a6105566.htm

10-Q 1 a6105566.htm MOLLER INTERNATIONAL, INC. 10-Q a6105566.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, 2009

o	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 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	o	Accelerated filer	o

Non-accelerated filer (Do not check if a smaller reporting company)	o	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 o No x

At November 20, 2009, there were 47,746,177 shares of common stock outstanding.

TABLE OF CONTENTS
	Page #
PART I - FINANCIAL INFORMATION

ITEM 1– FINANCIAL STATEMENTS

Unaudited Consolidated Balance Sheets as of September 30, 2009 and June 30, 2009	1
Unaudited Consolidated Statements of Operations for three months ended September 30, 2009 and September 30, 2008	2
Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2009 and September 30, 2008	3
Notes to Unaudited Consolidated 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
	September 30, 2009			June 30, 2009
ASSETS
CURRENT ASSETS
Cash	$	15,700		$	3,276
Advances to Employees		588			639
Accounts Receivable Other		441			441
Total current assets		16,729			4,356

PROPERTY AND EQUIPMENT, net of accumulated depreciation		11,214			11,214
OTHER ASSETS		319			353

	$	28,262		$	15,923
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	658,181		$	644,099
Accrued liabilities		452,869			469,130
Accrued liabilities-related parties		508,581			486,984
Accrued liabilities-majority shareholder		3,089,563			2,887,346
Notes payable-other		978,182			978,182
Note payable - majority shareholder		3,170,979			3,105,357
Notes payable - minority shareholders		100,807			369,307
Notes payable - related parties		1,735,666			1,735,766
Deferred wages - employees		304,019			309,643
Customer deposits		394,767			394,767
Total current liabilities		11,393,614			11,380,581

LONG TERM LIABILITIES
Deferred wages and interest-majority shareholder		1,170,210			1,085,414

Total liabilities		12,563,824			12,465,995

Commitments and contingencies
STOCKHOLDERS' DEFICIT
Common stock, authorized, 150,000,000 shares, no par value
47,602,173 and 45,980,565 issued and outstanding respectively		32,989,900			32,712,733
Accumulated deficit		(45,525,462	)		(45,162,805	)
Total stockholders' deficit		(12,535,562	)		(12,450,072	)

	$	28,262		$	15,923

See accompanying notes to unaudited consolidated financial statements.

MOLLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited
	Three Months Ended
	September 30, 2009			September 30, 2008
REVENUE
Revenues- related parties	$	47,266		$	-
Other revenue		3,133			2,851
Total revenues		50,399			2,851

COST OF REVENUE
Direct project expenses		696			65,303
Gross profit (loss)		49,703			(62,452	)

OPERATING EXPENSES
Selling, general and administrative		145,490			268,705
Rent expense to majority shareholder		132,274			132,036
Depreciation and amortization		-			180
Total operating expenses		277,764			400,921

Operating loss		(228,061	)		(463,373	)

OTHER EXPENSE
Interest expense		56,579			63,401
Interest expense- majority shareholder		78,017			74,420
Total other expense		134,596			137,821

NET LOSS	$	(362,657	)	$	(601,194	)


Loss per common share, basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding		47,486,025			45,737,602

See accompanying notes to unaudited consolidated financial statements.

MOLLER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
	Three Months Ended
	September 30,			September 30,
	2009			2008
Cash Flows From Operating Activities
Net Loss	$	(362,657	)	$	(601,194	)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation expense		-			180
Stock-based compensation		4,667			78,148
Change in operating assets and liabilities:
Accounts receivable		51			717
Accounts payable		14,082			27,480
Accrued liabilities-related parties		223,814			223,329
Accrued liabilities		(16,261	)		15,966
Other liabilities		79,172			97,236
Other assets		34			492
Net Cash Used in Operating Activities	$	(57,098	)	$	(157,646	)

Cash Flows Provided by Financing Activities
Proceeds from related party notes payable	$	80,397		$	170,423
Payments on related party note payable		(10,875	)		(12,777	)

Net Cash Provided by Financing Activities	$	69,522		$	157,646

Net Increase In Cash	$	12,424		$	-
Cash, Beginning of Period	$	3,276		$	-
Cash, End of Period	$	15,700		$	-

Cash paid during the year for:
Interest	$	-		$	-
Income taxes		-			-

Supplemental disclosure of non-cash financing activities Contributed capital in the form of contributed
common shares	$	-		$	50,000
Shares issued as repayment of debt		272,500			-

See accompanying notes to unaudited consolidated financial statements.

Moller International, Inc.

Notes To Consolidated Financial Statements

Unaudited

NOTE A –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 September 30, 2009, and its results of operations and its cash flows for the three months ended September 30, 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 2009 as reported in the 10-K have been omitted.

Recently Adopted Accounting Pronouncements

Effective this quarter, MI adopted The FASB Accounting Standards Codification (ASC or Codification) and the Hierarchy of Generally Accepted Accounting Principles (GAAP) which establishes the Codification as the sole source for authoritative U.S. GAAP and will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC. The adoption of the Codification did not have an impact on MI’s financial position, results of operations or cash flows. Since the adoption of the Accounting Standards Codification (ASC) the notes to the consolidated financial statements will no longer make reference to Statement of Financial Accounting Standards (SFAS) or other U.S. GAAP pronouncements.

MI does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows.

NOTE B – GOING CONCERN

As shown in the accompanying financial statements, MI has an accumulated deficits of $45,525,462 and a working capital deficit of $11,376,885 as of September 30, 2009. 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. Historically, funding was funded by certain shareholders, including, Dr. Paul S. Moller (“Dr. Moller”), the majority shareholder, in the form of short-term notes payable. As of September 30, 2009, amounts outstanding to Dr. Moller total $3,170,979. In addition, Dr. Moller has granted MI a deferral on the payment of rent for the office building. The total deferred rent, including interest owed to Dr. Moller at September 30, 2009 amounted to $3,089,563. There is no assurance that MI will continue to receive funding from shareholders in the future or that funds from 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.

On May 18, 2009, Dr. Moller has filed for protection under the Chapter 11 reorganization provisions of the federal bankruptcy law. With the outcome of these proceedings as yet undetermined, there is uncertainty over the potential impact on MI, if any. The impact of this action on MI’s ability to raise needed capital as well as the possibility that Dr. Moller could lose some or all of his holdings in MI to third party creditors has not been determined.

NOTE C – NOTES PAYABLE – RELATED PARTIES

During the quarter ended September 30, 2009, MI made additional borrowings from related parties of $10,397 and made repayments of $283,375, of which $272,500 were repaid through issuance of 1,602,941 common shares.

NOTE D - STOCK-BASED COMPENSATION

During the quarter ended September 30, 2009, MI issued 18,667 shares for services to an outside consultant with a fair market value at the date of issuance of $4,667.

Options outstanding and exercisable as of September 30, 2009 totaled 10,029,044 with a weighted average exercise price and remaining life of $0.43 and 3.46 years, respectively. As of September 30, 2009, 6,581,040 of these options have an intrinsic value of $290,336. There were no new stock options granted during the quarter.

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.

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.

NOTE F – SUBSEQUENT EVENTS

The Company evaluated all events or transactions that occurred after September 30, 2009 up through November 20, 2009, the date we issued these financial statements and noted the following non-recognizable subsequent events:

a.)	On October 1, 2009 the Company issued 21,277 shares of its common stock in accordance with an ongoing agreement for services to a consultant of the Company. These shares were valued at $0.235 per share determined from the closing price of the Company’s stock at date of issuance.

b.)	On October 20, 2009 the Company issued 100,000 shares of its common stock to their legal counsel for past services performed. These shares were valued at $0.27 per share determined from the closing price of the Company’s stock at date of issuance.

c.)	On November 2, 2009 the Company issued 22,727 shares of its common stock to an outside consultant for services rendered. These shares were valued at $0.22 per share determined from the closing price of the Company’s stock at date of issuance.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three months ended September 30, 2009 and September 30, 2008

For the three-months ended September 30, 2009, we had a net loss of $362,657 or $0.01 loss per share as compared to a net loss of $601,194 or $0.01 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.

Going Concern and Liquidity

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, 2009.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

United States Bankruptcy Court: Paul S. Moller/Rosa Maria Moller, Case #09-29936-C-11

Moller International’s President and majority shareholder, Paul S. Moller (“Dr. Moller”), has filed for protection under the Chapter 11 reorganization provisions of the federal bankruptcy law. The application was filed on 18 May 2009 in U.S. Bankruptcy Court for the Eastern District of California in Sacramento.

The proceedings are underway but no final outcome has yet to be made. MI will continue to assess it 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

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.

November 20, 2009	/s/ Paul S. Moller
Date	Paul S. Moller, Ph.D.
	President, CEO, Chairman of the Board