UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended July 31, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-27211
MEDINA INTERNATIONAL HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-1469319
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(State of Incorporation) (IRS Employer ID Number)
2051 Placentia Ave., Costa Mesa, CA 92627
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(Address of principal executive offices)
909-522-4414
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(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No []
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do
not check if a smaller reporting company) Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 15, 2009, there were 46,560,091 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
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Consolidated Balance Sheets - July 31, 2009 and April 30, 2009 F-1
Consolidated Statements of Operations -
Three months ended July 31, 2009 and 2008 F-2
Statement of Changes in Stockholders' Equity (Deficit) F-3
Three months ended July 31, 2009
Statements of Cash Flows -
Three months ended July 31, 2009 and 2008 F-4
Notes to Consolidated Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable 3
Item 4. Controls and Procedures 3
Item 4T. Controls and Procedures 4
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 5
Item 1A. Risk Factors - Not Applicable 5
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 5
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 5
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable 5
Item 5. Other Information - Not Applicable 5
Item 6. Exhibits 5
SIGNATURES 6
PART I. - FINANCIAL INFORMATION
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended JULY 31, 2009
(Unaudited)
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
July 31, April 30,
2009 2009
(Unaudited) (Audited)
---------------- ----------------
ASSETS
Current Assets:
Cash $ 1,883 $ 36,576
Receivables $ 3,166
Inventory 449,613 410,481
Total current assets 451,496 450,223
Fixed Assets: 1,072,871 1,074,798
Accumulated depreciation (243,689) (200,703)
---------------- ----------------
Total fixed assets 829,182 874,095
Other Assets:
Investment -
Total other assets - -
---------------- ----------------
TOTAL ASSETS $ 1,280,678 $ 1,324,318
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank Overdraft $ - $ -
Accounts payable 547,868 518,898
Accrued liabilities 477,608 377,555
Short term deposit 289,883 265,352
Customer Deposit 245,585 242,905
Stock subscription payable 243,113 902,738
Notes payable 89,000 64,000
Related party payable 898,653 909,854
Related Parties - short-term borrowings from shareholders 308,716 311,712
---------------- ----------------
Total current liabilities 3,100,426 3,593,014
---------------- ----------------
Stockholders' equity (deficit):
Preferred stock, $.00001 par value, 10,000,000 shares
authorized, none issued and outstanding - -
Common stock, $0.00001 par value, 100,000,000 shares
authorized, 46,560,091 and 35,560,091 shares
issued and outstanding on July 31, 2009 and
April 30, 2008, respectively 4,656 3,556
Additional paid-in capital 3,077,932 2,419,032
Common stock subscribed (100,000 shares) 10,000 10,000
Subscription to be received (3,000) (3,000)
Accumulated deficit (4,909,336) (4,698,284)
---------------- ----------------
Total stockholders' equity (deficit) (1,819,748) (2,268,696)
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 1,280,678 $ 1,324,318
================ ================
The accompanying notes are an integral part of these financial statements.
F-1
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the three months ended July 31,
2009 2008
-------------------------------------
----------------- ----------------
Sales, net $870 $0
Cost of Goods Sold 64,229 -
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Gross Profit (63,359) -
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General and administrative expenses 120,824 27,506
Selling and marketing expenses 287
Research and development expenses 1,370 -
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Loss from operations (185,840) (27,506)
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Other income (843) (90)
Interest expense 26,055 9,255
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Net other income (25,212) (9,165)
----------------- ----------------
Loss before income tax (expense) benefit (211,052) (36,671)
Income tax (expense) benefit - -
----------------- ----------------
Net Loss from Operations $ (211,052) $ (36,671)
================= ================
Net loss per share:
Basic $ (0.00) $ (0.00)
================= ================
Diluted $ (0.00) $ (0.00)
================= ================
Weighted average number of shares outstanding:
Basic 42,853,569 35,560,091
================= ================
Diluted 42,853,569 32,241,762
================= ================
The accompanying notes are an integral part of these financial statements.
F-2
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
Additional Common
Common Stock Paid-In Stock Subscription Accumulated
Shares Amount Capital Subscribed Receivable Deficit Totals
-------------- -------------- -------------- ------------------------- ----------- ----------
Balance - April 30, 2007 30,224,541 $ 3,022 $ 1,687,111 $ 10,000 $ (4,000) $(1,787,113) (90,980)
Stock issued for consulting 4,923,000 492 647,158 647,650
Stock issued for royalties 12,200 2 1,627 1,629
Stock issued to Directors 75,000 8 13,492 13,500
Stock issued for cash 124,000 12 14,989 15,001
Stock issued to Vendor 150,000 15 29,985 30,000
Shares issued for rent 51,350 5 24,670 24,675
Stock subscription receivable 1,000 1,000
Net loss (1,142,737) (1,142,737)
-------------- -------------- -------------- ----------- ------------ ----------- ----------
Balance - April 30, 2008 35,560,091 $ 3,556 $ 2,419,032 $ 10,000 $ (3,000) $(2,929,850) $(500,262)
Net loss (1,768,434) (1,768,434)
-------------- -------------- -------------- ----------- ------------ ----------- ----------
Balance - April 30, 2009 35,560,091 $ 3,556 $ 2,419,032 $ 10,000 $ (3,000) $(4,698,284) $(2,268,696)
Stock issued Acquisition 11,000,000 $ 1,100 $ 658,900 660,000
Net loss (211,052) (211,052)
-------------- -------------- -------------- ----------- ------------ ----------- ----------
Balance - July 31, 2009
(Unaudited) 46,560,091 $ 4,656 $ 3,077,932 $ 10,000 $ (3,000)$ (4,909,336)$(1,819,748)
============== ============== ============== =========== ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
July 31,
2009 2008
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Cash flows from operating activities:
Net loss $(211,052) $ (36,671)
-------------------------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued in exchange
for Consulting - -
Common stock issued in exchange services 375 50
-
Depreciation 42,986 14,316
Changes in operating assets and liabilities:
Impairment Loss on Investment 1,927 -
(Increase) decrease in receivables 3,166
(Increase) decrease in inventory (39,132) (99)
Increase in accounts payable 28,970 4,770
Increase in accrued payables 100,053
Increase in accrued interest 4,729
Increase in customer deposits 16,000
-------------------------------
Total adjustments 138,345 39,766
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Net cash received from (used in) operating activities (72,707) 3,095
-------------------------------
Cash flows from investing activities:
Increase in Investment - -
Purchase of fixed assets (81)
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Net cash used in investing activities - (81)
-------------------------------
Cash flows from financing activities:
Bank overdraft - (20)
(Payments on) proceeds from notes payables, related party (14,197) (27,901)
Customer deposit 2,680
Proceeds from note payable 25,000 37,325
Short term deposit
Proceeds (payments) from lines of Credit 24,531 (11,876)
Proceeds from the issuance of common stock - -
-------------------------------
Net cash (used in) provided by financing activities 38,014 (2,472)
-------------------------------
Net increase (decrease) in cash (34,693) 542
Cash and cash equivalents - beginning of period 36,576 -
-------------------------------
-------------------------------
Cash and cash equivalents - end of period $ 1,883 $ 542
===============================
Supplemental disclosure of cash flow information:
Interest Paid $ - $ -
===============================
Taxes paid $ - $ -
===============================
Non-cash financing and investing activities:
Equipment Purchased from related party $ - $ 32,790
===============================
Stock issued for prepaid expenses $ - $ 24,000
===============================
Stock issued for compensation $ - $666,563
===============================
$ -
The accompanying notes are an integral part of these financial statements.
F-4
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was
incorporated in 1998 as Colorado Community Broadcasting, Inc. 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, under its two wholly owned subsidiaries, Harbor Guard Boats, Inc.
and Medina Marine, Inc., plans to manufacture and sell recreational and
commercial boats.
The Company formed Medina Marine, Inc., as a wholly owned subsidiary of the
Company. Medina Marine was incorporated in the State of California on May 22,
2006 to manufacture and sell fire rescue, rescue and recreational boats.
The Company signed an agreement to acquire Modena Sports Design, LLC, as a
wholly owned subsidiary of the Company on June 18, 2008. Modena Sports Design,
LLC was formed in the State of California in 2003 to produce fire rescue, rescue
and recreational boats. Modena Sports Design, LLC reorganized as a California
corporation on January 7, 2009 and changed its name to Harbor Guard Boats, Inc.
The activity of Harbor Guard Boats, Inc. from inception up to the acquisition
date of June 18, 2009 will not be reflected on the consolidated financial
statements of Medina International Holdings, Inc. In fiscal year 2008 the
Company ceased reporting as a development stage company.
F-5
Presentation of Interim Information
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position and operating results of the Company for
the periods presented. The financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2009.
It is management's opinion that when the interim financial statements are read
in conjunction with the April 30, 2009. Annual Report on Form 10-K, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period. The accompanying consolidated financial statements of Medina
International Holdings, Inc. and its subsidiaries were prepared in accordance
with generally accepted accounting principles in the United States of America
("GAAP") and include the assets, liabilities, revenues, and expenses of our two
wholly owned subsidiaries, Medina Marine, Inc. and Harbor Guard Boats, Inc. All
intercompany balances and transactions have been eliminated in consolidation.
Going Concern
Recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States, which
contemplates continuation of the Company as a going concern. On July 31, 2009,
the Company's current liabilities exceeded its current assets by $2,648,930.
Also, the Company's operations generated no revenue during the current period
ended and the Company's accumulated deficit is $4,909,336.
Management has taken various steps to revise its operating and financial
requirements, which we believe are sufficient to provide the Company with the
ability to continue on in the subsequent year. Management devoted considerable
effort during the period ended July 31, 2009 towards management of liabilities
and improving our operations. Management believes that the above actions will
allow the Company to continue its operations through the next fiscal year.
The future success of the Company is likely dependent on its ability to attain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
obtain positive cash flow.
Summary of Accounting Policies:
Basis of Presentation and Consolidation
The accompanying consolidated financial statements of Medina International
Holdings, Inc. and its subsidiaries were prepared in accordance with generally
accepted accounting principles in the United States of America ("GAAP") and
include the assets, liabilities, revenues, and expenses of our two wholly owned
subsidiaries, Medina Marine, Inc. and Harbor Guard Boats, Inc. All intercompany
balances and transactions have been eliminated in consolidation.
F-6
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements, and the reported amounts
of revenues and expenses during the reporting periods. Significant estimates and
assumptions are used for, but are not limited to;
1) Revenue recognition;
2) Allowance for doubtful accounts;
3) Inventory costs;
4) Asset impairments;
5) Depreciable lives of assets;
6) Income tax reserves and valuation allowances;
7) Fair value of stock options;
8) Allocation of direct and indirect cost of sales;
9) Contingent liabilities; and
10) Warranty liabilities.
Future events and their effects cannot be predicted with certainty; accordingly,
our accounting estimates require exercise of judgment. We base our estimates on
historical experience, available market information, appropriate valuation
methodologies, and on various other assumptions that we believe to be
reasonable. We evaluate and update our assumptions and estimates on an ongoing
basis and may employ outside experts to assist in our evaluation, when
necessary. Actual results could differ materially from these estimates.
Revenue Recognition
Revenue Recognition is recognized when earned. The Company's revenue recognition
policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied, are recorded as
unearned revenue.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents. The Company maintains its cash in bank deposit accounts that may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Accounts receivable
The Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. At July 31, 2009 and April 30, 2009 the Company had no balance
in its allowance for doubtful accounts.
Inventory
We carry our inventories at the lower of their cost or market value. Cost is
determined using first-in, first-out ("FIFO") method. Market is determined based
on net realizable value. We also provide due consideration to obsolescence,
excess quantities, and other factors in evaluating net realizable value.
F-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.
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.
Comprehensive Loss
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain statements, however, require
entities to report specific changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, as a separate
component of the equity section of the balance sheet. Such items, along with net
income, are components of comprehensive income.
Issuance of Shares for Service
The Company accounts for employee and non-employee stock awards under SFAS
123(r), whereby equity instruments issued to employees for services are recorded
based on the fair value of the instrument issued and those issued to
non-employees are recorded based on the fair value of the consideration received
or the fair value of the equity instrument, whichever is more reliably
measurable.
Fair Value Of Financial Instruments
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.
F-8
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.
Sales each year were sold domestically and internationally and only to external
customers. The Company does not separate sales activities into different
operating segments. Quarter ended July 31, 2009, we did not record any sale.
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.
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.
F-9
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.
NOTE 2. INVENTORY
As of July 31, 2009, inventory consisted of the following:
Cost
----
Parts
Vortex hull & deck shells (2) $11,428
Parts 33,677
-------------
Total Parts $ 45,105
-------------
Work-in-Progress
15' Fire Rescue $ 26,476
21' Fire Rescue 12,603
28' Firehawk 46,635
37' Firehawk 276,170
37' Firehawk 42,624
Total Work-in-Progress $ 404,508
-------------
Total Inventory $ 449,613
=============
F-10
NOTE 3. FIXED ASSETS
--------------------------------------------------------------------------------
Property and Equipment For the quarter ended July 31,
2009
--------------------------------------------------------------------------------
Machinery and equipment; including molds & tools $1,053,556
Computers 13,535
Furniture and fixtures 2,080
Office equipments 3,200
Fire Extinguisher 500
----------
Total property and equipment 1,072,871
Less Accumulated Depreciation (243,689)
----------
Fixed Assets, net $ 829,182
--------------------------------------------------------------------------------
NOTE 4. Accrued Liabilities
Our accrued liabilities for the years ended July 31, 2009 are as follows
Interest - Shareholders' Loan 45,326
Interest - Related party 5,000
Interest - notes payable 1,920
Payroll 392,894
Warranty Liabilities 32,468
--------
Total accrued liabilities 477,608
NOTE 5. Short-Term Debt
--------------------------------------------------------------------------------
Financial Institutions For the Quarter ended July 31,
2009
--------------------------------------------------------------------------------
Line of Credit
--------------
Citi Bank $ 93,318
Credit Card
-----------
Advanta $ 9,059
American Express-1 32,120
American Express-2 33,778
Bank of America 36,714
Citi Bank 31,853
Wells Fargo Bank 25,039
Well Fargo Bank-2 22,070
Citi Bank 3,932
--------
Total short-term debt $289,883
--------------------------------------------------------------------------------
F-11
At July 31, 2009 the Company has a credit card totaling $100,000, under which
the Company may borrow on an unsecured basis since the year 2008 at an interest
rate of 8.75.% with monthly payments due. The outstanding balance for this
credit card was $95,318.
The Company's remaining credit cards carry various interest rates and require
monthly payments, and are substantially held in the name of or guaranteed by
related parties.
NOTE 6. Related Party Transactions
As of July 31, 2009 the Company owed $898,653 to a related party shareholder
incurred as part of the purchase transaction of Modena Sports Design, LLC.
The Company leases building space from the same party, month to month basis for
approximately $6,500 per month plus various costs.
NOTE 7. Customer Deposit
Deposit from customers at the end of quarter ended July 31, 2009 consists of the
following:
Items
Deposit for commercial boats $205,085
Deposit for recreational boats 40,500
------
Total $245,585
NOTE 8. Note Payable
--------------------------------------------------------------------------------
Items For the quarter ended July 31,
2009
--------------------------------------------------------------------------------
Notes payable - related party $50,000
Notes payable - others 39,000
-------
Total $89,000
--------------------------------------------------------------------------------
At July 31, 2009, the Company had an unsecured note payable with an unrelated
party in the amount of $10,000, which bears at 8% interest, and is currently
due.
At July 31, 2009, the Company had an unsecured note payable with an unrelated
party in the amount of $4,000, which bears no interest and is repayable by July
30, 2009.
At July 31, 2009, the Company had an unsecured note payable with an unrelated
party in the amount of $25,000, which bears no interest and is repayable by July
30, 2009.
At July 31, 2009, the Company had an unsecured note payable to Mr. Srikrishna
Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $50,000,
which bears an 8% interest repayable. Interest accrued to date $5,000.
NOTE 9. SHAREHOLDERS' LOANS
At July 31, 2009, Shareholders' loans consisted of the following:
Daniel Medina, President & Director $109,700
Madhava Rao Mankal, Chief Financial Officer & Director $199,016
--------
Total $308,716
========
Shareholder's loan from shareholder of the Company, unsecured, 8.5% interest per
annum, due on demand.
F-12
NOTE 10. STOCKHOLDERS' EQUITY:
11,000,000 common shares were issued during the three months ended July 31, 2009
as per the acquisition agreement
NOTE 11. COMMITMENTS
Rental Leases
The Company rents a 5,000 square-foot manufacturing facility for $6,500 per
month, on a verbal month-to-month basis, at 2051 Placentia Ave., Costa Mesa, CA
92627. This facility is owned by a related party, the CEO of Harbor Guard Boats,
Inc. We have accrued $96,983.in rental expenses for the year ended April 30,
2009.
The Company also rents warehouse space on a verbal, as needed basis in San
Bernardino, California. Costs are currently approximately $1,000 per month, with
rent expense in 2009 of $13,000. The Company has various license agreements
with a related party allowing its technology to be utilized in the manufacture
of its boats. The license agreements typical provide for small periodic renewal
payments, along with royalty payments based on a percentage (generally 1.5% -
2%) of related gross sales.
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The Company engages five full time employees. Our President and Chief Financial
Officer have been engaged on full time to work with Harbor Guard Boats, Inc.
1
Our securities are currently not liquid. There are no market makers in our
securities and it is not anticipated that any market will develop for our
securities until such time as we successfully implement our business plan of
producing and marketing our laser stripping machine and/or acquiring other
assets or equipment. We presently have no liquid financial resources to offer
such a candidate and must rely upon an exchange of our stock to complete such a
merger or acquisition.
RESULTS OF OPERATIONS
Results Of Operations For The Three-Month Period Ended July 31, 2009 Compared To
The Same Period Ended July 31, 2008
The Company did not recognize any revenues during the three months ended July
31, 2009 and 2008. We anticipate that the Company will not generate any
significant revenues until we achieve our business objective of operating
revenues, of which there can be no assurance.
During the three months ended July 31, 2009, operating expenses were $185,840
compared to $27,506 in the three months ended July 31, 2008. The $158,334
increase was due to a increase in depreciation 44,565 Rent $18,000, payroll
$9,054 and other administrative expenses.
Interest expense for the three months ended July 31, 2009 and 2008 were $26,055
and $9,255 respectively.
During the three months ended July 31, 2009, the Company recognized a net loss
of $211,052 compared to a net loss of $36,671 during the three months ended July
31, 2008. The increase of $174,381 was due mostly to the increase in
administration expenses, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2008, we had $1,883 in cash, $1,072,871 in gross fixed assets. The
Company will need to raise capital through loans or private placements in order
to carry out any operational plans. The Company does not have a source of such
capital at this time.
During the three months ended July 31, 2009, the Company used $72,707 from its
operating activities. The Company received $38,014 through financing activities
during the three months ended July 31, 2009. At July 31, 2009, the Company had a
working capital deficit of $2,648,930.
During the three months ended July 31, 2008, the Company received $3,095 from
its operating activities. The Company had $542 in cash at July 31, 2008. The
Company did not receive any funds through either financing or investing
activities during the three months ended July 31, 2008.
2
During the three months ended July 31, 2009, the Company made a payment of
$14,197 on promissory notes owed to officers and directors of the Company.
Currently, the Company's securities are not liquid. There are no market makers
in our securities and it is not anticipated that any market will develop for our
securities until such time as we successfully implement our business plan of
producing and marketing our laser stripping machine and/or acquiring other
assets or equipment. We presently have no liquid financial resources to offer
such a candidate and must rely upon an exchange of our stock to complete such a
merger or acquisition.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
------------------------------------------------------------------
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report. Based on the foregoing evaluation, our Chief Executive
Officer has concluded that our disclosure controls and procedures are not
effective timely alerting them to material information required to be included
in our periodic SEC filings and to ensure that information required to be
disclosed in our periodic SEC filings is accumulated and communicated to our
management, including our Chief Executive Officer, to allow timely decisions
regarding required disclosure as a result of the deficiency in our internal
control over financial reporting discussed below.
3
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on our financial
statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended July 31,
2009. We believe that internal control over financial reporting is not
effective. We have limited accounting staff and as such are subject to
weaknesses as a result.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended July 31, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
4
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS -
NONE
ITEM 1A. RISK FACTORS
NONE
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS -
During the three months ended July 31, 2009, we issued 11,000,000
shares our common stock as a result of the acquisition of Modena
Sports Design, LLC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE
ITEM 5. OTHER INFORMATION -
NONE
ITEM 6. EXHIBITS -
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act
5
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDINA INTERNATIONAL HOLDINGS, INC.
(Registrant)
Dated: October 23, 2009 By: /s/ Daniel Medina
------------------
Daniel Medina,
President
Dated: October 23, 2009 By: /s/ Madhava Rao Mankal
----------------------
Madhava Rao Mankal,
Chief Financial Officer
6