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.
Expanding the product line:
Medical International Technology Inc. ("MIT or the "Company") has been expanding financial resources in R&D in the last 5 years. 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. The Company expects that the three new products will be no exception.
The Company is refocusing its efforts and will target FDA approval for two 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 two products will help the Company's credibility all over the world.
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.
The Company intends to target diabetes market through its newly developed Med-Jet model MIT-P-I within the next 8 to 10 months. MIT intends to first introduce this product in China in order to grow its production capacity to eventually expand into other countries. The Med-Jet MIT-P-I is designed to be safe, precise, accurate, effective, easy to use and friendly to the environment.
The Company plans to target the potentially lucrative dental Anesthesia market with its Med-Jet model MIT-H-VI within the next 12 to 16 months. MIT intends to introduce this new product in North America first before being introduced into other markets.
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
The following information will outline market expectations by category and timeframe:
In the next fiscal year, the Company plans to expand its market for cosmetic dermatology, plastic surgery, and general practitioner for single and mass injections. It will do so through the use of the Med-Jet models MIT MBX and MIT-H-III. The Company also plans to introduce a model MESO-JET a product for the injections on the face for all cosmetic dermatology procedures, as well as the MIT-H-IV-1 and MIT-H-IV-5, the MIT P-I injector for Diabetics, , and the MIT-H-VI Dental injector.
In the next fiscal year, the Company plans to expand into the pork, cattle, and poultry markets, using our existing and newly redesigned products for mass animal vaccination.
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 progressing well; our veterinary staff has been successfully job training our distributors in various regions. We expect that these efforts will result in sales growth for the coming fiscal quarters and years.
During the third quarter of fiscal year 2011, MIT China purchased 151,000 sq. ft. of land and began construction of their 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.
The work in progress at MIT China for the construction of its 40,000 sq. ft. building is expected to be completed and certified by the Chinese SFDA by March 2014. We will start planning and purchasing much 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.
During 2013, we plan to open a few more CDC vaccination clinics and sell to the dermatology departments in hospitals to better promote our products in China.
We recently received our first important order of 2012, for $196,360 of our new Med-Jet model H-4.
During the first and second quarters of 2013, we have received few more orders valued at approximately $220,000 from our existing models and disposable nozzles.
Part of these orders has been delivered and been sold to important hospitals across China and mostly in the dermatology departments.
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 December 31, 2013 and 2012
For the three-month period ended December 31, 2013 the Company experienced a loss net from operations of $95,803 which was primarily due to selling, general and administrative expenses of $98,112 and sales of $25,101. Gross profits for the period were $4,948.
For the three-month period ended December 31, 2012 the Company experienced a net loss from operations of $172,179, which was primarily due to selling, general and administrative expenses of $233,879. Gross profits for the period were $61,700.
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 three-month period ending December 31, 2013 were $25,101 compared to sales of $113,621 for the same period last year. Gross profits for the period ending December 31, 2013 represented 20% of sales, where gross profits for the same period last year represented 54% of sales.
Liquidity and Capital Resources
For the three-month period ending December 31, 2013, the Company's cash position, including access to cash through a revolving line of credit, decreased to $6,987. Net cash used in operating activities was $14,367. Cash used by financing activities was $4,364 which was primarily a result of bank loans of $16,379. Cash used by investing activities was $1,185, which was a result of acquisitions of new patent rights. The effect of exchange rates on cash decreased cash balances by $2,851.
For the three-month period ending December 31, 2012, the Company's cash position, including access to cash through a revolving line of credit, decreased to $79,399. Net cash used in operating activities was $107,446. Cash used by financing activities was $116,382 which was primarily a result of bank line of $101,660. Cash used by investing activities was $1,015, which was a result of acquisitions of new patent rights. The effect of exchange rates on cash increased cash balances by $745.
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.
Per our previous fillings for FDA approval for our needle-free injector, the MED-JET is designed specifically for mass human 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.
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, we have completed all the tests and we have already filled the application, we should now expect a communication from FDA within the next three month.
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.
MIT will increasingly promote its Agro-Jet needle-free injector. Having the same benefits as Med-Jet, Agro-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.