Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
On January 14th, 2010 - Medical International Technology Inc. received clearance by FINRA to be traded on the OTC Bulletin Board. MIT's shares are currently posted for trading on the OTC Bulletin Board under the ticker symbol MDLH.OB.
On January 25th, 2010, we redesigned the company website. The new website's purpose will be to inform all shareholders about new developments in the following fields: Management & Advisory Board; Products; Latest News and Operations.
On January 28th, 2010, we appointed Mr. Jacques Gauthier and Mr. Michel Carrier as members of our newly formed Advisory Board.
Mr. Jacques Gauthier has served on the board of directors of Axcan Pharma Inc. since 1995. He is currently an advisor to the President and Scientific Director at Montreal Clinical Research Institute. Mr. Gauthier also serves on the board of directors of a variety of medical and pharmaceutical companies and associations. He has held various senior management positions, both in Canada and abroad, with UpJohn Laboratories Inc. and UpJohn International Inc., currently owned by Pfizer. In 1984, Mr. Gauthier joined BioMega / Boehringer Ingelheim Research Inc. where he served as president and general manager until 1996.
Mr. Michel Carrier has held various senior management positions in marketing and sales over the past 25 years. His vast experience and innovative marketing methods make him a great asset as a member of MIT's Advisory Board.
MIT President and CEO, Mr. Karim Menassa, believes that the nomination and acceptance by Mr. Gauthier and Mr. Carrier is a very important and positive step for the immediate and future success of the company.
On February 4th, 2010, we appointed Mr. Harold Gervais as the 3rd member to join the newly-formed Advisory Board. Furthermore, Mr. Gervais will also hold the position of Vice-President and part-time Chief Financial Officer at Medical International Technology Inc.
Mr. Harold Gervais, MBA, has more than 25 years of experience in managing businesses of all sizes. He was Executive Vice President and CFO of ABB Canada and CIO of ABB Americas. ABB is one of the world's leader in power and automation engineering company with revenues of 35Bn in 2008.
Medical International Technology, Inc.
Moreover, Mr. Gervais has held financial and human resources management position at Kimberly-Clark. Kimberly Clark is leading the world in essentials for a better life with revenues of 19.1 Billion in 2009.
Mr. Gervais completed many integration projects, realized the restructuring of different organizations and the optimization of different accounting systems. He has also completed several turnaround and financing mandates. Throughout the years he has developed an expertise for the creation and the execution of realistic action plans that deliver expected results. He currently sits on the board of directors of several companies.
The nomination and acceptance by Mr. Harold Gervais to join MIT's Advisory Board and his assuming the position of Vice-President and Chief Financial Officer of Medical International Technology Inc. will strengthen MIT's management team. The addition of Mr. Gervais serves to better control the company's overall operations, including the Chinese Joint Venture, in order to reach our objectives in sales and profits for the coming years.
On February 9th, 2010, we appointed Dr. Francis Bellido, PhD, MBA, as the 4th member to join the newly-formed Advisory Board. Mr. Bellido will also hold the position of Vice-President and Chief Strategy Officer.
Dr. Francis Bellido has more than 25 years of experience in the Biosciences and Financial industries. He has held several top executive positions in both small and large companies. He was President and Chief Operating Officer at Supratek Pharma, a pharmaceutical company specializing in the development of cancer drugs. While President and Chief Executive Officer of SGF-Sant� he managed a $500M health science investment portfolio. Dr. Bellido has also held several executive positions with Eli Lily in the United States and Europe including Strategic Asset Director, Global Business Unit Manager and Head of Regulatory Affairs. Dr. Bellido also received a Masters degree in Pharmaceutical Sciences and a Ph.D. in Medical Microbiology from the University of Geneva in Switzerland. He received his MBA from the University of Montr�al. He has held the position of Invited Professor at the School of Management of the University of Qu�bec in Montr�al.
The nomination and acceptance by Dr. Francis Bellido to join MIT's Advisory Board and his assuming the position of Vice-President and Chief Strategy Officer of Medical International Technology Inc. will strengthen MIT's management team. The addition of Dr. Bellido will also enrich negotiation opportunities with Medical and Pharmaceutical companies and help MIT achieve its goal to partner with multinational corporations.
The creation of a multi-functional Advisory Board, which, when completed, will be composed of many individuals from diverse backgrounds, will serve to strengthen the management of Medical International Technology Inc. in support to the President and Chief Executive Officer Mr. Karim Menassa. Our goal is to increase efficiency and take further advantage of the opportunities ahead in the global market of needle-free jet-injector for human and animal applications.
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 world wide. These three new products are no exception. The company will continue working towards obtaining FDA approval, which is expected in the last quarter of this year.
MIT products pipeline is already defined for 2010/2011; the realisation 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:
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.
Medical International Technology, Inc.
Medical International Technology Inc. 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", said Mr. Karim Menassa. The Med-Jet MIT-P-I is designed to be safe, precise, accurate, effective, easy to use and friendly to the environment.
According to the World Health Organization (WHO) statistics, last updated 26 October 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 by 2030. Statistics show there is 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 120 million doses of local Anaesthetics per year for the gums, for a total market of about $3.5 billion.
Medical International Technology Inc. is targeting this lucrative market with their Med-Jet model MIT-H-VI within the next 12 to 16 month. MIT intends to introduce this new product in North America first; other countries will follow shortly after. In the Dental Office, painful needle injections are enough to make even the most rational person skip dental visits. The Med-Jet MIT-H-VI will finally bring an end to traumatic dental visits.
MIT's newly designed Agro-Jet model MIT-XII will help prevent the spread of deadly diseases by providing a needle-free alternative to the vaccination of billions of day-old baby chicks yearly. This high speed vaccinator will be able to inject thousands of birds per hour safely, precisely, accurately, effectively, with ease of use and friendly to the environment.
Chinese Joint Venture:
In June of 2009, the company entered in a Joint Venture with Chinese partners and on February 10th, 2010, its Chinese Joint Venture has received the production certification to produce Med-Jet products in China.
MIT China's production facilities were the subject of a recent visit by the SFDA. These facilities were deemed suitable for medical device manufacturing, including the production of disposable accessories, by the SFDA and have therefore been granted a production certification.
Clinical trials of Med-Jet models MIT-MBX and MIT-H-III are set to begin in the near future. The obtainment of the production certification for human products together with the results from the clinical trials will represent an essential stepping-stone toward the ultimate goal of obtaining a licence to sell our Med-Jet injectors in China.
Medical International Technology, Inc.
Projected Sales and Market Breakdown
On February 6th 2010 we announced in our Corporate Update that the company firmly believes it will grow revenues well past US$ 75,000,000 annually within the next three years. The following information will outline market expectations by category and timeframe:
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 MIT-H-IV-1 and MIT-H-IV-5 will target private clinics and hospitals. During the third year, the injector for Diabetics, MIT P-I, and the Dental injector, MIT-H-VI, will be introduced and will drastically increase sales to achieve and exceed its forecasted US$ 55,000,000.
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 and exceed its forecasted US$ 20,000,000.
Since its establishment in 1990, Jiangyin Lanling Bottle Stoppers Co., Ltd. (one of the members of Hualan Group) has grown to be the leading medical packaging material manufacturer in China with an extensive product range, unparalleled manufacturing scale, leading edge technologies and national recognition as a highly-valued technology enterprise. Lanling is also the leading butyl rubber stopper producer in the Asia Pacific region. Mr. Hua Guoping, President and Chairman of Hualan Group, will be working with Medical International Technology.
China joint venture
The creation of the joint venture named Jiangsu Hualan MIT Medical Technology (MIT CHINA) Ltd., 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. The joint venture also gives MIT the opportunity to achieve its goals for the short and long-term future.
Furthermore, MIT China venture will help Medical International Technology Inc. supply large production volumes in lesser time, which will attract large medical and pharmaceutical partners. Mr. Menassa's meetings with suppliers in China were successful and represent an important step towards reducing production cost without compromising quality.
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 the different provinces. These efforts will result in sales growth for the coming months and years.
Mr. Menassa's meeting with SFDA personnel was very positive. The construction of a class 10,000 cleanroom lab, recommended by the SFDA, was completed on January 29, 2010. Having received certification for our production facilities earlier this week brings us a step closer to our goal of beginning production of our Med-Jet line of products and all the disposable accessories in China for the Chinese market.
Mr. Menassa, together with his Chinese partners, also had successful meetings with two hospitals in the city of Shanghai recommended by SFDA personnel for clinical trials with Med-Jet models MIT-MBX and MIT-H-III. Our goal is to complete our clinical trials in June of 2010 and start marketing and selling in July 2010.
Medical International Technology Inc. objective is to ensure that its injectors become an indispensable, environmentally friendly product for doctors, dentists, veterinarians and home users around the world.
Medical International Technology, Inc.
Medical International Technology Inc. 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, 2009 and 2008
For the three-month period ended December 31, 2009, the Company experienced a net loss from operations of $287,825 which was primarily due to research and development costs of $152,467 and selling, general and administrative expenses of $283,274. Gross profits for the period were $153,572.
For the three-month period ended December 31, 2008, the Company experienced a net loss from operations of $580,402 which was primarily due to research and development costs of $450,000 and selling, general and administrative expenses of $150,378. Gross profits for the period were $19,305.
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, 2009 were $208,563 compared to sales of $70,915 for the same period last year. Gross profits for the period ending December 31, 2008 represented 73% of sales, where gross profits for the same period last year represented 27% of sales. This is primarily a result of the Company experiencing more steady sales beginning in the last quarter of fiscal 2009. Research and development costs decreased primarily as a result of the expiration of the Idee contract, which is currently on a month to month renewal at $50,000 per month, as compared to a monthly charge in the prior quarter of $150,000 per month.
Liquidity and Capital Resources
For the three-month period ending December 31, 2009, the Company's cash position increased to $82,648. Net cash used in operating activities was $139,520, primarily as a result of the Company's net loss offset by common stock issued for services of $123,000; financing activities provided $219,818, which was primarily as a result of increases in amounts due to related parties. Cash used by investing activities was $10,437, which was entirely additional capital invested in the MIT China joint venture. The effect of exchange rates on cash reduced cash balances by $64,674.
For the three-month period ending December 31, 2008, the Company's cash position was $11,704. Net cash used in operating activities was $438,218, primarily due to the Company's net loss during the period. Financing activities provided $191,446, entirely from increased borrowings from related parties. The effect of exchange rates on cash increased cash balances by $168,734.
Plan of Operations
We are engaged in the business of research, development, marketing and sales of needle-free jet injector technology and products for humans and animals, for single and mass injections.
We continue to market our product in all available markets, seek regulatory approvals to expand those market opportunities and improve our products for application to new markets.
We have recently completed several rounds of financing resulting in net proceeds to the company of approximately $1,287,520 and continues efforts to secure additional funding to support and expand operations. Funds from these sales of our common stock are being used to fund continued operations, develop and seek regulatory approvals for our products and market those products worldwide.
We will continue to seek additional funding to expand operations and develop sales revenue to a volume sufficient to sustain operations.
Medical International Technology, Inc.
We have filed for FDA approval for its needle-free injector - the MED-JET, 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 stuck 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 our 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 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.
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 market the Med-Jet Needle-Free Injector for human use in all countries other than the U.S., at this point. 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 world wide 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 (H5N1) to humans, will be the Med-Jet-H, for mass vaccination in case of a pandemic, such as Avian Influenza, Polio, Tuberculosis, Malaria or HIV.
MIT is also pursuing increasing interest in 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.
On December 22, 2005 we announced that as part of its continuing restructuring program MIT is forming two divisions. The Human Medical Technology Division will focus on the development, production, marketing and sale of needle-free injectors and other medical technologies for humans. The Animal Medical Technology Division will deal with all aspects of the development, production, marketing and sale of the needle-free injectors and other technologies for animal applications worldwide.
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.