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EX-32.2 - MOLLER INTERNATIONAL INCex32-2.htm
EX-31.1 - MOLLER INTERNATIONAL INCex31-1.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 September 30, 2011
 
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No o
 
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 November 8 2011, there were 48,643,720 shares of common stock outstanding.

 
TABLE OF CONTENTS
 
 
 
Page #
PART I - FINANCIAL INFORMATION
 
  1
1
2
3
4
5
6
6
   
PART II - OTHER INFORMATION
 
7
7
7
7
7
ITEM 6 - Exhibits  8
   
SIGNATURES
9
   
EXHIBITS
 
 
 
 
 

 
 PART I - FINANCIAL INFORMATION
 
ITEM 1 – FINANCIAL STATEMENTS
 
MOLLER INTERNATIONAL, INC.
Consolidated Balance Sheets
 
   
September 30, 2011
   
June 30, 2011
 
ASSETS
           
CURRENT ASSETS
           
Cash
  $ 3,111     $ 24,217  
Accounts receivable
    2,458       2,459  
Prepaid Expenses
    6,518       8,403  
Advances to employees
    1,577       1,900  
Total current assets
    13,664       36,979  
                 
PROPERTY AND EQUIPMENT, net of accumulated depreciation
    9,448       9,682  
                 
OTHER ASSETS
    319       319  
                 
    $ 23,431     $ 46,980  
LIABILITIES AND DEFICIT IN STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable, trade
  $ 662,421     $ 681,949  
Accrued liabilities
    405,712       392,478  
Accrued liabilities-majority shareholder
    4, 510,345       4,310,018  
Notes payable-other
    992,606       978,182  
Note payable - majority shareholder
    2,967,665       3,072,846  
Notes payable - minority shareholders
    158,603       158,603  
Deferred wages – employees
    585,576       543,775  
Customer deposits
    389,768       394,767  
Total current liabilities
    10,672,696       10,532,618  
LONG TERM LIABILITIES
               
Deferred wages and interest-majority shareholder
    573,281       508,103  
                 
Total liabilities
    11,245,977       11,040,721  
                 
DEFICIT IN STOCKHOLDERS' EQUITY
               
Common stock, authorized, 150,000,000 shares, no par value
    48,597,031 and 48,404,062 issued and outstanding respectively
    37,934,294       37,880,275  
Accumulated deficit
    (49,156,840 )     (48,874,016 )
Total stockholders' deficit
    (11,222,546 )     (10,993,741 )
                 
    $ 23,431     $ 46,980  

See accompanying notes to unaudited consolidated financial statements.
 
 
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 
   
Three Months Ended
 
   
September 30, 2011
   
September 30, 2010
 
REVENUE
           
      Other revenue
  $ -     $ 3,515  
                 
OPERATING EXPENSES
               
Selling, general and administrative
    159,214       90,296  
Rent expense to majority shareholder
    16,842       132,267  
Total expenses
    176,056       222,563  
                 
Operating Loss
    (176,056 )     (219,048 )
                 
OTHER EXPENSE
               
     Interest expense
    27,963       12,006  
     Interest expense- majority shareholder
    78,805       110,195  
                Total other expense
    106,768       122,201  
                 
NET INCOME (LOSS)
  $ (282,824 )   $ (341,249 )
                 
Loss per share – Basic
  $ (0.01 )   $ (0.01 )
Loss per share – Diluted
  $ (0.01 )   $ (0.01 )
Weighted average common shares outstanding – Basic
    48,498,381       48,065,422  
Weighted average common shares outstanding – Diluted
    48,498,381       48,065,422  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

   
Three Months Ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
 
Cash Flows From Operating Activities
           
Net loss
  $ (282,824 )   $ (341,249 )
Adjustments to reconcile net loss to net cash
    Provided by (used in) operating activities:
               
    Depreciation expense
    232       -  
    Stock based compensation
    48,519       44,234  
Change in assets and liabilities:
               
    Other assets
    1,885       -  
    Accounts payable
    (19,524 )     20,558  
    Accrued liabilities - related parties
    200,327       205,879  
    Accrued liabilities
    25,158       (3,268 )
    Deferred wages
    106,979       93,635  
Net Cash Provided By Operating Activities
  $ 80,752     $ 19,789  
                 
Cash Used in Investing Activities
               
   Advances to employees
  $ 323     $ -  
Net Cash Used in Investing Activities
  $ 323     $ -  
                 
Cash Flows Used in Financing Activities
               
   Payments on related party note payable
    (105,181 )     (60,130 )
   Proceeds from notes payable
    3,000       -  
Net Cash  Used in Financing Activities
  $ (102,181 )   $ (60,130 )
                 
Decrease in Cash
  $ (21,106 )   $ (40,341 )
Cash, Beginning of Year
    24,217       50,102  
Cash, End of Year
  $ 3,111     $ 9,761  
                 
Supplemental Cash Flow Information:
               
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  
Supplemental Disclosure of Non-Cash:
               
Financing Activities:
               
Shares issued for customer deposits
  $ 5,500     $ -  
 
See accompanying notes to unaudited consolidated financial statements.
 

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 ended June 30, 2011 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 September 30, 2011, and its results of operations and its cash flows for the three months ended September 30, 2011 and 2010. 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 2011 as reported in the 10-K have been omitted.

NOTE B – GOING CONCERN

As of September 30, 2011, MI had an accumulated deficit of $49,156,840 and a working capital deficit of $10,659,032.  In addition, MI is currently in the development stage of the Skycar and Rotapower engine programs, and has no revenue producing products.  Successful completion of product development activities for either or both of these programs will require significant additional sources of capital. These conditions raise substantial doubt as to our ability to continue as a going concern. Historically, funding was provided by certain shareholders, including the majority shareholder, in the form of short-term notes payable. In addition, the majority shareholder granted us a deferral on the payment of rent for our building. There is no assurance that we will continue to receive funding from shareholders, particularly our major shareholder given he has filed for protection under the federal Chapter 11 reorganization provisions of the federal bankruptcy law. Consequently, we are evaluating several alternatives to raise the additional capital through debt or equity transactions. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
NOTE C – NOTES PAYABLE – RELATED PARTIES

During the three months ended September 30, 2011 and 2010, MI made repayments on related party notes payable of $105,181, and $60,130, respectively.

NOTE D - STOCK-BASED COMPENSATION

During the three months ended September 30, 2011, MI issued 192,969 shares of common stock for settlement of customer deposits, services to outside consultants and certain employees.  We valued these shares at the fair market value on the dates of issuance of $54,019.

No options were issued or forfeited during the quarter ended September 30, 2011.  A total of 32,097,740 options with a weighted average exercise price of $0.13 and a weighted average remaining life of 4.78 years were outstanding and exercisable as of September 30, 2011.  These options have an intrinsic value of $1,951,525.
 

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.  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 ruled on an application for letters of instruction in connection with Mr. Miller’s estate.  The court’s Probate Department issued a ruling on September 17, 2010; and in 2011 the court lifted the stay.  Consequently, the litigation has begun to move into a more active phase.

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.  The Company has accrued $200,000 against this estimated loss.  It is reasonably possible that these estimates may be significantly revised as the site investigation and other research and analysis proceeds.

NOTE F - SUBSEQUENT EVENTS

Subsequent to September 30, 2011, the Company issued a total of 32,937 shares common stock valued at $5,520 in accordance with ongoing agreements for services to consultants and employees working with the Company.

 
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Results of Operations
 
Three months Ended September 30, 2011 and September 30, 2010
 
For the three-months ended September 30, 2011, we had a net loss of $282,824 or $0.01 loss per share as compared to a net loss of $341,249 or $0.01 loss per share for the same period of 2010.  We continue to pursue the development activities on the Skycar, Rotapower engine project, primarily in the areas of its flight control system (FCS) and the performance advantages of introducing a hybrid approach to generating the high power required to take off and land. Although there is no assurance that this vehicle will meet with success in the market place, the Company is actively seeking support for the program and, if found, may choose to move into the production of these vehicles.

Going Concern and Liquidity

As of September 30, 2011, MI had an accumulated deficit of $49,156,840 and a working capital deficit of $10,659,032.  In addition, MI is currently in the development stage of the Skycar and Rotapower engine programs, and has no revenue producing products.  Successful completion of product development activities for either or both of these programs will require significant additional sources of capital. These conditions raise substantial doubt as to our ability to continue as a going concern. Historically, funding was provided by certain shareholders, including the majority shareholder, in the form of short-term notes payable. In addition, the majority shareholder granted us a deferral on the payment of rent for our building. There is no assurance that we will continue to receive funding from shareholders, particularly our major shareholder, given he has filed for protection under the federal Chapter 11 reorganization provisions of the federal bankruptcy law. Consequently, we are evaluating several alternatives to raise the additional capital through debt or equity transactions. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
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 - 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, 2011, 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.
 

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.  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 ruled on an application for letters of instruction in connection with Mr. Miller’s estate.  The court’s Probate Department issued a ruling on September 17, 2010; and in 2011 the court lifted the stay.  Consequently, the litigation has begun to move into a more active phase.

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 and has accrued $200,000. 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.

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

(a.)  
Reports on Form 8-K

None
 

ITEM 6 - EXHIBITS
 
(a.)  Exhibits
Exhibit No.
Description
 
     
31.1
 
31.2
 
32.1
 
32.2
 
101.INS
XBRL Instance Document
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
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, 2011
By:
/s/ Paul S. Moller   
Date   Paul S. Moller, Ph.D.  
    President, CEO, Chairman of the Board