UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 18, 2008
MEDINA INTERNATIONAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Colorado 000-27211 84-1469319
------------------------------------- ---------------------- ---------------------------------
(State or other jurisdiction of (Commission File (IRS Employer Identification
incorporation) Number) Number)
2051 Placentia Ave, Costa Mesa, CA 92627
----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(909) 522-4414
--------------
Registrant's telephone number, including area code
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 2 - FINANCIAL INFORMATION
Item 2.01 - Completion of Acquisition or Disposition of Assets.
Fixed Asset Purchase Agreement
On June 18, 2008, Medina International Holdings, Inc. ("the Registrant") entered
into a Fixed Asset Purchase Agreement with MGS Grand Sport, Inc. ("MGS Grand")
and Mardikian Design Associates ("Mardikian") to purchase the fixed assets of
Modena Sport Designs, LLC ("Modena Sports") in exchange for 11,000,000 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 the Registrant consist of office equipment, tools and machinery.
In addition, the Registrant will acquire web sites and domain names for the
websites Modena Sports. Upon the completion of the transaction, Modena Sports
will become a wholly-owned subsidiary of the Registrant. The transaction will be
completed upon the delivery of audited financial statements.
On ______, 2009, the Company received audited financial statements of Modena
Sports and are included in this filing.
Modena Sports was organized in the state of California and does business as
Harbor Guard Boats. Modena Sports is involved in the manufacturing of fire and
rescue boats.
Mold Purchase Agreement
On June 18, 2008, the Registrant, 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 Registrant, 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 revises prior
license agreements between the parties.
The Registrant has 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 the Registrant's 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) the Registrant agrees to pay $1,000,000 to MGS Grand
($200,000 in 2 months minimum and 3months maximum, $800,000 at a rate
of 10% of each boat sale until $800,000 has been paid).
Modena Sport Designs, LLC was incorporated as Harbor Guard Boats, Inc. on
January 7, 2009.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business to Be Acquired. The following is a
list of the financial statements filed as a part of this Report.
Description
-----------
Audited financial statements for the years ended April 30, 2008 and 2007 of
Modena Sport Unaudited financial statements for the period from May 1, 2008
to June 18, 2008 of Modena
(b) Proforma Financial Information. The following is a list of the
proforma financial statements filed as a part of this Report.
Description
-----------
Consolidated ProForma Balance Sheet and Income Statement (after the
transaction with Modena
(c) Exhibits. The following is a complete list of exhibits filed as
part of this Report. Exhibit numbers correspond to the numbers in
the exhibit table of Item 601 of Regulation S-K.
Exhibit No. Description
---------- ------------
10.01 Fixed Assets Purchase Agreement, dated June 18, 2008*
10.02 Mold Purchase Agreement, dated June 18, 2008*
10.03 License Agreement, dated June 18, 2008*
--------------------
** Filed as part of the Current Report on Form 8K filed with the SEC on July 7,
2008.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
MEDINA INTERNATIONAL HOLDINGS, INC.
By: /s/Daniel Medina
-----------------
Daniel Medina, President
Date: Octobe 12, 2009
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
-------
INDEPENDENT AUDITOR'S REPORT............................ F-1
BALANCE SHEETS................................................ F-2
STATEMENTS OF OPERATIONS .................................... F-3
STATEMENTS OF MEMBERS' EQUITY (DEFICIT).................. F-4
STATEMENTS OF CASH FLOWS...................................... F-5
NOTES TO FINANCIAL STATEMENTS................................ F-6
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Modena Sport Designs, LLC
Costa Mesa, California
I have audited the accompanying balance sheets of Modena Sport Designs, LLC as
of April 30, 2007 and 2008, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Modena Sport Designs, LLC as of
April 30, 2007 and 2008, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements the Company has suffered recurring losses from operations
and has a working capital deficit that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Aurora, Colorado /s/Ronald R. Chadwick, P.C.
--------------------------
August 19, 2009 RONALD R. CHADWICK, P.C.
F-1
MODENA SPORT DESIGNS, LLC
BALANCE SHEET
June 18, 2008 April 30, 2008 April 30, 2007
------------------ ---------------------- ---------------------
UNAUDITED AUDITED AUDITED
ASSETS
CURRENT ASSETS:
Cash $ 100,726 - -
Accounts receivables 338,100 - -
Inventory 262,686 216,820 38,566
Other receivables 276,845 - -
Other receivables - related party - 85,221 -
------------------ ---------------------- ---------------------
Total Current Assets 978,357 302,041 38,566
FIXED ASSETS, NET 694,730 - -
------------------ ---------------------- ---------------------
TOTAL ASSETS $ 1,673,087 $ 302,041 $ 38,566
================== ====================== =====================
LIABILITIES & MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 50,848 $ 6,022 $ 82
Accrued liabilities - - 2,700
Line of Credit 138,444 147,472 -
Bank Overdraft - 272 1,359
Deposit from customers 368,959 236,000 -
Short-term debt - related party 1,000,000 - 33,375
------------------ ---------------------- ---------------------
Total Current Liabilities 1,558,251 389,766 37,516
Long-term liabilities
------------------ ---------------------- ---------------------
Total liabilities 1,558,251 389,766 37,516
MEMBERS' EQUITY (DEFICIT) 114,836 (87,725) 1,050
------------------ ---------------------- ---------------------
TOTAL LIABILITIES & MEMBERS' EQUITY (DEFICIT) $ 1,673,087 $ 302,041 $ 38,566
================== ====================== =====================
The accompanying notes are an integral part of the financial statements
F-2
MODENA SPORT DESIGNS, LLC
STATEMENTS OF OPERATIONS
For the Period From
May 1, 2008 For the year ended April 30,
Through June 18, 2008 2008 2007
UNAUDITED AUDITED AUDITED
--------------------------- ---------------------- ----------------------
NET REVENUE $ 444,100 $ 575,110 $ 693,455
Cost of Goods Sold 205,760 488,715 271,230
--------------------------- ---------------------- ----------------------
Gross Profit 238,340 86,395 422,225
OPERATING EXPENSES
General and administrative expenses 9,162 53,779 18,145
Selling and marketing expenses 25,279 51,109 55,470
Research and development expenses - 68,500 339,000
--------------------------- ---------------------- ----------------------
Total Operating Expenses 34,441 173,388 412,615
--------------------------- ---------------------- ----------------------
INCOME FROM OPERATIONS 203,899 (86,993) 9,610
--------------------------- ---------------------- ----------------------
NON OPERATING INCOME/EXPENSES
Other income - - -
Interest expense (1,338) (1,782) -
--------------------------- ---------------------- ----------------------
Net other income (1,338) (1,782) -
--------------------------- ---------------------- ----------------------
NET INCOME $ 202,561 $ (88,775) $ 9,610
=========================== ====================== ======================
The accompanying notes are an integral part of the financial statements
F-3
MODENA SPORT DESIGNS, LLC
STATEMENTS OF CASH FLOWS
For the Period From
May 1, 2008 For the years ended April 30,
Through June 18, 2008 2008 2007
Cash flows from operating activities: UNAUDITED AUDITED AUDITED
-------------------------- ----------------------- --------------------
Net Income $ 202,561 $ (88,775) $ 9,610
Changes in operating assets and liabilities:
Decrease (increase) in inventory (45,866) (178,254) (38,566)
Increase (decrease) in accounts payable 44,826 5,940 82
Increase (decrease) in related party payable 5,402
Increase (decrease) in accrued liability (2,700) 2,700
Increase in customer deposits 132,959 236,000 -
(Increase) in accounts receivables (338,100)
Increase (decrease) in other receivables 85,221 (99,323) -
Other 28,425
-------------------------- ----------------------- --------------------
Total adjustments (92,535) (38,337) (30,382)
-------------------------- ----------------------- --------------------
Net cash used (received) in operating activities 110,026 (127,112) (20,772)
-------------------------- ----------------------- --------------------
Cash flows from investing activities:
- -
-------------------------- ----------------------- --------------------
Net cash used in investing activities - - -
-------------------------- ----------------------- --------------------
Cash flows from financing activities:
Bank overdraft (272) (1,087) 1,359
Proceeds (payments) from lines of credit (9,028) 128,199 19,273
-------------------------- ----------------------- --------------------
Net cash (used in) provided by financing activities (9,300) 127,112 20,632
-------------------------- ----------------------- --------------------
Increase (decrease) in cash and cash equivalents 100,726 - (140)
Cash and cash equivalents - beginning of period - - 140
-------------------------- ----------------------- --------------------
Cash and cash equivalents - end of period $ 100,726 $ - $ -
========================== ======================= ====================
Supplemental disclosure of cash flow information:
Cash paid during the year for Interest, net of amounts
capitalized $ 1,338 $ 1,782 $ -
========================== ======================= ====================
Income taxes $ - $ - $ -
========================== ======================= ====================
Supplemental schedule of noncash investing and financing
activities:
In June 2008 the Company incurred a $1,000,000 short term debt to a related
party in exchange for $694,730 in fixed assets, $276,845 in receivables and
$28,425 in other expenditures
The accompanying notes are an integral part of the financial statements
F-4
MODENA SPORT DESIGNS, LLC
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
Members' Paid in Retained Members'
Interests (%) Capital Earnings Equity
Balances April 30, 2006 100 $ - $ (8,560) $ (8,560)
Gain (loss) for period 9,610 9,610
---------------------------------------------------------------------------
Balances April 30, 2007 100 $ - $ 1,050 $ 1,050
Gain (loss) for period (88,775) (88,775)
---------------------------------------------------------------------------
Balances April 30, 2008 100 $ - $ (87,725) $ (87,725)
Gain (loss) for period 202,561 202,561
---------------------------------------------------------------------------
Balances June 18, 2008 100 $ - $ 114,836 $ 114,836
===========================================================================
The accompanying notes are an integral part of the financial statements
F-5
MODENA SPORT DESIGNS, LLC
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2008 and 2007, and for the period from May 1, 2008 through June
18, 2008 (Unaudited)
NOTE 1. GENERAL
Modena Sport Designs, LLC was formed in the State of California on March 28,
2003 to produce fire, rescue and recreational boats. Modena Sport Designs, LLC
reorganized as a California corporation on January 7, 2009 and changed its name
to Harbor Guard Boats, Inc.
Going Concern
Recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States, which
contemplates continuation of the Company as a going concern. As of June 18, 2008
the Company's current liabilities exceeded current assets by $579,894. Also, the
Company's operations generated $444,100 in revenue during the period from May 1,
2008 through June 18, 2008 and the members' equity at June 18, 2008 was
$114,836.
As of April 30, 2008, the Company's current liabilities exceeded current assets
by $87,725 and as of April 30, 2007, the Company's current assets exceeded
current liabilities by $1,050. Also, the Company's operations generated $575,110
and $693,455 in revenue for the years ended April 30, 2008 and 2007,
respectively, and at the end of the same periods the members' surplus (deficit)
was $(87,725) and $1,050, respectively..
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-6
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of our financial statements in conformity with GAAP requires the
use of estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Significant estimates and assumptions are used
for, but are not limited to;
1) Revenue recognition;
2) Allowance for doubtful accounts;
3) Inventory costs;
4) Asset impairments;
5) Depreciable lives of assets;
6) Income tax reserves and valuation allowances;
7) Allocation of direct and indirect cost of sales;
8) Contingent liabilities; and
9) Warranty liabilities.
Future events and their effects cannot be predicted with certainty; accordingly,
our accounting estimates require exercise of judgment. We base our estimates on
historical experience, available market information, appropriate valuation
methodologies, and on various other assumptions that we believe to be
reasonable. We evaluate and update our assumptions and estimates on an ongoing
basis and may employ outside experts to assist in our evaluation, when
necessary. Actual results could differ materially from these estimates.
Accounts Receivable
Accounts receivables are recorded at net realizable value consisting of a
carrying amount less an allowance for uncollectible accounts, as needed.
Revenue Recognition
Revenue Recognition is recognized when earned. The Company's revenue recognition
policies are in compliance with Staff accounting bulletin (SAB) 104. Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied, are recorded as
unearned revenue.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents. The Company maintains its cash in bank deposit accounts that may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Inventory
We carry our inventories at the lower of their cost or market value. Cost is
determined using first-in, first-out ("FIFO") method. Market is determined based
on net realizable value. We also provide due consideration to obsolescence,
excess quantities, and other factors in evaluating net realizable value.
F-7
Fixed Assets
Capital assets are stated at cost. Equipment consisting of molds is stated at
cost. Depreciation of fixed assets is provided using the straight-line method
over the estimated useful lives (3-7 years) of the assets. Expenditures for
maintenance and repairs are charged to expense as incurred.
Property and Equipment No. of Years
___________________________________________________________________________
Molds 7
Manufacturing Tools 5
Computers 3
Furniture 3
Manufacturing tool HGB 3
Office Equipments 3
Office Phone 3
___________________________________________________________________________
Long Lived Assets
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.
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.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards 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.
F-8
Foreign Currently Translations and Hedging
The Company is exposed to foreign currency fluctuations due to international
trade. The management does not intend to enter into forward exchange contracts
or any derivative financial investments for trading purposes. The management
does not currently hedge foreign currency exposure.
Basic and Diluted Net Loss per Share
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.
Products and services, geographic areas and major customers
The Company earns revenue from the sale of recreational and
commercial boats. All sales each period were domestic and to external
customers. The Company does not separate sales activities into
different operating segments.
In 2007 three major customers accounted for approximately 62.68% of
product sales or $383,476, and two other major customers accounted for
approximate product sales as follows: 15.61% or $95,450, 10.20% or
$62,398 and 11.51% or $70,400. During the year 2007 revenue from
logistics accounted for $81,731 from various customers.
In 2008 two major customers accounted for approximately 69.87% of
product sales or $394,557 and two other major customers accounted for
approximate product sales as follows: 15.94% or $90,000, 14.18% or
$80,090. During the year 2008 revenue from logistics accounted for
$10,463 from various customers. .
For the period from May 1, 2008 to June 18, 2008 two major customers
accounted for 100% of product sales or $435,400, with $8,700 accounted
for as logistics sales revenue from various customers. .
Recently issued accounting pronouncements
In June 2008, the Financial Accounting Standards Board ("FASB") ratified
Emerging Issues Task Force ("EITF") Issue No. 07-5, "Determining Whether an
Instrument (or an Embedded Feature) is indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The adoption of EITF 07-5 will not have an
impact on our consolidated financial position and results of operations.
F-9
In May 2008, the FASB issued Statement of Financial Accounting Standards
No. 162 ("SFAS No. 162"), "The Hierarchy of Generally Accepted Accounting
Principles." SFAS No. 162 identifies the sources of accounting principles and
the framework for selecting the principles used in the preparation of financial
statements that are presented in conformity with generally accepted accounting
principles. SFAS No. 162 becomes effective 60 days following the Securities and
Exchange Commission's approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles." We do not expect that the adoption of
SFAS No. 162 will have a material impact on our consolidated financial
statements.
In April 2008, the FASB issued FSP No. 142-3 ("FSP 142-3"), "Determination
of the Useful Life of Intangible Assets." FSP 142-3 amends the factors an entity
should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets under FASB Statement
No. 142, "Goodwill and Other Intangible Assets." This new guidance applies
prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset acquisitions. FSP 142-3
is effective for financial statements issued for fiscal years and interim
periods beginning after December 15, 2008. Early adoption is prohibited. Since
this guidance will be applied prospectively, on adoption, there will be no
impact to our current consolidated financial statements.
In March 2008, the FASB, affirmed the consensus of FASB Staff Position
(FSP) Accounting Principles Board Opinion No. 14-1 (APB 14-1), Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement), which applies to all convertible debt
instruments that have a net settlement feature; which means that such
convertible debt instruments, by their terms, may be settled either wholly or
partially in cash upon conversion. FSP APB 14-1 requires issuers of convertible
debt instruments that may be settled wholly or partially in cash upon conversion
to separately account for the liability and equity components in a manner
reflective of the issuer's nonconvertible debt borrowing rate. Previous guidance
provided for accounting for this type of convertible debt instrument entirely as
debt. FSP APB 14-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and interim periods within those fiscal years.
The adoption of FSP APB 14-1 will not have an impact on our financial
statements.
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.
In February 2008, the FASB issued FASB FSP 157-2, which delayed the
effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually), until fiscal
years beginning after November 15, 2008, and interim periods within those fiscal
years. These nonfinancial items include assets and liabilities such as reporting
units measured at fair value in a goodwill impairment test and nonfinancial
assets acquired and liabilities assumed in a business combination. Effective
January 1, 2008, we adopted SFAS No. 157 for financial assets and liabilities
recognized at fair value on a recurring basis. The partial adoption of SFAS No.
157 for financial assets and liabilities did not have a material impact on our
consolidated financial position, results of operations or cash flows.
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
F-10
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.
F-11
NOTE 3. Related Party Transactions
The Company in June 2008 issued a payable for $1,000,000 to a related party
owner in exchange for fixed assets valued at $694,730, a receivable of $276,845
and other items valued at $28,425. The Company also borrows money from the
related party as needed on verbal, non-interest bearing, due on demand basis.
Amounts due from or (owed to) the related party at June 18, 2008, and April 30,
2008 and 2007 were ($33,375), $85,221, and ($1,000,000). The related party also
provided the Company with rent free operating space through June 18, 2008.
NOTE 4. Inventory
Inventory consisted of the following:
Item As of June 18, For the yeares ended April 30,
2008 2007 2007
________________________________________________________________________________
Parts $ 67,711 $ - $ -
Work in Progress 194,975 216,820 38,566
--------------------------------------------------------
Total Inventory $ 262,686 $ 216,820 $ 38,566
________________________________________________________________________________
NOTE 5. Short-Term Debt
Financial Institutions June 18, April 30,
2009 2008
________________________________________________________________________________
Bank Overdraft $ - $ 272
Credit Card
American Express - 1 18,486 $ 7,817
American Express - 2 74,495 112,603
Bank of America 12,471 6,823
Citi Bank 32,992 20,220
------------------------------
Total short-term debt $ 134,444 $ 147,744
________________________________________________________________________________
Credit card rates vary and require monthly payments.
NOTE 6. Risk Management Activities
Foreign Currency
The majority of our business is denominated in U.S. dollars and fluctuations in
the foreign currency markets will have a minimal effect on our business.
Commodity Prices
We are exposed to market risk from changes in commodity prices. The cost of our
products could increase, if the prices of fiberglass and/or aluminum increases
significantly, further decreasing our ability to attain profitable operations.
We are not involved in any purchase commitments with any of our vendors.
F-12
Insurance
We are exposed to several risks, including fire, earthquakes, theft, and key
person liabilities. We do not carry any insurance for these risks, other than
general liability, which will adversely affect our operations if any of these
risks materialize.
NOTE 7. Income Tax
The Company is a limited liability company and taxed as a partnership. The tax
results of Company operations are passed through to its members.
F-13
MEDINA INTERNATIONAL HOLDINGS, INC.
AND MODENA SPORT DESIGNS, LLC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2008
MEDINA INTERNATIONAL HOLDINGS, INC.
AND MODENA SPORT DESIGNS, LLC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 30, 2008
Basis of Presentation
The following pro forma consolidated balance sheet as of April 30, 2008, and pro
forma consolidated statement of operations for the year then ended between
Medina International Holdings, Inc. and Modena Sport Designs, LLC are presented
to show what effects the acquisition of Modena Sport Designs, LLC by Medina
International Holdings, Inc. on June 18, 2008 for balance sheet purposes had on
stockholders' equity, and for operations might have had on historical financial
information had the transaction taken place on an earlier date. The pro forma
consolidated financial statements are derived from the historical financial
statements of Medina International Holdings, Inc. and Modena Sport Designs, LLC,
and assume that for balance sheet purposes the transaction took place on April
30, 2008, and for statement of operations purposes on May 1, 2007 with resulting
effects through April 30, 2008. The pro forma consolidated financial statements
should be read in conjunction with the historical financial information. The pro
forma consolidated financial statements are not necessarily indicative of the
result that would have been attained had the transaction actually taken place
earlier.
Medina International Holdings, Inc. and Modena Sport Designs, LLC
Pro Forma Consolidated Balance Sheet
(Unaudited)
April 30, 2008
Consolidated
Amount MIHI MSD
------------------------------------------------
Assets
Current assets:
Cash $ - $ - $ -
Inventory 285,633 68,813 216,820
Other receivables 85,221 - 85,221
------------------------------------------------
Total current assets 370,854 68,813 302,041
Fixed assets:
Fixed assets 376,482 376,482 -
Accumulated depreciation (58,519) (58,519) -
------------------------------------------------
Total net fixed assets 317,963 317,963 -
------------------------------------------------
- - -
------------------------------------------------
Total other assets - - -
------------------------------------------------
Total assets $ 688,817 $ 386,776 $ 302,041
================================================
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 196,381.00 $ 190,359 $ 6,022
Accrued liabilities 40,952 40,952 -
Bank Overdraft 292 20 272
Franchise Tax 800 800 -
Short-term debt 164,628 17,156 147,472
Deposit from customers 260,500 24,500 236,000
Stock subscriptions payable 241,563 241,563 -
Note payable - current 10,000 10,000 -
Related parties - short-term borrowings from shareholders 361,688 361,688 -
------------------------------------------------
Total Current Liabilities 1,276,804 887,038 389,766
Long-term liabilities - - -
------------------------------------------------
Total liabilities 1,276,804 887,038 389,766
------------------------------------------------
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
or outstanding - - -
Common stock, $.0001 par value, 100,000,000 shares authorized, 35,560,091
shares issued and outstanding 3,556 3,556 -
Additional paid-in capital 2,419,032 2,419,032 -
Common stock subscribed (100,000 shares) 10,000 10,000 -
Subscription to be received (3,000) (3,000) -
Accumulated deficit (3,017,575) (2,929,850) (87,725)
------------------------------------------------
Total Stockholders' Equity (Deficit) (587,987) (500,262) (87,725)
------------------------------------------------
Total liabilities and shareholders' equity (deficit) $ 688,817 $ 386,776 $ 302,041
================================================
Medina International Holdings, Inc. and Modena Sport Designs, LLC
Pro Forma Consolidated Statement of Operations
(Unaudited)
Year Ended April 30, 2008
Consolidated
Amount MIHI MSD
--------------------------------------------------------------
Sales, net $ 767,910 $ 192,800 $ 575,110
Cost of Goods Sold 603,829 115,114 488,715
--------------------------------------------------------------
Gross Profit 164,081 77,686 86,395
--------------------------------------------------------------
General and administrative expenses 1,113,125 1,059,346 53,779
Selling and marketing expenses 109,055 57,946 51,109
Research and development expenses 68,500 - 68,500
Impairment loss on investment 68,500 68,500 -
--------------------------------------------------------------
Loss from operations (1,195,099) (1,108,106) (86,993)
--------------------------------------------------------------
Other income - - -
Interest (expense) (36,413) (34,631) (1,782)
--------------------------------------------------------------
Net other income (36,413) (34,631) (1,782)
--------------------------------------------------------------
Loss before income tax (expense) benefit (1,231,512) (1,142,737) (88,775)
Income tax (expense) benefit - - -
--------------------------------------------------------------
Net Loss from Operations $ (1,231,512) $ (1,142,737) $ (88,775)
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