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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549

Form 10-K

|   |                                                                                    
|-- | -----------------------------------------------------------------------------------
|x  | ANNUAL REPORT UNDER SECTION
 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|   |                                                                                    
|   | For the fiscal year ended
January 31, 2009                                         
|   |                                                                                    
|OR
|   |                                                                                    
|o  | TRANSITION REPORT UNDER
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   |                                                                                    
|   | For the transition period
 from ____________ to ____________                       

|                                                       
|-------------------------------------------------------
|Commission
file number 001-33411                       
|                                                       
|Medical
 Nutrition USA, Inc.                           
|                                                       
|                                                       
|(Exact
 name of registrant as specified in its charter)

|                                                                     |  |                                      
|-------------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                             |  | 11-3686984                           
|                                                                     |  |                                      
|                                                                     |  |                                      
|(State
 or other jurisdiction of incorporation or                    |  | (I.R.S.
 Employer Identification No.)
|organization)                                                        |  |                                      
|                                                                     |  |                                      
|10 West Forest Avenue, Englewood, New Jersey                         |  | 07631                                
|                                                                     |  |                                      
|                                                                     |  |                                      
|(Address
 of principal executive offices)                            |  | (Zip
 Code)                          
|                                                                     |  |                                      
|Registrants
 telephone number, including area code: (201)
 569-1188
|                                                                    
|Securities
 registered under Section 12(b) of the Exchange Act:     
|                                                                    
|None                                                                
|                                                                    
|Securities
 registered under Section 12(g) of the Exchange Act:     
|                                                                    
|Common
 Stock, $0.001 par value                                     

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. 
Yes o  No  x

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. 
Yes o  No  x

Check
whether the issuer (1) has filed all reports to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes x  No  o

Indicate
by check mark if disclosure of delinquent filers in pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.    o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer, and smaller reporting company
in Rule 12b-2 of the Exchange Act.

| |                           |                            
| | ------------------------- | ---------------------------
| | Large accelerated filer o | Accelerated filer o        
| | Non-accelerated filer o   | Smaller Reporting Company x

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12B-2 of the
Exchange Act): Yes o  No x

The aggregate market value of
voting and non-voting stock held by non-affiliates of the registrant as of July
31, 2008 was approximately $30,837,858 (based on the average of the closing bid
price and closing ask price for shares of the registrants common stock as
reported on the NASDAQ Stock Market for the last trading date prior to that
date).

As of April 24, 2009 there
were 14,130,682 shares of the registrants common stock outstanding.

Documents
Incorporated by Reference

Portions of the registrants
Proxy Statement for the 2009 Annual Meeting of Shareholders scheduled to be
held June 3, 2009 are incorporated by reference in Part III hereof, which the
registrant intends to file with the Securities and Exchange Commission no later
that 120 days after the end of the fiscal year covered by this report.

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TABLE OF CONTENTS

|                               |              |                                                                                                                |   
|------------------------------ | ------------ | -------------------------------------------------------------------------------------------------------------- | --
|PART I                         |              |                                                                                                                |   
|                               | Item 1 -     | BUSINESS                                                                                                       | 2 
|                               | Item 1A
 -   | RISK
 FACTORS                                                                                                  | 6 
|                               | Item 2 -     | PROPERTIES                                                                                                     | 9 
|                               | Item 3 -     | LEGAL
 PROCEEDINGS                                                                                             | 9 
|                               | Item 4 -     | SUBMISSION
 OF MATTER TO A VOTE OF SECURITY HOLDERS                                                            | 9 
|                               |              |                                                                                                                |   
|PART II                        |              |                                                                                                                |   
|                               | Item 5 -     | MARKET
 FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
 PURCHASES OF EQUITY SECURITIES | 9 
|                               |              |                                                                                                                |   
|                               | Item 7 -     | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         | 11
|                               |              |                                                                                                                |   
|                               | Item 8 -     | FINANCIAL
 STATEMENTS AND SUPPLEMENTARY DATA                                                                   | 14
|                               | Item 9       | CHANGES
 IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                          | 14
|                               | Item 9A
 (T) | CONTROLS
 AND PROCEDURES                                                                                       | 15
|                               | Item 9B
 -   | OTHER
 INFORMATION                                                                                             | 16
|                               |              |                                                                                                                |   
|PART III                       |              |                                                                                                                |   
|                               | Item 10
 -   | DIRECTORS,
 EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE                                                       | 16
|                              
|                               | Item 11
 -   | EXECUTIVE
 COMPENSATION                                                                                        | 16
|                               | Item 12
 -   | SECURITY
 OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
 MATTERS               | 16
|                               | Item 13
 -   | CERTAIN
 RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                      | 16
|                               | Item 14
 -   | PRINCIPAL
 ACCOUNTANT FEES AND SERVICES                                                                        | 16
|                               | Item 15
 -   | EXHIBITS
 AND FINANCIAL STATEMENT SCHEDULES                                                                    | 16
|                               |              |                                                                                                                |   
|Signatures                     |              |                                                                                                                | 17
|Index to
 Financial Statements | F-1         
|Exhibit
 Index                 |             

| 
|-
|1

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FORWARD-LOOKING STATEMENTS

This
document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are forward-looking statements for purposes of
federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objectives of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements of belief;
and any statements of assumptions underlying any of the foregoing.

Forward-looking
statements may include the words may, could, will, estimate, intend,
continue, believe, expect or anticipate or other similar words. These
forward-looking statements present our estimates and assumptions only as of the
date of this annual report. Except for our ongoing obligation to disclose
material information as required by the federal securities laws, we do not
intend, and undertake no obligation, to update forward-looking statements.

Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed or any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties.

For
a detailed description of factors that could cause actual results to differ
materially from those expressed in any forward-looking statement please see
Risk Factors below.

|         |         
|-------- | --------
|Item
 1. | BUSINESS

INTRODUCTION

Medical
Nutrition USA, Inc. (a Delaware Corporation) (the
Company), incorporated in 2003, develops and distributes nutritional supplements for use in
long-term care facilities, hospitals and dialysis clinics. Some of the Companys
products are also sold through health food stores under private label or
licensing agreements. Unless the context otherwise requires, references to the
Company in this report refer to Medical Nutrition USA, Inc.

INDUSTRY OVERVIEW

Annual
sales of nutrition products, including supplements, fortified foods and
beverages and nutraceuticals in the United States were estimated to be
approximately $100 billion. Annual sales of nutritional supplements to health
care institutions, the industry segment in which the Company primarily
competes, are estimated to be approximately $5.0 billion annually and growing
at a rate of approximately 12% per year. The nutritional supplements industry
is fragmented and highly competitive and includes vitamins, minerals, dietary
supplements, herbs, botanicals and compounds derived there from. With certain
limited exceptions, the sale of nutritional supplements is not subject to FDA
approval prior to sale. See Government Regulation below. Opportunities in the
nutritional supplements industry were enhanced by the enactment of the Dietary
Supplement Health and Education Act of 1994 (DSHEA). Under DSHEA, vendors of
dietary supplements are able to educate consumers regarding the effects of
certain component ingredients.

LONG-TERM CARE

The
long-term care market includes nursing home, convalescent and assisted-living
facilities. There are approximately 17,000 nursing home facilities in the
United States. The number of Americans aged 65 and over is projected to increase
from 35 million to over 70 million by 2030. An important component of the Older
Americans Act (the OAA enacted in 1965) includes programs and services to
specifically address nutrition among older persons. Under the OAA, nursing home
facilities are required to assure that each resident maintain acceptable
parameters of nutritional status, such as body weight and protein levels,
unless the clinical condition demonstrates that this is not possible. Within
the nursing home resident population, protein energy malnutrition (PEM), a
deficiency of protein and energy (calories), is a common condition resulting in
loss of lean body mass, development of pressure ulcers, and impaired immune
response and organ function. In observational studies, Pro-Stat®, the Companys
modular protein supplement has been shown to be effective nutritional support
in the treatment of pressure ulcers, unintended weight loss and malnutrition.
In March 2006, a randomized, controlled clinical trial was published in the
peer-reviewed journal Advances in Skin and Wound Care, reporting a 96%
greater improvement in pressure ulcer healing among nursing home residents
receiving standard care plus Pro-Stat®, compared to a control group receiving
standard care plus a placebo.

Another
common condition within the nursing home resident population is urinary tract
infections. Urinary tract infections affect up to 50% of all nursing home
residents at an estimated treatment cost of greater than $1 billion annually.
In fiscal year 2009, the Company introduced its UTI-Stat product, a urinary
tract cleansing formula containing Proantinox, designed to aid in the
prevention of urinary tract infections and promote urinary tract health. The
Company is cooperating in a study being conducted in conjunction with Columbia
University Medical Center, on the role of UTI-Stat with Proantinox in
preventing urinary tract infections; the results of which will be published in
fiscal year 2010.

| 
|-
|2

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RENAL CARE

There
are more than 400,000 end stage renal disease patients undergoing dialysis
treatments in the United States. Dialysis patients need to maintain high
protein and calorie intake to avoid becoming malnourished. Dialysis causes a
higher need for protein intake because some protein loss occurs with each
treatment. Additionally, dialysis patients may suffer from poor appetite and
are typically restricted in the volume of liquids they can consume. Pro-Stat®
has been shown to have important benefits for dialysis patients: high protein
to volume ratio; small serving size; enhanced absorption; ease of
administration; and low sodium, potassium and phosphorous. The Company
participated in a study in cooperation with Renal Care Group and Vanderbilt
University to measure the efficacy of Pro-Stat® supplementation in improving
and maintaining serum albumin levels among dialysis patients, which was
completed in the fiscal year ended 2009. The results of this study are
currently being reviewed and should be published in the second quarter of
fiscal year 2010.

INDUSTRY TRENDS

The
Company believes that the market for its institutional nutritional supplements
will continue to expand as a result of the following:

| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The aging of the United
 States population and the resulting increase in the number of assisted
 living/nursing home residents;                                                                                       
| |   |                                                                                                                                                                                                                       
| |  | The growth in understanding
 of the link between diet, nutrition, and health, especially among the
 geriatric population; and                                                                                         
| |   |                                                                                                                                                                                                                       
| |  | Increased research into the
 beneficial effects of targeted nutritional intervention in reducing the
 severity of age-related disease and the incidence of nutritional deficiencies
 among institutionalized patients.

SALES, PRODUCTS AND STRATEGY

The
Company generates revenue principally through the sale of its branded products
directly to distributors who resell the products to end users, most of whom are
nursing homes and dialysis clinics, and through the sale of private label
products to others who sell these products to customers.

During
the past year, the Company has continued to implement its strategy to increase
the proportion of its sales generated by its own branded products, primarily to
nursing homes, nursing home distributors, and dialysis clinics. These products
include primarily the Pro-Stat® line of enzyme-hydrolyzed liquid protein used
to treat unintended weight loss, protein energy malnutrition and pressure ulcers, UTI-Stat, a urinary tract cleansing complex used to reduce the
incidence of urinary tract infection and promote urinary tract health., and
Fiber-Stat® liquid soluble fiber with FOS used to maintain bowel regularity and
probiotic intestinal health.

The
Companys strategy includes increasing the number of nursing homes, long-term
care facilities and dialysis clinics employing Pro-Stat®, UTI-Stat and
Fiber-Stat® in therapies. The Company uses consultant dietitians to supplement
its sales force also uses advertising and exhibitions at trade shows that focus
on the long-term care and dialysis markets. As a result of this strategy, unit
sales of the Companys branded products increased over 29% for the fiscal year
ended January 31, 2009 when compared to the prior fiscal year.

For
the fiscal year ended January 31, 2009, 76% of total sales were made to
distributors who resell products to end users. Two distributors accounted for
approximately 28% of total sales, as compared to 32% in the prior fiscal year.
The Company has no contractual arrangements with these distributors, and if
they were to discontinue purchasing from the Company, it could have a material
impact on the Companys sales unless end users were able to purchase the
Companys products from alternative distributors.

| 
|-
|3

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As
mentioned previously, in the past year, the Company introduced a new product
UTI-Stat with Proantinox, which we expect to be a material contributor to
revenues in the fiscal year ended 2010. Additionally, the Company has enhanced
its ProStat Advanced Wound Care formula with the addition of Citrulline to help
increase bloodflow and improve the effectiveness in treating pressure ulcers.

The
market for nutritional supplements is extremely competitive. There are many
companies with substantially greater resources than the Company and with
established brands presently being marketed, including Novartis Medical
Nutrition and Abbott Laboratories The Company believes that the success of its
strategy will depend upon the quality and effectiveness of its products; its
ability to establish brand name recognition for its products; its ability to
continue to develop new products, as well as the ability of its management and
sales force to implement and execute its strategy.

During
the fiscal year ended January 31, 2009, the Company recorded expenses, not
including salaries and wages, of $51,500 on research and development. For the
fiscal year ended January 31, 2008, the Company incurred $108,000 in research
and development costs.

MANUFACTURING

The
Company uses contracted third party manufacturers to produce its products. In
August 2003, the Company entered into a cross-ownership agreement with Organics
Corporation of America (Organics), its principal manufacturer, whereby mutual
protections were established regarding intellectual property and pricing.
Organics is responsible for receipt and storage of raw materials, production
and packaging, and labeling of finished goods. Organics, a related party owns
approximately 1% of the Companys outstanding stock. At present, the Company is
dependent upon Organics and another contract manufacturer for the production of
all of its products. If the contract manufacturers were unwilling or unable to
manufacture and deliver the Companys products, the Companys sales would be
adversely impacted. The Company believes at the present time it will be able to
obtain from its manufacturers the quantity of products it will need to meet
orders.

COMPETITION

The
nutritional supplement industry is highly competitive. Many of the Companys
competitors are large, well-known companies, such as Novartis Medical Nutrition
and Abbott Laboratories, that have considerably greater financial, sales,
marketing and technical resources than the Company. Additionally, these
competitors have research and development capabilities that may allow them to
develop new or improved products that may compete with product lines the
Company markets and distributes. In addition, competitors may elect to devote
substantial resources to marketing their products to similar outlets and may
choose to develop educational and information programs like those developed by
the Company to support their marketing efforts. In May, 2008, Abbott
Laboratories introduced its ProMod® liquid protein which is positioned
similarly to the Companys Pro-Stat® product. The Companys business, financial
condition and results of operations could be materially and adversely affected
by any one or more of such developments.

Competition
for the institutional nutritional supplement products the Company offers is
significant. These products compete against a number of well-known brands of
alternative or similar products with substantially greater market share than
the Companys products. As the Companys sales have grown, competitors have
attempted to introduce products that compete directly against the Companys
liquid protein supplement, such as Abbott Laboratories liquid ProMod®. The
Companys failure to adequately respond to the competitive challenges faced by
the products it offers could have a material adverse effect on its business,
financial condition and results of operations.

INTELLECTUAL
PROPERTY

The
Company regards the protection of copyrights, trademarks and other proprietary
rights that it may own or license as material to its future success and
competitive position. The Company intends to rely on a combination of laws and
contractual restrictions, such as confidentiality agreements, to establish and
protect its proprietary rights. Laws and contractual restrictions, however, may
not be sufficient to prevent misappropriation of proprietary rights or deter
others from independently developing products that are substantially equivalent
or superior.

| 
|-
|4

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Patents

In
January 2008, the Company was issued a patent for Method for Treating Wounds
to Promote Healing. This patent expires in 2023. In 1977, the Company was
issued four patents for its collagen hydrolysate product. These are for (1)
Method Of Providing High-Protein Nutrition By The Oral Administration Of A
Predigested Protein Composition, (2) Method Of Composition For Preventing
Nutritional Deficiency, (3) Method Of Treating Nutritional Deficiency During
Cardiac Cachexia, Diabetes, Hypoglycemia, Gastro-enterology, Lipid, Cell
Glycogen And Keratin Related Skin Conditions And Alcoholism, and (4) Method Of
Treating Obesity By The Oral Administration Of A Predigested Protein
Composition. In addition, a composition patent is pending for Prevention or
Treatment of Urinary Tract Infection.

Trademarks

The
Company has been using the Pro-Stat® mark since August 2002, the Fiber-Stat®
mark since August 2005 and the UTI-Stat mark since 2009. The Company intends
to take the actions that it believes are necessary to protect its proprietary
rights with respect to these marks, but it may not be able to do so on
commercially reasonable terms, if at all.

GOVERNMENT
REGULATION

The
formulation, manufacture and labeling of the Companys products are subject to
regulation by one or more federal agencies, including, principally, the Food
and Drug Administration (FDA). These activities are also regulated by various
agencies of the states and localities in which the Companys products are sold.

The
Dietary Supplement Health and Education Act of 1994 (DSHEA) was enacted in
1994. DSHEA amended the Federal Food, Drug, and Cosmetic Act and, in the
judgment of the Company, is favorable to the dietary supplement industry. The
legislation created a new statutory class of dietary supplements. This class
includes vitamins, minerals, herbs, amino acids and other dietary substances
for human use to supplement the diet. A dietary supplement which contains a new
dietary ingredient, one not on the market as of October 15, 1994, requires
evidence of a history of use or other evidence of safety establishing that it
will reasonably be expected to be safe, such evidence to be provided by the
manufacturer or distributor to the FDA before it may be marketed. DSHEA also recognizes
the need for the dissemination of information about the link between nutrition
and health and provides that publications, which are not false and misleading
and present a balanced view of available scientific information on a dietary
supplement, may be used in connection with the sale of dietary supplements to
consumers. Among other changes, DSHEA prevents the further regulation of
dietary ingredients as food additives and allows the use of statements of
nutritional support on product labels and in other labeling.

In
September 1997, the FDA issued final new regulations to implement DSHEA. Among
other things, these regulations established a procedure for dietary supplement
companies to notify the FDA about the intended marketing of a new dietary
ingredient or about the use in labeling of statements of nutritional support.
The regulations also established a format for nutrition labeling on dietary
supplements. The format became mandatory on March 23, 1999, and the Company
revised all of its dietary supplements labels to be in compliance by that date.

The
FDA and other federal authorities are reviewing alternative approaches to
assure the safety of vitamins, minerals, herbals and other products sold as
dietary supplements. Increased regulatory oversight could subject the Company
and other manufacturers and distributors of dietary supplements to increased
production and compliance costs and possibly require capital expenditures.
Future regulation affecting dietary supplements could result in a recall or
discontinuance of certain products.

EMPLOYEES

The
Company has 36 full time and 2 part time employees as of April 24, 2009.

| 
|-
|5

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|         |             
|-------- | ------------
|Item 1A. | RISK FACTORS

RISK FACTORS

The Company generates a significant amount of
revenues from two customers.

76%
of the companys sales are made to distributors who resell the products to end
users, typically nursing homes and hospitals. For the fiscal years ended
January 31, 2009 and 2008, two distributors accounted for approximately 28% and
32% of total revenues respectively. The Company does not have contracts with
these distributors and, as a result, there is no assurance that these
distributors will continue to order products from the Company or will continue
to order the products in the same amount. The loss of these distibutors could
have a material adverse effect upon the sales and operating results of the
Company unless end users were able to buy the companys products from
alternative distributors.

The Company may encounter problems
implementing its business strategy.

The
Company may encounter problems, delays and expenses in implementing its
business strategy. These may include, but are not limited to, unanticipated
problems and additional costs related to raw materials, marketing, competition,
acquisitions and product development. These problems may be beyond the
Companys control, and in any event, could adversely affect the Companys
results of operations. See Managements Discussion and Analysis or Plan of
Operation.

The Company faces increasing competitive
pressure.

Competition
for the institutional nutritional supplement products the Company offers is
significant. These products compete against a number of well-known brands of
alternative or similar products with substantially greater market share than
the Companys products. As the Companys sales have grown, competitors have
attempted to introduce products that compete directly against the Companys
liquid protein supplement, such as Abbott Laboratories liquid ProMod®, which
was introduced in May 2008. The Companys failure to adequately respond to the
competitive challenges faced by the products it offers could have a material
adverse effect on its business, financial condition and results of operations.

The Companys manufacturing is subject to
government regulations.

The
formulation, manufacture and labeling of the Companys products are subject to
regulation by one or more federal agencies, including, principally, the Food
and Drug Administration (FDA). These activities are also regulated by various
agencies of the states and localities in which the Companys products are sold.

The
FDA and other federal authorities are reviewing alternative approaches to
assure the safety of vitamins, minerals, herbals and other products sold as
dietary supplements. Increased regulatory oversight could subject the Company
and other manufacturers and distributors of dietary supplements to increased
production and compliance costs and possibly require capital expenditures.
Future regulation affecting dietary supplements could result in a recall or
discontinuance of certain products.

If the Company does not successfully manage
any growth it experiences, it may experience increased expenses without corresponding
revenue increases.

The
Companys business is growing at a rapid rate. This growth may place a
significant strain on management, financial and other resources. It also may
require the Company to increase expenditures before it generates corresponding
revenues. The Companys ability to manage future growth, should it occur, will
depend upon its ability to identify, attract, motivate, train and retain highly
skilled managerial, financial, business development, sales and marketing and other
personnel. Competition for these employees is intense. Moreover, the growth in
the Companys businesses will require the Companys management to integrate and
manage an increasing number of employees. The Company may not be able to
implement successfully and maintain its operational and financial systems or
otherwise adapt to growth. Any failure to manage growth, if attained, could
have a material adverse effect on the Companys business.

| 
|-
|6

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The Company has announced intentions to begin
selling certain of its products through retail stores.

The
Company has announced in fiscal 2009 that it intends to begin selling certain
of its products through retail stores. During fiscal 2009, the Company began
developing strategic plans and initiated discussions with several retailers in
preparation for the retail launch, but current economic conditions have delayed
the launch until fiscal 2010. The Company has limited experience in the retail
market. There are many existing products in the retail market that the Company
will have to compete against. Most of the competition is from companies larger
than us who have more financial resources to support their products with
marketing, advertising and rebates. The Company will need to make initial
expenditures in marketing and advertising to launch its retail products. There
is no certainty that the Company will realize profits from retail sales that
will exceed the expenses incurred. Management will need to carefully manage
this retail venture. If the Company is not successful in managing this, it
could have a material adverse effect on the Companys business.

The Company is dependent on one primary
manufacturer, Organics Corporation of America (Organics), a related party,
and a secondary manufacturer for the production of most of its products.

The
Company is dependent on Organics and a secondary manufacturer for the
production of most of its products. Organics has one factory for its production
facilities. If this manufacturer sustains damage to its facility, has labor or
financial problems, or materially changes the price of manufacturing, and the
secondary manufacturer is unable to manufacture on a timely basis the quantity
of products the Company purchases from Organics, this could interrupt the
supply of product which could cause the Company to lose product sales, which
could have a material adverse effect on the Companys business.

The Company is dependent on a limited number
of sources of supply for the raw materials for many of the products it offers.
If there were an interruption of supply of products, the Companys sales may
suffer and the Company could be required to abandon a product line.

The
Company is dependent on a limited number of sources of supply for the raw
materials for many of the products it offers. With respect to these products,
the Company cannot guarantee that these third parties will be able to provide
adequate supplies of raw materials in a timely fashion. If the Company is
unable to renew or extend an agreement with a third-party supplier, if an
existing agreement is terminated or if a third-party supplier otherwise cannot
meet the Companys need for raw materials, the Company may not be able to
obtain an alternative source of supply in a timely manner or at all. In these
circumstances, the Company may be unable to continue to market products as
planned and could be required to abandon or divest itself of a product line on
terms which would materially affect the Companys business.

The Company may be exposed to product
liability claims not covered by insurance.

The
Company may be exposed to product liability claims. Although the Company
believes that it currently carries and intends to maintain a comprehensive
multi - peril liability insurance package, the Company cannot guarantee that
this insurance will be sufficient to cover all possible liabilities. A
successful suit against the Company could have an adverse effect on its
business and financial condition if the amounts not covered by insurance are material.

The Companys future capital requirements
will depend on many factors. If the Company needs to obtain additional
financing and is unable to do so, it might not be able to continue to operate
at its current level.

The
Company believes that it has sufficient cash on hand to fully implement its
business strategy for. See Managements Discussion and Analysis or Plan of
Operation - Liquidity and Capital Resources. The Companys future capital
requirements will depend on many factors including: the costs of its sales and
marketing activities and its education programs for its markets, competing
product and market developments, the costs of developing new products, the
costs of expanding its operations, and its ability to generate positive cash flow
from its sales.

If
needed, additional funding may not be available on acceptable terms, or at all.
If additional funds were needed but were not available, the Company might be
required to significantly curtail or defer one or more of its marketing
programs or to limit or postpone obtaining or developing new products. If the
Company raises additional funds through the issuance of equity securities, the
percentage ownership of its then-current stockholders may be reduced and such
equity securities may have rights, preferences or privileges senior to those of
the holders of its common stock. If the Company raises additional funds through
the issuance of additional debt securities, these new securities would have
certain rights, preferences and privileges senior to those of the holders of
its common stock, and the terms of these debt securities could impose
restrictions on its operations. For a further discussion of expenditures and
other factors that could affect the Companys need for future capital, see
Managements Discussion and Analysis or Plan of Operation - Liquidity and
Capital Resources.

| 
|-
|7

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The Companys inability to obtain new
proprietary rights or to protect and retain its existing rights could impair
its competitive position and adversely affect its sales.

The
Company believes that the trademarks, copyrights and other proprietary rights
that it owns, will continue to be important to its success and competitive
position. If the Company fails to maintain its existing rights or cannot
acquire additional rights in the future, its competitive position may be
harmed. While some products the Company offers incorporate patented uses, most
of the products the Company sells are not protected by patents.

The
Company intends to take the actions that it believes are necessary to protect
its proprietary rights, but it may not be successful in doing so on
commercially reasonable terms, if at all. In addition, parties that license
their proprietary rights to the Company may face challenges to their patents
and other proprietary rights and may not prevail in any litigation regarding
those rights. Moreover, the Companys trademarks and the products it offers may
conflict with or infringe upon the proprietary rights of third parties. If any
such conflicts or infringements should arise, the Company would have to defend
itself against such challenges. The Company also may have to obtain a license
to use those proprietary rights or possibly cease using those rights
altogether. Any of these events could harm the Companys business.

The public market for the Companys common
stock may be volatile, and the price of the common stock may fluctuate for
reasons unrelated to the Companys operating performance.

There
has historically been a very limited public market for the Companys common
stock, and the Company does not know whether investor interest in the Company
will lead to the development of a more active trading market. The market prices
and trading volumes for securities of emerging companies, such as the Company,
historically have been highly volatile and have experienced significant
fluctuations both related and unrelated to the operating performance of those
companies. The price of the Companys common stock may fluctuate widely,
depending on many factors, including factors that may cause the Companys
quarterly operating results to fluctuate as well as market expectations and
other factors beyond the Companys control. This could restrict the Companys
ability to access the capital markets for necessary funding.

Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act
could have a material adverse effect on our business and stock price.

Section
404 of the Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal controls over financial reporting and disclosure
controls and procedures. The Company may not be able to identify and or
establish proper procedures to maintain an effective internal control
environment. Failure to achieve and maintain an effective internal control
environment could have a material adverse effect on our stock price or our
ability to access the capital markets for necessary funding.

The effect of general economic conditions and
the current financial crisis

Recent
distress in the financial markets has resulted in declines in institutional
spending, which can affect demand for the Companys products. Healthcare
institutions are exhibiting more stringent cost concerns and implementing
aggressive cost reductions. If the national economy or credit markets in
general were to deteriorate further, it is possible that such changes could put
negative pressure on our customers, affecting our cash flows. There can be no
assurance that our liquidity will not be affected by changes in the financial
markets and the global economy.

While
we do not anticipate that we will need additional financing or equity during
the next fiscal year, tightening of the credit markets could make it more
difficult for us to enter into agreements for new indebtedness or obtain
funding through the issuance of our securities. The effects of these changes
could also require us to make additional changes to our current plans and
strategy.

In
addition, the current credit crisis is having a significant negative impact on
businesses around the world, and the impact of this crisis on our major raw
material suppliers cannot be predicted. The inability of key suppliers to
access liquidity, or the insolvency of key suppliers, could lead to their
failure to deliver products or services. If we are unable to procure products
and services when needed, or if we experience deterioration in demand for our
products over an extended period of time, our sales and cash flows could be
negatively impacted in future periods.

Liquidity and Capital Resources

If
the Company raises additional funds through the issuance of common stock or
convertible preferred stock, the percentage ownership of its then-current
stockholders will be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of its common stock.
If the Company raises additional funds through the issuance of additional debt
securities, these new securities could have certain rights, preferences and
privileges senior to those of the holders of its common stock, and the terms of
these debt securities could impose restrictions on its operations. Management
believes that cash generated from operations, along with its current cash
balances, will be sufficient to finance working capital and capital expenditure
requirements for at least the next twelve months.

| 
|-
|8

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Concentration of Credit Risk

The
Company typically invests its excess cash in treasury backed money market
funds, corporate bonds and commercial paper. The diversification of the cash
investments is intended to secure safety and liquidity. As of January 31, 2009
the majority of cash and cash equivalents were invested in money market
accounts. The Company maintains the majority of its cash and cash equivalents
in bank accounts at two financial institutions. The balances, at times, may
exceed federally insured limits. At January 31, 2009, the Company had approximately
$9.2 million in excess of FDIC insured limits. The Companys operations are not
subject to risks of material foreign currency fluctuations, nor does it use
derivative financial instruments in its investment practices. The Company
places its marketable investments in instruments that meet high credit quality
standards. The Company does not expect material losses with respect to its
investment portfolio or exposure to market risks associated with interest
rates. The impact on the Companys
results of one percentage point change in short-term interest rates would
not have a material impact on the Companys
 future earnings, fair value, or cash flows
related to investments in cash equivalents or interest-earning marketable
securities.

|        |           
|------- | ----------
|Item 2. | PROPERTIES

The
principal executive offices of the Company are located at 10 West Forest
Avenue, Englewood, New Jersey 07631, where it leases approximately 7,500 square
feet. The lease is for a period of five years commencing January 1, 2005. The
annual rent for the fiscal year ending January 31, 2009 was approximately
$121,900, for the fiscal year ending January 31, 2010 it will be $80,100.

Approximately
3,500 square feet of this facility house the Companys administrative offices
with the balance utilized for shipping and warehousing. Some of the Companys
products are shipped by its third party manufacturer directly to major
customers. The Company believes its present facility is adequate for its
present and reasonably foreseeable future operational needs.

|        |                   
|------- | ------------------
|Item 3. | LEGAL
 PROCEEDINGS

None.

|        |                                                     
|------- | ----------------------------------------------------
|Item 4. | SUBMISSION
 OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

|        |                                                                                                                
|------- | ---------------------------------------------------------------------------------------------------------------
|Item 5. | MARKET FOR
 REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
 OF EQUITY SECURITIES.

Since April
18, 2007, the Companys common stock has been quoted on the NASDAQ Capital Market
under the symbol MDNU. Prior to that, the Companys common stock was quoted
on the OTC Bulletin Board under the symbol MDNU.OB. Information for periods
ending prior to April 18, 2007 as to the range of high and low bid quotations
for the Companys common stock was obtained from the National Quotation Bureau
Incorporated. Information for periods ending after April 18, 2007 as to the
high and low sales prices for the periods indicated was obtained from the
NASDAQ Stock Market:

|                   |  |      |      |     |   |      | 
|------------------ |  | ---- | ---- | --- | - | ---- | 
|THREE MONTHS ENDED |  | HIGH |      | LOW |  
|                   |  |      |      |     |  
|April 30,
 2007    |  | $    | 5.50 |     | $ | 4.00 | 
|July 31,
 2007     |  | $    | 7.10 |     | $ | 4.95 | 
|October 31,
 2007  |  | $    | 6.00 |     | $ | 3.80 | 
|January 31,
 2008  |  | $    | 5.49 |     | $ | 2.59 | 
|April 30,
 2008    |  | $    | 3.65 |     | $ | 2.72 | 
|July 31,
 2008     |  | $    | 3.34 |     | $ | 1.77 | 
|October 31,
 2008  |  | $    | 2.45 |     | $ | 1.65 | 
|January 31,
 2009  |  | $    | 1.90 |     | $ | 1.12 | 

The
above bid quotations for the periods ending prior to April 18, 2007 represent
prices between dealers and do not include actual retail mark-ups, mark-downs or
commissions and may not represent actual transactions.

As
of April 24, 2009, there were approximately 567 holders of record of the
Companys common stock.

The
Company has not declared any cash dividends on its common stock and it has no
intention to pay cash dividends in the foreseeable future.

| 
|-
|9

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As of
January 31, 2009, the following information is provided with respect to
compensation plans (including individual compensation arrangements) under which
equity securities of the Company are authorized for issuance, aggregated as
follows:

|                                                            |  |                                                                                       |  |                                                                         |      |                                                                                                                                           |  |     |    
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---
|Plan category                                               |  | Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights |  | Weighted averageexercise price ofoutstandingoptions, warrantsand rights |      | Number ofsecuritiesremainingavailable for futureissuance under equity
 compensation plans
 (excluding securities
 reflected in column (a) | 
|                                                           
|                                                            |  | (a)                                                                                   |  |                                                                         | (b)  |                                                                                                                                           |  | (c) |    
|                                                           
|Equity compensation plans approved by
 security holders     |  | 2,609,284                                                                             |  | $                                                                       | 2.52 |                                                                                                                                           |  |     | (1)
|                                                            |  |                                                                                       |  |                                                                         |      |                                                                                                                                           |  |     |    
|Equity compensation plans not approved by
 security holders |  | 200,000                                                                               |  | $                                                                       | 0.68 |                                                                                                                                           |  |    |    
|                                                            |  |                                                                                       |  |                                                                         |      |                                                                                                                                           |  |     |    
|                                                            |  |                                                                                       |  |                                                                         |      |                                                                                                                                           |  |     |    
|Total                                                       |  | 2,809,284                                                                             |  | $                                                                       | 2.39 |                                                                                                                                           |  |    |    
|                                                            |  |                                                                                       |  |                                                                         |      |                                                                                                                                           |  |     |    

|    |                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The 2003 Omnibus Equity Incentive Plan was amended to provide that as
 of January 31 of each year, the aggregate number of Common Shares reserved
 for issuance under the 2003 Plan is automatically increased in an amount
 equal to the number of Common Shares issued by reason of awards being
 exercised or settled, as applicable, during the immediately preceding fiscal
 year.

Company Stock Repurchase Plan

In December
2007, the Companys Board of Directors approved the Medical Nutrition USA, Inc.
Stock Repurchase Plan (the Plan). The Company did not obtain stockholder
approval. The Plan allowed for the purchase of up to 500,000 shares of Company
stock on the open market and from employees. The Plan allows for a maximum
weekly market purchase of 25,000 shares with no more than 50,000 shares in any
calendar month. Private transactions with employees can not exceed 50% of the
total shares to be purchased with no one individual employee exceeding 25% of
the total. The Plan commenced on January 15, 2008. As of January 31, 2009, the
Company had purchased 184,000 shares from employees and 264,000 shares on the
open market. The Company purchased these shares for an aggregate total of
$1,409,600. These purchased shares are deemed authorized and unissued shares
available for issuance. The Plan expired on July 31, 2008.

|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|----------------------------------- |  | --------------------------------- |  | ----------------------------- | ---- | ------------------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------------ | ------- | 
|Period                              |  | Total Number of
 Shares Purchased |  | Average Price
 Paid per Share |      | Total Number of
 Shares Purchased
 as Part of
 Publicly
 Announced Plans
 or Programs |         | Maximum
 Number of
 Shares that May
 Yet be
 Purchased Under
 the Plans or
 Programs |        
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |        
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|January 15, 2008  January 31, 2008 |  | 186,000                           |  | $                             | 3.20 |                                                                                       | 186,000 |                                                                                      | 314,000 | 
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|February 1, 2009-January 31, 2009   |  | 262,000                           |  | $                             | 3.11 |                                                                                       | 262,000 |                                                                                      |        | 
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 
|Total                               |  | 448,000                           |  | $                             | 3.15 |                                                                                       | 448,000 |                                                                                      |        | 
|                                    |  |                                   |  |                               |      |                                                                                       |         |                                                                                      |         | 

|  
|--
|10

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|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Overview -
During fiscal 2009, we were successful in implementing our strategy to expand
the distribution of our own branded products. As a result, the Companys
branded products are now being carried by approximately 113 distributors as
compared to 91 in the prior fiscal year, who supply products to long-term care
facilities and dialysis clinics.

Fiscal 2009
Highlights

Sales  Our
sales increased approximately 7%, to $13,747,200, during the fiscal year. The
sales increase was primarily the result of expanded distribution of our
Pro-Stat® line of hydrolyzed, liquid, modular protein and the introduction of
our UTI-Stat product. Sales of the Companys branded products increased
approximately 13%, from the prior fiscal year to $12,438.000.

New Product
Development  During fiscal 2009, we completed the development of, and began
marketing UTI-Stat, a natural urinary tract cleansing complex, containing
Proantinox®- a proprietary blend that aids in urinary tract health and protects
against recurrent urinary tract infections. In addition, an enhanced
formulation of Pro-Stat® Advanced Wound Care, a concentrated protein formula
clinically proven to aid in the healing of pressure ulcers, was developed and
will be introduced to the market in fiscal 2010. (See section on sales, product
and strategy)

Cash Balance
and Cash Flow  Our cash, and cash equivalents balance at January 31, 2009 was
$9,654,300. The Companys total cash, and cash equivalents, which included
short term investments in fiscal 2008, increased by $109,500. For the year,
cash provided by operating activities totaled $1,217,900 on a reported net loss
of $492,100. Cash provided by investing activities during the fiscal year ended
January 31, 2009 was $4,035,500 as compared to $4,487,000 cash used in the
comparable prior fiscal year. The increase in cash provided by investing
activities was primarily attributed to redemption of the Companys short term
investments. Cash used in financing activities during the fiscal year ended
January 31, 2009 was $807,100 as compared to $381,100 cash used in the
comparable prior fiscal year. The increase in cash used in financing activities
was primarily attributed to purchase of stock related to the Companys stock
repurchase plan.

Fiscal 2010
Expectations

We
expect our revenues to continue to grow as a result of our ongoing efforts to
expand distribution of our branded products. During fiscal 2009, the Company
expanded its field sales force by approximately 45%, which helped contribute to
a 29% growth in unit volume. As the sales force matures, we expect an increase
in both effectiveness and productivity, stimulating further growth in fiscal
2010.

UTI-Stat,
our urinary tract cleansing complex which was introduced in fiscal 2009 has
shown strong initial growth which we expect to continue into fiscal 2010. In
addition, in the second quarter of 2010, the Company plans to introduce an
enhanced formula of Pro-Stat® Advanced Wound Care, which improves blood flow to
promote the healing of pressure ulcers. The Company expects both products to
contribute to the growth during fiscal 2010.

The
Company expects to begin selling certain of its products through retail stores.
The Company believes that the retail sales opportunities for certain of its
products are significantly greater than in its traditional institutional
markets and that retail marketing will create greater awareness and be
complementary to its continuing efforts in nursing homes and dialysis clinics.
The Companys representatives have had discussions with several major retailers
regarding timing and product placement,. Because of the recessionary pressures
affecting many retailers, the Company believes that retail sales will not
contribute materially to results during fiscal 2010.

|  
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|11

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Results of Operations

The
following discussion of the financial condition and results of operation of the
Company should be read in conjunction with the Financial Statements and the
related Notes included elsewhere in this report.

Fiscal Year Ended January 31, 2009 Compared
to Fiscal Year Ended January 31, 2008

Sales
for the fiscal year ended January 31, 2009 were $13,747,200 as compared with
$12,800,600 for the fiscal year ended January 31, 2008, an increase of
approximately 7%. This increase was primarily attributable to an increase in
branded product sales to approximately $12,438,000 from $10,978,900. Effective
March 1, 2008, the Company reduced the price of certain Pro-Stat® formulas by
approximately 12% on a weighted average basis. This decrease was implemented to
allow the Company to more aggressively increase its market share and to
strengthen its competitive position. The increase in branded sales can be
attributed to growing awareness of our products and the increase in the size of
the Companys sales force. Almost all of the Companys branded product sales
were from formulations of hydrolyzed collagen. Private label sales decreased to
approximately $1,309,200 from $1,822,700 for the comparable prior year period,
as the Company has focused on increasing its institutional branded sales.

Cost
of sales for the fiscal year ended January 31, 2009 was $6,474,200 or 47.1 % of
sales, as compared with $5,994,900 for the fiscal year ended January 31, 2008,
or 46.8% of sales. Gross profit percentage was approximately 53% for the
periods ended January 31, 2009 and 2008.

Selling,
general and administrative expenses (SG&A) for the fiscal year ended
January 31, 2009, increased by $2,158,000 to $7,921,700, from $5,763,700 for
the fiscal year ended January 31, 2008. This increase was primarily
attributable to an increase in selling and marketing expenses of $1,443,100 and
an increase in general and administrative expenses of $715,000. This increase
in selling and marketing is primarily due to an increase in the size of the
Companys sales force, increased trade show and travel expenses and retail
markeeting development. The increase in general and administrative expenses is
primarily attributable to severance and recruitment costs of approximately
$225,000, higher bonus accruals of $107,000 and an increase in legal fees of
approximately $63,000.

Research
and development expenses for the fiscal year ended January 31, 2009 was $51,500
in comparison to $108,000 for the prior fiscal year. This decrease of $55,500
is primarily attributable to timing of the clinical trials.

For
the fiscal year ended January 31, 2009, the Company had an operating loss of
$700,200 as compared to an operating income of $934,000 for the fiscal year
ended January 31, 2008.

Interest
income for the fiscal year ended January 31, 2009 decreased to $237,800 in
comparison to $416,000 for the year ended January 31, 2008. This decrease is
due mainly to reduced interest rates and lower cash balances resulting from
cash used by the Company in repurchasing its own common stock under the stock
repurchase plan.

The
Company recorded a tax provision of $29,700 for the year ended January 31, 2009
at an effective rate of 6.4%. For tax purposes, certain expenses for stock
based compensation are not deductible. In fiscal year ended January 31, 2008,
the Company recorded a tax provision in the amount of $480,900, at an effective
tax rate of 35.6 %. For tax purposes, the Companys income is calculated prior
to certain GAAP charges for stock-based compensation, which is non tax
deductible.

The
Companys net loss for the fiscal year ended January 31, 2009 of $492,100 or $
(0.04) per share, compared to a net income for the fiscal year ended January
31, 2008 of $869,100 or $0.06 per share.

Liquidity and Capital Resources

At
January 31, 2009, the Company had cash and cash equivalents and short-term
investments of $9,654,300 as compared to $9,554,800 at January 31, 2008. At
January 31, 2009, approximately 95% of accounts receivable were less than 30
days past due. Cash provided by operations during the fiscal year ended January
31, 2009 was $1,217,900 as compared to $1,972,800 in the comparable prior
fiscal year. Cash provided by investing activities during the fiscal year ended
January 31, 2009 was $4,035,500 as compared to $4,487,000 cash used in the
comparable prior fiscal year.   The
increase in cash provided by investing activities was primarily attributed to
redemption of the Companys short term investments. Cash used in financing
activities during the fiscal year ended January 31, 2009 was $807,100 as
compared to $381,100 cash used in the comparable prior fiscal year. The
increase in cash used in financing activities was primarily attributed to
purchase of stock related to the Companys stock repurchase plan.

|  
|--
|12

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The
Companys future capital requirements will depend on many factors including:
costs of its sales and marketing activities and its education programs for its
markets, competing product and market developments, the costs of developing or
acquiring new products, the costs of expanding its operations, and its ability
to continue to generate positive cash flow from its sales.

If
the Company raises additional funds through the issuance of common stock or
convertible preferred stock, the percentage ownership of its then-current
stockholders will be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of its common stock.
If the Company raises additional funds through the issuance of additional debt
securities, these new securities could have certain rights, preferences and
privileges senior to those of the holders of its common stock, and the terms of
these debt securities could impose restrictions on its operations. Management
believes that cash generated from operations, along with its current cash
balances, will be sufficient to finance working capital and capital expenditure
requirements for at least the next twelve months.

Off -Balance Sheet Arrangements

As of January
31, 2009, we did not have any off-balance sheet financing arrangements or any
equity ownership interests in any variable entity or other minority owned
ventures.

Critical Accounting Policies:

Accounts Receivable - The Company provides an
allowance for doubtful accounts equal to the estimated uncollectible amounts in
trade accounts receivable. The Companys estimate is based on a review of the
current status of these accounts and historical trends. It is reasonably
possible that the Companys estimate of the allowance for doubtful accounts may
in the future change should historical trends of current account status
require.

Share Based Compensation - We account for our
stock based employee compensation plans under the Statement of Financial
Accounting Standard (SFAS) No. 123 (revised 2004), Shared-Based Payment
(SFAS No. 123R). SFAS No. 123R addresses the accounting for shared based
payment transactions in which an enterprise receives employee services for
equity instruments of the enterprise or liabilities that are based on the fair
value of the enterprises equity instruments or that may be settled by the
issuance of such equity instruments. SFAS No. 123R requires that such
transactions be accounted for using a fair value based method.

Deferred Tax Valuation Allowance - Deferred
taxes arise due to temporary differences in the bases of assets and liabilities
and from net operating losses and credit carry forwards. In general, deferred
tax assets represent future tax benefits to be received when certain expenses
previously recognized in the Companys statement of operations become
deductible expenses under applicable income tax laws or loss or credit carry
forwards are utilized. Accordingly, realization of deferred tax assets is
dependent on future taxable income against which these deductions, losses and
credits can be utilized. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Management considers
historical operating losses, scheduled reversals of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this
assessment.

Recent Accounting Pronouncements

In
September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements (SFAS No. 157), which
clarifies the definition of fair value whenever another standard requires or
permits assets or liabilities to be measured at fair value. Specifically, the
standard clarifies that fair value should be based on the assumptions market
participants would use when pricing the asset or liability, and establishes a
fair value hierarchy that prioritizes the information used to develop those
assumptions. SFAS No. 157 does not expand the use of fair value to any new
circumstances, and must be applied on a prospective basis except in certain
cases. The standard also requires expanded financial statement disclosures
about fair value measurements, including disclosure of the methods used and the
effect on earnings. The adoption of this pronouncement did not have a material
impact on our financial statements.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (FAS 159). FAS 159 permits companies to choose to
measure certain financial instruments and certain other items at fair value.
The standard requires that unrealized gains and losses on items for which the
fair value option has been elected be reported in earnings. FAS 159 is
effective as of the beginning of the entitys fiscal year that begins after
November 15, 2007, which was our fiscal year beginning February 1, 2008. The
adoption of this pronouncement did not have a material impact on our financial
statements.

In
February 2008, FASB Staff Position (FSP) FAS No. 157-2, Effective
Date of FASB Statement No. 157 (FSP No. 157-2) was issued. FSP
No. 157-2 defers the effective date of SFAS No. 157 to fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years, for all nonfinancial assets and liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). Examples of items within the scope of FSP
No. 157-2 are non-financial assets and non-financial liabilities initially
measured at fair value in a business combination (but not measured at fair
value in subsequent periods), and long-lived assets, such as property, plant
and equipment and intangible assets measured at fair value for an impairment
assessment under SFAS No. 144. We are currently evaluating the potential
impact, if any, of the adoption of FSP No. 157-2 on our financial statements.

|  
|--
|13

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In December
2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(FAS 141R), which replaces FASB Statement No. 141. FAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non controlling interest in the acquiree and the goodwill acquired. The
Statement also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. FAS 141R
is effective as of the beginning of an entitys fiscal year that begins after
December 15, 2008, which will be our fiscal year beginning February 1, 2009.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements - an amendment of Accounting Research Bulletin No. 51
(FAS 160), which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parents ownership interest and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
The Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. FAS 160 is effective as
of the beginning of an entitys fiscal year that begins after December 15,
2008, which will be our fiscal year beginning February 1, 2009. We are
currently evaluating the potential impact, if any, of the adoption of FAS 160
on our financial statements.

In December
2007, the Emerging Issues Task Force (EITF) issued EITF Issue No. 07-1,
Accounting for Collaborative Arrangements. EITF 07-1 provides guidance
concerning: determining whether an arrangement constitutes a collaborative
arrangement within the scope of the Issue; how costs incurred and revenue
generated on sales to third parties should be reported in the income statement;
how an entity should characterize payments on the income statement; and what
participants should disclose in the notes to the financial statements about a
collaborative arrangement. EITF 07-1 is effective as of the beginning of an
entitys fiscal year that begins after December 15, 2008, which will be our
fiscal year beginning February 1, 2009. We are in the process of evaluating the
impact, if any, of adopting EITF 07 -1 on our financial statements.

In April 2008,
the FASB issued FASB Staff Position No. 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing assumptions about renewal or extension used in
estimating the useful life of a recognized intangible asset under FAS No. 142,
Goodwill and Other Intangible Assets. This standard is intended to improve the
consistency between the useful life of a recognized intangible asset under FAS
No. 142 and the period of expected cash flows used to measure the fair value of
the asset under FAS No. 141R and other GAAP. FSP 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
which will be our fiscal year beginning February 1, 2009. The measurement
provisions of this standard will apply only to intangible assets of the Company
acquired after the effective date. We are in the process of evaluating the
impact, if any, of adopting FSP 142-3 on our financial statements.

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles. The implementation of this standard
will not have a material impact on the Companys financial position or results
of operations.

In
June 2008, the FASB issued FASB Staff Position (FSP) Emerging
Issues Task Force (EITF) No. 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities. Under the FSP, unvested share-based payment awards that contain
rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two-class method of
computing EPS. The FSP is effective for fiscal years beginning after
December 15, 2008, which will be our fiscal year beginning February 1,
2009. We are in the process of evaluating the impact, if any, of adopting EITF
03-6-1 on our financial statements.

|        |                                             
|------- | --------------------------------------------
|Item 8: | FINANCIAL
 STATEMENTS AND SUPPLEMENTARY DATA

See
the Companys Financial Statements, including the related notes thereto,
beginning on page F-1.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9: | CHANGES IN
 AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

|  
|--
|14

---



|            |                         
|----------- | ------------------------
|Item 9A(T): | CONTROLS AND
 PROCEDURES

Disclosure Controls and Procedures

Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by Medical Nutrition USA, Inc.
in the reports it files or submits under the Securities Exchange Act of 1934
(the Exchange Act) is recorded, processed, summarized, and reported within
the time periods specified by the Commissions rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to provide reasonable assurance that information required to be
disclosed by Medical Nutrition USA, Inc. in the reports it files or submits
under the Exchange Act is accumulated and communicated to management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.

Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Medical Nutrition USA, Inc. has
evaluated the effectiveness of its disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of
January 31, 2009, and, based upon this evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these controls and procedures
are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial
Reporting

Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Medical Nutrition USA, Inc. has
evaluated changes in internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the quarter ended January 31, 2009 and have concluded that no change has
materially affected, or is reasonably likely to materially affect, internal
control over financial reporting.

Managements Annual Report On Internal
Control Over Financial Reporting

Medical
Nutrition USA, Inc.s management is responsible for establishing and
maintaining an adequate system of internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a -15(f) and 15d-15(f). Our
internal control system was designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes, in accordance with accounting principles
generally accepted in the United States of America. Because of inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with
policies and procedures may deteriorate.

Medical
Nutrition USA, Inc.s management, including the Chief Executive Officer and
Chief Financial Officer, has conducted an evaluation of the effectiveness of
its internal control over financial reporting as of January 31, 2009 based on
the framework in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, management concluded that our internal control over financial
reporting was effective as of January 31, 2009.

This
annual report does not include an attestation report of Amper, Politziner &
Mattia, LLP., Medical Nutrition USA, Inc.s independent registered public
accounting firm, regarding internal control over financial reporting.
Managements report was not subject to attestation by Amper, Politziner &
Mattia, LLP pursuant to temporary rules of the SEC that permit Medical
Nutrition USA, Inc. to provide only managements report in this annual report.

|  
|--
|15

---



Limitations on the Effectiveness of Controls.

Our
management does not expect that our Disclosure Controls will prevent all error
and all fraud. A control system, no matter how well developed and operated, can
provide only reasonable, but not absolute assurance that the objectives of the
control system are met. Further, the design of the control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their design and monitoring costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of a
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated objectives under all potential future
conditions. Over time, control may become inadequate because of changes in
conditions, or because the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected.

|         |                   
|-------- | ------------------
|Item 9B. | OTHER
 INFORMATION

None

PART III

|         |                                                         
|-------- | --------------------------------------------------------
|Item 10. | DIRECTORS,
 EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information
regarding the Companys directors, officers and corporate governance is set
forth in Proposal 1 - Election of Directors in the Companys proxy statement
for its 2009 Annual Meeting of Shareholders to be held June 3, 2009. Such
information is incorporated herein by reference. Information regarding
compliance by the Companys directors and executive officers and owners of more
than ten percent of common stock with the reporting requirements of Section
16(a) of the Exchange Act is set forth in the proxy statement under the caption
Section 16(a) Beneficial Ownership Reporting Compliance. Such information is
incorporated herein by reference.

|         |                        
|-------- | -----------------------
|Item 11. | EXECUTIVE
 COMPENSATION

Information
regarding the compensation of the Companys executive officers and directors is
set forth in under the caption  Executive Compensation and Director
Compensation in the proxy statement. Such information is incorporated herein
by reference.

|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|Item 12. | SECURITY
 OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
 MATTERS

Information
regarding ownership of the Companys common stock by certain persons is set
forth under the caption Security Ownership of Certain Beneficial Owners and
Management in the proxy statement. Such information is incorporated herein by
reference.

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|Item 13. | CERTAIN
 RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information
regarding relationships or transactions between the Company and its affiliates
is set forth under the caption Transactions with Related Persons, Promoters
and Certain Control Persons in the proxy statement. Such information is
incorporated herein by reference

|         |                                       
|-------- | --------------------------------------
|Item 14. | PRINCIPAL
 ACCOUNTANT FEES AND SEVICES

Information
regarding the Companys principal accountant fees and services is set forth in
Proposal 2-Ratification of Selection of Independent Auditors in the proxy
statement. Such information is incorporated herein by reference.

|         |                                            
|-------- | -------------------------------------------
|Item 15. | EXHIBITS AND
 FINANCIAL STATEMENT SCHEDULES

See
the Exhibit Index at the end of this report

|  
|--
|16

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|                       |                                            
|---------------------- | -------------------------------------------
|Dated: April
 24, 2009 | MEDICAL
 NUTRITION USA, INC.               
|                       |                                            
|                       | By: /s/
 FRANCIS A. NEWMAN                 
|                       |                                            
|                       | Francis A.
 Newman, Chief Executive Officer

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

|                         |  |                                               |       |                 |  |      | 
|------------------------ |  | --------------------------------------------- | ----- | --------------- |  | ---- | 
|Signature                |  |                                               | Title |                 |  | Date | 
|                         |  |                                               |       |                 |  |      | 
|                         |  |                                               |       |                
|/s/ FRANCIS
 A. NEWMAN   |  | Chairman,
 Chief Executive Officer            |       | April 24,
 2009
|                         |  |                                               |       |                
|Francis A.
 Newman       |  | and Director
 (Principal Executive Officer)   |       |                
|                         |  |                                               |       |                
|                         |  |                                               |       |                
|/s/ FRANK J.
 KIMMERLING |  | Chief
 Financial Officer                      |       | April 24, 2009 
|                         |  |                                               |       |                
|Frank J. Kimmerling      |  | (Principal
 Accounting and Financial Officer) |       |                
|                         |  |                                               |       |                
|                         |  |                                               |       |                
|/s/ BERNARD
 KORMAN      |  | Director                                      |       | April 24,
 2009
|                         |  |                                               |       |                
|Bernard
 Korman          |  |                                               |       |                
|                         |  |                                               |       |                
|/s/ ANDREW
 HOROWITZ     |  | Director                                      |       | April 24,
 2009
|                         |  |                                               |       |                
|Andrew
 Horowitz         |  |                                               |       |                
|                         |  |                                               |       |                
|/s/ MARK H.
 ROSENBERG   |  | Director                                      |       | April 24,
 2009
|                         |  |                                               |       |                
|Mark H.
 Rosenberg       |  |                                               |       |                
|                         |  |                                               |       |                
|17                      

---



MEDICAL NUTRITION USA, INC.

INDEX TO FINANCIAL STATEMENTS

|                                                                                  |  |            
|--------------------------------------------------------------------------------- |  | -----------
|                                                                                  |  | Page(s)    
|                                                                                  |  |            
|Report of Independent Registered Public Accounting Firm                           |  | F-2        
|                                                                                  |  |            
|Balance Sheets at January 31, 2009 and 2008                                       |  | F-3        
|                                                                                  |  |            
|Statements of Operations for the Years Ended January 31, 2009 and
 2008           |  | F-4        
|                                                                                  |  |            
|Statements of Cash Flows for the Years Ended January 31, 2009 and
 2008           |  | F-5        
|                                                                                  |  |            
|Statements of Stockholders Equity for the Years Ended January 31,
 2009 and 2008 |  | F-6        
|                                                                                  |  |            
|Notes to Financial Statements                                                     |  | F-7 to F-22
|                                                                                  |  |            
|F-1                                                                              

---



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of
Directors and Stockholders
Medical Nutrition USA, Inc.

We have
audited the accompanying balance sheets of Medical Nutrition USA, Inc. as of
January 31, 2009 and 2008, and the related statements of operations, cash
flows, and stockholders equity 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 audit 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 their internal control over
financial reporting. Our audits include 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 includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes 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.

In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Medical Nutrition USA, Inc. as
of January 31, 2009 and 2008, 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.

As discussed
in Note 10 to the financial statements, effective February 1, 2007, the Company
adopted the provisions of Financial Interpretation (FIN) No. 48 Accounting for
Uncertainty in Income Taxes - an interpretation of Statement of Financial
Accounting Standards No. 109.

|                                    
|------------------------------------
|/s/ AMPER,
 POLITZINER & MATTIA, LLP
|                                    
|April 24,
 2009                     
|Hackensack,
 New Jersey             
|                                    
|F-2                                 

---



MEDICAL NUTRITION USA, INC.

BALANCE
SHEETS

|                                                                                                                                                                    |  |             |             |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                                    |  | January 31, |            
|                                                                                                                                                                    |  |             |            
|                                                                                                                                                                    |  | 2009        |             | 2008 |  
|                                                                                                                                                                    |  |             |             |      |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|ASSETS                                                                                                                                                              |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Current Assets:                                                                                                                                                     |  |             |             |      |   |             |  
|Cash and cash equivalents                                                                                                                                           |  | $           | 9,654,300   |      | $ | 5,208,000   |  
|Short-term investments                                                                                                                                              |  |             |            |      |   | 4,336,800   |  
|Accounts receivable, net of allowance of
 $65,600 and $45,000, respectively                                                                                         |  |             | 1,377,400   |      |   | 1,054,500   |  
|Inventories                                                                                                                                                         |  |             | 510,600     |      |   | 401,800     |  
|Deferred income taxes                                                                                                                                               |  |             | 406,500     |      |   | 877,700     |  
|Prepaid income taxes                                                                                                                                                |  |             | 8,300       |      |   | 232,000     |  
|Other current assets                                                                                                                                                |  |             | 191,900     |      |   | 179,800     |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Total current assets                                                                                                                                                |  |             | 12,149,000  |      |   | 12,290,600  |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Fixed assets, net of accumulated
 depreciation and amortization of $345,400 and $248,500, respectively                                                              |  |             | 318,800     |      |   | 199,000     |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Other assets:                                                                                                                                                       |  |             |             |      |   |             |  
|Deferred income taxes                                                                                                                                               |  |             | 969,000     |      |   | 480,000     |  
|Security deposits                                                                                                                                                   |  |             | 15,300      |      |   | 15,300      |  
|Investment in Organics Corporation of
 America                                                                                                                      |  |             | 125,000     |      |   | 125,000     |  
|Intangible assets, net of amortization                                                                                                                              |  |             | 276,800     |      |   | 252,700     |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  | $           | 13,853,900  |      | $ | 13,362,600  |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Current Liabilities:                                                                                                                                                |  |             |             |      |   |             |  
|Accounts payable                                                                                                                                                    |  | $           | 530,700     |      | $ | 364,800     |  
|Accrued expenses                                                                                                                                                    |  |             | 967,600     |      |   | 466,000     |  
|Accrued rebates                                                                                                                                                     |  |             | 73,700      |      |   | 61,700      |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Total current liabilities                                                                                                                                           |  |             | 1,572,000   |      |   | 892,500     |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Stockholders Equity:                                                                                                                                               |  |             |             |      |   |             |  
|Preferred stock $0.001 par value, 5,000,000
 shares authorized; no shares issued and outstanding at January 31, 2009 and
 2008                                      |  |             |            |      |   |            |  
|Common stock, $0.001 par value; 20,000,000
 shares authorized, 14,128,614 shares issued as of January 31, 2009 and
 14,045,483 shares issued as of January 31, 2008 |  |             | 14,100      |      |   | 14,000      |  
|Additional paid-in-capital                                                                                                                                          |  |             | 25,067,600  |      |   | 24,687,900  |  
|Accumulated deficit                                                                                                                                                 |  |             | (12,497,900 | )    |   | (12,005,800 | )
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             | 12,583,800  |      |   | 12,696,100  |  
|Less: treasury stock, at cost; 98,080 and
 52,562 shares, respectively                                                                                              |  |             | (301,900    | )    |   | (226,000    | )
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|Total stockholders equity                                                                                                                                          |  |             | 12,281,900  |      |   | 12,470,100  |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                                                                    |  | $           | 13,853,900  |      | $ | 13,362,600  |  
|                                                                                                                                                                    |  |             |             |      |   |             |  

|                                      
|--------------------------------------
|See notes to the financial statements.
|                                      
|F-3                                   

---



MEDICAL NUTRITION USA, INC.

STATEMENTS
OF OPERATIONS

|                                              |  |                         |            |      |   |            | 
|--------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- | 
|                                              |  | Years Ended January 31, |           
|                                              |  |                         |           
|                                              |  | 2009                    |            | 2008 |  
|                                              |  |                         |            |      |  
|                                              |  |                         |            |      |   |            | 
|Sales                                         |  | $                       | 13,747,200 |      | $ | 12,800,600 | 
|Cost of
 sales                                |  |                         | 6,474,200  |      |   | 5,994,900  | 
|                                              |  |                         |            |      |   |            | 
|Gross profit                                  |  |                         | 7,273,000  |      |   | 6,805,700  | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Selling,
 general and administrative expenses |  |                         | 7,921,700  |      |   | 5,763,700  | 
|                                              |  |                         |            |      |   |            | 
|Research and
 development expenses            |  |                         | 51,500     |      |   | 108,000    | 
|                                              |  |                         |            |      |   |            | 
|Operating
 (loss) income                      |  |                         | (700,200   | )    |   | 934,000    | 
|                                              |  |                         |            |      |   |            | 
|Interest
 income                              |  |                         | 237,800    |      |   | 416,000    | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|(Loss)
 income before income tax expense      |  |                         | (462,400   | )    |   | 1,350,000  | 
|                                              |  |                         |            |      |   |            | 
|Income tax
 expense                           |  |                         | 29,700     |      |   | 480,900    | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Net (loss)
 income                            |  | $                       | (492,100   | )    | $ | 869,100    | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|(Loss)
 earnings per common share:            |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Basic                                         |  | $                       | (0.04      | )    | $ | 0.06       | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Diluted                                       |  | $                       | (0.04      | )    | $ | 0.06       | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Weighted
 average common shares outstanding:  |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Basic                                         |  |                         | 13,893,787 |      |   | 14,128,601 | 
|                                              |  |                         |            |      |   |            | 
|                                              |  |                         |            |      |   |            | 
|Diluted                                       |  |                         | 13,893,787 |      |   | 15,553,755 | 
|                                              |  |                         |            |      |   |            | 

|                                      
|--------------------------------------
|See notes to the financial statements.
|                                      
|F-4                                   

---



MEDICAL NUTRITION USA, INC.

STATEMENTS
OF CASH FLOWS

|                                                                                      |  |                         |           |      |   |            |  
|------------------------------------------------------------------------------------- |  | ----------------------- | --------- | ---- | - | ---------- | -
|                                                                                      |  | Years Ended January 31, |          
|                                                                                      |  |                         |          
|                                                                                      |  | 2009                    |           | 2008 |  
|                                                                                      |  |                         |           |      |  
|                                                                                      |  |                         |           |      |   |            |  
|Operating Activities:                                                                 |  |                         |           |      |   |            |  
|Net (loss) income                                                                     |  | $                       | (492,100  | )    | $ | 869,100    |  
|Adjustments to reconcile (loss) income to
 net cash provided by operating activities: |  |                         |           |      |   |            |  
|Depreciation and amortization expense                                                 |  |                         | 157,100   |      |   | 101,900    |  
|Provision for losses on accounts
receivable                                           |  |                         | 20,600    |      |   | 800        |  
|Deferred income taxes                                                                 |  |                         | (17,700   | )    |   | 334,900    |  
|Stock based compensation                                                              |  |                         | 1,111,300 |      |   | 1,062,000  |  
|Changes in operating assets and
liabilities                                           |  |                         |           |      |   |            |  
|Accounts receivable                                                                   |  |                         | (343,600  | )    |   | (5,000     | )
|Inventories                                                                           |  |                         | (108,800  | )    |   | 94,400     |  
|Prepaid income taxes                                                                  |  |                         | 223,700   |      |   | (232,000   | )
|Other current assets                                                                  |  |                         | (12,100   | )    |   | (122,000   | )
|Accounts payable                                                                      |  |                         | 165,900   |      |   | (288,400   | )
|Accrued expenses                                                                      |  |                         | 501,600   |      |   | 189,400    |  
|Accrued rebates                                                                       |  |                         | 12,000    |      |   | (32,300    | )
|                                                                                      |  |                         |           |      |   |            |  
|Net cash provided by operating activities                                             |  |                         | 1,217,900 |      |   | 1,972,800  |  
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Investing Activities:                                                                 |  |                         |           |      |   |            |  
|Acquisition of fixed assets                                                           |  |                         | (216,800  | )    |   | (95,600    | )
|Website development costs                                                             |  |                         | (700      | )    |   | (1,700     | )
|Trademark costs                                                                       |  |                         | (51,300   | )    |   | (13,300    | )
|Capitalized patent costs                                                              |  |                         | (32,500   | )    |   | (39,600    | )
|Purchase of short term investments                                                    |  |                         |          |      |   | (4,336,800 | )
|Redemption of short term investments                                                  |  |                         | 4,336,800 |      |   |           |  
|                                                                                      |  |                         |           |      |   |            |  
|Net cash provided by (used in) investing
 activities                                  |  |                         | 4,035,500 |      |   | (4,487,000 | )
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Financing Activities:                                                                 |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Proceeds from exercise of options                                                     |  |                         | 42,200    |      |   | 203,200    |  
|Income tax benefit from exercise of stock
 options                                    |  |                         | 40,800    |      |   | 133,700    |  
|Stock repurchase plan                                                                 |  |                         | (814,200  | )    |   | (595,400   | )
|Purchase of treasury stock                                                            |  |                         | (75,900   | )    |   | (122,600   | )
|                                                                                      |  |                         |           |      |   |            |  
|Net cash (used in) financing activities                                               |  |                         | (807,100  | )    |   | (381,100   | )
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Net increase(decrease) in cash and cash
 equivalents                                  |  |                         | 4,446,300 |      |   | (2,895,300 | )
|Cash and cash equivalents - beginning of
 year                                        |  |                         | 5,208,000 |      |   | 8,103,300  |  
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Cash and cash equivalents - end of year                                               |  | $                       | 9,654,300 |      | $ | 5,208,000  |  
|                                                                                      |  |                         |           |      |   |            |  
|                                                                                      |  |                         |           |      |   |            |  
|Supplemental information:                                                             |  |                         |           |      |   |            |  
|Taxes paid during the year                                                            |  | $                       | 4,000     |      | $ | 258,800    |  
|                                                                                      |  |                         |           |      |   |            |  

|                                      
|--------------------------------------
|See notes to the financial statements.
|                                      
|F-5                                   

---



MEDICAL NUTRITION USA, INC.

STATEMENTS OF STOCKHOLDERS
EQUITY

YEARS ENDED JANUARY 31, 2009 AND 2008

|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|------------------------------------------------- |  | ------------ | - | ---------- | ------ | --------------- | - | -------------- | - | ------------------- | ----------- | ----- | ------- | ------ | - | -------- | - | - | ---------- | -
|                                                  |  | Common Stock |   | Additional |        | Accumulated     |   | Treasury Stock |   | Total Stockholders |            
|                                                  |  |              |   |            |        |                 |   |                |   |                     |            
|                                                  |  | Shares       |   | Amount     |        | Paid-in-capital |   | Deficit        |   | Shares              |             | Stock |         | Equity |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |  
|Balance at January 31, 2007                       |  | 14,027,294   |   | $          | 14,000 |                 | $ | 23,884,400     |   | $                   | (12,874,900 | )     | (22,851 | )      | $ | (103,400 | ) | $ | 10,920,100 |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Exercise of options                               |  | 125,266      |   |            | 200    |                 |   | 203,000        |   |                     |            |       |        |        |   |         |   |   | 203,200    |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Stock based compensation                          |  | 56,955       |   |            |       |                 |   | 1,062,000      |   |                     |            |       |        |        |   |         |   |   | 1,062,000  |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Income tax benefit from exercise of stock options |  |             |   |            |       |                 |   | 133,700        |   |                     |            |       |        |        |   |         |   |   | 133,700    |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Stock repurchase plan                             |  | (186,000     | ) |            | (200   | )               |   | (595,200       | ) |                     |            |       |        |        |   |         |   |   | (595,400   | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Purchase of treasury stock                        |  | (30,594      | ) |            |       |                 |   |               |   |                     |            |       | (29,711 | )      |   | (122,600 | ) |   | (122,600   | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Net income                                        |  |             |   |            |       |                 |   |               |   |                     | 869,100     |       |        |        |   |         |   |   | 869,100    |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Balance at January 31, 2008                       |  | 13,992,921   |   | $          | 14,000 |                 | $ | 24,687,900     |   | $                   | (12,005,800 | )     | (52,562 | )      | $ | (226,000 | ) | $ | 12,470,100 |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Exercise of options                               |  | 69,297       |   |            |       |                 |   | 42,200         |   |                     |            |       |        |        |   |         |   |   | 42,200     |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Restricted stock                                  |  | 276,407      |   |            | 200    |                 |   |               |   |                     |            |       |        |        |   |         |   |   | 200        |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Stock based compensation                          |  |             |   |            |       |                 |   | 1,111,300      |   |                     |            |       |        |        |   |         |   |   | 1,111,300  |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Retirement of treasury stock                      |  |             |   |            |       |                 |   | (500           | ) |                     |            |       |        |        |   |         |   |   | (500       | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Income tax benefit from exercise of stock options |  |             |   |            |       |                 |   | 40,800         |   |                     |            |       |        |        |   |         |   |   | 40,800     |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Stock repurchase plan                             |  | (262,000     | ) |            | (100   | )               |   | (814,100       | ) |                     |            |       |        |        |   |         |   |   | (814,200   | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Purchase of treasury stock                        |  | (46,091      | ) |            |       |                 |   |               |   |                     |            |       | (45,518 | )      |   | (75,900  | ) |   | (75,900    | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Net loss                                          |  |             |   |            |       |                 |   |               |   |                     | (492,100    | )     |        |        |   |         |   |   | (492,100   | )
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  
|Balance at January 31, 2009                       |  | 14,030,534   |   | $          | 14,100 |                 | $ | 25,067,600     |   | $                   | (12,497,900 | )     | (98,080 | )      | $ | (301,900 | ) | $ | 12,281,900 |  
|                                                  |  |              |   |            |        |                 |   |                |   |                     |             |       |         |        |   |          |   |   |            |  

See notes to the financial statements

F-6


---



MEDICAL NUTRITION USA, INC.NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 1. Organization
and Business:

Medical
Nutrition USA, Inc. (a Delaware Corporation) (referred to herein as Medical
Nutrition or the Company), incorporated in 2003, is primarily engaged in the development and
distribution of nutritional and health products. The Company develops
nutritional supplements for sale to physicians, dispensing medical clinics,
nursing homes and network marketing companies. The Companys products are sold
under its own brands and/or under private labels in the United States.

Note 2. Significant
Accounting Policies:

Concentration of credit risk  We are subject
to concentration of credit risk primarily from out cash investments. The Company
invests its excess cash in treasury backed money market funds, corporate bonds
and commercial paper. The diversification of the cash investments is intended
to secure safety and liquidity. The Company maintains the majority of its cash
and cash equivalents in bank accounts at two financial institutions. The
balances, at times, may exceed federally insured limits. At January 31, 2009,
the Company had approximately $9.2 million in excess of FDIC insured limits.
The Companys operations are not subject to risks of material foreign currency
fluctuations, nor does it use derivative financial instruments in its
investment practices. The Company places its marketable investments in
instruments that meet high credit quality standards. The Company does not expect
material losses with respect to its investment portfolio or exposure to market
risks associated with interest rates. The impact on the Companys
results of one percentage point change in short-term interest rates would
not have a material impact on the Companys
future
earnings, fair value, or cash flows related to investments in cash equivalents
or interest-earning marketable securities.

The other
financial component, which principally subjects the Company to significant
concentrations of credit risk, is trade accounts receivable. For the fiscal
years ended January 31, 2009 and 2008, two distributors accounted for approximately
28% and 32% of total revenues respectively. The Company has no contractual
arrangements with these distributors, and if they were to discontinue
purchasing from the Company, it could have a material impact on the Companys
sales unless end users were able to purchase the companys products from
alternative distributors.

Cash and Cash Equivalents  The Company
invests its excess cash in highly liquid short-term investments. The Company
considers short-term investments that are purchased with an original maturity
of three months or less to be cash equivalents. Cash and cash equivalents
consisted of cash and money market accounts at January 31, 2009 and 2008.

Short-term investments  As of January 31, 2008
the Companys investments consist of U.S Government backed securities,
corporate commercial paper and certificates of deposit. The Companys
short-term investment policy requires investments to be rated AAA with a
maturity of six months or less.

The Company
accounts for short-term investments as held to maturity investments pursuant to
SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Under this Statement, securities that the Company has the positive
intent and ability to hold to maturity are classified as held to maturity
securities and are carried at cost.

Accounts Receivable  The Company provides an
allowance for doubtful accounts equal to the estimated uncollectible amounts in
trade accounts receivable. The Companys estimate is based on a review of the
current status of these accounts and historical trends. It is reasonably
possible that the Companys estimate of the allowance for doubtful accounts may
in the future change should historical trends of current account status
require.

Inventories  Inventories, which consist
primarily of purchased finished foods, are stated at the lower of cost or
market, using the first-in, first-out (FIFO) cost method.

Fixed Assets  Furniture, fixtures and
equipment, and leasehold improvements are stated at cost and depreciated and
amortized over their estimated useful lives, which range from 3 to 7 years.
Leasehold improvements are amortized over the lesser of the useful lives or
lease terms. Depreciation and amortization are calculated using the
straight-line method for financial reporting purposes. Expenditures for repairs
and maintenance, which do not extend the useful life of the property, are
expensed as incurred.

F-7


---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 2. Significant
Accounting Policies (continued):

Intangible Assets  Patent application costs
relate to the Companys U.S. patent applications and consist primarily of legal
fees and other direct fees. The recoverability of the patent application costs
is dependent upon, among other factors, the success of the underlying clinical
studies used to support the patent and ultimately the resulting revenue. The
Company is amortizing the costs over the shorter of their useful lives or five
years. Trademarks costs are stated at cost and are amortized over the shorter
of their useful lives or seventeen years. Website costs are stated at cost and
are amortized over five years.

Research and Development  The Company
utilizes independent third parties to design and test certain products and to
conduct clinical trials and studies on its products. These expenditures are
accounted for as research and development costs and are expensed as incurred.

Income Taxes  The Company provides for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. SFAS 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the financial statement carrying amounts and the
tax basis of assets and liabilities. Additionally, the Company adopted
Financial Interpretation (FIN) No. 48, Accounting
for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109.
This interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The interpretation
contains a two-step approach to recognizing and measuring uncertain tax
positions accounted for in accordance with SFAS No. 109. The first step is to
evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as
the largest amount that has a greater than 50% likelihood of being realized
upon effective settlement. The interpretation also provides guidance on
derecognition, classification, interest and penalties, and other matters.

Fair Value of Financial Instruments  The
estimated fair values for financial instruments under SFAS No. 107,
Disclosures about Fair Value of Financial Instruments, are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. Additionally,
the carrying value of all other monetary assets and liabilities is estimated to
be equal to their fair value due to the short-term nature of these instruments.

Revenue Recognition  Revenue is recognized
when all four of the following conditions exist: persuasive evidence of an
arrangement exists; services have been rendered or delivery occurred; the price
is fixed or determinable; and collectibility is reasonably assured. Revenue
from product sales is recognized upon shipment of products to customers.

Share Based Compensation  The Company
accounts for stock based employee compensation plans under SFAS No. 123
(revised 2004), Shared-Based Payment (SFAS No. 123R). SFAS No. 123R
addresses the accounting for shared based payment transactions in which an
enterprise receives employee services for equity instruments of the enterprise
or liabilities that are based on the fair value of the enterprises equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS No. 123R requires that such transactions be accounted for using a fair
value based method.

F-8


---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 2009

Note 2. Significant Accounting Policies (continued):

Earnings Per Share  The financial statement
are presented in accordance with Statement of Financial Accounting Standards
No. 128 (SFAS 128), Earnings Per Share. Basic (loss) earnings per common share are
computed using the weighted average number of common shares outstanding during
the period.

Diluted (loss)
earnings per common share utilizes the treasury stock method for calculating the
dilutive effect of employee stock options, and nonvested shares. These
instruments will have a dilutive effect under the treasury stock method only
when the respective periods average market value of the underlying Company
common stock exceeds the actual proceeds. In applying the treasury stock
method, assumed proceeds include the amount, if any, the employee must pay upon
exercise, the amount of compensation cost for future services that the Company
has not yet recognized, and the amount of tax benefits, if any, that would be
credited to additional paid-in capital assuming exercise of the options and the
vesting of nonvested shares. In accordance with SFAS 128, diluted earnings per
share are not presented in periods during which the Company incurred a loss
from operations. For the year ended January 31, 2009 the potentially dilutive
commons stock equivalents, consisting of stock options and restricted stock,
which were excluded from the net (loss) per share calculations due to their
anti-dilutive effect amounted to 3,182,617. For the year ended January 31, 2008,
the potentially dilutive common stock equivalents, consisting of stock options,
which were excluded from the net income per share calculations due to their
anti-dilutive effect amounted to was 60,563.

Basic EPS is computed by
dividing net (loss) income by the weighted average number of shares outstanding
during the period. Diluted EPS is computed considering the potentially dilutive
effect of outstanding stock options and nonvested shares of restricted stock. A
reconciliation of the numerators and denominators of basic and diluted per
share computations follows:

|                                                                                 |  |                         |            |      |   |            | 
|-------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- | 
|                                                                                 |  | Year ended
 January 31, |           
|                                                                                 |  | 2009                    |            | 2008 |  
|                                                                                 |  |                         |            |      |  
|Numerator:                                                                       |  |                         |            |      |   |            | 
|Net (loss) income                                                                |  | $                       | (492,100   | )    |   | 869,100    | 
|Denominator:                                                                     |  |                         |            |      |   |            | 
|Weighted average common shares (Basic)                                           |  |                         | 13,893,787 |      |   | 14,128,601 | 
|Dilutive effect of outstanding options and
 nonvested shares of restricted stock |  |                         |           |      |   | 1,425,154  | 
|                                                                                 |  |                         |            |      |   |            | 
|                                                                                 |  |                         |            |      |   |            | 
|Weighted average common shares including
 assumed conversions (Diluted)          |  |                         | 13,893,787 |      |   | 15,553,755 | 
|                                                                                 |  |                         |            |      |   |            | 
|                                                                                 |  |                         |            |      |   |            | 
|Basic net (loss) income per share                                                |  | $                       | (0.04      | )    | $ | 0.06       | 
|                                                                                 |  |                         |            |      |   |            | 
|                                                                                 |  |                         |            |      |   |            | 
|Diluted net (loss) income per share                                              |  | $                       | (0.04      | )    | $ | 0.06       | 
|                                                                                 |  |                         |            |      |   |            | 

F-9


---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 2. Significant Accounting Policies (continued):

Carrying Values of Long-lived Assets - The
Company evaluates the carrying values of its long-lived assets to be held and
used in the business by reviewing undiscounted cash flows. Such evaluations are
performed whenever events and circumstances indicate that the carrying amount
of an asset may not be recoverable. If the sum of the projected undiscounted
cash flows over the remaining lives of the related assets does not exceed the
carrying values of the assets, the carrying values are adjusted for the
differences between the fair values and the carrying values.

Use of Estimates - In preparing financial
statements in conformity with accounting principles generally accepted in the
United States of America, management is required to make estimates and
assumptions that affect the reported amounts of assets and the disclosures of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. The Company uses estimates in
several accounts including accrued rebates and allowances for doubtful accounts
related to accounts receivable. Actual results could differ from those
estimates.

New Accounting Pronouncements

In September
2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157,
Fair Value Measurements (SFAS No. 157), which clarifies the definition of
fair value whenever another standard requires or permits assets or liabilities
to be measured at fair value. Specifically, the standard clarifies that fair
value should be based on the assumptions market participants would use when
pricing the asset or liability, and establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. SFAS No. 157
does not expand the use of fair value to any new circumstances, and must be
applied on a prospective basis except in certain cases. The standard also
requires expanded financial statement disclosures about fair value
measurements, including disclosure of the methods used and the effect on
earnings. The adoption of this pronouncement did not have a material impact on
our financial statements.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (FAS 159). FAS 159 permits companies to choose to
measure certain financial instruments and certain other items at fair value.
The standard requires that unrealized gains and losses on items for which the
fair value option has been elected be reported in earnings. FAS 159 is
effective as of the beginning of the entitys fiscal year that begins after
November 15, 2007, which was our fiscal year beginning February 1, 2008. The
adoption of this pronouncement did not have a material impact on our financial
statements.

In February
2008, FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB
Statement No. 157 (FSP No. 157-2) was issued. FSP No. 157-2 defers the
effective date of SFAS No. 157 to fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years, for all non- financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Examples of
items within the scope of FSP No. 157-2 are non-financial assets and
non-financial liabilities initially measured at fair value in a business
combination (but not measured at fair value in subsequent periods), and
long-lived assets, such as property, plant and equipment and intangible assets
measured at fair value for an impairment assessment under SFAS No. 144. We are
currently evaluating the potential impact, if any, of the adoption of FSP No.
157-2 on our financial statements.

F-10

---



In December
2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(FAS 141R), which replaces FASB Statement No. 141. FAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non controlling interest in the acquiree and the goodwill acquired. The
Statement also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. FAS 141R
is effective as of the beginning of an entitys fiscal year that begins after
December 15, 2008, which will be our fiscal year beginning February 1, 2009.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements - an amendment of Accounting Research Bulletin No. 51
(FAS 160), which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parents ownership interest and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
The Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. FAS 160 is effective as
of the beginning of an entitys fiscal year that begins after December 15,
2008, which will be our fiscal year beginning February 1, 2009. We are
currently evaluating the potential impact, if any, of the adoption of FAS 160
on our financial statements.

In December
2007, the Emerging Issues Task Force (EITF) issued EITF Issue No. 07-1,
Accounting for Collaborative Arrangements. EITF 07-1 provides guidance
concerning: determining whether an arrangement constitutes a collaborative
arrangement within the scope of the Issue; how costs incurred and revenue
generated on sales to third parties should be reported in the income statement;
how an entity should characterize payments on the income statement; and what
participants should disclose in the notes to the financial statements about a
collaborative arrangement. EITF 07-1 is effective as of the beginning of an
entitys fiscal year that begins after December 15, 2008, which will be our
fiscal year beginning February 1, 2009. We are in the process of evaluating the
impact, if any, of adopting EITF 07 -1 on our financial statements.

In April 2008,
the FASB issued FASB Staff Position No. 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing assumptions about renewal or extension used in
estimating the useful life of a recognized intangible asset under FAS No. 142,
Goodwill and Other Intangible Assets. This standard is intended to improve the
consistency between the useful life of a recognized intangible asset under FAS
No. 142 and the period of expected cash flows used to measure the fair value of
the asset under FAS No. 141R and other GAAP. FSP 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
which will be our fiscal year beginning February 1, 2009. The measurement
provisions of this standard will apply only to intangible assets of the Company
acquired after the effective date. We are in the process of evaluating the
impact, if any, of adopting FSP 142-3 on our financial statements.

In May 2008,
the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS No. 162). SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting principles used in the preparation
of financial statements. SFAS No. 162 is effective 60 days following the SECs
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. The implementation of this standard will not
have a material impact on the Companys financial position or results of
operations.

In June 2008,
the FASB issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF)
No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities. Under the FSP, unvested share-based
payment awards that contain rights to receive nonforfeitable dividends (whether
paid or unpaid) are participating securities, and should be included in the
two-class method of computing EPS. The FSP is effective for fiscal years
beginning after December 15, 2008, which will be our fiscal year beginning
February 1, 2009. We are in the process of evaluating the impact, if any, of
adopting EITF 03-6-1 on our financial statements.

F-11

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 3. Fixed Assets:

Fixed
assets consisted of the following at January 31, 2009 and 2008, respectively:

|                                                 |  |             |         |      |   |         | 
|------------------------------------------------ |  | ----------- | ------- | ---- | - | ------- | 
|                                                 |  | January 31, |        
|                                                 |  |             |        
|                                                 |  | 2009        |         | 2008 |  
|                                                 |  |             |         |      |  
|Furniture,
 fixtures and equipment               |  | $           | 613,800 |      | $ | 397,100 | 
|Leasehold
 improvements                          |  |             | 50,400  |      |   | 50,400  | 
|                                                 |  |             |         |      |   |         | 
|                                                 |  |             | 664,200 |      |   | 447,500 | 
|Less:
 Accumulated depreciation and amortization |  |             | 345,400 |      |   | 248,500 | 
|                                                 |  |             |         |      |   |         | 
|                                                 |  | $           | 318,800 |      | $ | 199,000 | 
|                                                 |  |             |         |      |   |         | 

Depreciation
and amortization expense was $96,900 and $59,300 for the fiscal years ended
January 31, 2009 and 2008, respectively.

Note 4. Intangible Assets:

Intangible
assets consisted of the following at January 31, 2009 and 2008, respectively:

|                                |  |             |         |      |   |         | 
|------------------------------- |  | ----------- | ------- | ---- | - | ------- | 
|                                |  | January 31, |        
|                                |  |             |        
|                                |  | 2009        |         | 2008 |  
|                                |  |             |         |      |  
|                                |  |             |         |      |   |         | 
|Patent
 application costs       |  | $           | 292,500 |      | $ | 260,000 | 
|Trademarks                      |  |             | 113,300 |      |   | 62,000  | 
|Website
 development costs      |  |             | 20,900  |      |   | 20,200  | 
|                                |  |             |         |      |   |         | 
|                                |  |             |         |      |   |         | 
|                                |  |             | 426,700 |      |   | 342,200 | 
|                                |  |             |         |      |   |         | 
|Less: Accumulated
 amortization |  |             | 149,900 |      |   | 89,500  | 
|                                |  |             |         |      |   |         | 
|                                |  |             |         |      |   |         | 
|                                |  | $           | 276,800 |      | $ | 252,700 | 
|                                |  |             |         |      |   |         | 

Intangible
amortization expense was $60,200 and $42,600 for the fiscal years ended January
31, 2009 and 2008, respectively.

The future
estimated amortization charges are as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended January 31, |  |   |         | 
|                        |  |   |         | 
|2010                    |  | $ | 62,400  | 
|2011                    |  |   | 62,400  | 
|2012                    |  |   | 60,700  | 
|2013                    |  |   | 22,760  | 
|2014                    |  |   | 6,600   | 
|Thereafter              |  |   | 61,900  | 
|                        |  |   |         | 
|                        |  |   |         | 
|                        |  | $ | 276,800 | 
|                        |  |   |         | 

F-12

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 5. Investment in Organics Corporation of America:

On
July 31, 2003, the Company entered into an agreement with Organics Corporation
of America (Organics) to purchase 5% of their issued and outstanding capital
stock for aggregate consideration of $125,000. In turn Organics agreed to
purchase 166,666 shares of the Companys common stock at a purchase price of
$0.75 per share for aggregate consideration of $125,000. As of January 31,
2009, Organics owned approximately 1% of the Companys common stock. In
addition, Organics agreed to assist the Company to (a) continue to develop and
improve products of the Company that have been developed or were in the process
of being developed and improved as of July 31, 2003; (b) design, develop,
implement, and provide merchantable and marketable products; and (c) maintain
the confidentiality of all proprietary product technology (see Note 10 -
Commitments and Contingencies). The Company is carrying this investment at cost.
For the years ended January 31, 2009 and 2008, purchases made from Organics
totaled $4,579,000 and $4,837,500, respectively. As of January 31, 2009 and
2008, the Company owed Organics $332,200 and $246,100, respectively. Such
amounts are included in the accounts payable of the accompanying Balance
Sheets.

F-13

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 6.Major Customers and Major Vendor-Related Party:

Major Customers

For
the fiscal year ended January 31, 2009, two distributors accounted for
approximately 28% of total revenues, representing $4,038,098 of sales as
compared to 32% or $4,040,700 of sales in the prior year for the same
distributors. The Company has no contractual arrangements with these
distributors, and if they were to discontinue purchasing from the Company, it
could have a material impact on the Companys sales unless end users were able
to purchase the companys products from alternative distributors.

As
of January 31, 2009, these distributors had an open accounts receivable balance
of $538,400 which represented 37% of the Companys total accounts receivable as
compared to $377,300 which represented 36% of the Companys total accounts
receivable as of January 31, 2008.

Major Vendor-Related Party

During
the years ended January 31, 2009 and 2008, the Company purchased $4,579,000 and
$4,837,500, respectively, of finished goods from Organics Corporation of
America (Organics), an approximate 1% shareholder of the Company. As of
January 31, 2009 and 2008, the Company had an accounts payable balance with
Organics of $332,200 and $246,100, respectively. The Company owns approximately
5% of the outstanding stock of Organics.

Note 7.Lease Commitments:

The
Company leases an office and warehouse facility in New Jersey under a lease, which
expires in December 2009. Total rental expense for the year ended January 31,
2009 and 2008 was approximately $121,900 and $95,700, respectively.

F-14

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 7.Lease Commitments (continued):

The
Company leases vehicles and equipment under various operating leases expiring
through 2012. During the years ended January 31, 2009 and 2008, the total
payments under such leases were $14,500 and $16,500, respectively.

The
future minimum lease payments are as follows:

|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Years Ended
 January 31, |  |   |       
|                         |  |   |       
|2010                     |  | $ | 16,500 | 
|2011                     |  |   | 8,700  | 
|2012                     |  |   | 1,800  | 
|                        
|                         |  |   |        | 
|                        
|                         |  | $ | 27,000 | 
|                         |  |   |        | 

Note 8.Stockholders Equity:

MNI Stock Repurchase Plan

In
December 2007, the Companys Board of Directors approved the Medical Nutrition
USA, Inc. Stock Repurchase Plan (the Plan). The Plan allows for the purchase
of up to 500,000 shares of Company stock on the open market and from employees.
The Plan allows for a maximum weekly market purchase of 25,000 shares with no
more than 50,000 shares in any calendar month. Private transactions with
employees can not exceed 50% of the total shares to be purchased with no one
individual employee exceeding 25% of the total. As of January 31, 2009, the
Company had purchased 184,000 shares from employees of the Company and 264,000
shares on the open market. The Company purchased these shares for an aggregate
total of $1,409,600. These repurchased shares are deemed authorized and
unissued shares available for issuance. The Plan expired on July 31, 2008.

F-15

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 8.Stockholders Equity (continued):

2000 Long-Term Incentive Stock Plan

On
October 19, 2000, the stockholders approved the 2000 Long-Term Incentive Stock
Plan (the 2000 Plan). Under the 2000 Plan, the Company may grant stock
options, stock appreciation rights (SARs) or stock awards. All employees of
the Company are eligible to participate in the 2000 Plan. The 2000 Plan
authorizes the issuance, in the aggregate, of up to 240,000 shares of common
stock. No stock option, SAR or other award, may be granted under the 2000 Plan
after October 27, 2009. The maximum number of shares for which awards may be
granted to any person in any fiscal year is 12,000. The purchase price per
share for each stock option may not be less than 100% of the fair market value
on the date of grant and may not be for more than ten years. In the case of
incentive stock options granted to an optionee who, at the time of grant, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company, the exercise price per share may not be less
than 110% of the fair market value on the date of grant and the option may not
be exercisable for more than five years. As of January 31, 2009, no stock
option grants were outstanding under the 2000 Plan.

2003 Omnibus Equity Incentive Plan

Effective
as of April 22, 2003, the Board of Directors (the Board) board adopted the
2003 Omnibus Equity Incentive Plan (the 2003 Plan). The purpose of the 2003
Plan is to promote the long-term success of the Company and the creation of
stockholder value by (a) encouraging employees, outside directors and consultants
to focus on critical long-range objectives, (b) encouraging the attraction and
retention of employees, outside directors and consultants with exceptional
qualifications and (c) linking employees, outside directors and consultants
directly to stockholder interests through increased stock ownership. The 2003
Plan seeks to achieve this purpose by providing for awards in the form of
restricted shares, stock units, options (which may constitute incentive stock
options or non-statutory stock options) or stock appreciation rights.

Initially,
the 2003 Plan authorized the issuance, in the aggregate, of up to 1,000,000
shares of common stock, increased by 250,000 additional shares of common stock
as of January 1, 2004. At the 2004 Annual Meeting, the 2003 Plan was amended to
provide that as of January 31 of each year, commencing with January 31, 2005,
the aggregate number of Common Shares reserved for issuance under the 2003 Plan
would automatically increase in an amount equal to the number of Common Shares
issued by reason of awards being granted, exercised or settled, as applicable,
during the immediately preceding fiscal year. At January 31, 2009, 2,609,284
options were issued and outstanding under the 2003 Plan.

On
June 7, 2006, the Board approved amendments to the Companys 2003 Plan to
increase the number of shares of common stock subject to the automatic
non-qualified stock option granted to each outside director on the date they
first join the Board pursuant to the Plan to 15,000 common shares, to increase
the number of shares of common stock subject to the automatic non-qualified
stock option granted annually to continuing outside directors pursuant to the
Plan to 15,000 common shares, and to increase the number of shares of common
stock subject to the automatic non-qualified stock option granted annually to
each chairman of a Board committee pursuant to the Plan to 5,000 common shares.
The Board also approved the restatement of the Plan to effect these changes. On
July 6, 2006 the Company executed the Amended and Restated 2003 Omnibus Equity
Incentive Plan, which includes the revisions set forth above (the Amended and
Restated 2003 Plan). No other provision of the Plan was changed.

In addition to
the options issued in connection with the plans described above, options
exercisable for an additional 200,000 shares remained outstanding as of January
31, 2009, which were issued prior to January 31, 2003 and not pursuant to any
formal plan.

F-16

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 8.Stockholders Equity (continued):

Stock Options

During
the year ended January 31, 2009, the Company granted options to purchase shares
of its common stock with a three year vesting schedule at exercise price of
$2.87 to employees as consideration for their efforts. Three of our Outside
Directors received annual option grants as per our Amended and Restated 2003
Omnibus Equity Incentive Plan of 20,000 shares each for serving on our Board of
Directors and for being Chairman of a Board committee. These Director options
become fully exercisable in one year from their grant date at an exercise price
of $1.98. All of these grants were priced at the fair market value of the
common stock on the date of grant.

The
following table summarizes the outstanding and exercisable options at January
31, 2009 (contractual life in years):

|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |           |  |   |      |  |   |      | 
|--------------- |  | ------------------- | --------- | ---------------------------- | - | ---------------------------- |  | --------------------- | ---- | ------ | - | ---------------------------- |  | --------------------- | --------- |  | - | ---- |  | - | ---- | 
|                |  | Options Outstanding |           | Options Exercisable          |  
|                |  |                     |           |                              |  
|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |           |  |   |      |  |   |      | 
|Range of prices |  | Number              |           | Weightedaverageremaininglife |   | Weightedaverageexerciseprice |  | Averageintrinsicvalue |      | Number |   | Weightedaverageexerciseprice |  | Averageintrinsicvalue |          
|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |          
|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |           |  |   |      |  |   |      | 
|$0.50-$3.00     |  |                     | 2,456,800 |                              | 5 |                              |  | $                     | 2.15 |        |   |                              |  |                       | 2,376,800 |  | $ | 2.14 |  |   |      | 
|$3.01-$5.96     |  |                     | 352,484   |                              | 8 |                              |  |                       | 4.14 |        |   |                              |  |                       | 281,934   |  |   | 4.05 |  |   |      | 
|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |           |  |   |      |  |   |      | 
|                |  |                     | 2,809,284 |                              | 7 |                              |  | $                     | 2.39 |        | $ | 1.21                         |  |                       | 2,658,734 |  | $ | 2.35 |  | $ | 0.60 | 
|                |  |                     |           |                              |   |                              |  |                       |      |        |   |                              |  |                       |           |  |   |      |  |   |      | 

F-17

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 8.Stockholders Equity (continued):

A
summary of option transactions for the two years ended January 31, 2009,
follows:

|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|------------------------------- |  | --------- | - | ---------------------------------- | ---- | -------------------- | --------- | ---------------------------------- | - | ---- | 
|                                |  | Options   |   | Weighted
 Average
 exercise
 price |      | Options
 Exercisable |           | Weighted
 Average
 exercise
 price |  
|                                |  |           |   |                                    |      |                      |           |                                    |  
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|Outstanding at January 31,
2007 |  | 2,884,697 |   | $                                  | 2.26 |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|Granted                         |  | 107,500   |   |                                    | 4.83 |                      |           |                                    |   |      | 
|Exercised                       |  | (125,266  | ) |                                    | 1.62 |                      |           |                                    |   |      | 
|Expired or Surrendered          |  | (66,450   | ) |                                    | 3.67 |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|Outstanding at January 31,
2008 |  | 2,800,481 |   |                                    | 2.36 |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|Granted                         |  | 83,100    |   |                                    | 2.23 |                      |           |                                    |   |      | 
|Exercised                       |  | (69,297   | ) |                                    | 0.61 |                      |           |                                    |   |      | 
|Expired or Surrendered          |  | (5,000    | ) |                                    | 3.98 |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 
|Outstanding at January 31,
2009 |  | 2,809,284 |   | $                                  | 2.39 |                      | 2,658,734 |                                    | $ | 2.35 | 
|                                |  |           |   |                                    |      |                      |           |                                    |   |      | 

The
future expense related to unvested stock options will be as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended January 31, |  |   |         | 
|                        |  |   |         | 
|2010                    |  | $ | 154,600 | 
|2011                    |  |   | 26,000  | 
|2012                    |  |   | 3,500   | 
|                        |  |   |         | 
|                        |  |   |         | 
|                        |  | $ | 184,100 | 
|                        |  |   |         | 

SFAS
No. 123(R) requires the benefits of tax deductions in excess of those
recognized in conjunction with compensation expense, to be reported as a
financing cash flow, rather than as an operating cash flow. This requirement
has the effect of reducing net operating cash flows and increasing net
financing cash flows in periods in and after adoption.

The
income tax benefits derived from the exercise of non-qualified stock options
and disqualifying dispositions of incentive stock options in excess of any
amounts previously classified as a deferred tax asset, when realized, are
credited to additional paid -in capital. For the year ended January 31, 2009
the tax benefit realized on the tax deductions from option exercises under
stock-based compensation arrangements was approximately $40,800 and is recorded
as additional paid in capital.

For
the years ended January 31, 2009 and 2008, the Company has estimated the fair
value of each option award on the date of grant using the Black-Scholes model.
For the years ended January 31, 2009 and 2008, respectively, the expected
volatility was based on both historical volatility and implied volatility of
the Companys stock. The expected term of options granted represents the period
of time that options granted are expected to be outstanding. The Company used
historical data to estimate expected option exercise and post-vesting employment
termination behavior. The Company utilized the risk-free interest rate for
periods equal to the expected term of the option based upon the U.S. treasury
yield curve in effect at the time of the grant. The Company has no intention of
declaring any dividends.

|    
|----
|F-18

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 8.Stockholders Equity (continued):

The
fair value of stock-based awards was estimated using the Black-Scholes model
with the following weighted-average assumptions for stock options granted in
the years ended January 31, 2009 and 2008:

|                                         |  |                               |      |                               |   |      |  
|---------------------------------------- |  | ----------------------------- | ---- | ----------------------------- | - | ---- | -
|                                         |  | Year Ended
 January 31,
 2009 |      | Year Ended
 January 31,
 2008 |  
|                                         |  |                               |      |                               |  
|                                         |  |                               |      |                               |  
|Expected term until exercised, years     |  |                               | 6    |                               |   | 6    |  
|Expected stock price volatility,
average |  |                               | 66   | %                             |   | 77   | %
|Risk-free interest rate                  |  |                               | 3.5  | %                             |   | 4    | %
|Expected Dividend yield                  |  |                               | 0    |                               |   | 0    |  
|Weighted-average fair value per option   |  | $                             | 1.33 |                               | $ | 3.05 |  

Restricted Stock Awards

During
the years ended January 31, 2009 and 2008, the Company granted restricted stock
awards totaling 185,000 and 142,500 shares of its common stock with a three
year vesting schedule to 10 and 9 employees, respectively, as consideration for
their services. The shares become vested yearly based upon continued employment.
The shares have been valued at $1.50 and $4.40 per share, respectively, which
was the fair market value at the date of the approval of the grant. The Company
is amortizing the expense over the vesting period.

The
following table summarizes the status of Restricted stock as of January 31,
2009, and changes during the year then ended:

|                              |  |          |   |                                            |      | 
|----------------------------- |  | -------- | - | ------------------------------------------ | ---- | 
|                              |  | Shares   |   | Weighted
 Average
 Grant
 Date Fair
 Value |     
|                              |  |          |   |                                            |     
|                              |  |          |   |                                            |     
|Nonvested at January 31,
2008 |  | 325,833  |   | $                                          | 4.26 | 
|Granted                       |  | 185,000  |   |                                            | 1.50 | 
|Vested                        |  | (137,500 | ) |                                            | 4.24 | 
|Forfeited                     |  |         |   |                                            |     | 
|                              |  |          |   |                                            |      | 
|                              |  |          |   |                                            |      | 
|Nonvested at January 31,
2009 |  | 373,333  |   | $                                          | 2.90 | 
|                              |  |          |   |                                            |      | 

The
future expense related to unvested restricted stock awards will be as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended January 31, |  |   |         | 
|                        |  |   |         | 
|2010                    |  | $ | 561,600 | 
|2011                    |  |   | 254,100 | 
|2012                    |  |   | 77,600  | 
|                        |  |   |         | 
|                        |  |   |         | 
|                        |  | $ | 893,300 | 
|                        |  |   |         | 

For the year
ended January 31, 2009 and 2008, the Company recognized share -based
compensation cost of $1,111,300 and $1,062,000, respectively. These costs are
included in selling, general and administrative expense.

|    
|----
|F-19

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 9.Income Taxes:

The
components of the provision for income taxes consist of the following:

|                    |  |                               |        |                               |   |         | 
|------------------- |  | ----------------------------- | ------ | ----------------------------- | - | ------- | 
|                    |  | Year Ended
 January 31,
 2009 |        | Year Ended
 January 31,
 2008 |  
|                    |  |                               |        |                               |  
|                    |  |                               |        |                               |  
|Current 
 Federal  |  | $                             |       |                               | $ |        | 
|Current 
 State    |  |                               | 6,300  |                               |   | 12,300  | 
|Deferred 
 Federal |  |                               | 10,700 |                               |   | 386,900 | 
|Deferred 
 State   |  |                               | 12,700 |                               |   | 81,700  | 
|                    |  |                               |        |                               |   |         | 
|                    |  |                               |        |                               |   |         | 
|Income tax
 expense |  | $                             | 29,700 |                               | $ | 480,900 | 
|                    |  |                               |        |                               |   |         | 

Income
tax expense was calculated using the statutory tax rate. The difference between
the effective tax rate and the statutory tax rate is mainly due to
nondeductible stock based compensation expense.

|                                     |  |                               |      |                               |  |       |   
|------------------------------------ |  | ----------------------------- | ---- | ----------------------------- |  | ----- | --
|                                     |  | Year Ended
 January 31,
 2009 |      | Year Ended
 January 31,
 2008 | 
|                                     |  |                               |      |                               | 
|                                     |  |                               |      |                               | 
|Statutory
 Federal income tax rate   |  |                               | (34  | )%                            |  | 34    | % 
|State taxes,
 net of Federal benefit |  |                               | 1.8  | %                             |  | 8.3   | % 
|Other                                |  |                               | 2.1  | %                             |  | (12.5 | )%
|Stock based
 compensation            |  |                               | 36.5 | %                             |  | 5.8   | % 
|                                     |  |                               |      |                               |  |       |   
|                                     |  |                               |      |                               |  |       |   
|Effective
 income tax rate           |  |                               | 6.4  | %                             |  | 35.6  | % 
|                                     |  |                               |      |                               |  |       |   

Deferred
income taxes reflect the tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial accounting purposes
and the amounts used for income tax reporting. The Company utilizes the asset
and liability approach which requires the recognition of deferred tax assets
and liabilities for the future tax consequences of events that have been
recognized in the Companys financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future
events other than enactments of changes in the tax law or rates.

|    
|----
|F-20

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 9.Income Taxes (continued):

The
Companys deferred taxes are comprised of the following:

|                                             |  |                               |           |                               |   |           |  
|-------------------------------------------- |  | ----------------------------- | --------- | ----------------------------- | - | --------- | -
|                                             |  | Year Ended
 January 31,
 2009 |           | Year Ended
 January 31,
 2008 |  
|                                             |  |                               |           |                               |  
|Current
 Deferred Taxes                      |  |                               |           |                               |   |           |  
|Provision
 for losses on accounts receivable |  | $                             | 13,500    |                               | $ | 5,800     |  
|Non
 deductible accruals                     |  |                               | 37,800    |                               |   |          |  
|Inventory                                    |  |                               | 8,700     |                               |   |          |  
|Net
 operating losses                        |  |                               | 346,500   |                               |   | 871,900   |  
|                                             |  |                               |           |                               |   |           |  
|Total Current Deferred                       |  |                               | 406,500   |                               |   | 877,700   |  
|                                             |  |                               |           |                               |   |           |  
|                                             |  |                               |           |                               |   |           |  
|NonCurrent
 Deferred Taxes                   |  |                               |           |                               |   |           |  
|Depreciable
 assets                          |  |                               | (99,700   | )                             |   | (46,500   | )
|Amortizable
 assets                          |  |                               | 34,300    |                               |   | 18,600    |  
|Stock based
 compensation                    |  |                               | 477,200   |                               |   | 286,600   |  
|Net
 operating losses                        |  |                               | 557,200   |                               |   | 221,300   |  
|                                             |  |                               |           |                               |   |           |  
|Total Non-Current
Deferred                   |  |                               | 969,000   |                               |   | 480,000   |  
|                                             |  |                               |           |                               |   |           |  
|Total Deferred Taxes                         |  | $                             | 1,375,500 |                               | $ | 1,357,700 |  
|                                             |  |                               |           |                               |   |           |  

The
Company has Federal income tax loss carryforwards as of January 31, 2009 of
approximately $2,635,900. The Federal Net Operating Loss (NOL) carryforwards
expire beginning in 2020 and will be fully expired during 2025. The Company has
various state NOLS of approximately $185,500 which expire during 2012.

Effective
February 1, 2007, the Company adopted Financial Interpretation (FIN) No. 48,Accounting for
Uncertainty in Income Taxes-An
Interpretation of FASB Statement No. 109. This interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The interpretation contains a two-step approach to
recognizing and measuring uncertain tax positions accounted for in accordance
with SFAS No. 109. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that
it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount that has a
greater than 50% likelihood of being realized upon effective settlement. The
interpretation also provides guidance on derecognition, classification,
interest and penalties, and other matters. The adoption did not have an effect
on the financial statements.

The
tax years 2004-2008 remain open to examination by the major taxing
jurisdictions to which the Company is subject.

|    
|----
|F-21

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MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2009

Note 10. Commitments
and Contingencies:

Government Regulations

The
Companys nutritional and health products are produced by third parties in
various plants under applicable government regulations. The Company depends
upon its vendors to comply with such regulations. Failure by such vendors to
comply with the applicable regulations could result in fines and/or seizure of
the food products. Presently, the Company is not a party to any such lawsuits.

Product Development and Supply Agreement

On
July 31, 2003, the Company entered into a ten-year product development and
supply agreement with Organics Corporation of America (Organics). Organics,
a related party, has agreed to assist the Company to continue to develop and
improve products that have been developed or are in the process of being
developed and improved; design, develop, implement, and provide merchantable
and marketable products; and maintain the confidentiality of all proprietary
product technology. The Company currently uses Organics as its primary
manufacturer of its products. Under the agreement, in consideration for
Organics performance, the Company shall make payment to them for all invoices
submitted for products and services performed, at costs to which both parties
have agreed upon and that Organics has the opportunity to manufacturer other
products for the Company in the future. In connection with this transaction,
the Company and Organics purchased shares of each others common stock. (See
Note 5  Investment in Organics Corporation of America and Note 6-Major
Customers and Major Vendor- Related Party)

Employment Contract

Effective
April 17, 2006, the Company entered into an employment agreement with Mr.
Francis A. Newman, Chief Executive Officer. This agreement renews automatically
on April 17 of each succeeding year unless terminated as provided within the
terms of the agreement. Under the agreement, Mr. Newman is entitled to a minimum
base salary of $185,500 with annual salary increases at the discretion of the
Board of Directors, and an annual incentive bonus in an amount up to 100% of
base salary if the Company achieves agreed-upon targets. Additionally, Mr.
Newman is entitled to various other benefits (such as travel allowance and
participation in employee benefit plans).

Bonus Plan

On
June 7, 2005, the Company approved a bonus plan for officers based on a formula
which takes into account sales and EBITDA, with annual targets to be set at the
level of the annual operating plan approved by the Board of Directors. The plan
allows for payment up to 100% of the officers base salary. The percentage
combination of cash and common stock of the Company used to pay the bonuses will
be at the discretion of the Board of Directors, but in no case will the cash
portion be less than 25% of the bonuses awarded. For the years ended January
31, 2009 and 2008, the Company expensed $248,000 and $147,800 in bonuses based
on this plan, respectively.

401(k) Plan

In
March 2007, the Company established a 401(k) retirement plan (plan) for all
eligible employees. In January 2008, the Company amended the plan to include a
maximum Company contribution of 4 percent of base salary for the first 5
percent of elected base salary deferrals. Employees are eligible to contribute
the maximum as allowed by law. For the years ended January 31, 2009 and 2008,
the 401(k) expense was $89,000 and $5,700, respectively, and is included in
selling, general and administrative expenses.

F-22

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Exhibit
Index

|        |  |                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                     
|        |  |                                                                                                                                                                                 
|3.1     |  | Certificate
 of Incorporation of Medical Nutrition USA, Inc., dated March 23, 2003 (1)                                                                                          
|        |  |                                                                                                                                                                                 
|3.2     |  | Bylaws of
 Medical Nutrition USA, Inc., as adopted March 7, 2003 (2)                                                                                                            
|        |  |                                                                                                                                                                                 
|4.1     |  | Form of
 convertible 8% Notes dated July 31, 2003 between Medical Nutrition USA, Inc.
 and certain investors (3)                                                                
|        |  |                                                                                                                                                                                 
|4.2     |  | Form of
 Convertible Promissory Note dated December 5, 2003 between Medical Nutrition
 USA, Inc. and certain investors (4)                                                      
|        |  |                                                                                                                                                                                 
|4.3     |  | Form of
 Class A Warrant Agreement and related Warrant Certificate*                                                                                                             
|        |  |                                                                                                                                                                                 
|4.4     |  | Form of
 Class B Warrant Agreement and related Warrant Certificate*                                                                                                             
|        |  |                                                                                                                                                                                 
|4.5     |  | Warrant to
 Purchase Shares of Common Stock dated as of April 1, 2003 between Medical
 Nutrition USA, Inc. (f/k/a Gender Sciences, Inc.) and Kirlin Securities,
 Inc.*          
|        |  |                                                                                                                                                                                 
|4.6     |  | Common Stock
 Purchase Warrant dated as of April 22, 2003 between Medical Nutrition USA,
 Inc. and Unity Venture Capital Associates, Ltd.*                                      
|        |  |                                                                                                                                                                                 
|10.1    |  | 2000 Long
 term Incentive Plan (5) #                                                                                                                                            
|        |  |                                                                                                                                                                                 
|10.2    |  | 2003 Omnibus
 Equity Incentive Plan (6) #                                                                                                                                       
|        |  |                                                                                                                                                                                 
|10.3    |  | Employment
 Agreement dated March 1, 2003 by and between Medical Nutrition USA, Inc. and
 Francis A. Newman (7) #                                                               
|        |  |                                                                                                                                                                                 
|10.4    |  | Form of
 Subscription Agreement dated July 31, 2003 between Medical Nutrition USA,
 Inc. and Organics Corporation of America (8)                                                
|        |  |                                                                                                                                                                                 
|10.5    |  | Form of
 Subscription Agreement dated July 31, 2003 between Organics Corporation of
 America and Medical Nutrition USA, Inc. (9)                                                
|        |  |                                                                                                                                                                                 
|10.6    |  | Office Lease
 dated October 4, 1984 by and between Medical Nutrition, Inc., a predecessor
 of Medical Nutrition USA, Inc. and Van Brunt Associates, L.P. (10)                   
|        |  |                                                                                                                                                                                 
|10.7    |  | First
 Amendment to Office Lease dated October 24, 1994 by and between Medical
 Nutrition, Inc., a predecessor of Medical Nutrition USA, Inc. and Van Brunt
 Associates, LP (11)
|        |  |                                                                                                                                                                                 
|10.8    |  | Lease
 Extension Letter Agreement dated November 17, 1999 by and between Medical
 Nutrition, Inc., a predecessor of Medical Nutrition USA, Inc. and First
 Industrial Realty    
|        |  | Trust, Inc.
 (12)                                                                                                                                                               
|        |  |                                                                                                                                                                                 
|10.9    |  | Second Amendment
 to Office Lease dated September 9, 2004 by and between Medical Nutrition USA,
 Inc. and The Realty Associates Fund VI, L.P. (13)                              
|        |  |                                                                                                                                                                                 
|10.10   |  | Executive
 Bonus Program effective January 1, 2005 (14) #                                                                                                                       
|        |  |                                                                                                                                                                                 
|21.1    |  | Subsidiaries
 of Medical Nutrition USA, Inc. (15)                                                                                                                               
|        |  |                                                                                                                                                                                 
|23.1    |  | Consent of
 Amper, Politziner & Mattia, LLP, Independent Registered Public Accounting
 Firm                                                                                     

---



|     |  |                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------
|31.1 |  | Rule
 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. **                                     
|     |  |                                                                                                            
|31.2 |  | Rule
 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. **                                     
|     |  |                                                                                                            
|32.1 |  | Certificate
 of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
 Section 1350. **
|     |  |                                                                                                            

* Previously
filed.

** Filed
herewith.

# Indicates
management contract or compensatory plan or arrangement.

|     |                                                                                                                                                   
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2005.                           
|     |                                                                                                                                                   
|(2)  | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2005.                           
|     |                                                                                                                                                   
|(3)  | Incorporated
 by reference from the Companys Quarterly Report on Form 10-QSB for the
 fiscal quarter ended July 31, 2003.                        
|     |                                                                                                                                                   
|(4)  | Incorporated
 by reference from the Companys Quarterly Report on Form 10-QSB for the
 fiscal quarter ended October 31, 2003                      
|     |                                                                                                                                                   
|(5)  | Incorporated
 by reference from the Companys definitive proxy statement for its 2000
 Annual Meeting of Shareholders to be held October 19, 2000.
|     |                                                                                                                                                   
|(6)  | Incorporated
 by reference from the Companys definitive proxy statement for its 2004
 Annual Meeting of Shareholders to be held June 8, 2004.    
|     |                                                                                                                                                   
|(7)  | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2004.                           
|     |                                                                                                                                                   
|(8)  | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2004.                           
|     |                                                                                                                                                   
|(9)  | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2004.                           
|     |                                                                                                                                                   
|(10) | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2003.                           
|     |                                                                                                                                                   
|(11) | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2003.                           
|     |                                                                                                                                                   
|(12) | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2003.                           
|     |                                                                                                                                                   
|(13) | Incorporated
 by reference from the Companys Annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2005.                           
|     |                                                                                                                                                   
|(14) | Incorporated
 by reference from the Companys Quarterly Report on Form 10-QSB for the
 fiscal quarter ended July 31, 2005.                        
|     |                                                                                                                                                   
|(15) | Incorporated
 by reference from the Companys annual Report on Form 10-KSB for the fiscal
 year ended January 31, 2005.                           

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