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.
-10-
Medical International Technology, Inc.
Overview
Medical International Technology, Inc. (MIT) is receiving revenues 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, will become the most important medical city 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 US$ 1.4 million dollars.
MIT China received recently all the legal documents pertaining to the licenses for the manufacturing of all 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.
Our associations with "Jiangsu Hualan" the largest manufacturer of rubber stopper in China will help Medical International Technologies (MIT Canada) Inc. become a world leader in the Needle-Free technology and reduce the world's dependence on needles. Moreover, it will ensure that MIT injectors become an indispensable, environmentally friendly product for single and mass vaccination and biologics injectables for doctors and users around the world. MIT's mission is to help make the world needle-free.
Medical International Technology Inc. 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.
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.
-11-
Medical International Technology, Inc.
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 December 2007, the Financial Accounting Standards Board issued FASB Accounting Standards Codification 805, "Business Combinations" (ASC 805), previously referred to as Statement of Financial Accounting Standards No. 141R "Business Combinations." ASC 805 will require, among other things, the expensing of direct transaction costs, in process research and development to be capitalized, certain contingent assets and liabilities to be recognized at fair value and earn-out arrangements may be required to be measured at fair value recognized each period in earnings. In addition, certain material adjustments will be required to be made to purchase accounting entries at the initial acquisition date and will cause revisions to previously issued financial information in subsequent filings. ASC 805 is effective for transactions occurring after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may have a material impact on our consolidated financial position, results from operations and cash flows should we enter into a material business combination after the standards effective date.
In March 2008, the Financial Accounting Standards Board issued FASB Accounting Standards Codification 815, "Derivatives and Hedging" (ASC 815), previously referred to as Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities - An Amendment to SFAS 133" (SFAS 161). SFAS 161 applies to all derivative instruments accounted for under ASC 815 and requires entities to provide greater transparency on how and why entities use derivative instruments, how derivative instruments are accounted for under ASC 815, and the effect the derivative instruments may have on the results of operations and cash flows. ASC 815 is effective for fiscal years and interim periods beginning after November 15, 2008. Since ASC 815 only applies to disclosures it has not had a material impact on our consolidated financial position, results from operations, and cash flows.
In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 167, "Amendments to FASB Interpretation No. 46(R)" (SFAS 167). SFAS 167 addresses the effects of eliminating the qualifying special-purpose entity (QSPE) concept from Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" and addresses certain key provisions of FIN 46(R), including transparency of enterprises' involvement with variable interest entities (VIEs). SFAS 167 is effective for fiscal years beginning after November 15, 2009 and interim periods within those fiscal years. We are currently assessing the implications of this standard and evaluating the impact of adopting SFAS 167 on our consolidated financial statements.
Click here for further details here »
