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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

     For the fiscal year ended January 31, 2007

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For the transition period from _______________________ to _____________

                         Commission file number 0-18349

                           MEDICAL NUTRITION USA, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                               11-3686984
     -------------------------------               -------------------
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

   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

Check whether the issuer is not required to file reports pursuant to section 13
or 5(d) of the Exchange Act. [ ]

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 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 [ ]

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B contained  herein,  and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [ ]

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

State issuer's revenues for its most recent fiscal year: $10,531,300.

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant  as of May 10,  2007  was  approximately  $60,235,216  (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 for the last  trading date
prior to that date).

As of May 10, 2007 there were 14,068,145 shares of the registrant's common stock
outstanding.

Portions of the  registrant's  Proxy  Statement  for the 2007 Annual  Meeting of
Shareholders  scheduled to be held June 6, 2007 are incorporated by reference in
Part III hereof.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

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                                TABLE OF CONTENTS

PART I
         Item 1 -  DESCRIPTION OF BUSINESS                              2
         Item 2 -  DESCRIPTION OF PROPERTY                              8
         Item 3 -  LEGAL PROCEEDINGS                                    8
         Item 4 -  SUBMISSION OF MATTER TO SECURITY HOLDERS             8

PART II
         Item 5 -  MARKET FOR COMMON EQUITY, RELATED
                    STOCKHOLDER MATTERS AND SMALL BUSINESS
                    ISSUER PURCHASES OF EQUITY SECURITIES               9
         Item 6 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                    PLAN OF OPERATIONS                                  10
         Item 7 -  FINANCIAL STATEMENTS                                 13
         Item 8 -  CHANGES IN AND DISAGREEMENTS WITH
                    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                    DISCLOSURE                                          13
         Item 8A-  CONTROLS AND PROCEDURES                              14
         Item 8B-  OTHER INFORMATION                                    14

PART III
         Item 9 -  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
                    AND CONTROL PERSONS; COMPLIANCE WITH
                    SECTION 16(a) OF THE EXCHANGE ACT                   14
         Item 10 - EXECUTIVE COMPENSATION                               14
         Item 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                    OWNERS AND MANAGEMENT AND RELATED
                    STOCKHOLDER MATTERS                                 14
         Item 12 - CERTAIN RELATIONSHIPS AND RELATED
                    TRANSACTIONS  AND DIRECTOR INDEPENDENCE             14
         Item 13 - EXHIBITS                                             15
         Item 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES               15
Signatures                                                              16
Index to Consolidated 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.   DESCRIPTION OF BUSINESS

INTRODUCTION

     Medical  Nutrition  USA,  Inc. (a  Delaware  Corporation)  (the  "Company")
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.  The Company's  predecessor was  incorporated in New Jersey in 1981,
and  reincorporated  in Delaware on April 23, 2003. Unless the context otherwise
requires,  references to the Company in this report  include  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 $4.2 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,    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") includes  programs and services
to specifically  address nutrition among older persons.  Nursing home facilities
are required by law to assure that each resident maintain "acceptable

                                                                               2
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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, impaired immune response
and organ  function.  In  observational  studies,  Pro-Stat(R),  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(R),  compared to a control group receiving  standard
care plus a placebo.

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(R) has
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  has  agreed  to  sponsor  a study in
cooperation  with Renal  Care Group and  Vanderbilt  University  to measure  the
efficacy of  Pro-Stat(R)  supplementation  in improving  and  maintaining  serum
albumin levels among dialysis patients.

INDUSTRY TRENDS

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

   o  The aging of the United States  population  and the resulting  increase in
      the number of  assisted  living/nursing  home  residents;

   o  The growth in  understanding  of the link  between  diet,  nutrition,  and
      health,  especially  among  the  geriatric  population;  and

   o  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

     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(R)  line of  enzyme-hydrolyzed
liquid protein used to treat unintended weight loss, protein energy malnutrition
and pressure ulcers.

     The Company's  strategy  includes  increasing  the number of nursing homes,
long-term care facilities and dialysis  clinics  employing  Pro-Stat(R)  therapy
through  expansion  of its own sales force to 18 sales  people as of January 31,
2007 from 12 sales  people as of the same date in 2006,  and through  consultant
dietitians.  The Company also uses  advertising  and  exhibitions at trade shows
that  focus on the  long-term  care and  dialysis  markets.  As a result of this
strategy,  sales of the Company's  branded  products  increased over 44% for the
fiscal year ended January 31, 2007 when compared to the prior fiscal year.

     During the fiscal year ending January 31, 2007,  the revenues  generated by
the  Company  resulted  from the sale of  branded  products  and  private  label
products.

     For the fiscal year ended  January 31,  2007,  one private  label  customer
accounted  for  approximately  15.1% of total sales as compared to 21.6% for the
same  customer  in the  prior  fiscal  year.  The  Company  has  no  contractual
arrangements  with  this  customer  and if  this  customer  was  to  discontinue
purchasing  from the Company,  it would have a material  impact on the Company's
sales.

                                                                               3
<PAGE>

     In the past  year,  the  Company  has  developed  a number of new  products
including  Fiber-Stat(R)  laxation  liquid and  Pro-Stat(R)  Advanced Wound Care
(AWC).  Pro-Stat(R)  AWC expands the potential uses of Pro-Stat(R)  for patients
with advanced wounds and Fiber-Stat(R)  provides an alternative and novel method
of providing  fiber  supplementation.  The Company has been able to successfully
market these new products.

     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.  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,  2007,  the  Company  recorded
expenses,  not  including  salaries  and wages,  of  $273,500  on  Research  and
Development.  For the fiscal year ended January 31, 2006,  the Company  incurred
$9,000 in Research and Development costs.

MANUFACTURING

     The Company uses contracted  third parties to manufacture 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 material,  production and
packaging,  and labeling of finished goods. At present, the Company is dependent
upon Organics for the production of almost all of its products. If Organics 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 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 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.  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.  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
<PAGE>

Patents

     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.  These patents expired in 1994. Currently,  the
Company has been granted provisional rights for a patent-pending for "Method for
Treating Wounds to Promote Healing".

Trademarks

     The Company has been using the  Pro-Stat(R)  mark since August 2002 and the
Fiber-Stat(R)  mark since August 2005.  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.

     Principally  through the efforts of the dietary  supplement  industry,  the
Dietary  Supplement  Health and Education Act of 1994  ("DSHEA") was signed into
law in 1994.  DSHEA amends the Federal Food,  Drug, and Cosmetic Act and, in the
judgment of the Company, is favorable to the dietary supplement industry.  First
and  foremost,  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 31 full time employees as of May 10, 2007.

                                                                               5
<PAGE>

RISK FACTORS

The Company generates a significant amount of revenues from one customer.

     For the fiscal year ended  January 31,  2007,  one private  label  customer
accounted for approximately 15.1% of total revenues, as compared to 21.6% in the
prior year.  The Company does not have  contracts  with this  customer and, as a
result, there is no assurance that this customer will continue to order products
from the Company or will continue to order the products in the same amount.  The
loss of this customer  would have a material  adverse  effect upon the sales and
operating results of the Company.

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 marketing,  competition  and product
acquisitions  and  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."

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.

The Company is currently dependent on one principal manufacturer, Organics
Corporation of America ("Organics") for the production of its products.

     The Company is dependent Organics for the production of its products.  This
manufacturer 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,  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.

                                                                               6
<PAGE>

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 fiscal year 2008.  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."

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 technology,
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.

                                                                               7
<PAGE>

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..

Item 2.   DESCRIPTION OF PROPERTY

     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, 2007 was  approximately
$136,900,  for the fiscal year ending January 31, 2008 it will be $139,300,  for
the fiscal year ending  January 31, 2009 it will be $141,800  and for the fiscal
year ending January 31, 2010 it will be $132,100.

     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.

                                                                               8
<PAGE>

PART II

Item 5.   MARKET  FOR  COMMON  EQUITY  RELATED  STOCKHOLDER  MATTERS  AND  SMALL
          BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

     The Company's  common stock is currently  quoted on the OTC Bulletin  Board
under  the  symbol  "MDNU.OB".  Information  as to the range of high and low bid
quotations  for the  Company's  common  stock,  for the  periods  indicated,  as
furnished by National Quotation Bureau Incorporated, is set forth:

                 THREE MONTHS ENDED      HIGH        LOW
                 ------------------   ---------   ---------
                 April 30, 2005       $    2.95   $    2.25
                 July 31, 2005        $    3.10   $    2.70
                 October 31, 2005     $    3.15   $    2.46
                 January 31, 2006     $    4.75   $    2.70
                 April 30, 2006       $    5.05   $    4.10
                 July 31, 2006        $    4.20   $    3.70
                 October 31, 2006     $    4.20   $    3.50
                 January 31, 2007     $    4.62   $    4.00

     The  above bid  quotations  represent  prices  between  dealers  and do not
include actual retail mark-ups,  mark-downs or commissions and may not represent
actual transactions.

     On April 2, 2007,  the Company was notified  that its common stock has been
approved  for  listing on the NASDAQ  Capital  Market.  The common  stock  began
trading under the symbol "MDNU" on April 18, 2007.

     As of May 10, 2007, there were  approximately  530 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.

     As of January 31, 2007, 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:

                                Number of
                               securities        Weighted
                                 to be           average
                               issued upon       exercise        Number of
                              exercise of        price of        securities
                              outstanding      outstanding       remaining
                                options,         options,         available
                                warrants         warrants        for future
                               and rights       and rights        issuance
        Plan category              (a)             (b)              (c)
-------------------------    --------------   --------------   --------------

Equity compensation plans
approved by security
holders                           2,431,097   $         2.53               (1)
                             --------------   --------------   --------------

Equity compensation plans           453,600   $         0.84                -
not approved by security
holders
                             --------------   --------------   --------------

Total                             2,884,697   $         2.26                -
                             ==============   ==============   ==============

                                                                               9
<PAGE>

(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 granted,  exercised
or settled, as applicable, during the immediately preceding fiscal year.

ITEM 6.   Management's Discussion and Analysis or Plan of Operation

EXECUTIVE SUMMARY

Overview - During fiscal 2007, 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  80
distributors   who  supply   products  to  facilities   and  dialysis   clinics.
Additionally,  in January 2007, Pro-Stat(R) 64 modular liquid protein supplement
was selected by the U.S. Department of Veterans Affairs as the exclusive product
on its Nutrition  Formulary in the  Therapeutic  Specialty  Modular  Nutritional
Products. Purchase amounts under the contract will depend upon the rate at which
individual facilities use the products.

Fiscal 2007 Highlights

Sales - Our sales increased approximately 44%, to $10,531,300, during the fiscal
year.  The sales increase was primarily the result of expanded  distribution  of
our  Pro-Stat(R)  line of  hydrolyzed,  liquid,  modular  protein.  Sales of the
Company's branded products  increased  approximately  56%, from the prior fiscal
year to $8,442,700.

New Product Development - We completed development of, and began marketing,  our
Pro-Stat(R)  Advanced  Wound Care and  Fiber-Stat(R)  laxation  liquid  products
during Fiscal 2007.

Cash  Balance  and  Cash  Flow - Our  cash  balance  at  January  31,  2007  was
$8,103,300.  For  the  year,  cash  provided  by  operating  activities  totaled
$1,626,400  on a  reported  net loss of  $1,986,900.  The  Company's  total cash
position  increased by  $5,742,100  and accounts  receivable,  net of allowance,
increased by $338,800 from the prior year.

Fiscal 2008 Expectations

We expect our revenues to continue to grow as a result of our ongoing efforts to
expand  distribution of our branded products.  We also expect to introduce a new
product in the second quarter of the year.

RESULTS OF OPERATIONS

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

FISCAL YEAR ENDED  JANUARY 31,  2007  COMPARED TO FISCAL YEAR ENDED  JANUARY 31,
2006

     Sales for the fiscal  year  ended  January  31,  2007 were  $10,531,300  as
compared with $7,310,500 for the fiscal year ended January 31, 2006, an increase
of 44.1%.  This  increase was primarily  attributable  to an increase in branded
product  sales to  approximately  $8,442,700  from  $5,397,100.  The increase in
branded  sales can be  attributed  to growing  awareness  of our  products,  the
increase in the size of the Company's sales force,  the publishing in March 2006
of our clinical  study on pressure  ulcer healing and the market  penetration of
our newly introduced  product of Pro-Stat(R)  Advanced Wound Care (AWC).  Almost
all of the Company's  branded product sales were from formulations of hydrolyzed
collagen.  Private  label  sales  increased  to  approximately  $2,088,600  from
$1,913,400 for the comparable prior year period.

                                                                              10
<PAGE>

     Cost of sales for the fiscal year ended January 31, 2007 was  $5,007,000 or
47.5% of sales,  as compared with  $3,523,900  for the fiscal year ended January
31, 2006, or 48.2% of sales.  Gross profit  percentage  increased  from 51.8% to
52.5% for the fiscal year ended  January  31,  2007  compared to the fiscal year
ended January 31, 2006.  This increase in gross profit  percentage was primarily
due to an increase in the sales of branded  products  which have a higher  gross
profit than the Company's private label products.

     Selling,  general  and  administrative  expenses  for the fiscal year ended
January 31, 2007, increased by $1,359,300 to $4,616,600, from $3,257,300 for the
fiscal year ended January 31, 2006. This increase was primarily  attributable to
stock  based  compensation  expense of  $681,200  and an increase in selling and
marketing expenses of $497,400. This increase in selling and marketing is due to
expanded marketing of the Company's branded products.

     Research and  development  expenses  for the fiscal year ended  January 31,
2007 was $273,500 in comparison to $9,000 for the prior fiscal year. The Company
sponsored two academic  university  clinical  studies that began in fiscal 2007.
The anticipated outcomes will be published in peer reviewed journals.

     For the fiscal year ended  January  31,  2007,  the  Company had  operating
income of $634,200 as compared to an operating income of $520,300 for the fiscal
year ended January 31, 2006.

     Interest  expense was $2,862,600 for the fiscal year ended January 31, 2007
and  interest   income  was  $273,800  as  compared  to  $749,500  and  $60,900,
respectively,  for the fiscal  year ended  January  31,  2006.  The  increase in
interest  expense was primarily due to an increase in the non-cash  amortization
of debt discount  from  $526,300 in the prior fiscal year to $2,769,300  for the
fiscal year ended January 31, 2007.

     Prior to the fiscal year ended January 31, 2007, the Company had provided a
valuation  allowance  for the full amount of its deferred tax assets  because of
the substantial uncertainties associated with the Company's ability to realize a
deferred  tax  benefit due to its  financial  condition.  However,  based on the
Company's current and projected taxable income,  the deferred tax benefit in the
amount of $1,692,600 has been recorded in the fiscal year ended January 31, 2007
financial  statements.  The provision for taxes in Fiscal 2006 related solely to
state franchise amounts. The book benefit for the net operating losses generated
in Fiscal 2006 was offset by recording a full valuation  allowance.  The Company
may be subject to annual NOL  limitations in accordance  with section 382 of the
Internal  Revenue Code,  nevertheless  the Company expects to utilize all of the
NOL carryforwards prior to their expiration.

     The Company  incurred a net loss for the fiscal year ended January 31, 2007
of $294,300 or $0.03 per share, compared to a net loss for the fiscal year ended
January 31, 2006 of $176,900 or $0.06 per share.

LIQUIDITY AND CAPITAL RESOURCES

     At January 31, 2007, the Company had cash of $8,103,300 as compared to cash
of  $2,361,200 at January 31, 2006.  At January 31, 2007,  approximately  99% of
accounts receivable were less than 30 days past due. Cash provided by operations
during the fiscal  year ended  January 31,  2007 was  $1,626,400  as compared to
$358,600 in the comparable prior fiscal year.

     From April 29, 2003 to August 31,  2003,  the Company  borrowed  $3,127,500
from  various  individuals  and  issued the 2003  Notes.  Each of the 2003 Notes
evidencing the loans was substantially the same, other than the principal amount
thereof.  The 2003 Notes had a term of three  years.  The 2003 Notes,  including
accrued  and unpaid  interest,  if any,  were  convertible  at any time prior to
maturity at the option of the note holder  into shares of the  Company's  common
stock at a conversion  price of $0.75 per share.  On August 5, 2004,  $37,500 of
the 2003 Notes and accrued  interest of $3,000 was converted  into 54,066 shares
of common  stock.  On November 18,  2004,  $37,500 of the 2003 Notes and accrued
interest of $3,900 was converted  into 55,140  shares of common  stock.  For the
year ended January 31, 2007,  $3,052,500 of the 2003 Notes and accrued  interest
of $726,500 was converted into 5,038,574  shares of common stock. At January 31,
2007, there were no 2003 Notes outstanding.

                                                                              11
<PAGE>

     In December  2003,  the Company  entered  into a Clinical  Trial  Agreement
wherein  the Company  agreed to  implement  a clinical  development  program and
pursue a patent for one of its  products in exchange  for two loans  aggregating
$250,000  from two private  investors.  Subsequent to the loan  transaction  one
individual became a director of the Company.  As additional  consideration,  the
Company issued warrants to the investors to purchase up to 111,111 shares of the
Company's  common stock. The warrants had a three-year term and were exercisable
at $3.00 per share. In December 2006, the notes and warrants were converted into
222,222  shares of common  stock.  At January 31,  2007,  none of these notes or
related warrants were outstanding.

     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.

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 will change.

Share Based  Compensation - Effective February 1, 2006, the Company adopted SFAS
No.123(R),  "Share-Based  Payment,"  using the modified  prospective  transition
method.   Under  the  modified   prospective   transition   method,   recognized
compensation cost for the year ended January 31, 2007 includes:  1) compensation
cost for all  share-based  payments  granted  prior to, but not yet vested as of
February 1, 2006,  based on the grant date fair value  estimated  in  accordance
with the original  provisions  of Statement  123 for the portion  vesting in the
year ended  January  31,  2007;  and 2)  compensation  cost for all share  based
payments  granted on or after  February  1,  2006,  based on the grant date fair
value  estimated in accordance  with Statement  123(R).  In accordance  with the
modified  prospective  transition  method,  the Company has not  restated  prior
period results.

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  Pronouncements - In May 2005, the FASB issued SFAS No. 154,  "Accounting
Changes  and  Error   Corrections,"  which  changes  the  requirements  for  the
accounting  and reporting of a change in accounting  principle.  SFAS No. 154 is
effective for accounting  changes and corrections of errors made in fiscal years
beginning after December 15, 2005. This Statement does not change the transition
provisions of any existing accounting  pronouncements,  including those that are
in a transition phase as of the effective date of the Statement.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and Financial  Liabilities".  SFAS No. 159 permits entities to
choose to measure many  financial  instruments  and certain  other items at fair
value  that  are not  currently  required  to be  measured  at fair  value.  The
objective is

                                                                              12
<PAGE>

to improve  financial  reporting by providing  entities with the  opportunity to
mitigate  volatility in reported earnings caused by measuring related assets and
liabilities  differently  without  having  to  apply  complex  hedge  accounting
provisions.   SFAS  No.  159  also   establishes   presentation  and  disclosure
requirements  designed to facilitate  comparisons  between  entities that choose
different  measurement  attributes for similar types of assets and  liabilities.
SFAS No. 159 is effective for fiscal years  beginning  after  November 15, 2007.
The Company  does not  anticipate  that the adoption of SFAS No. 159 will have a
material effect on the Company's consolidated financial statements.

     In July 2006, the FASB issued FIN 48 "Accounting  for Uncertainty in Income
Taxes."  This  interpretation  requires  that  we  recognize  in  our  financial
statements,  the impact of a tax position,  if that position is more likely than
not of being sustained on audit,  based on the technical merits of the position.
The provisions of FIN 48 are effective for fiscal years beginning after December
15,  2006.  The  Company  does not  believe  the  adoption of FIN 48 will have a
material impact on its financial condition or results of operations.

     In  September  2006,  the  FASB  issued   Statement  No.  157  "Fair  Value
Measurements",  which defines fair value,  establishes a framework for measuring
fair value under GAAP, and expands disclosure about fair value measurement. FASB
Statement No. 157 applies to other accounting  pronouncements  that require fair
value  measurements  or permit  fair value  measurements.  The new  guidance  is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007 and for interim  periods  within those  fiscal  years.  We are
currently  evaluating  the  potential  impact,  in any, of the  adoption of FASB
Statement No. 157 on our consolidated financial position,  results of operations
and cash flows.

Item 7:   FINANCIAL STATEMENTS

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

Item 8:   CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     On April 26, 2006, Medical Nutrition USA, Inc. (the "Company") was notified
by Goldstein & Ganz, PC  ("Goldstein & Ganz") that they were  declining to stand
for re-election as the Company's independent accountant.

     The  audit  reports  of  Goldstein  & Ganz  on the  consolidated  financial
statements  of Medical  Nutrition  USA, Inc. as of and for the fiscal year ended
January 31, 2006 and 2005 did not contain an adverse  opinion or  disclaimer  of
opinion,  and were not  qualified as to  uncertainty,  audit scope or accounting
principals,  except that the audit report for the fiscal year ended  January 31,
2005 stated that the Company's  consolidated financial statements for its fiscal
years ended January 31, 2005 and 2004 had been restated.

     During the two most recent fiscal years ended January 31, 2006, and for the
period  February 1 to April 26, 2006,  there were no  disagreements  between the
Company  and  Goldstein  & Ganz  on  any  matter  of  accounting  principles  or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements,  if not resolved to the  satisfaction of Goldstein & Ganz,  would
have caused  Goldstein  & Ganz to make  reference  to the subject  matter of the
disagreement in their audit reports.

     Goldstein & Ganz has been provided with a copy of the  disclosures  in Form
8-K dated April 28, 2006.

     On April 26, 2006, the Audit  Committee of the Company's Board of Directors
engaged  Amper,  Politziner  &  Mattia,  P.C.  to serve  as its new  independent
accountant.  Prior to the  selection of Amper,  Politziner & Mattia,  P.C.,  the
Company did not consult  with them  regarding  any matter  requiring  disclosure
under Item 304(a)(2) of Regulation S-B.

                                                                              13
<PAGE>

Item 8A:  CONTROLS AND PROCEDURES

     The Company maintains disclosure controls and procedures designed to ensure
that information  required to be disclosed in the reports that the Company files
or submits under the  Securities  Exchange Act of 1934, is recorded,  processed,
summarized and reported within the time period  specified in the rules and forms
of the Securities and Exchange  Commission.  In connection  with the Form 10-KSB
for the fiscal year ended January 31, 2007, the Company's management,  including
its Chief Executive Officer and Chief Financial Officer, conducted an evaluation
of the effectiveness of the Company's disclosure controls and procedures.  Based
on this  evaluation,  the Company's Chief Executive  Officer and Chief Financial
Officer  concluded that the Company's  disclosure  controls and procedures  were
effective as of January 31, 2007.

     There were no changes in the Company's  internal  controls  over  financial
reporting  that  materially  affected,  or are  reasonably  likely to materially
affect the Company's internal control over financial reporting during the fiscal
year ended January 31, 2007.

     It should be noted that a control  system,  no matter how well designed and
operated,  can  provide  only  reasonable,  not  absolute,  assurance  that  the
objectives of the control system are met. As a result, there can be no assurance
that a control system will succeed in preventing all possible instances of error
and fraud.  The Company's  disclosure  controls and  procedures  are designed to
provide reasonable assurance of achieving their objectives,  and the conclusions
of our Chief  Executive  Officer,  and Chief  Financial  Officer are made at the
"reasonable assurance" level.

Item 8B - OTHER INFORMATION

None.

PART III

Item 9.   DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS,  AND CONTROL  PERSONS AND
          CORPORATE  GOVERNANCE;  COMPLIANCE  WITH SECTION 16(a) OF THE EXCHANGE
          ACT

     Information  regarding the Company's directors and officers is set forth in
"Proposal 1 - Election of Directors" under the caption "Biographical Information
Regarding  Directors" in the Company's  definitive  proxy statement for its 2007
Annual  Meeting of  Shareholders  to be held June 6, 2007.  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 10.  EXECUTIVE COMPENSATION

     Information  regarding the compensation of the Company's executive officers
and  directors  is set forth in "Proposal 1 - Election of  Directors"  under the
caption  "Director  Compensation"  and under the  caption  "Summary  of Cash and
Certain  Other  Compensation"  in  the  proxy  statement.  Such  information  is
incorporated herein by reference.

Item 11.  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 12.  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 "Certain Relationships and Related
Transactions" in the proxy statement. Such information is incorporated herein by
reference.

                                                                              14
<PAGE>

Item 13.  EXHIBITS

     See the Exhibit Index at the end of this report.

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Information regarding the Company's principal accountant fees and services
is set forth in "Proposal 2 - Ratification of Appointment of Independent Public
Accountants" in the proxy statement. Such information is incorporated herein by
reference.

                                                                              15
<PAGE>

SIGNATURES

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


Dated: May 16, 2007                               MEDICAL NUTRITION USA, INC.


                                                  By: /s/ FRANCIS A. NEWMAN
                                                      --------------------------
                                                      Francis A. Newman,
                                                      Chief Executive Officer

     In  accordance  with the  Exchange Act this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
Signature                     Title                                           Date
-------------------------     --------------------------------------------    -------------
<S>                           <C>                                             <C>
/s/ FRANCIS A. NEWMAN         Chairman, Chief Executive Officer               May 16 , 2007
-------------------------     and Director (Principal Executive Officer)
Francis A. Newman


/s/ ALAN LEVY                 Chief Financial Officer                         May 16 , 2007
-------------------------     (Principal Accounting and Financial Officer)
Alan Levy


/s/ BERNARD KORMAN            Director                                        May 16, 2007
-------------------------
Bernard Korman


/s/ ANDREW HOROWITZ           Director                                        May 16, 2007
-------------------------
Andrew Horowitz


/s/ MARK H. ROSENBERG         Director                                        May 16 , 2007
-------------------------
Mark H. Rosenberg
</TABLE>

                                                                              16
<PAGE>

                           MEDICAL NUTRITION USA, INC.

                          INDEX TO FINANCIAL STATEMENTS

                                                                      Page(s)
                                                                   -----------

Report of Independent Registered Public Accounting Firm                F-2

Report of Independent Registered Public Accounting Firm                F-3

Consolidated Balance Sheets at January 31, 2007 and 2006               F-4

Consolidated  Statements of Operations  for the Years Ended
 January 31, 2007 and 2006                                             F-5

Consolidated  Statements  of Cash Flows for the Years Ended
 January 31, 2007 and 2006                                             F-6

Consolidated  Statements of Stockholders' Equity for the
 Years Ended January 31, 2007 and 2006                                 F-7

Notes to Consolidated Financial Statements                         F-8 to F-20

                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Medical Nutrition USA, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Medical Nutrition
USA,  Inc. as of January 31, 2007,  and the related  consolidated  statements of
operations,  cash flows, and stockholders' equity for the year then ended. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

We conducted  our audit 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 audit 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 audit provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  the  Medical
Nutrition USA, Inc. as of January 31, 2007, and the results of their  operations
and their cash flows for the year then ended,  in conformity  with U.S generally
accepted accounting principles.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
changed its method of accounting for stock-based  compensation upon the adoption
of  Statement  of  Financial  Accounting  Standard  No.  123  (R),  "Share-Based
Payment".

                                            /s/ AMPER, POLITZINER & MATTIA, P.C.

May 11, 2007
Edison, New Jersey

                                       F-2
<PAGE>

                             GOLDSTEIN & GANZ, P.C.

                          CERTIFIED PUBLIC ACCOUNTANTS
                               98 CUTTERMILL ROAD
                           GREAT NECK, NEW YORK 11021

                                   ----------

                                 (516) 487-0110

                            Facsimile (516) 487-2928


                                                Member of the American Institute
                                                of Certified Public Accountants

                                                Member of The New York State
                                                Society of Certified Public
                                                Accountants

             Report of Independent Registered Public Accounting Firm

To the Board of Directors of
Medical Nutrition USA, Inc.

          We have audited the accompanying consolidated balance sheet of Medical
Nutrition  USA,  Inc.  as of  January  31,  2006  and the  related  consolidated
statements of operations, cash flows, and stockholders' equity for the year then
ended January 31, 2006. 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 audit.

          We conducted our audit 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.  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
audit provides 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 Medical Nutrition
USA,  Inc. as of January 31, 2006 , and the results of its  operations  and cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.


                                                     Goldstein & Ganz, CPA's, PC

Great Neck, NY
April  14, 2006

                                       F-3
<PAGE>

                           MEDICAL NUTRITION USA, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 January 31,
                                                                         ----------------------------
                                                                             2007            2006
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                              $  8,103,300    $  2,361,200
  Accounts receivable, net of allowance of $44,200 and
   $29,600 at January 31, 2007 and January 31, 2006, respectively           1,050,300         711,500
  Inventories                                                                 496,200         271,700
  Deferred income taxes                                                       250,500               -
  Other current assets                                                         57,800          72,400
                                                                         ------------    ------------

    Total current assets                                                    9,958,100       3,416,800

  Fixed assets, net of accumulated depreciation of
   $189,200 and $157,400, respectively                                        162,700          83,000

OTHER ASSETS:
  Deferred income taxes                                                     1,442,100               -
  Security deposits                                                            15,300          15,300
  Investment in Organics Corporation of America                               125,000         125,000
  Intangible assets, net of amortization                                      240,700         260,100
                                                                         ------------    ------------

                                                                         $ 11,943,900    $  3,900,200
                                                                         ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                       $    653,200    $    228,000
  Accrued expenses                                                            276,600         205,800
  Accrued rebates                                                              94,000          52,300
  Convertible promissory notes, net of discount                                     -         533,200
  Accrued interest payable                                                          -         633,200
                                                                         ------------    ------------

    Total current liabilities                                               1,023,800       1,652,500
                                                                         ------------    ------------
STOCKHOLDERS' EQUITY:
  Preferred stock $0.001 par value, 5,000,000 shares
   authorized; no shares outstanding at January 31, 2007 and 2006                   -               -
  Common stock, $0.001 par value; 20,000,000 shares
   authorized; 14,050,145 and 3,015,781 issued
   at January 31, 2007 and January 31, 2006, respectively                      14,000           3,000
  Additional paid-in-capital                                               23,884,400      14,835,700
  Accumulated deficit                                                     (12,874,900)    (12,580,600)
                                                                         ------------    ------------
                                                                           11,023,500       2,258,100
  Less: treasury stock, at cost; 22,851 shares as of January 31, 2007        (103,400)        (10,400)
                                                                         ------------    ------------
  Total stockholders' equity                                               10,920,100       2,247,700
                                                                         ------------    ------------
                                                                         $ 11,943,900    $  3,900,200
                                                                         ============    ============
</TABLE>

               See notes to the consolidated financial statements.

                                       F-4
<PAGE>

                           MEDICAL NUTRITION USA, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            Years Ended January 31,
                                                                         ----------------------------
                                                                             2007            2006
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Sales                                                                    $ 10,531,300    $  7,310,500
Cost of sales                                                               5,007,000       3,523,900

                                                                         ------------    ------------
Gross profit                                                                5,524,300       3,786,600
                                                                         ------------    ------------

Selling, general and administrative expenses                                4,616,600       3,257,300

Research and development                                                      273,500           9,000

                                                                         ------------    ------------
Operating income                                                              634,200         520,300
                                                                         ------------    ------------

Other (expense) income:
  Interest income                                                             273,800          60,900
  Interest expense including debt discount amortization                    (2,862,600)       (749,500)

                                                                         ------------    ------------
Total other (expense)                                                      (2,588,800)       (688,600)
                                                                         ------------    ------------

Loss before income taxes (benefit)                                         (1,954,600)       (168,300)

Income tax provision (benefit)                                             (1,660,300)          8,600
                                                                         ------------    ------------

Net (loss)                                                               $   (294,300)   $   (176,900)
                                                                         ============    ============

Basic and diluted per common share data:
Net (loss)                                                               $      (0.03)   $      (0.06)
                                                                         ============    ============

Weighted average number of common shares outstanding                       10,800,383       2,930,448
                                                                         ============    ============
</TABLE>

               See notes to the consolidated financial statements.

                                       F-5
<PAGE>

                           MEDICAL NUTRITION USA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           Years Ended January 31,
                                                                         ----------------------------
                                                                             2007           2006
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
OPERATING ACTIVITIES:
  Net (loss)                                                             $   (294,300)   $   (176,900)
  Adjustments to reconcile net cash provided by
  operating activities:
    Depreciation and amortization expense                                      71,300          26,700
    Provision for losses on accounts receivable                                14,600          20,000
    Deferred income taxes                                                  (1,692,600)              -
    Interest expense paid with common stock                                    93,300               -
    Interest expense from debt discount amortization                        2,769,300         526,300
    Stock based compensation                                                  690,400               -
  Changes in operating assets and liabilities
    Accounts receivable                                                      (353,400)       (232,600)
    Inventory                                                                (224,500)       (200,400)
    Other current assets                                                       14,600          (6,600)
    Accounts payable                                                          425,200         266,300
    Accrued expenses                                                           70,800          92,900
    Accrued rebates                                                            41,700          42,900
                                                                         ------------    ------------
Net cash provided by operating activities                                   1,626,400         358,600
                                                                         ------------    ------------

INVESTING ACTIVITIES:
  Acquisition of fixed assets                                                (111,500)        (35,100)
  Website development costs                                                   (12,200)              -
  Trademark costs                                                              (4,500)         (3,400)
  Capitalized patent costs                                                     (3,400)        (53,700)
  Purchase of treasury bill                                                 2,994,700               -
  Redemption of treasury bill                                              (2,994,700)              -
                                                                         ------------    ------------
Net cash (used for) investing activities                                     (131,600)        (92,200)
                                                                         ------------    ------------

FINANCING ACTIVITIES:
  Proceeds from exercise of warrants, net of expenses of $93,800 and $0     4,096,000          83,100
  Proceeds from exercise of options                                           254,700           9,000
  Purchase of treasury stock                                                 (103,400)              -
                                                                         ------------    ------------
Net cash provided by financing activities                                   4,247,300          92,100
                                                                         ------------    ------------

Net increase in cash                                                        5,742,100         358,500
Cash and cash equivalents - beginning of year                               2,361,200       2,002,700
                                                                         ------------    ------------

Cash and cash equivalents - end of year                                  $  8,103,300    $  2,361,200
                                                                         ============    ============

Supplemental information:
  Taxes paid during the period                                           $     32,308    $     14,088
                                                                         ============    ============
  Conversion of debt to common stock - face amount
  $3,052,500 with accrued interest of $726,500 related
  to the year ended January 31, 2007
</TABLE>

                 See notes to consolidated financial statements.

                                       F-6
<PAGE>

                           MEDICAL NUTRITION USA, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                      YEARS ENDED JANUARY 31, 2007 AND 2006

<TABLE>
<CAPTION>
                                       Common Stock                                                                    Total
                               ----------------------------      Additional       Accumulated        Treasury       Stockholders'
                                  Shares          Amount      Paid-in-capital       Deficit           Stock            Equity
                               ------------    ------------   ---------------    --------------    ------------    --------------
<S>                              <C>           <C>            <C>                <C>               <C>             <C>
Balance at January 31, 2005       2,892,965    $      2,900   $    14,743,700    $  (12,403,700)   $    (10,400)   $    2,332,500

Exercise of options                  12,000               -             9,000                 -               -             9,000

Exercise of warrants                110,816             100            83,000                 -               -            83,100

Net (loss)                                -               -                 -          (176,900)              -          (176,900)
                               ------------    ------------   ---------------    --------------    ------------    --------------

Balance at January 31, 2006       3,015,781           3,000        14,835,700       (12,580,600)        (10,400)        2,247,700

Exercise of options                 376,803             300           254,400                  -              -           254,700

Exercise of warrants,
 net of expenses of $93,800       5,607,599           5,600         4,340,400                  -              -         4,346,000

Conversion of convertible
 notes and accrued interest
 to common stock                  5,038,574           5,100         3,773,900                  -              -         3,779,000

Stock based compensation             12,300               -           690,400                  -              -           690,400

Purchase of treasury stock          (23,763)              -                 -                  -       (103,400)         (103,400)

Retirement of treasury stock              -               -           (10,400)                 -         10,400                 -

Net (loss)                                -               -                 -          (294,300)              -          (294,300)
                               ------------    ------------   ---------------    --------------    ------------    --------------

Balance at January 31, 2007      14,027,294    $     14,000   $    23,884,400    $  (12,874,900)   $   (103,400)   $   10,920,100
                               ============    ============   ===============    ==============    ============    ==============
</TABLE>

               See notes to the consolidated financial statements

                                       F-7
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 1. Organization and Business:

     Medical Nutrition USA, Inc. (a Delaware  Corporation)(Medical  Nutrition or
the  Company)  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 domestically in the United States.

Note 2. Significant Accounting Policies:

Principles of Consolidation - The consolidated  financial statements include the
accounts of the Company and its wholly owned  subsidiaries  after elimination of
inter-company accounts and transactions for ongoing activities.

Concentration  of  credit  risk  - The  Company  maintains  its  cash  and  cash
equivalents  in several  bank  accounts  at two high  credit  quality  financial
institutions.  The balances,  at times, may exceed federally  insured limits. At
January 31, 2007, the Company had  approximately  $7.8 million in excess of FDIC
insured limits.

     The  financial  component,   which  principally  subjects  the  Company  to
significant concentrations of credit risk, is trade accounts receivable.

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, 2007 and 2006.

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 will change.

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-8
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

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,  the  underlying  clinical
studies 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. The Company is amortizing the costs
over the shorter of their useful lives or seventeen years.

Research and Development - The Company and its subsidiaries  utilize independent
third  parties to design  and test  certain  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 No. 109 (SFAS 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.

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.  The fair value of cash is based on its demand value,  which is equal
to its carrying  value.  The fair values of notes payable are based on borrowing
rates that are available to the Company for loans with similar terms, collateral
and  maturity.  The  estimated  fair  values of notes  payable  approximate  the
carrying values.  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 - Effective February 1, 2006, the Company adopted SFAS
No.123(R),  "Share-Based  Payment,"  using the modified  prospective  transition
method.   Under  the  modified   prospective   transition   method,   recognized
compensation cost for the year ended January 31, 2007 includes:  1) compensation
cost for all  share-based  payments  granted  prior to, but not yet vested as of
February 1, 2006,  based on the grant date fair value  estimated  in  accordance
with the original  provisions  of Statement  123 for the portion  vesting in the
year ended  January  31,  2007;  and 2)  compensation  cost for all share  based
payments  granted on or after  February  1,  2006,  based on the grant date fair
value  estimated in accordance  with Statement  123(R).  In accordance  with the
modified  prospective  transition  method,  the Company has not  restated  prior
period results.

     For the year ended  January 31, 2007,  the Company  recognized  share-based
compensation  cost of  $690,400,  which is  included  in  selling,  general  and
administrative   expense.   The  Company  did  not  capitalize  any  share-based
compensation cost.

     Prior to adopting  Statement 123(R), the Company presented the tax benefit,
if any, of stock  option  exercises as operating  cash flows.  Statement  123(R)
requires that tax benefits,  if any,  resulting from tax deductions in excess of
the  compensation  cost  recognized for those options be classified as financing
cash flows.

     Statement 123(R) also requires  companies to calculate an initial "pool" of
excess  tax  benefits   available  at  the  adoption  date  to  absorb  any  tax
deficiencies that may be recognized under Statement 123(R).  The "pool" includes
the net excess tax benefits  that would have been  recognized if the Company had
adopted Statement 123 for recognition purposes on its effective date.

                                       F-9
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 2. Significant Accounting Policies (continued):

          The Company has elected to calculate the "pool" of excess tax benefits
under the alternative transition method described in FASB Staff Position ("FSP")
No. FAS123(R)-3,  "Transition  Election Related to Accounting for Tax Effects of
Share-based  Payment  Awards,"  which also specifies the method the Company must
use to calculate  excess tax benefits  reported on the  statement of cash flows.
The  Company  is in a net  operating  loss  position;  therefore,  no excess tax
benefits from share-based payment arrangements have been recognized for the year
ended January 31, 2007.

          The  following  table  illustrates  the  effect on net  income and net
income  per  share as if the  fair-value-based  method  under  SFAS 123 had been
applied. Option forfeitures are accounted for as they occurred and no amounts of
compensation  expense have been capitalized into inventory or other assets,  but
instead are considered period expenses in the pro forma amounts.

                                                               FISCAL
                                                            YEAR ENDED
                                                          JANUARY 31, 2006
                                                          ----------------
Net loss                                                  $       (176,900)
Add:    Stock based employee compensation expense
         included in reported net loss, net of
         related tax effects                                             -
Deduct: Stock based employee compensation expense
         determined under fair value based method
         for all awards, net of related tax effects               (365,300)
                                                          ----------------
Pro forma net loss                                        $       (542,200)
                                                          ================
Loss per share:
  Basic and Diluted--as reported                          $          (0.06)
  Basic and Diluted--pro forma                            $          (0.19)

Earnings  Per Share - The  consolidated  financial  statement  are  presented in
accordance with Statement of Financial  Accounting Standards No. 128 (SFAS 128),
"Earnings  Per Share".  Basic  earnings per common share are computed  using the
weighted average number of common shares  outstanding during the period. For the
year ended January 31, 2007,  the Company  recognized  share-based  compensation
cost of  $690,400,  which is  included in  selling,  general and  administrative
expense. The Company did not capitalize any share-based compensation cost.

     For the year ended  January 31, 2007,  the Company has  estimated  the fair
value of each option award on the date of grant using the  Black-Scholes  model.
The Company based  expected  volatility on  historical  volatility.  The Company
estimated  the expected  term of stock  options  using  historical  exercise and
employee termination experience. The Company estimated the fair value of options
awarded during the year ended January 31, 2007 using the following assumptions.


                                                             Year Ended
                                                          January 31, 2007
                                                          ----------------
Expected term until exercised, years                               6
Expected stock price volatility, average                          30%
Risk-free interest rate, zero coupon U.S. Treasury Notes           5%
Expected Dividend Yield                                            0
Weighted-average fair value per option                           $2.26

                                      F-10
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 2. Significant Accounting Policies (continued):

     Diluted  earnings  per common  share  incorporate  the  incremental  shares
issuable upon the assumed exercise of stock options and warrants.  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, 2007, the potentially dilutive common stock equivalents, consisting of stock
options,  which were excluded from the net (loss) per share  calculations due to
their anti-dilutive effect amounted to was $1,618,200.

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  State  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. Actual results could differ from those estimates.

Reclassification - Certain amounts in the January 31, 2006 financial statements,
statement  of  operations  were  reclassified   between  selling,   general  and
administrative  expenses  and income  taxes to conform to the  January  31, 2007
presentation.

New Accounting Pronouncements

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections," which changes the requirements for the accounting and reporting of
a change in  accounting  principle.  SFAS No. 154 is  effective  for  accounting
changes and  corrections of errors made in fiscal years beginning after December
15,  2005.  This  Statement  does not change the  transition  provisions  of any
existing  accounting  pronouncements,  including  those that are in a transition
phase as of the effective date of the Statement.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and Financial  Liabilities".  SFAS No. 159 permits entities to
choose to measure many  financial  instruments  and certain  other items at fair
value  that  are not  currently  required  to be  measured  at fair  value.  The
objective  is to improve  financial  reporting by  providing  entities  with the
opportunity  to mitigate  volatility  in reported  earnings  caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. SFAS No. 159 also establishes presentation and disclosure
requirements  designed to facilitate  comparisons  between  entities that choose
different  measurement  attributes for similar types of assets and  liabilities.
SFAS No. 159 is effective for fiscal years  beginning  after  November 15, 2007.
The Company  does not  anticipate  that the adoption of SFAS No. 159 will have a
material effect on the Company's consolidated financial statements.

     In July 2006, the FASB issued FIN 48 "Accounting  for Uncertainty in Income
Taxes."  This  interpretation  requires  that  we  recognize  in  our  financial
statements,  the impact of a tax position,  if that position is more likely than
not of being sustained on audit,  based on the technical merits of the position.
The provisions of FIN 48 are effective for fiscal years beginning after December
15,  2006.  The  Company  does not  believe  the  adoption of FIN 48 will have a
material impact on its financial condition or results of operations.

                                      F-11
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 2. Significant Accounting Policies (continued):

     In  September  2006,  the  FASB  issued   Statement  No.  157  "Fair  Value
Measurements",  which defines fair value,  establishes a framework for measuring
fair value under GAAP, and expands disclosure about fair value measurement. FASB
Statement No. 157 applies to other accounting  pronouncements  that require fair
value  measurements  or permit  fair value  measurements.  The new  guidance  is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007 and for interim  periods  within those  fiscal  years.  We are
currently  evaluating  the  potential  impact,  in any, of the  adoption of FASB
Statement No. 157 on our consolidated financial position,  results of operations
and cash flows.

Note 3. Fixed Assets:

     Fixed  assets  consisted  of the  following  at January  31, 2007 and 2006,
respectively:

                                                 January 31,
                                           ----------------------
                                              2007        2006
                                           ----------   ----------
Furniture, fixtures and equipment          $  304,800   $  193,300
Leasehold improvements                         47,100       47,100
                                           ----------   ----------
                                              351,900      240,400
Less: Accumulated depreciation                189,200      157,400
                                           ----------   ----------
                                           $  162,700   $   83,000
                                           ==========   ==========

Depreciation  expense was $31,900 and $24,000 for the fiscal years ended January
31, 2007 and 2006, respectively.

Note 4. Intangible Assets:

     Intangible  assets consisted of the following at January 31, 2007 and 2006,
respectively:

                                                 January 31,
                                           ----------------------
                                              2007        2006
                                           ----------   ----------
Patent application costs                   $  220,400   $  217,000
Trademarks                                     48,700       44,200
Website development costs                      18,500        6,300
                                           ----------   ----------
                                              287,600      267,500

Less: Accumulated amortization                 46,900        7,400
                                           ----------   ----------
                                           $  240,700   $  260,100
                                           ==========   ==========

Amortization expense was $39,400 and $2,700 for the fiscal years ended January
31, 2007 and 2006, respectively.

The future estimated amortization charges are as follows:

              Years Ended January 31,
              -----------------------
                      2008               $   40,800
                      2009                   40,800
                      2010                   40,800
                      2011                   40,800
                      2012                    4,300
                                         ==========
                                         $  167,500
                                         ==========

                                      F-12
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

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.  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  11 -
"Commitments  and  Contingencies").  The Company is carrying this  investment at
cost.  For the  years  ended  January  31,  2007 and 2006,  purchases  made from
Organics totaled $4,609,300 and $3,305,900, respectively. As of January 31, 2007
and 2006, the Company owed Organics  $590,000 and $124,700,  respectively.  Such
amounts are included in the accounts payable of the accompanying balance sheets.

Note 6.  Notes Payable:

2003 8% Convertible Promissory Notes

     From April 29, 2003 to August 31,  2003,  the Company  borrowed  $3,127,500
from  various  individuals  and  issued the 2003  Notes.  Each of the 2003 Notes
evidencing the loans was substantially the same, other than the principal amount
thereof.  The  2003  Notes  were  for a term of three  years.  The  2003  Notes,
including  accrued and unpaid  interest,  if any, were  convertible  at any time
prior to maturity at the option of the note-holder  into shares of the Company's
common  stock at a  conversion  price of $0.75 per share.  The terms of the 2003
Notes provided that the 2003 Notes,  including  accrued and unpaid interest,  if
any,  would  automatically  convert at any time prior to maturity if the Company
completed  an equity  financing  in which the Company  obtained  net proceeds of
$2,000,000  or more, at a rate that would be the lower of $0.75 per share or the
price per share  sold in the  equity  financing.  If the price per share in such
equity  financing  was  equal to or less than  $0.75,  the 2003  Notes  would be
converted into shares of either the Company's  preferred  stock or common stock,
depending  upon the  class of  equity  securities  sold by the  Company  in such
financing.  If the price per share in such equity financing was more than $0.75,
the 2003 Notes would be converted into shares of the Company's  common stock. In
connection  with this  transaction,  the Company  also  issued to the  investors
common stock purchase  warrants.  (See Note 9) On August 5, 2004, $37,500 of the
2003 Notes and accrued  interest of $3,000 was  converted  into 54,066 shares of
common  stock.  On  November  18,  2004,  $37,500 of the 2003 Notes and  accrued
interest of $3,900 was converted  into 55,140  shares of common  stock.  For the
year ended January 31, 2007,  $3,052,500 of the 2003 Notes and accrued  interest
of $726,500 was converted into 5,038,574  shares of common stock. At January 31,
2007,  there  were  no 2003  Notes  outstanding.  The  total  interest  expense,
including amortization of beneficial conversion features and warrant expense for
the  years  ended  January  31,  2007 and 2006  were  $2,525,600  and  $520,500,
respectively.

December 2003 Convertible Promissory Notes

     In December  2003,  the Company  entered  into a Clinical  Trial  Agreement
wherein  the Company  agreed to  implement  a clinical  development  program and
pursue a patent for one of its  products in exchange  for two loans  aggregating
$250,000  from two private  investors.  Subsequent to the loan  transaction  one
individual became a director of the Company.  As additional  consideration,  the
Company issued warrants to the investors to purchase up to 111,111 shares of the
Company's  common stock. The warrants have a three-year term and are exercisable
at $3.00 per share. In addition,  the investors  agreed to assist the Company in
the completion of the clinical trials and the  dissemination  and publication of
the clinical  trial results.  The loans are evidenced by convertible  promissory
notes that are payable in a single installment on their third  anniversary.  The
interest rate was to be determined by calculating  one-half percent for each one
percent  increase  in actual  sales  over  projected  sales (as set forth in the
convertible  promissory  notes)  during the period July 1, 2004 through June 30,
2005.  Since  actual  sales did not exceed  projected  sales as set forth in the
notes,  no interest will be accrued.  The interest  previously  accrued  through
April 30,  2005,  was  reversed.  The  notes are  convertible  at  anytime  at a
conversion  price per share of $2.25. In December 2006, the notes were converted
and warrants exercised into 222,222 shares of common stock.

                                      F-13
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006

Note 6.  Notes Payable (continued):

Notes Payable at January 31, 2006 consisted of the following:

                                                          January 31,
                                                             2006
                                                         ------------
2003 8% convertible promissory notes, bearing interest
at 8% maturing at varying dates from April 29, through
August 1, 2006                                           $  3,052,500

December 2003 convertible promissory notes,
maturing in December 2006                                     250,000
                                                         ------------
                                                            3,302,500
Less: Unamortized debt discount                             2,769,300
                                                         ------------
                                                              533,200
Less: current portion                                         533,200
                                                         ------------
Long term portion                                                   -
                                                         ============

          The  Company  recorded  $2,769,300  and  $526,300,   respectively,  in
non-cash  charges to interest  expense for the years ended  January 31, 2007 and
2006.

Note 7. Major Customers:

     For the fiscal year ended  January 31,  2007,  one customer  accounted  for
approximately  15.1%  of total  revenues,  representing  $1,595,100  of sales as
compared to 21.6% or $1,579,100 of sales in the prior year for the same customer

     As of January 31,  2007,  this  customer  had an open  accounts  receivable
balance of $352,200  which  represented  32.3% of the Company's  total  accounts
receivable.

Note 8. 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, 2007 and 2006 was approximately $136,900 and $114,300, respectively.

The future minimum lease payments are as follows:

              Years Ended January 31,
              -----------------------
                        2008              $  139,300
                        2009                 141,800
                        2010                 132,100
                        2011                       -
                        2012                       -
                                          ==========
                                          $  413,200
                                          ==========

                                      F-14
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 8. Lease Commitments (continued):

     The Company leases  vehicles and equipment under various  operating  leases
expiring  through 2010.  During the years ended  January 31, 2007 and 2006,  the
total payments under such leases were $7,800 and $10,500, respectively.

         The future minimum lease payments are as follows:

              Years Ended January 31,
              -----------------------
                        2008              $   10,800
                        2009                   6,900
                        2010                   4,000
                                          ----------
                                          $   21,700
                                          ==========

Note 9. Stockholders' Equity:

Class A and Class B Warrants

     In  November  2002,  in  connection  with  the  issuance  of  its  2002  8%
Convertible  Promissory  Notes, the Company also issued, to the investors of the
Notes,  Class B common  stock  purchase  warrants  exercisable  for an aggregate
600,000 shares of the Company's common stock, at $0.75 per share. The expiration
date of these warrants was accelerated to April 14, 2006, in accordance with the
terms of the warrants.  Additional  information  with respect to the  expiration
date  acceleration is provided below. All of these warrants were exercised prior
to expiration.

     In July 2003,  in  connection  with the issuance of the  Company's  2003 8%
convertible  promissory  notes,  the Company also  issued,  Class A common stock
purchase  warrants  exercisable for an aggregate 730,000 shares of the Company's
common  stock,  at $0.50 per  share.  These  warrants  were  issued  to  certain
shareholders  who purchased shares of common stock in April 2002 in exchange for
surrender of certain anti-dilution rights granted in the April 2002 transaction.
The  expiration  date of these  warrants was  accelerated  to April 14, 2006, in
accordance with the terms of the warrants.  All of these warrants were exercised
prior to expiration.

     In July 2003,  in  connection  with the issuance of the  Company's  2003 8%
convertible  promissory  notes, the Company also issued, to the investors of the
Notes,  Class B common stock purchase  warrants  exercisable for an aggregate of
approximately  4,170,000  shares of the  Company's  common  stock,  at $0.75 per
share.  The expiration date of these warrants was accelerated to April 14, 2006,
in  accordance  with  the  terms  of the  warrants.  Approximately  99% of these
warrants  were  exercised  prior to  expiration  and  approximately  1% of these
warrants expired on April 14, 2006.

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.  At January 31, 2007,  82,000 stock option grants were
outstanding under the 2000 Plan.

                                      F-15
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 9. Stockholders' Equity (continued)::

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, 2007, 2,349,097 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
Section 7.2 of 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 Section 7.2
of 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.

Stock Options

     During the year ended  January  31,  2007,  the Company  issued  options to
purchase  195,200 shares of its common stock with a three year vesting  schedule
at exercise  prices  ranging  from $3.81 to $4.75 per share to 19  employees  as
consideration for their efforts.  Two members of the Medical Advisory Board were
issued an annual award of options to purchase 5,000 shares each of the Company's
common stock which are immediately exercisable at an exercise price of $3.70 and
$4.60 per share,  respectively.  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 $3.70.  All of these
grants were priced at the fair market  value of the common  stock on the date of
grant.

                                      F-16
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 9. Stockholders' Equity (continued)::

Stock Grants

     During the year ended January 31, 2007, the Company issued restricted stock
awards  totaling  282,000  shares of its common  stock with a three year vesting
schedule to 23 employees as consideration  for their efforts.  The shares become
vested yearly based upon  continued  employment.  The shares have been valued at
$4.15 per share which was the fair  market  value at the date of issuance of the
grant. The Company is amortizing the expense over the vesting period.

         The restricted stock grants amortization will be as follows:

              Years Ended January 31,
              -----------------------
                        2008                   413,400
                        2009                   409,500
                        2010                   344,000
                                            ----------
                                             1,166,900
                                            ==========

     The following table  summarizes the outstanding and exercisable  options at
January 31, 2007 (contractual life in years):

<TABLE>
<CAPTION>
                                Options Outstanding                Options exercisable
                                -------------------              ----------------------
                                      Weighted        Weighted                 Weighted
                                      average         average                  average
                                     remaining        exercise                 exercise
Range of prices     Number              life           price        Number       price
---------------   -----------   -------------------   --------   -----------  ---------
<S>                 <C>                  <C>          <C>          <C>        <C>
$0.50-$3.00         2,587,097            7            $   2.08     1,886,161  $    1.91
$3.01-$4.75           297,600            9                3.87        34,167       3.43
                  -----------   -------------------   --------   -----------  ---------
$0.50-$4.75         2,884,697            7            $   2.26     1,920,328  $    1.94
                  ===========   ===================   ========   ===========  =========
</TABLE>

     A summary of option  transactions for the two years ended January 31, 2007,
follows:

                                                         Weighted
                                                         Average
                                                         exercise
                                             Options      price
                                           ----------   ----------
Outstanding at January 31, 2005             2,774,040   $     2.96
                                           ----------   ----------
Granted                                       689,400         2.76
Exercised                                      12,000         0.75
Expired or Surrendered                        195,940        18.94
                                           ----------   ----------
Outstanding at January 31, 2006             3,255,500         1.97
                                           ----------   ----------
Granted                                       265,200         4.07
Exercised                                     376,803         0.68
Expired or Surrendered                        259,200         2.72
                                           ----------   ----------
Outstanding at January 31, 2007             2,884,697   $     2.26
                                           ----------   ----------

                                      F-17
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 9. Stockholders' Equity (continued):

     For the year ended January 31, 2007,  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.

     During the year ended  January  31,  2007,  the Company  issued  options to
purchase  195,200 shares of its common stock with a three year vesting  schedule
at exercise  prices  ranging  from $3.81 to $4.75 per share to 19  employees  as
consideration for their efforts.  Two members of the Medical Advisory Board were
issued at different  dates an annual  award of options to purchase  5,000 shares
each of the  Company's  common  stock which are  immediately  exercisable  at an
exercise price of $3.70 and $4.60 per share, respectively.  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 $3.70.

     During the year ended January 31, 2007, the Company issued restricted stock
grants to purchase  282,000 shares of its common stock with a three year vesting
schedule to 23 employees as consideration  for their efforts.  The shares become
vested yearly based upon  continued  employment.  The shares have been valued at
$4.15 per share which was the market value at the date of issuance of the grant.
The Company is amortizing the expense over the vesting period.

Note 10. Income Taxes:

     The  provision  for income  taxes for the periods  below  differs  from the
amount computed by applying the federal statutory rate due to the following:

                                                     Year Ended     Year Ended
                                                     January 31,    January 31,
                                                        2007           2006
                                                    ------------   ------------
Statutory Federal income tax rate                         -34.0%          -34.0%
State taxes, net of Federal benefit                         1.6%            5.1%
Change in deferred tax assets valuation allowance         -52.5%           34.0%
                                                    ------------   ------------
Effective income tax rate                                 -84.9%            5.1%
                                                    ============   ============

     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  significant
component of the Company's  deferred tax asset is comprised of the Company's net
operating losses ("NOL's").

     The  Company has Federal  income tax loss  carryforwards  as of January 31,
2007 of  approximately  $4,561,400  and state income tax loss  carryforwards  of
approximately $1,556,700. The Federal NOL carryforwards expire beginning in 2008
and will be fully  expired  during 2025.  Prior to the fiscal year ended January
31, 2007, the Company had provided a valuation  allowance for the full amount of
its deferred tax assets because of the substantial uncertainties associated with
the  Company's  ability to realize a deferred  tax benefit due to its  financial
condition. However, based on the Company's current and projected taxable income,
the  deferred  tax benefit of  $1,692,600  has been  recorded in the fiscal year
ended January 31, 2007 financial  statements.  The provision for income taxes in
Fiscal 2006  consists of state  franchise  taxes.  The book  benefit for the net
operating  losses  generated  in  Fiscal  2006 was  offset by  recording  a full
valuation  allowance.  The Company may be subject to annual NOL  limitations  in
accordance  with  section 382 of the Internal  Revenue  Code,  nevertheless  the
Company  expects  to  utilize  all of  the  NOL  carryforwards  prior  to  their
expiration.

                                      F-18
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 10. Income Taxes (continued):

     The expiration of the Company's Federal NOL's are as follows:

              Years Ended January 31,
              -----------------------
                       2008                  $   320,300
                       2009                            -
                       2010                      113,800
                       2011                       50,800
                       2012                       17,800
                    Thereafter                 4,058,700
                                             -----------
                                             $ 4,561,400
                                             ===========

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

                                                     Year Ended     Year Ended
                                                     January 31,    January 31,
                                                        2007           2006
                                                    ------------   ------------
Current - State                                     $     32,300   $      8,600
Deferred - Federal                                    (1,551,900)             -
Deferred - State                                        (140,700)             -
                                                    ------------   ------------
Income tax (benefit) expense                        $ (1,660,300)  $      8,600
                                                    ============   ============

Note 11. 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.

                                      F-19
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

Note 11. Commitments and Contingencies (continued):

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
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").

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 year ended
January 31,  2007 and 2006,  the  Company  paid in total  $34,100 and $17,600 in
bonuses based on this plan, respectively.

                                      F-20
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

                                  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.*

   5.1    Opinion of Foley & Lardner LLP.*

   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, P.C.,  Independent  Registered
          Public Accounting Firm

                                      F-21
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

   23.2   Consent of  Goldstein  & Ganz,  P.C.,  Independent  Registered  Public
          Accounting  Firm.

   23.3   Consent of Foley & Lardner LLP (included in Exhibit  5.1).

   24.1   Power of Attorney  (included on the signature page of the Registration
          Statement).

   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 pursuant to 18 U.S.C.  Section
          1350. **

   32.2   Certificate of 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.

                                      F-22
<PAGE>

                           MEDICAL NUTRITION USA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2007

(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.

                                      F-23