- Quarterly Report (10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Or

o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______________ to ______________

   

Medical International Technology, Inc.

(Exact name of small business issuer as specified in its charter)

 

Colorado		000-31469		84-1509950
(State or other jurisdiction of incorporation or organization)		(Commission file number)		(IRS Employer Identification No.)

 

1872 Beaulac

Ville Saint-Laurent

Montreal, Quebec, Canada H4R 2E7

(Address of principal executive offices)

[phone]

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90 days. Yes  x No o

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 of Regulation S-T (§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  x    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company x
(Do not check is a smaller reporting company)

                                  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No x

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock. As of August 14, 2012, there were 83,804,627 shares, par value $.0001 per share, of Common Stock issued and outstanding.

 

 

 

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MEDICAL INTERNATIONAL TECHNOLOGY, INC.

FORM 10-Q

June 30, 2012

 

TABLE OF CONTENTS

 

PART I.    FINANCIAL INFORMATION
Item 1.      Consolidated Financial Statements	3
Consolidated Balance Sheet	3
Consolidated Statements of Operations,	5
Consolidated Statements of Cash Flows	6
Consolidated Statements of Comprehensive Loss	7
Consolidated Statement of Stockholders’ (Deficit)	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.       Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.       Controls and Procedures	18
Part II. OTHER INFORMATION	19
Item 1        Legal Proceedings	19
Item 1A.    Risk Factors	19
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.       Defaults upon Senior Securities	19
Item 4.        Mine Safety Disclosures	19
Item 5.       Other Information	19
Item 6.       Exhibits	19
SIGNATURES	20

 

 

 

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PART 1 - FINANCIAL INFORMATION

 

Item 1. Financial Information

 

CONSOLIDATED BALANCE SHEET

 

		June 30, 2012				September 30, 2011
		(Unaudited)				(Audited)
Assets
Current Assets
Cash and cash equivalents		$	-			$	10,889
Accounts receivable			51,689				48,349
Inventories			276,825				322,906
Prepaid expenses			7,440				18,820
Total Current Assets			335,954				400,964
Long Term Investment
Investment in MIT China Joint Venture			57,284				242,056
Property and Equipment
Tooling and machinery			688,994				678,918
Furniture and office equipment			139,747				147,950
Leasehold improvements			28,751				30,438
			857,492				857,306
Less accumulated depreciation			(562,217	)			(502,782	)
			295,275				354,524
Other Assets
Patents (net of accumulated amortization of $9,412 and $16,097)			31,948				23,781
Total assets		$	720,461			$	1,021,325

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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CONSOLIDATED BALANCE SHEET

 

		June 30, 2012				September 30,   2011
		(Unaudited)				(Audited)
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Bank overdraft			402
Bank line		$	24 ,533			$	31,167
Deferred income			1,083,834				1,083,317
Accounts payable and accrued expenses			246,477				209,310
Amounts due to related parties			-				152,723
Total current liabilities			1,355,246				1,476,517
Long-Term Debts			205,200				177,247
Total Liabilities			1,560,446				1,653,764
Stockholders' Equity (Deficit)
Preferred stock, $.0001 par value; 3,000,000 shares authorized; None issued and outstanding as of December 31, 2007			-				-
Common stock, $.0001 par value; 100,000,000 shares authorized; 83,804,627 and 83,804,627 shares issued and Outstanding, respectively			7,979				7,909
Additional paid-in capital			12,867,476				12,804,206
Deficit			(13,316,317	)			(13,062,171	)
Other comprehensive income (loss)			(399,123	)			(382,381	)
Total Stockholders' Equity (Deficit)			(839,985	)			(632,439	)
Total Liabilities and Stockholders' Equity (Deficit)		$	720,461			$	1,021,325

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Three-Months Period Ended June 30,								Nine-Months Period  Ended June 30,
		2012 (Unaudited)				2011 (Unaudited)				2012 (Unaudited)				2011 (Unaudited)
Sales		$	401,157			$	89,248			$	828,644			$	290,503
Cost of sales			( 95,989	)			(33,909	)			(195,486	)			(99,915	)
Gross profit (loss)			305,168				55,339				633,158				190,588
Selling, general, and administrative expenses			(215,403	)			(214,597	)			(664,266	)			(412,243	)
			(215,403	)			(214,597	)			(664,266	)			(412,243	)
Gain (loss) from operations			89,765				(159,258	)			(31,108	)			(221,655	)
Other Income (Expense)
Equity earnings (loss) on MIT China Joint Venture			(80,166	)			(60,968)				(184,773	)			(81,802	)
Interest income/loss			240				-				824				-
Interest expense			(4,065	)			(24,687	)			(39,089	)			(31,867	)
Total other income (expense)			(83,991	)			(1,685	)			(223,038	)			(113,669	)
Net income (loss)		$	5,774			$	(244,873	)		$	(254,146	)		$	(335,324	)
Basic income (loss) per share		$	0.0001			$	(0.0003	)		$	(0.003	)		$	(0.004	)
Basic weighted average shares outstanding			83,804,627				71,478,627				83,804,627				71,478,627

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine-Month Period Ended
		June 30,				June 30,
		2012				2011
Cash flows from operating activities:
Net loss		$	(254,146	)		$	(335,324	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Equity loss from MIT China Joint Venture			184,733				81,802
Depreciation and amortization expense			94,517				27,232
Common stock issued for services			-				31,000
Changes in:
Accounts receivable			(3,340)				(3,586	)
Inventories			46,082				(135,994	)
Prepaid expenses			11,380				(19,013	)
Accounts payable and accrued liabilities			61,700				(202,266	)
Deferred income			518				112,092
Net cash used by operating activities			141,484				(444,057	)
Cash flows from investing activities:
Acquisition of patents			(16,692	)			(10,579	)
Investment in MIT China joint venture			-				-
Tooling and machinery			(47,718	)			(97,625	)
Net cash used by investing activities			(64,410	)			(108,204	)
Cash flows from financing activities:
Bank line			(31,167	)			-
Bank overdraft			402				-
Bank loans			27,953				123,533
Proceeds from issuance of stock, net			63,340				491,581
Decrease in amounts due to related parties			(152,723	)			(26,191)
Issuance of notes payable			-				-
Repayment on notes payable			-				-
Net cash provided from financing activities			(92,195	)			588,923
Effect of exchange rates			4,232				(11,185	)
Increase (decrease) in cash			(10,889	)			25,477
Cash, beginning of period			10,889				26,716
Cash, end of period		$	-			$	52,193
Supplemental disclosure of cash flow information:
Cash paid for interest		$	39,089			$	31,867
Cash paid for federal income taxes		$	-			$	-
Supplemental disclosure of non-cash transactions
Common stock issued for debt reductions		$	-			$	-

 The accompanying notes are an integral part of these consolidated financial statements

 

 

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

		Nine Months Ended June 30, 2012				Nine Months Ended June 30, 2011
Net loss		$	(254,146	)		$	(335,324	)
Other comprehensive income (loss)
Foreign currency translation adjustment			(16,742)				(15,365)
Net comprehensive income (loss)		$	(270,888	)		$	(350,689	)

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT)

 

		Common Stock								Additional Paid in
		Shares				Amount				Capital				Deficit
Balance – September 30, 2011			79,090,627			$	7,909			$	12,804,206			$	(13,062,171	)
Shares issued for debts			-				-				-				-
Shares issued for services			-				-				-				-
Shares issued for additional capital			180,000				20				17,980				-
Net loss for the period ended December 31, 2011			-				-				-				(235,153	)
															-
Balance – December 31, 2011			79,270,627				7,929				12,822,186				(13,297,324	)
Shares issued for debts			-				-				-				-
Shares issued for services			4,534,000				50				45,290				-
Shares issued for additional capital			-				-				-				-
Net loss for the period ended March 31, 2012			-				-				-				(24,767)
															-
Balance – March  31, 2012			83,804,627				7,979				12,867,476				(13,322,091
Shares issued for debts			-				-				-				-
Shares issued for services			-				-				-				-
Shares issued for additional capital			-				-				-				-
Net loss for the period ended June 30, 2012			-				-				-				5,774
															-
Balance – June 30, 2012			83,804,627				7,979				12,867,476				(13,316,317	)

The accompanying notes are an integral part of these consolidated financial statements

 

 

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Notes to Financial Statements

(Unaudited)

 

Note 1 – Basis of Presentation

 

Interim Financial Statements

 

The accompanying unaudited condensed consolidated financial statements of Medical International Technology, Inc. (“MIT” or the “Company”) and its subsidiary (collectively referred to as the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission.  All significant intercompany balances and transactions have been eliminated. These financial statements do not include all information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. It is recommended that these interim unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

 

In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months period ended June 30, 2012 are not necessarily indicative of the results which may be expected for any other interim periods or for the year ending September 30, 2012. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

Note 2 – Inventories

 

Inventories at June 30, 2012 and September 30, 2011 consist of the following:

 

		June 30, 2012				September 30, 2011
Raw materials		$	216,907			$	208,892
Work in process			57,780				102,259
Finished goods			2,138				11,755
Total		$	276,825			$	322,906

 

Note 3 – Property and Equipment

 

The cost of property and equipment is depreciated over the estimated useful lives of the related assets, which range from 5 to 7 years. Depreciation is computed on the straight-line method for financial reporting purposes and on the declining balance method for income tax reporting purposes. Depreciation expense for the nine months ended June 30, 2012 and 2011 was $87,311 and $22,144, respectively.

 

Note 4 – Intangible Assets

 

As of June 30, 2012, the Company has net patents on certain technologies aggregating $31,948. Amortization expense for the years ended June 30, 2012 and 2011 were $16,096 and $5,761, respectively. During the nine months ended June 30, 2012, the Company capitalized patent costs on its needle-free injector of $16,692.  Following is a detail of patents at June 30, 2012:

 

		Gross Intangible Assets				Accumulated Amortization				Net  Intangible Assets			Weighted Average Life (Years)
Patents		$	48,045			$	16,097			$	31,948		7.5 through 15

 

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Notes to Financial Statements

(Unaudited)

Note 5 –   Joint Venture Agreement

On May 6, 2009, the Company entered into a certain joint venture agreement (the “Joint Venture Agreement”) with Jiangsu Hualan Biotechnology Ltd. (China) (“Jiangsu Hualan”).  Pursuant to the Joint Venture Agreement, the parties thereto established a joint venture company, Jiangsu Hualan MIT Medical Technology (MIT China) Ltd. (“MIT China” or the “Joint Venture”), focusing on research, production and sales of medical equipments, import and export of medical equipments and components products, especially Needle-Free Jet Injector products. The total investment by the Joint Venture shall amount to $2,000,000, and the registered capital shall amount to $1,400,000.  The Company invested cash of $426,678 and transferred the license rights to produce and sell the Company’s needle-free injectors products into the Joint Venture.  The license rights were valued at $280,000 under the agreement.  The contributions by the Company resulted in the Company owning 49% of the registered capital of the Joint Venture.  Jiangsu Hualan contributed cash of $714,000, and owns 51% of the registered capital.

 

Under the Joint Venture Agreement, the Company appointed 1 member, and Jiangsu Hualan appointed 2 members, to the board of directors of the Joint Venture.  Profits of the Joint Venture will be allocated based upon each party’s investment in the registered capital.

 

During the period from May 6, 2009 to September 30, 2009, the Joint Venture had not commenced operations.  The Joint Venture commenced operations during the Company’s 1st quarter of fiscal 2010.

 

The Company accounts for its investment in MIT China in accordance with Financial Accounting Standards Board Accounting Standards Codification 323, “Investment — Equity Method and Joint Venture” (ASC 323), previously referred to as Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” Accordingly, the Company adjusts the carrying amount of its investment in MIT China to recognize its share of earnings or losses. As of September 30, 2011, the Company’s recorded investment in the MIT China was $242,056. During the nine months ended June 30, 2012, the Company recorded an equity loss from its investment in MIT China of $184,773.

Note 6 – Bank Line

The Company has an equipment line of credit up to a maximum of $350,000. The line is secured by account receivables, inventories, equipment and all other assets of the Company. At June 30, 2012, the Company had no amounts outstanding under the agreement. 

 

Note 7 – Related Party Transactions

 

Related party balances consist of the following at June 30, 2012 and September 30, 2011: 

 

		June 30, 2012				September 30, 2011
Payable to 2849-674 Canada Inc		$	-			$	72,723
Payable to 9211-0766 Quebec Inc			-				80,000
		$	-			$	178,767

The Company has borrowed from shareholders and corporations owned by shareholders. These loans are bearing interest at 8%, and are due during fiscal 2012.

 

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Notes to Financial Statements

(Unaudited)

Note 8 – Stockholders' Equity (Deficit)

 

Issuance of Common Stock

 

From time to time, the Company will issue common stock for services rendered, debt reductions or as part of private placement offerings. 

For the quarter ended June 30, 2012, there were no common stock issuances.  

Preferred Stock

 

As of June 30, 2012, there was no preferred stock outstanding. Dividend features and voting rights are at the discretion of the Board of Directors without the requirement of shareholder approval.

 

Outstanding Options

 

As of June 30, 2012 and 2011, there are no options outstanding to purchase shares of the Company’s common stock.

 

Outstanding Warrants

 

During the period ended June 30, 2011, the Company issued warrants to purchase an aggregate of 2,815,000 common shares at an exercise price of $0.15 per share and 333,332 common shares at an exercise price of $0.20 per share. The warrants were issued in connection with private placements completed during 2011. The warrants vested immediately and have terms of one to two years that expire between March 28, 2012 and February 4, 2013. The Company estimated the fair value of the warrants using the Black-Scholes method with assumptions including: (1) term of 1 year to two years; (2) a computed volatility rate of 205%; (3) a discount rate of $0.45%; and (4) zero dividends. The fair value of the warrants was estimated to be $218,991. 

 

Note 9 –Operating Leases

 

The Company leases its office and warehouse space under an operating lease that expires on December 31, 2014 that calls for a monthly rent of $4,414. Rent expense for the nine months ended June 30, 2012 was approximately $38,500.

 

 

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Notes to Financial Statements

(Unaudited)

Future minimum lease commitments pertaining to the lease expire as follow:

 

Year ended
September 30, 2012			52,549
September 30, 2013			52,964
September 30, 2014			52,964
Thereafter			13,241
		$	171,718

 

Note 10– Deferred Income

 

Deferred income consists of the following at June 30, 2012 and September 30, 2011: 

 

		June 30, 2012				September 30, 2011
Deposits from customers and distributors		$	11,335			$	10,817
Non-refundable Distribution Rights Deposit			1,072,500				1,072,500
Total		$	1,083,835			$	1,078,009

 

On November 1, 2007, the Company received a deposit of $1,300,000 for the worldwide rights to market and sells while maintaining our right to sell all Medical International Technology Inc.’s Needle-Free Jet-Injectors for the human and animal markets. This deposit was part of an agreement under negotiation, which was finalized in January 2009.  Upon finalization, the Company began recognizing the deposit into income over the contractual life of the agreement. During the year ended September 30, 2010, the Company recognized $130,000 into income under this agreement.  During 2011, the Company was notified of potential litigation related to this contract.  Accordingly, due to the uncertainty in a final resolution, the Company ceased recognizing income related to this contract during 2011.  Upon a final resolution of the dispute, the Company will begin amortizing the deposit into income over the remaining contractual life of the agreement.

Note 11 –Notes Payable

 

Long-term debt consists of the following at June 30, 2012 and September 30, 2011:

 

		June 30, 2012				September 30, 2011
Note payable to a bank, bearing interest at prime plus 3%, repayment of the loan in sixty (60) equal and consecutive installments of 2,413.12 starting January 20, 2012, secured by equipment, due January 20, 2016.		$	126,144			$	82,227
Loan Canada Economic Development, no interest, repayment of the contribution in sixteen (16) equal and consecutive quarterly installment starting twelve (12) month after the project completion date.			79,056				95,020
Long-term debt		$	205,200			$	177,247

 

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Future scheduled principal payments under note agreements are as follows:

June 30, 2013			28,957
June 30, 2014			51,442
June 30, 2015			51,442
June 30, 2016			51,442
June 30, 2017			21,917
		$	205,200

 

Note 12 – Contingencies

 

Legal Proceedings

 

From time to time, the Company is named in legal actions in the normal course of business. In the opinion of management, the outcome of these matters, if any, will not have a material impact on the financial condition or results of operations of the Company.

Investment in MIT China Joint Venture

The Company accounts for its investment in MIT China in accordance with Financial Accounting Standards Board Accounting Standards Codification 323, “Investment — Equity Method and Joint Venture” (ASC 323), previously referred to as Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” Accordingly, the Company adjusts the carrying amount of its investment in MIT China to recognize its share of earnings or losses. As of June 30, 2012, the Company’s recorded investment in the MIT China was $57,284. During the nine months ended June 30, 2012, the Company recorded an equity loss from its investment in MIT China of $184,773.

 

 

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Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Business Development

Expanding the product line :

Medical International Technology Inc. has been considerably expanding financial resources in R&D in the last 5 years, having spent several millions of dollars. MIT already has 5 products for the human market and 9 products for the animal market. The company will soon be unveiling two new additions to its human product line and one for its animal line.

MIT’s patented technology has received approval in several countries worldwide. These three new products are no exception.

 

The Company is refocusing its efforts and will target FDA approval for 2 of its latest product lines: first, the home use injector for diabetics and other treatments requiring daily injections, and second, product targeting physicians in their clinics for vaccination and other biological injection medications. FDA approval for these 2 products will help the company’s credibility all over the world.

 

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MIT products pipeline is already defined for 2012/2013; the realization of these new products design will be achieved by new finance to MIT and or a partnership with Medical and Pharmaceutical Companies.

New products for human diabetes, dentistry and poultry applications and their market potentials :

Diabetes

The International Diabetes Federation states that the diagnosis rate of diabetes has increased over the last two decades from 30 million to 246 million people with a disproportionate ratio coming from the United States, India, and China.

MIT is targeting this huge market with their newly developed Med-Jet model MIT-P-I within the next 8 to 10 month. “With our successful Chinese joint venture, MIT intends to introduce this new product in China first; thereafter we will have enough production capacity to sell all over the world.” The Med-Jet MIT-P-I is designed to be safe, precise, accurate, effective, easy to use and friendly to the environment.

 

Dentistry

According to the World Health Organization (WHO) statistics, last updated October 26, 2004, the number of dentists in the world was numbered in the millions. There are 234,104 registered Dentist in the USA, 18,861 in Canada, 50,920 in China and it is estimated that 400,000 will be needed in these three countries by 2030. Statistics show there are an estimated average of 6 to 10 dentists for every 10,000 people in Europe.

It is estimated that 150,000 U.S. dentists could administer about 250 million doses of local Anaesthetics per year for the gums, for a total market of about $3.5 billion.

MIT is targeting this lucrative market with their Med-Jet model MIT-H-VI within the next 12 to 16 month. MIT intends to introduce this new product in North America first; other countries will follow shortly after. In dental offices, painful needle injections are enough to make even the most rational person skip dental visits. The Med-Jet MIT-H-VI will finally bring an end to traumatic dental visits.

Poultry Vaccinations

MIT’s newly designed Agro-Jet model MIT-XII will help prevent the spread of deadly diseases by providing a needle-free alternative to the vaccination of billions of day-old baby chicks yearly. This high speed vaccinator will be able to inject thousands of birds per hour safely, precisely, accurately, effectively, with ease of use and friendly to the environment.

Projected Sales and Market Breakdown

Based on the actual financial crisis and market situation worldwide, the Company has revised its total sales forecast and believes it will grow revenues gradually to $25,000,000 within the next three to five years. The following information will outline market expectations by category and timeframe:

 

Human applications:

 

Our initial target market for the first year is cosmetic Dermatology, Plastic surgery, and General Practitioner for single and mass injections, using Med-Jet models MIT MBX and MIT-H-III. The second year, in addition to the previous models, the introduction of model MESO-JET a new product for the injections on the face for all cosmetic dermatology procedures, in the third and forth and fifth year we will introduce MIT-H-IV-1 and MIT-H-IV-5 will target private clinics and hospitals, also the injector for Diabetics, MIT P-I, and the Dental injector, MIT-H-VI, will be introduced and will drastically increase sales to achieve its forecast.

Animal applications:

 

Our initial target market for the first year is the pork, cattle, and poultry markets, using our existing and newly redesigned products for mass animal vaccination. The second year in addition to the previous models, MIT will introduce and market its day-old baby chicken injector, a highly-requested product by farmers around the world. During the third year, MIT will present 2 more new products expected to drastically increase sales to achieve its forecast.

 

 

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China joint venture

 

The creation of MIT China in June of 2009 has given MIT a unique advantage to expand its production operations and increase its sales and profits in the multi-billion dollar worldwide needle-free injector market. Furthermore, MIT China venture will help MIT supply large production volumes in lesser time, which will attract large medical and pharmaceutical partners.

 

The introduction of our Agro-Jet needle-free injector for animal application is going very well; our veterinary staff is doing an excellent job training our distributors in various regions. These efforts will result in sales growth for the coming months and years.

 

During the third quarter of fiscal year 2011, MIT China purchased 151,000 sq. ft. of land and began construction of our first building in Taizhou (China Medical City). This first building of 40,000 sq. ft. when finalized will be used for the production of injectors for the Chinese market only.

 

Work in progress at MIT China for the construction of its 40,000 sq. ft. building, the first stage (the offices) has been completed, and our first move of all our employees to Taishou was conducted in the beginning of August 2012. The other part of the construction is scheduled to be complete by December 2012, our managements and engineers are working hard to plan the purchasing of the equipment and tools necessary for the assembly and production of some of our Agro-Jet and Med-Jet products. The production facility should be able to supply a large number of injectors and disposables to the Chinese market.

 

Per the recent discussions and understanding of our general manager, Ethan Sun, with our Joint Venture partner, our plan of sales and expansion into the Chinese market is progressing and MIT China agreed and sold 9% of their joint venture for an investment of 18,000,000 RMB (US$3,000,000). MIT China now has 46.41%, we have 44.59%, and Taizhou Amazon Investment Center has 9% ownership in such venture.

 

We have recently supplied a CDC (Centre of Disease Control) vaccination clinic in China with one Med-Jet model MIT H-III, and requested an MIT China nurse to be present at the clinic at all times for training, supervision of the proper usage and procedures of our Med-Jet for vaccination., the results are very good so far and we expect more uses of our Med-Jet H-III from many of the CDC clinics and hospitals across China in fiscal year 2013.

 

We are proceeding positively with our SFDA for our new Med-Jet model H-4. We expect our certification in 2013 fiscal year.

 

Our Model Med-Jet H-4 will target all vaccination clinics, hospitals, all CDC Centers and many other departments that have needs for any biologic injections.

Our objective is to ensure that our injectors become an indispensable and environmentally friendly product for doctors, dentists, veterinarians and home users around the world.

 

We will continue providing a safe and effective means to help prevent the spread of deadly diseases to both humans and animals through the use of the Med-Jet® and Agro-Jet® needle-free injection system.

 

Results of Operations

 

Results of Operations for the three months ended  June 30, 2012 and 2011

 

For the nine-month period ended June 30, 2012, the Company experienced a net loss from operations of $31,108, which was primarily due to selling, general and administrative expenses of $664,266. Gross profits for the period were $633,158.

For the six-month period ended June 30, 2011, the Company experienced a net loss from operations of $221,655, which was primarily due to selling, general and administrative expenses of $412,243. Gross profits for the period were $190,588.

 

The reduced net loss between the comparable quarters was due to increased sales as the Company continues to push its products into the market along with reduced research and development costs. Sales for the nine-month period ending June 30, 2012 were $828, 644 compared to sales of $290,503 for the same period last year. Gross profits for the period ending June 30, 2012 represented 76% of sales, where gross profits for the same period last year represented 65% of sales.

 

 

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Liquidity and Capital Resources

For the nine-month period ending June 30, 2012, the Company’s cash position, including access to cash through a revolving line of credit, decreased to $10,889. Net cash used in operating activities was $141,484. Cash used by financing activities was $92,195 which was primarily a result of decreases in amounts due to related parties of $152,723.  Cash used by investing activities was $64,410, which was a result of acquisitions of new patent rights and tooling and machinery. The effect of exchange rates on cash increased cash balances by $4,232.

 

For the nine-month period ending June 30, 2011, the Company’s cash position increased to $25,477. Net cash used in operating activities was $444,057. Financing activities provided $588,9323 which was primarily as a result of increases in cash received of $491,581 from issuance of common stock.  Cash used by investing activities was $108,204, which was additional capital invested in the MIT China joint venture and acquisitions of new patent rights and tooling and machinery. The effect of exchange rates on cash decreased cash balances by $11,185.

 

Plan of Operations

MIT intends to concentrate its activities in the medical and veterinary sectors, in particular, in the field of equipment and instrumentation. The Company's strategy is to build good, reliable and cost effective products, seek and establish strategic alliances with different pharmaceutical companies and manufacturers to ensure good distribution channels for its products.

 

MIT promotes and sells products in over 30 countries including the United States of America. MIT is exerting every effort and using its resources to promote its products and to open markets for its technology. As we continue to market our products, we hope to gain broader acceptance of the needle-free injection technology. MIT is continually researching and developing its products to the market needs.

 

We will continue to seek additional funding to expand operations, develop sales revenue, conduct presentation to medical and pharmaceutical companies, achieve sales to a volume sufficient to sustain operations and yield a good return to our shareholders.

 

Product Development

Per our previous fillings for FDA approval for our needle-free injector, the MED-JET is designed specifically for human mass inoculations. The MED-JET is capable of delivering many types of medications such as vaccines, insulin and other types of injectables. Its low-pressure technology offers an advantage to alternative high pressure systems that can cause blowbacks and expose medical workers and patients alike to microscopic traces of blood.

According to the International Sharps Injury Prevention Society (http://www.isips.org), it has been estimated that one out of every seven workers is accidentally struck by a contaminated sharp point each and every year. The Center for Disease Control (CDC: http://www.cdc.gov/niosh/2000-108.html#5) estimates that there are 600,000 to 800,000 needle stick injuries per year in the U.S. alone, and many are not reported. More than 20 types of infectious agents have been transmitted through needlesticks, including hepatitis B and C, tuberculosis, syphilis, malaria, herpes, diphtheria, gonorrhea, typhus and Rocky Mountain spotted fever. The MED-JET will eliminate this risk to health care professionals and create a safer workplace. Other advantages include its light weight (0.5 kg) and an excellent medication absorption rate. Additionally, the system has the ability to increase or decrease the volume and pressure of injection. This technology is unique to MIT’s MED-JET MBX Injector. The system is designed to inject up to 600 individuals an hour.

The approval process can be expensive and may take an extended period of time. There can be no assurance that this system will receive approval from the FDA or if approved gain broad acceptance by the medical community or individual patients.

 

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During the last quarter of 2011 we signed with an outside consultant to help MIT with the FDA approval process and to expedite the approval.  This work is proceeding and few more tests must be done in order to file complete documentations to FDA, and we are expecting to complete these tests within the second quarter of 2013.

 

On December 15, 2005, we received full certification granted under the International Organization for Standardization, as well as the Canadian Medical Device Conformity Assessment System for devices to be licensed by HEALTH CANADA. These certifications allow MIT to currently market the Med-Jet Needle-Free Injector for human use in all countries other than the U.S. The Med-Jet injector has been submitted for FDA approval which, if accepted, will allow MIT to sell the Med-Jet in the United States, making it a truly worldwide system.

 

MIT's Needle-Free Injection System, designed specifically to allow fast, accurate and safe injections, is rapidly moving toward establishing itself as a valuable instrument in the fight against disease in both humans and animals. Spurred on by growing fears of a worldwide epidemic that could match or even exceed the deadly flu pandemic of 1918 which killed millions of people, the MIT team is focusing its efforts to make its Needle-Free Injection System available to the world.

 

Now that MIT is able to sell its Med-Jet in all countries other than the U.S., it is working to complete two FDA filings. The first of these will be for use of the Med-Jet for injecting anesthesia in a variety of situations. The second, and most significant in light of the news coming out of Asia concerning the spread of Influenza A (H1N1) to humans, will be the Med-Jet-H III and H-4, for mass vaccination in case of a pandemic, such as Avian Influenza, Polio, Tuberculosis, Malaria or HIV.

 

MIT will increasingly promote its Agro-Jet and our new Avian-Jet needle-free injector designed specifically for poultry vaccination. Having the same benefits as Med-Jet, Agro-Jet and Avian-Jet will become a valuable instrument in the fight against Avian Flu via its ability to mass inoculate animals at over 1000 injections per hour.

Off Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

 

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

 

Not required for Smaller Reporting Companies.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. 

 

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II OTHER INFORMATION

 

Item 1.   Legal Proceedings

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors

Not required for Smaller Reporting Companies.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.   Defaults upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

 

Not applicable.

 

Item 5.   Other information

 

None.

Item 6.   Exhibits

Exhibits

 

31.1	Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *	Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS **	XBRL Instance Document
101.SCH **	XBRL Taxonomy Schema
101.CAL **	XBRL Taxonomy Calculation Linkbase
101.DEF **	XBRL Taxonomy Definition Linkbase
101.LAB **	XBRL Taxonomy Label Linkbase
101.PRE **	XBRL Taxonomy Presentation Linkbase

 

*In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

 

** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

   

 

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Medical International Technology, Inc.
Date: AUGUST 14, 2012	By:	/s/ Karim Menassa
		Karim Menassa
		President, Chief Executive Officer, and Chief Financial Officer
		(Duly Authorized Officer, Principal Executive Officer, and Principal Financial Officer)

 

 

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