NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2016
(Unaudited)
NOTE
1 - INTRODUCTION
On
April 29, 2016, Medina International Holdings, Inc. (the “Company”) entered into an Acquisition and Purchase Agreement
with Medical Innovation Holdings, a Joint Venture (“MedHold”) effective April 29, 2016, whereby all of the assets
of MedHold were acquired by the Company. In conjunction therewith, 35,100,000 shares (post-reverse split 1-for-10) were issued.
Since the owners of MedHold now own approximately 94% of Medina, this transaction was accounted for as a reverse acquisition of
Medina by MedHold resulting in a recapitalization of Medhold. Accordingly, the financial statements presented herein do not contain
comparisons to the prior fiscal year, as operations with MedHold have only been ongoing since April 29, 2016.
Prior
to the acquisition, Medina went through a restructuring and divesture. For details, please see the 8-K/A filed by Medina on June
6, 2016.
The
Company is establishing a nationwide, state-by-state, multi-disciplinary medical specialist provider/practice network, staffed
by 16 types of Physician Specialists. These Physician Specialists will provide virtual medical consultations to the potential
millions of rural patient population base who are chronically underserved. This will be accomplished via a seamless, comprehensive,
sophisticated end-to-end virtual medicine program.
On
August 9, 2016 the Company announced that it had set up a subsidiary, 3Point Care, to provide services critical to the Company
for the administration, scheduling, claims processing, technical support as well as delivering medical and health related services.
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. The Company is a development stage enterprise and has
limited operations as of July 31, 2016. On July 31, 2016, the Company’s had a stockholders’ deficiency of $ 736,751.
Management
is devoting considerable effort to establish a business as discussed above. Management has taken various steps in that direction
and it believes that its 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:
Presentation
of Interim Information
In
the opinion of the management of the Company, the accompanying unaudited financial statements include all normal adjustments considered
necessary to present fairly the financial position and operating results of the Company for the period presented. The financial
statements and notes are presented as permitted by Form 10-Q, and do not contain certain information included in the Company’s
Annual Report on Form 10-K for the fiscal year ended April 30, 2016. It is management’s opinion that when the interim financial
statements are read in conjunction with the April 30, 2016 Annual Report on Form 10-K, the disclosures are adequate to make the
information presented not misleading. Interim results are not necessarily indicative of results for a full year or any future
period. The accompanying consolidated financial statements of Medical Innovation 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 subsidiaries. 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; and
9)
Contingent liabilities.
Future
events and their effects cannot be predicted with certainty; accordingly, our accounting estimates require 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 SEC Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized at the date services are rendered and 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.
Advertising
costs
Advertising
costs are expensed as incurred. The Company recorded no advertisement costs in the three months ended July 31, 2016.
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 consists of medical equipment and related assets. 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
|
|
|
Medical Equipment
|
|
|
7
years
|
|
|
Telemedicine Equipment
|
|
|
3
years
|
|
|
Computers
|
|
|
3
years
|
|
|
Furniture
|
|
|
5
years
|
|
|
Office Equipment
|
|
|
5
years
|
|
|
Office Phone
|
|
|
3
years
|
|
Long
Lived Assets
The
Company adopted Statement of Financial Accounting Standard 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
The
Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized
for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s
assets and liabilities. Any deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in
which the temporary differences are expected to reverse.
GAAP
generally requires that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however,
require entities to report specific changes in assets and liabilities, such as unrealized gains and losses on available-for-sale
securities, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components
of comprehensive income.
Issuance
of Shares for Service
The
Company accounts for employee and non-employee stock awards under 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.
Foreign
Currency Translations and Hedging
The
Company will be exposed to foreign currency fluctuations due to international trade. Management does not intend to enter into
forward exchange contracts or any derivative financial investments for trading purposes. There is no present international trade
and as such 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 intends to establish a nationwide, state-by-state, multi-disciplinary medical specialist provider/practice network, staffed
by 16 types of Physician Specialists. These specialist Physicians will provide virtual medical consultations to the potential
millions of rural patients who are chronically underserved. This will be accomplished via a seamless, comprehensive, sophisticated
end to end virtual medicine program.
Recently
issued accounting pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”)
amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand
the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the
FASB deferred the effective date of the revenue recognition guidance to reporting periods beginning after December 15, 2017. Early
adoption is permitted for reporting periods beginning after December 15, 2016. We are continuing to evaluate our method of adoption
and the impact this ASU, and related amendments and interpretations, will have on our consolidated financial statements (“CFS”).
In
August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as
a Going Concern” (“ASU 2014-15”), which requires management to perform interim and annual assessments of an
entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides
guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures
will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern.
ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016,
with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on the
Company’s CFS.
In
November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes”. The new guidance
requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent
on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within
those annual periods. The Company does not anticipate the adoption of this ASU will have a significant impact on its CFS.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition
requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02requires an entity to recognize assets and liabilities arising from
a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is
effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating
the effect this standard will have on its CFS.
In
March 2016, the FASB issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and
deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax
benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy
election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods
beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the ASU; however,
we expect the ASU will have a material impact on our CFS.
As
of July 31, 2016, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s
financial statements to have a material impact on the Company’s CFS.
NOTE
3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following as of July 31, 2016 and April 30, 2016.
|
|
|
July
31, 2016
|
|
|
April
30, 2016
|
|
|
|
|
|
|
|
|
|
|
Audit fee
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
Transfer agent
|
|
|
1,621
|
|
|
|
1,621
|
|
|
Attorney fees
|
|
|
200,522
|
|
|
|
200,522
|
|
|
Officers
|
|
|
60,000
|
|
|
|
|
|
|
Amount due for consultant BBVI, LLC
|
|
|
81,000
|
|
|
|
|
|
|
Total
|
|
$
|
344,643
|
|
|
$
|
203,643
|
|
NOTE
4 - NOTES PAYABLE
Notes
payable consisted of the following as of July 31, 2016 and April 30, 2016.
|
|
|
July
31, 2016
|
|
|
April
30, 2016
|
|
|
|
|
|
|
|
|
|
|
Syndicated Equity, Inc.
|
|
$
|
256,025
|
|
|
$
|
256,025
|
|
|
C. S. Seshadri
|
|
|
185,905
|
|
|
|
185,905
|
|
|
Total
|
|
$
|
441,930
|
|
|
$
|
441,930
|
|
The
Company retained a Note payable of $256,025. The Note was issued on June 18, 2015 and was due in one month at 1%. The Note carries
a default interest rate of 18% and is convertible at 60% of the Volume Weighted Average Price for 5 days prior to conversion.
This note is currently in default. The Company evaluated and recorded beneficial conversion on this note in prior years financial
statements.
The
Seshadri notes are payable on demand and are convertible into an equivalent of the Company’s common stock determined by
60% of the average of the three lowest closing bid prices of the Company’s common stock during the ten trading days prior
to the date the conversion notice is sent by Mr. Seshadri. The notes carry interest at 8%. Additionally, Mr. Seshadri’s
written consent for certain activities not in existence or not committed to by the Company on the issue date of the notes, as
follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets and certain advances and loans
in excess of $100,000. The Note was subject to a release of liability and was assigned to a subsidiary of the former Medina International
Holdings, Inc., which was the original maker of the Note. The release was conditional upon the Note being paid and in the event
of non-payment, the release would be null and void. Since the Note is unpaid and the former subsidiary does not have the ability
to pay, the Company has recorded a liability for the Note in these financial statements. The Company evaluated and recorded beneficial
conversion on this note in prior years financial statements.
NOTE
5 - EMPLOYMENT AGREEMENT
As
of July 31, 2016 there are no employment agreements with any management personal. However, on April 1, 2016 the Company entered
into a memorandum of understanding with its CEO that includes a tentative salary of $144,000 per annum based upon certain conditions
and other provisions. However, as of October 12, 2016 no definitive agreement has been signed.
NOTE
6 - PREFERRED STOCK
As
of July 31, 2016 the Company had 30 shares of convertible preferred stock outstanding. Each preferred stock is convertible in
to 1% of the outstanding common shares at the date of conversion. At July 31, 2016 the preferred shares were convertible into
approximately 11.4 million shares of common stock.
NOTE
7 - PENDING LITIGATION
The
Company assumed liabilities due to a former law firm of $140,000 (see note 3 above). The law firm has filed suit against the Company
and other guarantors to collect its fees, including costs. The Company is presently attempting to settle this matter.
NOTE
8 - CONTRACTUAL OBLIGATIONS
As
part of the acquisition on April 29, 2016, Medical Innovation Holdings, Inc. (the “Company”) assumed a consulting
agreement that was entered into on February 20, 2016 by MedHold JV, which obligates MedHold JV to pay BBV International Consulting,
LLC (“BBVI”) $30,000 per month through February 19, 2019 for strategic and corporate planning. The agreement was ratified
by the Company’s Board of Directors effective May 1, 2016. No material relationship exists between BBVI and its representatives
and any officers or directors of the Company. During the three months ended July 31, 2016, the Company expensed $90,000 on consulting
fees.
NOTE
9 - SHORT-TERM DEBT
As
of July 31, 2016 short term debt consisted of the following:
|
Short-Term
Debt
|
|
July
31,2016
|
|
|
Borrowings from shareholders
|
|
$
|
1,900
|
|
|
Short term debt
|
|
|
18,100
|
|
|
Total
|
|
$
|
20,000
|
|
The
short-term debts do not carry interest and are payable on demand.
NOTE
10 - STOCKHOLDERS’ EQUITY
860,000
common shares (post-reverse split 1-for-10) were issued during the three-month period for $172,000 at a price per post-split share
of $0.20 through a private placement to unrelated parties under Rule 506 of Regulation D.
NOTE
11 - SUBSEQUENT EVENTS
On
or about June 24, 2016, the Company proposed a reverse split of the common stock issued and outstanding on a one new share for
ten old shares basis, with fractional shares being rounded up to the next whole share, and sought authorization to change the
Company’s name to Medical Innovation Holdings, Inc. (note these actions required an amendment to the Articles of Incorporation
and required the approval of the Financial Industry Regulatory Authority (“FINRA”), which was granted). The majority
shareholders approved both proposals and a Schedule 14C Information Statement was filed on August 8, 2016. The stock split and
name change were effective September 15, 2016, and as such, the numbers reflected in the unaudited financial statements are post-split
figures; all per share data has been retroactively restated.