10-Q 1 mihi10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------- FORM 10Q ----------------- (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2009 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to ___________ Commission file number: 000-27211 MEDINA INTERNATIONAL HOLDINGS, INC. ------------------------------------------------------- (Exact name of registrant as specified in its charter) COLORADO 84-1469319 84-1469319 ---------------------------------- -------------------- (State of Incorporation) (IRS Employer ID Number) No. 2051 Placentia Ave., Costa Mesa, CA 92627 ----------------------------------------------- (Address of principal executive offices) 909-522-4414 -------------------------- (Registrant's Telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ] Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X] Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of November 20, 2009, there were 46,676,341 shares of the registrant's common stock issued and outstanding.
PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page ---- Consolidated Balance Sheets - October 31, 2009 and April 30, 2009 F-1 Consolidated Statement of Operations - Three months and six months ended October 31, 2009 and 2008 F-2 Statement of Changes in Stockholders' Equity (Deficit) F-3-F-4 Statement of Cash Flows - Six months ended October 31, 2009 and 2008 F-5 Notes to Consolidated Financial Statements F-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3. Quantitative and Qualitative Disclosures about Market Risk - Not Applicable 7 Item 4. Controls and Procedures 7 Item 4T. Controls and Procedures 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings -Not Applicable 8 Item 1A. Risk Factors - Not Applicable 8 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9 -Not Applicable Item 3. Defaults upon Senior Securities - Not Applicable 9 Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable 9 Item 5. Other Information - Not Applicable 9 Item 6. Exhibits 9 SIGNATURES 10
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets October 31, April 30, 2009 2009 (Unaudited) (Audited) ASSETS Current Assets: Cash $ 414 $ 36,576 Receivables - 3,166 Inventory 525,522 410,481 ---------------- ---------------- Total current assets 525,936 450,223 Fixed Assets: 1,072,873 1,074,798 Accumulated depreciation (287,746) (200,703) ---------------- ---------------- Total fixed assets 785,127 874,095 ---------------- ---------------- TOTAL ASSETS $1,311,063 $ 1,324,318 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 560,147 $ 518,898 Accrued liabilities 595,869 377,555 Short term deposit 297,880 265,352 Customer Deposit 328,115 242,905 Stock subscription payable 240,000 902,738 Notes payable 89,000 64,000 Related party payable 880,448 909,854 Related Parties - short-term borrowings from shareholders 324,921 311,712 ---------------- ---------------- Total current liabilities 3,316,380 3,593,014 Stockholders' equity (deficit): Preferred stock, $.00001 par value, 10,000,000 shares authorized, none issued and outstanding - - Common stock, $0.0001 par value, 100,000,000 shares authorized, 46,676,341 and 35,560,091 shares issued and outstanding on October 31, 2009 and April 30, 2009, respectively 4,667 3,556 Additional paid-in capital 3,082,575 2,419,032 Common stock subscribed (100,000 shares) 10,000 10,000 Subscription to be received (3,000) (3,000) Accumulated deficit (5,099,559) (4,698,284) ---------------- ---------------- Total stockholders' equity (deficit) (2,005,317) (2,268,696) ---------------- ---------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $1,311,063 $ 1,324,318 ================ ================ The accompanying notes are an integral part of these financial statements. F-1
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statement of Operations (Unaudited) For the three months ended October 31, For the six months ended October 31, 2009 2008 2009 2008 ---- ---- ---- ---- Sales, net $ 694 $ - $ 1,564 $ - Cost of Goods Sold 49,369 - 97,130 - -------------------------------------------- ------------------------------------ Gross Profit (Loss) (48,675) - (95,566) - General and administrative expenses 118,539 35,995 256,680 63,501 Selling and marketing expenses 2,763 - 3,050 - Research and development expenses - - 1,370 - -------------------------------------------- ------------------------------------ Loss from operations (169,977) (35,995) (356,666) (63,501) Other income 2,800 - 4,336 90 Interest expense (22,889) (8,386) (48,945) (17,641) -------------------------------------------- ------------------------------------ Net other income (20,089) (8,386) (44,609) (17,551) Loss before income tax (expense) benefit (190,066) (44,381) (401,275) (81,052) Income tax (expense) benefit - - - - -------------------------------------------- ------------------------------------ Net Loss from Operations $ (190,066) $ (44,381) $ (401,275) $ (81,052) ============================================ ==================================== Net loss per share: Basic $ (0.004) $ (0.001) $ (0.009) $ (0.002) Diluted $ (0.004) $ (0.001) $ (0.009) $ (0.002) Weighted average number of shares outstanding: Basic 44,713,219 35,560,091 44,713,219 35,560,091 Diluted 44,713,219 35,560,091 44,713,219 35,560,091 The accompanying notes are an integral part of these financial statements. F-2
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) Additional Common Shares Common Stock Paid-In stock Committed to Subscription Shares Amount Capital subscribed Be issued Receivable ---------------- ----------------- ---------------- -------------- ------------------------- ---------------- ----------------- ---------------- -------------- ------------------------- Balance - April 30, 2008 (restated) 35,560,091 3,556 2,419,032 10,000 (3,000) ---------------- ----------------- ---------------- -------------- ------------------------- Net loss - - - - - ---------------- ----------------- ---------------- -------------- ------------------------- Balance - April 30, 2009 35,560,091 3,556 2,419,032 10,000 - (3,000) ================ ================= ================ ============== ========================= Stock issued for royalties 10,000 - 404 - - - Stock issued to directors 106,250 11 4,239 - - - Stock issued for the purchase of HGB* 11,000,000 1,100 658,900 - - - Net loss - - - - - - ---------------- ----------------- ---------------- -------------- ------------------------- Balance - October 31, 2009 46,676,341 $ 4,667 $ 3,082,575 $ 10,000 $ - $ (3,000) ================ ================= ================ ============== ========================= * - Harbor Guard Boats The accompanying notes are an integral part of these financial statements. F-3
(continued) MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) Accumulated Deficit Totals ------------------------------- ------------------------------- Balance - April 30, 2008 (restated) (2,929,850) (500,262) ------------------------------- Net loss (1,768,434) (1,768,434) ------------------------------- Balance - April 30, 2009 (4,698,284) (2,268,696) =============================== Stock issued for royalties - 404 Stock issued to directors - 4,250 Stock issued for the purchase of HGB* - 660,000 Net loss (401,275) (401,275) ------------------------------- Balance - October 31, 2009 $ (5,099,559) $ (2,005,317) =============================== * - Harbor Guard Boats The accompanying notes are an integral part of these financial statements. F-4
MEDINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (Unaudited) Six Months Ended October 31, 2009 2008 --------------------------- Cash flows from operating activities: Net loss $ (401,275) $ (81,052) Adjustments to reconcile net loss to net cash used in operating activities: Common stock expenses 2,071 550 Depreciation expenses 88,621 28,572 Impairment loss on investment - - Gain on settlement of accounts payable (693) - Write-off of fixed assets 885 - Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 3,166 - (Increase) decrease in inventory (115,041) (2,889) Increase (decrease) in accounts payable and accrued liabilities 259,563 (16,515) Increase (decrease) in customer deposits 85,210 37,200 --------------------------- Total adjustments 323,782 46,918 --------------------------- Net cash (used) received in operating activities (77,493) (34,134) --------------------------- Cash flows from investing activities: Purchase of fixed assets - (138) --------------------------- Net cash used in investing activities - (138) --------------------------- Cash flows from financing activities: Bank overdraft - (20) Proceeds from notes payables - related party 15,450 6,358 Payments to notes payables - related party (44,856) - Proceeds from note payable 25,000 37,325 Proceeds from lines of credit & credit cards 53,432 - Payments on lines of credit & credit cards (20,904) (9,376) Proceeds from related party - short-term borrowings from shareholders 26,094 - Payment to related party - short-term borrowings from shareholders (12,885) - --------------------------- Net cash provided by financing activities 41,331 34,287 --------------------------- Net increase (decrease) in cash and cash equivalents (36,162) 15 Cash and cash equivalents - beginning of period 36,576 - --------------------------- Cash and cash equivalents - end of period $ 414 $ 15 =========================== Supplemental disclosure of cash flow information: Interest Paid $ - $ - =========================== Taxes paid $ - $ - =========================== Non-cash financing and investing activities: Increase in office equipment and tools and related party notes payable $ - $ - =========================== Stock issued for compensation $ 1,938 $ - =========================== The accompanying notes are an integral part of these financial statements. F-5
PART I. - FINANCIAL INFORMATION Medina International Holdings, Inc. and Subsidiaries Notes to the Consolidated Financial Statements For the six months ended October 31, 2009 (Unaudited) NOTE 1. GENERAL Medina International Holdings, Inc. ("Company," "Medina," "we," "us," "our") was incorporated in 1998 as Colorado Community Broadcasting, Inc. and the Company changed the name of the business in 2005 to Medina International Holdings, Inc. The Company intended to purchase low power television licenses or stations and planned to broadcast local programming mixed with appropriate national programming. The Company, under its two wholly owned subsidiaries, Harbor Guard Boats, Inc. ("HGB") and Medina Marine, Inc., plans to manufacture and sell recreational and commercial boats. The Company formed Medina Marine, Inc., as a wholly owned subsidiary of the Company. Medina Marine was incorporated in the State of California on May 22, 2006 to manufacture and sell fire rescue, rescue and recreational boats. The Company signed an agreement to acquire Modena Sports Design, LLC, as a wholly owned subsidiary of the Company on June 18, 2008. Modena Sports Design, LLC was formed in the State of California in 2003 to produce fire rescue, rescue and recreational boats. Modena Sports Design, LLC reorganized as a California corporation on January 7, 2009 and changed its name to Harbor Guard Boats, Inc. In fiscal year 2008 the Company ceased reporting as a development stage company. 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 October 31, 2009, the Company's current liabilities exceeded its current assets by $2,790,424. Also, the Company's operations generated $694 in revenue during the three months period ended October 31, 2009 and the Company's accumulated deficit is $5,099,559. We have taken various steps to revise its operating and financial requirements, which we believe are sufficient to provide the Company with the ability to continue in the subsequent year. Management devoted considerable effort during the period ended October 31, 2009 towards management of liabilities and improving our operations. F-6 The future success of the Company is likely dependent on its ability to obtain additional capital to produce 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. 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. F-7 Cash and Cash Equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. The Company maintains its cash in bank deposit accounts that may exceed federally insured limits. The Company has not experienced any losses in such accounts. Accounts receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At October 31, 2009 and April 30, 2009, the Company had no balance in its allowance for doubtful accounts. Advertising costs Advertising costs are expensed as incurred. The Company recorded advertising costs during the six months period ended October 31, 2009 in the amount of $2,614. 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. Fixed Assets Capital assets are stated at cost. Equipment consisting of molds is stated at cost. Depreciation of fixed assets is provided using the straight-line method over the estimated useful lives (3-7 years) of the assets. Expenditures for maintenance and repairs are expensed 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 ---------------------------------------------- ------------------ F-8 Long Lived Assets The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance. Impairment losses are required to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced. Income Taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income (loss). Valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. Comprehensive Loss Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. Issuance of Shares for Service The Company accounts for employee and non-employee stock awards, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Fair Value of Financial Instruments The Company discloses 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 Currently Translations and Hedging The Company is exposed to foreign currency fluctuations due to international trade. The management does not intend to enter into forward exchange contracts or any derivative financial investments for trading purposes. The management does not currently hedge foreign currency exposure. F-9 Basic and Diluted Net Loss per Share Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Products and services, geographic areas and major customers The Company earns revenue from the sale of recreational and commercial boats, domestically and internationally. The Company does not separate sales activities into different operating segments. There was $694 revenue earned by the Company during the period ended October 31, 2009. Revenue generated from repair and logistics. Recently issued accounting pronouncements In June 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") 105, "Generally Accepted Accounting Principles" (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, 2009. We adopted the provisions of the standard on September 30, 2009, which did not have a material impact on our financial statements. There were various other accounting standards and interpretations issued in 2009, 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 As of October 31, 2009 the Company owed to a related party shareholder in the amount of $880,448, incurred as part of the purchase transaction of Modena Sports Design, LLC (currently Harbor Guard Boats, Inc.). The Company leases building space from the same party on a verbal, month to month basis for approximately $6,000 per month plus various costs. Rent expenses incurred by the Company during the six months period ended October 31, 2009 was $36,000. F-10 NOTE 4. Inventory As of October 31, 2009 and April 30, 2009, inventory consisted of the following: -------------------------------------------------------------------- ----------- Item October 31 April 30, -------------------------------------------------------------------- ----------- 2009 2009 ---- ---- Raw materials and supplies $ 31,699 $ 39,410 Work in progress 493,823 344,594 Finished goods - 26,477 --------------- -------- Total Inventory $ 525,522 $ 410,481 ------------------------------------------------------- -------------- --------- NOTE 5. Fixed Assets As of October 31, 2009 and April 30, 2009, fixed assets consisted of the following: ---------------------------------------------------- --------------- ----------- Property and Equipment October 31 April 30, -------------------------------------------------------------------- ----------- 2009 2009 ---- ---- Machinery and equipment; including molds & tools $ 1,053,558 $ 1,053,558 Computers 13,535 14,420 Furniture and fixtures 2,080 3,120 Office equipments 3,200 3,200 Fire Extinguisher 500 500 --- --- Total property and equipment 1,072,873 1,074,798 Less: Accumulated Depreciation (287,746) (200,703) --------------- --------------- Total property and equipment $ 785,127 $ 874,095 ------------------------------------------------ -------------- --------------- NOTE 6. Accrued Liabilities Our accrued liabilities as of October 31, 2009 and April 30, 2009 are as follows: ----------------------------------------------------------------- -------------- Accrued Liabilities October 31 April 30, ----------------------------------------------------------------- -------------- 2009 2009 ---- ---- Interest - shareholders' loan $ 79,281 $ 42,225 Interest - related party 6,000 4,000 Interest - notes payable 2,206 1,636 Payroll 472,761 296,694 Warranty liabilities 35,621 33,000 --------------- -------------- Total accrued liabilities $ 595,869 $ 377,555 ---------------------------------------------------------------- -------------- F-11 NOTE 7. Short-Term Debt Our short-term debt as of October 31, 2009 and April 30, 2009 are as follows: ----------------------------------------------------------------- -------------- Financial Institutions October 31 April 30, ----------------------------------------------------------------- -------------- 2009 2009 ---- ---- Line of Credit Citi Bank $ 94,932 $ 75,347 Credit Card Advanta 8,767 9,240 American Express - 1 33,077 33,842 American Express - 2 33,999 33,751 Bank of America 38,412 37,363 Citi Bank -1 33,290 30,276 Wells Fargo Bank 25,263 26,258 Wells Fargo Bank - 2 22,599 16,385 Citi Bank - 2 3,140 2,890 Citi Bank -3 4,401 - -------------- ------------- Total short-term debt $ 297,880 $ 265,352 ------------------------------------------------------------------ ------------- As of October 31, 2009 the Company had a line of credit totaling $100,000, under which the Company may borrow on an unsecured basis, since year 2008, at an interest rate of 8.75%. The outstanding balance for this credit card was $94,932. The Company's remaining credit cards carry various interest rates and require monthly payments, and are substantially held in the name of or guaranteed by related parties. NOTE 8. Risk Management Activities Foreign Currency The majority of our business is denominated in U.S. dollars and fluctuations in the foreign currency markets will have a minimal effect on our business. Commodity Prices We are exposed to market risk from changes in commodity prices. The cost of our products could increase, if the prices of fiberglass and/or aluminum increases significantly, further decreasing our ability to attain profitable operations. We are not involved in any purchase commitments with any of our vendors. F-12 Insurance We are exposed to several risks, including fire, earthquakes, theft, and key person liabilities. We do not carry any insurance for these risks, other than general liability insurance, which will adversely affect our operations if any of these risks materialize. NOTE 9. Customer Deposit Deposit from customers consists of the following: ----------------------------------------------------------------- -------------- Customer Deposits October 31 April 30, ----------------------------------------------------------------- -------------- 2009 2009 ---- ---- Deposit for commercial boats $ 307,615 $ 222,405 Deposit for recreational boats 20,500 20,500 --------------- -------------- Total customer deposits $ 328,115 $ 242,905 ---------------------------------------------------------------- -------------- NOTE 10. Notes Payable ----------------------------------------------------------------- -------------- Notes Payable October 31 April 30, ----------------------------------------------------------------- -------------- 2009 2009 ---- ---- Notes payable - related party $ 50,000 $ 50,000 Notes payable - others 39,000 14,000 --------------- -------------- Total notes payable $ 89,000 $ 64,000 ---------------------------------------------------------------- --------------- As of October 31, 2009, the Company had an unsecured note payable with an unrelated party in the amount of $10,000, which bears at 8% interest, and is currently due. As of October 31, 2009, the Company had an unsecured note payable with an unrelated party in the amount of $4,000, which bears no interest and is currently due. As of October 31, 2009, the Company had an unsecured note payable to Mr. Srikrishna Mankal, son of Madhava Rao Mankal, CFO of the Company, in the amount of $50,000, which bears an 8% interest. Interest accrued to date $6,000. As of October 31, 2009, the Company had an unsecured note payable with an unrelated party in the amount of $25,000, which bears $2,500 interest and is currently due. F-13 NOTE 11. Shareholders' Loans At October 31 2009, Shareholders' loans consisted of the following: ----------------------------------------------------------------- -------------- Shareholders' Loans October 31 April 30, ----------------------------------------------------------------- -------------- 2009 2009 ---- ---- Daniel Medina, President $ 129,400 $ 107,399 Madhava Rao Mankal, Chief Financial Officer 195,521 204,313 --------------- -------------- -------------- --------------- Total Shareholders' Loans $ 324,921 $ 311,712 Shareholders' loan from shareholder of the Company, unsecured, 10% interest per annum, 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 12. 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. As of October 31, 2009, the Company had 46,676,341 shares of its common stock issued and outstanding. As of April 30, 2009, the Company had 35,560,091 shares of its common stock issued and outstanding. The following table presents shares issued during the six months period ended October 31, 2009. -------------------------------------------------------------------------------- Shares issued during the six months period ended October 31, 2009 -------------------------------------------------------------------------------- Shares issued to directors 106,250 Shares issued for royalty 10,000 Shares issued for the purchase of Harbor Guard Boats 11,000,000 --------------------- --------------------- Total shares issued during the period 11,116,250 ---------------------------------------------------------- --------------------- 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 cap, and has voting rights equal to common stock in an amount equal to the number of shares that Series A could be converted into. No preferred shares were issued or outstanding at October 31, 2009. F-14 Stock Subscriptions Payable At October 31, 2009, the Company had an obligation to issue 20 Series A preferred shares for consideration already rendered in the amount of $240,000. NOTE 13. Commitments Operating Leases The Company rents a 5,000 square-foot manufacturing facility for $6,000 per month, on a verbal month-to-month basis, at 2051 Placentia Ave., Costa Mesa, CA 92627. This facility is owned by a related party, the CEO of Harbor Guard Boats, Inc. We have incurred $36,000 in rental expenses for the six months period ended October 31, 2009. The Company has various license agreements with a related party allowing its technology to be utilized in the manufacture of its boats. These license agreements typically provide for small periodic renewal payments, along with royalty payments based on a percentage (generally 1.5% - 2%) of related gross sales. Note 14 Subsequent Events The Company has evaluated it activities subsequent to the quarter ended October 31, 2009 and found no reportable subsequent events. F-15 ITEM 2. 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-Q contains forward-looking statements. The presentation of future aspects of Medina International Holdings, Inc. ("Medina International Holdings, Inc.,""Company" or "issuer") found in these statements is subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," or "could" or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company's actual results to be materially different from any future results expressed or implied by Medina International Holdings, Inc. in those statements. Important facts that could prevent Medina International Holdings, Inc. from achieving any stated goals include, but are not limited to, the following: 1 Some of these risks might include, but are not limited to, the following: (a) Volatility or decline of the Company's stock price; (b) Potential fluctuation in quarterly results; (c) Failure of the Company to earn revenues or profits; (d) Inadequate capital to continue or expand its business inability to raise additional capital or financing to implement its business plans; (e) Failure to achieve a business; (f) Rapid and significant changes in markets; (g) Litigation with or legal claims and allegations by outside parties; and (h) Insufficient revenues to cover operating costs. There is no assurance that the Company will be profitable, the Company may not be able to successfully develop, manage or market its products and services, the Company may not be able to attract or retain qualified executives and personnel, the Company's products and services may become obsolete, government regulation may hinder the Company's business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of warrants and stock options, and other risks inherent in the Company's businesses. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q 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 personnel who risk their lives to save others. We design, manufacture, test, deliver, and support fire rescue, rescue, and patrol watercrafts (commercial). Our products are sold to fire, search & rescue, emergency, police, defense, and military departments in the United States and abroad. Fire departments have been our largest customers and we rely heavily on government funded departments to achieve sales and continue our operations. In addition, we also manufacture two models of recreational watercrafts. Key Challenges We face numerous challenges to sustain our 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 to bring to market; and g) Reducing internal control weaknesses over financial reporting and disclosure. 2 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, they 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 business strategy is to deliver products and services to aid organizations and personnel who risk their lives to save others. Our intent 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 to our employees; Results of Operations For the Three Months Ended October 31, 2009 Compared to the Three Months Ended October 31, 2008 Our Company has earned revenues of $694 for the three months period ended October 31, 2009 as compared to none for the three months period ended October 31, 2008. Revenues during the three months ended October 31, 2009, were a result of our work in spare parts and logistics. We did not generate any revenue from sales of our products during the three months period ended October 31, 2009 and October 31, 2008. During the three months ended October 31, 2009, we incurred a cost of goods sold of $46,369 compared to none during the three months ended October 31, 2008. The increase of $46,369 was a result of the increase in operational activities, which includes depreciation expenses. 3 During the three months ended October 31, 2009, we incurred general and administrative expenses of $118,539 compared to $35,995 during the three months ended October 31, 2008. The $82,544 increase in general and administrative expenses for the three months period ended October 31, 2009 was mainly due to the accrual of management salary of $90,000. The Company also decreased rental expense in the amount of $9,000 during the three months period ended October 31, 2009, as compared with that of the same period ended October 31, 2008. The Company moved its operations from San Bernardino International Airport to Costa Mesa, California. During the three months ended October 31, 2009, the Company incurred selling and marketing expenses of $2,763 compared to none during the three months ended October 31, 2008. The increase of $2,763 in selling expenses during the three months period ended October 31, 2009 compared to the three months period ended October 31, 2008, was primarily due to the advertising costs of $2,614. During the three months ended October 31, 2009, the Company recognized a net loss of $190,066 compared to $44,381 during the three months ended October 31, 2008. Increase of $145,685 was a result of the $82,544 increase in general and administrative expenses combined with the $46,369 increase in cost of goods sold. For the Six Months Ended October 31, 2009 Compared to the Six Months Ended October 31, 2008 Our Company has earned revenues of $1,564 for the six months period ended October 31, 2009 as compared to none for the six months period ended October 31, 2008. Revenues during the six months ended October 31, 2009, were a result of our work in spare parts and logistics. We did not generate any revenue from sales of our products during the six months period ended October 31, 2009 and October 31, 2008. During the six months ended October 31, 2009, we incurred a cost of goods sold of $97,130 compared to none during the six months ended October 31, 2008. The increase of $97,130 was a result of the increase in operational activities, which includes depreciation expenses. During the six months ended October 31, 2009, we incurred general and administrative expenses of $256,680 compared to $63,501 during the six months ended October 31, 2008. The $193,179 increase in general and administrative expenses for the six months period ended October 31, 2009 was mainly due to the accrual of management salary of $188,000 and professional fees of $16,018, compared to professional fees of $11,228 for the same period ended October 31, 2008. The Company also decreased rental expense in the amount of $18,000 during the six months period ended October 31, 2009, as compared with that of the same period ended October 31, 2008. The Company moved its operations from San Bernardino International Airport to Costa Mesa, California. During the six months ended October 31, 2009, we incurred research and development expenses of $1,370 compared to none during the six months ended October 31, 2008. During the six months ended October 31, 2009, the Company incurred selling and marketing expenses of $3,050 compared to none during the six months ended October 31, 2008. The increase of $3,050 in selling expenses during the six months period ended October 31, 2009 compared to the six months period ended October 31, 2008 was primarily due to the advertising costs of $2,614. 4 During the six months ended October 31, 2009, the Company recognized a net loss of $401,275 compared to $81,052 during the six months ended October 31, 2008. Increase of $320,223 was a result of the $193,179 increase in general and administrative expenses combined with the $97,130 increase in cost of goods sold. Liquidity and Capital Resources As of October 31, 2009, the Company had $414 cash on hand, an inventory of $525,522 and net fixed assets of $785,127. The Company's total current liabilities were $3,316,380 as of October 31, 2009, which was represented mainly accounts payable of $560,147, accrued liabilities of $595,869, deposits from customers of $328,115, short-term debt of $297,880, notes payable of $89,000 and short-term borrowings from shareholders totaling $324,921. In addition, stock subscription payable of $240,000 and note payable for the acquisition of $880,448 are included in the current liabilities. At October 30, 2009, the Company's current liabilities exceeded current assets by $2,790,444. The Company used $77,493 in operating activities for the six months period ended October 31, 2009 compared to usage of $34,134 for six months period ended October 31, 2008. The Company did not provide or use any cash in investing activities for the six months period ended October 31, 2009 compared to usage of $138 for six months period ended October 31, 2008. During the six months period ended October 31, 2009, the Company obtained $41,331 from financing activities, which included the $53,432 increase in the lines of credits and credit cards held by the Company. The Company also obtained $25,000 through the issuance of notes payable and $26,094 in short-term borrowings from related party. The Company also made payments to short-term borrowings from related party, lines of credit and credit cards, and notes payables in the amount of $12,885, $20,904, and $44,856, respectively. During the six months period ended October 31, 2008, the Company obtained $34,287 from financing activities, which included the $9,376 decrease in the lines of credits held by the Company and obtained $37,325 through the issuance of notes payables. The Company has an accumulated deficit, as of October 31, 2009, of $5,099,559 compared to October 31, 2008 of $4,698,284. Contractual Obligations and Other Commercial Commitments The Company does not have capital sufficient to meet its cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934. Management will have to seek loans or equity placements to cover such cash needs and cover outstanding payables. Lack of existing capital may be a sufficient impediment to prevent the Company from accomplishing its goal of expanding operations. There is no assurance, however, that without funds we will ultimately be able to carry out its business. No commitments to provide additional funds have been made by the Company's management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to cover its expenses as they are incurred. Irrespective of whether the Company's cash assets prove to be inadequate to meet its operational needs, the management might seek to compensate providers of services by issuances of stock in lieu of cash. 5 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 October 31, 2009, we do not have any obligation under certain guarantees or contracts as defined above. As of October 31, 2009, we do not have any retained or contingent interest in assets as defined above. As of October 31, 2009, we do not hold derivative financial instruments. Accounting for Derivative Instrument and Hedging Activities, as amended. As of October 31, 2009, we do 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, 2009 and 2008, we were not involved in any unconsolidated SPE transactions. Dividends The Company has not declared or paid any cash dividends on its common stock and does not anticipate paying dividends for the foreseeable future. Recent Accounting Pronouncements In June 2009, 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, 2009. We adopted the provisions of the standard on September 30, 2009, which did not have a material impact on our financial statements. There were various other accounting standards and interpretations issued in 2009, none of which are expected to have a material impact on the Company's financial position, operations or cash flows. 6 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 $3,316,380, no significant cash, minimal other assets, and no capital commitments. ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable ITEM 4. CONTROLS AND PROCEDURES Disclosures Controls and Procedures We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of the deficiency in our internal control over financial reporting discussed below. ITEM 4T. CONTROLS AND PROCEDURES Management's Quarterly Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: 7 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Management's assessment of the effectiveness of the small business issuer's internal control over financial reporting is as of the quarter ended October 31, 2009. We believe that internal control over financial reporting is effective. 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. This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - NONE ITEM 1A. RISK FACTORS - NONE 8 ITEM 2. CHANGES IN SECURITIES - The following additional common shares were issued during period of May 1, 2009 through October 31, 2009: a) 10,000 common shares were issued for the royalty payable valued at $404 at the market rate of $0.04. b) 106,250 common shares were issued to Directors for services valued at $4,250 at the market rate of $0.04. c) 11,000,000 common shares were issued in lieu of the HGB acquisition agreement valued at market value of $660,000 at the rate of $0.06. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE ITEM 5. OTHER INFORMATION - NONE ITEM 6. EXHIBITS - Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Exhibit 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act Exhibit 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act 9 SIGNATURES Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDINA INTERNATIONAL HOLDINGS, INC. (Registrant) Dated: December 15, 2009 By: /s/ Daniel Medina ----------------------------------- Daniel Medina, President Dated: December 15, 2009 By: /s/ Madhava Rao Mankal ----------------------------------- Madhava Rao Mankal, Chief Financial Officer