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 January 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
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(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 [X]
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 January 31, 2011, there were 51,006,747 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Consolidated Balance Sheets - January 31, 2011 and April 30, 2010 F-1
Consolidated Statement of Operations -
Three months and nine months ended January 31, 2011 and 2010 F-2
Statement of Changes in Stockholders' Equity (Deficit) F-4
Statement of Cash Flows -
Nine months ended January 31, 2011 and 2010 F-5
Notes to Consolidated Financial Statements F-7
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 5
Item 4. Controls and Procedures 5
Item 4T. Controls and Procedures 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 6
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 7
Item 5. Other Information 7
Item 6. Exhibits 7
SIGNATURES 8
PART I - FINANCIAL INFORMATION
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, April 30,
2011 2010
(Unaudited) (Audited)
----------- ---------
ASSETS
Current Assets:
Cash $ 36 $ 107,223
Receivables 2,925 62,283
Inventory 235,963 164,652
Other receivables - 465
-------------------- ---------------------
Total current assets 238,924 334,623
Property & Equipment 1,083,236 1,065,055
Accumulated depreciation (479,513) (361,207)
-------------------- ---------------------
Total property & equipment 603,723 703,848
Other assets
Prepaid expenses 7,749 8,249
-------------------- ---------------------
TOTAL ASSETS $ 850,396 $ 1,046,720
==================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 671,471 $ 640,055
Accrued liabilities 275,514 186,075
Short term debt 206,968 214,757
Customer Deposit 229,335 308,000
Stock committed to be issued 3,375 -
Notes payable 67,887 104,000
Related party payable 833,480 870,941
Related Parties - short-term borrowings from shareholders 420,198 407,217
-------------------- ---------------------
Total current liabilities 2,708,228 2,731,045
Stockholders' equity (deficit):
Preferred stock, Series 'A', $.01 par value, 50 shares
authorized, 20 issued and outstanding as on January 31, 2011 and April 30, 2010 240,000 240,000
Common stock, $0.0001 par value, 100,000,000 shares
authorized, 51,006,747 shares issued and outstanding on January 31, 2011
and April 30, 2010 5,101 5,101
Additional paid-in capital 3,513,928 3,513,928
Accumulated deficit (5,616,861) (5,443,354)
-------------------- ---------------------
Total stockholders' equity (deficit) (1,857,832) (1,684,325)
-------------------- ---------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 850,396 $ 1,046,720
==================== =====================
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 January 31,
2011 2010
---- ----
Sales, net $ 251,716 $ 541,418
Cost of Goods Sold 199,649 502,076
----------------------- ---------------------
Gross profit (loss) 52,067 39,342
General and administrative expenses 179,927 123,237
Selling and marketing expenses 20,255 27,755
Research and development - -
----------------------- ---------------------
Income (loss) from operations (148,115) (111,650)
Other income 32,046 -
Interest expense (23,701) (8,187)
----------------------- ---------------------
Net other Income (loss) 8,345 (8,187)
Loss before income tax (expense) benefit (139,770) (119,837)
Income tax (expense) benefit - -
----------------------- ---------------------
Net Loss from operations $ (139,770)$ (119,837)
======================= =====================
Net loss per share:
----------------------- ---------------------
Basic $ (0.00)$ (0.00)
Diluted $ (0.00)$ (0.00)
======================= =====================
Weighted average number of shares outstanding:
----------------------- ---------------------
Basic 51,006,747 45,438,149
Diluted 51,006,747 45,438,149
----------------------- ---------------------
The accompanying notes are an integral part of these financial statements.
F-2
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(continued)
For the nine months ended January 31,
2011 2010
---- ----
Sales, net $ 1,158,766 $ 542,982
Cost of Goods Sold 780,613 599,206
----------------------- ------------------------
Gross profit (loss) 378,153 (56,224)
General and administrative expenses 420,083 379,224
Selling and marketing expenses 110,556 30,805
Research and development - 1,370
----------------------- ------------------------
Income (loss) from operations (152,486) (467,623)
Other income 32,046 3,643
Interest expense (53,067) (57,131)
----------------------- ------------------------
Net other Income (loss) (21,021) (53,488)
Loss before income tax (expense) benefit (173,507) (521,111)
Income tax (expense) benefit - -
----------------------- ------------------------
Net Loss from operations $ (173,507)$ (521,111)
======================= ========================
Net loss per share:
----------------------- ------------------------
Basic $ (0.00)$ (0.01)
Diluted $ (0.00)$ (0.01)
======================= ========================
Weighted average number of shares outstanding:
----------------------- ------------------------
Basic 51,006,747 44,713,219
Diluted 51,006,747 44,713,219
----------------------- ------------------------
The accompanying notes are an integral part of the financial statements
F-3
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Unaudited)
Additional Common
Common Stock Preferred Stock Paid-In Stock
Shares Amount Shares Amount Capital Subscribed
---------------------------------------------------------------------------------------
Balance - April 30, 2008 35,560,091 $ 3,556 - $ - $ 2,419,032 $ 10,000
Net loss
------------------------------------------------------------------------------------------
Balance - April 30, 2009 35,560,091 3,556 - - 2,419,032 10,000
Stock issued to Directors/Officers 20 240,000
Stock issued to Directors 131,250 13 5,585
Stock issued for acquisition of HGB 11,000,000 1,100 658,900
Stock issued for accrued liabilities 4,135,000 413 413,087
Shares issued for services 80,406 8 7,332
Stock subscription receivable 100,000 10 9,990 (10,000)
Net loss
------------------------------------------------------------------------------------------
Balance - April 30, 2010 51,006,747 5,101 20 240,000 3,513,928 -
Net loss
------------------------------------------------------------------------------------------
Balance - January 31, 2011 51,006,747 $ 5,101 $ 20 $ 240,000 $ 3,513,928 $ -
==========================================================================================
The accompanying notes are an integral part of the financial statements
F-4
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Unaudited)
(continued)
Subscription Accumulated
Receivable Deficit Totals
------------------------------------------------
Balance - April 30, 2008 $ (3,000) $ (2,929,850) $ (500,262)
Net loss (1,768,434) (1,768,434)
---------------------------------------------
Balance - April 30, 2009 (3,000) (4,698,284) (2,268,696)
Stock issued to Directors/Officers 240,000
Stock issued to Directors 5,599
Stock issued for acquisition of HGB 660,000
Stock issued for accrued liabilities 413,500
Shares issued for services 7,341
Stock subscription receivable 3,000 (3,000) 0
Net loss (742,070) (742,070)
---------------------------------------------
Balance - April 30, 2010 - (5,443,354) (1,684,325)
Net loss (173,507) (173,507)
---------------------------------------------
Balance - January 31, 2011 $ - $(5,616,861) $ (1,857,832)
=============================================
The accompanying notes are an integral part of the financial statements
F-5
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended January 31,
2011 2010
---- ----
------------------- --------------------
Cash flows from operating activities:
Net loss $ (173,507) $ (521,111)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock expenses 3,375 9,581
Depreciation expenses 118,307 131,098
Gain on settlement of accounts payable (32,046)
Write-off of fixed assets - 1,925
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 59,358 (122,254)
(Increase) decrease in other receivable 465 -
(Increase) decrease in inventory (71,311) 313,701
Increase (decrease) in accounts payable
and accrued liabilities 152,901 329,591
Increase (decrease) in customer deposits (78,665) (125,000)
(Increase) decrease in prepaid expenses 500 -
------------------- --------------------
Total adjustments 152,884 538,642
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Net cash (used) received in operating activities (20,623) 17,531
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Cash flows from investing activities:
Purchase of property and equipment (18,181) -
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Net cash used in investing activities (18,181) -
------------------- --------------------
Cash flows from financing activities:
Proceeds from notes payables - related party - -
Payments to notes payables - related party (73,574) (35,880)
(Payments) Proceeds from note payable 25,000
Proceeds from lines of credit & credit cards 89,126 65,976
Payments on lines of credit & credit cards (96,915) (108,370)
Proceeds from related party - short-term borrowings
from shareholders 35,849
Payment to related party - short-term borrowings
from shareholders (22,869) (733)
------------------- --------------------
Net cash provided (used) by financing activities (68,383) (54,007)
------------------- --------------------
Net increase (decrease) in cash and cash equivalents (107,187) (36,476)
Cash and cash equivalents - beginning of period 107,223 36,576
------------------- --------------------
Cash and cash equivalents - end of period $ 36 $ 100
=================== ====================
Supplemental disclosure of cash flow information:
Interest Paid $ 9,120 $ -
=================== ====================
Taxes paid $ - $ -
=================== ====================
The accompanying notes are an integral part of these financial statements
F-6
Medina International Holdings, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the nine months ended January 31, 2011
(Unaudited)
NOTE 1. GENERAL
Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was
incorporated in 1998 as Colorado Community Broadcasting, Inc. and the Company
changed the name of the business in 2005 to Medina International Holdings, Inc.
The Company intended to purchase low power television licenses or stations and
planned to broadcast local programming mixed with appropriate national
programming. During fiscal year 2008, the Company ceased reporting as a
development stage company.
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. Medina Marine was incorporated in the State of
California 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, 2009 and changed its name to Harbor Guard Boats, Inc.
("HGB").
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 January 31,
2011, the Company's current liabilities exceeded its current assets by
$2,469,304. Also, the Company's operations generated $1,158,766 in revenue
during the nine month period ended and the Company's accumulated deficit was
$5,616,861.
We have taken various steps to revise the Company's 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 January 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 fiscal
year.
The future success of the Company is 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.
F-7
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. 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.
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 January 31, 2011 and April 30, 2010, the Company had no
balance in its allowance for doubtful accounts.
F-8
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 3
Office Equipments 3
Office Phone 3
-------------------------------------- ------------------
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.
Income Taxes
Deferred income tax assets and liabilities are computed annually for differences
between the financial statements and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted laws
and rates applicable to the periods in which the differences are expected to
affect taxable income (loss). Valuation allowance is established when necessary
to reduce deferred tax assets to the amount expected to be realized.
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.
F-9
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 Currency 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.
Products and services, geographic areas and major customers
The Company earns revenue from the sale of recreational and commercial boats.
The Company does not separate sales activities into different operating
segments. The Company sold seven fire and rescue boats and earned $1,158,766 in
revenues for the nine month period ended January 31, 2011.
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 January 31, 2011 and April 30, 2010, inventory consisted of the following:
---------------------------------------------------- ------------------- -------------
Item January 31, April 30,
---------------------------------------------------- ------------------- -------------
2011 2010
---- ----
Raw materials and supplies $ 35,203 $ 31,699
Work in progress 200,760 106,477
Finished goods - 26,476
------------------- -------------
Total Inventory $ 235,963 $ 164,652
---------------------------------------------------- ----------------- -------------
F-10
NOTE 4. Property and Equipment
As of January 31, 2011 and April 30, 2010, Property and Equipment consisted of
the following:
------------------------------------------------------- --------------- --------------
Property and Equipment January 31, April 30,
------------------------------------------------------- --------------- --------------
2011 2010
---- ----
Machinery and equipment; including molds & tools $ 1,063,921 $1,045,740
Computers 13,535 13,535
Furniture and fixtures 2,080 2,080
Office equipments 3,200 3,200
Fire Extinguisher 500 500
--- ---
Total property and equipment 1,083,236 1,065,055
--------- ---------
Less: Accumulated Depreciation (479,513) (361,207)
--------------- --------------
-------------- ---------------
Total property and equipment $ 603,723 $ 703,848
------------------------------------------------------- -------------- ---------------
Company purchased machinery and made molds during the nine months period ended
January 31, 2011.
NOTE 5. Prepaid expenses
As of January 31, 2011 and April 30, 2010, prepaid expenses included operating
expenses and vendor deposit in the amount of $7,749 and $8,249, respectively.
NOTE 6. Accrued liabilities
Our accrued liabilities as of January 31, 2011 and April 30, 2010 were as
follows:
----------------------------------------------------- ----------------- --------------
Accrued Liabilities January 31, April 30,
----------------------------------------------------- ----------------- --------------
2011 2010
---- ----
Bank overdraft $ 3,219 $ -
Interest - shareholders' loan 4,047
Interest - related party 10,000 8,500
Interest - notes payable 2,961 5,272
Payroll and taxes 229,131 139,783
Warranty liabilities 30,203 28,473
----------------- --------------
Total accrued liabilities $ 275,514 $ 186,075
----------------------------------------------------- ---------------- ---------------
Previous interest payables on shareholders' loan was transferred and added to
shareholders loan amount. For the nine month period ended January 31, 2011,
interest payables on shareholders' loan was accrued and included in
Shareholders' loan account.
F-11
NOTE 7. Short-term Debt
-------------------------------------------------------- ---------------------------------
Short-term debt January 31, April 30,
-------------------------------------------------------- ---------------------------------
2011 2010
---- ----
Line of credit - Financial Institution $ 94,932 $ 94,932
Credit cards 112,036 119,825
------- -------
Total $ 206,968 $ 214,757
-------------------------------------------------------- -------------- ---------------
As of January 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 January 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.
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 January 31, April 30,
------------------------------------------------------- --------------- --------------
2011 2010
---- ----
Deposit for commercial boats $ 208,835 $ 287,500
Deposit for recreational boats 20,500 20,500
--------------- --------------
Total customer deposits $ 229,335 $ 308,000
------------------------------------------------------- -------------- ---------------
F-12
NOTE 10. Notes payable
------------------------------------------------------- --------------- --------------
Notes Payable January 31, April 30,
------------------------------------------------------- --------------- --------------
2011 2010
---- ----
Notes payable - related party $ 62,887 $ 65,000
Notes payable - others 5,000 39,000
--------------- --------------
Total notes payable $ 67,887 $ 104,000
------------------------------------------------------- -------------- ---------------
The Company had an unsecured note payable to an unrelated party in the amount of
$10,000, which bears interest at 8% per annum, and is currently due. As of
January 31, 2011, the outstanding balance on this note was $5,000. As of January
31, 2011, accrued interest on this note was $2,962.
As of January 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 January 31, 2011, accrued interest
on this note was $10,000.
The Company had an unsecured note payable to Rosa Medina, mother of Daniel
Medina, President of the Company, in the amount of $15,000, which bears interest
at 8% per annum. As of January 31, 2011, the outstanding balance on this note
was $12,887. As of January 31, 2011, accrued interest on this note was $0.
NOTE 11. Related Party Transactions
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.
As of January 31, 2011, the Company owed $833,480 to a related party shareholder
incurred as part of the purchase transaction of Modena Sports Design, LLC
(currently Harbor Guard Boats, Inc.).
During the year ended April 30, 2010, the Company issued 1,455,000 shares of its
common stock to Mr. Daniel Medina, President of the Company, in exchange for
$145,500 of salary payable to Mr. Medina. The agreement contains a buyback
provision of $0.10/share or $145,500, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 1,380,000 shares of its
common stock to Mr. Madhava Rao Mankal, Chief Financial Officer of the Company,
in exchange for $138,000 of salary payable to Mr. Madhava Rao. The agreement
contains a buyback provision of $0.10/share or $138,000, redeemable at any time
when the Company has surplus cash.
F-13
During the year ended April 30, 2010, the Company issued 1,300,000 shares of its
common stock to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard
Boats, wholly owned subsidiary of the Company, in exchange for $130,000 of
salary payable to Mr. Albert Mardikian. The agreement contains a buyback
provision of $0.10/share or $130,000, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 10,000 shares of its
common stock in exchange for royalty payments, at the rate of $0.03/ share or
$300, to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard Boats,
wholly owned subsidiary of the Company.
NOTE 12. Shareholders' loans
As of January 31, 2011, Shareholders' loans consisted of the following:
------------------------------------------------------- --------------- --------------
Shareholders' Loans January 31, April 30,
------------------------------------------------------- --------------- --------------
2011 2010
---- ----
Daniel Medina, President $ 159,839 $ 156,743
Madhava Rao Mankal, Chief Financial Officer 260,359 250,474
--------------- --------------
Total Shareholders' Loans $ 420,198 $ 407,217
Shareholders' loan are unsecured, accrued at 10%
interest per annum and due on demand
------------------------------------------------------- -------------- ---------------
During the year ended April 30, 2010, the Company transferred interest accrued
on shareholders' loans to the shareholders' loan account in the amount of
$75,155. For the nine month period ended January 31, 2011, interest payables on
shareholders' loan was 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 (deficit)
Common Stock
The Company has been authorized to issue, 100,000,000 shares of common stock
with a par value of $0.0001. As of January 31, 2011 and April 30, 2010, the
Company had 51,006,747 shares of its common stock issued and outstanding. During
the nine months period ended January 31, 2011, no common shares were issued by
the Company.
During the year ended April 30, 2010, the Company issued 1,455,000 shares of its
common stock to Mr. Daniel Medina, President of the Company, in exchange for
$145,500 of salary payable to Mr. Medina. The agreement contains a buyback
provision of $0.10/share or $145,500, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 1,380,000 shares of its
common stock to Mr. Madhava Rao Mankal, Chief Financial Officer of the Company,
in exchange for $138,000 of salary payable to Mr. Madhava Rao. The agreement
contains a buyback provision of $0.10/share or $138,000, redeemable at any time
when the Company has surplus cash.
During the year ended April 30, 2010, the Company issued 1,300,000 shares of its
common stock to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard
Boats, wholly owned subsidiary of the Company, in exchange for $130,000 of
salary payable to Mr. Albert Mardikian. The agreement contains a buyback
provision of $0.10/share or $130,000, redeemable at any time when the Company
has surplus cash.
F-14
During the year ended April 30, 2010, the Company issued 10,000 shares of its
common stock in exchange for royalty payments, at the rate of $0.03/ share or
$300, to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard Boats,
wholly owned subsidiary of the Company.
Common Stock - Subsidiary
As of January 31, 2011, 1,000,000 common shares of Harbor Guard Boats, Inc., a
wholly owned subsidiary of the Company, were issued and outstanding. These
shares were issued in the name of Medina International Holdings, Inc.
As of January 31, 2011, 100 common shares of Medina Marine, Inc., a wholly owned
subsidiary of the Company, were issued and outstanding. These shares were issued
in the name of Medina International Holdings, Inc.
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 50 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.
In 2010, in satisfaction of a stock subscription payable incurred in May of
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.
Stock Subscriptions Payable
At January 31, 2011, the Company had an obligation to issue 53,750 common
shares, in consideration of directors' fees and consulting services.
At April 30, 2008, the Company had an incurred obligation to issue 41,250 common
shares for past consideration rendered in the amount of $1,563, and an
obligation to issue 20 Series `A' preferred shares for past consideration
rendered in the amount of $240,000, for a total stock subscription payable
liability of $241,563. In addition, as of April 30, 2009, the Company had an
incurred obligation to issue 11,091,250 common shares for past consideration
rendered in the amount of $662,738, The combined total stock subscription
payable liability of $902,738 were fulfilled by the issuance of the common and
preferred shares during the year ended April 30, 2010.
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 in 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 and $200,000 is currently due.
F-15
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 as of the date of the agreement.
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 three year lease agreement on 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.
Prior to February 3, 2010, the Company rented a 5,000 square-foot manufacturing
facility at 2051 Placentia Ave., Costa Mesa, CA 92627, for $6,500 per month, on
a verbal month-to-month basis. This facility was owned by a related party, Mr.
Mardikian, CEO of Harbor Guard Boats, Inc. We have accrued $75,500 in rental
expenses as of April 30, 2010, with $57,000 incurred in fiscal year 2010. The
Company moved its operations to Corona, California, in February of 2010.
The Company has various license agreements with a related party, allowing the
technologies to be utilized for manufacturing its boats. These license
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 minus certain costs.
NOTE 16. Subsequent Events
As of the date of this filing, the Company has a backlog of five orders to
manufacture fire rescue boats.
Medina Marine signed a Mold Lease Agreement, on November 5, 2011, with Daniel F.
Medina, Jr., son of Daniel F. Medina, Sr., President of the Company, to lease
two recreational molds. The Mold Lease Agreement is effective for a period of 24
months from the date of the agreement. Medina Marine has the exclusive rights to
use the molds to manufacture recreational watercrafts. Mr. Medina, Jr. will
receive a pre-determined rate of $1,000-1,200 per boat manufactured using the
specified molds.
Medina Marine's Board of Directors passed a resolution on February 22, 2011 to
distribute ten (10) percent of its outstanding shares to Medina International
Holdings, Inc.'s shareholders, contingent on successful registration of Medina
Marine's common shares with the Securities and Exchange Commission.
Harbor Guard Boats, wholly owned subsidiary of the Company, issued 1,000,000 of
its common shares to Medina International Holdings, Inc. As of the date of this
report, 1,000,000 shares of Harbor Guard Boats were issued and outstanding.
Medina Marine, wholly owned subsidiary of the Company, issued 100 of its common
shares to Medina International Holdings, Inc. As of the date of this report,
5,000,000 shares of Medina Marine, in the name of Medina International Holdings,
Inc., were issued and outstanding.
F-16
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.
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 marketed 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, Medina Marine manufactures and markets three models of recreational
watercrafts.
1
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.
In July of 2008, we acquired Harbor Guard Boats, Inc. as our wholly owned
subsidiary. Our management has recognized that our business was 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.
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 protecting its citizens. 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 January 31, 2011 Compared to the Three Months Ended
January 31, 2010
We recognized $251,716 in revenues during the three months ended January 31,
2011, compared to $541,418 for the same period ended January 31, 2010, a
decrease of $289,702 or 54%. We sold two boats for the three months ended
January 31, 2011 compared to two boats during the three months ended January 31,
2010.
Our cost of goods sold for the three months ended January 31, 2011 was $199,649
compared to $502,076 for the same period ended January 31, 2010. The decrease in
cost of goods sold of $302,427 or 60% was a result due to decrease in
corresponding sales activities.
For the three months ended January 31, 2011, we incurred general and
administrative expenses of $179,927 compared to $123,237 for the same period
ended January 31, 2010. The increase in general and administrative expenses for
the three months period ended January 31, 2011 of $56,690 or 46%, was mainly due
to increase in professional fees.
2
For the three months ended January 31, 2011, we incurred selling and marketing
expenses of $20,255 compared to $27,755 for the three months ended January 31,
2010. The decrease of $7,500 or 27% in selling expenses was primarily due to
decrease of $10,000 in bad debt expenses.
For the three months ended January 31, 2011, we had $32,046 in other income,
comprising of gain from settlement of accounts payable.
We incurred $23,701 in interest expenses for the three month period ended
January 31, 2011 compared to $8,187 for the same period ended January 31, 2010.
Interest expense increased by $15,514 or 189%.
During the three months ended January 31, 2011, we recognized a net loss of
$139,770 compared to $119,837 for the same period ended January 31, 2010.
Increase in net losses of $19,933 or 17% was mainly due to $56,690 increase in
general and administrative expenses.
For the Nine Months Ended January 31, 2011 Compared to the Nine Months Ended
January 31, 2010
We recognized $1,158,766 in revenue during the nine months period ended January
31, 2011, compared to $542,982 for same period ended January 31, 2010, resulting
from an increase in sales of $615,784 or 113%. We sold seven boats for the nine
months ended January 31, 2011 compared to two during the nine months ended
January 31, 2010.
Our cost of goods sold for the nine months ended January 31, 2011 was $780,613,
compared to $599,206 for the same period ended January 31, 2010. The increase in
cost of goods sold of $181,407 or 30% was due to an increase in corresponding
sales activities.
For the nine months ended January 31, 2011, we incurred general and
administrative expenses of $420,083 compared to $379,224 for the same period
ended January 31, 2010. The increase in general and administrative expenses of
$40,859 or 11% was mainly due to professional expenses of $29,692.
For the nine months ended January 31, 2011, we incurred selling and marketing
expenses of $110,556 compared to $30,805 for the same period ended January 31,
2010. The increase of $79,751 or 259% in selling expenses was primarily due to
the sales commission of $67,135 and marketing expenses of $20,506.
For the nine months ended January 31, 2011, we had $32,046 in other income,
comprising of gain from settlement of accounts payable.
Interest expense decreased by $4,064 or 7% for the nine month period ended
January 31, 2011. We incurred $53,067 for the nine month period ended January
31, 2011 compared to $57,131 for the same period ended January 31, 2010.
For the nine months ended January 31, 2011, we recognized a net loss of $173,507
compared to $521,111 for the same period ended January 31, 2010. Decrease in net
losses of $347,604 or 67% was a result from an increase of $434,377 in gross
profit.
Liquidity and Capital Resources
As of January 31, 2011, we had $36 cash on hand, an inventory of $235,963 and
net property and equipment of $603,723. As of January 31, 2011, our total
current liabilities were $2,708,228, represented mainly by accounts payable of
$671,471, accrued liabilities of $275,514, deposits from customers of $229,335,
short-term debt of $206,968, notes payable of $67,887 and short-term borrowings
from shareholders of $420,198. In addition, note payable incurred as a result of
acquisition of $833,480, were also included in current liabilities. At January
31, 2011, our current liabilities exceeded current assets by $2,469,304.
We used $20,623 in operating activities for the nine month period ended January
31, 2011 compared to net cash received in the amount of $17,531 for nine month
period ended January 31, 2010.
3
We used $18,181 in investing activities for the nine month period ended January
31, 2011 compared to none for nine month period ended January 31, 2010.
During the nine months period ended January 31, 2011, we used $63,383 in
financing activities, which included payments of $96,915 towards the lines of
credits and credit cards held by the Company. We made $73,574 in payments
towards notes payable and $22,869 in payments towards short-term borrowings from
related parties. During the nine months period ended January 31, 2010, we made
payments towards short-term borrowings from related parties, lines of credit and
credit cards, and notes payables in the amount of $733, $108,370, and $35,880,
respectively.
During the nine months period ended January 31, 2011, we received proceeds from
line of credit and notes payable from related parties in the amount of $89,126
and $35,849, respectively. For the nine months period ended January 31, 2010, we
received proceeds from line of credit and notes payable from related parties in
the amount of $65,976 and $0, respectively
As of January 31, 2011, we had an accumulated deficit of $5,616,861 compared to
January 31, 2010 of $5,219,395.
As of the date of this filing, the Company had a backlog of five orders to
manufacture fire rescue boats.
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 its 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.
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, 2011, we do not have any obligation under certain guarantees
or contracts as defined above.
As of January 31, 2011, we do not have any retained or contingent interest in
assets as defined above.
As of January 31, 2011, we do not hold derivative financial instruments.
4
Accounting for Derivative Instrument and Hedging Activities, as amended.
As of January 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 January 31, 2011 and April 30, 2010, we were not involved in any
unconsolidated SPE transactions.
Dividends
We have not declared or paid any cash dividends on its common stock and do not
anticipate paying dividends for the foreseeable future.
Recent Accounting Pronouncements
There were various other accounting standards and interpretations issued in
2010, none of which are expected to have a material impact on the Company's
financial position, operations or cash flows.
Going Concern
Our auditors have issued a "going concern" qualification as part of their
opinion in the Audit Report. For the year ended April 30, 2010, there was
substantial doubt about our ability to continue as a "going concern." We have
limited capital, debt in excess of $2,708,228, no significant cash, minimal
other assets, and no capital commitments.
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.
5
ITEM 4T. CONTROLS AND PROCEDURES
--------------------------------
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on our financial
statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended January 31,
2011. We believe that internal control over financial reporting is not
effective. 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.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report for this interim report.
There was no change in our internal control over financial reporting that
occurred during the quarter ended January 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.
6
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.
ITEM 1A. RISK FACTORS - Not Applicable
---------------------
ITEM 2. CHANGES IN SECURITIES -
-------------------------------
From the period of November 1, 2010 through January 31, 2011, we did not issue
any securities.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES -
----------------------------------------
None.
ITEM 4 (REMOVED AND RESERVED)
-----------------------------
ITEM 5 OTHER INFORMATION -
--------------------------
Medina Marine, wholly owned subsidiary of Medina International Holdings, Inc.,
appointed Mr. Nuvdeep Singh Bhasin to its board of directors on February 22,
2011. In 2007, Mr. Bhasin is a principal of Forefront Investments, a commercial
and residential brokerage firm focusing on real estate and finance transactions.
He is also the founding partner of Rubix Realty, an online residential discount
real estate brokerage with a focus on technology. He holds a California
Department of Real Estate Broker License and is a member of the California
Association of Realtors and the National Association of Realtors. He is a
Certified Management Accountant candidate and is currently a member of the
Institute of Management Accountants. Mr. Bhasin graduated from California State
University, Fullerton with a B.A. in Business Administration with an emphasis on
Entrepreneurship.
Medina Marine signed a Mold Lease Agreement, on November 5, 2011, with Daniel F.
Medina, Jr., son of Daniel F. Medina, Sr., President of the Company, to lease
two recreational molds. The Mold Lease Agreement is effective for a period of 24
months from the date of the agreement. Medina Marine has the exclusive rights to
use the molds to manufacture recreational watercrafts. Mr. Medina, Jr. will
receive a pre-determined rate of $1,000-1,200 per boat manufactured using the
specified molds.
Medina Marine's Board of Directors passed a resolution on February 22, 2011 to
distribute ten (10) percent of its outstanding shares to Medina International
Holdings, Inc.'s shareholders, contingent on successful registration of Medina
Marine's common shares with the Securities and Exchange Commission.
ITEM 6. EXHIBITS -
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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
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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 10, 2011 By: /s/ Daniel Medina
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Daniel Medina,
President
Dated: March 10, 2011 By: /s/ Madhava Rao Mankal
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Madhava Rao Mankal,
Chief Financial Officer
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