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Medical Technology Inc. Files SEC form 10-K, Annual Report
Thursday, December 29 2011

Annual Report


Item 7. 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-K. 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.

Overview

Medical International Technology, Inc. is based in Montreal, Canada; specializing in production, marketing and sale of needle-free jet injector products designed for humans and animals, for single and mass injections. Needle-free jet injector technology and products provide advantages over traditional needle injection techniques and products, including; efficiency, handling security, biological waste elimination, and patient stress reduction.

The Company's major source of revenues is from sales. The company has maintained operations from these revenues and through equity and debt financing. The company has been dependent on advances from related parties to maintain operations. There are no agreements, assurances or commitments to continue providing these advances. Products are currently developed, assembled and shipped from our facility. Component manufacturing is subcontracted to various suppliers and machine shops.

On May 21, 2009 MIT signed a Joint Venture Agreement with the largest manufacturer of rubber stopper in China supplying to most of the Pharmaceutical Corporation MIT has also received an initial order of 120 Agro-Jet� for vaccination of livestock and poultry from the joint venture. The name of the joint venture company is "Jiangsu Hualan MIT Medical Technology (MIT China) Ltd" and it is located in Taizhou city in the Jiangsu province. This prime location supported by the central government, recently being named by the Central Chinese government as "China Medical City" and become one of the most important medical cities in China through the relocation of the pharmaceutical and medical devices corporations. MIT Canada/USA has 49% equity in "Jiangsu Hualan MIT Medical Technology (MIT China) Ltd." The total investment by both parties is $1.4 million dollars.

MIT China received all the legal documents pertaining to the licenses for the manufacturing of some of MIT Canada products and has started assembling the Agro-Jet models in September 2009 for the sales to the Chinese market. MIT Canada will continue to produce and supply most of the components for the joint venture. Our plan is to implement step by step the assembly and production of all our models for the Human "MED-JET" and Animal "AGRO-JET" needle-free technologies.

During fiscal year 2010 MIT China started their first clinical trial required towards obtaining the Chinese SFDA. The second and final trial was completed successfully also during the same fiscal year, MIT China received the final report from the two hospitals involved in the trial. At the start of fiscal year 2011 MIT China submitted the completed report to the Chinese SFDA authorities for final approval and issuance of the official licence to sell MIT Med-Jets.

On February 2011 MIT China received its official certification from the Chinese SFDA authorities to sell the MED-JET� products, in September 2011 MIT China received also received the price index for the Province of Jiangsu allowing our Med-Jet products to be sold in all Jiangsu Hospitals and clinics. MIT China is working hard towards obtaining other price index across all Chinese provinces during fiscal 2012 and 2013.

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 finalised will be used for the production of injectors for the Chinese market only. The construction is expected to be completed during the last quarter of 2012.

The Company is pleased to 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.


Management Plan of Operations

Medical International Technology's 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 and develop sales revenue to a volume sufficient to sustain operations.

Results of Operations

Comparison for the year ended September 30, 2011 to the year ended September 30, 2010

The following table presents the statement of operations for the year ended September 30, 2011 as compared to the comparable period of the year ended September 30, 2010. The discussion following the table is based on these results.

Years Ended September 30, 2011 2010 Revenues $ 437,378 $ 510,893 Cost of sales 200,848 228,408 Gross profit 236,533 282,485 Operating expenses Selling, general and administrative expenses 702,169 1,066,293 Total operating expenses 702,169 1,066,293 Operating income (loss) (465,636) (783,808 ) Other: Equity earnings (loss) on MIT China Joint Venture (130,762 ) (88,681 ) Amortization non-refundable Distribution Rights Deposit - 130,000 Interest expense (47,041 ) (8,620 ) Total other income (expense) (177,803) 32,699 Income (loss) before provision for income taxes (634,439 ) (751,109 ) Net loss $ (643,439) $ (751,109 )

Revenues

The company's consolidated revenues decreased by $73,515 or 14.4% to $437,378 during the fiscal year ending September 30, 2011. This slight reduction in sales was primarily due to the market situation in general.

Cost of Sales

The cost of sales decreased slightly by $27,560 in 2011. This slight decrease was related to our marketing and selling initiatives in the selected niche markets.

Gross Profit

The gross profit decreased by 16.26% for the year ending September 30, 2011, This decrease is due primarily to the marketing and selling initiatives in the selected niche markets that have secured our monthly sales.


Operating Expenses

Selling, general and administrative expenses decreased from approximately $364,124 to $702,169.

Comparison for the year ended September 30, 2010 to the year ended September 30, 2009

The following table presents the statement of operations for the year ended September 30, 2010 as compared to the comparable period of the year ended September 30, 2009. The discussion following the table is based on these results.

Years Ended September 30, 2010 2009 Revenues $ 640,893 $ 656,477 Cost of sales 228,408 228,334 Gross profit 412,485 428,143 Operating expenses Research and development costs - 1,981,104 Selling, general and administrative expenses 1,066,293 778,364 Total operating expenses 1,066,293 2,759,468 Operating income (loss) (653,808 ) (2,331,325 ) Other income (expense): Equity earnings (loss) on MIT China Joint Venture (88,681 ) - Interest income - 956 Interest expense (8,620 ) (3,841 ) Total other income (expense) (97,301 ) (2,885 ) Income (loss) before provision for income taxes (751,109 ) (2,334,210 ) Net loss $ (751,109 ) $ (2,334,210 )

Revenues

The company's consolidated revenues decreased by $15,584 or 0.02% to $640,893 during the fiscal year ending September 30, 2010. This slight reduction in sales was primarily due to the market situation in general.

Cost of Sales

The cost of sales increased slightly by $74 in 2010. This slight increase was related to our marketing and selling initiatives in the selected niche markets.

Gross Profit

The gross profit decreased by 3.65% for the year ending September 30, 2010, This decrease is due primarily to the marketing and selling initiatives in the selected niche markets that have secured our monthly sales.

Operating Expenses

Selling, general and administrative expenses increased by approximately $287,929 to $1,066,293. This increase stemmed primarily from the costs related to the production, investment in moulds and marketing initiatives in the various business segments.

Net Loss

The company's net loss decreased to $751,109 from $2,334,210, due to the fact that during the third quarter ended June 30, 2010, the Company received notification from Idee that the board of directors of Idee had agreed to terminate the agreement and release the Company of its obligations due of $3,403,982.


Liquidity and Capital Resources

During the fiscal year ending September 30, 2011 the Company's cash position decreased by $15,827. Net cash used by operating activities was $585,863, resulting primarily from accounts payable, accrued liabilities and inventories. Net cash provided by financing activities was $954,943, resulting primarily from the issuance of stock in private placements netting cash proceeds of $772,572. Net cash used by investing activities was $398,116 resulting primarily from the acquisition of Tooling and machinery of 363,379. The effect of exchange rates on cash during fiscal 2011 resulted in an increase in cash value of $13,209.

During the fiscal year ending September 30, 2010 the Company's cash position decreased by $50,745. Net cash used by operating activities was $3,014,516, resulting primarily from increases in related party payables and common stock issued for services. Net cash provided by financing activities was $2,813,706, resulting primarily from the issuance of stock in private placements netting cash proceeds of $346,004 and reduction in amounts due to related parties of 3,153,696. Net cash used by investing activities was $20,910. The effect of exchange rates on cash during fiscal 2010 resulted in a decrease in cash value of $230,645.

The Company has reported a negative working capital position of $41,075,553 and has accumulated operation losses since inception of $13,062,171, which raises substantial doubt about the Company's ability to continue as a going concern. The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders and upon obtaining the capital requirements for the continuing operations of the Company. Management believes actions planned and presently being taken provides the opportunity for the Company to continue as a going concern.

During the year ended September 30, 2011, the Company issued 12,830,332 shares of common stock in connection with private placements, debt reductions and for services. The Company issued 5,163,332 shares at $0.10 per share for total proceeds of $517,081, 365,000 shares were issued at $0.10 per share for total debt reductions of $36,500, and 7,302,000 shares were issued at $.0138 per share for services rendered of $100,921. The private placement proceeds were used to provide additional working capital.

The Company expects that revenues from existing and developing sales may not meet its liquidity requirements for the next 12-month period at its current level of operations. The company has been dependent on advances from related parties to maintain operations. There are no agreements, assurances or commitments to continue providing these advances. The company continues to rely on management to develop the business and work to develop sales. Management has and may continue to supplement cash flows from sales with additional equity and debt financing. Substantially, expanded operations are expected to require additional capital, either from a future offering of equity or the company pursuing other methods of financing, as appropriate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).

Critical Accounting Policies

The accompanying discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and all available information. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. US GAAP requires us to make estimates and judgments in several areas, including those related to recording various accruals, income taxes, the useful lives of long-lived assets, such as property and equipment and intangible assets, and potential losses from contingencies and litigation. We believe the policies discussed below are the most critical to our financial statements because they are affected significantly by management's judgments, assumptions and estimates.

Foreign Currency Translations

The Company operates out of its offices in Montreal, Canada and maintains its books and records in Canadian Dollars. The financial statements herein have been converted into U.S. Dollars. Balance sheet accounts have been translated at exchange rates in effect at the end of the year. Income statement accounts have been translated at average exchange rates for the year. Translation gains and losses are included as a separate component of stockholders' equity.

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board ("FASB") issued authoritative guidance that revises the manner in which entities present comprehensive income in their financial statements. The guidance requires entities to report comprehensive income in either a single, continuous statement or two separate but consecutive statements. This guidance will become effective for fiscal years beginning after December 15, 2011; however, we have early adopted this guidance as of the end of our fiscal 2011 reporting period as permitted by the guidance. The adoption of this new guidance had no impact on our consolidated financial condition and results of operations.


In May 2011, the FASB issued authoritative guidance to amend the fair value measurement and disclosure requirements. The guidance requires the disclosure of quantitative information about unobservable inputs used, a description of the valuation processes used and a qualitative discussion around the sensitivity of the measurements. The guidance will become effective for the Company at the beginning of our second quarter of fiscal 2012. We expect adoption to have no impact on our consolidated financial condition and results of operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are not required to provide the information required by this Item because we are a smaller reporting company.

Item 8. Financial Statements and Supplementary Data

Medical International Technology, Inc.

Financial Statements

Contents

Page Report of Independent Registered Public Accounting Firm 16 Financial Statements
Consolidated Balance Sheet 17 Consolidated Statements of Operations 18 Consolidated Statements of Comprehensive Loss 19 Consolidated Statement of Stockholders' (Deficit) 20 Consolidated Statements of Cash Flows 21 Notes to Consolidated Financial Statements 22


Report of Independent Registered Public Accounting Firm

To The Board of Directors and Stockholders of Medical International Technology, Inc.

We have audited the accompanying consolidated balance sheets of Medical International Technology, Inc. and subsidiaries as of September 30, 2011 and 2010, and the related consolidated statements of operations, comprehensive loss, stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2011 and 2010 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Medical International Technology, Inc. and subsidiaries as of September 30, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency. Those conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ PS STEPHENSON & CO., P.C.

Wharton, Texas
December 22, 2011



MEDICAL INTERNATIONAL TECHNOLOGY CONSOLIDATED BALANCE SHEETS -------------------------------------------------------------------------------- September 30, 2011 2010 Assets Current assets Cash and cash equivalents $ 10,889 $ 26,716 Accounts receivable 48,349 12,809 Inventories 322,906 224,223 Prepaid expenses 18,820 20,200 Total current assets 400,964 238,948 Property and Equipment Tooling and machinery 678,918 301,995 Furniture and office equipment 147,950 141,600 Leasehold improvements 30,438 29,132 Total property and equipment 857,306 427,727 Less accumulated depreciation (502,782 ) (451,779 ) Total property and equipment, net 354,524 20,948 Patents (net of accumulated amortization of $9,412 and $4,372) 23,781 14,834 Investment in MIT China Joint Venture 242,056 348,434 Total assets $ 1,021,325 $ 668,164

Liabilities and Stockholder's Equity (Deficit) Current liabilities Bank line $ 31,167 $ - Deferred income 1,083,317 1,078,009 Accounts payable and accrued expenses 209,310 312,303 Amounts due to related parties 152,723 178,767 Total current liabilities 1,476,517 1,569,079 Long-Term Debts 177,247 - Total liabilities 1,653,764 1,569,079

Stockholder's Equity (Deficit) Preferred stock, $.0001 par value; 3,000,000 shares authorized; No issued and outstanding shares. - - Common stock, $.0001 par value; 100,000,000 shares authorized; 79,090,627 and 66,260,295 issued and outstanding, respectively 7,909 6,626 Additional paid-in capital 12,804,206 11,931,996 Accumulated deficit (13,062,171 ) (12,418,732 ) Other comprehensive income (loss) (382,381 ) (420,805 ) Total Stockholder's Equity (Deficit) (632,439 ) (900,915 ) Total Liabilities and Stockholder's Equity (Deficit) $ 1,021,325 $ 668,164

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



MEDICAL INTERNATIONAL TECHNOLOGY CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------------------------------------------------- Years Ended September 30, 2011 2010 Revenues $ 437,378 $ 510,893 Cost of sales 200,845 228,408 Gross profit 236,533 282,485 Operating expenses Selling, general and administrative expenses 702,169 1,066,293 Total operating expenses 702,169 1,066,293 Operating income (loss) (465,636 ) (783,808 ) Other Equity earnings (loss) on MIT China Joint Venture (130,762 ) (88,681) Amortization Non-refundable Distribution Rights Deposit - 130,000 (130,762) 41,319 Interest expense (47,041 ) (8,620 ) Total other income (expense) (47,041 ) 32,699 ) Income (loss) before provision for income taxes (643,439) (751,109) Provision for (benefit from) income taxes - - Net loss $ (643,439) $ (751,109) Net loss per common share $ (0.01) $ (0.01) Weighted average common shares outstanding - basic and diluted 69,736,503 61,791,129