Attached files

file filename
EX-31.1 - EXHIBIT 31.1 - MOLLER INTERNATIONAL INCa6301373ex31_1.htm
EX-32.2 - EXHIBIT 32.2 - MOLLER INTERNATIONAL INCa6301373ex32_2.htm
EX-32.1 - EXHIBIT 32.1 - MOLLER INTERNATIONAL INCa6301373ex32_1.htm
EX-31.2 - EXHIBIT 31.2 - MOLLER INTERNATIONAL INCa6301373ex31_2.htm
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, 2010
 
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    ¨
Accelerated filer    ¨
 
       
 
Non-accelerated filer    ¨
(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
 
As of May 21, 2010, there were 47,975,049 shares of common stock outstanding.
 
 
 
 

 

TABLE OF CONTENTS
 
     
Page #
       
       
PART I - FINANCIAL INFORMATION 1
       
ITEM 1– FINANCIAL STATEMENTS 1
       
  Unaudited Consolidated Balance Sheets as of March 31, 2010 and June 30, 2009
1
       
  Unaudited Consolidated Statements of Operations for three- and nine-months ended March 31, 2010 and March 31, 2009
2
       
  Unaudited Consolidated Statements of Cash Flows for the three- and nine-months ended March 31, 2010 and March 31, 2009
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 4T – CONTROLS AND PROCEDURES
7
       
PART II - OTHER INFORMATION 8
       
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
10
Exhibit 31.2
11
Exhibit 32.1
12
Exhibit 32.2
13

 
 
ii

 
 
 
 
 
 
Consolidated Balance Sheet
 
Unaudited
 
   
March 31, 2010
   
June 30, 2009
 
ASSETS
           
CURRENT ASSETS
           
Cash
  $ 6,820     $ 3,276  
Advances to Employees
    595       639  
Accounts Receivable Other
    441       441  
Total current assets
  $ 7,856     $ 4,356  
                 
PROPERTY AND EQUIPMENT, net of accumulated depreciation
  $ 11,593     $ 11,214  
                 
OTHER ASSETS
               
Workers' compensation deposit
    319       353  
                 
    $ 19,768     $ 15,923  
                 
LIABILITIES AND DEFICIT IN STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable, trade
  $ 663,071     $ 644,099  
Accrued liabilities
    462,634       469,130  
Accrued liabilities-related parties
    551,289       486,984  
Accrued liabilities-majority shareholder
    3,491,381       2,887,346  
Notes payable-other
    978,182       978,182  
Note payable - majority shareholder
    3,205,363       3,105,357  
Notes payable - minority shareholders
    95,665       369,307  
Notes payable - related parties
    1,732,663       1,735,766  
Deferred wages - employees
    374,231       309,643  
Customer deposits
    394,767       394,767  
Total current liabilities
  $ 11,949,246     $ 11,380,581  
LONG TERM LIABILITIES
               
Deferred wages and interest-majority shareholder
  $ 1,344,689     $ 1,085,414  
                 
Total liabilities
  $ 13,293,935     $ 12,465,995  
                 
DEFICIT IN STOCKHOLDERS' EQUITY
               
Common stock, authorized, 150,000,000 shares, no par value
               
  47,885,805 and 45,980,565 issued and outstanding respectively
  $ 33,180,810     $ 32,712,733  
Accumulated deficit
    (46,454,977 )     (45,162,805 )
Total deficit in stockholders' equity
  $ (13,274,167 )   $ (12,450,072 )
                 
    $ 19,768     $ 15,923  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
1

 
 
 
Consolidated Statements Of Operations
 
Unaudited  
                   
   
Three Months Ended
   
Nine Months Ended
 
    March 31,     March 31,     March 31,     March 31,  
   
2010
   
2009
   
2010
   
2009
 
REVENUE
                       
Revenues- related parties
  $ 5,921     $ 353,133     $ 153,111     $ 479,729  
Other revenue
    23,296               30,030       200  
Total revenues
    29,217       353,133       183,141       479,929  
                                 
COST OF REVENUE
                               
Direct project expenses
    5,014       14,699       5,710       114,354  
Gross Profit
    24,203       338,434       177,431       365,575  
                                 
OPERATING EXPENSES
                               
Selling, general and administrative
    231,776       215,864       620,153       754,904  
Rent expense to majority shareholder
    132,274       132,036       396,823       396,109  
Depreciation and amortization
    -       180       -       540  
Total expenses
    364,050       348,080       1,016,976       1,151,553  
                                 
Operating Loss
    (339,847 )     (9,646 )     (839,545 )     (785,978 )
                                 
OTHER EXPENSE
                               
Other income
    -       -       150       -  
Interest expense
    (87,870 )     (96,224 )     (215,342 )     (196,121 )
Interest expense- majority shareholder
    (79,104 )     (77,135 )     (237,435 )     (228,451 )
Total other expense
    166,974       173,359       452,627       424,572  
                                 
                                 
NET INCOME (LOSS)
    (506,821 )     (183,005 )     (1,292,172 )     (1,210,550 )
                                 
                                 
Loss per common share, basic and diluted
  $ (0.01 )     0.00 )   $ (0.03 )   $ (0.03 )
                                 
Weighted average common shares outstanding
    47,832,958       45,974,991       47,682,517       45,840,595  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
2

 
 
 
Consolidated Statement of Cash Flows
 
Unaudited
 
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2010
   
2009
 
Cash Flows From Operating Activities
           
Net Loss
  $ (1,292,172 )   $ (1,210,550 )
Adjustments to reconcile net loss
               
to net cash used in operating activities:
               
Depreciation expense
    -       540  
Stock based compensation
    106,801       217,408  
Option expense
    66,115       -  
Imputed interest
    22,661       33,991  
Change in assets and liabilities:
               
Accounts receivable
    44       2,706  
Accounts payable
    18,972       37,699  
Accrued liabilities – related parties
    668,340       -  
Accrued liabilities
    (6,496 )     702,721  
Customer deposits
    -       (846 )
Other assets
    (345 )     -  
Other liabilities
    323,863       814  
Net Cash Used in Operating Activities
  $ (92,217 )   $ (215,517 )
                 
Cash Flows Provided from Financing Activities
               
Borrowing from related party debt
    130,685       238,246  
Borrowing on note payable
    -       20,104  
Payments related party note payable
    (34,924 )     (40,997 )
Net Cash Provided from Financing Activities
  $ 95,761     $ 217,353  
                 
Net (decrease) in cash
    3,544       1,836  
Cash Balance at Beginning of Period
    3,276       -  
Cash Balance at End of Period
  $ 6,820     $ 1,836  
                 
Supplemental Disclosure of Non-Cash Financing Activities:
               
Contributed capital in the form of common shares
  $ 30,319     $ 66,500  
Imputed Interest of notes payable
  $ -     $ 33,991  
Shares issued as repayment of debt
  $ 272,500     $ -  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
3

 

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, 2009 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, 2010, and its results of operations and its cash flows for the nine months ended March 31, 2010 and 2009. 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 2009 as reported in the 10-K have been omitted.

 
NOTE B – GOING CONCERN

As of March 31, 2010, MI has accumulated deficits of $46,454,977.  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.

 
NOTE C – NOTES PAYABLE – RELATED PARTIES

During the quarter ended March 31, 2010, MI repaid $2,982.  The total owed to this party is $1,732,663 at March 31, 2010.  The amounts are due upon demand and interest is accrued at the stated rate of 5%.

During the quarter ended March 31, 2010, MI repaid $5,000 to another related party.

 
NOTE D - STOCK-BASED COMPENSATION

Amortization of stock option expense during the quarter ended March 31, 2010  totaled $66,115.

During the three months ended March 31, 2010, MI issued 117,889 shares for services to outside consultants and estimated the value of these shares at the fair market value of $29,815 on the date of issuance which approximates when the services were performed.

 
4

 
 
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.
 
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. MI will continue to assess its potential loss in the future as more information
is available.

 
NOTE F - SUBSEQUENT EVENTS

The company evaluated all events or transactions that occurred after March 31, 2010 up through May 24, 2010, the date we issued these financial statements, and noted the following non-recognizable subsequent events:

a.)  
In April and May 2010 the Company issued 89,244 shares of its common stock in accordance with an ongoing agreement for services to two consultants of the Company. These shares were valued at $22,577 determined from the closing price of the Company’s stock at date of issuance.
 
 
5

 
 
 
Results of Operations
 
Three months Ended March 31, 2010 and March 31, 2009
 
For the three-months ended March 31, 2010, we had a net loss of $506,821 or $0.01 loss per share as compared to a net loss of $183,005 or $0.00 loss per share for the same period of 2009.  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, 2010 and March 31, 2009

For the nine-months ended March 31, 2010, we had a net loss of $1,292,172 or $0.03 loss per share as compared to a net loss of $1,210,550 or $0.03 loss per share for the same period of 2009.  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, 2010, MI has accumulated deficits of $46,454,977. 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, 2010, amounts outstanding to him total $3,205,363 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, 2010 is $2,082,290.   He has also agreed to defer his salary.  Total amounts due to him for the deferred salaries including accrued interest total $1,344,689.

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.

 
6

 


As a smaller reporting company we are not required to report items under this section.

 

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, 2009, although the company is conducting an internal audit with respect to the Sarbanes-Oxley Act provisions and expect the outcome of this audit to result in revisions to some of its existing processes and controls to take effect in the next reporting period.

 
7

 
 


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.
 
 
Not applicable

 

None

 

None

 

(a.)  
Reports on Form 8-K

The following reports were filed on Form 8-K during the period ending February 11, 2010.

Moller International, Inc (“MI”) and Future Toys Design Limited (a.k.a., “Cyberking Toys”) of Chai Wan, Hong Kong have entered into a three-year “Robotic License and Technology Transfer Agreement” as of 10 February 2010.  Under the terms of this agreement MI will provide on-going technical support for the use of its Aerobot™ technology in scale model toys.  Additionally the agreement provides Cyberking Toys with rights to market its scale model vertical take off and landing capable toys with the Aerobot™ mark.  In exchange for this support and trademark name usage, MI will receive royalties on the sales of toys employing its technology or bearing its trademarked name.

 
8

 
 
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
 
 
 
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 24, 2010   /s/ Paul S. Moller
Date   Paul S. Moller, Ph.D.
 
 
President, CEO, Chairman of the Board
 
 
9