SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED: APRIL 30, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commissions 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) (I.R.S. Employer Identification No.)
255, S. Leland Norton Way, San Bernardino, CA 92408
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 522-4414
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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Title of each class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Yes [ ] No [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]
State issuer's revenues for its most recent fiscal year. $192,800
There were 35,660,091 shares of the Registrant's common stock outstanding as of
June 10, 2008. The aggregate market value of the 13,148,482 shares of common
stock held by non-affiliates of the Registrant is approximately $788,909 based
on the closing market price of $0.06 per share on June 10, 2008.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Yes [ ] No [X]
MEDINA INTERNATIONAL HOLDINGS, INC.
2008 ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
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Part I.
Item 1. Description of Business 4
Item 2. Description of Property 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Part II.
Item 5. Market for Common Equity and Related Stockholder Matters 15
Item 6. Management's Discussion and Analysis or Plan of Operation 18
Item 7. Financial Statements 21
Item 8. Changes in and Disagreements With Accountants on Accounting and 21
Financial Disclosure
Item 8a. Controls and Procedures. 21
Item 8(a)T. Internal Controls and Procedures 21
Item 8b. Other Information
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons and 24
Corporate Governance; Compliance with Section 16(a) of the
Exchange Act
Item 10. Executive Compensation 26
Item 11. Security Ownership of Certain Beneficial Owners and Management and
and Related Stockholder Matters
Item 12. Certain Relationships and Related Transactions, and Director
Independence
Part IV.
Item 13. Index to Exhibits 31
Item 14. Principal Accountant Fees and Services 32
FORWARD-LOOKING STATEMENTS
In addition to historical information, some of the information presented in
this Annual Report on Form 10-KSB contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Although Medina International Holdings, Inc., ("Medina" or the "Company,"
which may also be referred to as "we," "us" or "our") believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from our expectations. Such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated, including but not limited
to, our ability to reach satisfactorily negotiated settlements with our
outstanding creditors and raise debt and/or equity to fund negotiated
settlements with our creditors and to meet our ongoing operating expenses.
Cautionary statements regarding the risks, uncertainties and other factors
associated with these forward-looking statements are discussed on page 18 below.
You are urged to carefully consider these factors, as well as other information
contained in this Annual Report on Form 10-KSB and in our other periodic reports
and documents filed with the Securities and Exchange Commission ("SEC").
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Medina International Holdings, Inc. ("Medina") was incorporated in 1998 in the
state of Colorado as Colorado Community Broadcasting, Inc. In 2005, the Company
changed its name to Medina International Holdings, Inc. Our corporate offices
are located at 255 S. Leland Norton Way, San Bernardino, CA 92408 and our
telephone number is (909)522-4414.
Prior to 2005, we originally intended to purchase low power television licenses
or stations and planned to broadcast local programming mixed with appropriate
national programming. We were unsuccessful in our attempt to enter the low power
television business.
In 2004, after the change of our management, the board and shareholders approved
the name change to Medina International Holdings, Inc. At that time, Messrs.
Daniel F. Medina and Mr. Madhava Rao Mankal were appointed as the President and
Chief Financial Officer, respectively, and were also appointed directors of the
Company. Since these organizational restructurings, we have pursued a business
plan that focuses on the manufacturing of watercraft for rescue operations, as
well as recreational use.
We operate our watercraft manufacturing activities, through our wholly-owned
subsidiary, Medina Marine, Inc. ("Medina Marine"). Medina Marine was
incorporated in May 2006, in the state of California. Our wholly-owned
subsidiary, Medina Marine, Inc. maintains a website at www.medinamarine.com.
Information on Medina Marine's website is
not part of this Annual Report and you should not rely on it in deciding whether
to invest in our common stock.
Fixed Asset Purchase Agreement
On June 18, 2008, we entered into a Fixed Asset Purchase Agreement with MGS
Grand Sports, Inc. ("MGS Grand") and Mardikian Design Associates ("Mardikian")
to purchase the fixed assets of Modena Sports, Design, LLC ("Modena Sports") in
exchange for 5,500,000 shares of its restricted common stock. MGS Grand owns a
95% equity interest in Modena Sports and Mardikian owns the remaining 5% equity
interest. The fixed assets to be acquired by us consist of office equipment,
tools and machinery. In addition, we will acquire web sites and domain names for
the websites Modena Sports. Upon the completion of the transaction, Modena
Sports will become our wholly-owned subsidiary. The transaction will be
completed upon the delivery of audited financial statements.
Modena Sports was organized in the state of California and does business as
Harbor Guard Business. Modena Sports is involved in the manufacturing of fire
and rescue boats.
1
Mold Purchase Agreement
On June 18, 2008, Medina and MGS Grand and Mardikian Design entered into a Mold
Purchase Agreement, as a part of the Fixed Asset Purchase Agreement, referred to
above. The Mold Purchase Agreement allows for the purchase of certain molds and
tools from MGS Grand and Mardikian Design.
PRODUCTS
We offer, through Medina Marine, four watercraft products for recreational use
and for use by fire and/or rescue operations.
1. The Vortex Recreational Boat ("the Vortex"). The Vortex is a 22'
long boat that can seat up to 7 individuals and its intended use is
solely for recreational purposes. The Vortex has a V-birth cabin that
can seat up to 2 individuals. The Vortex is capable of reaching speeds
as high as 60 miles per hour.
2. 12' Commercial Rescue Boat ("12' Rescue"). The 12' Rescue boat is
intended to seat up to 6 people at a time, while including a
containment area for multiple patients. The 12' rescue boat contains a
jet engine, which allows it to reach speeds of 50 miles per hour. The
jet engine also allows the boat to obtain high speeds from a stand
still, in a matter of seconds, while still being able to be stopped
from such high speeds. The smaller of the boats to be offered, it size
and weightlessness means it can be used in smaller water areas.
3. The 15' Commercial Rescue and Fire Boat ("15' Rescue"). The 15'
Rescue boat is designed using the patented v-hull design. The v-hull
provides the boat with better stability and provides the boat with
quicker response capabilities. The boat has been designed with a jet
engine that allows the boat to reach speeds up to 50 miles per hour.
The boat has the same capabilities as the 12' Rescue boat. The
difference is in the usage of the watercraft. The 15' Rescue is
designed to also include a patented water pump, at the request of the
customer. The inclusion of a water pump allows the boat to be used in
fighting fires.
4. The 21' Commercial Fire and Rescue Boat ("21' Rescue") with cat
bottom. The 21' Rescue boat is the longest of the rescue boats offered.
The boat is designed to provide greater stability, while providing more
room for patients and crew members. The boat incorporates a CAT bottom
hull for additional stability. The boat is designed with five medical
compartments, allowing the boat to carry a greater amount of medical
equipment. Additionally, the boat is designed with a dive area in the
front and the back of the boat. The 21' Rescue, like the 15' Rescue is
designed to include a water pump for fighting fires.
Our watercraft products are made out of fiberglass materials. We are using
fiberglass to build our watercraft products in order to provide durability and
enhance the speeds that the watercraft need to be able to obtain while holding
their maximum capacity. In addition, the use of fiberglass means that any
repairs or damage to the interior or exterior of the craft is easily repaired.
The boats incorporate an enclosed platform in their designs, which prevents the
boats from flooding and therefore provides a greater stability.
All of our watercrafts use jet propulsion for their power. The use of jet
engines allows the watercraft to operate in waters with depths of less than 10
feet of water. In addition, the jet engines provide a greater safety to the
rescuers and those being rescued. Most rescue watercraft use propeller engines,
however, our jet propulsion watercrafts allow the crew members to get extremely
close to the victims without worry of causing further injury to those being
rescued.
The water pump used in these designs uses water retrieved from the bottom of the
boat and spray water at 750 gallons per minute, without compromising the
stability of the craft.
This innovation in fire rescue/rescue watercraft design will allow us to market
these boats to both fire departments and rescue departments.
2
LICENSES
In manufacturing our watercrafts we utilize several patented designs. The
patents and patents applications used are not owned by or developed by the
Company. Rather, the Company licenses the right to use the patents from Mr.
Albert Mardikian. Prior to June 18, 2008, we had entered into several different
license agreements with Mr. Mardikan. On June 18, 2008, the Company, MGS Grand
and Albert Mardikian ("Mardikian") entered into a License Agreement to allow the
Registrant exclusive rights to the patents and designs for the "rescue jet"
personal water craft and related assemblies, systems and design rights. The
License Agreement revised the prior license agreements between the Company and
Mr. Mardikian.
We have agreed to pay a royalty for the use of the design and patents in an
amount equal to gross sales less sales returns and freight and sales commissions
for a period of 15 years. The royalties consist of:
a) 2% for Patented Designs with or without Patented Fire Pump technology
used in our production;
b) 1% for Patented Pump Technology used in designs other than Mardikian
or his associates;
c) 1% for using Patents in any of distributor or associated companies
products; and
d) we will pay $1,000,000 to MGS ($200,000 in 2 months minimum and 3
months maximum, $800,000 at a rate of 10% of each boat sale until
$800,000 has been paid).
Prior to June 18, 2008, the Company had entered into the following license
agreements, all of which have been rescinded as a result of the June 18, 2008
License Agreement.
1. In February 2005, we signed a license agreement ("the Vortex
License") with Mr. Mardikian to manufacture and sell our Vortex boats.
The Vortex License has a term of 5 years and provides an option to
renew by the Company, as long as the Company is not in default on the
terms of the license agreement. The Vortex License grants the Company
an exclusive right to use the design in Vortex boats. The Vortex
License provides for royalty payments equal to 2% of the gross sales,
less sales returns for a period of 5 years. The Vortex License also
requires a minimum license payment of $200 per calendar quarter.
2. In January 2006, we signed a license agreement ("the Water Pump
License") with Mr. Mardikian to use his water pump patent (United
States Patent 6,343,964) in the fire and rescue boats designed by us.
The license has a term of 5 years and provides an option to renew by
the Company, as long as the Company is not in default on the terms of
the Water Pump License. The Water Pump License grants us to a
non-exclusive right to use the patent in the manufacturing of both the
15' Rescue and the 21' Rescue boats. The Water Pump License provides
for a royalty payment equal to 1% of the gross sales, less sales
returns, up to January 31, 2008, at which time the royalty payment will
increase to 1.5% of the gross sales, less sales returns, till January
31, 2011. The Water Pump License does require a minimum payment of $600
per every six-month period.
3. In June 2006, we signed a license agreement ("15' Rescue Design
License") with Mr. Mardikian to use his design for the manufacturing of
our 15' Rescue boats. The 15' Rescue Design License has a term of 5
years and provides an option to renew by the Company, as long as we are
not in default of any of the terms of the 15' Rescue Design License.
The 15' Rescue Design License grants us a non-exclusive right to use
the design of the 15' Rescue boat through out the world. The 15' Rescue
Design License provides for a royalty payment equal to 2% of the gross
sales, less sales return for the period of 5 years. The 15' Rescue
Design License provides for a minimum $100.00 monthly payment.
All of the licenses referenced above are with Mr. Mardikian, and shall be
treated separately and not as one license agreement.
3
CURRENT OPERATIONS
Our operations to date have focused on the building of molds of our watercraft
designs and minimal sales activities. We have successfully built the molds for
our 15' Rescue and 21' Rescue boats. In addition, we have subleased an 11,000
square foot facility in San Bernadino, California in which to manufacture and
assemble our watercraft products.
COMPETITION
Our products complete with those companies that are already established in the
industry. Our competition may have established dealerships around the United
States and other parts of the world, which may give them an advantage over our
company. In addition, our competition may have good relations with the
government and its personnel and a proven track record, which may adversely
affect our sales effort. An established competition to our company may have
resources and man power to expand into other cities and countries and offer
their products at lower prices.
We believe that the use of the jet propulsion engines and the innovations in our
designs provide greater stability will provides us with an advantage over our
current competition Our competitors build similar rescue watercraft, though they
may use different materials in the construction of their products. While some
competitors also use fiberglass in the construction, others manufacture crafts
using inflatable materials, metals, and aluminum.
There is greater competition for our Vortex boats, then for our rescue and fire
watercrafts. The recreational industry is larger then the fire and rescue
industry and our competition in this industry have an established clientele and
has far greater resources then we have at this time. We believe that our design
of the Vortex will provide us an advantage over our established and larger
competition.
MARKETING
Our marketing strategy includes displaying and demonstrating the watercraft at
regional, national and international boat show. In addition we are working to
demonstrate our boats on waterways throughout the United States. We are also
going to advertise in boating magazines and will use the help of the internet to
sell our products.
We are taking measures to build dealer relations as well as customer and
supplier relations, to further improve our establishment in the marine industry.
Currently, we have dealers for the country of Turkey, Colombia, and the U.S.
military. We are aggressively looking into establishing dealerships around the
world, which have proven track record of selling watercrafts to their respective
governments.
RISK FACTORS
An investment in our common stock involves a number of risks. Before making an
investment decision, you should carefully consider all of the risks described in
this Form-10KSB. The risks discussed in this document could materially and/or
adversely affect our business, financial condition and results of operations and
cause the trading price of our common stock to decline significantly. If this
occurs, you may lose all or part of your investment.
WE RELY UPON KEY EMPLOYEES TO PROCEED WITH OUR BUSINESS PLANS
The loss of our key employees could impair our ability to proceed with our
business. Our success depends in significant part on the continued services of
our key employees, including Mr. Daniel Medina, President and Director, and Mr.
Madhava Rao Mankal, Chief Financial Officer and Director.
4
WE RELY UPON LICENSES IN THE MANUFACTURING OF OUR BOATS
We manufacture our boats under various licenses; the loss of any could impair
our business. Mr. Albert Mardikian holds the patents on the designs we use to
build our boats. If we breach the license agreement, it may seriously impair our
ability to manufacture the boats and could cause us to fail to successfully
implement our business plan. The licenses are each for a certain period of time.
If Mr. Mardikian is unwilling to renew the licenses, it may seriously impair our
ability to manufacture the boats and could cause us to fail to successfully
implement our business plan.
WE DEPEND ON OUR SUPPLIERS AND IF WE CANNOT OBTAIN CERTAIN COMPONENTS FOR OUR
PRODUCTS, WE MIGHT HAVE TO DEVELOP ALTERNATIVE DESIGNS THAT COULD INCREASE OUR
COSTS.
We depend upon a number of suppliers for components in manufacturing our boats.
There is an inherent risk that certain components will be unavailable for prompt
delivery or, in some cases, discontinued. We have only limited control over any
third-party manufacturer as to quality controls, timeliness of production,
deliveries and various other factors. Should the availability of certain
components be compromised, it could force us to develop alternative designs
using other components, which could add to the cost of goods sold and compromise
delivery commitments. If we are unable to obtain components in a timely manner,
at an acceptable cost, or at all, we may need to select new suppliers, redesign
or reconstruct the process we use to build the hulls, which management believes
would take a minimum of one year. We may not be able to manufacture any boats
for a period of time, which could materially and adversely affect our business,
through the results of our operations, and our financial condition.
In addition, if a change in the manufacturer of a key component is required,
qualification of a new supplier may result in delays and additional expenses in
meeting customer demand for products.
WE HAVE A LIMITED OPERATING HISTORY AND MAY NEVER ACHIEVE OR SUSTAIN PROFITABLE
OPERATIONS.
We have generated $217,800 in revenues from inception to date from our
operations. Our ability to successfully commercialize the boats will depend on,
among other things, our ability to manufacture and sell our boats and the
relative cost to the customer of our product as compared to alternative
competitive products. As a result, we may never achieve or sustain profitable
operations.
We anticipate that we will continue to incur operating losses for the
foreseeable future, due to a high level of planned operating and capital
expenditures for developing manufacturing capabilities, increased sales and
marketing costs, the hiring of additional personnel, greater levels of product
development and our general growth objectives related to the design and
manufacturing of our products.
We have incurred losses since our inception and expect to continue to incur
losses in the future. We may never become profitable. We have historically
generated substantial losses, which, if continued, could make it difficult to
fund our operations or successfully execute our business plan, and could
adversely affect our stock price. We experienced net losses of $1,093,230 for
the year ended April 30, 2008 and at April 30, 2008, we had an accumulated
deficit of $2,880,343.
THE IMPACT OF MARKET FLUCTUATIONS IN MONEY MARKETS, FINANCIAL STABILITY AND
FINANCING COSTS COULD ADVERSELY AFFECT OUR PROFITABILITY.
Most of our expenses and capital spending are transacted in the US dollars. The
Company's exposure to market risk for changes in interest rates relate primarily
to the Company's cash and cash equivalent balances, marketable securities,
investment in sales-type leases, and loan agreement. The majority of the
Company's investments may be in short-term instruments and therefore subject to
fluctuations in US interest rates. Our financing arrangements will periodically
renew and an increase in interest rates may result in higher interest charges to
us. Due to the uncertain nature of such, we cannot assure that this will not
have a material adverse impact on our financial condition and results of
operations.
5
OUR INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE DO NOT
GENERATE ENOUGH CASH FROM OPERATIONS TO SUSTAIN OUR BUSINESS WE MAY HAVE TO
LIQUIDATE ASSETS OR CURTAIL OUR OPERATIONS.
The accompanying financial statements have been prepared assuming we will
continue as a going concern. Conditions exist which raise substantial doubt
about our ability to continue our business unless we are able to generate
sufficient cash flows to meet our obligations and sustain our operations. In
addition, we have limited working capital. We cannot assure or guarantee that
additional capital and/or debt financing will be available and to the extent
required by us, or that if available, it will be on terms favorable or
acceptable by us. Our financial statements do not include any adjustment that
might result from the outcome of this uncertainty. This may be an indicator of
our inability to continue in business which could cause loss of investment.
OUR CURRENT LIABILITIES EXCEED OUR CURRENT ASSETS BY A SIGNIFICANT AMOUNT, WHICH
COULD PUT STOCKHOLDER/INVESTORS AT SERIOUS RISK OF OR LOSS OF THEIR INVESTMENT.
The Company, at April 30, 2008, has current liabilities totaling $283,784 and
$92,813 in current assets. As of April 30, 2008, we have a working capital
deficit of approximately $190,971. At April 30, 2008, our liabilities include
accounts payables of $190,358 and accrued interest of $40,950. In the event that
creditors or litigants, if any, were to attempt to collect, it is unlikely that
stockholders, as equity holders, would receive some or any return of investment,
because creditors would be paid first.
A SEGMENT OF OUR BUSINESS FOCUSES ON GOVERNMENT AGENCIES, LIMITED NUMBER OF
POTENTIAL CUSTOMERS, AND IF WE CANNOT OBTAIN GOVERNMENT CONTRACTS, WE MAY NOT
EARN REVENUES.
Obtaining government contracts may involve long purchase and payment cycles,
competitive bidding, qualification requirements, delays or changes in funding,
budgetary constraints, political agendas, extensive specification development,
price negotiations and milestone requirements. Each government agency also
maintains its own rules and regulations with which we must comply and which can
vary significantly among agencies. Governmental agencies also often retain some
portion of fees payable upon completion of a project and collection of these
fees may be delayed for several months.
WE ARE SUBJECT TO SUBSTANTIAL COMPETITION AND WE MUST CONTINUE TO FOCUS ON
PRODUCT DEVELOPMENT TO REMAIN COMPETITIVE.
We are subject to significant competition that could harm our ability to gain
business and increase the pressure on prices on our products we offer. We face
competition from a variety of firms. Moreover, we may not have sufficient
resources to undertake the continuing research and development necessary to
remain competitive. Competitors may attempt to independently develop similar
designs or duplicate our products or designs. We or our competitors may
intentionally or unintentionally infringe upon or misappropriate products or
proprietary information. In the future, litigation may be necessary to enforce
intellectual property rights or to determine the validity and scope of the
proprietary rights of others. Any such litigation could be time consuming and
costly. We operate under a licensing agreement with the owner of the patented
progress for the 12' and 15' fire rescue boats, as well as the "water pump"
patent for the boat. Any patent or patents sub-licensed to us relating to
current or future products may be challenged, invalidated, or circumvented or
the rights granted there under may not be held valid if subsequently challenged.
Our boat designs are based on technological and design innovation. Consequently,
the life cycles of some of our products can be relatively short. Our success
depends significantly on our ability to establish and maintain a competitive
position in this field. Our products may not remain competitive in light of
technological developments by others. Our competitors may succeed in discovering
and developing technology before we do that might render our technology, and
hence making our products, obsolete and noncompetitive.
6
We are a small company in terms of employees, technical and research resources
and capital. We expect to have significant research and development, sales and
marketing, and general and administrative expenses for several years. These
amounts may be expended before any commensurate incremental revenue from these
efforts may be obtained. These factors could hinder our ability to meet changes
in the boat industry as rapidly or effectively as competitors with substantially
more resources.
THE BOAT INDUSTRY IS VERY COMPETITIVE, WHICH MAY HAVE AN ADVERSE AFFECT ON
PROFITS IF SALES FALLS SHORT OF OUR GOALS
The boat industry is very competitive and competition is increasing in both the
United States and abroad. We may not be able to compete successfully against
either current or future competitors. Many of our competitors have substantially
greater financial, technical and marketing resources, larger customer bases,
longer operating histories, greater name recognition and more established
relationships in the industry than we do. As a result, these companies may be
able to develop and expand their market share more rapidly, adapt to changes in
customer requirements more quickly, take advantage of acquisition and other
opportunities more readily, and devote greater resources to the marketing and
sale of their products than we can. In addition, competition could result in
significant price erosion, reduced revenue, lower margins or loss of market
share, any of which would significantly harm our business. If we are unable to
successfully compete, we will be unable to achieve our business plan.
COMMERCIALIZATION OF OUR PROPOSED NEW PRODUCTS COULD FAIL IF IMPLEMENTATION OF
OUR SALES AND MARKETING STRATEGY IS UNSUCCESSFUL.
A significant sales and marketing effort will be necessary to achieve the level
of market awareness and sales needed to achieve profitability from sales of our
new products. We currently have only limited sales and marketing experience,
both in the United States and abroad, which may limit our ability to
successfully develop and implement our sales and marketing strategy. We need to:
|X| Hire and train sales and marketing personnel; Manage
geographically dispersed operations;
|X| Encourage customers to purchase products.
If we fail to successfully create and implement a sales and marketing strategy
it could result in increased costs and net losses with resulting potential
failure of the Company.
WE MUST COMPLY WITH ENVIRONMENTAL REGULATIONS OR WE MAY HAVE TO PAY EXPENSIVE
PENALTIES OR CLEAN UP COSTS.
We are subject to federal, state, local and foreign laws, and regulations
regarding protection of the environment, including air, water, and soil. Our
manufacturing business involves the use, handling, storage, and contracting for
recycling or disposal of, hazardous or toxic substances or wastes, including
environmentally sensitive materials, such as batteries, solvents, lubricants,
degreasing agents, gasoline and resin. We must comply with certain requirements
for the use, management, handling, and disposal of these materials. We do not
maintain insurance for pollutant cleanup and removal. If we are found
responsible for any hazardous contamination, we may have to pay expensive fines
or penalties or perform costly clean-up. Even if we are charged, and later found
not responsible, for such contamination or clean up, the cost of defending the
charges could be high.
7
IF WE DO NOT COMPLY WITH GOVERNMENT REGULATIONS, WE MAY BE UNABLE TO SHIP OUR
PRODUCTS OR MAY HAVE TO PAY EXPENSIVE FINES OR PENALTIES.
We are subject to regulation by county, state, and federal governments,
governmental agencies, and regulatory authorities from several different
countries. If we fail to obtain regulatory approvals or suffer delays in
obtaining regulatory approvals, we may not be able to market our products and
services, and generate revenues. Further, we may not be able to obtain necessary
regulatory approvals. Although we do not anticipate problems satisfying any of
the regulations involved, we cannot foresee the possibility of new regulations,
which could adversely affect our business. Our products are subject to export
limitations and we may be prevented from shipping our products to certain
nations or buyers.
WE RELY ON PROPRIETARY DESIGNS AND RIGHTS AND IF WE HAVE TO LITIGATE THOSE
RIGHTS, OUR EXPENSES COULD SUBSTANTIALLY INCREASE.
Our intellectual property is important to our business. We rely on a combination
of license rights, trade secret laws, confidentiality procedures, and
contractual provisions to protect our intellectual property. The patents and
patents-pending protect and enhance the construction of the sleek, progressive
"V" and double pad-bottomed "V-hull" boat. The hull is designed so that as water
hits the hull, it flows to the next convenient degree, creating a lift and
literally raising the boat to the top of the water. The progressive "V" hull
gives the boats excellent stability and handling at low and high speeds,
extraordinary tracking for precision handling, and reliability when utilized in
emergency and natural disaster situations.
Our success and ability to compete depend, in part, on the protection of our
designs and technology. In addition, our technology could infringe on patents or
proprietary rights of others. We have not undertaken or conducted any
comprehensive patent infringement searches or studies. If any third parties hold
any conflicting rights, we may be required to stop making, using or selling our
products or to obtain licenses from and pay royalties to others. Further, in
such event, we may not be able to obtain or maintain any such licenses on
acceptable terms, if at all. We may need to engage in future litigation to
enforce intellectual property rights or the rights of customers, to protect
trade secrets or to determine the validity and scope of proprietary rights of
others, including customers. This litigation could result in substantial costs
and diversion of resources and could materially and adversely affect our results
of operations.
WE WILL NEED SIGNIFICANT ADDITIONAL FUNDS FOR OPERATIONS AND PRODUCT MARKETING
AND DEVELOPMENT, WHICH WE MAY NOT BE ABLE TO OBTAIN.
The expansion and development of our business will require significant
additional capital. We intend to seek substantial additional financing in the
future to fund the growth of our operations, including funding the significant
capital expenditures necessary for us to provide products in our targeted
markets. We may be unable to obtain any future equity or debt financing on
acceptable terms or at all. A market downturn or general market uncertainty will
adversely affect our ability to secure additional financing. If we are unable to
obtain additional capital or are required to obtain it on terms less
satisfactory than what we desire, we will need to delay deployment of our new
products or take other actions that could adversely affect our business,
prospects, operating results and financial condition. To date, our cash flow
from operations has been insufficient to cover our expenses and capital needs.
Our current capital resources have been expended and we need additional capital
to continue expansion, which we may not be able to obtain, and failure to obtain
could impair or curtail operations.
THE PRIMARY BUSINESS LOCATION THE COMPANY OPERATES FROM MAY HAVE AN ADVERSE
EFFECT ON THE COMPANY'S PERFORMANCE
Our principal place of business is located at 255 S. Leland Norton Way, San
Bernardino, California 92408, and consists of 11,000 sq. ft., which we rent from
Lasera Technologies, Inc. on a month to month basis. Beginning October 1, 2006,
the Company began paying Lasera Technologies a sum of $3,000 per month for the
space. Management anticipates that this arrangement will be suitable for our
needs for the foreseeable future. If we were to terminate or if this arrangement
was terminated, we would have to move our operations to another location which
is feasible, cost effective, and has building codes that would allow for the
manufacturing of boats.
8
THE ECONOMY CAN HAVE AN ADVERSE AFFECT ON OUR COMPANY
We are susceptible to fluctuations in the economy. If fewer boats are purchased
in response to general slowdowns in the economy, our business could be adversely
affected. Sales of recreational boats generally fluctuate with the economy.
Fluctuations in the market for recreational boats could cause fluctuations in
our operating results and a decline in the growth of the recreational boats
market could have a material and adverse effect on our business, financial
condition, and results of operations.
INTERNATIONAL TRADE SITUATIONS WITH OUR COMPANY CAN HAVE AN AFFECT ON OUR
BUSINESS
The hulls for our Vortex recreational boats are manufactured in China. The
United States has designated China as a most favored nation, which has resulted
in low tariffs on imports into the United States from China. Each year, the
United States reconsiders the renewal of China's status as a most favored
nation. If import tariffs or taxes increase because the United States does not
renew or even revokes China's most favored nations status, or for any other
reason, our cost of goods would substantially increase, and our business,
financial condition, and results of operations would likely be adversely
affected.
CHANGES IN INTERNATIONAL POLITICAL, SOCIAL AND ECONOMIC ENVIRONMENT MAY AFFECT
OUR FINANCIAL PERFORMANCE.
Our financial performance may be affected by changes in China's political,
social and economic environment. We expect to be able to cost-effectively
produce our Vortex recreational boats, in part, by manufacturing the hulls for
our boats in China. The role of the Chinese central and local governments in the
Chinese economy is significant. Chinese policies toward economic liberalization,
and laws and policies, foreign investment, currency exchange rates and other
matters could change, resulting in greater restrictions on our ability to do
business and operate our manufacturing facilities in China. The Chinese
government could impose surcharges, increase our tax rates, or revoke, terminate
or suspend our operating licenses without compensating us. Confrontations have
occurred between the military and civilians. If for these or any other reason,
we lose our ability to manufacture our products in China, or our cost of doing
business in China increases, our business, financial condition, and results of
operations would be materially and adversely affected.
RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK
The Securities and Exchange Commission has adopted a number of rules to regulate
"penny stock." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4,
15g-5, 15g-6, 15g-7 and 15g-9 under the Securities Exchange Act of 1934, as
amended.
"Penny Stocks" are stocks:
|X| with a price of less than $5.00 per share;
|X| that are not traded on a "recognized" national exchange;
|X| whose price are not quoted on the NASDAQ automated Quotation at
not less than $5.00 per share;
|X| issuers with net tangible assets of less than $2 million (if the
issuer has been in continuous operation less than three years)
The requirements affecting brokers affect trades in our shares, discussed in the
Risk Factors, reduce the potential market for our shares by reducing the number
of potential investors. This will make it more difficult for investors in our
common stock to sell shares to their parties or to otherwise dispose of them.
This, in turn, could cause stock price to decline, and this impediment to
trading could cause difficulty to our stock to ever develop any consistency in
volume, or any substantial volume, which negatively affects liquidity of the
shares and which may adversely affect our share price.
9
INVESTORS SHOULD BE AWARE OF THE RISKS IN THE MARKET FOR PENNY STOCKS AND THE
POSSIBILITIES OF FRAUD AND ABUSE.
Stockholders should be aware that, according to SEC, the market for penny stocks
has suffered, in recent years, from patterns of fraud and abuse. Such patterns
include (i) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchasers and sales and
false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. The Company will not be able to
control any of such patterns.
WE EXPECT OUR STOCK PRICE TO BE VOLATILE WHICH COULD CAUSE INVESTMENT LOSSES TO
PURCHASERS OF OUR STOCK.
The trading price of our common stock is likely to be highly volatile. Our stock
price could fluctuate widely in response to many factors, including the
following:
|X| Our historical and anticipated quarterly and annual operating
results;
|X| Announcements of new products or services by us or our
competitors or new competing technologies;
|X| Investors perceptions of us and investments relating to the boat
industry;
|X| Developments in the boat industry;
|X| Technological innovations;
|X| Failure to diversify.
|X| Changes in pricing made by us, our competitors or providers of
alternative services;
|X| The addition or loss of business customers;
|X| Variations between our actual results and analyst and investor
expectations;
|X| Condition or trends in the boat industry, including regulatory
developments;
|X| Announcements by us of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
|X| Additions or departures of key personnel; and
|X| General market and economic conditions.
In addition, in recent years the stock market in general, and the Over-the-
Counter Bulletin Board Market, in particular, have experienced extreme price and
volume fluctuations. These fluctuations have often been unrelated or
disproportionate to the operating performance of these companies. These market
and industry factors may materially and adversely affect our stock price,
regardless of our operating performance.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT.
Trading in our securities is subject to the SEC's "penny stock" rules, described
above and trading in our securities will continue to be subject to the penny
stock rules for the foreseeable future. The SEC has adopted regulations that
generally define a penny stock to be any equity security that has a market price
of less than $5.00 per share, subject to certain exceptions. These rules require
that any broker-dealer who recommends our securities to persons other than prior
customers and accredited investors must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser's
written agreement to execute the transaction. Unless an exception is available,
the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated with trading in the penny stock market. In addition, broker-dealers
must disclose commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities they offer. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from recommending transactions in our securities,
which could severely limit the liquidity of our securities and consequently
adversely affect the market price for our securities.
10
WE WILL NEED TO RAISE ADDITIONAL FUNDS WHICH COULD DILUTE THE SHARES
We need to raise additional funds through public or private debt or equity
financing to be able to fully execute our business plan. Any additional capital
raised through the sale of equity may dilute your ownership interest. We may not
be able to raise additional funds on favorable terms, or at all. If we are
unable to obtain additional funds, we will be unable to execute our business
plan.
OUR SECURITIES HAVE BEEN THINLY TRADED ON THE OVER-THE-COUNTER BULLETIN BOARD,
WHICH MAY NOT PROVIDE LIQUIDITY FOR OUR INVESTORS.
Our securities are quoted on the Over-the-Counter Bulletin Board. The
Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that
provides significantly less liquidity than the NASDAQ Stock Market or national
or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board
are usually thinly traded, highly volatile, have fewer market makers and are not
followed by analysts. The Securities and Exchange Commission's order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any price.
INVESTORS MUST CONTACT A BROKER-DEALER TO TRADE OVER-THE-COUNTER BULLETIN BOARD
SECURITIES AND AS A RESULT, YOU MAY NOT BE ABLE TO BUY OR SELL OUR SECURITIES AT
THE TIMES THAT YOU MAY WISH
Even though our securities are quoted on the Over-the-Counter Bulletin Board,
the Over-the-Counter Bulletin Board may not permit our investors to sell
securities when and in the manner that they wish. Because there are no automated
systems for negotiating trades on the Over-the-Counter Bulletin Board, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders to buy or
sell a specific number of shares at the current market price it is possible for
the price of a stock to go up or down significantly during the lapse of time
between placing a market order and its execution.
FUTURE SALES OF OUR COMMON STOCK BY RESTRICTED SHAREHOLDERS COULD HAVE A
DEPRESSIVE EFFECT ON THE MARKET PRICE FOR OUR STOCK
We currently have 35,660,091 shares of common stock outstanding as of August 1,
2008, Subject to restrictions on transfer referred to below, all other shares of
common stock which we have not registered as "restricted securities" as defined
under the Securities Act (1934) and in the future may be sold in compliance with
Rule 144 under the Securities Act or pursuant to a registration statement filed
under the Securities Act. Rule 144 generally provides that a person holding
restricted securities for a period of one year may sell every three months in
brokerage transactions or market-maker transactions an amount equal to the
greater of (i) one percent (1%) of our issued and outstanding common stock or
(ii) the average weekly trading volume of the common stock during the four
calendar weeks prior to the sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who is not an affiliate of the company and who has satisfied a two year holding
period. The sale of substantial numbers of these shares, whether pursuant to
Rule 144 or pursuant to a registration statement, may have a depressive effect
on the market price of our common stock by causing the supply exceeding demand.
In addition, sales of significant amounts of restricted shares held by Mr.
Madhava Rao Mankal and Mr. Daniel Medina, who own a total of 22,344,000 shares
of common stocks, or the prospect of these sales, could adversely affect the
market price of our common stock.
11
WE MAY ISSUE SHARES TO RAISE CAPITAL OR FOR SERVICES IN THE FUTURE AT A PRICE
LOWER THAN THAT PAID BY CURRENT INVESTORS AND SUCH ACTIONS WOULD BE DILUTIVE,
EVEN HIGHLY DILUTIVE, OF CURRENT OUTSTANDING SHARES, WHICH WOULD ADVERSELY
AFFECT MARKET VALUES.
We will need to raise substantial additional capital and may issue shares for
cash, services, or acquisitions at a price less than that paid by current
owners, as needs arise. This poses a risk for investors in that there is no
protection for them against such dilutive issuances, which could ultimately
adversely affect the market and price for our shares, if a market ever develops.
OUR OPERATING RESULTS IN FUTURE PERIODS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY
AND MAY FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS OR
INVESTORS, AND THIS COULD AFFECT OUR MARKET PRICE.
Our annual and quarterly operating results are likely to fluctuate significantly
in the future due to numerous factors, many of which are outside of our control.
These factors include many of which are discussed in other risk factors; such as
low revenues, competition, failure to approve products proposed, lack of
additional capital, management changes, and intellectual property infringement
claims to extremely high operating costs. If our operating results are
negatively affected by any of these factors, our operating results in future
periods could fail to meet or exceed the expectations of securities analysts or
investors. In that event, any trading price of our common stock would decline.
WE MAY BE UNABLE TO OBTAIN THE ADDITIONAL CAPITAL REQUIRED TO EXPAND OUR
BUSINESS. WE MAY HAVE TO CURTAIL OUR BUSINESS IF WE CANNOT FIND ADEQUATE
FUNDING, RESULTING ULTIMATELY IN BUSINESS FAILURE.
Our ability to grow depends significantly on our ability to expand our
operations through internal growth and by acquiring other companies or assets
that require significant capital resources. We may need to seek additional
capital from public or private equity or debt sources to fund our growth and
operating plans and respond to other contingencies such as:
|X| Shortfalls in anticipated revenues or increases in expenses; |X|
The development of new services; or |X| The expansions of our
operations, including the recruitment of additional personnel.
We cannot be certain that we will be able to raise additional capital in the
future on terms acceptable to us or at all. If alternative sources of financing
are insufficient or unavailable, we may be required to modify our growth and
operating plans in accordance with the extent of available financing. Any
additional equity financing may involve substantial dilution to our then
existing stockholders.
OUR PRINCIPAL OFFICERS AND DIRECTORS OWN 62.81% OF OUR STOCK WHICH, IF VOTED IN
A BLOCK WILL BE A CONTROLLING INTEREST AND INVESTORS WILL HAVE A LIMITED VOICE
IN OUR MANAGEMENT.
Messrs. Daniel Medina and Madhava Rao Mankal, officers and directors of the
Company, beneficially own approximately 62.66% of our outstanding common stock.
As a result, Messrs. Medina and Mankal have the ability to control substantially
all matters submitted to our stockholders for approval, including:
|X| Election of our board of directors;
|X| Removal of any of our directors;
|X| Amendment of our certificate of incorporation or bylaws; and
|X| Adoption of measures that could delay or prevent a change in
control or impede a merger, takeover or other business
combination involving the company.
12
As a result of their ownership and positions with little additional support,
Messrs. Mankal and Medina are able to influence all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal place of business is located at 255 S. Leland Norton
Way, San Bernardino, California 92408. The Company subleases 11,000 square foot
of space at a rate of $3,000 per month from Lasera Technologies, Inc. The
Company uses the space to assemble boats and fiberglass lay-up. It is
anticipated that this arrangement will be suitable for the Company's needs for
the foreseeable future.
The Company's mailing address is 255 S. Leland Norton Way, San Bernardino,
California 92408.
ITEM 3. LEGAL PROCEEDINGS
As of April 30, 2008, the Company, nor any members of management were not a
party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Medina International Holdings, Inc. is quoted on the Over-the-Counter Bulletin
Board (OTCBB) and the trading symbol is MIHI.OB. The Company began trading on
the OTCBB in May 2006. There may never be substantial activity in the market and
if there is substantial activity, such activity may not be maintained, and no
prediction can be made as to what prices may prevail in market.
As of the date of this report, there had been trading or quotation of the
Company's common stock. The range of high and low trade quotations for each
fiscal quarter since the last report, as reported by the National Quotation
Bureau Incorporated, was as follows:
High Low
------------------------------------------------ ---------------- --------------
Year ended April 30, 2008
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
First Quarter $ 1.30 $ 0.55
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Second Quarter $ 0.55 $ 0.20
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Third Quarter $ 0.20 $ 0.01
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Fourth Quarter $ 0.04 $ 0.01
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Year ended April 30, 2007
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
First Quarter No Quote No Quote
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Second Quarter No Quote No Quote
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Third Quarter $ 0.34 $ 0.20
------------------------------------------------ ---------------- --------------
------------------------------------------------ ---------------- --------------
Fourth Quarter $ 0.40 $ 0.20
------------------------------------------------ ---------------- --------------
As of April 30, 2008, there were 99 shareholders of record of the Company's
common Stock.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its common stock and
does not anticipate paying dividends for the foreseeable future.
14
RECENT SALES OF UNREGISTERED SECURITIES
The Company made the following unregistered sales of its securities from May 1,
2007 to April 30, 2008
DATE ISSUED TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
05/15/07 Common Stock 850,000 Consulting Services Business Associates
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
05/15/07 Common Stock 2,500 License Royalty Fee
Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
05/15/07 Common Stock 37,500 Services Directors
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
05/15/07 Common Stock 24,000 Cash Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
06/22/07 Common Stock 750,000 Consulting Services Business Associates
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/10/07 Common Stock 523,000 Consulting Services Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/10/07 Common Stock 37,500 Services Directors
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/10/07 Common Stock 9,700 Royalty Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/10/07 Common Stock 100,000 $10,000 Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/10/07 Common Stock 1,350 Rent Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
12/18/07 Common Stock 3,000,000 Consulting Services Business Associate
------------------ -------------------------- ---------------- -------------------------------- ----------------------------------
EXEMPTION FROM REGISTRATION CLAIMED. The sale by the Company of its unregistered
securities was made by Registrant in reliance upon Section 4(2) of the
Securities Act of 1933, as amended. The corporation, which purchased the
unregistered securities, was known to the Company and its management, through
pre-existing business relationships. The purchaser was provided access to all
material information, which it requested, and all information necessary to
verify such information and were afforded access to management of the Company in
connection with the purchase. The purchaser 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.
15
ITEM 6. 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-KSB 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 Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB
filed by the Company and any Current Reports on Form 8-K filed by the Company.
16
RESULTS OF OPERATION FOR THE YEAR ENDED APRIL 30, 2008 AS COMPARED TO YEAR ENDED
APRIL 30, 2007.
The Company earned $192,800 in revenues during the fiscal year ended April 30,
2008, as compared to $0 during the fiscal year ended April 30, 2007. The
revenues were from the sale of two fire rescue watercrafts, one for a customer
in the state of Connecticut and the other for a customer in the country of
Turkey.
We expect the trend of losses to continue for the foreseeable future as we
attempt to grow our business.
The Company incurred total operating expenses of $1,164,331 for the year ended
April 30, 2008, as compared to operating expenses $628,399 for the year ended
April 30, 2007. The increase of $535,932 in operating expenses is primarily a
result of an increase of $400,892 in stock compensation expenses compared to the
year ended April 30, 2007. The operating expenses for the year ended April 30,
2008, primarily included $30,035 in professional fees, $885,892 in stock
compensation and $278,439 in general and administration expenses. The operating
expenses for the year ended April 30, 2007, which included $38,290 in profession
fees, $485,000 in stock compensation and $105,109 for general and administration
expenses.
The Company recognized an interest expense of $35,390 for the year ended April
30, 2008, compared to an interest expense of $18,594 for the year ended of April
30, 2007. The increase of $16,796 is due to an increase of funds loaned to the
Company. For the year ended April 30, 2008, the Company recognized other income
of $0, compared to $1,529 for the year ended April 30, 2007. The increase was
due to a one time commission received on the sale of some parts and equipment
that Company was unable to use.
The Company recognized a net loss of $1,093,230 for the year ended April 30,
2008, compared to a net loss of $649,321 for the year ended April 30, 2007. The
decrease of $439,909 was due to the $535,932 increase in operating expenses,
caused mainly by the $400,892 increase in stock compensation expense. The net
loss per share for the year ended April 30, 2008 was $0.03 compared to $0.02 for
the year ended April 30, 2007.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2008, the Company had no cash on hand, an inventory (consisting
of two recreational boat hull and decks, three 15' fire rescue jet engines) of
$68,813, prepaid expenses of $24,000 and net fixed assets (consisting of molds
for the 12', 15' and 21' fire rescue jet) of $318,726. The Company's current
liabilities were $183,784 as of April 30, 2008, which was represented mainly
accounts payable of $190,358, accrued interest payable of $40,950, advances from
customers of $24,500, lines of credits totaling $17,156 and short-term loans
from stockholders totaling $362,447. At April 30, 2008, the Company's current
liabilities exceeded current assets by $190,971.
As of April 30, 2007, the Company had $5,136 in cash, an inventory (consisting
of two recreational boat hull and decks) totaling $54,557, and fixed assets
(consisting of molds for 21' fire rescue jet) totaling $320,465. The Company's
current liabilities were $204,042 as of April 30, 2007, which was represented
mainly by accounts payable of $129,610, accrued interest payable of $15,127,
lines of credits totaling $28,805, advances from customers of $20,500 and
short-term loans from stockholders totaling $261,588. At April 30, 2007, the
Company's current liabilities exceeded current assets by $144,231.
The Company used $29,849 in operating activities for the year ended April 30,
2008 compared to $105,915 for year ended April 30, 2007. The Company used cash
of $80,517 in investing activities during the year ended April 30, 2008 on the
manufacturing of molds for the fire and rescue watercrafts. For the year ended
April 30, 2007, the Company had used cash $131,554 for manufacturing of the
molds for the fire and rescue watercrafts.
During the year ended April 30, 2008, the Company obtained $105,230 from
financing activities, which included the $11,649 decrease in the lines of
credits held by the Company and $100,859 obtained in short-term loans from
stockholders of the Company. In addition, the Company sold shares of its common
stock for $16,000. At the year ended April 30, 2007, the Company obtained
$240,637 through its financing activities.
17
The Company has an accumulated deficit, as of April 30, 2008, of $2,880,343
compared to the year ended April 30, 2007 of $1,787,113.
The Company does not have capital sufficient 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 us the Company from
accomplishing the goal of expanding operations. There is no assurance, however,
that without funds we the Company will ultimately 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.
GOING CONCERN
The Company's auditors have issued a "going concern" qualification as part of
their opinion in the Audit Report. There is substantial doubt about the ability
of the Company to continue as a "going concern." The Company has minimal
revenue, limited capital, debt of $646,231, no significant cash, minimal other
assets, and no capital commitments.
CRITICAL ACCOUNTING POLICIES
Management is required to make judgments, assumptions and estimates that affect
the amounts reported when we prepare financial statements and related
disclosures in conformity with generally accepted accounting principles in the
United States. Note, "Summary of Significant Accounting Policies," to the
financial statements for the fiscal year ended April 30, 2008 describes the
significant accounting policies and methods used in the preparation of our
financial statements. Estimates are used for, but not limited to, our accounting
for contingencies, inventory valuation, goodwill and intangible asset
impairments, restructuring costs, and income taxes. Actual results could differ
from these estimates.
ITEM 7. FINANCIAL STATEMENTS
Please refer to pages F-1 through F-11.
ITEM 8 CHANGES IN ACCOUNTANTS AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 8a CONTROLS AND PROCEDURES
EVALUATION OF INTERNAL AND DISCLOSURE CONTROLS
Management's Annual 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 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:
18
(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
(iii)provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or
ITEM 8(A)T. INTERNAL CONTROLS AND PROCEDURES
Management's Annual Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting. 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. Based on our evaluation,
management has concluded, as of April 30, 2008, we did maintain effective
controls over the financial reporting process.
Inherent Limitations Over Internal Controls
Internal control over financial reporting cannot provide absolute assurance of
achieving financial reporting objectives because of its inherent limitations,
including the possibility of human error and circumvention by collusion or
overriding of controls. Accordingly, even an effective internal control system
may not prevent or detect material misstatements on a timely basis. 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.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
Changes in Internal Control Over Financial Reporting.
We have made no change in our internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND COMPLIANCE WITH
SECTION 16(A)
All directors of the Company hold office until the next annual meeting of the
security holders or until their successors have been elected and qualified. The
officers of the Company are appointed by the board of directors and hold office
until their death, resignation or removal from office. The Company's directors
and executive officers, their ages, positions held, and the duration of their
office are as follows:
19
------------------------------ ------ ------------------------------------
Name Age Position
------------------------------ ------ ------------------------------------
------------------------------ ------ ------------------------------------
Daniel Medina 54 President & Director
------------------------------ ------ ------------------------------------
Madhava Rao Mankal 57 Chief Financial Officer & Director
------------------------------ ------ ------------------------------------
Mike Swanson 52 Director
------------------------------ ------ ------------------------------------
Tony Eishet 49 Resigned as Director 12-14-2007
------------------------------ ------ ------------------------------------
Arun Madhav 45 Resigned as Director 4-14-2008
------------------------------ ------ ------------------------------------
Mike Gallo Director
------------------------------ ------ ------------------------------------
Our success depends on the performance of our two officers and directors, Mr.
Medina and Mr. Mankal. We do not have "key person" life insurance policies on
any of our employees nor do we have employment agreements for fixed terms with
any of our employees. Our employees, including any member of our management
team, may terminate his or her employment with us at any time. Given our early
stage of development, we depend on our ability to retain and motivate high
quality personnel, especially our officers. Our future success also depends on
our continuing ability to identify, hire, train and retain highly qualified
technical, sales, marketing and customer service personnel. Moreover, the boat
industry has a high level of employee mobility and aggressive recruiting of
skilled personnel. We may be unable to continue to employ our key personnel or
to attract and retain qualified personnel in the future.
BIOGRAPHIES OF OFFICERS AND DIRECTORS
Set forth below is a brief description of the background of our officers and
directors, based upon information provided by them to us.
DANIEL MEDINA, PRESIDENT AND DIRECTOR
Mr. Medina worked as a Sales Representative and Production Manager with
Rosemary's Draperies from 1973-1985. Daniel Medina owned Lavey Craft Boat Co.
from 1985-1992. Mr. Medina was also a partner in California Cool Custom Boats
from 1992- June 1997. He worked as the designer and manufacturer of all of their
boats. Mr. Medina served as Director of Sales and Marketing and Production
Manager for Sonic Jet Performance, Inc. from October 1999 to October 2001 and
successfully increased the company revenue by 50%. He has extensive experience
in every phase of sales, marketing and manufacturing. Mr. Medina also serves as
an officer and director of Genesis Companies Group, Inc.
MADHAVA RAO MANKAL, CHIEF FINANCIAL OFFICER AND DIRECTOR
Mr. Mankal has more than 28 years of experience as an executive. He served as
President and the Chief Financial Officer of Force Protection, Inc. (formerly
Sonic Jet Performance, Inc.) from May 1999 to December 2003. He served as a
director of Force Protection, Inc. until September 30, 2004. Mr. Mankal
currently serves as one of the independent directors of Cavico Corp and a member
of their audit committee. He has over 25 years of senior financial management
experience, including the positions of controller, chief financial officer and
financial advisor. Mr. Mankal has his Chartered Accountant and Cost Accountant
certifications from India. He has received a Certified Management Accountant in
the Untied States. He is member of the Institute of Chartered Accountants of
India, Institute of Cost and Works Accountants of India and Institute of
Management Accountants in the United States. He has Bachelor Degree in Commerce
from Bangalore University.
20
MICHAEL SWANSON, DIRECTOR
Michael Swanson has worked for the City of Orange Fire Department since 1983 and
his present position is as Fire Captain. Prior to that, he worked for the
Federal Fire Department for the last four years. He is an active member of the
Orange Fire Department Medical Core Committee, the Safety Committee and Physical
Fitness Committee. He is also a member of the International Association of Fire
Fighters Local 2386, and is a member of the California Professional
Firefighters. In 1990, Mr. Swanson was a recipient of the Valor Award from the
Orange Rotary Club, for his actions in saving the life of a child. Mr. Swanson
is a Certified Instructor at the Saddleback College Paramedic School, where he
has served as a Spinal Immobilization Instructor, Advanced Airway Instructor,
Emergency Technician Instructor, State Paramedic, State Fire Officer (on going),
Haz Mat, Trench, Swift Water, Confined Space First Responder (on going).
TONY A. ESHIET, DIRECTOR Resigned on December 14, 2007
Mr. Eshiet has been the Chief Operating Officer of HollyTouch Corporation, since
August 2001. Prior to that, Mr. Eshiet was the Executive Vice President and
Financial Center Manager of CITIBANK from June 2000 to August 2001. Prior to
joining Citibank, Mr. Eshiet was the Vice-President and Branch Manager of WELLS
FARGO BANK from September 1991 to June 2000, where he managed high-level
branches in Century City, Long Beach and Monterey Park in California. Mr. Eshiet
was recognized as a "Circle of Stars Performer" on many occasions, he has also
received Wells Fargo's "Golden Coach Award" given to the top Branch Manager in
sales and customer service. Mr. Eshiet has a Bachelor of Science degree in
Banking and Finance from Johnson C. Smith University in Charlotte, North
Carolina, where he was honored as an "Outstanding Student of the Year". Mr.
Eshiet received his Master Degree in Business Administration (M.B.A) from the
University of Phoenix. Mr. Eshiet holds a number of licenses in the financial
and investment field, including his Series 7, Series 24, Series 63 and also Life
and Health. Mr. Eshiet serves on Corporate Board of Directors of S & P
Investment Inc. and American Film Venture Group.
ARUN MADHAV, DIRECTOR Resigned on April 14, 2008
Mr. Madhav is the founder and director of Eka Technologies, Inc., a product
design and development company, since May 2003. Prior to starting Eka
Technologies, Inc., Arun held various positions at Interlink Electronics, Inc.
from April 1997 through May 2003. Among those positions he was the Director of
Product Marketing at Interlink Electronics, Inc. (LINK). During his tenure at
Interlink, he introduced several new and innovative products ranging from
radio-frequency remotes to signature pads. Prior to Intelink, he introduced new
system level products in the field of Non-Destructive testing for companies,
such as Physical Acoustics, Nuson and Ultran Laboratories. Mr. Madhav has a BS
in Mechanical Engineering from Bangalore University, an MS in Engineering
Science and Mechanics from Virginia Tech, and an MBA from California State
University, Northridge.
MIKE GALLO, DIRECTOR Appointed April 14, 2008
Mr. Gallo began his professional career as an Officer in the United States Air
Force, managing Military Airlift Command facility design and operations at
Norton Air Force Base in San Bernardino, California. In 1989, Mr. Gallo served
as the Director of Program Control for the TRW Launch Services Organization. In
1993 Mr. Gallo co-founded Kelly Space & Technology, Inc. (KST), a commercial
Reusable Launch Vehicle (RLV), aerospace, energy and homeland security
technology development company where he serves as President and Chief Executive
Officer. Mr. Gallo also serves as a Director for Global Energy Systems, LLC, a
KST subsidiary formed to implement its energy-related lines of business. Mr.
Gallo provides leadership to the commercial, civil and military space community
as a founding member, the past Chairman and current Chief Financial Officer
(CFO) of the California Space Authority (CSA), an organization that serves as
the space policy advisor to the State of California and represents California's
diverse space enterprise community. Mr. Gallo also serves as the Arrowhead
Section Chairman of the American Institute of Aeronautics and Astronautics
(AIAA). Mr. Gallo is the past Chairman and current Vice Chairman of the
Community Action Partnership of San Bernardino County (CAPSBC) providing key
services and support to our low income community. He is also the Past Chairman
of the Board for the San Bernardino Area Chamber of Commerce, founding member
and School Board Chairman of the Norton Space and Aeronautics Academy (NSAA), a
newly formed K-12 San Bernardino County Charter School and is an Executive Board
Member of the California Workforce Association (CWA). As the past Chairman and
current Vice Chairman of the San Bernardino County Workforce Investment Board
(WIB), Mr. Gallo is focused on the implementation of key strategic workforce,
economic development and education objectives to enable our region to compete
for targeted high-growth industry clusters with an exceptionally qualified
workforce.
21
EMPLOYMENT AGREEMENTS
At this time, none of the officers of the Company or any of its employees are
subject to employment agreements.
BOARD OF DIRECTORS
Our Board of Directors consists of four (4) individuals, two of whom are
officers of the Company. Directors are elected to the Board of Directors for a
one (1) year term and are elected on an annual basis. Executive officers are
appointed by the board of directors on an annual basis and serve until their
successors have been duly elected and qualified. There are no family
relationships among any of our directors, officers or key employees.
RESOLUTION OF CONFLICTS OF INTEREST
Currently, the Company does not have a procedure, in place which would allow our
officers or directors to resolve potential conflicts in an arms-length fashion.
Accordingly, they will be required to use their discretion to resolve them in a
manner which they consider appropriate.
Further, we do not have a procedure in place with regard to any intellectual
property that an officer or director might develop in another business. The
policy and the exception is that, if it is related to the business of our
company, it belongs to the Company. Although our officers and directors have
indicated that they are not involved in any intellectual property development
(IP) outside of our company, our position would be that, if it is not related to
our company's business, we would not assert any ownership claim to such IP.
We are not aware of any apparent conflict with any other business or venture in
which any employee, officer or director may be involved. All of the officers and
directors have indicated that they do not have any business interests in any
business, suppliers, subcontractor, or sales entity that directly or indirectly
competes with our company.
AUDIT COMMITTEE FINANCIAL EXPERT
We currently do not have an audit committee financial expert serving on our
audit committee.
22
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation paid
by the Company to the President and the Company's two most highly compensated
executive officers for the fiscal years ended April 30, 2008, 2007, and 2006 the
"Named Executive Officers"):
SUMMARY EXECUTIVES COMPENSATION TABLE
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
Non-equity Non-qualified
incentive deferred
Stock Option plan compensation All other
Salary Bonus awards awards compensation earnings compensation Total
Name & Position Year ($) ($) ($) ($) ($) ($) ($) ($)
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
Daniel Medina, (1) 2008 0 0 0 0 0 0 0 0
President & Director 2007 0 0 0 0 0 0 0 0
2006 0 0 0 0 0 0 0 0
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
Madhava Rao 2008 0 0 0 0 0 0 0 0
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
---------------------- ------- ---------- -------- ---------- ---------- -------------- ----------------- -------------- ----------
(1) Messrs. Mankal and Medina provide their services as officers without
compensation.
23
Equity
incentive
Equity Equity plan
incentive incentive awards:
plan plan Market or
awards: awards: payout
Number of Number of Number of Number of value of
Securities Securities securities Market unearned unearned
underlying underlying underlying Number of value of shares, shares,
unexercised unexercised unexercised shares of shares of units or units or
options options unearned units of units of other others
(#) (#) options Option Option stock that stock that rights that rights that
exercisable unexercisable (#) exercise expiration have not have not have not have not
price date vested(#) vested ($) vested(#) vested ($)
---------------------------------------------------------------------------------------------------------------------------------
Daniel Medina $ - $ - $ - $ - $ - $ - $ - $ - $ -
---------------------------------------------------------------------------------------------------------------------------------
Madhava Rao Mankal $ - $ - $ - $ - $ - $ - $ - $ - $ -
---------------------------------------------------------------------------------------------------------------------------------
On May 20, 2005, the Board of Directors approved the issuance of 10 shares of a
Series A Preferred Convertible Stock to Messrs. Medina and Mankal, each. At this
time the shares of the Series A Preferred Convertible Stock have not been issued
to Messrs. Medina and Mankal.
STOCK OPTION AND AWARD PLAN
We have adopted the 2006 Medina International Holdings, Inc. Stock Option and
Compensation Award Plan (the "Plan"), which was approved by the board of
directors on August 28, 2006 to obtain and retain the services of the types of
employees, consultants and directors who will contribute to the Company's long
range success and to provide incentives which are linked directly to increases
in share value which will incur to the benefit of all stockholders of the
Company.
Under the Plan, 2,000,000 shares of common stock shall be reserved and available
for issuance. Stock reserved thereunder may consist, in whole or in part, of
authorized and unissued shares of treasury shares. The plan shall be
administered by either (i) the Board, or (ii) a committee appointed by the
Board. During the year ended April 30, 2008, the Company issued a total 100,000
shares to two (2) consultants under the Plan to consultants engaged by the
Company.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
No options were exercised during the fiscal years ended April 30, 2008 and 2007.
24
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SAR
Options/SAR at FY-End ($)
S at FY-End
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Name Shares Value Exercisable/ Exercisable/
Acquired Realized Unexercisable Unexercisable
on ($)
Exercise
(#)
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Daniel Medina, President & Director $ - $ - $ - $ -
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Madhava Rao Mankal, CFO & Director $ - $ - $ - $ -
-------------------------------------------------------------------------------------------------
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
25
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives Compensation Table"
during the year ended April 30, 2008:
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Non-qualified
Non-equity deferred
Fees earned incentive compensation All other
or paid in Stock awards Option plan earnings compensation Total
Name cash ($) awards ($) compensation ($) ($) ($)
($) ($)
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Daniel Medina $ -0- $ -0- $ -0- $ -0- $ -0- $-0- $ -0-
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Madhava Rao $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $-0-
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Tony Eshiet (1) $ -0- $ 4,500 $-0- $ -0- $-0- $ -0- $ 4,500
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Mike Swanson (1) $ -0- $4,500 $-0- $ -0- $-0- $-0- $4,500
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Arun Madhav (1) $ -0- $4,500 $-0- $-0- $-0- $-0- $4,500
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
Mike Gallo $ -0- $ -0- $-0- $ -0- $-0- $-0- $-0-
----------------- ------------- -------------- -------------- -------------- --------------- --------------- --------------
(1) During the year ended April 30, 2008, certain directors of the Company,
Messrs. Eshiet, Swanson and Madhav were issued a total of 75,000 shares
or 25,000 shares each. The shares were issued for a total compensation
of $13,500.
26
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Section 16(a) of the Exchange Act, requires our officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership of our company
equity securities with the SEC and NASDAQ. Officers, directors and greater-than
10% shareholders are required by the SEC regulation to furnish the Company with
copies of all Section 16(a) that they file.
The following table sets forth certain information regarding the beneficial
ownership of outstanding shares of our common stock as of August 1, 2008 on a
fully diluted basis, by (a) each person known by us to own beneficially 5% or
more of our outstanding shares of common stock, (b) our directors, Chief
Executive Officer, Chief Financial Officer and executive officers named in
"MANAGEMENT--Director and Executive Compensation," and (c) all our directors and
executive officers as a group
Name And Address* of Class of Equity Amount and Nature of Percent of Class(1)
Beneficial Ownership Beneficial Owner
----------------------------- -------------------------- -------------------------- -------------------------
----------------------------- -------------------------- -------------------------- -------------------------
Daniel Medina, Common Shares 11,099,000 31.12%
President & Director
11564 E. Beverly Blvd.
Whittier, CA 90601
Madhava Rao Mankal, Chief Common Shares 11,245,000 31.53%
Financial Officer &
Director
7476 Sungold Ave,
Corona, CA 92880
Mike Swanson, Director Common Shares 55,203 0.15%
5059 Quail Run Rd, #7
Riverside, CA 92507
Mike Gallo, Director Common Shares - -
-------------------------- -------------------------
All Directors and Executive Officers as a Group 22,399,203 62.81%
(4 persons)
(1) Based upon 35,660,091 shares of common stock issued and outstanding on August 1,
2008.
At the time of this filing, Messrs. Swanson, Medina and Gallo were delinquent in
filing Form 3s & 4s reporting changes in their ownership position of the
Company.
27
PART IV
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has adopted a policy under which any consulting or finders fee that
may be paid to a third party or affiliate for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock and/or in cash. Any such issuance of stock would be made on an ad hoc
basis. Accordingly, the Company is unable to predict whether or in what amount
such a stock issuance might be made.
Although there is no current plan in existence, it is possible that the Company
will adopt a plan to pay or accrue compensation to its officers and directors
for services related to seeking business opportunities and completing a merger
or acquisition transaction.
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Year Ended April 30, 2008
During the year ended April 30, 2008, we issued a total of 75,000 shares of our
restricted stock to our independent directors, Messrs. Eshiet, Swanson and
Madhav for their services as directors. The shares were issued at a price of
$0.25, $0.20, and $0.07 per share for the first, second and third quarter,
respectively. The total compensation value of the shares was $13,500.
During the year ended April 30, 2008, Mr. Medina, the President and a Director
of the Company advanced the Company a total of $37,998 in funds to support our
continuing operations. The advances are due on demand and accrues interest at
8.0%.
During the year ended April 30, 2008, Mr. Mankal, the Chief Financial Officer
and a Director of the Company, advanced the Company a total of $93,747 in funds
to support our continuing operations. The advances are due on demand and accrues
interest at 8.0%.
The Company in May 2005, has committed to issue a total of 20 shares of
preferred stock at the value of $12,000 per share to Mr. Madhava Rao Mankal (10
shares of Preferred Stock) and Mr. Daniel F. Medina (10 shares of Preferred
Stock).
During the year ended April 30, 2008, the Company issued 50,000 shares of its
restricted common stock for consulting service to Srikrishna Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and director of the Company,
recorded at market value of $0.20 per share with total value of $10,000.
28
During the year ended April 30, 2008, the Company issued 50,000 shares of its
restricted common stock for consulting service to Michelle Medina, daughter of
Daniel F. Medina, president and director of the Company, recorded at market
value of $0.07 per share with total value of $3,500.
During the year ended April 30, 2008, the Company issued 1,500,000 shares of its
restricted common stock for consulting service to Daniel Medina, Jr., son of
Daniel F. Medina, president and director of the company, recorded at market
value of $0.07 per share with total value of $105,000.
During the year ended April 30, 2008, the Company issued 750,000 shares of its
restricted common stock for consulting service to Srikrishna Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and director of the company,
recorded at market value of $0.07 per share with total value of $52,500.
During the year ended April 30, 2008, the Company issued 750,000 shares of its
restricted common stock for consulting service to Pavan Kumar Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and director of the company,
recorded at market value of $0.07 per share with total value of $52,500.
Year Ended April 30, 2007
During the fiscal year ended April 30, 2007, we issued a total of 37,500 shares
of our restricted stock to our independent directors, Messrs. Eshiet, Swanson
and Madhav for their services as directors. Each director received 12,500 shares
of our restricted common stock. The shares were issued at a price of $0.50 per
share, a premium to the then market price of $0.20 per share. The total
compensation value of the shares was $18,750.
During the year ended April 30, 2007, Mr. Medina, the President and a Director
of the Company advanced the Company a total of $81,527 in funds to support our
continuing operations. The advances are due on demand and accrued interest at
8.5%.
During the year ended April 30, 2007, Mr. Mankal, the Chief Financial Officer
and a Director of the Company, advanced the Company a total of $180,067 in funds
to support our continuing operations. The advances are due on demand and accrued
interest at 8.5%.
ITEM 13. EXHIBITS
The following is a complete list of exhibits filed as part of this Form 10KSB.
Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of
Regulation S-K.
Exhibit Description of Document
31.1 Certification by Chief Executive Officer. *
31.2 Certification by Chief Financial Officer. *
32.1 Section 906 Certification by Chief Executive Officer*
32.2 Section 906 Certification by Chief Financial Officer*
---------------
* Filed herewith.
(1) Filed herewith.
29
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
General. Jaspers + Hall, PC is the Company's principal auditing/ accountant
firm. The Company's Board of directors has considered whether the provisions of
audit services is compatible with maintaining Jaspers + Hall, PC's independence.
Audit Fees. Jaspers + Hall billed $2,000 for review services and $2,000 audit
fee in the fiscal year ended April 30, 2008 and billed $2,250 for review
services, $1,000 in audit fees and services for the fiscal year ended April 30,
2007.
There were no other fees in 2007 or 2008 paid to Auditors or Auditors
affiliates.
The Company's Board acts as the audit committee and had no "pre-approval
policies and procedures" in effect for the auditors engagement for the audit
years 2008 and 2007.
30
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
-------
INDEPENDENT AUDITOR'S REPORT............................ F-1
BALANCE SHEET................................................ F-2
STATEMENT OF OPERATIONS ................................. F-3
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT).................. F-4
STATEMENT OF CASH FLOWS...................................... F-5
NOTES TO FINANCIAL STATEMENTS................................ F-6
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
-----------------------------------------------------------------------
9175 Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
To the Board of Directors
Medina International Holdings, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Medina International Holdings,
Inc.(A Development Stage Company) as of April 30, 2008 and 2007, and the related
statements of operations, cash flows, and changes in stockholders' deficit for
the years then ended and for the period March 16, 1998 (inception) to April 30,
2008. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company is in the development stage and conditions
exist, which raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
August...., 2008
/s/Jaspers + Hall PC
F-1
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
APRIL 30,
2008 2007
-------------------- ---------------
ASSETS:
Current Assets:
Cash $ - $ 5,136
Inventory 68,813 54,557
Prepaid Expenses 24,000 -
Other Receivables - 118
-------------------- ---------------
Total Current Assets 92,813 59,811
Other Assets:
Investment 25,500 25,000
-------------------- ---------------
Total Other Assets 25,500 25,000
Fixed Assets:
Fixed Assets 375,982 320,465
Accumulated Depreciation (57,256) -
-------------------- ---------------
Total Net Fixed Assets 318,726 320,465
-------------------- ---------------
TOTAL ASSETS $ 437,039 $ 405,276
==================== ===============
LIABILITIES AND STOCKHOLDERS'DEFICIT:
Liabilities:
Accounts payable $ 190,358 $ 129,610
Accrued Interest 40,950 15,127
Bank Overdraft 20 -
Franchise Tax 800 -
Lines of credit and Credit cards 17,156 28,805
Customer deposit 24,500 20,500
Note payable 10,000 10,000
Related parties - short-term borrowings from shareholders 362,447 261,588
-------------------- ---------------
TOTAL LIABILITIES 646,231 465,630
-------------------- ---------------
Stockholders' Deficit:
Preferred stock, $.001 par value, 10,000 shares authorized, none issued
Class A Preferred stock $0.001par value, 50 shares authorized - -
and none issued or outstanding
Common stock, $.0001 par value, 100,000,000 shares authorized, 35,660,091 and
30,324,541 shares issued and outstanding on April 30, 2008
and 2007, respectively 3,566 3,032
Additional paid-in capital 2,429,022 1,697,101
Shares committed to be issued 241,563 30,625
Subscription to be received (3,000) (4,000)
Deficit accumulated during the development stage (2,880,343) (1,787,113)
-------------------- ---------------
Total Stockholders' Deficit (209,192) (60,355)
-------------------- ---------------
-------------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 437,039 $ 405,276
==================== ===============
The accompanying notes are an integral part of the financial statements
F-2
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
March 16, 1998
Year Ended (Inception) to
April 30, April 30,
2008 2007 2008
----------------- ---------------- ---------------
INCOME
Sales $ 192,800 $ - $ 217,800
Cost Of Goods Sold 86,264 - $ 86,264
----------------- ---------------- ---------------
Gross Profit 106,536 - 131,536
OPERATING EXPENSES:
Professional Fees 30,035 38,290 177,188
Bank Charges 4,865 809 6,450
Telephone 5,624 3,592 14,302
Travel 17,163 10,355 42,537
Settlement of debt - - 17,000
Stock compensation 885,892 485,000 1,944,104
Research and Development - 25,000 25,000
Consultant Expenses 50,000 - 497,500
Commission Expenses 26,510 - 26,510
Marketing 8,426 - 8,426
Rent 36,000 21,000 57,000
Other Administrative Expenses 99,816 44,354 163,991
----------------- ---------------- ---------------
Total Operating Expenses 1,164,331 628,399 2,980,008
----------------- ---------------- ---------------
Other Income(Expense)
Interest expense (35,390) (18,594) (54,550)
Other Expenses (45) (3,856) (3,901)
Other income - 1,529 26,580
----------------- ---------------- ---------------
Net Other Income (35,435) (20,922) (31,871)
----------------- ---------------- ---------------
Net Loss from Operations $ (1,093,230) $ (649,321) $(2,880,343)
================= ================ ===============
Weighted average number of
shares outstanding 33,211,319 29,589,285
================= ================
Net Loss Per Share $ (0.03) $ (0.02)
================= ================
The accompanying notes are an integral part of the financial statements
F-3
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
June 30, 2008
Additional Shares
Common Stock Paid-In Committed to Subscription
Shares Amount Capital Be issued Receivable
--------------- ------------ ---------------- ---------------------------------
Balance - March 16, 1998 - $ - $ - $ - $ -
Stock issued for services 2,400,000 240 1,760 - -
Stock issued for cash 300,000 30 24,970 - (10,500)
Net loss
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 1999 2,700,000 270 26,730 - (10,500)
--------------- ------------ ---------------- ---------------------------------
Cash payment of subscription receivable - - - - 10,250
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2000 2,700,000 270 26,730 - (250)
--------------- ------------ ---------------- ---------------------------------
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2001 2,700,000 270 26,730 - (250)
--------------- ------------ ---------------- ---------------------------------
Net income - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2002 2,700,000 270 26,730 - (250)
--------------- ------------ ---------------- ---------------------------------
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2003 2,700,000 270 26,730 - (250)
--------------- ------------ ---------------- ---------------------------------
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2004 2,700,000 270 26,730 - (250)
--------------- ------------ ---------------- ---------------------------------
Stock issued for services 24,120,000 2,412 - - -
Subscription receivable - - (250) - 250
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2005 26,820,000 2,682 26,480 - -
--------------- ------------------------------- ---------------------------------
Stock issued for services 1,954,109 195 976,860 - -
Stock issued for royalties 3,600 1 1,799 - -
Stock issued for rent 1,250 - 625 - -
Stock issued for license 33,332 3 16,663 - -
Stock issued for consideration 50,000 5 24,995 - -
Stock issued for cash 126,100 13 63,037 - -
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2006 28,988,391 2,899 1,110,459 - -
--------------- ------------ ---------------- ---------------------------------
Stock issued for services 670,000 67 334,933 - -
Stock issued for consulting 225,000 22 112,478 - -
Stock issued for royalties 3,200 0 1,600 - -
Stock issued for rent 450 0 225 - -
Stock issued to Directors 37,500 4 18,746 - -
Stock issued for conversion of loan 100,000 10 18,690 - -
Stock issued for cash 100,000 10 49,990 - (4,000)
Stock issued for cash 200,000 20 49,980 - -
Shares to be committed to be issued - - - 30,625 -
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2007 30,324,541 3,032 1,697,101 30,625 (4,000)
--------------- ------------ ---------------- ---------------------------------
Stock issued for consulting 4,923,000 492 647,158 - -
Stock issued for royalties 12,200 2 1,627 - -
Stock issued to Directors 75,000 8 13,492 - -
Stock issued for cash 124,000 12 14,989 - 1,000
Stock issued to Vendor 150,000 15 29,985
Shares issued for rent 51,350 5 24,670
Shares to be committed to be issued - - - 210,938
Net loss - - - - -
--------------- ------------ ---------------- ---------------------------------
Balance - April 30, 2008 35,660,091 $ 3,566 $ 2,429,022 $ 241,563 $ (3,000)
=============== ============ ================ =================================
The accompanying notes are an integral part of the financial statements.
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
June 30, 2008
(continued)
Deficit Accum.
During the
Development
Stage Totals
----------------- --------------
$ - $ -
- 2,000
- 14,500
(2,793) (2,793)
----------------- --------------
(2,793) 13,707
----------------- --------------
- 10,250
(5,253) (5,253)
----------------- --------------
(8,046) 18,704
----------------- --------------
(21,426) (21,426)
----------------- --------------
(29,472) (2,722)
----------------- --------------
4,881 4,881
----------------- --------------
(24,591) 2,159
----------------- --------------
(4,610) (4,610)
----------------- --------------
(29,201) (2,451)
----------------- --------------
(7,397) (7,397)
----------------- --------------
(36,598) (9,848)
----------------- --------------
- 2,412
- -
(61,682) (61,682)
----------------- --------------
(98,280) (69,118)
------------------ --------------
- 977,055
- 1,800
- 625
- 16,666
- 25,000
- 63,050
(1,039,512) (1,039,512)
----------------- --------------
(1,137,792) (24,434)
----------------- --------------
- 335,000
- 112,500
- 1,600
- 225
- 18,750
- 18,700
- 46,000
- 50,000
- 30,625
(649,321) (649,321)
----------------- --------------
(1,787,113) (60,355)
----------------- --------------
- 647,650
- 1,629
- 13,500
- 16,001
30,000
24,675
- 210,938
(1,093,230) (1,093,230)
----------------- --------------
$ (2,880,343) $ (209,192)
================= ==============
The accompanying notes are an integral part of the financial statements.
F-5
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
March 16, 1998
(Inception) to
April 30, April 30, April 30,
2008 2007 2008
---------------- ------------------------------------
Cash flows from operating activities:
Net loss $ (1,093,230) $ (649,321) $ (2,880,343)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued in exchange
for Consulting 909,892 498,700 2,407,151
Upholstry services 6,000 - 6,000
Settlement of debt - - 18,700
Depreciation 57,256 - 57,256
Impairment Loss on Investment 19,500 - 19,500
Changes in operating assets and liabilities:
Decrease (increase) in other receivable 118 (118) -
Increase in inventory (14,256) (43,129) (68,813)
Decrease in prepaid expenses - 800 -
Increase in accounts payable 55,049 66,653 199,786
Increasein accrued interest 25,823 - 25,823
Increase in customer deposits 4,000 20,500 24,500
---------------- ------------------------------------
Total adjustments 1,063,381 543,406 2,694,902
---------------- ------------------------------------
Net cash used in operating activities (29,849) (105,915) (185,441)
Cash flows from investing activities:
Increase in investment (25,000) - (25,000)
Purchase of fixed assets (55,517) (131,554) (375,982)
---------------- ------------------------------------
Net cash used in investing activities (80,517) (131,554) (400,982)
Cash flows from financing activities:
Bank overdraft 20 - 20
Proceeds from notes payables, related party 100,859 131,597 342,825
Proceeds from note payable - 10,000 10,000
Proceeds (payments) from lines of Credit (11,649) 3,040 36,778
Proceeds from the issuance of common stock 16,000 96,000 201,800
---------------- ------------------------------------
Net cash provided by financing activities 105,230 240,637 591,423
Net decrease in cash and cash equivalents (5,136) 3,168 -
Cash and cash equivalents - beginning of period 5,136 1,968 -
---------------- ------------------------------------
Cash and cash equivalents - end of period $ - $ 5,136 $ -
================ ====================================
Supplemental disclosure of cash flow information:
Interest Paid $ - $ - $ -
================ ====================================
Taxes paid $ - $ - $ -
================ ====================================
See notes to these consolidated financial statements.
F-6
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TTHE CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2008
NOTE 1. GENERAL
Medina International Holdings, Inc. ("Company") was formed 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.
The Company plans to manufacture and sell Recreational and Commercial boats. The
Company has designed and built a mold for 21' Commercial Fire Rescue boats. The
Company has acquired the licenses to manufacture 12' and 15' Fire Rescue boats.
In addition, the Company has acquired the license to manufacture and sell 22'
Recreational boats (vortex). The Company is in the process of manufacturing the
21' Fire Rescue which was developed internally by the Company.
The Company formed Medina Marine, Inc. as and wholly owned subsidiary of the
company. Medina Marine was incorporated in the State of California on May 22,
2006 to produce Fire Rescue, Rescue and Recreational boats.
The Company owns the rights to the following websites:
www.medinamarine.com
www.medinainternationalholdings.com
www.medinaih.com
DEVELOPMENT STAGE
The Company has not earned significant revenue from planned principal
operations. Accordingly, the Company's activities have been accounted for as
those of a "Development Stage Company" as set forth in Statement of Financial
Accounting Standards No. 7 ("SFAS"). Among the disclosures required by SFAS 7
are that the Company's financial statements of operations, stockholders' equity
(deficit) and cash flows disclose activity since the date of the Company's
inception.
GOING CONCERN
In view of the matters described above, 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 April 30, 2008,
the company's current liabilities exceeded its current assets by $139,315. Also,
the Company's operations generated $192,800 during the current period ended and
the company's accumulated deficit is $2,880,343.
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 April 30, 2008 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.
F-7
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles ("GAAP"), and
expands disclosures about fair value measurements. This statement applies under
other accounting pronouncements that require or permit fair value measurement
where the FASB has previously determined that under those pronouncements fair
value is the appropriate measurement. This statement does not require any new
fair value measurements but may require companies to change current practice.
This statement is effective for those fiscal years beginning after November 15,
2007 and to the interim periods within those fiscal years. We believe that SFAS
No. 157 should not have a material impact on our financial position or results
of operations
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are required to be
reported in earnings at each reporting date. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, the provisions of which are
required to be applied prospectively. We believe that SFAS 159 should not have a
material impact on our financial position or results of operations
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business
Combinations, or SFAS No. 141R. SFAS No. 141R will change the accounting for
business combinations. Under SFAS No. 141R, an acquiring entity will be required
to recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141R will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations we engage in will be recorded and
disclosed following existing GAAP until January 1, 2009. We expect SFAS No. 141R
will have an impact on accounting for business combinations once adopted but the
effect is dependent upon acquisitions at that time. We are still assessing the
impact of this pronouncement.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51, or SFAS No. 160".
SFAS No. 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008. We believe that SFAS 160 should not have a material impact on
our financial position or results of operations.
In March 2008, the FASB issued SFAS No. 161 Disclosures about Derivative
Instruments and Hedging Activities. SFAS No. 161 requires additional disclosure
related to derivatives instruments and hedging activities. The provisions of
SFAS No. 161 are effective as of January 1, 2008 and the Company is currently
evaluating the impact of adoption.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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. At April 30th, 2008, the Company had $0 in cash or cash
equivalents.
F-8
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of finished goods and raw materials.
Property & Equipment
Capital assets are stated at cost. Equipment consisting of molds is stated at
cost. Depreciation of equipment is provided using the straight-line method over
the estimated useful lives (5-7 years) of the assets. Expenditures for
maintenance and repairs are charged to expense as incurred.
LONG-LIVED ASSETS
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a
Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 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.
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.
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 the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.
F-9
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of financial accounting standard No. 107, 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
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No. 15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. 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.
NOTE 3. INVENTORY
As of April 30, 2008, inventory consisted of the following:
Item Cost
---- ----
Parts
Vortex hull & deck shells(2) $11,428
Parts $19,193
-------
Total Parts $30,620
Work in Progress
15' Fire Rescue $19,885
21' Fire Rescue $12,171
-------
Total Work in Progress $32,056
Finished Goods
15' Fire Rescue - Demo $ 6,137
-------
Total Finished Goods $ 6,137
=======
Total Inventory $68,813
NOTE 4. INVESTMENT
Medina International Holdings, Inc. and its subsidiary have invested $25,000 in
the exchange of 500,000 shares of the restricted common stock of Genesis
Companies Group, Inc. Messrs. Medina and Mankal, directors and officers of the
Company also serve as officers and directors of Genesis Companies Group, Inc.
The 500,000 shares represent 3% of the issued and outstanding common shares of
Genesis Companies Group, Inc.
These securities are carried at their estimated fair value of $25,000 based upon
the amount paid for the shares, due to the fact that there is no trading market
for the Genesis Companies Group, Inc. shares. Because there is not a trading
market for the shares, the Company is unable to recognize any gains or losses on
the value of the shares and has classified the shares as a long term asset.
F-10
During the fiscal year ended April 30, 2008, the company received $5,000 of the
principal amount and management believed that the investment in Genesis
Companies Group, Inc. was impaired, therefore expensed $19,500 as a loss of
investment.
The Company invested $25,000 in Nexgen, Inc. for (10) innovative fire protective
equipment during the fiscal year ended April 30, 2008.
Company Sub-total
------- ---------
Genesis Companines Group, Inc. $ 500
Nexgen, Inc. $25,000
-------
Total $25,500
NOTE 5. FIXED ASSETS
At April 30, 2008, fixed assets consisted of the following:
Molds Total
----- -----
15' Fire Rescue $ 66,778
21' Fire Rescue $268,535
12' Fire Rescue $ 7,680
--------
Total Molds $342,993
NOTE 6. LINE OF CREDIT
At April 30, 2008, the Company has an credit card totaling $10,000, under which
the Company may borrow on an unsecured basis since the year 2005 on an interest
rate of 16.99% with a payment due date on the 18th of every month. The
outstanding balance for this credit card was $9,735.
At April 30, 2008, Medina Marine, Inc. has a credit card from Wells Fargo Bank
totaling $7,500, under which Medina Marine, Inc. may borrow on an unsecured
basis since the year 2006 on an interest rate of 16.24% with a payment due date
on the 11th of every month. The outstanding balance for this credit card was
$7,421.
NOTE 7. NOTE PAYABLE
At April 30, 2008, the Company had an unsecured note payable with an unrelated
party in the amount of $10,000, which bears an 8% interest repayable within 15
months or with an option to convert the amount of the note payable into the
Company's common stock at $0.25 per share.
NOTE 8. SHAREHOLDERS' LOANS
At April 30, 2008, Shareholders' loans consisted of the following:
Daniel Medina, President & Director $119,520
Madhava Rao Mankal, Chief Financial Officer & Director $242,927
========
Total $362,447
========
Shareholder's loan from shareholder of the Company, unsecured, 8.5% interest per
annum, due on demand.
F-11
NOTE 9. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company has been authorized for issue, 100,000,000 shares of Common Stock
with a par value of $0.0001. At April 30, 2008, the Company had 35,660,091
shares of its common stock issued and outstanding.
STOCK TRANSACTIONS
During the year ended April 30, 2008, the Company has issued restricted shares
pursuant to exemptions from registration under Section 4(2), 4(6) and regulation
D as follows:
During the year ended April 30, 2008, the Company issued 124,000 shares of its
restricted common stock to unrelated parties for cash valued at $16,000.
During the year ended April 30, 2007, the Company issued a total of 75,000
shares of its restricted common stock to its three independent directors
(Messrs. Eshiet, Swanson and Madhav) as compensation for their services as
directors. The shares were issued at market value at issue date of $0.20, $0.25,
and $0.07 for a total value of $13,500.
During the year ended April 30, 2008, the Company issued a total of 1,350 shares
of its restricted common stock as payment of rent on a mail box, totaling $675.
During the year ended April 30, 2008, the Company issued a total of 50,000
shares of its restricted common stock as payment of rent of space at 255 S.
Leland Norton Way, San Bernardino, CA 92408, in exchange for $24,000 of rental
payments.
During the year ended April 30, 2008, the Company issued a total of 12,200
shares of its restricted common stock as payment of royalty fees. The shares
were issued at market value at issue date of $0.20, $0.25, and $0.07 for a total
value of $1,629.
During the year ended April 30, 2008, the Company issued 1,600,000 shares of its
restricted common stock for consulting service to 4 unrelated third parties,
recorded at market value of $0.25 per share with total value of $400,000.
During the year ended April 30, 2008, the Company issued 8,000 shares of its
restricted common stock for consulting service to 1 unrelated third party,
recorded at market value of $0.20 per share with total value of $1,600.
During the year ended April 30, 2008, the Company issued 150,000 shares
restricted common stock to one vendor for providing services to the Company,
recorded at a market value of $0.20 per share with a total value of $30,000.
During the year ended April 30, 2008, the Company issued 165,000 shares of its
restricted common stock for consulting service to 2 unrelated third parties,
recorded at market value of $0.07 per share with total value of $11,550.
During the year ended April 30, 2008, the Company issued 50,000 shares of its
restricted common stock for consulting service to Daniel Medina, Jr., son of
Daniel F. Medina, president and director of the Company, recorded at market
value of $0.20 per share with total value of $10,000.
During the year ended April 30, 2008, the Company issued 50,000 shares of its
restricted common stock for consulting service to Srikrishna Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and Director of the Company,
recorded at market value of $0.20 per share with total value of $10,000.
During the year ended April 30, 2008, the Company issued 50,000 shares of its
restricted common stock for consulting service to Michelle Medina, daughter of
Daniel F. Medina, President and Director of the Company, recorded at market
value of $0.07 per share with total value of $3,500.
During the year ended April 30, 2008, the Company issued 1,500,000 shares of its
restricted common stock for consulting service to Daniel Medina, Jr., son of
Daniel F. Medina, president and director of the company, recorded at market
value of $0.07 per share with total value of $105,000.
F-12
During the year ended April 30, 2008, the Company issued 750,000 shares of its
restricted common stock for consulting service to Srikrishna Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and director of the company,
recorded at market value of $0.07 per share with total value of $52,500.
During the year ended April 30, 2008, the Company issued 750,000 shares of its
restricted common stock for consulting service to Pavan Kumar Mankal, son of
Madhava Rao Mankal, Chief Financial Officer and director of the company,
recorded at market value of $0.07 per share with total value of $52,500.
NOTE 10. COMMITMENTS
Rental Leases
The Company rents an 11,000 square-foot manufacturing facility for $3,000 per
month on a month-to-month basis at 255 S. Leland Norton Way, San Bernardino, CA
92408.
LICENSES
1. In February 2005, we signed a license agreement ("the Vortex License") with
Mr. Mardikian to manufacture and sell our Vortex boats. The Vortex License has a
term of 5 years and provides an option to renew by the Company, as long as the
Company is not in default on the terms of the license agreement. The Vortex
License grants the Company an exclusive right to use the design in Vortex boats.
The Vortex License provides for royalty payments equal to 2% of the gross sales,
less sales returns for a period of 5 years. The Vortex License also requires a
minimum license payment of $200 per calendar quarter.
2. In January 2006, we signed a license agreement ("the Water Pump License")
with Mr. Mardikian to use his water pump patent (United States Patent 6,343,964)
in the fire and rescue boats designed by us. The license has a term of 5 years
and provides an option to renew by the Company, as long as the Company is not in
default on the terms of the Water Pump License. The Water Pump License grants us
to a non-exclusive right to use the patent in the manufacturing of both the 15'
Rescue and the 21' Rescue boats. The Water Pump License provides for a royalty
payment equal to 1% of the gross sales, less sales returns, up to January 31,
2008, at which time the royalty payment will increase to 1.5% of the gross
sales, less sales returns, till January 31, 2011. The Water Pump License does
require a minimum payment of $600 per every six-month period.
3. In June 2006, we signed a license agreement ("15' Rescue Design License")
with Mr. Mardikian to use his design for the manufacturing of our 15' Rescue
boats. The 15' Rescue Design License has a term of 5 years and provides an
option to renew by the Company, as long as we are not in default of any of the
terms of the 15' Rescue Design License. The 15' Rescue Design License grants us
a non-exclusive right to use the design of the 15' Rescue boat through out the
world. The 15' Rescue Design License provides for a royalty payment equal to 2%
of the gross sales, less sales return for the period of 5 years. The 15' Rescue
Design License provides for a minimum $100.00 monthly payment.
NOTE 11. SUBSEQUENT EVENTS
Fixed Asset Purchase Agreement
On June 18, 2008, we entered into a Fixed Asset Purchase Agreement with MGS
Grand Sports, Inc. ("MGS Grand") and Mardikian Design Associates ("Mardikian")
to purchase the fixed assets of Modena Sports, Design, LLC ("Modena Sports") in
exchange for 5,500,000 shares of its restricted common stock. MGA Grand owns a
95% equity interest in Modena Sports and Mardikian owns the remaining 5% equity
interest. The fixed assets to be acquired by us consist of office equipment,
tools and machinery. In addition, we will acquire web sites and domain names for
the websites Modena Sports. Upon the completion of the transaction, Modena
Sports will become our wholly-owned subsidiary. The transaction will be
completed upon the delivery of audited financial statements.
Modena Sports was organized in the state of California and does business as
Harbor Guard Business. Modena Sports is involved in the manufacturing of fire
and rescue boats.
F-13
Mold Purchase Agreement
On June 18, 2008, Medina and MGS Grand and Mardikian Design entered into a Mold
Purchase Agreement, as a part of the Fixed Asset Purchase Agreement, referred to
above. The Mold Purchase Agreement allows for the purchase of certain molds and
tools from MGS Grand and Mardikian Design.
License Agreement
On June 18, 2008, the Company, MGS Grand and Albert Mardikian ("Mardikian")
entered into a License Agreement to allow the Registrant exclusive rights to the
patents and designs for the "rescue jet" personal water craft and related
assemblies, systems and design rights. The License Agreement revised the prior
license agreements between the Company and Mr. Mardikian.
We have agreed to pay a royalty for the use of the design and patents in an
amount equal to gross sales less sales returns and freight and sales commissions
for a period of 15 years. The royalties consist of:
a) 2% for Patented Designs with or without Patented Fire Pump
technology used in our production;
b) 1% for Patented Pump Technology used in designs other than
Mardikian or his associates;
c) 1% for using Patents in any of distributor or associated
companies products; and
d) we will pay $1,000,000 to MGS ($200,000 in 2 months minimum and 3
months maximum, $800,000 at a rate of 10% of each boat sale until
$800,000 has been paid).
F-14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDINA INTERNATIONAL HOLDINGS, INC.
(a Colorado corporation)
Date: August 14, 2008 By:_______________________________________
Daniel F. Medina,
President & Director
Date: August 14, 2008 By:________________________________________
Madhava Rao Mankal,
Chief Financial Officer & Director
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: August 14, 2008 By:_______________________________________
Daniel F. Medina,
President & Director
Date: August 14, 2008 By:________________________________________
Madhava Rao Mankal,
Chief Financial Officer & Director
Date: August 14, 2008 By:_______________________________________
Mike Swanson,
Director
Date: August 14, 2008 By:________________________________________
Mike Gallo,
Director