UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
September 30, 2008
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Moller International, Inc.
--------------------------
(Exact name of small business issuer as specified in its charter)
1222 RESEARCH PARK DRIVE
DAVIS, CALIFORNIA 95618
-----------------------
(Address of principal executive offices,
Issuer's telephone number, including area code)
California 68-0006075
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Issuer's telephone number (530) 756-5086
Issuer's facsimile number (530) 756-5179
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
Large accelerated filer |_| Accelerated filer |_|
Non-accecelerated filer |_| (Do not check if 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|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 45,745,247 shares as of November 13,
2008.
Transitional Small Business Disclosure Format (Check one): [ ] Yes [X] No
TABLE OF CONTENTS
Page #
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of September 30, 2008
and June 30, 2008 1
Unaudited Consolidated Statements of Operations for three-months
ended September 30, 2008 and September 30, 2007 2
Unaudited Consolidated Statements of Cash Flows for the three
months ended September 30, 2008 and September 30, 2007 3
Notes to Consolidated Unaudited Financial Statements 4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 6
ITEM 3 - QUALITATIVE AND QUANTITATIVE FACTORS CONCERNING MARKET RISKS 6
ITEM 4T - CONTROLS AND PROCEDURES 6
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 8
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds 8
ITEM 3 - Defaults upon Senior Securities 8
ITEM 4 - Submission of Matters to a Vote of Security Holders 8
ITEM 5 - Other Matters 8
ITEM 6 - Exhibits 8
SIGNATURES 9
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
ii
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MOLLER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
September 30, 2008 June 30, 2008
ASSETS
CURRENT ASSETS
Cash $ - $ -
Accounts receivable 10,723 13,563
Prepaid expenses - -
---------------------------------------------
Total current assets 10,723 13,563
=============================================
PROPERTY AND EQUIPMENT, net of accumulated depreciation 11,753 11,933
OTHER ASSETS
Patent costs 72,529 72,529
Advance to Freedom Motors 2,123 -
Workers' compensation deposit 675 1,167
Total other assets 75,327 73,696
---------------------------------------------
$ 97,803 $ 99,192
=============================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable, trade $ 572,651 $ 545,171
Accrued liabilities 449,414 433,448
Accrued liabilities-related parties 443,599 413,290
Accrued liabilities-majority shareholder 2,646,181 2,453,161
Notes payable-other 958,078 958,078
Note payable - majority shareholder 3,039,081 2,897,399
Notes payable - minority shareholders 365,671 348,671
Notes payable - related parties 1,736,560 1,737,596
Deferred wages - employees 174,582 155,921
Customer deposits 394,767 394,767
---------------------------------------------
Total current liabilities 10,780,584 10,337,502
=============================================
LONG TERM LIABILITIES
Deferred wages and interest-majority shareholder 839,908 761,333
---------------------------------------------
Total long term liabilities 839,908 761,333
---------------------------------------------
Total liabilities 11,620,492 11,098,835
=============================================
STOCKHOLDERS' DEFICIT
Common stock, authorized, 150,000,000 shares, no par value,
45,747,469 and 45,684,334 shares issued and outstanding,
respectively 31,569,216 31,491,068
Accumulated deficit (43,091,905) (42,490,711)
Total stockholders' deficit (11,522,689) (10,999,643)
---------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 97,803 $ 99,192
=============================================
See accompanying notes to unaudited consolidated financial statements.
1
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended
September 30, 2008 September 30, 2007
-------------------- --------------------
INCOME
Revenues - affiliate $ 2,851 $ 518,027
-------------------- --------------------
Total income 2,851 518,027
OPERATING EXPENSES:
Administrative salaries and wages 135,362 159,849
Building expenses 15,167 15,989
Depreciation expense 180 359
Direct project expenses 65,303 80,661
Employee benefits and payroll taxes 28,278 31,771
Legal, accounting, and professional fees 34,432 34,389
Office supplies and expense 55,148 7,867
Other expenses 15,549 8,514
Patent expense (15,231) 3,266
Rent expense to majority shareholder 132,036 131,847
-------------------- --------------------
Total operating expenses 466,224 474,512
-------------------- --------------------
Income (Loss) from Operations (463,373) 43,515
OTHER EXPENSE
Interest 137,821 124,586
-------------------- --------------------
Total other expense 137,821 124,586
-------------------- --------------------
NET LOSS $ (601,194) $ (81,071)
==================== ====================
Loss per common share, basic and diluted $ (0.01) $ (0.00)
==================== ====================
Weighted average common shares outstanding, basic and diluted 45,737,602 45,720,932
==================== ====================
See accompanying notes to unaudited consolidated financial statements.
2
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
Three Months Ended
September 30, September 30,
2008 2007
----------------------- -----------------------
Cash Flows From Operating Activities
Net Loss $ (601,194) $ (81,071)
Adjustments to Reconcile Net Loss
to Net Cash Used in operating activities:
Depreciation Expense 180 359
Stock Based Compensation 78,148 43,887
Change in assets and liabilities:
Accounts Receivable, employees 717 40
Accounts Payable 27,480 (73,704)
Accrued Liabilities 336,531 149,682
Customer Deposits (5,000)
Prepaid Expenses - 14,587
Other assets 492 -
----------------------------------------------------
Net Cash (used in) provided by operating
Activities $ (157,646) $ 48,780
Cash Flows Provided by Financing Activities
Borrowing from related party debt 170,423 192,865
Payments on related party note payable (12,777) (61,445)
----------------------------------------------------
Net cash provided by financing Activities $ 157,646 $ 131,420
Net (decrease) In Cash - 180,200
Cash Balance at End of Period $ - 185,915
Cash Balance at Beginning of Period $ - $ 5,715
Supplemental Disclosure of Non-Cash Financing
Activities:
Contributed Capital in the form of contributed
common shares $ 50,000 $ -
See accompanying notes to unaudited consolidated financial statements.
3
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-QSB. 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 September
30, 2008, and its results of operations and its cash flows for the three months
ended September 30, 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 September 30, 2008, MI has accumulated deficits of $43,091,905 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 September 30, 2008, amounts outstanding to him total $3,039,081 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 September 30, 2008 is $2,646,181. He has also agreed to defer his
salary. Total amounts due to him for the deferred salaries including accrued
interest total $839,908.
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.
4
NOTE C - NOTES PAYABLE - RELATED PARTIES
During the quarter ended September 30, 2008, MI borrowed an additional $9,500
from a related party and repaid $10,536. The total owed to this party is
$1,736,560 at September 30, 2008. The amounts are due upon demand and interest
is accrued at the stated rate of 7%.
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 September
30, 2008, related to stock options granted during previous years totaled
$23,716.
During the three months ended September 30, 2008, MI issued 10,555 shares for
services to outside consultants and estimated the value of these shares at the
fair market value on the date of issuance of $4,432, 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 is
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. As of September 30, 2008, Dr. Moller
contributed the first 100,000 common shares on behalf of MI per the terms of the
agreement. As a result, MI recorded $50,000 in expense equal to the fair market
value of these shares.
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 draft CAO has not been finalized. The property owner is
proceeding with work to investigate, characterize and remediate the soil and
groundwater contamination at this property, with RWQCB oversight.
5
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 September 30, 2008 and September 30, 2007
For the three-months ended September 30, 2008, we had a net loss of $601,194 or
$0.01 loss per share as compared to a net loss of $81,071 or $0.00 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.
Going Concern
As of September 30, 2008, MI has accumulated deficits of $43,091,905. 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.
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 4T - 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.
6
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.
7
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 draft CAO has not been finalized. 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
Exhibit No. Description
----------- -----------
31.1 Certification of CEO
31.2 Certification of CFO
32.1 Certification of CEO
32.2 Certification of CFO
8
SIGNATURES
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.
November 14, 2008 /s/ Paul S. Moller
- ----------------- -------------------------------------
Date Paul S. Moller, Ph.D.
President, CEO, Chairman of the Board
9