a5901414.htm

10-Q 1 a5901414.htm MOLLER INTERNATIONAL, INC. 10-Q a5901414.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 December 31, 2008

¨	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 #

PART I - FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of December 31, 2008 and June 30, 2008	1
Unaudited Consolidated Statements of Operations for three- and six-months ended December 31, 2008 and December 31, 2007	2
Unaudited Consolidated Statements of Cash Flows for the three- and six-months ended December 31, 2008 and December 31, 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	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

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.

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.

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.

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.

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.

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

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 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.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

J.F. Wilson & Associates Ltd. v. Estate of Percy Symens, et al.

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

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.

February 23, 2009			/s/ Paul S. Moller
Date			Paul S. Moller, Ph.D.
			President, CEO, Chairman of the Board