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 March 31, 2009
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 (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
1222 Research Park Drive,
Davis CA 95618
---------------------------- ------------------------------
(Address of Principal (Zip Code)
Executive Office)
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 |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
(Do not check if a smaller reporting company)
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 May 19, 2009, there were 45,980,565 shares of common stock outstanding.
TABLE OF CONTENTS
Page #
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of March 31, 2009 and June 30, 2008 1
Unaudited Consolidated Statements of Operations for three-and nine-months ended
March 31, 2009 and March 31, 2008 2
Unaudited Consolidated Statements of Cash Flows for the three-and nine-months ended
March 31, 2009 and March 31, 2008 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 7
ITEM 4 T - CONTROLS AND PROCEDURES 7
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
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
March 31, 2009 June 30, 2008
ASSETS
CURRENT ASSETS
Cash $ 1,836 $ -
Advances to Employees 616 363
Accounts Receivable Trade 9,800 9,800
Accounts Receivable Other 441 3,400
--------------------------------
Total current assets $ 12,693 $ 13,563
PROPERTY AND EQUIPMENT, net of accumulated depreciation $ 11,393 $ 11,933
OTHER ASSETS
Patent costs $ 72,529 $ 72,529
Advance to Freedom Motors 846 -
Workers' compensation deposit 353 1,167
--------------------------------
Total other assets $ 73,728 $ 73,696
$ 97,814 $ 99,192
================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable, trade $ 582,870 $ 545,171
Accrued liabilities 449,572 433,448
Accrued liabilities-related parties 464,872 413,290
Accrued liabilities-majority shareholder 2,690,222 2,453,161
Notes payable-other 969,854 958,078
Note payable - majority shareholder 3,069,087 2,897,399
Notes payable - minority shareholders 377,607 348,671
Notes payable - related parties 1,742,549 1,737,596
Deferred wages - employees 314,955 155,921
Customer deposits 394,767 394,767
--------------------------------
Total current liabilities $ 11,056,355 $ 10,337,502
LONG TERM LIABILITIES
Deferred wages and interest-majority shareholder $ 1,000,253 $ 761,333
--------------------------------
Total long term liabilities $ 1,000,253 $ 761,333
Total liabilities $ 12,056,608 $ 11,098,835
STOCKHOLDERS' DEFICIT
Common stock, authorized, 150,000,000 shares, no par value,
45,980,565 and 45,684,334 issued and outstanding respectively $ 31,742,467 $ 31,491,068
Accumulated deficit (43,701,261) (42,490,711)
--------------------------------
Total stockholders' deficit $ (11,958,794) $ (10,999,643)
$ 97,814 $ 99,192
================================
See accompanying notes to unaudited consolidated financial statements.
1
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
For the Three Months Ended: For the Nine Months Ended:
31-Mar-09 31-Mar-08 31-Mar-09 31-Mar-08
------------------------------------------------------------
INCOME
Revenues Affiliate $353,133 $9,800 $479,729 $533,520
Miscellaneous - 1,600 200 5,107
------------------------------------------------------------
Total income 353,133 11,400 479,929 538,627
EXPENSES
Administrative salaries and wages $161,423 $223,790 $436,326 $533,191
Building expenses 8,104 10,164 39,148 45,806
Depreciation expense 180 360 540 1,079
Direct project expenses 14,699 72,135 114,354 219,445
Employee benefits and payroll taxes 12,953 55,255 93,134 117,853
Legal, accounting, and professional fees 16,693 32,001 83,156 113,404
Office supplies and expense 5,700 7,218 89,582 28,204
Other expenses 10,991 (7,640) 34,714 27,585
Patent expense - 34,949 (21,156) 43,617
Rent expense to majority shareholder 132,036 131,848 396,109 395,542
------------------------------------------------------------
Total expenses $362,779 $560,080 $1,265,907 $1,525,726
------------------------------------------------------------
Operating Loss ($9,646) ($548,680) ($785,978) ($987,099)
OTHER EXPENSE
Interest $173,359 $153,347 $424,572 $404,714
------------------------------------------------------------
Total other expense $173,359 $153,347 $424,572 $404,714
------------------------------------------------------------
NET LOSS ($183,005) ($702,027) ($1,210,550) ($1,391,813)
============================================================
Loss per common share, basic and diluted $0.00 ($0.02) ($0.03) ($0.03)
============================================================
Weighted average common shares outstanding, 45,974,991 45,707,405 45,840,595 45,706,480
============================================================
Basic and diluted
See accompanying notes to unaudited consolidated financial statements.
2
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended
March 31, 2009 March 31, 2008
-------------- --------------
Cash Flows From Operating Activities
Net Loss $ (1,210,550) $ (1,391,813)
Adjustments to Reconcile Net Loss
to Net Cash Used:
Depreciation Expense 540 1,078
Stock Based Compensation 217,408 193,380
Imputed Interest 33,991 -
Change in assets and liabilities:
Accounts Receivable 2,706 56,288
Accounts Payable 37,699 114,569
Accrued Liabilities and deferred wages 702,721 635,000
Customer Deposits (846) (5,000)
Prepaid Expenses - (7,647)
Other assets 814 (108)
--------------------------------
Net Cash Used in Operating Activities $ (215,517) $ (404,253)
--------------------------------
Cash Used in Investing Activities
Purchase of equipment - -
Proceeds from sale of equipment 350
Purchase of other assets - -
Net Cash Used in investing Activities $ - $ 350
--------------------------------
Cash Flows Provided from Financing Activities
Proceeds from related party note payable 238,246 489,744
Payments for related party note payable (40,997) (133,641)
Proceeds from note payable 20,104 50,000
Payments of notes payable -- (7,000)
--------------------------------
Net Cash Provided from Financing Activities $ 217,353 $ 399,103
--------------------------------
Net (decrease) In Cash 1,836 (4,800)
Cash Balance at End of Period $ 1,836 $ 915
Cash Balance at Beginning of Period $ - $ 5,715
Supplemental Disclosure of Non-Cash Financing Activities:
Income taxes paid $ - $ -
Interest paid $ - $ -
Assumption of employee receivable by majority
shareholder $ - $ 40,197
Contributed Capital in the form of common shares $ 66,500 $ -
Imputed Interest of notes payable $ 33,991 $ -
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-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-K. In the opinion of
management, the accompanying unaudited financial statements contain all
adjustments necessary to fairly present MI's financial position as of March 31,
2009, and its results of operations and its cash flows for the nine months ended
March 31, 2009 and 2008. 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-K have been omitted.
NOTE B - GOING CONCERN
As of March 31, 2009, MI has accumulated deficits of $43,701,261. 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 March 31, 2009, amounts outstanding to him total $3,069,087 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 March 31, 2009 is $2,690,222. He has also agreed to defer his salary.
Total amounts due to him for the deferred salaries including accrued interest
total $1,000,253.
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 March 31, 2009, MI borrowed an additional $4,000 from a
related party and repaid $3,610. The total owed to this party is $1,742,549 at
March 31, 2009. The amounts are due upon demand and interest is accrued at the
stated rate of 5%.
During the quarter ended March 31, 2009, MI borrowed an additional $15,128 from
another related party and repaid $11,192.
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 March 31,
2009, related to stock options granted during previous years totaled $65,490.
During the nine months ended March 31, 2009, MI issued 15,318 shares for
services to outside consultants and estimated the value of these shares at the
fair market value on the date of issuance of $2,857 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.
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 March 31, 2009 and March 31, 2008
For the three-months ended March 31, 2009, we had a net loss of $183,005 or
$0.00 loss per share as compared to a net loss of $702,027 or $0.02 loss per
share for the same period of 2008. 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.
Nine months Ended March 31, 2009 and March 31, 2008
For the nine-months ended March 31, 2009, we had a net loss of $1,210,550 or
$0.03 loss per share as compared to a net loss of $1,391,813 or $0.03 loss per
share for the same period of 2008. 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 March 31, 2009, MI has accumulated deficits of $43,701,261. 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 March 31, 2009, amounts outstanding to him total $3,069,087 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 March 31, 2009 is $2,690,222. He has also agreed to defer his salary.
Total amounts due to him for the deferred salaries including accrued interest
total $1,000,253.
6
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.
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 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
8
Exhibit No. Description
----------- --------------------
31.1 Certification of CEO
31.2 Certification of CFO
32.1 Certification of CEO
32.2 Certification of CFO
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.
May 20, 2009 /s/ Paul S. Moller
- ------------ -------------------------------------
Date Paul S. Moller, Ph.D.
President, CEO, Chairman of the Board
9