UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 2011
[ ] 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.)
1802 Pomona Rd, Corona, CA 92880
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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(b) of this Act:
Title of each class Name of each exchange on which registered
Common stock OTC: Bulletin Board
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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Title of each class
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
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 such filing
requirements for the past 90 days.
Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 229.405 of
this chapter) is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Small reporting company [X ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year: $1,542,436
There were 51,110,497 shares of the Registrant's common stock outstanding as of
July 20, 2011. The aggregate market value of the 14,207,496 shares of common
stock held by non-affiliates of the Registrant is approximately $852,450 based
on the closing market price of $0.06 per share on July 20, 2011.
DOCUMENTS INCORPORATED BY REFERENCE
None
MEDINA INTERNATIONAL HOLDINGS, INC.
2010 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
Part I
Item 1. Description of Business 1
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments
Item 2. Description of Property 13
Item 3. Legal Proceedings 13
Item 4. (Removed and Reserved) 13
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters 14
and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition and 15
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 24
Item 8. Financial Statements and Supplementary Data F-1 - F-15
Item 9. Changes in and Disagreements With Accountants on Accounting and 25
Financial Disclosure.
Item 9A. Controls and Procedures 25
Item 9A(T) Controls and Procedures 26
Item 9B. Other Information 27
Part III
Item 10. Directors, Executive Officers, Corporate Governance 27
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 32
Item 13. Certain Relationships and Related Transactions, and Director
Independence 32
Item 14. Principal Accounting Fees and Services 34
Part IV
Item 15. Index to Exhibits 35
Signatures 36
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FORWARD-LOOKING STATEMENTS
In addition to historical information, some of the information presented in
this Annual Report on Form 10-K 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 below.
You are urged to carefully consider these factors, as well as other information
contained in this Annual Report on Form 10-K and in our other periodic reports
and documents filed with the Securities and Exchange Commission ("SEC").
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
Medina International Holdings, Inc. ("Medina," "we," "us," "Company") was
incorporated on June 23, 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 1802 Pomona Road, Corona,
California, 92880, and our telephone number is (909) 522-4414.
Medina manufactures products and services to assist emergency and defense
organizations and personnel. Our products are manufactured by the Company's two
wholly owned subsidiaries, Medina Marine, Inc. and Harbor Guard Boats, Inc. The
Company's securities are traded on Over-the-Counter-Bulletin-Board (OTCBB) under
the symbol, "MIHI."
In 2004, there was a change of management. 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 as directors of the
Company. In 2005 the board and shareholders approved the name change to Medina
International Holdings, Inc. Since these organizational restructurings, we have
pursued a business plan that focuses on watercraft manufacturing for rescue,
emergency, and defense operations, as well as, recreational use.
Medina Marine, Inc. was formed in the State of California, on May of 2006, as a
wholly owned subsidiary for the sole purpose of manufacturing watercrafts. Since
inception, Medina Marine has sold three fiberglass watercrafts, two in the
United States and one abroad. Medina Marine currently plans to manufacture and
market three models of recreational watercrafts.
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 incorporated in the State of California in 2003 to produce fire rescue,
rescue and recreational boats. Modena Sports Design, LLC changed its name on
January 7, 2009 to Harbor Guard Boats, Inc. Harbor Guard Boats currently has
eight (8) models of commercial watercrafts, ranging from 15' to 37' in length.
Harbor Guard Boats ("HGB") designs, manufactures, and markets high-performance,
hand-laid fiberglass, commercial boats ranging from 15' to 37', which are
utilized by fire, search & rescue, emergency, patrol, military and defense
organizations. These watercrafts combine innovative designs with power, safety,
handling and stability to create superior products designed to protect and save
lives.
1
The Company owns the rights to the following websites:
www.medinaih.com
www.medinainternationalholdings.com
www.medinamarine.com
www.harborguardboats.com
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www.wintecprotectivesystems.com
Our Company operates under exclusive licenses for the following patents:
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Patent No. Date
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U.S. 6,620,003 9/16/2003
U.S. 7,004,101 2/28/2006
U.S. 6,343,964 2/5/2002
U.S. 6,168,481 1/2/2001
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Agreements
On June 18, 2008 the following agreements were entered into:
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 Mr.
Albert Mardikian owns the remaining 5% equity interest. The fixed assets
acquired by us consisted of office equipment, tools and machinery. In addition,
we acquired web sites and domain names currently under Modena Sports. Upon the
completion of the transaction, Modena Sports become our wholly-owned subsidiary.
The transaction was completed upon the delivery of audited financial statements.
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. Under the Mold Purchase Agreement,
wepurchased certain molds and tools from MGS Grand and Mardikian Design in
exchange for an additional 5,500,000 shares of its restricted common stock. MGS
Grand owns a 95% equity interest in Modena Sports and Mr. Albert Mardikian owns
the remaining 5% equity interest.
License Agreement The License agreement, entered into on 18th day of
June, 2008, grants license to licensee (Medina International Holdings, Inc.) the
exclusive right to use and enjoy the benefits of the Patent and design rights
associated with the patent for a period of 15 years. License agreement provides
for the following as compensation.
a) 2% for Patented Designs with or without Patented Fire Pump technology used in the Company's production.
b) 1% for Patented Pump Technology used in designs other than Mr. Mardikian's or his Associates.
c) 1% for using Patents in any of our distributor or associated companies products.
d) Medina agrees to pay $1,000,000 to MGS as under:
$200k in 2 months minimum and 3 months maximum, and balance
$800K will be released at the rate of 10% of each boat sale
until the complete debt balance of $800K is paid off.
All of the licenses referenced above are with Mr. Albert Mardikian, CEO of
Harbor Guard Boats, Inc. and/or his affiliated entities and shall be treated
separately and not as one license agreement.
Agreement with Wintec Protective Systems, Inc.
On June 28, 2011, Medina International Holdings, Inc. entered into a
Contribution and Exchange Agreement with WinTec Protective Systems, Inc.
("WinTec.") As part of the Contribution and Exchange Agreement, the Company
agreed to issue 3,000,000 shares of its restricted common stock in exchange for
20,400,000 shares of the common stock of WinTec. As a result of such exchange,
the Company holds 51% of the issued and outstanding common stock of WinTec,
making WinTec a subsidiary of the Company.
2
Wintec was incorporated in the State of Texas. Wintec's Operations are located
in Houston, Texas. Wintec has developed various products such as CORTAIN,
Hydro-Tain, and Blast Block. Medina International Holdings, Inc. has first right
to use CORTAIN, anti-corrosion material for small marine crafts.
As part of the Contribution and Exchange Agreement, the Company has agreed to
register the 3,000,000 shares issued with the Securities and Exchange Commission
("SEC") for resale by WinTec. If any of the following occur:
(i) the Registration Statement is not filed on or before the Required
Filing Date,
(ii) the Registration Statement is not declared effective on or before the
Required Effective Date, or
(iii)the Registration Statement is declared effective but cease to be
effective for a period of time which shall exceed three hundred and sixty
five (365) days in the aggregate per year (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective)
then the Company will be required to pay WinTec an amount equal to one-half
percent (0.5%) of the fair market value of the 3,000,000 shares of the Company's
common stock on the first business day after the non-registration event and for
each subsequent thirty (30) day period (pro rata for any period less than thirty
(30) days) which are subject to such Non-Registration Event.
Stock Redemption and Purchase Agreement
Concurrent with the signing of the Contribution and Exchange Agreement, the
Company also entered into a Stock Redemption and Purchase Agreement with WinTec.
The Stock Redemption and Purchase Agreement provides that provides WinTec the
right to repurchase 12,400,000 shares of its common stock held by the Company
upon the closing of the Contribution and Exchange Agreement in exchange for
$1,500,000. In addition, the Company has agreed to issue to WinTec an option to
purchase up to 3,000,000 shares of its restricted common stock at an exercise
price of $0.10 per share.
The Stock Redemption and Purchase Agreement provides that the WinTec Board of
Directors shall be reduced from 7 to 6 directors and that the Company will have
the ability to appoint 2 of the directors.
Upon the completion of the Stock Redemption and Purchase Agreement, the Company
will hold 8,000,000 shares of WinTec, representing 28.99% of the issued and
outstanding common stock of WinTec.
Loan Agreement and Revolving Promissory Note
Concurrent to the signing of the Contribution and Exchange Agreement, the
Company entered into a Loan Agreement and Revolving Promissory Note with WinTec.
As part of the Loan Agreement, the Company has agreed to lend to WinTec
$1,500,000 cash to be used by WinTec to expand its business operations, which
includes at some future point moving their laboratory facility from Texas to
California.
The Loan Agreement provides for the funds to be delivered to WinTec in three
tranches, as set forth below:
- Fifty Thousand Dollars ($50,000) upon execution of the loan
documentation, and
- Four Hundred Fifty Thousand ($450,000) 30 days after the execution of the
loan documentation and
- One Million ($1,000,000) shall be funded at such times, and in such
amounts, as requested by WinTec.
The Loan Agreement provides for the Company to be issued an exclusive license
for the use of WinTec's anti-corrosion material for small marine craft, pursuant
and the first right of first refusal to exclusively license such intellectual
property of WinTec as it may license to third parties.
3
The Revolving Promissory Note has an annual interest rate of 1% and a term of
four (4) years from the date of issuance. The Revolving Promissory Note does not
provide for a payment schedule, only that payments will be made as requested by
the Company.
Stock Issuance
On June 28, 2011, as part of the Contribution and Exchange Agreement and the
Stock Redemption and Purchase Agreement, the Company made the following
issuances of its restricted common stock and equity instruments:
- 3,000,000 shares of its restricted common stock to WinTec pursuant to the
Contribution and Exchange Agreement in exchange for 20,400,000 shares of the
common stock of WinTec.
- An option to purchase 3,000,000 shares of the Company's restricted common
stock at an exercise price of $0.10 per share to WinTec as part of the Stock
Redemption and Purchase Agreement.
Product Description
We manufacture commercial and recreational watercrafts under our two wholly
owned subsidiaries, Medina Marine and Harbor Guard Boats. Our commercial
products are utilized by fire, search & rescue, patrol, emergency, military and
defense departments, while the recreational products are targeted towards
leisure and sports inclined individuals.
Our Company's products combine power, safety, handling and stability in rough
water along with high-speed performance. Boats already in use are getting
international praise and recognition for the powerful rescue tool they have
become to America's municipalities.
Commercial Boats - The Company currently has eight (8) commercial
watercraft models, ranging from 15' to 37' in length.
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Watercraft Fire Rescue Rescue
-------------------------------- --------------- -----------------
15' Interceptor o o
21' Interceptor o o
21' Firecat o o
18' Firehawk Defender 0 0
24/26' Firehawk Defender o o
28' Firehawk Defender o o
30' Firehawk Defender o o
37' Firehawk Defender o o
-------------------------------- --------------- -----------------
Recreational Boats - The Company currently has 3 recreational watercraft models.
Our watercraft products are made out of fiberglass materials. In addition to
durability and improved speeds, the use of fiberglass means that any repairs or
damage to the interior or exterior of the craft can be easily repaired. Our
products incorporate a platform, which prevents the boats from flooding,
providing a greater stability for our products.
All of our watercrafts either use jet propulsion, I/O and Out Boards for their
power. The use of jet engines allows the watercraft to operate in shallow
waters. In addition, the jet engines provide a greater safety to the rescuers
and those being rescued. Our jet propulsion watercrafts allow the crew members
to get extremely close to the victims without the worry of causing further
injury to those being rescued. The use of I/O and Outboard engines are installed
mainly in 24' and up models. In addition, some of our models are designed to
accommodate multiple or mixture of the above mentioned engine types, taking into
consideration safety and agility.
4
The water pump used in our products uses water retrieved from the bottom of the
boat and sprays water at 750-3000 gallons per minute, without compromising the
stability of the craft. MCD System allows the water intake to be diverted to
water pump for spraying. Both of these systems are patented.
Our innovative watercraft designs allow us to market our products to fire and
rescue departments, as well as to defense and military departments.
Competition
Our products compete 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 efforts. 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.
Our competitors build similar rescue watercraft, though they may use different
materials in the construction of their products, such as inflatable, metal, and
aluminum. We believe that the use of the jet propulsion, I/O, and Outboard
engines and the innovations in our designs provide greater stability, which will
provide us with an advantage over our current competition.
There is greater competition for our recreational products than there are for
our rescue and fire rescue watercrafts. The recreational industry is larger than
the fire and rescue industry and our competitors in the recreational boat
industry have an established clientele and may have far greater resources than
we have at this time.
Sales and Marketing
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Units Sold for the year ended April 30,
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2011 2010
Department Type No. Sold Percentage No. Sold Percentage
Fire Department 8 89% 1 50%
Police 1 11% 1 50%
--------------------------- ------------ --------------- ---------------- ---------------
Total 9 100% 2 100%
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Harbor Guard Boats, Inc. has sold 32 watercrafts since 2005 and Medina Marine,
Inc. has sold 3 watercrafts since 2004 for combined total of 35 watercrafts to
various domestic and international rescue and fire departments.
The Company has begun aggressively marketing its products throughout the United
States and around the world. By working with independent sales agents, the
Company has been able to expand its reach into agencies worldwide that are
looking for watercrafts for search and rescue, defense, and emergency purposes.
Our watercrafts are sold to departments, such as Fire, Police, Defense,
Emergency, and Volunteer Fire Departments. Most of our sales have come from Fire
Department in the United States and abroad; however, there is an increasing
potential for sales opportunities in other departments as well.
5
Our Company seeks to constantly expand dealers in the U.S. and around the world.
Currently we have dealers in United States to represent the following states:
Michigan, Wisconsin, Illinois, South Carolina, North Carolina, Georgia, New
York, New Jersey, Puerto Rico and Connecticut.
In addition, we have established dealer relations in the following
countries/region: Caribbean, India, Middle East, Turkey, and South America.
Our commercial boat marketing strategy includes displaying and demonstrating our
products at regional, national and international shows throughout the United
States, and advertising our products in industry magazines and on the Internet.
ITEM 1A. RISK FACTORS
The ownership of the Company's securities involves certain risk factors,
including without limitation, lack of liquidity, various conflicts of interest,
and economic and market risks. An investment in the Company's common stock
involves a number of risks. 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.
Risks in Equity
We expect our stock price to be volatile which could cause a complete loss of
investment 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, but not
limited to the following:
a) our historical and anticipated quarterly and annual operating results;
b) announcements of new products or services by us or our competitors or new competing technologies;
c) investors' perceptions of us and investments relating to the watercraft and/or defense industry;
d) developments in the watercrafts and/or defense industry;
e) technological innovations;
f) failure to diversify;
g) changes in pricing made by us, our competitors or providers of alternative/substitute services;
h) the addition or loss of business customers;
i) variations between our actual results and analyst and investor expectations;
j) condition or trends in the boat industry, including regulatory developments;
k) announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
l) additions or departures of key personnel; and
m) general market and economic conditions.
In addition, in recent years the stock market in general, and the
Over-The-Counter 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 markets
and industry factors may materially adversely affect our stock price, regardless
of our operating performance.
6
The stock market, from time-to time, has experienced significant price
and volume fluctuations that have particularly affected the market prices for
the common stock of similar companies. These broad market fluctuations may
adversely affect the market price of the Company's common stock. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has been instituted. There can be
no assurance that such litigation will not occur in the future with respect to
the Company. Such litigation, regardless of its outcome, would result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect upon the company's business, results of
operations, and financial condition.
In the past, the trading price of the Company's common stock has
experienced substantial volatility. Sales of substantial amounts of common stock
in the public market could adversely affect prevailing market prices. As of July
20, 2011, we had 51,110,497 shares of common stock outstanding, of which
14,207,496 is or will be freely tradable, other than restrictions imposed upon
our affiliates. The freely tradable shares, along with the contractually
restricted shares, are significantly greater in number than the daily average
trading volume of our shares. If the selling stockholders, or the holders of the
freely tradable shares, were to sell a significant amount of our common stock in
the public market, the market price of our common stock would likely be
significantly and adversely affected.
Penny Stock Reform Act. In October 1990, congress enacted the "Penny
Stock Reform Act of 1990" (the "90 Act") to counter fraudulent practices common
in Penny Stock transactions. Rule 3a51-1 of the Exchange Act defines "Penny
Stock" as an equity security that is not among other things;
a) a reported security (i.e., listed on certain national securities
exchanges):
b) a security registered or approved for registration and traded on a
national securities exchange that meets certain guidelines, where the trade is
effected through the facilities of that national exchange;
c) a security listed on NASDAQ;
d) a security of an issuer that meets certain minimum financial
requirements ("net tangible assets" in excess of $2,000,000 if the issuer has
been continuously operating for less than three (3) years), or "average return"
of at least $6,000,000 for the last three years; or
e) a security with a price of at least $5.00 per share for the
transaction in question or that has a bid quotation (as defined in the rule) of
at least $5.00 per share.
Under rule 3a51-1, the Company's common stock falls within the
definition of "Penny Stock," pursuant to the 90 Act, broker-dealers, prior to
effecting a transaction in a Penny Stock, are required to provide investors with
written disclosure documents containing information concerning various aspects
of the market for Penny Stocks as well as specific information about the Penny
Stock and the transaction involving the purchase and sale of that stock (e.g.,
price quotes and broker-dealer and associated person compensation). Subsequent
to the transaction, the broker is required to deliver monthly or quarterly
statements containing specific information about the Penny Stock. These added
disclosure requirements will most likely negatively affect the ability of
purchasers herein to sell their shares in the secondary market.
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 the investor's 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.
7
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 amount of 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 securities have been thinly traded on the Over-The- Counter Market, Pink
Sheets which may not provide liquidity for our investors
Our securities are quoted on the Over-the-Counter-Bulletin-Board (OTCBB), under
the symbol MIHI. Securities traded on the Over-The-Counter Market 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 OTCBB
markets. Quotes for stocks included on the OTCBB market are not listed in
newspapers. Therefore, prices for securities traded solely on the OTCBB 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.
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
As of July 20, 2011, we had 51,110,497 shares of common stock outstanding, ,
subject to restrictions on transfer referred to below, all other shares of
common stock which we have not registered are considered "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 six months 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 one 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
to exceed demand.
In addition, sales of significant amounts of restricted shares held by Mr.
Madhava Rao Mankal, CFO and Director of the Company and Mr. Daniel Medina,
President and Director of the Company, and Mr. Albert Mardikian, Director and
CEO, Harbor Guard Boats, Inc., who own a total of 36,488,001 shares of our
Company's common stocks, or the prospect of these sales, could adversely affect
the market price of our common stock.
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 the
company's 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.
8
Risks in General Operations
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, Chief Executive Officer of Harbor Guard
Boats, Inc., holds the patents on the designs we use to build our products. If
we breach the license agreement, it may seriously impair our ability to
manufacture the boats and we may not be able to successfully implement our
business plan. Each license is 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 we may not be able to successfully implement our
business plan.
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. Our success and
ability to compete depends, 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 a third party holds 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 adversely affect our results of operations.
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 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.
Our ability to successfully commercialize our products will depend on, among
other things, our ability to manufacture and sell our products 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.
9
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
materially adversely affect our stock price. We experienced net losses of
$566,022 for the year ended April 30, 2011. At April 30, 2011, we had an
accumulated deficit of $6,009,376.
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 U.S. 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 agreements. The majority
of the company's investments may be in short-term instruments and therefore
subject to fluctuations in U.S. interest rates. Our financing arrangements will
be periodically renewed and an increase in interest rates may result in higher
interest charges to us. Due to the uncertain nature of such, we cannot provide
assurance that this will not have a material adverse impact on our financial
condition and results of operations.
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 exists 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 provide assurance 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 part or all of
your investment.
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 it could impair
or curtail operations.
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
At April 30, 2011, we had current liabilities of $2,825,258 and $122,883 in
current assets. As of April 30, 2011, we have a working capital deficit of
approximately $2,702,375. 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 their investment, because creditors would be
paid first.
10
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, varying significantly among agencies,
with which we must adhere to. Government 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 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 these
charges could be high.
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 United States governments (county, state,
federal governments, government agencies, etc.), and regulatory authorities from
foreign nations. 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.
Risks in sales/marketing
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 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. 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.
11
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.
Commercialization of our current and future products could fail if
implementation of our sales and marketing strategy is unsuccessful
A significant sales and marketing effort will be necessary in order to achieve
the level of market awareness to realize profitability from sales of our current
and future 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:
a) hire and train sales and marketing personnel; b) manage
geographically dispersed operations; c) encourage customers to
purchase our products.
If we fail to successfully create and implement our sales and marketing
strategy, it could result in increased costs and net losses, resulting in
potential failure of the company.
Success dependent on market acceptance. Our Company's success is
dependent on the market acceptance of our products. Despite the increasing
demand for commercial boats, market acceptance of the company's products will be
dependent, among other things, upon its quality, ease of use, speed,
reliability, and cost effectiveness. Even if the advantages of our products are
established, we are unable to predict how quickly, if at all, our products will
be accepted in the marketplace.
Risks in management
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..
Our principal officers and directors own 72.20% 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, Albert Mardikian and Madhava Rao Mankal, officers and
directors of the Company, beneficially own approximately 71.39% of our
outstanding common stock as of July 20, 2011. As a result, Messrs. Medina,
Mardikian and Mankal have the ability to control substantially all matters
submitted to our stockholders for approval, including:
a) election of our board of directors;
b) removal of any of our directors;
c) amendment of our certificate of incorporation or bylaws; and
d) adoption of measures that could delay or prevent a change in control
or impede a merger, takeover or other business combination involving
the company.
As a result of their ownership and positions, Messrs. Medina, Mardikian and
Mankal are able to influence all matters requiring stockholder approval, with
little additional support, including the election of directors and approval of
significant corporate transactions.
12
Conflicts of interest ---- The board of directors of the Company is
subject to various conflicts of interest arising out of their relationship with
the company. The officers and directors of the Company will devote such time, as
they deem necessary to the business and affairs of the Company. Officers and
directors of the Company are required by law to deal fairly and in good faith
with the company and they intend to do so. However, in any company, there are
certain inherent conflicts between the officers and directors and the investors,
which cannot be fully mitigated. Because the officers and directors will engage
in activities independent of the company, some of these activities may conflict
with those of the company. Thus, the officers and directors may be placed in the
position where their decisions could favor their own activities or other
activities with which they are associated over those of the Company. Officers
and directors of the company may engage in business separately from activities
on behalf of the company or client entities for which the Company also provides
services to.
Limitations on directors' and officers' liability. The Company's
articles of incorporation provide, as permitted by governing Colorado law, that
a director or officer of the Company shall not be personally liable to the
company, or its shareholders, for monetary damages for breach of his or her
fiduciary duty of care as a director or officer, with certain exceptions. In
addition, the company has agreed to indemnify its officers and directors to the
fullest extent permitted by Colorado law. Such provisions may discourage
stockholders from bringing a lawsuit against directors for breaches of fiduciary
duty and may also have the effect of reducing the likelihood of derivative
litigation against directors and officers even though such action, if
successful, might otherwise have benefited the company's stockholders. In
addition, a stockholder's investment in the company may be adversely affected to
the extent that the company, pursuant to such provisions, pays costs of
settlement and damage awards against the company's officers or directors.
ITEM 1B. Unresolved Staff Comments
NONE
ITEM 2. DESCRIPTION OF PROPERTIES
As of April 30, 2011, we did not own any properties. We moved our Company's
activities, including all subsidiaries, from Costa Mesa, California to Corona,
California during on February 3, 2010. Our management signed a three-year lease
for a 11,900 sq. ft. building in the city of Corona, California, effective April
1, 2010. The address for this location is 1802 Pomona Rd, Corona, CA, 92880.
This building is owned by unrelated parties. The lease to the Corona facility
expires on March 31, 2013, and calls for monthly payments, initially of $2,600
per month plus costs, escalating over the term of the lease to $6,000 per month
plus costs.
ITEM 3. LEGAL PROCEEDINGS
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation, filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina. Plaintiffs are seeking monetary damages exceeding $1 million as well as
punitive damages in unspecified amounts and a dissolution of the Company. Mr.
Mardikian is a Director and significant shareholder of the Company. The suit is
in its preliminary stages and no prediction can be made as to its eventual
outcome. The Company intends to vigorously defend the lawsuit in the normal
course of business.
ITEM 4. REMOVED AND RESERVED.
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) market and the trading symbol for our
Company's common stock is MIHI. The Company's common stock began trading on the
Over-the-Counter-Bulletin-Board (OTCBB) in May of 2006. As a result of
non-timely filings of Annual and Quarterly reports, our stock began trading on
the Pink Sheets market in April of 2009. In September of 2010, the Company's
common stock was reinstated for trading on the Over-the-Counter-Bulletin-Board
(OTCBB) market.
As of the date of this report, the Company's common stock has been thinly
traded. 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 for our 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, were as follows:
------------------------- ------------- -------------
High Low
------------------------- ------------- -------------
Year ended April 30,
2011
First Quarter $0,05 $0.01
Second Quarter $0.05 $0.01
Third Quarter $0.05 $0.01
Fourth Quarter $0.04 $0.02
Year ended April 30,
2010
First Quarter $0.04 $0.01
Second Quarter $0.06 $0.01
Third Quarter $0.10 $0.04
Fourth Quarter $0.07 $0.04
------------------------- ------------- -------------
Dividend Policy
We have never paid nor declared any cash dividends on our common stock. We do
not expect to pay any cash dividends on our common stock in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Board of Directors and will depend on our financial position, results of
operations, capital requirements, restrictions contained in current or future
financing instruments, and other factors the Board considers relevant.
Recent Sales of Unregistered Securities
The Company issued 103,750 unregistered securities during the fiscal year ended
April 30, 2011. The following presents the purpose for the issuance of
unregistered securities:
------------------------------------------ ------------------------- ----------------------------
Person/Entity No. of Common Stock Purpose
------------------------------------------ ------------------------- ----------------------------
Board of Directors 93,750 Fees
Lebo Network Consulting 10,000 Conversion of Payable
------------------------------------------ ------------------------- ----------------------------
The Company did not sell any unregistered securities from May 1, 2010 to April
30, 2011.
14
For the year end April 30, 2010, the Company issued 11,010,000 shares of common
stock to MGS Grand Sports/Mardikian Design Engineering for acquisition &
royalties, and issued three officers 4,135,000 shares of common stock for
accrued salary conversion. Exemption from Registration Claimed
The sale, if any, 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 was
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.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial data derived from the
audited Consolidated Financial Statements for three years. This information
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations, as well as the audited
Consolidated Financial Statements and the Notes thereto.
-------- -------------------------------------------- --------------------------------------------------------------
During the year ended April 30,
2011 2010 2009
---- ---- ----
Operating Results
Net Sales $1,542,436 541,675 $ 1,034,379
Gross Margin 512,531 (98,837) (76,537)
Net Loss $ (566,022) $ (745,070) $ (1,768,434)
Balance Sheet
Total assets $ 580,285 $ 1,046,720 $ 1,324,318
Total debt 2,825,258 2,731,046 3,593,014
Total Stockholders' equity (2,244,973) (1,684,326) (2,268,696)
Cash Flows
Net cash received by operating activities $ 14,295 $ 177,211 $ (242,088)
Net cash used by investing activities
Net cash provided by financing activities (71,007) (106,564) 282,250
-------- -------------------------------------------- -------------------- --------------------- -------------------
ITEM 7. 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-K 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.
15
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 and/or profits;
(d) Inadequate capital to continue or expand its business;
(e) Inability to raise additional capital or financing to implement its
business plans;
(f) Failure to achieve a business;
(g) Rapid and significant changes in markets;
(h) Litigation or legal claims and allegations by outside parties; and
(i) 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-Q and Annual Report on this Form 10-K
filed by the Company and any Current Reports on Form 8-K filed by the Company.
Overview
We are in the business of delivering products and services to aid organizations
and service personnel who risk their lives to save others. We design,
manufacture, test, deliver, and support fire rescue, rescue, and patrol
watercrafts (commercial) to increase the effectiveness and efficiency of the
mission of our users. Our products are sold to fire, search & rescue, emergency,
police, defense, and military departments in the United States and abroad. Fire
departments are our largest customers and we rely heavily on government funded
departments to achieve sales and continue our operations.
In addition, we also manufacture two recreational watercraft models.
The Company owns the rights to the following websites:
www.medinaih.com
www.medinainternationalholdings.com
www.medinamarine.com
www.harborguardboats.com
www.wintecprotectivesystems.com
16
Key Challenges
We face numerous challenges to sustain operations. We have identified some of
the challenges we continue to face:
a) Continuing to expand our customer base both domestically and internationally;
b) Continuing to meet or exceed customer's price expectations; c) Continuing to
build brand name both domestically and internationally; d) Continuing to provide
quality customer support; e) Competing with established competitors; f)
Continuing the development of new products; and g) Reducing internal control
weaknesses over financial reporting and disclosure.
The main uncertainty about our operations is whether we will continue to receive
orders for our commercial products. Our potential customers rely on federal
grants or other government budgets to receive funds to purchase equipment.
Depending on the size of aid received, service personnel purchase equipment(s)
for their departments. The size of the aid received by these departments creates
a demand for our product, in terms of price and features. The timing of the
funds cannot be predicted for our prospective international customers. The size
of the aid cannot be predicted; hence we will be unable to forecast our outlook
for the coming fiscal year.
In July of 2008, we acquired Harbor Guard Boats, Inc. as our wholly owned
subsidiary. Our management has recognized that our business was changing, and in
response, we are attempting to rebalance our workforce and manufacturing
capacity. We may incur costs as a result of our efforts to meet these
restructuring needs.
In addition, Our Company's accounting and financial systems need to be
substantially improved in order to accommodate our current and projected
production levels. We may incur costs as a result of our efforts to improve the
accounting and financial systems.
Strategy
Our strategy is to not only manufacture high quality watercrafts, but also to
seek and/or develop innovative products to assist emergency and defense
personnel and departments to become more efficient and effective in their
mission. In addition, our strategy includes the following:
a) Capitalize on the demand for commercial and recreational watercrafts;
b) Build long-term relationships with business partners and stakeholders while
providing profitability for our investors; c) Develop and expand strategic
partnerships; d) Identify new products and markets to meet changing customer
requirements; e) Retain and provide opportunities for growth for our employees;
Results of Operations
The following discussion and analysis is based on our consolidated statements of
operations, which reflect our results of operations for the years ended April
30, 2011 and 2010, as prepared in accordance with generally accepted accounting
principles in the United States of America ("GAAP").
17
The following tables present our results of operations for the two years ended
April 30, 2011 and 2010, as well as the percentage changes from year to year.
---------------------------------------- ----------------------------------------- -- ---------------- -- -----------------
For the year ended April 30, Dollar Change Percentage
Change
---------------------------------------- ----------------------------------------- -- ---------------- -- -----------------
2011 2010 2011 vs. 2010 2011 vs. 2010
Sales, net $1,542,436 $541,675 $ 1,000,761 185%
Cost Of Sales 1,029,905 640,512 389,393 61%
--------------------- -- ---------------- -- ---------------- -- -----------------
Gross Profit 512,531 (98,837) 611,368 619%
General and administrative expenses 664,929 519,840 145,089 28%
Selling and marketing expenses 153,446 50,459 102,987 204%
Write off of Assets 222,570 - 222,570 n/a
--------------------- -- ---------------- -- ---------------- -- -----------------
Loss from operations (305,844) (669,136) 363,292 (54%)
Other income 32,046 2,800 29,246 1045%
Interest expense (69,654) (78,734) 9,080 (12%)
--------------------- -- ---------------- -- ---------------- -- -----------------
Net other loss (37,608) (75,934) 38,326 (50%)
Loss before income tax (expense) $ (566,022) $(745,070) $179,048 (24%)
benefit
Income tax (expense) benefit - - - -
--------------------- -- ---------------- -- ---------------- -- -----------------
Net Loss from Operations $ (566,022) $(745,070) $179,048 (24%)
---------------------------------------- --------------------- -- ---------------- -- ---------------- -- -----------------
2011 Compared to 2010
Net Sales
Harbor Guard Boats has sold 32 units since its inception.
------------------------------- --------------------------------- - --------------- -- ----------------
Revenue For the Years Ended April 30, Dollar Change Percent Change
------------------------------- --------------------------------- - --------------- -- ----------------
2011 2010 2011 vs. 2010 2011 vs. 2010
---- ---- ------------- -------------
Boat Sales, net $ 1,539,007 $ 537,515 $ 185%
1,001,492
Spare parts and logistics 3,429 4,160 (1)%
(731)
$ 1,542,436 $ 541,675 $ 185%
------------ ---------- ----- ----
1,000,761
------------------------------- ---------------- ---------------- - --------------- -- ----------------
Our sole source of revenue since our inception is attributable to commercial
watercrafts. Our company sold nine watercrafts and earned $1,539,007 in revenues
for the year ended April 30, 2011 as compared to two watercrafts and earned
$537,515 in revenues for the year ended April 30, 2010. Since most of our sales
consist of commercial watercrafts, we do not anticipate offering discounts or
other sales incentives.
The following table presents our watercraft sales for the years ended April 30,
2011 and 2010.
-----------------------------------------------
For the year ended April 30,
-----------------------------------------------
2011 2010
---- ----
Units Sold 9 2
Revenue $ $ 537,515
1,539,007
------------------- ------------- -------------
18
The increase in sales for the year ended April 30, 2011 of $1,000,761, or 185%,
was primarily due to an increase in watercrafts sold.
Cost of sales
Costs of sales are costs to produce our product and generally consist of direct
materials, direct labor and production overhead.
--------------------------------------------- ----------------------------------
For the year ended April 30,
--------------------------------------------- ----------------------------------
2011 2010
---------------- ---------------
Cost of sales $1,029,905 $640,512
Gross profit $ 512,531 $(98,837)
Gross profit as a percentage of net sales 33.22% (18.24)%
--------------------------------------------- ------------------ ---------------
The increase in cost of goods sold for the year ended April 30, 2011 of $389,393
or 61%, was primarily due to the increase in sales. Our cost of goods sold
comprise of direct material, direct labor, and production overhead which
includes depreciation. Gross loss is mainly due to the under recovery of
depreciation during the year ended April 30, 2010. We included royalty payments,
for the use of the patents, as part of the production overhead..
General and administrative expenses.
-------------------------------------------- ------------------------------ ----------------- ----------------------
General and Administrative Expenses For the year ended April 30, Dollar Change Percentage Change
-------------------------------------------- ------------------------------ ----------------- ----------------------
2011 2010 2011 vs. 2010 2011 vs. 2010
---- ---- ------------- -------------
General and Administrative Expenses $ 664,929 $ 519,840 $ 145,089 28%
-------------------------------------------- ---------------- ------------- ----------------- ----------------------
General and administrative expenses include, but not limited to:
a) Professional fees for legal, accounting, consulting, and development
activities;
b) Public company related expenditures;
c) Stock compensation for services rendered to the Company;
d) Management salaries
e) Compensation expenses; and
f) Payroll taxes
The increase in general and administrative expenses for the year ended April 30,
2011 of $145,089 or 28%, was mainly due to the increase in professional fees of
$120,738 for legal fees incurred due to the pending lawsuit brought by one of
our major shareholder and board member, Mr.Albert Mardikian.
Selling and marketing expenses
-------------------------------------------- ------------------------------ ----------------- ----------------------
Selling and Marketing Expenses For the year ended April 30, Dollar Change Percentage Change
-------------------------------------------- ------------------------------ ----------------- ----------------------
2011 2010 2011 vs. 2010 2011 vs. 2010
---- ---- ------------- -------------
Selling and Marketing Expenses $ 153,446 $ 50,459 $ 102,987 204%
-------------------------------------------- ---------------- ------------- ----------------- ----------------------
Selling expenses include:
a) Commission paid to sales personnel;
b) Traveling expenses related to sales;
c) Freight expenses and
d) Marketing expenditures.
The increase in selling and marketing expenses of $102,987 or 204%, during the
year ended April 30, 2011 compared to the year ended April 30, 2010, was
primarily due to commission on sales, freight associated with sales, and
attendance of trade shows. Due to the higher unit sales of our products during
the year ended April 30, 2011, we incurred $96,757 in commission expenses as
compared to $8,550 during the year ended April 30, 2010.
19
Other Income and Expenses
-------------------------------------------- ------------------------------ ----------------- ----------------------
Other Income (Expenses) For the year ended April 30, Dollar Change Percentage Change
-------------------------------------------- ------------------------------ ----------------- ----------------------
2011 2010 2011 vs. 2010 2011 vs. 2010
---- ---- ------------- -------------
Other Income $ 32,046 $ 2,800 $ 29,246 1045%
Other Expense $(69,654) $(78,734) $ 9,080 (12%)
-------------------------------------------- ---------------- ------------- ----------------- ----------------------
Other income consisted of cancellation of debt by our vendors.
Other Expense consists of interest expense on notes payable, credit cards, line
of credits and shareholders' loans.
Our other expenses decreased by $9,080 or (12 %), during the year ended April
30, 2011, primarily due to the decrease of short-term debt, such as line of
credit and credit cards, of Harbor Guard Boats, Inc. The interest accrued on
shareholders' loan during the year ended April 30, 2011 was $41,490 compared to
$35,143 during the year ended April 30, 2010. We also incurred interest on
related party liabilities of $6,524 during the year ended April 30, 2011
compared to $5,644 during the year ended April 30, 2010.
Net Loss
------------------------------------------ -------------------------------- ----------------- ----------------------
Net Loss For the year ended April 30, Dollar Change Percentage Change
------------------------------------------ -------------------------------- ----------------- ----------------------
2011 2010 2011 vs. 2010 2011 vs. 2010
---- ---- ------------- -------------
Net Loss $ (566,022) $(745,070) $179,048 (24%)
------------------------------------------ ----------------- -------------- ----------------- ----------------------
Based on the explanations described above, our net loss of $745,070 for the year
ended April 30, 2010 decreased by $179,048, or 24%, to $566,022 for the year
ended April 30, 2011.
Liquidity and Capital Resources
------------------------------------------------------------ ------------------------------------
Cash Flow For the Years Ended April 30,
------------------------------------------------------------ ------------------------------------
2011 2010
---- ----
Net cash provided by (used in) operating activities $ 14,295 $ 177,211
Net cash provided by (used in) investing activities $ (33,158) $ -
Net cash provided by (used in) financing activities $ (71,007) $ (106,564)
------------------------------------------------------------ --------------- --------------------
As of April 30, 2011, we had $17,353 cash on hand, an inventory of $99,640 and
net fixed assets of $425,941. As of April 30, 2011, our total current
liabilities were $2,825,258, which were represented mainly by accounts payable
of $759,866, accrued liabilities of $295,994, deposits from customers of
$238,495, short-term debt of $214,564, notes payable of $62,077, and short-term
borrowings from shareholders totaling $417,820. In addition, a note payable for
the acquisition of Harbor Guard Boats, Inc. in the amount of $833,480 is
included in the current liabilities. At April 30, 2011, our current liabilities
exceeded current assets by $2,702,375.
As of April 30, 2010, we had $107,223 cash on hand, an inventory of $164,652 and
net fixed assets of $703,848. Our total current liabilities were $2,731,046 as
of April 30, 2010, which were represented mainly by accounts payable of
$640,055, accrued liabilities of $186,075, deposits from customers of $308,000,
short-term debt of $214,757, notes payable of $104,000 and short-term borrowings
from shareholders totaling $407,217. In addition, note payable for the
acquisition of Harbor Guard Boats, Inc. in the amount of $870,941 is included in
the current liabilities. At April 30, 2010, our current liabilities exceeded
current assets by $2,396,423.
Our operations provided $14,295 in operating activities for the year ended April
30, 2011 compared to that of $177,211 for year ended April 30, 2010.
20
For the year ended April 30, 2011, we had invested $33,158 for a spray booth and
an equipment. The Company did not provide any cash from investing activities
during the year ended April 30, 2010.
During the year ended April 30, 2011, the Company used $71,007 from financing
activities, which included payments of $86,819 made on notes payables and
payments towards credit cards and bank loan, while receiving $16,005 of proceeds
from new notes payables, credit cards, bank loans and stock subscription
receivables.
The Company has an accumulated deficit, as of April 30, 2011, of $6,009,376
compared to that for the year ended April 30, 2010, of $5,443,354.
Subsequent Events
Agreement with Wintec Protective Systems, Inc.
On June 28, 2011, Medina International Holdings, Inc. entered into a
Contribution and Exchange Agreement with WinTec Protective Systems, Inc.
("WinTec.") As part of the Contribution and Exchange Agreement, the Company
agreed to issue 3,000,000 shares of its restricted common stock in exchange for
20,400,000 shares of the common stock of WinTec. As a result of such exchange,
the Company holds 51% of the issued and outstanding common stock of WinTec,
making WinTec a subsidiary of the Company.
Wintec was incorporated in the State of Texas. Wintec's Operations are located
in Houston, Texas. Wintec has developed various products such as CORTAIN,
Hydro-Tain, and Blast Block. Medina International Holdings, Inc. has first right
to use CORTAIN, anti-corrosion material for small marine crafts.
Please visit Wintec Protective Systems' website at
http://wintecprotectivesystems.com/
As part of the Contribution and Exchange Agreement, the Company has agreed to
register the 3,000,000 shares issued with the Securities and Exchange Commission
("SEC") for resale by WinTec. If any of the following occur:
(i) the Registration Statement is not filed on or before the Required Filing
Date,
(ii) the Registration Statement is not declared effective on or before the
Required Effective Date, or
(iii)the Registration Statement is declared effective but cease to be effective
for a period of time which shall exceed three hundred and sixty five (365)
days in the aggregate per year (defined as a period of 365 days commencing
on the date the Registration Statement is declared effective)
then the Company will be required to pay WinTec an amount equal to one-half
percent (0.5%) of the fair market value of the 3,000,000 shares of the Company's
common stock on the first business day after the non-registration event and for
each subsequent thirty (30) day period (pro rata for any period less than thirty
(30) days) which are subject to such Non-Registration Event.
Stock Redemption and Purchase Agreement
Concurrent with the signing of the Contribution and Exchange Agreement, the
Company also entered into a Stock Redemption and Purchase Agreement with WinTec.
The Stock Redemption and Purchase Agreement provides that provides WinTec the
right to repurchase 12,400,000 shares of its common stock held by the Company
upon the closing of the Contribution and Exchange Agreement in exchange for
$1,500,000. In addition, the Company has agreed to issue to WinTec an option to
purchase up to 3,000,000 shares of its restricted common stock at an exercise
price of $0.10 per share.
The Stock Redemption and Purchase Agreement provides that the WinTec Board of
Directors shall be reduced from 7 to 6 directors and that the Company will have
the ability to appoint 2 of the directors.
21
Upon the completion of the Stock Redemption and Purchase Agreement, the Company
will hold 8,000,000 shares of WinTec, representing 28.99% of the issued and
outstanding common stock of WinTec.
Loan Agreement and Revolving Promissory Note
Concurrent to the signing of the Contribution and Exchange Agreement, the
Company entered into a Loan Agreement and Revolving Promissory Note with WinTec.
As part of the Loan Agreement, the Company has agreed to lend to WinTec
$1,500,000 cash to be used by WinTec to expand its business operations, which
includes at some future point moving their laboratory facility from Texas to
California.
The Loan Agreement provides for the funds to be delivered to WinTec in three
tranches, as set forth below:
- Fifty Thousand Dollars ($50,000) upon execution of the loan documentation,
and
- Four Hundred Fifty Thousand ($450,000) 30 days after the execution of the
loan documentation and
- One Million ($1,000,000) shall be funded at such times, and in such
amounts, as requested by WinTec.
The Loan Agreement provides for the Company to be issued an exclusive license
for the use of WinTec's anti-corrosion material for small marine craft, pursuant
and the first right of first refusal to exclusively license such intellectual
property of WinTec as it may license to third parties.
The Revolving Promissory Note has an annual interest rate of 1% and a term of
four (4) years from the date of issuance. The Revolving Promissory Note does not
provide for a payment schedule, only that payments will be made as requested by
the Company.
Stock Issuance
On June 28, 2011, as part of the Contribution and Exchange Agreement and the
Stock Redemption and Purchase Agreement, the Company made the following
issuances of its restricted common stock and equity instruments:
- 3,000,000 shares of its restricted common stock to WinTec pursuant to the
Contribution and Exchange Agreement in exchange for 20,400,000 shares of the
common stock of WinTec.
- An option to purchase 3,000,000 shares of the Company's restricted common
stock at an exercise price of $0.10 per share to WinTec as part of the Stock
Redemption and Purchase Agreement.
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 limited
capital, debt in excess of $2,702,375 minimal other assets, and no capital
commitments.
22
Off-Balance Sheet Arrangements
In accordance with the definition under SEC rules, the following qualify as
off-balance sheet arrangements:
a) Any obligation under certain guarantees or contracts;
b) A retained or contingent interest in assets transferred to an
unconsolidated entity or similar entity or similar arrangement that
serves as credit, liquidity, or market risk support to that entity for
such assets;
c) Any obligation under certain derivative instruments; and
d) Any obligation under a material variable interest held by the
registrant in an unconsolidated entity that provides financing,
liquidity, market risk, or credit risk support to the registrant, or
engages in leasing, hedging, or research and development services with
the registrant.
The following will address each of the above items pertaining to the Company.
As of April 30, 2011, we did not have any obligation under certain guarantees or
contracts as defined above.
As of April 30, 2011, we did not have any retained or contingent interest in
assets as defined above.
As of April 30, 2011, we did not hold derivative financial instruments, as
defined by FASB statement No. 133.
Accounting for Derivative Instrument and Hedging Activities, as amended.
As of April 30, 2011, we did not participate in transactions that generate
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities
("SPEs"), which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. As of April 30, 2011, 2010, 2009 and 2008, we were not involved in any
unconsolidated SPE transactions.
Dividends
We have never paid nor declared any cash dividends on our common stock. We do
not expect to pay any cash dividends on our common stock in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Board of Directors and will depend on our financial position, results of
operations, capital requirements, restrictions contained in current or future
financing instruments, and other factors the Board considers relevant.
Short Term.
On a short-term basis, we have not generated revenues sufficient to cover
operations. Based on our Company's prior history, we may continue to have
insufficient revenue to satisfy current and recurring liabilities. For short
term needs the Company will be dependent on receipt, if any, of offering
proceeds.
Need for Additional Financing
We do not have capital sufficient to meet its cash needs. We will have to seek
loans or equity placements to cover such cash needs. No commitments to provide
additional funds have been made by the Company's management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to us to allow us to cover our expenses as they may be
incurred.
We will need substantial additional capital to support our continuing
operations. we have only just begun to generate revenues, but continue to
operate at a net loss. We have no committed source for any funds as of the date
hereof. No representation is made that any funds will be available when needed.
In the event funds cannot be raised when needed, we may not be able to carry out
our business plan, may never achieve sales, and could fail in business as a
result of these uncertainties.
23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 and if the prices of fiberglass and/or aluminum increase
significantly, it will further decrease our ability to attain profitable
operations. We are not involved in any purchase commitments with any of our
vendors.
Insurance
We are exposed to several risks, including fire, earthquakes, theft, and key
person liabilities. We do not carry any insurance for these risks, other than
general liability insurance, which will adversely affect our operations if any
of these risks materialize.
24
ITEM 8. FINANCIAL STATEMENTS
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
Medina International Holdings, Inc.
Corona, California
I have audited the accompanying consolidated balance sheets of Medina
International Holdings, Inc. as of April 30, 2011 and 2010, and the related
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Medina
International Holdings, Inc. as of April 30, 2011 and 2010, and the consolidated
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 consolidated 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.
----------------------
July 28, 2011 RONALD R.CHADWICK, P.C.
F-1
MEDINA INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Audited)
April 30, April 30,
2011 2010
(Audited) (Audited)
ASSETS
Cash 17,353 107,223
Receivables 5,890 62,283
Inventory 99,640 164,652
Other receivables - 465
------------ ------------
Total current assets 122,883 334,623
------------ ------------
848,213 1,065,055
Accumulated depreciation (422,272) (361,207)
------------ ------------
Total property & equipment 425,941 703,848
------------ ------------
Prepaid expenses 31,461 8,249
------------ ------------
TOTAL ASSETS 580,285 1,046,720
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Accounts payable 759,866 640,055
Accrued liabilities 295,994 186,075
Short term debt 214,564 214,757
Customer Deposit 238,495 308,000
Stock committed to be issued 2,962 -
Notes payable 62,077 104,000
Related party payable 833,480 870,941
Related Parties - short-term borrowings from shareholders 417,820 407,217
------------ ------------
Total current liabilities 2,825,258 2,731,046
------------ ------------
Total Liabilties 2,825,258 2,731,046
------------ ------------
Preferred stock, $.01 par value, 10,000,000 shares authorized
Series A preferred stock, $0.01 par value, 50 shares authorized, 20 shares issued and
outstanding 240,000 240,000
Common stock, $0.0001 par value, 100,000,000 shares authorized
51,110,497 and 51,006,747 shares issued and outstanding on April 30, 2011 and April 30, 2010 5,111 5,100
Additional paid-in capital 3,519,292 3,513,928
Accumulated deficit (6,009,376) (5,443,354)
------------ ------------
Total stockholders' equity (deficit) (2,244,973) (1,684,326)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 580,285 1,046,720
============ ============
The accompanying notes are an integral part of these financial statements
F-2
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Audited)
For the years ended April 30,
2011 2010
---- ----
Sales, net $ 1,542,436 $ 541,675
Cost of Goods Sold 1,029,905 640,512
------------------ --------------
Gross profit (loss) 512,531 (98,837)
------------------ --------------
General and administrative expenses 664,929 519,840
Selling and marketing expenses 153,446 50,459
Write-off of assets 222,570 -
------------------ --------------
Income (loss) from operations (305,844) (669,136)
------------------ --------------
Other income 32,046 2,800
Interest expense (69,654) (78,734)
------------------ --------------
Net other Income (loss) (37,608) (75,934)
------------------ --------------
Loss before income tax (expense)
benefit (566,022) (745,070)
Income tax (expense) benefit - -
------------------ --------------
Net Loss from operations $ (566,022) $ (745,070)
================== ==============
Net loss per share:
Basic $ (0.01)$ (0.02)
Diluted $ (0.01)$ (0.02)
================== ==============
Weighted average number of shares
outstanding:
Basic 51,025,792 46,666,218
Diluted 51,025,792 46,666,218
The accompanying notes are an integral part of these financial statements.
F-3
Medina International Holdings, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Audited)
Additional Common
Common Stock Preferred Stock Paid-In Stock Subscription Accumulated
--------------------------------------------
Shares Amount Shares Amount Capital Subscribed Receivable Deficit Totals
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2009 35,560,091 3,556 - - 2,419,032 10,000 (3,000) (4,698,284) (2,268,696)
Stock issued for
subscription payable 20 240,000 240,000
Stock issued to Directors 50,000 5 3,157 3,162
Stock issued for
subscription payable 11,091,250 1,109 661,629 662,738
Stock issued for accrued
liabilities 4,135,000 413 413,087 413,500
Shares issued for services 70,406 7 7,033 7,040
Stock subscription
receivable 100,000 10 9,990 (10,000) 3,000 (3,000) -
Net loss (742,070) (742,070)
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2010 51,006,747 5,100 20 240,000 3,513,928 - - (5,443,354) (1,684,326)
Stock issued to Directors 93,750 10 4,365 4,375
Shares issued for services 10,000 1 999 1,000
Net loss (566,022) (566,022)
-----------------------------------------------------------------------------------------------------
Balance - April 30, 2011 51,110,497 5,111 20 240,000 3,519,292 $ - $ - $ (6,009,376$ (2,244,973)
=====================================================================================================
The accompanying notes are an integral part of the financial statements
F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Audited)
For Years Ended
April 30,
2011 2010
---- ----
---------------- ---------------
Cash flows from operating activities:
Net loss $ (566,022)$ (745,070)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock expenses 8,337 10,202
Depreciation expenses 159,273 165,066
Write-off of fixed assets 151,792 -
Original issue note discount - 4,000
Impairment Loss on Disposal - 4,562
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable 56,394 (59,582)
Decrease (Increase) in other receivable 465 -
Decrease (Increase) in inventory 65,012 245,829
Increase (decrease) in accounts payable 121,842 121,772
Increase (decrease) in accrued liabilities 109,919 378,119
Increase (decrease) in customer deposits (69,505) 65,095
(Increase) decrease in prepaid expenses (23,212) -
Other Assets - (8,249)
Increase (decrease) in other liabilites - (4,533)
---------------- ---------------
Total adjustments 580,317 922,281
---------------- ---------------
Net cash (used) received in operating activities 14,295 177,211
---------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (33,158) -
---------------- ---------------
Net cash used in investing activities (33,158) -
---------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable 16,005 81,635
Payments from note payable (86,819) (23,281)
Payments on lines of credit & credit cards (193) (167,918)
Proceeds from stock subscription receivable - 3,000
---------------- ---------------
Net cash provided (used) by financing activities (71,007) (106,564)
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (89,870) 70,647
Cash and cash equivalents - beginning of period 107,223 36,576
---------------- ---------------
Cash and cash equivalents - end of period $ 17,353 $ 107,223
================ ===============
Supplemental disclosure of cash flow information:
Interest Paid $ 16,812 $ 5,808
================ ===============
Taxes Paid $ - $ -
================ ===============
Supplemental schedule of noncash investing and financing activities:
Stock issued for services $ 5,375 $413,500
The accompanying notes are an integral part of these financial statements
F-5
Medina International Holdings, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
April 30, 2011 and 2010
NOTE 1. GENERAL
Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was
incorporated in 1998 as Colorado Community Broadcasting, Inc. The Company
intended to purchase low power television licenses or stations and planned to
broadcast local programming mixed with appropriate national programming. The
Company changed the name of the business in 2005 to Medina International
Holdings, Inc.
The Company, under its two wholly owned subsidiaries, Harbor Guard Boats, Inc.
and Medina Marine, Inc., plans to manufacture and sell recreational and
commercial boats. The Company formed Medina Marine, Inc., as a wholly owned
subsidiary of the Company, on May 22, 2006 to manufacture and sell fire rescue,
rescue and recreational boats.
The Company signed an agreement to acquire Modena Sports Design, LLC, as a
wholly owned subsidiary of the Company on June 18, 2008. Modena Sports Design,
LLC was formed in the State of California in 2003 to produce fire rescue, rescue
and recreational boats. Modena Sports Design, LLC reorganized as a California
corporation on January 7, 2010 and changed its name to Harbor Guard Boats, Inc.
The activity of Harbor Guard Boats, Inc. from its inception up to the
acquisition date of June 18, 2008 will not be reflected on the consolidated
financial statements of Medina International Holdings, Inc.
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 April 30, 2011,
the Company's current liabilities exceeded its current assets by $2,702,375.
Also, the Company's operations generated $1,542,436 in revenue during the year
ended April 30, 2011 and the Company's accumulated deficit was $6,009,376.
Management devoted considerable effort during the period ended April 30, 2011
towards management of liabilities and improving operations. Management has taken
various steps to revise its operating and financial requirements, and it
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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Consolidation
The accompanying consolidated financial statements of Medina International
Holdings, Inc. and its subsidiaries were prepared in accordance with generally
accepted accounting principles in the United States of America ("GAAP") and
include the assets, liabilities, revenues, and expenses of our two wholly owned
subsidiaries, Medina Marine, Inc. and Harbor Guard Boats, Inc. All intercompany
balances and transactions have been eliminated in consolidation.
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 its accounts receivables accounts periodically for
collectability and establishes an allowance for doubtful accounts and records
bad debt expense when deemed necessary. At April 30, 2011 and 2010, the Company
had no balance in its allowance for doubtful accounts.
Advertising costs
Advertising costs are expensed as incurred. The Company recorded advertising
costs in 2011 and 2010 of $5,961 and $3,339, respectively.
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 estimated at
the date of acquisition of Modena Sports Design, LLC. 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 -Used 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"), now codified in ASC 350,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 ASC
350. ASC 350 requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amounts. In that event, a loss is recognized based on the amount by
which the carrying amount exceeds the fair market value of the long-lived
assets. Loss on long-lived assets to be disposed of is determined in a similar
manner, except that fair market values are reduced.
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.
At April 30, 2011 and 2010 the Company had net operating loss carry forwards of
approximately $6,009,376 and $5,443,354 which begin to expire in 2029. The
deferred tax asset of approximately $1,201,362 and $1,088,308 in 2011 and 2010
respectively, created by the net operating losses have been offset by a 100%
valuation allowance. The change in the valuation allowance in 2011 and 2010 was
$113,054 and $148,926
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.
F-8
Issuance of Shares for Service
The Company accounts for employee and non-employee stock awards under ASC 718,
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
FASB ASC 825 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 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. Management does
not currently hedge foreign currency exposure.
Basic and Diluted Net Loss per Share
Net loss per share is calculated in accordance with FASB ASC 105. Basic net loss
per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
Products and Services, Geographic Areas and Major Customers
The Company earns revenue from the sale of recreational and commercial boats.
The Company sells its products within United States and abroad. The Company does
not separate sales activities into different operating segments and/or
geographic areas.
Recently issued accounting pronouncements
In June 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Codification ("ASC") 105, "Generally Accepted Accounting
Principals" (formerly Statement of Financial Accounting Standards ("SFAS") No.
168, "The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles"). ASC 105 establishes the FASB ASC as the single
source of authoritative nongovernmental U.S. GAAP. The standard is effective for
interim and annual periods ending after September 15, 2010. We adopted the
provisions of the standard on September 30, 2010, which did not have a material
impact on our financial statements. There were various other accounting
standards and interpretations issued in 2010, none of which are expected to have
a material impact on the Company's financial position, operations or cash flows.
NOTE 3. Related Party Transactions
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina.
Plaintiffs are seeking monetary damages exceeding $1 million as well as punitive
damages in unspecified amounts and a dissolution of the Company.
F-9
Mr. Mardikian is a Director and significant shareholder of the Company.
The suit is in its preliminary stages and no prediction can be made as to its
eventual outcome. At this stage, the Company believes that plaintiffs' claims
are without merit and will vigorously defend the lawsuit in the normal course of
business.
As of April 30, 2011 and 2010 the Company owed $833,480 and $870,941 to a
related party shareholder incurred as part of the purchase transaction of Modena
Sports Design, LLC. In addition, at the end of April 30, 2011 $270,964 out of
$759,866 in accounts payable was owed to related parties and at the end of April
30, 2010, $186,070 out of $640,055 in accounts payable was owed to related
parties.
During the year period ended April 30, 2011, the Company issued 93,750 shares of
its common stock to its independent directors, at various fair values for a
total amount of $4,375.
During the year ended April 30, 2010, the Company issued 1,455,000 shares of its
common stock to Mr. Daniel Medina, President of the Company, in exchange for
$145,500 of salary payable to Mr. Medina. The agreement contains a buyback
provision of $0.10/share or $145,500, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 1,380,000 shares of its
common stock to Mr. Madhava Rao Mankal, Chief Financial Officer of the Company,
in exchange for $138,000 of salary payable to Mr. Madhava Rao. The agreement
contains a buyback provision of $0.10/share or $138,000, redeemable at any time
when the Company has surplus cash.
During the year ended April 30, 2010, the Company issued 1,300,000 shares of its
common stock to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard
Boats, wholly owned subsidiary of the Company, in exchange for $130,000 of
salary payable to Mr. Albert Mardikian. The agreement contains a buyback
provision of $0.10/share or $130,000, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 10,000 shares of its
common stock in exchange for royalty payments, at the rate of $0.03/ share or
$300, to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard Boats,
wholly owned subsidiary of the Company.
NOTE 4. Receivables
As of April 30, 2011 and 2010, receivables consisted of the following:
--------------------------- --------------------------------
Receivables For the years ended April 30,
--------------------------- --------------------------------
2011 2010
---- ----
Commercial Boats $ 5,890 $ 62,283
Other
- -
-------------- --------------
Total Receivables $ 5,890 $ 62,283
------- ------------------- -------------- -- --------------
F-10
NOTE 5. Inventory
As of April 30, 2011 and 2010, inventory consisted of the following:
---------------------- ---------------------------------
Inventory For the years ended April 30,
---------------------- ---------------------------------
2011 2010
---- ----
Materials $ 5,465 $ 31,699
Work in progress 94,175 106,477
Finished goods - 26,476
-------------- ---------------
Total inventory $99,640 $164,652
---- ----------------- -------------- -- ---------------
During the year ended April 30, 2011, the Company wrote off inventory in the
amount of $70,778.
NOTE 6. Fixed Assets
At April 30, 2011 and 2010, fixed assets consisted of the following:
------------------------------------- --------------------------------
Fixed Assets For the years ended April 30,
------------------------------------- --------------------------------
2011 2010
---- ----
Machinery and equipment;
including molds & tools $ 828,441 $ 1,045,740
Computers 13,535 13,535
Furniture 2,537 2,080
Office equipments 3,200 3,200
Fire Extinguisher 500 500
Total property and equipment 848,213 1,065,055
------- ---------
Less accumulated depreciation (422,272) (361,207)
-------------- -------------
Fixed Assets, net $425,941 $ 703,848
----- ------------------------------- -------------- --- -------------
During the year ended April 30, 2011, the Company decided to write down the
value of the Firehawk 37' mold, in the amount of $151,792. This mold was part of
the acquisition of Harbor Guard Boats, Inc.
NOTE 7. Prepaid Expenses
As of April 30, 2011 and April 30, 2010, prepaid expenses included operating
expenses and vendor deposit in the amount of $31,461 and $8,249, respectively.
NOTE 8. Accrued Liabilities
Our accrued liabilities for the years ended April 30, 2011 and 2010 were as
follows:
------------------------------- -------------------------------
Accrued Liabilities For the years ended April 30,
------------------------------- -------------------------------
2011 2010
---- ----
Interest - shareholders' loan $ - $ 4,047
Interest - related party 10,000 8,500
Interest - note payable - 5,272
Accrued expenses 683 1,295
Accrued payroll 256,490 138,488
Warranty liabilities 28,821 28,473
------------- --------------
Total accrued $ 295,994 $ 186,075
liabilities
------ ------------------------ ------------- -- --------------
F-11
NOTE 9. Short-Term Debt
------------------------------- -------------------------------
Short-term debt For the years ended April 30,
------------------------------- -------------------------------
2011 2010
---- ----
Loan - Financial Institution $ 94,932 $ 94,932
Credit card 119,632 119,825
------------- --------------
Total short-term debt $214,564 $214,757
------ ------------------------ ------------- -- --------------
The Company has a loan from a financial institution, under which the Company may
borrow up to $100,000 on an unsecured basis at an interest rate of 8.75% with
monthly payments due. As of April 30, 2011 and 2010, the outstanding balance for
this loan was $94,932.
The Company's remaining credit cards carry various interest rates and require
monthly payments, and are substantially held in the name of or guaranteed by
related parties.
NOTE 10. Risk Management Activities
Foreign Currency
The majority of the Company's business is denominated in U.S. dollars and
fluctuations in the foreign currency markets will have a minimal effect on the
Company's business activities.
Commodity Prices
The Company is exposed to market risk from changes in commodity prices. The cost
of the Company's products could increase if the prices of fiberglass and/or
aluminum increase significantly, further decreasing the Company's ability to
attain profitable operations. The Company is not involved in any purchase
commitments with any of our vendors.
Insurance
The Company is exposed to several risks, including fire, earthquakes, theft, and
key person liabilities. The Company does not carry any insurance for these
risks, other than general liability insurance, which will adversely affect the
Company's operations if any of these risks materialize.
NOTE 11. Customer Deposit
Deposits from customers consisted of the following for the years ended April 30,
2011 and April 30, 2010:
------------------------------- -------------------------------
Customer Deposit For the years ended April 30,
------------------------------- -------------------------------
2011 2010
---- ----
Deposit for commercial boats $ 217,995 $ 287,500
Deposit for recreational boats 20,500 20,500
------------- --------------
Total customer deposit $ 238,495 $ 308,000
------ ------------------------ ------------- -- --------------
NOTE 12. Notes Payable
------------------------------- -------------------------------
Notes Payable For the years ended April 30,
------------------------------- -------------------------------
2011 2010
---- ----
Note payable - related party $ 62,077 $ 65,000
Note payable - others - 39,000
------------- --------------
Total notes payable $ 62,077 $ 104,000
------ ------------------------ ------------- -- --------------
F-12
At April 30, 2011, the Company had an unsecured note payable to Mr. Srikrishna
Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $50,000,
which bears an 8% interest per annum. Interest accrued to date on this note
payable is $10,000.
At April 30, 2011, the Company had an unsecured note payable to a relative of an
officer of the Company, in the amount of $12,077. The Company repaid $2,923 of
the principal amount during the year ended April 30, 2011.
At April 30, 2010, 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 April 30, 2010, the Company had an unsecured note payable with an unrelated
party in the amount of $4,000, which bears no interest and is currently due.
At April 30, 2010, the Company had an unsecured note payable with an unrelated
party in the amount of $25,000, which bears an interest payable in the amount of
$2,500 and is currently due. Interest accrued to date is $2,500.
At April 30, 2010, 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 is
$7,000.
At April 30, 2010, the Company had an unsecured note payable to a relative of an
officer of the Company, in the amount of $15,000, which bears an interest
repayable in the amount of $1,500. Interest accrued to date $1,500.
NOTE 13. Shareholder Loans
At April 30, 2011, Shareholder loans consisted of the following:
------------------------------------ --------------------------------
Shareholders' Loans For the years ended April 30,
------------------------------------ --------------------------------
2011 2010
---- ----
Daniel Medina, President $163,924 $ 156,743
Madhava Rao Mankal, CFO 253,896 250,474
------------- ---------------
Total shareholders' loan $417,820 $ 407,217
------ ----------------------------- ------------- -- ---------------
Shareholder loans are unsecured, bear interest at 8 - 10% per annum, and are due
on demand. From time to time, shareholders are involved in funding operations.
These funds are provided and collected on an as needed basis.
NOTE 14. Acquisition
Medina International Holdings, Inc. ("Company") acquired Modena Sport Designs,
LLC (currently Harbor Guard Boats, Inc.) a California corporation, on June 18,
2008, as its wholly owned subsidiary. The results of operations of Modena Sport
Designs, LLC included in the consolidated financial statements of the Company in
the form 10-K for the year ended April 30, 2009, are from June 18, 2008 to April
30, 2009.
F-13
The Company accounted for the acquisition of 100% equity in Modena Sport
Designs, LLC using the purchase method. The purchase price to acquire Modena
Sport Designs, LLC (fixed assets, molds, and license agreements) was 11,000,000
shares of the Company's common stock and $1,000,000 in cash payments, of which
$800,000 is contingent on boat sales and $200,000 is currently due.
The 11,000,000 shares of Company's common stock was valued at $0.06, which was
the fair value of the Company's common stock traded on the
Over-the-counter-bulletin-board (OTCBB) market as of the date of the agreement.
Share certificates for 11,000,000 shares were issued on June 1, 2009 and
accounted in Medina international Holdings, Inc.'s books for the year ended
April 30, 2009.
The complete disclosure of the acquisition of Modena Sports Design, LLC
(currently Harbor Guard Boats, Inc.), along with the acquired goodwill, were
reported in our annual report on Form 10-K for the period ended April 30, 2010.
NOTE 15. Stockholders' Equity
Common Stock
The Company has been authorized to issue, 100,000,000 shares of common stock
with a par value of $0.0001. The Company had 51,110,497 and 51,006,747 shares of
its common stock issued and outstanding on April 30, 2011 and 2010,
respectively.
Preferred Stock
The Company has been authorized to issue 10,000,000 shares of preferred stock
with a par value of $.01, out of which 50 shares have been designated as
convertible Series A preferred stock ("Series A"). The Series A has a stated
value $12,000 per share, each one share of Series A is convertible into 1% of
the outstanding common shares at the time of conversion, may be converted at
anytime, is redeemable by the Company in whole or in part at anytime at a price
equal to the greater of (a) $12,000 per share or (b) the market value of the
common stock into which the Series A is convertible, has preferential
liquidation rights to common stock subject to a 150% of invested capital, and
has voting rights equal to common stock in an amount equal to the number of
shares that Series A could be converted into.
At April 30, 2011, the Company had 20 shares of Series `A' Preferred Stock
issued and outstanding. Mr. Mankal and Mr. Medina, CFO and President of the
Company, respectively hold 10 shares each of Series `A' preferred stock.
Stock Subscriptions Payable
At April 30, 2011, the Company has an obligation to issue 29,620 common shares,
in consideration of $2,962 in interest on note.
NOTE 16. Commitments
Operating Leases
The Company signed a 3 year lease for 11,900 square feet building in the city of
Corona, in the state of California, effective April 1, 2010. The address for
this location is 1802 Pomona Rd, Corona, CA 92880. This building is owned by
unrelated parties. The lease expires on March 31, 2013, and calls for monthly
payments, initially of $2,600 per month plus costs, escalating over the term of
the lease to $6,000 per month plus costs.
F-14
Our consolidated contractual obligations as of April 30, 2011, are as follows:
--------------------------------------- --------------------
Operating Lease Obligation Amount
--------------------------------------- --------------------
April 30, 2012 $ 68,544
April 30, 2013 72,828
--------------------
Total operating lease $ 141,372
obligation
------- ------------------------------- --------------------
Prior to February 3, 2011, the Company rented a 5,000 square-foot manufacturing
facility at 2051 Placentia Ave., Costa Mesa, CA 92627, for $6,500 per month, on
a verbal month-to-month basis. This facility was owned by a related party, the
CEO of Harbor Guard Boats, Inc. We have accrued $75,500 in rental expenses as of
April 30, 2011, with $40,555 incurred in fiscal year 2011. The Company moved its
operations to Corona in February of 2011.
The Company has various license agreements with a related party allowing its
technology to be utilized in the manufacture of its boats, along with royalty
payments based on a percentage (generally 1.5% - 2%) of related gross sales.
NOTE 17. Litigation
On December 28, 2010, Albert Mardikian and MGS Grand Sport, Inc., a California
corporation filed a Complaint for breach of contract; money lent; account
stated; accounting; declaratory relief; fraud and deceit; breach of fiduciary
duty; conversion; and involuntary dissolution in Superior Court of the State of
California, County of Orange against Medina International Holdings, Inc.; Modena
Sports Design, LLC; Harbor Guard Boats, Inc.; Madhava Rao Mankal; and Danny
Medina.
Plaintiffs are seeking monetary damages exceeding $1 million as well as punitive
damages in unspecified amounts and a dissolution of the Company.
Mr. Mardikian is a Director and significant shareholder of the Company.
The suit is in its preliminary stages and no prediction can be made as to its
eventual outcome. At this stage, the Company believes that plaintiffs' claims
are without merit and will vigorously defend the lawsuit in the normal course of
business.
F-15
ITEM 9 CHANGES IN ACCOUNTANTS AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
EVALUATION OF INTERNAL AND DISCLOSURE CONTROLS
Management's Annual Report on 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) to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), Mr. Daniel Medina, our President and Mr.
Madhava Rao Mankal our Chief Financial 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 April 30, 2011.
The Company, under the supervision and with the participation of the Company's
management, including the Company's Principal Executive Officerand Chief
Financial Officer, performed an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of April
30, 2011. Based on that evaluation, the Principal Executive Officer and Chief
Financial Officer concluded that, because of the material weakness in internal
control over financial reporting described below, the Company's disclosure
controls and procedures were not effective as of April 30, 2011.
25
ITEM 9(A)T. INTERNAL 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.
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.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the year ended April 30,
2011. We believe that internal control over financial reporting is not effective
because of the small size of the business. We have not identified any, current
material weaknesses considering the nature and extent of our current operations
and any risks or errors in financial reporting under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. 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 changes in our internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
26
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. 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, and positions held
are as follows:
------------------------------------------------------------------------------
Name Age Position
-----------------------------------------------------------------------------
Daniel Medina 57 President & Director
Madhava Rao Mankal 60 Chief Financial Officer & Director
John Erich Lewis 45 Director
Mike Gallo 53 Director
Albert Mardikian 65 Director of MIHI, and CEO, Harbor Guard
Boats, Inc.
In January 2011, Michael Swanson, a director of the Company, resigned from the
Board of Directors.
Our success mainly depends on the performance of Mr. Medina and Mr. Mankal. We
do not have "key person" life insurance policies on 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. 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
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.
27
MADHAVA RAO MANKAL, Chief Financial Officer and Director
Mr. Mankal has more than 30 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 United States. He is a fellow of the Institute of Chartered Accountants of
India, fellow of the Institute of Cost and Works Accountants of India and a
member of the Institute of Management Accountants in the United States. He holds
a Bachelors Degree in Commerce from Bangalore University.
MIKE GALLO, Director
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, 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.
JOHN ERICH LEWIS, Director
John Erich Lewis has 26 years of experience in management of various aviation
operations and government related programs. As the Program Manager and Quality
Assurance Manager of the Kelly Space & Technology, Inc. Jet and Rocket Test
Facility, Dr. Lewis is responsible for the implementation of government
contracts and technical demonstrations of Kelly's technologies. Along with
Kelly, Dr. Lewis co founded the nonprofit Technical Employment Training Inc. and
serves as the Executive Director providing training and job placement in the
machine trades for the displaced workforce. Prior to Kelly, Dr. Lewis was at
Gulfstream Aerospace where he managed special projects regarding Lean
Manufacturing on the production line, specializing in the aircraft electrical
system assembly methods. This included sequence of production planning, manpower
requirements and design of electrical installations in the corporate jets. Prior
to Gulfstream Dr. Lewis worked with Lockheed-Martin providing direct support of
U.S. Army units as a consultant to civilian and U.S. Army personnel.
Additionally, he held flight status as a civilian and performed test flights on
refurbished military aircraft. Dr. Lewis earned a Ph.D. in Aviation Management
from Corllins University, a Masters of Aeronautical Science in Aviation
Management, a Masters in Aviation System Safety and a Bachelor of Science in
Professional Aeronautics from Embry-Riddle Aeronautical University. He also
holds a minor in Aviation Safety and is a licensed aircraft Airframe and
Powerplant mechanic. Dr. Lewis served in the U.S. Army as a volunteer with
Special Operations, he served with the 160th Special Operations Aviation
Regiment (Airborne) as a Blackhawk helicopter crewchief assigned to temporary
duty stations throughout the world performing classified missions with elite,
multi-national armed forces and completing training at the Army's Airborne
Infantry School, Air Assault School, Tactical Transport Helicopter Repair School
and the JFK Special Warfare Center and School. Dr. Lewis is a decorated combat
veteran during his participation in Operation Just Cause in Panama, and
Operation Desert Shield and Desert Storm in the Middle East. Dr. Lewis is a life
member in the VFW.
28
ALBERT MARDIKIAN, Director Chief Executive Officer - Harbor Guard Boats
Mr. Albert Mardikian is currently CEO of Harbor Guard Boats, Inc. He is also in
charge of research and new product development. He holds 24 various design and
utility patents on watercraft, cars and boats. He has been responsible for
designs meeting stringent DOT, Coast Guard and EPA safety standards. He has been
primarily responsible for many popular designs, including: Convertible tops for
the Mercedes Benz 500 line; design and coach building of convertible tops for
BMW 3, 6, and M series; design and fabrication of a Ferrari 12 cylinder
limousine; design and coach building of Porsche convertible tops, and many
others. He also holds several patents on hull designs for recreational and
search and rescue watercraft. His Rescue Fire Jet watercraft was the only boat
dispatched in Hurricane Floyd in New Jersey. The mission included extinguishing
fires in over 85 buildings and rescuing people stranded by the flooding.
Mr. Mardikian is a member of SAE Engineering Group, a member of the
International Boating and Safety Group and a member of the National Marine
Manufacturers Association. He is Graduate from North Rope University on Aircraft
Maintenance and Design Engineering.
Employment Agreements
The Company has entered into employment agreements for a five year term,
commencing on July 1st, 2008, with each of the key executive officers. The
current annual compensation for the Company's executive officers is as follows:
Mr. Daniel Medina, President and Director, MIHI - $168,000
Mr. Madhava Rao Mankal, CFO and Director, MIHI - $168,000
Mr. Albert Mardikian, CEO, Harbor Guard Boats, Inc. - $120,000
However, due to the lack of revenues and availability of cash, executive
officers have received some of their compensation in the form of Common Stock of
the Company and/or have accrued their compensation to be paid when cash is
available.
BOARD OF DIRECTORS
Our Board of Directors consists of five (5) individuals, two of whom are
officers of the Company. Directors are elected to the Board of Directors for a
one (1) year term or until the next shareholders meeting. There are no family
relationships among any of our directors, officers or key employees.
The Company's Board of Directors is currently working on establishing the
following committees for the following purposes:
1) Audit Committee - Oversees the work of the Company's accounting and internal
audit processes. The committee is directly responsible for the appointment,
compensation, retention, and oversight of the Company's independent auditors.
2) Compensation Committee - The Compensation Committee stays informed as to
market levels of compensation and, based on evaluations, recommends compensation
levels and systems to the Board. The Compensation Committee recommends to the
Board the compensation of the Chief Executive Officer and determines the
compensation of the other executive officers.
3) Nominating and Corporate Governance Committee - The Governance and Nominating
Committee is responsible for recommending to the Board individuals to be
nominated as directors. The committee evaluates new candidates and current
directors.
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, our officers and directors will be required to use their discretion
to resolve them in a manner which they consider appropriate.
29
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 our 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. Our board of directors is currently
seeking qualified financial expert and/or members to establish an independent
Audit Committee.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation paid
by the Company to the President, Chief Financial Officer, and the Company's most
highly compensated executive officers for the fiscal years ended April 30, 2011,
2010, and 2009 the "Named Executive Officers"):
------------------------------------------------------------------------------------------------------------------------------------
SUMMARY EXECUTIVES COMPENSATION TABLE
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Name & Position Year Salary Bonus Stock Option None Equity Nonqualified All other Total
awards awards incentive deferred compensation
plan compensation
compensation earnings
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
($) ($) ($) ($) ($) ($) ($) ($)
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Daniel Medina, 2011 $168,000 $ - $- $ - $- $- $- $168,000
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Director & 2010 $148,000 $ - $- $ - $- $- $- $148,000
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
President 2009 $100,000 $ - $- $ - $- $- $- $100,000
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Madhava Rao Mankal, 2011 $157,500 $- $- $- $- $- $- $157,500
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Director & 2010 $148,000 $148,500
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
CFO 2009 $100,000 $100,000
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Albert Mardikian, 2011 $- $ - $- $- $- $- $- $-
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Director & CEO, Harbor 2010 $ 60,000 $ - $- $- $- $- $- $ 60,000
Guard Boats, Inc.
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
2009 $100,000 $ - $- $- $- $- $- $100,000
------------------------ ------- ---------- --------- --------- ---------- --------------- --------------- --------------- ---------
Stock Option and Award Plan
We have adopted the 2006 Medina International Holdings, Inc. Stock Option and
Compensation Award Plan (the "Plan"), which was approved by the board of
directors on August 28, 2006 to obtain and retain the services of the types of
employees, consultants and directors who will contribute to the Company's long
range success and to provide incentives which are linked directly to increases
in share value which will incur to the benefit of all stockholders of the
Company.
Under the Plan, 2,000,000 shares of common stock shall be reserved and available
for issuance. Stock reserved under the plan may consist, in whole or in part, of
authorized and unissued shares of treasury shares. The plan shall be
administered by either (i) the Board, or (ii) a committee appointed by the
Board.
30
No options were issued or exercised during the fiscal years ended April 30, 2011
and 2010.
------------------------------------------------------------------------------------------------------------------------------------
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR values
------------------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SAR
Options/SARS at FY-End at FY-End ($)
------------------------------------------------- ------------ ---------- ------------------------------ ---------------------------
Name Shares Value Exercisable/Unexercisable Exercisable/Unexercisable
------------------------------------------------- ------------ ---------- ------------------------------ ---------------------------
Daniel Medina, Director & President $- $- $- $ -
------------------------------------------------- ------------ ---------- ------------------------------ ---------------------------
Madhava Rao Mankal, Director & CFO $- $- $- $ -
------------------------------------------------- ------------ ---------- ------------------------------ ---------------------------
Albert Mardikian, Director & CEO, Harbor Guard $- $- $- $-
Boats, Inc.
------------------------------------------------- ------------ ---------- ------------------------------ ---------------------------
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives Compensation Table"
during the year ended April 30, 2011:
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Non
Fees qualified,
earned Options non-equity
or paid Stock awards plan incentive
in cash awards ($) compensation earnings Deferred All other
Name ($) (1) ($) ($) compensation($) ($) Total
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Daniel Medina, Director $- $- $- $- $- $- $-
& President
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Madhava Rao Mankal, $- $- $- $- $- $- $-
Director & CFO
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Albert Mardikian,
Director & CEO, Harbor $- $- $- $- $- $- $-
Guard Boats, Inc.
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Mike Swanson, Director $- $ 1,062 $- $- $- $- $ 1,062
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Mike Gallo, Director $- $2,063 $- $- $- $- $ 2,063
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
John Erich Lewis, $- $1,250 $- $- $- $- $1,250
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
Total $- $4,375 $- $- $- $- $4,375
-------------------------- ---------- ------------- --------------- ------------ ------------------- ----------- ----------------
31
(1) The Company issued 43,750 shares to Mr. Mike Gallo, 18,750 shares to
Mike Swanson, and 31,250 to John Erich Lewis toward services as
Directors of the Company for the year ended April 30, 2011, valued at
$4,375. These shares were valued based on the closing market price at
the time of issuance.
(2) Mr. Swanson, resigned as a director of the Company in January 2011.
ITEM 12. 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 April 30, 2011, by (a)
each person known by us to own beneficially 5% or more of our outstanding shares
of common stock, (b) our directors, Principal Executive Officer, Chief Financial
Officer and other executive officers named in "MANAGEMENT--Director and
Executive Compensation," and (c) all our directors and executive officers as a
group.
The percentages are based on 51,110,497 shares of common stock issued and
outstanding as of April 30, 2011.
------------------------------------------------------ ----------- -------------- ----------------
Name, Address & Nature of Beneficial Owner Title of Shares Percent of
Class Class
------------------------------------------------------ ----------- -------------- ----------------
Daniel Medina, Director & President, Common 12,220,667 23.91%
Stock
----------- -------------- ----------------
1802 Pomona Rd, Corona, CA 92880
------------------------------------------------------ ----------- -------------- ----------------
------------------------------------------------------ ----------- -------------- ----------------
Madhava Rao Mankal, Director & CFO Common 12,271,667 24.01%
Stock
----------- -------------- ----------------
1802 Pomona Rd, Corona, CA 92880
------------------------------------------------------ ----------- -------------- ----------------
------------------------------------------------------ ----------- -------------- ----------------
Mike Gallo, Director, Common 93,750 0.18%
Stock
----------- -------------- ----------------
294 South Leland Norton Way, San Bernardino,
California 92408
------------------------------------------------------ ----------- -------------- ----------------
------------------------------------------------------ ----------- -------------- ----------------
John Erich Lewis, Director Common 321,250 0.62%
Stock
----------- -------------- ----------------
1802 Pomona Rd, Corona, CA 92880
------------------------------------------------------ ----------- -------------- ----------------
------------------------------------------------------ ----------- -------------- ----------------
Albert Mardikian, CEO, Harbor Guard Boats, Inc. and Common 11,995,667 23.48%
Associated companies Stock
----------- -------------- ----------------
45 Goleta Ave, Corona Del Mar, CA 92625
------------------------------------------------------ ----------- -------------- ----------------
------------------------------------------------------ ----------- -------------- ----------------
Total Officers & Directors, as a group (5 36,903,001 72.20%
Individuals)
------------------------------------------------------ ----------- -------------- ----------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has adopted a policy under which any consulting or finder's 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.
32
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 largely
unforeseeable terms of a future agreement with an unidentified business entity.
Transactions with Management and Others
Year Ended April 30, 2011
Medina Marine signed a Mold Lease Agreement, on November 5, 2011, with Daniel F.
Medina, Jr., son of Daniel F. Medina, Sr., President of the Company, to lease
two recreational molds. The Mold Lease Agreement is effective for a period of 24
months from the date of the agreement. Medina Marine has the exclusive rights to
use the molds to manufacture recreational watercrafts. Mr. Medina, Jr. will
receive a pre-determined rate of $1,000-1,200 per boat manufactured using the
specified molds.
Medina Marine's Board of Directors passed a resolution on February 22, 2011 to
distribute ten (10) percent of its outstanding shares to Medina International
Holdings, Inc.'s shareholders, contingent on successful registration of Medina
Marine's common shares with the Securities and Exchange Commission.
Medina Marine, wholly owned subsidiary of Medina International Holdings, Inc.,
appointed Mr. Nuvdeep Singh Bhasin to its board of directors on February 22,
2011. In 2007, Mr. Bhasin founded Forefront Investments, a commercial and
residential brokerage firm focusing on real estate and finance transactions. He
holds a California Department of Real Estate Broker License and is a member of
the California Association of Realtors and the National Association of Realtors.
He is a Certified Management Accountant candidate. Mr. Bhasin graduated from
California State University, Fullerton with a B.A. in Business Administration
with an emphasis on Entrepreneurship.
Harbor Guard Boats, wholly owned subsidiary of the Company, issued 1,000,000 of
its common shares to Medina International Holdings, Inc. As of the date of this
report, 1,000,000 shares of Harbor Guard Boats were issued and outstanding.
Medina Marine, wholly owned subsidiary of the Company, issued 5,000,000 of its
common shares to Medina International Holdings, Inc. As of the date of this
report, 5,000,000 shares of Medina Marine, in the name of Medina International
Holdings, Inc., were issued and outstanding.
Year Ended April 30, 2010
As of April 30, 2010, the Company owed $870,941 to a MGS Grand Sports, Inc.
controlled by Mr. Albert Mardikian incurred as part of the purchase transaction
of Modena Sports Design, LLC.
During the year ended April 30, 2010, the Company issued 11,000,000 shares of
its common MGS Grand Sports, Inc. and Mardikian Designs controlled by Mr. Albert
Mardikian, in accordance with the acquisition of Modena Sports Design, LLC (now
Harbor Guard Boats).
33
The Company leased building space from MGS Grand Sports, on a verbal, month to
month basis for approximately $6,500 per month. MGS Grand Sports is an entity
controlled by Mr. Albert Mardikian, CEO of Harbor Guard Boats. Accrued rent to
the related party as of April 30, 2010 was $75,500. The Company stopped accruing
rental expenses under this agreement after the Company moved its operations to
its new location in Corona, California in February of 2010.
During the year ended April 30, 2010, the Company issued 1,455,000 shares of its
common stock to Mr. Daniel Medina, President of the Company, in exchange for
$145,500 of salary payable to Mr. Medina. The agreement contains a buyback
provision of $0.10/share or $145,500, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 1,380,000 shares of its
common stock to Mr. Madhava Rao Mankal, Chief Financial Officer of the Company,
in exchange for $138,000 of salary payable to Mr. Madhava Rao. The agreement
contains a buyback provision of $0.10/share or $138,000, redeemable at any time
when the Company has surplus cash.
During the year ended April 30, 2010, the Company issued 1,300,000 shares of its
common stock to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard
Boats, wholly owned subsidiary of the Company, in exchange for $130,000 of
salary payable to Mr. Albert Mardikian. The agreement contains a buyback
provision of $0.10/share or $130,000, redeemable at any time when the Company
has surplus cash.
During the year ended April 30, 2010, the Company issued 10,000 shares of its
common stock in exchange for royalty payments, at the rate of $0.03/ share or
$300, to Mr. Albert Mardikian, Chief Executive Officer of Harbor Guard Boats,
wholly owned subsidiary of the Company.
At April 30, 2010, 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 $7,000.
We have issued 50,000 shares to Mr. Mike Gallo and 50,000 shares to Mike Swanson
toward services as Directors of the Company for the year ended April 30, 2009
and 2010.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
General
Ronald R. Chadwick, P.C.is the Company's principal auditing/ accountant firm.
The Company's Board of directors has considered whether the provisions of audit
services are compatible with maintaining Ronald R. Chadwick, P.C.'s
independence.
Audit Fees.
Ronald R. Chadwick, P.C. billed $4,500 for review services and $4,657 audit fee
in the fiscal year ended April 30, 2011. Audit and Review fees for the year
ended April 30, 2010 was $15,157 and for the year ended April 30, 2009 was
$26,890.
There were no other fees in 2011and 2010 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 2011 and 2010.
34
PART IV
ITEM 15. EXHIBITS
The following is a complete list of exhibits filed as part of this Form 10K.
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.
35
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 1, 2011 By: /s/Daneil F. Medina
-----------------
Daniel F. Medina,
President & Director
Date: August 1, 2011 By: /s/Madhava Rao Mankal
------------------
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 1, 2011 By: /s/Daniel F. Medina
----------------
Daniel F. Medina,
President & Director
Date: August 1, 2011 By: /s/Madhava Rao Mankal
------------------
Madhava Rao Mankal,
Chief Financial Officer &
Director
Date: August 1, 2011 By: /s/Erich Lewis
-----------
Erich Lewis,
Director
Date: August 1, 2011 By: /s/Mike Gallo
-----------
Mike Gallo,
Director
36