UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------------------------
FORM 10Q
----------------------------------------------------- (Mark-----------------
(Mark One)
[X][X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended JanuaryendedJuly 31, 2013[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file
number:number : 000-27211MEDINA INTERNATIONAL HOLDINGS, INC.
----------------------------------------------------- (Exact-------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1469319
------------------------- --------------------------- (State------------------------------------------------------
(State of Incorporation) (IRS Employer ID Number)
1802 Pomona Rd.191 Kettering DR.,
Corona,Ontario, CA92880 ----------------------------------------------------- (Address91761-----------------------------------------------
(Address of principal executive offices)
909-522-4414
----------------------------------------------------- (Registrant's--------------------------
(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 of Regulation S-T
(ss.232.405(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes[X][X ] 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“large accelerated filer," "accelerated filer"” “accelerated filer” and"smaller“smaller reportingcompany"company” in Rule 12b-2 of the Exchange Act.Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
[ 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 January 31,August 25, 2013, there were 55,890,11756,090,117 shares of the registrant'sregistrant’s common stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) | Page |
Consolidated Balance Sheets | F-1 |
Consolidated Statements of Operations - Three months | F-2 |
Statements of Cash Flows - | F-3 |
Statement of Changes in Stockholders' Equity (Deficit) | F-4 |
Notes to Consolidated Financial Statements | F-5 |
Item 2. | 1 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. Controls and Procedures | 3 |
PART II | |
Item 1. Legal Proceedings | 4 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds -Not Applicable | 5 |
Item 3. Defaults Upon Senior | 5 |
Item 4. Mine Safety Disclosures | 5 |
Item 5. Other Information | 5 |
Item 6. Exhibits | 5 |
SIGNATURES | 6 |
PART I. -– FINANCIAL INFORMATION
MEDINA INTERNATIONAL HOLIDNGS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, April 30,
2013 2012
(Unaudited) (Audited)
------------------------------
ASSETS
Current assets
Cash $ 189,934 $ -
Receivables 237,718 237,718
Reserve (237,718) (237,718)
------------------------------
Total receivables - -
------------------------------
Inventory 160,089 224,566
------------------------------
Total current assets 350,023 224,566
------------------------------
Property and equipment 788,155 753,332
Accumulated depreciation (514,213) (441,206)
------------------------------
Total property and equipment 273,942 312,126
------------------------------
Other assets
Prepaid expenses 15,644 9,468
------------------------------
Total assets $ 639,609 $ 546,160
==============================
LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 592,790 $ 684,678
Accrued liabilities 42,387 458,947
Short term debt 128,709 132,614
Bank overdraft - 192
Customer deposit 762,349 428,891
Stock subscription payable 2,200 -
Notes payable 110,500 90,500
Related party payable 50,000 57,500
Related parties - short term 1,250,887 683,041
------------------------------
Total current liabilities 2,939,822 2,536,363
------------------------------
Shareholders' equity (deficit)
Preferred stock 10,000,000 shares authorized Series A preferred stock,
$0.01 par value, 50 shares authorized,
30 shares issued and outstanding as on January 31, 2013 and April 30, 2012 360,000 360,000
Series B preferred stock, $0.01 par value, 100 shares authorized,
20 shares issued and outstanding as on January 31, 2013 and April 30, 2012 20,000 20,000
Common stock, $0.0001 par value: 500,000,000 shares authorized
55,890,117 and 55,890,117 shares issued and outstanding as on
January 31, 2013 and April 30, 2012 5,589 5,589
Additional paid-in capital 4,880,270 4,880,270
Accumulated deficit (7,566,072) (7,256,062)
------------------------------
Total Medina International Holdings, Inc. shareholders' equity
(deficit) (2,300,213) (1,990,203)
------------------------------
Total liabilities and shareholders' equity (deficit) $ 639,609 $ 546,160
==============================
The accompanying notes are an integral part of these financial statements.
F-1
MEDINA INTERNATIONAL HOLIDNGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended For the nine months ended
January 31, January 31,
2013 2012 2013 2012
--------------------------- ---------------------------
Sales, net $ 347,86$ 9,576 $ 1,048,373$ 449,919
Cost of Goods Sold 346,966 35,436 877,384 328,841
--------------------------- ---------------------------
Gross profit (loss) 895 (25,860) 170,989 121,078
--------------------------- ---------------------------
General and administrative expenses 226,289 408,813 389,377 1,126,004
Selling and marketing expenses 28,475 31,487 76,233 88,032
Write-off of assets - - - 219,600
--------------------------- ---------------------------
Income (loss) from operations (253,869) (466,160) (294,621) (1,312,558)
--------------------------- ---------------------------
Other income 26,722 17,164 24,874 17,164
Interest expense (13,579) (23,665) (40,263) (124,119)
--------------------------- ---------------------------
Net other Income (loss) 13,143 (6,501) (15,389) (106,955)
--------------------------- ---------------------------
Net (income) loss $ (240,726)$ (472,661) $ (310,010)$ (1,419,513)
===========================================================
Net loss per share:
Basic $ 0.00 $ (0.01) $ (0.01)$ (0.03)
=========================== ===========================
Diluted $ 0.00 $ (0.01) $ (0.01)$ (0.03)
=========================== ===========================
Weighted average number of shares outstanding:
Basic 55,890,117 53,723,597 55,890,117 53,723,597
=========================== ===========================
Diluted 55,890,117 53,723,597 55,890,117 53,723,597
=========================== ===========================
The accompanying notes are an integral part of these financial statements.
F-2
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Nine Months Ended January 31, 2013
(Unaudited)
Preferred Stock Preferred Stock Additional
Common Stock Series A Series B Paid-In
Shares Amount Shares Amount Shares Amount Capital
-----------------------------------------------------------------------------------------
Balance - April 30, 2012 55,890,117 5,589 30 360,000 20 20,000 4,880,270
Net income (loss) - - - - - - -
-----------------------------------------------------------------------------------------
Balance - January 31, 2013 55,890,117 5,589 30 360,000 20 20,000 4,880,270
=========================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
Medina International Holdings, Inc. and Subsidiaries
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 2013 (Un-Audited) | April 30, 2013 (Audited) | |||||||
ASSETS | ||||||||
Cash | $ | 21,780 | $ | 2,635 | ||||
Inventory | 654,181 | 193,748 | ||||||
Other receivables | 237,718 | 247,718 | ||||||
Reserve | (237,718 | ) | (237,718 | ) | ||||
Total other receivables | - | 10,000 | ||||||
Total current assets | 675,961 | 206,383 | ||||||
Fixed Assets: | 811,535 | 768,957 | ||||||
Accumulated depreciation | (552,072 | ) | (526,435 | ) | ||||
Total property & equipment | 259,463 | 242,522 | ||||||
Prepaid expenses & deposits | 16,676 | 18,674 | ||||||
TOTAL ASSETS | $ | 952,100 | $ | 467,579 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||
Accounts payable | $ | 619,404 | $ | 656,903 | ||||
Accrued liabilities | 921,579 | 930,981 | ||||||
Short term debt | 126,134 | 128,842 | ||||||
Bank overdraft | - | 9,428 | ||||||
Customer Deposit | 1,212,529 | 538,583 | ||||||
Stock committed to be issued | 3,000 | 7,700 | ||||||
Notes payable | 110,500 | 110,500 | ||||||
Related party payable | 50,000 | 50,000 | ||||||
Related Parties - short-term borrowings from shareholders | 430,724 | 442,121 | ||||||
Total current liabilities | 3,473,870 | 2,875,058 | ||||||
Total Liabilties | 3,473,870 | 2,875,058 | ||||||
Preferred stock 10,000,000 shares authorized | ||||||||
Series A preferred stock, $0.01 par value, 50 shares authorized, 30 shares issued and outstanding on July 31, 2013 and April 30, 2013 | 360,000 | 360,000 | ||||||
Series B preferred stock, $0.001 par value, 100 shares authorized, 20 shares issued and outstanding on July 31, 2013 and April 30, 2013 | 20,000 | 20,000 | ||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized56,090,117 and 55,890,117 shares issued and outstanding on July 31, 2013 and April 30, 2013 | 5,609 | 5,589 | ||||||
Additional paid-in capital | 4,887,950 | 4,880,270 | ||||||
Accumulated deficit | (7,795,329 | ) | (7,673,338 | ) | ||||
Total stockholders' equity (deficit) | (2,521,770 | ) | (2,407,479 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $ | 952,100 | $ | 467,579 | ||||
The accompanying notes are an integral part of these financial statements
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Nine Months Ended January 31, 2013
Operations
(Unaudited)
(continued)
Accumulated
Deficit Totals
------------------------------
Balance - April 30, 2012 $ (7,256,062) $ (1,990,203)
Net income (loss) (310,010) (310,010)
----------------------------------
Balance - January 31, 2013 $ (7,566,072) $ (2,300,213)
==================================
For the three months ended July 31, | ||||||||
2013 | 2012 | |||||||
Sales, net | $ | 57,288 | $ | 642,755 | ||||
Cost of Goods Sold | 67,077 | 447,628 | ||||||
Gross profit (loss) | (9,789 | ) | 195,127 | |||||
General and administrative expenses | 87,563 | 121,298 | ||||||
Selling and marketing expenses | 1,043 | 41,237 | ||||||
Write-off of assets | - | - | ||||||
Income (loss) from operations | (98,395 | ) | 32,592 | |||||
Other income | - | - | ||||||
Interest expense | (23,596 | ) | (15,570 | ) | ||||
Net other Income (loss) | (23,596 | ) | (15,570 | ) | ||||
Loss before income tax (expense) benefit | (121,991 | ) | 17,022 | |||||
Income tax (expense) benefit | - | - | ||||||
Net Gain (Loss) from operations | $ | (121,991 | ) | $ | 17,022 | |||
Net loss per share: | ||||||||
Basic | $ | (0.00 | ) | $ | 0.00 | |||
Diluted | $ | (0.00 | ) | $ | 0.00 | |||
Weighted average number of shares outstanding: | ||||||||
Basic | 55,951,655 | 55,890,117 | ||||||
Diluted | 55,951,655 | 55,890,117 | ||||||
The accompanying notes are an integral part of these financial statements.
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
January 31,
2013 2012
--------------------------------
Cash flows from operating activities:
Net income (loss) $ (310,010)$ (1,419,513)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation expenses 73,007 25,647
Stock issued for acquiring 51% of Wintec - 259,600
Gain on settlement of accounts payable - 295,449
Interest on Convertible Notes - 63,333
Stock issued for services 2,200 16,500
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - 5,321
(Increase) decrease in other receivable - -
(Increase) decrease in inventory 64,477 13,688
Increase (Decrease) in accounts payable
and accrued liabilities 65,046 220,195
Increase (Decrease) in customer deposits 333,458 77,656
(Increase) decrease in prepaid expenses (6,167) 23,678
--------------------------------
Total adjustments 532,021 1,001,067
--------------------------------
Net cash (used) received in operating activities 222,011 (418,446)
--------------------------------
Cash flow from investing activities:
Purchase of property and equipment (34,823) (90,799)
--------------------------------
Total cash flow used in investing activities (34,823) (90,799)
--------------------------------
Cash flows from financing activities:
Proceeds (Payments) from notes payable - related party (7,500) (4,705)
Proceeds (Payments) from note payable 20,000 102,500
Proceeds (Payments) on lines of credit & credit cards (3,905) 89,992
Proceeds (Payments) from short-term borrowings Shareholders (5,839) 57,775
Proceeds from sale of stock - 250,000
--------------------------------
Total cash flow provided (used) by financing activities 2,756 495,562
Net increase (decrease) in cash and cash equivalents 189,944 (13,683)
Cash and cash equivalents - beginning of period - 17,353
--------------------------------
Cash and cash equivalents - end of period $ 209,626 $ 3,670
================================
Supplemental disclosure of cash flow information:
Interest Paid $ 10,239 $ 5,212
================================
Taxes Paid $ - $ -
================================
Accrued payroll accounts of Mr. Daniel Medina and Madhava Rao Mankal amounting
to $573,685 transferred from Accounts Payable to Short Term Borrowings
accounts.
The accompanying notes are an integral part of these financial statements.
F-5
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For Three Months Ended July 31, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (121,991 | ) | $ | 17,022 | |||
Adjustments to reconcile net loss to net cashused in operating activities: | ||||||||
Stock subscription payable | 3,000 | 500 | ||||||
Depreciation expenses | 25,637 | 24,536 | ||||||
Write-off of fixed assets | 0 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease (Increase) in accounts receivable | - | |||||||
Decrease (Increase) in other receivable | 10,000 | - | ||||||
Decrease (Increase) in inventory | (460,434 | ) | 124,926 | |||||
Increase (decrease) in accounts payable | (37,498 | ) | (62,992 | ) | ||||
Increase (decrease) in accrued liabilities | (9,402 | ) | 3,445 | |||||
Increase (decrease) in customer deposits | 673,946 | (68,421 | ) | |||||
(Increase) decrease in prepaid expenses | 1,998 | - | ||||||
Total adjustments | 207,247 | 21,994 | ||||||
Net cash (used) received in operating activities | 85,256 | 39,016 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (42,578 | ) | (11,857 | ) | ||||
Net cash used in investing activities | (42,578 | ) | (11,857 | ) | ||||
Cash flows from financing activities: | ||||||||
Bank overdraft | (9,428 | ) | (192 | ) | ||||
Proceeds/(Payments) from notes payable | - | 20,000 | ||||||
Proceeds/(Payments) from related party note payable | - | (7,500 | ) | |||||
Proceeds/(Payments) from related party note payable shareholders | (11,397 | ) | (549 | ) | ||||
Proceeds/(Payments) on lines of credit & credit cards | (2,708 | ) | (7,349 | ) | ||||
Proceeds from stock subscription | - | |||||||
Net cash provided (used) by financing activities | (23,533 | ) | 4,410 | |||||
Net increase (decrease) in cash and cash equivalents | 19,145 | 31,569 | ||||||
Cash and cash equivalents - beginning of period | 2,635 | - | ||||||
Cash and cash equivalents - end of period | $ | 21,780 | $ | 31,569 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest Paid | $ | 4,956 | $ | 15,570 | ||||
Taxes Paid | $ | - | $ | - | ||||
Supplemental schedule of noncash investing and financing activities: | ||||||||
Stock issued for services | $ | 7,700 | $ | 30,513 | ||||
The accompanying notes are an integral part of these financial statements
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
Common Stock | Preferred Stock Series A | Preferred Stock Series B | Additional Paid-In | Accumulated | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||||||||
Balance - April 30, 2011 | 51,110,497 | $ | 5,111 | 20 | $ | 240,000 | $ | - | $ | 3,519,292 | $ | (6,009,376 | ) | $ | (2,244,973 | ) | ||||||||||||||||||||
Stock issued to Directors | 200,000 | 20 | 10 | 120,000 | 20 | 20,000 | 35,155 | 175,175 | ||||||||||||||||||||||||||||
Shares issued for services | 650,000 | 65 | 19,985 | 20,050 | ||||||||||||||||||||||||||||||||
Shares issued for cash | 1,000,000 | 100 | 149,900 | 150,000 | ||||||||||||||||||||||||||||||||
Shares issued on conversion of debt | 2,929,620 | 293 | 47,169 | 47,462 | ||||||||||||||||||||||||||||||||
Beneficial Loan conversion Expense | 95,000 | 95,000 | ||||||||||||||||||||||||||||||||||
Settlement of Lawsuit | 1,013,769 | 1,013,769 | ||||||||||||||||||||||||||||||||||
Net loss | (1,246,686 | ) | (1,246,686 | ) | ||||||||||||||||||||||||||||||||
Balance - April 30, 2012 | 55,890,117 | $ | 5,589 | 30 | $ | 360,000 | 20 | $ | 20,000 | $ | 4,880,270 | $ | (7,256,062 | ) | $ | (1,990,203 | ) | |||||||||||||||||||
Net loss | (417,276.00 | ) | (417,276 | ) | ||||||||||||||||||||||||||||||||
Balance - April 30, 2013 | 55,890,117 | $ | 5,589 | 30 | $ | 360,000 | 20 | $ | 20,000 | $ | 4,880,270 | $ | (7,673,338 | ) | $ | (2,407,479 | ) | |||||||||||||||||||
Shares issued for payable | 200,000 | 20 | 7,680 | 7,700 | ||||||||||||||||||||||||||||||||
Net loss | (121,991 | ) | (121,991 | ) | ||||||||||||||||||||||||||||||||
Balance - July 31, 2013 | 56,090,117 | $ | 5,609 | 30 | $ | 360,000 | 20 | $ | 20,000 | $ | 4,887,950 | $ | (7,795,329 | ) | $ | (2,521,770 | ) | |||||||||||||||||||
The accompanying notes are an integral part of the financial statements
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINETHREE MONTHS ENDED JANUARYJULY 31, 2013
(Unaudited)
NOTE 1.1 – 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 acquiredsigned 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 of Wintec Protective Systems, Inc. in
exchange for 3,000,000 common shares of the Company. The Company has invested
$237,718 in Wintec Protective Systems, Inc. under the acquisition agreement.
This agreement was cancelled under the settlement agreement, dated March 28,
2012. Wintec Protective Systems, Inc. has agreed to repay $237,718 within two
years from the date of settlement agreement.
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 unaudited 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, 2012.2013. It is management's opinion that when the interim financial statements are read in conjunction with the April 30, 20122013 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 ("USGAAP"(“GAAP”) and include the assets, liabilities, revenues, and expenses of subsidiaries, Medina Marine, Inc., Harbor Guard Boats, Inc. All intercompany balances and transactions have been eliminated in consolidation.
F-6
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 JanuaryJuly 31, 2013, the Company's current liabilities exceeded its current assets by $2,589,799.$2,797,910. Also, the Company's operations generated $1,048,373$57,288 revenue during the nine monthscurrent period ended January 31, 2013 and the Company's accumulated deficit at
January 31, 2013 is $7,566,072.
$7,795,329.
Management takeshas 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 JanuaryJuly 31, 2013 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 2.2 - 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 ("USGAAP"(“GAAP”) and include the assets, liabilities, revenues, and expenses of our twothree wholly owned subsidiaries, Harbor Guard Boats, Inc., and Medina Marine, Inc.Inc.. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of our consolidated financial statements in conformity with USGAAPGAAP 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-7
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. |
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 ASC 650 "Revenue“Revenue Recognition."” 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 January 31, 2013 and April 30, 2012, the Company had
$237,718 in its allowance for doubtful accounts.
Inventory
We carry our inventories at the lower of itstheir cost or market value. Cost is determined using first-in, first-out ("FIFO"(“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. Fixed assets consistEquipment consisting of tools (molds), office
equipment, fire extinguishers and manufacturing tools and aremolds 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.
Long Lived Assets
The Company adopted codification ASC 350 "Accounting for the Impairment or Disposal of Long-Lived Assets", The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 350. ASC 350 requires impairment losses 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.
F-8
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
Disclosures about fair value of financial instruments, requires that the Company disclose 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 Currency Translation 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 andAnd Diluted Net Loss perPer 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.
Products and services, geographic areas and major customers
The Company earns revenue from the sale of commercialrecreational and recreationalcommercial boats. The Company'sCompany’s products were sold domestically and internationally. The Company does not separate sales activities into different operating segments.
F-9
Recently issued accounting pronouncements
There were accounting standards and interpretations issued during the ninethree months ended JanuaryJuly 31, 2013, none of which are expected to have a material impact on the Company'sCompany’s financial position, operations or cash flows.
NOTE 3. INVENTORY
As of JanuaryJuly 31, 2013, and April 30, 2012, inventory consisted of the following:
January 31, April 30,
Item 2013 2012
---------------------------------------- ---------------------- ----------------
Raw material and supplies $ 0 $ 0
Work in progress 160,089 224,566
Finished goods 0 0
---------------------- ----------------
Total Inventory $ 160,089 $ 224,566
Inventory | Cost | |||
Parts | $ | 0 | ||
Work-in-Progress | 654,181 | |||
Finished Goods | 0 | |||
Total Inventory | $ | 654,181 | ||
NOTE 4. FIXED ASSETS
Other Receivables
As of JanuaryJuly 31, 2013, other receivables consisted of the following:
Disposal of Subsidiary | $ | 237,718 | ||
Reserve | (237,718 | ) | ||
| Total Receivables | 0 |
Entry in Settlement Agreement - Disposition of Subsidiary
On March 28, 2012, ROK Global, PLC ("ROK") entered into a Settlement Agreement and Mutual Release ("the Settlement Agreement") with Medina International Holdings, Inc. ("the Company"), Wintec Protective Systems, Inc. ("Wintec"), Mr. Daniel Medina, and Mr. Madhava Mankal Rao. Mr. Medina and Mankal are officers and directors of the Company.
In 2011, the Company, Wintec and ROK entered into agreements that provided for the Company to provide funding to Wintec and to contribute 3,000,000 shares of its common stock in exchange for 20,400,000 shares of Wintec. As a result of the agreements, Wintec had become the Company's 51% held subsidiary.
The Settlement Agreement provides for the agreements entered into in 2011 to be terminated and cancelled, effective immediately. All parties agree to the termination of the agreements without remedy and resolve each party of any claims or liabilities arising out of such agreements. As a result of the termination, Wintec is no longer a subsidiary of the Company. The Company transferred back to Wintec the 20,400,000 shares of Wintec in exchange for $1. Wintec transferred 3,000,000 shares of the Company's common stock issued in 2011, in exchange for $1;
Wintec per agreement to pay to the Company $237,718 within two years of the date of the Settlement Agreement, which we have reserved at 100% of total receivable due to non availability of financial statements of Wintec Protective Systems, Inc.
NOTE 5. FIXED ASSETS
As of July 31, 2013, fixed assets consisted of the following:
Property and Equipment | Cost | |||
Machinery and equipment; including molds & tools | $ | 698,850 | ||
Computers | 13,535 | |||
Furniture & fixture | 3,610 | |||
Office equipments | 4.540 | |||
Fire Extinguisher | 500 | |||
Intangible Assets | 90,500 | |||
Total Property and Equipment | 811,535 | |||
Less accumulated depreciation | (552,072 | ) | ||
Fixed Assets, Net | $ | 259,463 | ||
NOTE 6. Prepaid Expenses
As of July 31, 2013 and April 30, 2012, property and equipment consisted of
the following:
NOTE 6. ACCRUED LIABILITIES
7. Accrued Liabilities
Our accrued liabilities as of July 31, 2013 were as follows:
Amount | ||||
Interest – shareholders’ loan | 105,893 | |||
Interest – related party | 7,000 | |||
Interest – note payable | 34,040 | |||
Accrued payroll | 748,412 | |||
Warranty liabilities | 26,234 | |||
| Total accrued liabilities | $ | 921,579 | ||
NOTE 8. SHORT-TERM DEBT
As of JanuaryJuly 31, 2013, and April 30, 2012, accrued liabilitiesShort term debts consisted of the following:
Financial Institutions | ||||
Citi bank | $ | 94,886 | ||
Wells Fargo bank | 5,515 | |||
Credit Cards | 25,733 | |||
Total Short Term debt | $ | 126,134 |
At July 31, 2013, the Company hadhas a line of credit totaling $100,000, under which the Company may borrow on an unsecured basis since the year 2008 at an interest rate of 8.75%8.75.% with monthly payments due. The outstanding balance as of January 31, 2013for this loan was $94,886.
At January 31, 2013, Company owed $6,131.
The Company originally borrowed $11,024.92$11,025 from Wells Fargo bank as equipment loan repayable in monthly installments over a period of 60 monthly installments of $212. As on July 31, 2013 remaining balance is $5,515.
The Company'sCompany’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.
F-11
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.
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. RELATED PARTY TRANSACTIONS
Deposit from customers at the end of quarter ended July 31, 2013 consists of the following:
Notes payable - related party | $ | 50,000 |
At July 31, 2013, the Company had an unsecured note payable to Mr. Srikrishna Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $50,000. Interest accrued to date $7,000.
NOTE 10. CUSTOMER DEPOSIT
Deposit from customers at the end of quarter ended July 31, 2013 consists of the following:
Deposit for commercial boats Deposit for recreational boats Total $ 1,192,029 20,500 $ 1,212,529
NOTE 11. NOTE PAYABLE
Deposit from customers at the end of quarter ended July 31, 2013 consists of the following:
Notes payable – others | 110,500 | |||
Total | $ | 110,500 |
At July 31, 2013, the Company had an unsecured convertible note payable with an unrelated party in the amount of $90,500, which bears at 8-22% interest and is currently due. The note is convertible at the holders' option (principal & interest) in full or part into common stock at 60% of the average of the three lowest market bid prices on the Company’s common stock from the previous 10 days’ quotes. The Company recognized a $95,000 beneficial conversion expense during the year ended April 30, 2013 with an offset to additional paid in capital.
NOTE 12. SHAREHOLDERS' LOANS
At July 31, 2013, Shareholders' loans consisted of the following:
Daniel Medina, President & Director Madhava Rao Mankal, Chief Financial Officer& Director Total $ 237,616 193,108 $ 430,724
Shareholder’s loan from shareholder of the Company, unsecured, 10% interest per annum, due on demand.
NOTE 13. STOCKHOLDERS' EQUITY
200,000 shares were issued during the quarter ended July 31, 2013 to two independent directors for services.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Rental Leases
As of April 30, 2013, we did not own any properties. We moved our Company’s activities, including all subsidiaries, from Corona, California to Ontario, California during on April 2013. Our management signed a three-year lease for a 13,045 sq. ft. building in the city of Ontario, California, effective May 1, 2013. The address for this location is 191 Kettering Dr., Corona, CA, 91761. This building is owned by unrelated parties. The lease to the Corona facility expires on June 30, 2016, and calls for monthly payments, initially of $5,610.00 per month plus $495.00 costs, escalating over the term of the lease to $5,950 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. The license agreements typical provide for $1,500 royalty payment on every boat manufactured by the company except on boats manufactured where Mr. Albert Mardikian'sMardikian’s patents are not used.
NOTE 10. CUSTOMER DEPOSIT
As of January 31,
Litigation
On March 15, 2013 and April 30, 2012, customer deposit consisted of the
following:
NOTE 15 – SUBSEQUENT EVENTS
Completed and delivered 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 common shares were issued or
outstanding at January 31, 2013.
The Company has issued 30 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 15
shares of Series `A' preferred stock, which was valued at $360,000 in total. No
shares were issuedboat during the three months ended January 31,month of August 2013.
Series B
During the year ended April 20, 2012, 20 shares of Preferred Series "B" was
issued to one individual and were valued at $20,000 per the redemption clause of
the Preferred Series B shares. The holders of the Series B Stock have the
following rights under the Certificate of Designation with respect to the
redemption, at any time, the Company may, in its sole discretion, redeem some or
all of the outstanding shares of Series B Stock at a "Redemption Price" equal to
the greater of (i) $1,000 per share or (ii) the market value of the common stock
into which the Series B Stock is convertible, as of the Redemption Date.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Rental Leases
The Company signed a 3 year lease for 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 of $2,600 per month plus costs, escalating over the term of
the lease to $6,000 per month plus costs.
F-14
The Company has various license agreements with a related party allowing its
technology to be utilized in the manufacture of its boats. The license
agreements typical provide for $1,500 royalty payment on every boat manufactured
by the company except on boats manufactured where Mr. Albert Mardikian's patents
are not used.
The Board of Directors of the Company authorized the creation of a new series of
its Preferred Stock. On August 28, 2012, the Company amended its Articles of
Incorporation to designate the Series C Convertible Preferred Stock. The Series
C Convertible Preferred Stock ("Series C Preferred Stock") has 500 authorized
shares. At the time of this filing no shares of the Series C Preferred Stock
have been issued.
The holders of the Series C Preferred Stock would have a voting right equal to
that of the common stock holders in any matter that the common stock holders of
the Company are able to vote upon. The Series C Preferred Stock is equal to such
number of votes as shall be equal to the aggregate number of shares of common
stock into which such holder's shares of Series C Stock are convertible
immediately after the close of business on the record date determined for any
vote.
NOTE 15. SUBSEQUENT EVENTS
The Company has evaluated it activities subsequent to the period ended January
31, 2013, through March 12, 2013 and found no reportable subsequent events.
F-15
ITEM 22. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.
The independent registered public accounting firm'sfirm’s report on the Company'sCompany’s financial statements as of April 30, 2012,2013, and for each of the years in the two-year period then ended, includes a "going concern"“going concern” explanatory paragraph, that describes substantial doubt about the Company'sCompany’s ability to continue as a going concern.
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 engages approximately sixseven full time employees. Our President and Chief Financial Officer have been engaged on full time to work with Harbor Guard Boats, Inc.
The Board of Directors of the Company authorized the creation of a new series of
its Preferred Stock. On August 28, 2012, the Company amended its Articles of
Incorporation to designate the Series C Convertible Preferred Stock. The Series
C Convertible Preferred Stock ("Series C Preferred Stock") has 500 authorized
shares. At the time of this filing, no shares of the Series C Preferred Stock
have been issued.
Our securities are currently not liquid. There are limited market makers in our securities and it is not anticipated that any market will develop for our securities until such time as we successfully implement our business plan of producing and marketing our Fire and Rescue boats. We presently have no liquid financial resources to offer such a candidate and must rely upon an exchange of our stock to complete such a merger or acquisition.
1
RESULTS OF OPERATION
Results Of Operations For the Three MonthsThe Three-Month Period Ended JanuaryJuly 31, 2013 Compared to the Three MonthsTo The Same Period Ended JanuaryJuly 31, 2012
The Company recognized $347,861$57,288 in revenues during the three months ended January 31, 2013 as compared to $9,576 for the three months period ended January
31, 2012, resulting in an increase in sales during the quarter of $338,285. We
sold two boats for the three months ended JanuaryJuly 31, 2013 compared to none$642,755 during the three months ended JanuaryJuly 31, 2012. While we sold no boatsThis resulted in decrease of sales over the prior period we did during that period recognize revenues from the activities
of Wintec Systems, which we no longer are involved with.
Our cost of goodsby $585,467 or 91.09%. We sold for the three months ended January 31, 2013 was $346,966
compared to $35,436one fiberglass boat during the three monthsquarter ended January 31, 2012. The increase
in cost of goods sold of $311,530 or 879.13% was a result of increase in
corresponding sales activities.
Gross profit margin increased to $895 for the three months period ended JanuaryJuly 31, 2013 compared to ($25,860) for the three months period ended January 31,
2012. Increases in gross profit by $26,755 due to sale of two aluminum boats at an
average price of $173,930 per boat.
During the three months period ended January 31, 2013, we incurred general and
administrative expenses of $226,289 compared to $408,813 during the three months
periodquarter ended JanuaryJuly 31, 2012. The decrease in general and administrative
expenses for the three months period ended January 31, 2013 of $182,524 or
44.65% was mainly due to the decrease of development expenditures of Wintec
Protective Systems, Inc. and professional & legal expenses.
During the three months ended JanuaryJuly 31, 2013 the Company incurred sellinggeneral and marketingadministrative expenses of $28,475decreased by $17,937 or 17.00% to $87,563 compared to $31,487 during$105,500 for the three monthsquarter ended JanuaryJuly 31, 2012. The decrease of $3,012 or 9.56% in selling expenses was
primarilyis mainly due to the decrease in selling commissionsprofessional and sales expenditure of
Wintec Protective Systems, Inc.
Interest expensemanagement salary. Selling and marketing expenses decreased by $10,086$40,194 or 42.61%97.47% to $1,043 for the three month periodquarter ended January 31, 2013. The Company incurred $13,579 for the three month period ended
JanuaryJuly 31, 2013 compared to $23,665$41,237 for the three month periodquarter ended JanuaryJuly 31, 2012. Decreases in interest expenses wasThe decrease is mainly due to reductiondecrease in interest
from borrowing.
sales commission for the quarter ended July 31, 2013 caused by the decrease in sales.
During the three months ended JanuaryJuly 31, 2013 interest expense increased by $8,026 or 51.55% to $23,596 compared to $15,570 for the period ended July 31, 2012. This increase is due to interest expense on shareholders loan and on unrelated party note which has conversion feature.
During the three months ended July 31, 2013, the Company recognized a net loss of $240,726$121,991 compared to $472,661 during the three months ended January 31,
2012. Decrease ina net lossincome of $231,935 was result of decrease in administration
expenses, selling and marketing and interest expenses which included expenses of
Wintec Protective Systems, Inc.
For the Six Months Ended January 31, 2013 Compared to the Nine Months Ended
January 31, 2012
The Company recognized $1,048,373 in revenue during the nine months period ended
January 31, 2013 as compared to $449,919$17,022 for the nine months periodquarter ended January 31, 2012 resulting in an increase in sales during the period of
$598,454. We sold five boats made of custom made aluminum and fiberglass, during
the nine months ended January 31, 2013 compared to three made out of fiberglass
during the six months ended January 31, 2012. The difference in building
materials allowed us to charge a higher price on those boats sold in the nine
months ended January 31, 2013, compared to the prior period.
Our cost of goods sold for the nine months ended January 31, 2013 was $877,384
compared to $328,841 during the nine months ended JanuaryJuly 31, 2012. The increase in costloss of goods sold of $548,543 or 166.81% was a result due to increase in
corresponding sales activities and in the different materials used in the
construction of the boats, as discussed above.
2
Gross profit margin increased to $170,989 for the nine months period ended
January 31, 2013 compared to $121,989 for the nine months period ended January
31, 2012. Increase in gross profit by $49,911, due to increase of sale of two
boats and also the use of additional building material increase the average
price of boat by $59,701.
During the nine months ended January 31, 2013, we incurred general and
administrative expenses of $389,377 compared to $1,126,004 during the nine
months ended January 31, 2012. The decrease in general and administrative
expenses for the nine months period ended January 31, 2013 of $736,627 or 65.41%
was$139,013 mainly due to the decrease in expenditures of Wintec Protective Systems,
Inc. amounting to $463,528 and Professional & Legal expenses amounting to
$188,699, write off of asset amounting to 219,600.
During the nine months ended January 31, 2013, the Company incurred selling and
marketing expenses of $76,232 compared to $88,032 during the nine months ended
January 31, 2012. The decrease of $11,800 or 13.40% was primarily due to the
marketing expenses amounting to $20,085 and in expenditure of Wintec Protective
Systems, Inc. amounting to $27,582, with corresponding increase in sales
commission amounting to $32,003.
Interest expense decreased by $83,856 or 67.56% for the nine month period ended
January 31, 2013. The Company incurred $40,263 for the nine month period ended
January 31, 2013 compared to $124,119 for the nine month period ended January
31, 2012. Decreases in interest expense is mainly due to decrease in beneficial
interest from additional borrowing.
During the nine months ended January 31, 2013, the Company recognized a net loss
of $310,010 compared to $1,419,513 during the nine months ended January 31,
2012. Decrease in net loss of $1,109,503 or 78.16% was a result of the $736,627
decrease in administration expenses and expenses of Wintec Protective Systems,
Inc. combined with the $598,454 increase in sales
sales.
LIQUIDITY AND CAPITAL RESOURCES
As
At July 31, 2013, we had total current assets of January$675,961, consisting of cash of $21,780 and $654,181 in inventory. At July 31, 2013, the Company had $189,934 cash on hand, inventory of
$160,089 and net property and equipment of $273,942. The Company's total current liabilities were $2,939,822 as of January 31, 2013, which was represented mainly
accounts payable of $592,791, accrued liabilities of $42,387, deposits from
customers of $762,349, short-term debt of $128,709, notes payable of $110,500
and short-term borrowings from shareholders totaling $1,250,887.$3,473,871. At JanuaryJuly 31, 2013, the Company's current liabilities exceeded current assets by $2,904,799.Company has a working capital deficit of $2,797,910. The Company used $222,011will need to raise capital through loans or private placements in operating activities for the nine months period
ended January 31, 2013 comparedorder to usage of $418,446 for nine month period ended
January 31, 2012.
The Company used $34,823 in investing activities for the nine months period
ended January 31, 2013 compared to $90,799 for nine month period ended January
31, 2012.
carry out any operational plans.
During the ninethree months period ended JanuaryJuly 31, 2013, the Company provided $2,766 in$85,256 from its operating activities. The Company used $42,576 for purchase of equipment. The Company used $23,533 through financing activities includes loan induring the amount of $20,000 from
unrelated party compared tothree months ended July 31, 2012.
During the ninethree months period ended JanuaryJuly 31, 2012, the Company provided $495,562 includes proceeds$39,016 from $250,000 from saleits operating activities. The Company used $11,857 for purchase of stock,
$102,500 from notes payable, $57,775 from shareholders.
Duringequipment. The Company used $4,602 through financing activities during the ninethree months period ended JanuaryJuly 31, 2012,2012.
At July 31, 2013, the Company provided
$495,562 in financing activities includes loanhad an unsecured note payable to Mr. Srikrishna Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $102,500 from$50,000, which bears an 8% interest repayable. Interest accrued to date $7,000.
At July 31, 2013, the Company had an unsecured convertible note payable with an unrelated party proceeds from sale of restricted stock for $150,000, proceeds in the amount of $89,992 from credit cards$90,500, which bears at 8-22% interest and $57,775 from short-term
borrowings from shareholder.is currently due. The Company made payments of $4,705 towards notes
payable related parties held by the Company.
3
Loan from unrelated party during the nine months ended January 31, 2011 includes
convertible notes for $48,000 issued to Asher Enterprises, Inc. ("Asher") in
June 24, 2011 and has a maturity date on the March 13, 2012 with interest of 8%
per annum. These notes arenote is 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 notholders' option (principal & interest) in existencefull 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 byat 60% of the average of the three lowest closingmarket bid prices ofon the Company'sCompany’s common stock duringfrom the ten trading days prior to the date the
conversion notice is sent by Asher. We have provided $35,000 as interest expense
lossprevious 10 days’ quotes.
Going Concern
The independent registered public accounting firm’s report on the above transaction.
The convertible notes for $42,500 issued to Asher in August 1, 2011 had a
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 became immediately due and payable. In that event, 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.
Both convertible notes have been transferred by Asher to C.S. Seshadri, the two
notes have principal balances of amount of $48,000 and $42,500 and have retained
their original terms, as discussed above, with the exception of the due dates,
which have been extended to __________________________.
The Company has an accumulated deficit, as of January 31, 2013, of $7,566,072
compared to $7,256,062Company’s financial statements as of April 30, 2012.
Going Concern
The Company's auditors have issued a "going concern" qualification independent
registered public accounting firm's report on the Company's financial statements
as part of their opinion in the Audit Report. For the year ended April 30, 2012,2013, and for each of the years in the two-year period then ended, includes a "going
concern"“going concern” explanatory paragraph, that describes substantial doubt about the Company'sCompany’s ability of the Company to continue as a "goinggoing concern."
4
Short Term.
On a short-term basis, we do not generate any revenue or revenues sufficient to cover operations. Based on prior history, we will continue to have insufficient revenue to satisfy current and recurring liabilities as we continue to develop our operations. For short term needs we will be dependent on receipt, if any, of offering proceeds.
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.
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.
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.
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
shareholders. 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 January 31, 2013, we do not have any obligation under certain guarantees
or contracts as defined above.
As of January 31, 2013, we do not have any retained or contingent interest in
assets as defined above.
As of January 31, 2013, we do not hold derivative financial instruments.
Accounting for Derivative Instrument and Hedging Activities, as amended.
As of January 31, 2013, 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 January 31, 2013 and April 30, 2012, 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.
ITEM 3.QUANTATIVE3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
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ITEM 4.CONTROLS4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintainedmaintain 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 havehas 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.
Management's
Management’s assessment of the effectiveness of the small business issuer'sissuer’s internal control over financial reporting is as of the quarter ended JanuaryJuly 31, 2013. We believe that internal control over financial reporting is not effective because of the small size of the business. We have not identified any, current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended JanuaryJuly 31, 2013, 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
NONE
On March 15, 2013, Robert Doherty filed a Complaint for Damages against the Company and ROK Protective Systems, Inc., ROK Americans and Wintec Protective Services, LLC in the Superior Court of State of California for the County of Riverside.
A Request for Entry of Default was filed by the Plaintiff with the Court on May 8, 2013, effectively eliminating the Company’s right to answer the Complaint unless the Request for Entry of Default is set aside.
Mr. Doherty served as the Chief Executive Officer of Wintec Protective Services, LLC (“Wintec”) when it was a subsidiary of the Company. The Company entered into a Settlement and Mutual Release with Wintec in March 2012, which provided for the agreements entered into in 2011, whereby the Wintec was no longer a subsidiary of the Company.
Mr. Doherty has alleged, among other items, Breach of Contract and the Failure to pay wages owed to him under and Employment Agreement by and between himself and Wintec, LLC.
Mr. Doherty is seeking monetary damages of approximately $661,218 in connection with Employment Agreement. Further, Mr. Doherty is asking for the 500,000 shares of the Company’s common stock, be repurchased by the Company.
The Company has retained legal counsel on the matter, intends to move for a set aside of the Request for Entry of Default, to file a motion to be removed from the suit, and to vigorously defend itself against any claims.
ITEM 2. CHANGES IN SECURITIES -
NONE
During the period of May 1, 2013 through July 31, 2013, the Company issued 200,000 shares of its common stock (100,000 shares each) to two of independent director as compensation for services.
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 directors of the Company, and therefore known to the Company and its management, through pre-existing business relationships, as long standing business associates . 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. MINE SAFETY DISCLOSURES. NONE.
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NOT APPLICABLE.
ITEM 55. 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
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)
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(1) Pursuant to Rule 406T of Regulation S-T, this interactive data fileis deemed not filed or part of a registration statement or prospectusfor purposes of Sections 11 or 12 of the Securities Act of 1933, isdeemed not filed for purposes of Section 18 of the Securities ExchangeAct of 1934, and otherwise is not subject to liability under thesesections.
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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: March 15, 2013 By: /s/ Daniel Medina
-----------------------------------
Daniel Medina,
President
Dated: March 15, 2013 By: /s/ Madhava Rao Mankal
-----------------------------------
Madhava Rao Mankal,
Chief Financial Officer
(Principal Accounting Officer)
| Dated: September 23, 2013 | By: | /s/ Daniel Medina | |
| Daniel Medina, | |||
| President | |||
| Dated: September 23, 2013 | By: | /s/ Madhava Rao Mankal | |
Madhava Rao Mankal, | |||
Chief Financial Officer | |||
(Principal Accounting Officer) |