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 July 31, 2011
[ ] 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., Corona, 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 of 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 [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 accelerated filer," "accelerated filer" and "smaller
reporting 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]
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 August 1, 2011, there were 54,110,497 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
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Consolidated Balance Sheets - July 31, 2011 and April 30, 2010 F-1
Consolidated Statements of Operations -
Three months ended July 31, 2011 and 2010 F-2
Statement of Changes in Stockholders' Equity (Deficit) F-3-4
Statements of Cash Flows -
Three months ended July 31, 2011 and 2010 F-5
Notes to Consolidated Financial Statements F-6
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 3
Item 4. Controls and Procedures 3
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 4
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 4
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 5
Item 4. Rescinded and Removed 5
Item 5. Other Information - Not Applicable 5
Item 6. Exhibits 5
SIGNATURES 6
PART I. - FINANCIAL INFORMATION
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, April 30,
2011 2011
(Unaudited) (Audited)
---------------- ---------------
ASSETS
Current Assets:
Cash $ 4,716 $ 17,353
Receivables 25,943 5,890
Inventory 64,153 99,640
Other receivables -
---------------- ---------------
Total current assets 94,812 122,883
---------------- ---------------
Fixed Assets:
Property Plant and Equipment 848,213 848,213
Accumulated depreciation (464,126) (422,272)
---------------- ---------------
Total Fixed Assets 384,087 425,941
---------------- ---------------
Other Assets:
Deposits 33,569 31,461
--------------------------------
TOTAL ASSETS $ 512,468 $ 580,285
================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 877,778 $ 759,866
Accrued liabilities 369,199 295,994
Short term debt 210,059 214,564
Customer Deposit 90,800 238,495
Shares commited to be issued 7,962 2,962
Notes payable 148,874 62,077
Related party payable accrued 833,480 833,480
Related Parties - short-term borrowings from shareholders 411,419 417,820
---------------- ---------------
Total current liabilities 2,949,571 2,825,258
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Stockholders' equity (deficit):
Medina International Holdings, Inc. stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized
Series A preferred stock, $0.01 par value, 50 shares authorized, 20
shares issued an240,000anding 240,000 Common stock, $.0001 par value,
100,000,000 shares authorized, 54,110,497 and 51,110,497 shares issued and
outstanding on July 31, 2010 and April 30, 2010 5,411 5,111
Additional paid-in capital 3,758,992 3,519,292
Accumulated deficit (6,421,991) (6,009,376)
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Total Medina International Holdings, Inc. stockholders' equity (2,417,588) (2,244,973)
---------------- ---------------
Noncontrolling interest (19,515) -
---------------- ---------------
Total stockholders' equity (deficit) (2,437,103) (2,244,973)
---------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 512,468 $ 580,285
================ ===============
The accompanying notes are an integral part of these financial statements.
F-1
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the three months ended July 31,
2011 2010
----------------- ----------------------
Sales, net $ 300,662 $488,260
Cost of Goods Sold 177,292 355,264
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Gross Profit 123,370 132,996
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General and administrative expenses 477,290 102,366
Selling and marketing expenses 26,198 53,131
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Loss from operations (380,118) (22,501)
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Other income (expense)
Interest expense (52,012) 10,008
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Net other income (52,012) (10,008)
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Loss before income tax (expense) benefit (432,130) (32,509)
Income tax (expense) benefit - -
----------------- ----------------------
Net Income (loss) $ (432,130) $ (32,509)
Less: Net (income) loss attributable to
noncontrolling interest 19,515
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Net Income (loss) attributable to
Medina Internationa Holdings, Inc. $ (412,615) $ (32,509)
================= ======================
Net loss per share (Medina International
Holdings, Inc.):
Basic $ (0.0081) $ (0.0006)
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Diluted $ (0.0081) $ (0.0006)
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Weighted average number of shares outstanding:
Basic 51,208,323 51,006,747
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Diluted 51,208,323 51,006,747
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The accompanying notes are an integral part of these financial statements.
F-2
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
Additional Common
Common Stock Preferred Stock Paid-In Stock Subscription Accumulated
Shares Amount Shares Amount Capital Subscribed Receivable Deficit
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Balance - April 30, 2009 35,560,091 $ 3,556 - $ - $ 2,419,032 $ 10,000 $ (3,000) $ (4,698,284)
Stock issued for subscription
payable 20 240,000
Stock issued to Directors 50,000 5 3,157
Stock issued for subscription
payable 11,091,250 1,109 661,629
Stock issued for accrued
liabilities 4,135,000 413 413,087
Shares issued for services 70,406 7 7,033
Stock subscription receivable 100,000 10 9,990 (10,000) 3,000 (3,000)
Net loss (742,070)
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Balance - April 30, 2010 51,006,747 5,100 20 240,000 3,513,928 - - (5,443,354)
Stock issued to Directors 93,750 10 4,365
Shares issued for services 10,000 1 999
Net loss (566,022)
----------------------------------------------------------------------------------------------------
Balance - April 30, 2011 51,110,497 5,111 20 240,000 3,519,292 $ - $ - $ (6,009,376)
Stock issued for 51%
acquisition 3,000,000 300 239,700
Net loss $ (412,615)
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Balance - July 31, 2011 $ 54,110,497 $ 5,411 $ 20 $ 240,000 $ 3,758,992 $ - $ - $ (6,421,991)
====================================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
(continued)
Stockholders'
Equity -
Medina
International Noncontrolling
Holdings, Inc. Interest Totals
------------------------------------------
Balance - April 30, 2009 $ (2,268,696) $ - $ (2,268,696)
Stock issued for subscription
payable 240,000 240,000
Stock issued to Directors 3,162 3,162
Stock issued for subscription
payable 662,738 662,738
Stock issued for accrued
liabilities 413,500 413,500
Shares issued for services 7,040 7,040
Stock subscription receivable - -
Net loss (742,070) (742,070)
------------------------------------------
Balance - April 30, 2010 (1,684,326) (1,684,326)
-
Stock issued to Directors 4,375 4,375
Shares issued for services 1,000 1,000
Net loss (566,022) (566,022)
------------------------------------------
Balance - April 30, 2011 $ (2,244,973) (2,244,973)
-
Stock issued for 51%
acquisition 240,000 240,000
Net loss (412,615) $ (19,515) (432,130)
------------------------------------------
Balance - July 31, 2011 $ (2,417,588) $ (19,515) (2,437,103)
==========================================
The accompanying notes are an integral part of these financial statements.
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
July 31,
2011 2010
-----------------------------------
Cash flows from operating activities:
Net loss (432,130) $ (32,509)
-----------------------------------
Adjustments to reconcile net loss to net cash used in operating
activities:
Common stock issued in exchange
for Consulting 240,000 -
Common stock issued in exchange services 5,000 1,250
Depreciation 41,854 39,262
Changes in operating assets and liabilities:
Impairment Loss on Investment -
(Increase) decrease in receivables (20,053) -
(Increase) decrease in inventory 35,486 28,571
(increase) decrease in other receivables (2,108) (10,521)
Increase (decrease) in accounts payable 117,913 (51,263)
Increase (decrease) in accrued payables 73,205 26,521
Increase (decrease) in customer deposits (147,695) (64,700)
-----------------------------------
Total adjustments 343,602 (30,880)
-----------------------------------
Net cash received from (used in) operating activities (88,528) (63,389)
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Cash flows from investing activities:
-----------------------------------
Net cash used in investing activities - -
-----------------------------------
Cash flows from financing activities:
Proceeds (payments) on/from notes payables, related party (6,401) (7,602)
Proceeds (payment) on/from note payable 86,797 (29,000)
Proceeds (payment) on/from short term debt & Lines of Credit (4,505) 3,399
-----------------------------------
Net cash (used in) provided by financing activities 75,891 (33,203)
-----------------------------------
Net increase (decrease) in cash (12,637) (96,592)
Cash and cash equivalents - beginning of period 17,353 107,223
-----------------------------------
Cash and cash equivalents - end of period 4,716 $ 10,631
===================================
Supplemental disclosure of cash flow information:
Interest Paid 17,012 $ 10,008
===================================
Taxes paid - $ -
===================================
Non-cash financing and investing activities:
Equipment Purchased from related party - $ -
===================================
Stock issued for compensation - $ 1,250
===================================
The accompanying notes are an integral part of these financial statements.
F-5
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended JULY 31, 2011
(Unaudited)
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was
incorporated in 1998 as Colorado Community Broadcasting, Inc. The Company
intended to purchase low power television licenses or stations and planned to
broadcast local programming mixed with appropriate national programming. The
Company changed the name of the business in 2005 to Medina International
Holdings, Inc.
The Company, under its two wholly owned subsidiaries, Harbor Guard Boats, Inc.
and Medina Marine, Inc., plans to manufacture and sell recreational and
commercial boats. The Company formed Medina Marine, Inc., as a wholly owned
subsidiary of the Company, on May 22, 2006 to manufacture and sell fire rescue,
rescue and recreational boats.
The Company signed an agreement to acquire Modena Sports Design, LLC, as a
wholly owned subsidiary of the Company on June 18, 2008. Modena Sports Design,
LLC was formed in the State of California in 2003 to produce fire rescue, rescue
and recreational boats. Modena Sports Design, LLC reorganized as a California
corporation on January 7, 2010 changed its name to Harbor Guard Boats, Inc. The
activity of Harbor Guard Boats, Inc. from its inception up to the acquisition
date of June 18, 2008 will not be reflected on the consolidated financial
statements of Medina International Holdings, Inc.
The Company entered into an agreement with WinTec Protective Systems, Inc. on
June 28, 2011 to acquire 51% of the equity or 20,400,000 common shares of WinTec
Protective Systems, Inc. in exchange for 3,000,000 common shares of the Company.
Agreement with Wintec Protective Systems, Inc.
On June 28, 2011, Medina International Holdings, Inc. entered into a
Contribution and Exchange Agreement with WinTec Protective Systems, Inc.
("WinTec.") As part of the Contribution and Exchange Agreement, the Company
agreed to issue 3,000,000 shares of its restricted common stock in exchange for
20,400,000 shares of the common stock of WinTec. As a result of such exchange,
the Company holds 51% of the issued and outstanding common stock of WinTec,
making WinTec a subsidiary of the Company.
Wintec was incorporated in the State of Texas. Wintec's Operations are located
in Houston, Texas. Wintec has developed various products such as CORTAIN,
Hydro-Tain, and Blast Block. Medina International Holdings, Inc. has first right
to use CORTAIN, anti-corrosion material for small marine crafts.
As part of the Contribution and Exchange Agreement, the Company has agreed to
register the 3,000,000 shares issued with the Securities and Exchange Commission
("SEC") for resale by WinTec. If any of the following occur:
F-6
(i) the Registration Statement is not filed on or before the Required
Filing Date,
(ii) the Registration Statement is not declared effective on or before the
Required Effective Date, or
(iii)the Registration Statement is declared effective but cease to be
effective for a period of time which shall exceed three hundred and sixty
five (365) days in the aggregate per year (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective)
then the Company will be required to pay WinTec an amount equal to one-half
percent (0.5%) of the fair market value of the 3,000,000 shares of the Company's
common stock on the first business day after the non-registration event and for
each subsequent thirty (30) day period (pro rata for any period less than thirty
(30) days) which are subject to such Non-Registration Event.
Stock Redemption and Purchase Agreement
Concurrent with the signing of the Contribution and Exchange Agreement, the
Company also entered into a Stock Redemption and Purchase Agreement with WinTec.
The Stock Redemption and Purchase Agreement provides that provides WinTec the
right to repurchase 12,400,000 shares of its common stock held by the Company
upon the closing of the Contribution and Exchange Agreement in exchange for
$1,500,000. In addition, the Company has agreed to issue to WinTec an option to
purchase up to 3,000,000 shares of its restricted common stock at an exercise
price of $0.10 per share.
The Stock Redemption and Purchase Agreement provides that the WinTec Board of
Directors shall be reduced from 7 to 6 directors and that the Company will have
the ability to appoint 2 of the directors.
Upon the completion of the Stock Redemption and Purchase Agreement, the Company
will hold 8,000,000 shares of WinTec, representing 28.99% of the issued and
outstanding common stock of WinTec.
Loan Agreement and Revolving Promissory Note
Concurrent to the signing of the Contribution and Exchange Agreement, the
Company entered into a Loan Agreement and Revolving Promissory Note with WinTec.
As part of the Loan Agreement, the Company has agreed to lend to WinTec
$1,500,000 cash to be used by WinTec to expand its business operations, which
includes at some future point moving their laboratory facility from Texas to
California.
The Loan Agreement provides for the funds to be delivered to WinTec in three
tranches, as set forth below:
- Fifty Thousand Dollars ($50,000) upon execution of the loan
documentation, and
- Four Hundred Fifty Thousand ($450,000) 90 days after the execution of the
loan documentation and
- One Million ($1,000,000) shall be funded at such times, and in such
amounts, as requested by WinTec.
F-7
The Loan Agreement provides for the Company to be issued an exclusive license
for the use of WinTec's anti-corrosion material for small marine craft, pursuant
and the first right of first refusal to exclusively license such intellectual
property of WinTec as it may license to third parties.
The Revolving Promissory Note has an annual interest rate of 1% and a term of
four (4) years from the date of issuance. The Revolving Promissory Note does not
provide for a payment schedule, only that payments will be made as requested by
the Company.
Stock Issuance
On June 28, 2011, as part of the Contribution and Exchange Agreement and the
Stock Redemption and Purchase Agreement, the Company made the following
issuances of its restricted common stock and equity instruments:
- 3,000,000 shares of its restricted common stock to WinTec pursuant to the
Contribution and Exchange Agreement in exchange for 20,400,000 shares of
the common stock of WinTec.
- An option to purchase 3,000,000 shares of the Company's restricted common
stock at an exercise price of $0.10 per share to WinTec as part of the
Stock Redemption and Purchase Agreement.
Presentation of Interim Information
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position and operating results of the Company for
the periods presented. The financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2011.
It is management's opinion that when the interim financial statements are read
in conjunction with the April 30, 2011 Annual Report on Form 10-K, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period. The accompanying consolidated financial statements of Medina
International Holdings, Inc. and its subsidiaries were prepared in accordance
with generally accepted accounting principles in the United States of America
("GAAP") and include the assets, liabilities, revenues, and expenses of
subsidiaries, Medina Marine, Inc., Harbor Guard Boats, Inc. and WinTec
Protective Systems, Inc. All intercompany balances and transactions have been
eliminated in consolidation.
F-8
Going Concern
Recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States, which
contemplates continuation of the Company as a going concern. On July 31, 2011,
the Company's current liabilities exceeded its current assets by $2,854,759.
Also, the Company's operations generated $300,662 revenue during the current
period ended and the Company's accumulated deficit is $6,421,991.
Management has taken various steps to revise its operating and financial
requirements, which we believe are sufficient to provide the Company with the
ability to continue on in the subsequent year. Management devoted considerable
effort during the period ended July 31, 2011 towards management of liabilities
and improving our operations. Management believes that the above actions will
allow the Company to continue its operations through the next fiscal year.
The future success of the Company is likely dependent on its ability to attain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
obtain positive cash flow.
Summary of 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 three wholly
owned subsidiaries, Harbor Guard Boats, Inc., Medina Marine, Inc., and WinTec
Protective Systems, 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;
F-9
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 July 31, 2011 and April 30, 2011, the Company had no
balance in its allowance for doubtful accounts.
Inventory
We carry our inventories at the lower of their 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.
F-10
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.
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.
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 And Diluted Net Loss Per Share
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
F-11
Products and services, geographic areas and major customers
The Company earns revenue from the sale of recreational and commercial boats.
The Company's products were sold domestically and internationally. The Company
does not separate sales activities into different operating segments.
Recently issued accounting pronouncements
There were accounting standards and interpretations issued during the three
months ended July 31, 2011, none of which are expected to have a material impact
on the Company's financial position, operations or cash flows.
NOTE 2. INVENTORY
As of July 31, 2011, inventory consisted of the following:
Inventory Cost
--------- ----
Parts $ 0
Work-in-Progress 64,153
Finished Goods 0
------------
Total Inventory $ 64,153
============
NOTE 3. FIXED ASSETS
As of July 31, 2011, fixed assets consisted of the following:
Property and Equipment Cost
Machinery and equipment; including molds & tools $828,441
Computers 13,535
Furniture & fixture 2,537
Office equipments 3,200
Fire Extinguisher 500
---------
Total Property and Equipment 848,213
Less accumulated depreciation (364,126)
------------
Fixed Assets, Net $384,087
============
F-12
NOTE 4. SHORT-TERM DEBT
As of July 31, 2011, Short term debts consisted of the following:
Financial Institutions
----------------------
Citi bank $94,932
Credit Cards 115,127
------------
Total Short Term debt $210,059
============
At July 31, 2011, the Company has a credit card totaling $100,000, under which
the Company may borrow on an unsecured basis since the year 2008 at an interest
rate of 8.75.% with monthly payments due. The outstanding balance for this
credit card 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 5. RELATED PARTY TRANSACTIONS
As of July 31, 2011 the Company owed $833,840 to a related party shareholder
incurred as part of the purchase transaction of Modena Sports Design, LLC.
Medina under the licensing agreement agrees to pay $1,000,000 to MGS Grand
Sports, Inc. as under: $200,000 in 2 months minimum and 3 months maximum and
balance $800K will be released at the rate of 10% of each boat sale until the
complete debt of balance $800K is paid off. Liability is limited to one million
dollars contingent upon production and sale of boats.
NOTE 6. CUSTOMER DEPOSIT
Deposit from customers at the end of quarter ended July 31, 2011 consists of the
following:
Deposit for commercial boats $ 70,300
Deposit for recreational boats 20,500
------
Total $ 90,800
==========
NOTE 7. NOTE PAYABLE
Deposit from customers at the end of quarter ended July 31, 2011 consists of the
following:
Notes payable - related party $61,374
Notes payable - others 87,500
------------
Total $148,874
============
F-13
At July 31, 2011, the Company had an unsecured note payable with a related party
in the amount of $11,374, which bears 8% interest and the payment is currently
due.
At July 31, 2011, 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,
which bears an 8% interest repayable. Interest accrued to date $11,000.
The convertible notes for $52,500 issued to Asher Enterprises, Inc. ("Asher") in
June 24, 2011 are due and maturity date on the March 13, 2012 with interest of
8% per annum. These notes are convertible at the election of Asher from time to
time after the issuance date. In the event of default, the amount of principal
and interest not paid and the notes become immediately due and payable. Should
that occur, the Company is liable to pay Asher 150% of the then outstanding
principal and interest. The note agreements contain covenants requiring Asher's
written consent for certain activities not in existence or not committed to by
the Company on the issue date of the notes, as follows: dividend distributions
in cash or shares, stock repurchases, borrowings, sale of assets and certain
advances and loans in excess of $100,000. Outstanding note principal and
interest accrued thereon can be converted in whole, or in part, at any time by
Asher after the issuance date into an equivalent of the Company's common stock
determined by 60% of the average of the three lowest closing bid prices of the
Company's common stock during the ten trading days prior to the date the
conversion notice is sent by Asher. We have provided $35,000 as interest expense
loss on the above transaction.
NOTE 8. SHAREHOLDERS' LOANS
At July 31, 2011, Shareholders' loans consisted of the following:
Daniel Medina, President & Director $162,145
Madhava Rao Mankal, Chief Financial Officer & Director 249,274
---------
Total $411,419
========
Shareholder's loan from shareholder of the Company, unsecured, 10% interest per
annum, due on demand.
NOTE 9. STOCKHOLDERS' EQUITY
During the three months ended, the Company, issued 3,000,000 common shares of
its common stock to WinTec Protective Systems, Inc.
F-14
NOTE 10. 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.
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 small periodic renewal payments, along with
royalty payments based on a percentage (generally 1.5% - 2%) of related gross
sales.
Mardikian Lawsuit
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.
NOTE 11 - SUBSEQUENT EVENTS
The Company evaluated events through August 11, 2011 for subsequent events to be
included in its July 31, 2011 financial statements herein.
F-15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 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 entered into an agreement with WinTec Protective Systems, Inc. on
June 28, 2011 to acquire 51% of the equity or 20,400,000 common shares of WinTec
Protective Systems, Inc. in exchange for 3,000,000 common shares of the Company.
WinTec's operations are located in Houston, Texas. WinTec has developed for use
a anti-corrosion material for small marine craft.
The Company engages six full time employees. Our President and Chief Financial
Officer have been engaged on full time to work with Harbor Guard Boats, Inc.
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.
RESULTS OF OPERATION
Results Of Operations For The Three-Month Period Ended July 31, 2011 Compared To
The Same Period Ended July 31, 2010
The Company recognized $300,662 in revenues during the three months ended July
31, 2011 compared to $488,260 in 2010 resulting in decrease of sales during this
quarter of $187,598. We sold two boats during the quarter ended July 31, 2011,
compared to three during the quarter ended July 31, 2010.
1
During the three months ended July 31, 2011 general and administrative expenses
increased by $374,924 or 170.88% to $477,290 for the quarter ended July 31, 2011
compared to $102,366 for the quarter ended July 31, 2010. Selling and marketing
expenses decreased by $26,933 to $26,198 for the quarter ended July 31, 2011
compared to $53,131 for the quarter ended July 31, 2010. Decrease is mainly due
to reduction in sales commission, freight and trade show expenses for the
quarter ended July 31, 2011.
During the three months ended July 31, 2011 interest expense increased by
$42,004 or 419.70% to $52,012for the period ended July 31, 2011 compared to
$10,008 for the period ended July 31, 2010. This increase is due to the loss in
the amount of $35,000 on account of the loss on the conversion feature of the
loan agreement.
During the three months ended July 31, 2011, the Company recognized a net loss
of $432,130 compared to a net loss of $32,509 for the quarter ended July 31,
2010. The increase of $399,621 or 1,229.26% was mostly due to write off of loss
on account of cost of 3,000,000 shares valued at $219,600 issued towards
acquisition of 51% of WinTec Protective Systems, Inc., cost of administration
expenses of WinTec Protective Systems, Inc. $79,827, legal expenses $59,810 and
Audit fees $11,828.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2011, we had total current assets of $94,812, consisting of cash of
$4,716, $25,943 in accounts receivable and $64,153 in inventory. At July 31,
2011, the Company had current liabilities of $2, 949,571. At July 31, 2011, the
Company has a working capital deficit of $2,854,759. The Company will need to
raise capital through loans or private placements in order to carry out any
operational plans.
During the three months ended July 31, 2011, the Company used $88,528 from its
operating activities. The Company provided $75,891 through financing activities
during the three months ended July 31, 2011.
During the three months ended July 31, 2010, the Company used $63,389 from its
operating activities. The Company had $10,631 in cash at July 31, 2010. The
Company used $33,203 through financing activities during the three months ended
July 31, 2010.
During the three months ended July 31, 2011, the Company made a payment of
$4,505 on Lines of Credit , $6,401 owed to related party of the Company and
received $87,500 on Promissory note.
At July 31, 2011, the Company had an unsecured note payable with a related party
in the amount of $11,374, which bears 8% interest and the payment is currently
due.
At July 31, 2011, 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,
which bears an 8% interest repayable. Interest accrued to date $11,000.
2
The convertible notes for $52,500 issued to Asher Enterprises, Inc. ("Asher") in
June 24, 2011 are due and maturity date on the March 13, 2012 with interest of
8% per annum. These notes are convertible at the election of Asher from time to
time after the issuance date. In the event of default, the amount of principal
and interest not paid and the notes become immediately due and payable. Should
that occur, the Company is liable to pay Asher 150% of the then outstanding
principal and interest. The note agreements contain covenants requiring Asher's
written consent for certain activities not in existence or not committed to by
the Company on the issue date of the notes, as follows: dividend distributions
in cash or shares, stock repurchases, borrowings, sale of assets and certain
advances and loans in excess of $100,000. Outstanding note principal and
interest accrued thereon can be converted in whole, or in part, at any time by
Asher after the issuance date into an equivalent of the Company's common stock
determined by 60% of the average of the three lowest closing bid prices of the
Company's common stock during the ten trading days prior to the date the
conversion notice is sent by Asher. We have provided $35,000 as interest expense
loss on the above transaction.
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.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain 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.
3
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 has 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, to allow timely decisions
regarding required disclosure as a result of the deficiency in our internal
control over financial reporting discussed below.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended July 31, 2011, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS -
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina.
Plaintiffs are seeking monetary damages exceeding $1 million as well as punitive
damages in unspecified amounts and a dissolution of the Company.
Mr. Mardikian is a Director and significant shareholder of the Company.
The suit is in its preliminary stages and no prediction can be made as to its
eventual outcome. At this stage, the Company believes that plaintiffs' claims
are without merit and will vigorously defend the lawsuit in the normal course of
business.
ITEM 2. CHANGES IN SECURITIES
During the period of May 1, 2011 through July 31, 2011, the Company issued
3,000,000 common shares of its common stock to WinTec Protective Systems, Inc.
in exchange for 51% of the equity of WinTec Protective Systems.
4
Exemption From Registration Claimed
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were known to the Company and its management,
through pre-existing business relationships. All purchasers were provided access
to all material information, which they requested, and all information necessary
to verify such information and were afforded access to management of the Company
in connection with their purchases. All purchasers of the unregistered
securities acquired such securities for investment and not with a view toward
distribution, acknowledging such intent to the Company. All certificates or
agreements representing such securities that were issued contained restrictive
legends, prohibiting further transfer of the certificates or agreements
representing such securities, without such securities either being first
registered or otherwise exempt from registration in any further resale or
disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -
NONE
ITEM 4. RESCINDED AND REMOVED.
ITEM 5. OTHER INFORMATION
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
5
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: September 15, 2011 By: /s/ Daniel Medina
------------------------------------
Daniel Medina, President
Dated: September 15, 2011 By: /s/ Madhava Rao Mankal
------------------------------------
Madhava Rao Mankal,
Chief Financial Office
6