expenses | - | 23,933 | ||||||
Other assets | 814 | (528 | ) | |||||
Deferred wages and accrued | - | 139,839 | ||||||
Net Cash Used in Operating Activities | $ | (200,564 | ) | $ | (210,920 | ) | ||
Cash Used in Investing Activities | ||||||||
Purchase of equipment | - | - | ||||||
Proceeds from sale of equipment | 204 | |||||||
Purchase of other assets | - | |||||||
Net Cash Used in investing Activities | $ | - | $ | 204 | ||||
Cash Flows Provided from Financing Activities | ||||||||
Proceeds from related party note payable | 204,821 | 59,000 | ||||||
Payments for related party note payable | (23,890 | ) | (37,629 | ) | ||||
Proceeds from note payable | 20,104 | 209,306 | ||||||
Payments of notes payable | - | (24,563 | ) | |||||
Net Cash Provided from Financing Activities | $ | 201,035 | $ | 206,114 | ||||
Net (decrease) In Cash | 471 | (4,602 | ) | |||||
Cash Balance at End of Period | $ | 471 | 5,715 | |||||
Cash Balance at Beginning of Period | $ | - | $ | 1,113 | ||||
Supplemental Disclosure of Non-Cash Financing Activities: | ||||||||
Assumption of employee receivable by majority | ||||||||
shareholder | $ | - | $ | 40,197 | ||||
Contributed Capital in the form of common shares | $ | 66,500 | $ | - |
See accompanying notes to unaudited consolidated financial statements.
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Moller International, Inc.
Notes To Consolidated Financial Statements
Unaudited
NOTE A – ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited financial statements of Moller International, Inc. (“MI”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, these financial statements may not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ending June 30, 2008 filed on Form 10-KSB. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to fairly present MI’s financial position as of December 31, 2008, and its results of operations and its cash flows for the six months ended December 31, 2008 and 2007. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for 2008 as reported in the 10-KSB have been omitted.
NOTE B – GOING CONCERN
As of December 31, 2008, MI has accumulated deficits of $43,518,256. MI currently has limited recurring revenue-producing products and is continuing its development of products in both the Skycar and Rotapower 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 MI’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, Dr. Paul S. Moller, ("Dr. Moller"), is providing funds received from the refinancing 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 December 31, 2008, amounts outstanding to him total $3,057,095 from these transactions. In addition, he has deferred payment of current year building rent owed by MI of $496,800. The total deferred rent, including interest owing to Dr. Moller at December 31, 2008 is $2,778,777. He has also agreed to defer his salary. Total amounts due to him for the deferred salaries including accrued interest total $918,482.
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.
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NOTE C – NOTES PAYABLE – RELATED PARTIES
During the quarter ended December 31, 2008, MI borrowed an additional $5,900 from a related party and repaid $301. The total owed to this party is $1,742,159 at December 31, 2008. The amounts are due upon demand and interest is accrued at the stated rate of 5%.
During the quarter ended September 30, 2008, MI borrowed an additional $9,500 from a related party and repaid $10,536.
NOTE D - 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. Amortization of stock option expense during the quarter ended December 31, 2008, related to stock options granted during previous years totaled $44,603.
During the three months ended December 31, 2008, MI issued 220,000 shares for services to outside consultants and estimated the value of these shares at the fair market value on the date of issuance of $79,200, which approximates when services were performed.
On September 15, 2008, Dr. Moller entered a service agreement for a six-month period with Wakabayashi Fund LLC. Per terms of the agreement, Wakabayashi was engaged to provide public relations services for MI in exchange for non-refundable retainer items of the issuance of 100,000 common shares at front and 50,000 shares monthly for 4 months. These shares issued for services were issued by Dr. Moller instead of MI. In the current quarter ending December 31, 2008, Dr. Moller contributed 50,000 common shares on behalf of MI per the terms of the agreement. As a result, MI recorded $16,500 in expense equal to the fair market value of these shares. The contract was canceled by MI after the first monthly contribution was made.
NOTE E - LITIGATION AND CONTINGENCIES
J.F. Wilson & Associates Ltd. v. Estate of Percy Symens, et al.
Moller International (MI) is named as a defendant in a lawsuit pending in Yolo County, California Superior Court - J.F. Wilson & Associates Ltd. v. Estate of Percy Symens, et al. 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. On December 20, 2006, defendant and cross-complainant Donald M. Miller died; and on January 7, 2008, the court ordered a stay of proceedings until the court’s Probate Department rules on an application for letters of instruction in connection with Mr. Miller’s estate. The court’s Probate Department has not yet issued a ruling, and the stay remains in place.
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 regarding the draft cleanup and abatement order. The RWQCB has indicated that it will not move forward at this time with finalizing the draft cleanup and abatement order; and the property owner is proceeding with work to investigate, characterize and remediate the soil and groundwater contamination at this property, with RWQCB oversight.
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MI’s probable loss has been estimated at this time in the range of $200,000 to $1,000,000. It is reasonably possible that these estimates may be significantly revised as the site investigation and other research and analysis proceeds.
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months Ended December 31, 2008 and December 31, 2007
For the three-months ended December 31, 2008, we had a net loss of $426,351 or $0.01 loss per share as compared to a net loss of $608,715 or $0.01 loss per share for the same period of 2007. We continue to pursue the development of the Skycar, Rotapower engine and Aerobot products. We currently propose to produce variations of it 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 into the production of these vehicles.
Six months Ended December 31, 2008 and December 31, 2007
For the six-months ended December 31, 2008, we had a net loss of $1,027,545 or $0.02 loss per share as compared to a net loss of $689,786 or $0.02 loss per share for the same period of 2007. As stated above, we continue to pursue the development of the Skycar, Rotapower engine and Aerobot products. We currently propose to produce variations of it M200X, an earlier prototype volantor and are attempting to license the Rotapower engine to a potential manufacturing entity.
Going Concern and Liquidity
As of December 31, 2008, MI has accumulated deficits of $43,518,256. MI currently has limited recurring revenue-producing products and is continuing its development of products in both the Skycar and Rotapower 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 MI’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, Dr. Paul S. Moller, ("Dr. Moller"), is providing funds received from the refinancing 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 December 31, 2008, amounts outstanding to him total $3,057,095 from these transactions. In addition, he has deferred payment of current year building rent owed by MI of $496,800. The total deferred rent, including interest owing to Dr. Moller at December 31, 2008 is $2,778,777. He has also agreed to defer his salary. Total amounts due to him for the deferred salaries including accrued interest total $918,482.
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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.
ITEM 3 – QUALITATIVE AND QUANTITATIVE CONCERNS ABOUT MARKET RISK
As a smaller reporting company we are not required to report items under this section.
ITEM 4 T - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our President, Paul Moller, acts as the "Certifying Officer" for the Company and is responsible for establishing and maintaining disclosure controls and procedures. 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. 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 as soon as possible and when funding becomes available.
Changes in Internal Controls Over Financial Reporting
There have been no changes in the company’s internal controls over Financial Reporting since the year ended June 30, 2008.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
J.F. Wilson & Associates Ltd. v. Estate of Percy Symens, et al.
Moller International (MI) is named as a defendant in a lawsuit pending in Yolo County, California Superior Court - J.F. Wilson & Associates Ltd. v. Estate of Percy Symens, et al. 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. On December 20, 2006, defendant and cross-complainant Donald M. Miller died; and on January 7, 2008, the court ordered a stay of proceedings until the court’s Probate Department rules on an application for letters of instruction in connection with Mr. Miller’s estate. The court’s Probate Department has not yet issued a ruling, and the stay remains in place.
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 regarding the draft cleanup and abatement order. The RWQCB has indicated that it will not move forward at this time with finalizing the draft cleanup and abatement order; and the property owner is proceeding with work to investigate, characterize and remediate the soil and groundwater contamination at this property, with RWQCB oversight.
MI’s probable loss has been estimated at this time in the range of $200,000 to $1,000,000. It is reasonably possible that these estimates may be significantly revised as the site investigation and other research and analysis proceeds.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS; PURCHASES OF EQUITY SECURITIES
Not applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER MATTERS
None
ITEM 6 - EXHIBITS
(a) Exhibits
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Exhibit No. | Description | ||||
31.1 | Certification of CEO | ||||
31.2 | Certification of CFO | ||||
32.1 | Certification of CEO | ||||
32.2 | Certification of CFO |
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
MOLLER INTERNATIONAL, INC. | ||||
February 23, 2009 | /s/ Paul S. Moller | |||
Date | Paul S. Moller, Ph.D. | |||
President, CEO, Chairman of the Board |
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