Medical International Technology Inc. (fka MDLH)

[jotuk6771]

Financial Condition and Results of Operations

During the fiscal year ending September 30, 2008 the Company experienced a net loss of $2,361,882, primarily comprised of selling, general and administrative expenses of $656,059 and research and development costs of $1,802,085. Included in research and development costs are expenses of $1,800,000 related to the Company's research and development contract with Idee International R&D, Inc., an affiliated entity. For the prior fiscal year 2007 the Company experienced a net loss of $898,376 where selling, general and administrative expenses totaled $830,363. And research and development costs were $134,294.

Net comprehensive loss, after adjustment for foreign currency translation, for fiscal year 2008 was $2,632,393.

For the twelve-months ended September 30, 2008 the Company experienced a decrease in sales of $9,813 compared to sales for the prior year. Gross profit for the twelve-months ended September 30, 2008 was $97,243 or approximately 30% of sales as compared to $216,652, or 64%. Costs of sales continue to be increased by the need to customize many of the items ordered to fit the particular needs of clients utilizing our products in new applications.

Liquidity and Capital Resources

During the fiscal year ending September 30, 2008 the Company's cash position decreased by $92,702. Net cash provided by operating activities was $521,257, resulting primarily from increases in related party payables and deferred income. Net cash used by financing activities was $332,014, resulting primarily from debt repayments of $282,318. Net cash used by investing activities was $4,648, resulting entirely from capital asset additions. The effect of exchange rates on cash during fiscal 2008 resulted in a decrease in cash values of $277,297.

The Company has reported a net liability position of $2,629,455 and has accumulated operation losses since inception of $9,333,413, 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.

Medical International Technology, Inc. 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.