Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended October 31, 2011
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-27211
MEDINA INTERNATIONAL HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-1469319
------------------------- ---------------------------
(State of Incorporation) (IRS Employer ID Number)
1802 Pomona Rd., CA 92880
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(Address of principal executive offices)
909-522-4414
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(Registrant's Telephone number)
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 past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the 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 for Regulation S-T (ss.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 [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, 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.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of October 31, 2011, there were 55,290,117 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Consolidated Balance Sheets - October 31, 2011 and April 30, 2011 F-1
Consolidated Statement of Operations -
Three months and six months ended October 31, 2011 and 2010 F-2
Statement of Cash Flows -
Six months ended October 31, 2011 and 2010 F-3
Statement of Changes in Stockholders' Equity (Deficit) F-4
Notes to Consolidated Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures
About Market Risk - Not Applicable 6
Item 4. Controls and Procedures 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 1A. Risk Factors - Not Applicable 7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 8
Item 4. Removed and Reserved
Item 5. Other Information 8
Item 6. Exhibits 8
SIGNATURES 9
Item 1. Financial Statements (Unaudited)
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, April 30,
2011 2011
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 65,744 $ 17,353
Receivables 20,727 5,890
Inventory 32,435 99,640
--------------- --------------
Total current assets 118,906 122,883
--------------- --------------
Property & Equipment 913,746 848,213
Accumulated depreciation (486,192) (422,272)
--------------- --------------
Total property & equipment 427,554 425,941
--------------- --------------
Other assets
Prepaid Expenses 13,012 31,461
--------------- --------------
TOTAL ASSETS $ 559,472 $ 580,285
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 963,854 $ 759,866
Accrued liabilities 345,323 295,994
Short term debt 209,882 214,564
Customer Deposit 316,151 238,495
Stock subscription payable - 2,962
Notes payable 219,032 62,077
Related party payable 833,480 833,480
Related Parties - short-term borrowings from shareholders 438,012 417,820
--------------- --------------
Total current liabilities 3,325,734 2,825,258
--------------- --------------
Stockholders' equity (deficit):
Preferred stock, Series 'A' , $.01 par value, 50 shares
authorized, 20 issued and outstanding as on October 31, 2011 and April 30, 2011 240,000 240,000
Common stock, $0.0001 par value, 500,000,000 shares
authorized, 55,290,117 and 51,110,497 shares issued and outstanding on October 31, 2011
and April 30, 2011 5,529 5111
Additional paid-in capital 3,924,836 3,519,292
Accumulated deficit (6,827,435) (6,009,376)
--------------- --------------
Total Medina International Holdings, Inc. stockholders' equity (deficit) (2,657,070) (2,244,973)
--------------- --------------
Noncontrolling Interest (109,192) 0
--------------- --------------
Total stockholders' equity (deficit) (2,766,262) (2,244,973)
--------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 559,472 $ 580,285
=============== ==============
The accompanying notes are an integral part of these financial statements
F-1
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
For the three months ended For the six months ended
October 31, October 31,
2011 2010 2011 2010
---- ---- ---- ----
Sales, net $ 139,681 $ 418,791 $ 440,343 $ 907,051
Cost of Goods Sold 112,608 238,081 293,404 580,964
------------------------------------- -----------------------------------
Gross Profit (Loss) 27,073 180,710 146,939 326,087
------------------------------------- -----------------------------------
General and administrative expenses 449,506 125,409 724,091 240,157
Selling and marketing expenses 23,447 37,169 49,645 90,300
Cost of acuisition fopr 51% of
Wintec Protective Systems, Inc. - - 219,600 -
------------------------------------- -----------------------------------
Income (Loss) from operations (445,880) 18,132 (846,397) (4,370)
------------------------------------- -----------------------------------
Other income - - - -
Interest expense (48,441) (19,359) (100,454) (29,366)
------------------------------------- -----------------------------------
Net other loss (48,441) (19,359) (100,454) (29,366)
------------------------------------- -----------------------------------
Loss before income tax (expense) benefit (494,321) (1,227) (946,851) (33,736)
Income tax (expense) benefit - - - -
------------------------------------- -----------------------------------
Net Income (Loss) $ (494,321) $(1,227) $ (946,851 $ (33,736)
Less Net (income) loss attributable to
noncontrolling interest $ 128,791 $ - $ 128,791 $ -
------------------------------------- -----------------------------------
Less Net (income) loss attributable to
Medina International Holdings, Inc. $ (365,5$0) (1,227) $ (818,060 $ (33,736)
===================================== ===================================
Basic $ (0.01) $ (0.00) $ (0.02) $ (0.00)
------------------------------------- -----------------------------------
Diluted $ (0.01) $ (0.00) $ (0.02) $ (0.00)
===================================== ===================================
Weighted average number of
shares outstanding:
Basic 55,818,598 51,006,747 55,818,598 51,006,747
------------------------------------- -----------------------------------
Diluted 55,818,598 51,006,747 55,818,598 51,006,747
--------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-2
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
Additional Common
Common Stock Preferred Stock Paid-In Stock Subscription Accumulated
Shares Amount Shares Amount Capital Subscribed Receivable Deficit
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2008 35,560,091 $ 3,556 - $ - $ 2,419,032 $ 10,000 $ (3,000) $ (2,929,850)
Net loss (1,768,434)
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2009 35,560,091 $ 3,556 - $ - $ 2,419,032 $ 10,000 $ (3,000) $ (4,698,284)
Stock issued for subscription
payable 20 240,000
Stock issued to Directors 50,000 5 3,157
Stock issued for subscription
payable 11,091,250 1,109 661,629
Stock issued for accrued
liabilities 4,135,000 413 413,087
Shares issued for services 70,406 7 7,033
Stock subscription receivable 100,000 10 9,990 (10,000) 3,000 (3,000)
Net loss (742,070)
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2010 51,006,747 5,100 20 240,000 3,513,928 - - (5,443,354)
Stock issued to Directors 93,750 10 4,365
Shares issued for services 10,000 1 999
Net loss (566,022)
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2011 51,110,497 5,111 20 240,000 3,519,292 $ - $ - $ (6,009,376)
Stock issued for 51%
acquisition 3,000,000 300 239,700
Cash 1,000,000 100 149,900
Loan Interest 29,620 3 2,959
Directors fees 100,000 10 7,990
Consultant 50,000 5 4,995
Net loss $ (818,059)
-----------------------------------------------------------------------------------------------------
Balance - October 31, 2011 $ 55,290,117 $ 5,529 $ 20 $ 240,000 $ 3,924,836 $ - $ - $ (6,827,435)
=====================================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
(continued)
Stockholders'
Equity
Medina
International Non-Controlling
Holdings, Inc. Interest Totals
----------------------------------------------
Balance - April 30, 2008 $ (500,262)
Net loss (1,768,434)
-------------------------------------------
Balance - April 30, 2009 $ (2,268,696) $ - $ (2,268,696)
Stock issued for subscription
payable 240,000 240,000
Stock issued to Directors 3,162 3,162
Stock issued for subscription
payable 662,738 662,738
Stock issued for accrued
liabilities 413,500 413,500
Shares issued for services 7,040 7,040
Stock subscription receivable - -
Net loss (742,070) (742,070)
--------------------------------------------
Balance - April 30, 2010 (1,684,326) (1,684,326)
-
Stock issued to Directors 4,375 4,375
Shares issued for services 1,000 1,000
Net loss (566,022) (566,022)
--------------------------------------------
Balance - April 30, 2011 $ (2,244,973) (2,244,973)
-
Stock issued for 51%
acquisition 240,000 $ 19,600 259,600
Cash 150,000 150,000
Loan Interest 2,962 2,962
Directors fees 8,000 8,000
Consultant 5,000 5,000
Net loss (818,059) $ (128,792) (946,851)
--------------------------------------------
Balance - October 31, 2011 $ (2,657,070) $ (109,192$ (2,766,262)
============================================
The accompanying notes are an integral part of these financial statements.
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
October 31,
2011 2010
-------------------------------
Net loss $ (946,851) $ (33,736)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock expenses - 2,625
Depreciation expenses 63,920 78,556
Stock issued for acquiring 51% of Wintec 259,600 -
Interest on Convertible Notes 68,333 -
Stock issued for services 13,000 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (14,837) 62,283
(Increase) decrease in other receivable - (2,570)
(Increase) decrease in inventory 67,205 (40,360)
Increase (decrease) in accounts payable
and accrued liabilities 253,317 114,079
Increase (decrease) in customer deposits 77,656 (207,500)
(Increase) decrease in prepaid expenses 18,449 (11,846)
Total adjustments 806,643 (4,733)
-------------------------------
Net cash (used) received in operating activities (140,208) (38,469)
-------------------------------
Cash flows from investing activities:
Purchase of property and equipment (65,533) (17,725)
-------------------------------
Net cash used in investing activities (65,533) (17,725)
-------------------------------
Cash flows from financing activities:
Proceeds (payments) from notes payables - related party (1,378) 20,650
Proceeds (Payments) from note payable 90,000 (29,000)
Proceeds (Payments) from lines of credit & credit cards (4,682) (6,163)
Proceeds (Payments) from short-term borrowings Shareholders 20,192 (35,213)
Proceeds from sale of stock 150,000 -
-------------------------------
Net cash provided (used) by financing activities 254,132 (49,726)
-------------------------------
Net increase (decrease) in cash and cash equivalents 48,391 (105,920)
Cash and cash equivalents - beginning of period 17,353 107,223
Cash and cash equivalents - end of period $ 65,744 $ 1,303
===============================
Supplemental disclosure of cash flow information:
Interest Paid $ 5,212 $ 6,985
===============================
Taxes paid $ - $ -
===============================
The accompanying notes are an integral part of these financial statements
F-5
Medina International Holdings, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the six months ended October 31, 2011
(Unaudited)
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was
incorporated in 1998 as Colorado Community Broadcasting, Inc. The Company
intended to purchase low power television licenses or stations and planned to
broadcast local programming mixed with appropriate national programming. The
Company changed the name of the business in 2005 to Medina International
Holdings, Inc.
The Company, under its two wholly owned subsidiaries, Harbor Guard Boats, Inc.
and Medina Marine, Inc., plans to manufacture and sell recreational and
commercial boats. The Company formed Medina Marine, Inc., as a wholly owned
subsidiary of the Company, on May 22, 2006 to manufacture and sell fire rescue,
rescue and recreational boats.
The Company signed an agreement to acquire Modena Sports Design, LLC, as a
wholly owned subsidiary of the Company on June 18, 2008. Modena Sports Design,
LLC was formed in the State of California in 2003 to produce fire rescue, rescue
and recreational boats. Modena Sports Design, LLC reorganized as a California
corporation on January 7, 2010 changed its name to Harbor Guard Boats, Inc.
The Company entered into an agreement with WinTec Protective Systems, Inc. on
June 28, 2011 to acquire 51% of the equity or 20,400,000 common shares of WinTec
Protective Systems, Inc. in exchange for 3,000,000 common shares of the Company.
Wintec Protective Systems, Inc. formed Security Glass Solution, Inc. a wholly
owned subsidiary in the State of Texas on July 28, 2011.
Agreement with Wintec Protective Systems, Inc.
On June 28, 2011, Medina International Holdings, Inc. entered into a
Contribution and Exchange Agreement with WinTec Protective Systems, Inc.
("WinTec.") As part of the Contribution and Exchange Agreement, the Company
agreed to issue 3,000,000 shares of its restricted common stock in exchange for
20,400,000 shares of the common stock of WinTec. As a result of such exchange,
the Company holds 51% of the issued and outstanding common stock of WinTec,
making WinTec a subsidiary of the Company.
Wintec was incorporated in the State of Texas. Wintec's Operations are located
in Houston, Texas. Wintec has developed various products such as CORTAIN,
Hydro-Tain, and Blast Block. Medina International Holdings, Inc. has first right
to use CORTAIN, anti-corrosion material for small marine crafts.
As part of the Contribution and Exchange Agreement, the Company has agreed to
register the 3,000,000 shares issued with the Securities and Exchange Commission
("SEC") for resale by WinTec. If any of the following occur:
F-6
(i) the Registration Statement is not filed on or before the Required Filing
Date,
(ii) the Registration Statement is not declared effective on or before the
Required Effective Date, or
(iii)the Registration Statement is declared effective but cease to be effective
for a period of time which shall exceed three hundred and sixty five (365) days
in the aggregate per year (defined as a period of 365 days commencing on the
date the Registration Statement is declared effective)then the Company will be
required to pay WinTec an amount equal to one-half percent (0.5%) of the fair
market value of the 3,000,000 shares of the Company's common stock on the first
business day after the non-registration event and for each subsequent thirty
(30) day period (pro rata for any period less than thirty (30) days) which are
subject to such Non-Registration Event.
Stock Redemption and Purchase Agreement
Concurrent with the signing of the Contribution and Exchange Agreement, the
Company also entered into a Stock Redemption and Purchase Agreement with WinTec.
The Stock Redemption and Purchase Agreement provides that provides WinTec the
right to repurchase 12,400,000 shares of its common stock held by the Company
upon the closing of the Contribution and Exchange Agreement in exchange for
$1,500,000(amended to $237,658 on October 24,2011). In addition, the Company has
agreed to issue to WinTec an option to purchase up to 3,000,000 shares of its
restricted common stock at an exercise price of $0.10 per share.
The Stock Redemption and Purchase Agreement provides that the WinTec Board of
Directors shall be reduced from 7 to 6 directors and that the Company will have
the ability to appoint 2 of the directors.
Upon the completion of the Stock Redemption and Purchase Agreement, the Company
will hold 8,000,000 shares of WinTec, representing 20% of the issued and
outstanding common stock of WinTec.
Loan Agreement and Revolving Promissory Note
Concurrent to the signing of the Contribution and Exchange Agreement, the
Company entered into a Loan Agreement and Revolving Promissory Note with WinTec.
As part of the Loan Agreement, the Company has agreed to lend to WinTec
$1,500,000 (amended to $237,658 on October 24,2011) cash to be used by WinTec to
expand its business operations, which includes at some future point moving their
laboratory facility from Texas to California.
The Loan Agreement provides for the funds to be delivered to WinTec, as set
forth below:
- Fifty Thousand Dollars ($50,000) upon execution of the loan documentation,
and
- Four Hundred Fifty Thousand ($450,000) amended to $187,658 on October 24,
2011 and 90 days after the execution of the loan documentation.
F-7
The Loan Agreement provides for the Company to be issued an exclusive license
for the use of WinTec's anti-corrosion material for small marine craft, pursuant
and the first right of first refusal to exclusively license such intellectual
property of WinTec as it may license to third parties.
The Revolving Promissory Note has an annual interest rate of 1% and a term of
four (4) years from the date of issuance. The Revolving Promissory Note does not
provide for a payment schedule, only that payments will be made as requested by
the Company.
Stock Issuance
On June 28, 2011, as part of the Contribution and Exchange Agreement and the
Stock Redemption and Purchase Agreement, the Company made the following
issuances of its restricted common stock and equity instruments:
- 3,000,000 shares of its restricted common stock to WinTec pursuant to
the Contribution and Exchange Agreement in exchange for 20,400,000
shares of the common stock of WinTec.
- An option to purchase 3,000,000 shares of the Company's restricted
common stock at an exercise price of $0.10 per share to WinTec as part
of the Stock Redemption and Purchase Agreement.
The future success of the Company is likely dependent on its ability to obtain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
obtain positive cash flow.
Presentation of Interim Information
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position and operating results of the Company for
the periods presented. The financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2011.
It is management's opinion that when the interim financial statements are read
in conjunction with the April 30, 2011 Annual Report on Form 10-K, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period. The accompanying consolidated financial statements of Medina
International Holdings, Inc. and its subsidiaries were prepared in accordance
with generally accepted accounting principles in the United States of America
("GAAP") and include the assets, liabilities, revenues, and expenses of
subsidiaries, Medina Marine, Inc., Harbor Guard Boats, Inc. and Wintec
Protective Systems, Inc. All intercompany balances and transactions have been
eliminated in consolidation.
F-8
Going Concern
Recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States, which
contemplates continuation of the Company as a going concern. On October 31,
2011, the Company's current liabilities exceeded its current assets by
$3,206,828. Also, the Company's operations generated $440,343 revenue during the
current period ended and the Company's accumulated deficit is $6,827,435.
Management has taken various steps to revise its operating and financial
requirements, which we believe are sufficient to provide the Company with the
ability to continue on in the subsequent year. Management devoted considerable
effort during the period ended October 31, 2011 towards management of
liabilities and improving our operations. Management believes that the above
actions will allow the Company to continue its operations through the next
fiscal year.
The future success of the Company is likely dependent on its ability to attain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
obtain positive cash flow.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Consolidation
The accompanying consolidated financial statements of Medina International
Holdings, Inc. and its subsidiaries were prepared in accordance with generally
accepted accounting principles in the United States of America ("GAAP") and
include the assets, liabilities, revenues, and expenses of our two wholly owned
subsidiaries, Medina Marine, Inc. and Harbor Guard Boats, Inc. and of Wintec
Protective Systems, Inc. 51% subsidiary. All intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements, and the reported amounts
of revenues and expenses during the reporting periods. Significant estimates and
assumptions are used for, but are not limited to;
1) Revenue recognition;
2) Allowance for doubtful accounts;
3) Inventory costs;
4) Asset impairments;
5) Depreciable lives of assets;
6) Income tax reserves and valuation allowances;
7) Fair value of stock options;
8) Allocation of direct and indirect cost of sales;
9) Contingent liabilities; and
10) Warranty liabilities.
F-9
Future events and their effects cannot be predicted with certainty; accordingly,
our accounting estimates require exercise of judgment. We base our estimates on
historical experience, available market information, appropriate valuation
methodologies, and on various other assumptions that we believe to be
reasonable. We evaluate and update our assumptions and estimates on an ongoing
basis and may employ outside experts to assist in our evaluation, when
necessary. Actual results could differ materially from these estimates.
Revenue Recognition
Revenue Recognition is recognized when earned. The Company's revenue recognition
policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied, are recorded as
unearned revenue.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents. The Company maintains its cash in bank deposit accounts that may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Accounts receivable
The Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. At October 31, 2011 and April 30, 2010, the Company had no
balance in its allowance for doubtful accounts.
Inventory
We carry our inventories at the lower of its cost or market value. Cost is
determined using first-in, first-out ("FIFO") method. Market is determined based
on net realizable value. We also provide due consideration to obsolescence,
excess quantities, and other factors in evaluating net realizable value.
Fixed Assets
Capital assets are stated at cost. Equipment consisting of molds is stated at
cost. Depreciation of fixed assets is provided using the straight-line method
over the estimated useful lives (3-7 years) of the assets. Expenditures for
maintenance and repairs are charged to expense as incurred.
- -------------------------------------- ------------------
Property and Equipment No. of Years
- -------------------------------------- ------------------
Molds 7
Manufacturing Tools 5
Computers 3
Furniture 3
Manufacturing tool HGB - used 3
Office Equipments 3
Office Phone 3
- -------------------------------------- ------------------
F-10
Long Lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance. Impairment losses are required to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced.
Comprehensive Loss
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain statements, however, require
entities to report specific changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, as a separate
component of the equity section of the balance sheet. Such items, along with net
income, are components of comprehensive income.
Issuance of Shares for Service
The Company accounts for employee and non-employee stock awards, whereby equity
instruments issued to employees for services are recorded based on the fair
value of the instrument issued and those issued to non-employees are recorded
based on the fair value of the consideration received or the fair value of the
equity instrument, whichever is more reliably measurable.
Fair Value of Financial Instruments
The Company discloses estimated fair values of financial instruments. The
carrying amounts reported in the statements of financial position for current
assets and current liabilities qualifying, as financial instruments are a
reasonable estimate of fair value.
Foreign Currently Translations and Hedging
The Company is exposed to foreign currency fluctuations due to international
trade. The management does not intend to enter into forward exchange contracts
or any derivative financial investments for trading purposes. The management
does not currently hedge foreign currency exposure.
Basic and Diluted Net Loss per Share
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
F-11
Products and services, geographic areas and major customers
The Company earns revenue from the sale of recreational and commercial boats.
The Company's products were sold domestically and internationally. The Company
does not separate sales activities into different operating segments.
Recently issued accounting pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Codification ("ASC") 105, "Generally Accepted Accounting
Principals" (formerly Statement of Financial Accounting Standards ("SFAS") No.
168, "The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles"). ASC 105 establishes the FASB ASC as the single
source of authoritative nongovernmental U.S. GAAP. The standard is effective for
interim and annual periods ending after September 15, 2009. We adopted the
provisions of the standard on September 30, 2009, which did not have a material
impact on our financial statements.
There were various other accounting standards and interpretations issued in
2009, none of which are expected to have a material impact on the Company's
financial position, operations or cash flows.
NOTE 3 Inventory
As of October 31, 2011 and April 30, 2011, inventory consisted of the following:
- ------------------------------------------------------- --------------- --------------
Item October 31 April 30,
- ------------------------------------------------------- --------------- --------------
2011 2011
---- ----
Raw materials and supplies $ 1,961 $ 5,465
Work in progress 30,474 94,175
Finished goods
-------------- --------------
Total Inventory $ 32,435 $99,640
- ------------------------------------------------------- -------------- --------------
NOTE 4 Property and equipment
As of October 31, 2011 and April 30, 2011, Property and equipment consisted of
the following:
- ------------------------------------------------------- --------------- --------------
Property and Equipment October 31 April 30,
- ------------------------------------------------------- --------------- --------------
2011 2011
---- ----
Machinery and equipment; including molds & tools $893,629 $828,441
Computers 13,535 13,535
Furniture and fixtures 2,537 2,537
Office equipments 3,545 3,200
Fire Extinguisher 500 500
-------- ---------
Total property and equipment 913,746 848,213
Less: Accumulated Depreciation 486,192 (422,272)
---------- ---------
Total property and equipment $427,554 $ 425,941
- ---------------------------------------------------- ---------- ---------
F-12
The Company has spent on Designs for new designs for 30' and 37'and company is
developing a 20' mold during the six months period ended October 31, 2011.
NOTE 5 Prepaid expenses
As of October 31, 2011 and April 30, 2011, prepaid expenses included operating
expenses and vendor deposit in the amount of $13,012 and $31,461 respectively.
NOTE 6 Accrued liabilities
Our accrued liabilities as of October 31, 2011 and April 30 2011 were as
follows:
--------------------------------------------------- --------------- ------------
Accrued Liabilities October 31 April 30,
--------------------------------------------------- --------------- ------------
2011 2011
------- -------
Interest- related party 12,000 10,000
Interest - notes payable -- 683
Payroll and taxes 320,251 256,490
Warranty liabilities 13,072 28,821
-------------- ------------
Total accrued liabilities $ 345,323 $ 295,994
--------------------------------------------------- -------------- ------------
NOTE 7 Short-term debt
- --------------------------------------------------------- -------------------------------
Short-term debt October 31 April 30,
- --------------------------------------------------------- -------------------------------
2011 2011
---- ----
Line of credit - Financial Institution $ 94,932 $ 94,932
Credit card 114,950 119,632
-------- -------
Total $209,882 $214,564
------------------------------------------------------ ------------- ---------------
As of October 31, 2011 the Company had a line of credit totaling $100,000, under
which the Company may borrow on an unsecured basis at an interest rate of 8.75%.
The outstanding balance as of October 31, 2011 was $94,932.
The Company's remaining credit cards carry various interest rates and require
monthly payments, and are substantially held in the name of or guaranteed by
related parties.
NOTE 8 Risk Management Activities
Foreign Currency
The majority of our business is denominated in U.S. dollars and fluctuations in
the foreign currency markets will have a minimal effect on our business.
F-13
Commodity Prices
We are exposed to market risk from changes in commodity prices. The cost of our
products could increase, if the prices of fiberglass and/or aluminum increases
significantly, further decreasing our ability to attain profitable operations.
We are not involved in any purchase commitments with any of our vendors.
Insurance
We are exposed to several risks, including fire, earthquakes, theft, and key
person liabilities. We do not carry any insurance for these risks, other than
general liability insurance, which will adversely affect our operations if any
of these risks materialize.
NOTE 9 Customer deposit
Deposit from customers consisted of the following:
------------------------------------------------------- --------------- --------------
Customer Deposits October 31 April 30,
------------------------------------------------------- --------------- --------------
2011 2011
---- ----
Deposit for commercial boats $295,651 $ 217,995
Deposit for recreational boats 20,500 20,500
-------------- --------------
Total customer deposits $316,151 $ 238,495
----------------------------------------------------- -------------- --------------
NOTE 10 Notes payable
Notes payable consisted of the following:
- ------------------------------------------------------- --------------- --------------
Notes Payable October 31 April 30,
- ------------------------------------------------------- --------------- --------------
2011 2011
---- ----
Notes payable - related party $60,699 $ 62,077
Notes payable - other 158,333
0,000
------------ -------------
Total notes payable $219,032 $ 62,077
- ------------------------------------------------------- ------------ -------------
As of October 31, 2011, the Company had an unsecured note payable to Srikrishna
Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $50,000,
which bears interest at 8% per annum. As of October 31, 2011, accrued Interest
on this note was $12,000.
As of October 31, 2011, the Company had an unsecured note payable to Rosa
Medina, mother of Daniel Medina, President of the Company, in the amount of
$10,699, which bears interest at 8% per annum. As of October 31, 2011, accrued
Interest on this note was $0.
F-14
The convertible notes for $52,500 issued to Asher Enterprises, Inc. ("Asher") in
June 24, 2011 are due and maturity date on the March 13, 2012 with interest of
8% per annum. These notes are convertible at the election of Asher from time to
time after the issuance date. In the event of default, the amount of principal
and interest not paid and the notes become immediately due and payable. Should
that occur, the Company is liable to pay Asher 150% of the then outstanding
principal and interest. The note agreements contain covenants requiring Asher's
written consent for certain activities not in existence or not committed to by
the Company on the issue date of the notes, as follows: dividend distributions
in cash or shares, stock repurchases, borrowings, sale of assets and certain
advances and loans in excess of $100,000. Outstanding note principal and
interest accrued thereon can be converted in whole, or in part, at any time by
Asher after the issuance date into an equivalent of the Company's common stock
determined by 60% of the average of the three lowest closing bid prices of the
Company's common stock during the ten trading days prior to the date the
conversion notice is sent by Asher. We have provided $35,000 as interest expense
loss on the above transaction.
The convertible notes for $42,500 issued to Asher Enterprises, Inc. ("Asher") in
August 1,2011 are due and maturity date on the May 1, 2012 with interest of 8%
per annum. These notes are convertible at the election of Asher from time to
time after the issuance date. In the event of default, the amount of principal
and interest not paid and the notes become immediately due and payable. Should
that occur, the Company is liable to pay Asher 150% of the then outstanding
principal and interest. The note agreements contain covenants requiring Asher's
written consent for certain activities not in existence or not committed to by
the Company on the issue date of the notes, as follows: dividend distributions
in cash or shares, stock repurchases, borrowings, sale of assets and certain
advances and loans in excess of $100,000. Outstanding note principal and
interest accrued thereon can be converted in whole, or in part, at any time by
Asher after the issuance date into an equivalent of the Company's common stock
determined by 60% of the average of the three lowest closing bid prices of the
Company's common stock during the ten trading days prior to the date the
conversion notice is sent by Asher. We have provided $28,333 as interest expense
loss on the above transaction.
NOTE 11 Related Party Transactions
As of October 31, 2011 the Company owed $833,480 to a related party shareholder
committed as part of the purchase transaction of Modena Sports Design, LLC
(currently Harbor Guard Boats, Inc.)
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina.
Plaintiffs are seeking monetary damages exceeding $1 million as well as punitive
damages in unspecified amounts and a dissolution of the Company. Mr. Mardikian
is a Director and significant shareholder of the Company. The suit is in its
preliminary stages and no prediction can be made as to its eventual outcome. At
this stage, the Company believes that plaintiffs' claims are without merit and
will vigorously defend the lawsuit in the normal course of business.
F-15
NOTE 12 Shareholders' loans
At October 31 2011, Shareholders' loans consisted of the following:
- ------------------------------------------------------- --------------- --------------
Shareholders' Loans October 31 April 30,
- ------------------------------------------------------- --------------- --------------
2011 2011
---- ----
Daniel Medina, President $ 186,588 $ 163,924
Madhava Rao Mankal, Chief Financial Officer 251,424 253,896
--------------- --------------
Total Shareholders' Loans $ 438,012 $ 417,820
- ------------------------------------------------------- -------------- ---------------
Shareholders' loans are unsecured, accrued at 10% interest per annum and due on
demand.
Interest is accrued and included in Shareholders' loan account. From time to
time, shareholders are involved in funding operations. These funds are provided
and collected on an as needed basis.
NOTE 13 Stockholders' equity
Common Stock
The Company has been authorized to issue, 500,000,000 shares of common stock
with a par value of $0.0001. As of October 31, 2011 and April 30, 2011, the
Company had 55,290,117 and 51,110,497 shares of its common stock issued and
outstanding respectively. During the six months period ended October 31, 2010
4,179,620 common shares were issued by the Company for cash and services.
Preferred Stock
The Company has been authorized to issue 10,000,000 shares of preferred stock
with a par value of $.01, out of which 10 shares have been designated as
convertible Series `A' preferred stock ("Series A"). The Series `A' has a stated
value $12,000 per share, each one share of Series `A' is convertible into 1% of
the outstanding common shares at the time of conversion, may be converted at
anytime, is redeemable by the Company in whole or in part at anytime at a price
equal to the greater of (a) $12,000 per share or (b) the market value of the
common stock into which the Series `A' is convertible, has preferential
liquidation rights to common stock subject to a 150% of invested capital cap,
and has voting rights equal to common stock in an amount equal to the number of
shares that Series `A' could be converted into 20 preferred shares were issued
or outstanding at October 31, 2010.
In 2010, in satisfaction of a stock subscription payable incurred in May 01,
2007, the Company issued 20 shares of its Series `A' preferred stock to two of
its executive officers, Messrs. Madhava Rao Mankal, CFO of the Company and
Daniel Medina, President of the Company. Mr. Mankal and Mr. Medina each received
10 shares of Series `A' preferred stock, which was valued at $240,000 in total.
F-16
NOTE 14 Acquisition
Medina International Holdings, Inc. ("Company") acquired Modena Sport Designs,
LLC (currently Harbor Guard Boats, Inc.) a California corporation, on June 18,
2008, as its wholly owned subsidiary. The results of operations of Modena Sport
Designs, LLC included in the consolidated financial statements of the Company in
the form 10-K for the year ended April 30, 2009, are from June 18, 2008 to April
30, 2009.
The Company accounted for the acquisition of 100% equity of Modena Sport
Designs, LLC using the purchase method. The purchase price to acquire Modena
Sport Designs, LLC (fixed assets, molds, and license agreements) was 11,000,000
shares of the Company's common stock and $1,000,000 in cash payments, of which
$800,000 is contingent on boat sales at the rate of 10% of price of each boat
sale and $200,000 was due within two to three months upon signing of the
agreement.
The 11,000,000 shares of Company's common stock was valued at $0.06, which was
the fair value of the Company's common stock traded on the
Over-the-counter-bulletin-board (OTCBB) market. Share certificates for
11,000,000 shares were issued on June 1, 2009 and accounted in Medina
international Holdings, Inc.'s books for the year ended April 30, 2009.
The complete disclosure of the acquisition of Modena Sports Design, LLC
(currently Harbor Guard Boats, Inc.), along with the acquired goodwill, were
reported in our annual report on Form 10-K for the period ended April 30, 2010.
NOTE 15 Commitments
Operating Leases
The Company signed a 3 year lease agreement for a 11,900 square feet building in
the city of Corona, in the state of California, effective April 2010. The
address for this location is 1802 Pomona Rd, Corona, CA 92880. This building is
owned by unrelated parties. The lease expires on March 31, 2013, and calls for
monthly payments initially at $2,600 per month plus costs, escalating over the
term of the lease to $6,000 per month plus costs.
The Company has various license agreements with a related party allowing its
technology to be utilized in the manufacture of its boats. These licenses
agreements typically provide for small periodic renewal payments, along with
royalty fee payments based on a percentage (generally 1.5% - 2%) of related
gross sales.
NOTE 16 Subsequent Events
None
F-17
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY AND FORWARD LOOKING STATEMENTS
In addition to statements of historical fact, this Form 10-Q contains
forward-looking statements. The presentation of future aspects of Medina
International Holdings, Inc. ("Medina International Holdings, Inc., "Company" or
"issuer") found in these statements is subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
reflected in such statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's analysis only as
of the date hereof. Without limiting the generality of the foregoing, words such
as "may," "will," "expect," "believe," "anticipate," "intend," or "could" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company's actual results to be materially
different from any future results expressed or implied by Medina International
Holdings, Inc. in those statements. Important facts that could prevent Medina
International Holdings, Inc. from achieving any stated goals include, but are
not limited to, the following:
Some of these risks might include, but are not limited to, the following:
(a) Volatility or decline of the Company's stock price;
(b) Potential fluctuation in quarterly results;
(c) Failure of the Company to earn revenues or profits;
(d) Inadequate capital to continue or expand its business inability to
raise additional capital or financing to implement its business plans;
(e) Failure to achieve a business;
(f) Rapid and significant changes in markets;
(g) Litigation with or legal claims and allegations by outside parties;
and
(h) Insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company may not
be able to successfully develop, manage or market its products and services, the
Company may not be able to attract or retain qualified executives and personnel,
the Company's products and services may become obsolete, government regulation
may hinder the Company's business, additional dilution in outstanding stock
ownership may be incurred due to the issuance of more shares, warrants and stock
options, or the exercise of warrants and stock options, and other risks inherent
in the Company's businesses.
1
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
filed by the Company and any Current Reports on Form 8-K filed by the Company.
Overview
We are in the business of providing quality products and services to emergency
and rescue personnel who risk their lives to save others. We design,
manufacture, test, deliver, and support fire rescue, rescue, and patrol
watercrafts (commercial), ranging from 15' to 37' in length. Our commercial
watercrafts are sold to organizations dedicated to protecting its country and
its citizens. Our products are sold to fire, search & rescue, emergency, police,
defense, and military departments in the United States and abroad. Fire
departments are our largest customers and we rely heavily on government funded
departments to achieve sales and continue our operations.
In addition, we also manufacture two models of recreational watercrafts.
Key Challenges
We face numerous challenges to sustain our operations. We have identified some
of the challenges we continue to face:
a) Continuing to expand our customer base both domestically and
internationally;
b) Continuing to meet or exceed customer's price expectations;
c) Continuing to build brand name both domestically and internationally;
d) Continuing to provide quality customer support;
e) Competing with established competitors;
f) Continuing the development of new products to bring to market; and
g) Reducing internal control weaknesses over financial reporting and
disclosure.
The main uncertainty about our operations is whether we will continue to receive
orders for our commercial products. Our potential customers rely on federal
grants or other government budgets to receive funds to purchase equipment.
Depending on the size of aid received, organization's decision maker(s) purchase
equipment(s) for their departments. The size of the aid received by these
departments creates a demand for our product, in terms of price and features.
The timing of the funds cannot be predicted for our prospective international
customers. The size of the aid cannot be predicted; hence we will be unable to
forecast our outlook for the coming fiscal year.
In June of 2011, we acquired 51% of Wintec Protective Systems, Inc. and in June
18, 2008 we acquired Harbor Guard Boats, Inc. as our wholly owned subsidiary.
Our management has recognized that our businesses is changing, and in response,
we are attempting to rebalance our workforce and manufacturing capacity. We may
incur costs as a result of our efforts to meet these restructuring needs.
2
In addition, our Company's accounting and financial systems need to be
substantially improved in order to accommodate our current and projected
production levels. We may incur costs as a result of our efforts to improve the
accounting and financial systems.
Strategy
Our business strategy is to deliver quality products and services to aid
organizations dedicated to protect its people and property. Our intent is to not
only manufacture high quality watercrafts, but also to seek and/or develop
innovative products to assist emergency and defense personnel and departments to
become more efficient and effective in their mission. In addition, our strategy
includes the following:
a) Capitalize on the demand for commercial and recreational watercrafts;
b) Build long-term relationships with business partners and stakeholders
while providing profitability for our investors;
c) Develop and expand strategic partnerships;
d) Identify new products and markets to meet changing customer
requirements;
e) Retain and provide opportunities for growth for our employees;
For the Three Months Ended October 31, 2011 Compared to the Three Months Ended
October 31, 2010
The Company recognized $139,681 in revenues during the three months ended
October 31, 2011 as compared to $418,791 for the three months period ended
October 31, 2010, resulting a decrease in sales during the quarter of $279,110.
We sold one boat for the three months ended October 31, 2010 compared to two
during the three months ended October 31, 2010.
Our cost of goods sold for the three months ended October 31, 2011 was $112,608
compared to $238,081 during the three months ended October 31, 2010. The
decrease in cost of goods sold of $125,473 or 52.70% was a result of decrease in
corresponding sales activities.
During the three months ended October 31, 2011, we incurred general and
administrative expenses of $449,506 compared to $125,409 during the three months
ended October 31, 2010. The increase in general and administrative expenses for
the three months period ended October 31, 2011 of $324,097 or 258.43% was mainly
due to the development expenditure of Wintec Protective Systems, Inc. and
Professional & Legal expenses.
During the three months ended October 31, 2011, the Company incurred selling and
marketing expenses of $23,447 compared to $37,169 during the three months ended
October 31, 2010. The decrease of $13,722 or %36.91 in selling expenses was
primarily due to the decrease in selling commission of $14,922.
Interest expense increased by $29,082 or 150.22% for the three month period
ended October 31, 2011. The Company incurred $48,441 for the three month period
ended October 31, 2011 compared to $19,359 for the three month period ended
October 31, 2010. Increasing in interest is mainly due to additional borrowing.
During the three months ended October 31, 2011, the Company recognized a net
loss of $494,321 compared to $1,227 during the three months ended October 31,
2010. Increase in net loss of $493,094 was a result of increase in
administration expenses.
3
For the Six Months Ended October 31, 2011 Compared to the Six Months Ended
October 31, 2010
The Company recognized $440,343 in revenue during the six months period ended
October 31, 2011 as compared to $907,051 for the six months period ended October
31, 2010 resulting decrease in sales during the six months ended by $466,708. We
sold three boats for the six months ended October 31, 2011 compared to five
during the six months ended October 31, 2010.
Our cost of goods sold for the six months ended October 31, 2011 was $293,404
compared to $580,964 during the six months ended October 31, 2010. The decrease
in cost of goods sold of $287,560 or 49.49% was a result due to decrease in
corresponding sales activities.
During the six months ended October 31, 2011, we incurred general and
administrative expenses of $724,091 compared to $240,156 during the six months
ended October 31, 2010. The increase in general and administrative expenses for
the six months period ended October 31, 2011 of $483,934 or 201.50% was mainly
due to mainly due to the development expenditure of Wintec Protective Systems,
Inc. and Professional & Legal expenses.
During the six months ended October 31, 2011, the Company incurred selling and
marketing expenses of $49,645 compared to $90,300 during the six months ended
October 31, 2010. The decrease of $40,655 or 45.02% was primarily due to the
sales commission of $35,988, freight charges of $452 and marketing expenses of
$3,045.
Interest expense increased by $71,088 or 242.07% for the six month period ended
October 31, 2011. The Company incurred $100,454 for the six month period ended
October 31, 2011 compared to $29,366 for the six month period ended October 31,
2010. Increases in interest expense is mainly due to additional borrowing.
During the six months ended October 31, 2011, the Company recognized a net loss
of $946,851 compared to $33,736 during the six months ended October 31, 2010.
Increase in net loss of $913,115 or 2,706.64% was a result of the $483,934
increase in administration expenses and cost of acquisition of Wintec Protective
Systems, Inc. $219,600.
Liquidity and Capital Resources
As of October 31, 2011, the Company had $65,744 cash on hand, an inventory of
$32,435 and net property and equipment of $427,554. The Company's total current
liabilities were $3,325,734 as of October 31, 2011, which was represented mainly
accounts payable of $963,854, accrued liabilities of $345,323, deposits from
customers of $316,151, short-term debt of $209,882, notes payable of $219,032
and short-term borrowings from shareholders totaling $438,012. In addition, note
payable incurred as a result of acquisition amounting to $833,480 are included
in the current liabilities. At October 30, 2011, the Company's current
liabilities exceeded current assets by $3,206,828.
The Company used $140,208 in operating activities for the six months period
ended October 31, 2011 compared to usage of $38,469 for six month period ended
October 31, 2010.
The Company used $65,533 in investing activities for the six months period ended
October 31, 2011 compared to 17,725 for six month period ended October 31, 2010.
4
During the six months period ended October 31, 2011, the Company provided
$254,132 in financing activities includes loan in the amount of $95,000 from
unrelated party, proceeds from sale of restricted stock for $150,000 and $20,192
from short-term borrowings from shareholder. The Company made payments includes
$4,682 towards the lines of credits and credit cards and $1,378 towards notes
payable related parties held by the Company.. During the six months period ended
October 31, 2010, the Company made payments towards short-term borrowings from
related parties, lines of credit and credit cards and notes payables in the
amount of $35,213, $6,163, and $29,000, respectively.
The Company has an accumulated deficit, as of October 31, 2011, of $6,827,435
compared to $6,009,376 as of April 30, 2011. The convertible notes for $52,500
issued to Asher Enterprises, Inc. ("Asher") in June 24, 2011 are due and
maturity date on the March 13, 2012 with interest of 8% per annum. These notes
are convertible at the election of Asher from time to time after the issuance
date. In the event of default, the amount of principal and interest not paid and
the notes become immediately due and payable. Should that occur, the Company is
liable to pay Asher 150% of the then outstanding principal and interest. The
note agreements contain covenants requiring Asher's written consent for certain
activities not in existence or not committed to by the Company on the issue date
of the notes, as follows: dividend distributions in cash or shares, stock
repurchases, borrowings, sale of assets and certain advances and loans in excess
of $100,000. Outstanding note principal and interest accrued thereon can be
converted in whole, or in part, at any time by Asher after the issuance date
into an equivalent of the Company's common stock determined by 60% of the
average of the three lowest closing bid prices of the Company's common stock
during the ten trading days prior to the date the conversion notice is sent by
Asher. We have provided $35,000 as interest expense loss on the above
transaction.
Contractual Obligations and Other Commercial Commitments
The Company does not have sufficient capital to meet its cash needs, including
the costs of compliance with the continuing reporting requirements of the
Securities Exchange Act of 1934. Management will have to seek loans or equity
placements to cover such cash needs and cover outstanding payables. Lack of
existing capital may be a sufficient impediment to prevent the Company from
accomplishing its goal of expanding operations. There is no assurance that the
Company will be able to carry out our business. No commitments to provide
additional funds have been made by the Company's management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to cover its expenses as they are incurred.
Irrespective of whether the Company's cash assets prove to be inadequate to meet
its operational needs, the management might seek to compensate providers of
services by issuances of stock in lieu of cash.
5
Off-Balance Sheet Arrangements
In accordance with the definition under SEC rules, the following qualify as
off-balance sheet arrangements:
a) Any obligation under certain guarantees or contracts;
b) A retained or contingent interest in assets transferred to an
unconsolidated entity or similar entity or similar arrangement that serves as
credit, liquidity, or market risk support to that entity for such assets;
c) Any obligation under certain derivative instruments; and
d) Any obligation under a material variable interest held by the registrant
in an unconsolidated entity that provides financing, liquidity, market risk, or
credit risk support to the registrant, or engages in leasing, hedging, or
research and development services with the registrant.
The following will address each of the above items pertaining to the Company.
As of October 31, 2011, we do not have any obligation under certain guarantees
or contracts as defined above.
As of October 31, 2011, we do not have any retained or contingent interest in
assets as defined above.
As of October 31, 2011, we do not hold derivative financial instruments.
Accounting for Derivative Instrument and Hedging Activities as amended.
As of October 31, 2011, we did not participate in transactions that generate
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities
("SPEs"), which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. As of October 31, 2011 and April 30, 2011, we were not involved in any
unconsolidated SPE transactions.
Dividends
The Company has not declared or paid any cash dividend on its common stock and
does not anticipate paying dividends for the foreseeable future.
Recent Accounting Pronouncements
There were various other accounting standards and interpretations issued in
2009, none of which are expected to have a material impact on the Company's
financial position, operations or cash flows.
Going Concern
The Company's auditors have issued a "going concern" qualification as part of
their opinion in the Audit Report. For the year ended April 30, 2011, there was
substantial doubt about the ability of the Company to continue as a "going
concern." The Company has limited capital, debt in excess of $3,206,828 no
significant cash, minimal other assets, and no capital commitments.
6
ITEM 3.QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4.CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintained disclosure controls and procedures (as such term
is defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that our disclosure
controls and procedures are not effective in timely alerting them to material
information required to be included in our periodic SEC filings and to ensure
that information required to be disclosed in our periodic SEC filings is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure as a result of the deficiency in our internal control over
financial reporting discussed below.
There was no change in our internal control over financial reporting that
occurred during the quarter ended October 31, 2011, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina.
Plaintiffs are seeking monetary damages exceeding $1 million as well as punitive
damages in unspecified amounts and a dissolution of the Company.
Mr. Mardikian is a Director and significant shareholder of the Company.
The suit is in its preliminary stages and no prediction can be made as to its
eventual outcome. At this stage, the Company believes that plaintiffs' claims
are without merit and will vigorously defend the lawsuit in the normal course of
business.
7
ITEM 2. CHANGES IN SECURITIES -
During the period of May 1, 2011 through October 31, 2011, the Company issued
3,000,000 common shares at $.08 per share of its common stock to Wintec
Protective Systems, Inc. for the value of $240,000 in exchange for 51% of the
equity of Wintec Protective Systems. The Company also issued 100,000 common
shares at $0.08 to two Independent Directors toward fees, 50,000 common shares
at $0.10 per share for the value of $5,000 as legal consulting to patent
attorney, 1,000,000 common shares in lieu of cash in the amount of $150,000 at
price of $0.15 per share and 29,620 common shares towards settlement of interest
on loan amounting to $2,962.
Exemption From Registration Claimed
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were known to the Company and its management,
through pre-existing business relationships. All purchasers were provided access
to all material information, which they requested, and all information necessary
to verify such information and were afforded access to management of the Company
in connection with their purchases. All purchasers of the unregistered
securities acquired such securities for investment and not with a view toward
distribution, acknowledging such intent to the Company. All certificates or
agreements representing such securities that were issued contained restrictive
legends, prohibiting further transfer of the certificates or agreements
representing such securities, without such securities either being first
registered or otherwise exempt from registration in any further resale or
disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -
None.
ITEM 4. REMOVED AND RESERVED
None.
ITEM 5 OTHER INFORMATION -
None.
ITEM 6. EXHIBITS -
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
8
101.INS XBRL Instance Document (1)
101.SCH XBRL Taxonomy Extension Schema Document (1)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
-----------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file
is deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, is
deemed not filed for purposes of Section 18 of the Securities Exchange
Act of 1934, and otherwise is not subject to liability under these
sections.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDINA INTERNATIONAL HOLDINGS, INC.
(Registrant)
Dated: December __, 2011 By: /s/ Daniel Medina
-----------------------------------
Daniel Medina,
President
Dated: December __, 2011 By: /s/ Madhava Rao Mankal
-----------------------------------
Madhava Rao Mankal,
Chief Financial
Officer