---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2008                                     

OR

|  |                                                                                    
|- | -----------------------------------------------------------------------------------
|o | TRANSITION REPORT
 UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |                                                                                    
|  | For the
 transition period from _______________________ to _____________           
| 

Commission file number 0-18349

|                                                      
|------------------------------------------------------
|Medical Nutrition USA, Inc.                           
|                                                      
|(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-3686984                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer 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.o

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. Yesx Noo

---



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. o

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

State issuers
revenues for its most recent fiscal year: $12,800,600.

The aggregate
market value of voting stock held by non-affiliates of the registrant as of
April 18, 2008 was approximately $46,260,179 (based on the average of the
closing bid price and closing ask price for shares of the registrants common
stock as reported on the NASDAQ Stock Market for the last trading date prior to
that date).

As of April
18, 2008 there were 14,018,236 shares of the registrants common stock
outstanding.

Portions of
the registrants Proxy Statement for the 2008 Annual Meeting of Shareholders
scheduled to be held June 4, 2008 are incorporated by reference in Part III
hereof.

Transitional
Small Business Disclosure Format (check one): Yeso No x

---



|                              |              |                                                                                                                    |    |  | 
|----------------------------- | ------------ | ------------------------------------------------------------------------------------------------------------------ | -- |  | 
|                              |              | TABLE OF CONTENTS                                                                                                  |    |  | 
|                             
|PART I                        |              |                                                                                                                    |    | 
|                              | Item 1 -     | DESCRIPTION OF BUSINESS                                                                                            | 2  |  | 
|                              | Item 2 -     | DESCRIPTION OF PROPERTY                                                                                            | 8  |  | 
|                              | Item 3 -     | LEGAL PROCEEDINGS                                                                                                  | 9  |  | 
|                              | Item 4 -     | SUBMISSION OF MATTER TO SECURITY HOLDERS                                                                           | 9  |  | 
|                              |              |                                                                                                                    |    |  | 
|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                                                        | 11 |  | 
|                              | Item 7 -     | FINANCIAL STATEMENTS                                                                                               | 14 |  | 
|                              | Item 8 -     | CHANGES IN AND DISAGREEMENTS WITH
 ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
 DISCLOSURE                             | 14 |  | 
|                              | Item 8A -    | CONTROLS AND PROCEDURES                                                                                            | 15 |  | 
|                              | Item 8B -    | OTHER INFORMATION                                                                                                  | 16 |  | 
|                              |              |                                                                                                                    |    |  | 
|PART III                      |              |                                                                                                                    |    |  | 
|                              | Item 9 -     | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
 AND CONTROL PERSONS; COMPLIANCE WITH
 SECTION 16(a) OF THE EXCHANGE ACT | 16 |  | 
|                              | Item 10 -    | EXECUTIVE COMPENSATION                                                                                             | 16 |  | 
|                              | Item 11 -    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
 OWNERS AND MANAGEMENT AND RELATED
 STOCKHOLDER MATTERS                   | 16 |  | 
|                              | Item 12 -    | CERTAIN RELATIONSHIPS AND RELATED
 TRANSACTIONS AND DIRECTOR INDEPENDENCE                                          | 16 |  | 
|                              | Item 13 -    | EXHIBITS                                                                                                           | 16 |  | 
|                              | Item 14 -    | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                             | 16 |  | 
|                              |              |                                                                                                                    |    | 
|Signatures                    |              | 17                                                                                                                 |    | 
|Index to Financial Statements | F-1          |                                                                                                                    |   
|Exhibit Index                 | F-22 to F-23 |                                                                                                                    |   

1

---



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. Unless the context otherwise requires,
references to the Company in this report refer to Medical Nutrition USA, Inc.

INDUSTRY OVERVIEW

Annual sales of nutrition products, including
supplements, fortified foods and beverages and nutraceuticals in the United
States were estimated to be approximately $100 billion. Annual sales of
nutritional supplements to health care institutions, the industry segment in
which the Company primarily competes, are estimated to be approximately $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
enacted in 1965) includes programs and services to specifically address
nutrition among older persons. Under the OAA, nursing home facilities are
required to assure that each resident maintain acceptable parameters of nutritional
status, such as body weight and protein levels, unless the clinical condition
demonstrates that this is not possible. Within the nursing home resident
population, protein energy malnutrition (PEM), a deficiency of protein and
energy (calories), is a common condition resulting in loss of lean body mass,
development of pressure ulcers, and impaired immune response and organ
function. In observational studies, Pro-Stat®, the Companys modular protein
supplement has been shown to be effective nutritional support in the treatment
of pressure ulcers, unintended weight loss and malnutrition. In March 2006, a
randomized, controlled clinical trial was published in the peer-reviewed
journal Advances in Skin and Wound Care, reporting a 96% greater improvement
in pressure ulcer healing among nursing home residents receiving standard care
plus Pro-Stat®, compared to a control group receiving standard care plus a
placebo.

2

---



RENAL CARE

There
are more than 400,000 end stage renal disease patients undergoing dialysis
treatments in the United States. Dialysis patients need to maintain high
protein and calorie intake to avoid becoming malnourished. Dialysis
causes a higher need for protein intake because some protein loss occurs with
each treatment. Additionally, dialysis patients may suffer from poor appetite
and are typically restricted in the volume of liquids they can consume.
Pro-Stat® has 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 sponsored a study in cooperation with Renal Care Group and Vanderbilt
University to measure the efficacy of Pro-Stat® supplementation in improving
and maintaining serum albumin levels among dialysis patients which was recently
completed. The results of this study are currently being reviewed and should be
published within the next year.

INDUSTRY TRENDS

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

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

SALES,
PRODUCTS AND STRATEGY

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

During
the past year, the Company has continued to
implement its strategy to increase the proportion of its sales generated by its
own branded products, primarily to nursing homes, nursing home distributors,
and dialysis clinics. These products include primarily the Pro-Stat® line of
enzyme-hydrolyzed liquid protein used to treat unintended weight loss, protein
energy malnutrition and pressure ulcers.

The
Companys strategy includes increasing the number of nursing homes, long-term
care facilities and dialysis clinics employing Pro-Stat® therapy.
The Company also uses consultant dietitians to supplement its sales force. 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 30% for the fiscal year ended January 31, 2008 when compared to
the prior fiscal year.

For
the fiscal year ended January 31, 2008, two customers accounted for
approximately 32% of total sales, as compared to 29% in the prior fiscal year.
The Company has no contractual arrangements with these customers and if these
customers were to discontinue purchasing from the Company, it would have a
material impact on the Companys sales.

3

---



In
the past year, the Company introduced a new product named Pro-Stat® Profile.
Pro-Stat® Profile is formulated for those whose essential amino acid intake is
inadequate or indeterminable. Pro-Stat® Profile is formulated to score 100% on
the Institute of Medicine (IOM) Protein
Digestibility-Corrected Amino Acid Score (PDCAAS) The Food and
Agriculture Organization of the World Health Organization (FAO/WHO) developed
PDCAAS to measure protein value in human nutrition. The method is based on
comparison of the concentration of the first limiting indispensable amino acid
(IAA) in the test protein with the concentration of that amino acid in a
reference (scoring) pattern, which was updated by the IOM in 2005. This scoring
pattern is derived from the IAA requirements of the preschool-age child.

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, 2008, the Company recorded expenses, not
including salaries and wages, of $108,000 on research and development. For the
fiscal year ended January 31, 2007, the Company incurred $273,500 in research
and development costs.

MANUFACTURING

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

COMPETITION

The
nutritional supplement industry is highly competitive. Many of the Companys
competitors are large, well-known companies 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

---



Patents

In
January 2008, the Company was issued a patent for Method for Treating Wounds
to Promote Healing. This patent expires in 2023. In 1977, the Company was
issued four patents for its collagen hydrolysate product. These are for (1)
Method Of Providing High-Protein Nutrition By The Oral Administration Of A
Predigested Protein Composition, (2) Method Of Composition For Preventing
Nutritional Deficiency, (3) Method Of Treating Nutritional Deficiency During
Cardiac Cachexia, Diabetes, Hypoglycemia, Gastro-enterology, Lipid, Cell
Glycogen And Keratin Related Skin Conditions And Alcoholism, and (4) Method Of
Treating Obesity By The Oral Administration Of A Predigested Protein
Composition. These patents expired in 1994.

Trademarks

The
Company has been using the Pro-Stat® mark since August 2002 and the Fiber-Stat®
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.

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

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

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

5

---



EMPLOYEES

The
Company has 33 full time employees as of April 8, 2008.

RISK FACTORS

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

For
the fiscal years ended January 31, 2008 and 2007, two customers accounted for
approximately 32% of total revenues. The Company does not have contracts with
these customers and, as a result, there is no assurance that these customers
will continue to order products from the Company or will continue to order the
products in the same amount. The loss of these customers 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 has announced a 46% growth in its
sales force in Fiscal 2009.

The
Company announced in December 2007 that it was going to rapidly increase the
size of its sales force. This expansion will put a significant strain on
management. There will be costs involved in recruiting, hiring, training and
providing technology support. Competition to hire qualified personnel in the
specific markets we are seeking will be intense. These new employees will need
to be trained and will take a certain amount of time to become acclimated to
the Company, its products and the way it does business. The growth of the
Companys business will depend on the successful integration of these new
employees. Any failure to manage this growth could have a material adverse
effect on the Companys business.

The Company has reduced the price of some of
its Products.

The
Company announced in April 2008 that it reduced the price of certain products
by approximately 12% on a weighted average basis. This price reduction can have
the effect of lowering sales if the Company does not increase the number of
units it sells. Competition in this industry is intense. Competition can also
lower prices to below our pricing. Certain of our competitors are larger than
us and have more financial resources. The lower sales price will also cause
gross margins to decrease by an approximate 1.5%. Lower gross margins without a
corresponding increase in sales can mean less funds available for the Company
to pay its expenses, which may hurt the profitability of the Company. Company
management may not be able to successfully implement this strategy, which could
have a material adverse effect on the Companys business.

6

---



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

The
Company announced in April 2008 that it intends to begin selling certain of its
products through retail stores by the end of the Fiscal 2009 year. The Company
has limited experience in the retail market. There are many existing products in
the retail market that the Company will have to compete against. Most of the
competition is from Companies larger than us who have more financial resources
to support their products with marketing, advertising and rebates. The Company
will need to make initial expenditures in marketing and advertising to launch
its retail products. There is no certainty that the Company will realize
profits from retail that will exceed the expenses incurred. Management will
need to carefully manage this retail venture. If the Company is not successful
in managing this, it could have a material adverse effect on the Companys
business.

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

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

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

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

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

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

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

The
Company believes that it has sufficient cash on hand to fully implement its
business strategy for fiscal year 2009. See Managements Discussion and
Analysis or Plan of Operation - Liquidity and Capital Resources. The Companys
future capital requirements will depend on many factors including: the costs of
its sales and marketing activities and its education programs for its markets,
competing product and market developments, the costs of developing new
products, the costs of expanding its operations, and its ability to generate
positive cash flow from its sales.

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

7

---



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

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

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

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

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

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

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

|        |                        
|------- | -----------------------
|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, 2008 was approximately
$95,700, for the fiscal year ending January 31, 2009 it will be $117,400, and
for the fiscal year ending January 31, 2010 it will be $110,800.

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.

8

---



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

None.

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

None.

PART II

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

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

|                   |  |      |      |     |   |      | 
|------------------ |  | ---- | ---- | --- | - | ---- | 
|THREE MONTHS
ENDED |  | HIGH |      | LOW |  
|                   |  |      |      |     |  
|                   |  |      |      |     |   |      | 
|April 30, 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 | 
|April 30, 2007     |  | $    | 5.50 |     | $ | 4.00 | 
|July 31, 2007      |  | $    | 7.10 |     | $ | 4.95 | 
|October 31, 2007   |  | $    | 6.00 |     | $ | 3.80 | 
|January 31, 2008   |  | $    | 5.49 |     | $ | 2.59 | 

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

As
of April 17, 2008, there were approximately 578 holders of record of the
Companys common stock.

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

9

---



As
of January 31, 2008, the following information is provided with respect to
compensation plans (including individual compensation arrangements) under which
equity securities of the Company are authorized for issuance, aggregated as
follows:

|                                                            |  |                                                                                             |  |                                                                             |   |                                                              |  |    |   | 
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | - | ------------------------------------------------------------ |  | -- | - | 
|Plan category                                               |  | Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights |  | Weighted average
exercise price of
outstanding
options, warrants
and rights |   | Number of
securities
remaining
available for future
issuance | 
|                                                            |  |                                                                                             |  |                                                                             |   |                                                              | 
|                                                            |  | (a)                                                                                         |  | (b)                                                                         |   | (c)                                                          | 
|                                                            |  |                                                                                             |  |                                                                             |   |                                                              | 
|Equity compensation plans approved by
 security holders     |  | 2,346,881                                                                                   |  |                                                                             | $ | 2.65                                                         |  | (1 | ) | 
|                                                            |  |                                                                                             |  |                                                                             |   |                                                              |  |    |   | 
|Equity compensation plans not approved by
 security holders |  | 453,600                                                                                     |  |                                                                             | $ | 0.84                                                         |  |   |   | 
|                                                            |  |                                                                                             |  |                                                                             |   |                                                              |  |    |   | 
|Total                                                       |  | 2,800,481                                                                                   |  |                                                                             | $ | 2.36                                                         |  |   |   | 
|                                                            |  |                                                                                             |  |                                                                             |   |                                                              |  |    |   | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

Company Stock Repurchase Plan

In
December 2007, the Companys Board of Directors approved the Medical Nutrition
USA, Inc. Stock Repurchase Plan (the Plan). The Plan allows for the purchase
of up to 500,000 shares of Company stock on the open market and from employees.
The Plan allows for a maximum weekly market purchase of 2 5,000 shares with no more
than 50,000 shares in any calendar month. Private transactions with employees
can not exceed 50% of the total shares to be purchased with no one individual
employee exceeding 25% of the total. The Plan commenced on January 15, 2008.
For the year ended January 31, 2008, the Company has purchased 184,000 shares
from employees and 2,000 shares on the open market. These purchased shares are
being considered as unissued shares available for issuance. There are 314,000
shares available for purchase under the Plan as of January 31, 2008.

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

10

---



|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 6. | Managements Discussion and Analysis
or Plan of Operation

Executive Summary

Overview -
During fiscal 2008, 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 91 distributors as
compared to 80 in the prior fiscal year, who supply products to long-term care
facilities and dialysis clinics.

Fiscal 2008
Highlights

Sales  Our
sales increased approximately 22%, to $12,800,600, during the fiscal year. The
sales increase was primarily the result of expanded distribution of our
Pro-Stat® line of hydrolyzed, liquid, modular protein. Sales of the Companys
branded products increased approximately 30%, from the prior fiscal year to
$10,977,900.

New Product
Development  We completed development of, and began marketing Pro-Stat®
Profile. Pro-Stat® Profile provides a concentrated source of complete protein
(10 g/30 ml) and energy (101 Kcal/30 ml), with the IOM 2005 essential amino
acid pattern as well as important conditionally essential and
non-essential amino acids. (See section on sales, product and strategy)

Cash Balance
and Cash Flow  Our cash, cash equivalents and short-term investment balance at
January 31, 2008 was $9,544,800. For the year, cash provided by operating
activities totaled $1,972,800 on a reported net income of $869,100. The
Companys total cash, cash equivalents and short-term investments position
increased by $1,441,500.

Fiscal 2009
Expectations

We
expect our revenues to continue to grow as a result of our ongoing efforts to
expand distribution of our branded products. The Company announced in December
2007 plans to further expand its field sales force by approximately 45% during
the first half of fiscal 2009. The expenses for these additional positions will
begin to be recognized in the first and second quarter of fiscal 2009, with the
expected revenue impact beginning to be realized later in the third and fourth
quarters. In addition, the Company decided to price some of its products more
aggressively in order to further increase its rate of market share growth - and
strengthen its competitive position. During the first quarter of fiscal 2009,
the Company reduced the price of certain Pro-Stat® formulas by approximately
12% on a weighted average basis. After offsetting reductions in product costs,
the Company expects that gross margins will be approximately 150 basis points
lower compared to fiscal 2008 beginning in the second quarter and by a smaller
amount in the first quarter. The Company believes that although its strategy to
substantially increase its sales force and the more aggressive pricing will
increase expenses and reduce its rate of revenue growth during the first half
of fiscal 2009, it will result in increased rates of revenue growth beginning
the second half of the fiscal 2009 and continuing thereafter.

In
the second quarter of 2009 fiscal year, the Company will introduce a new
product named UTI-Stat, which contains a proprietary formulation that helps
support urinary tract health and helps prevent recurrence of urinary tract
infections. Trials conducted in 10 long-term care facilities in five states
showed that 92% of residents with a history of urinary tract infections remained
symptom-free while taking UTI-Stat. The Company expects that UTI-Stat will
begin contributing to sales towards the end of this years third quarter.

The
Company also announced its intention to begin selling certain of its products
through retail stores by the end of the fiscal 2009 year. The Company believes
that the retail sales opportunities for certain of its products are
significantly greater than in its traditional institutional markets and that
retail marketing will create greater awareness and be complementary to its
continuing efforts in nursing homes and dialysis clinics.

11

---



Results of Operations

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

Fiscal Year Ended January 31, 2008 Compared
to Fiscal Year Ended January 31, 2007

Sales
for the fiscal year ended January 31, 2008 were $12,800,600 as compared with
$10,531,300 for the fiscal year ended January 31, 2007, an increase of
approximately 22%. This increase was primarily attributable to an increase in
branded product sales to approximately $10,977,900 from $8,442,700. The
increase in branded sales can be attributed to growing awareness of our
products and the increase in the size of the Companys sales force. Almost all
of the Companys branded product sales were from formulations of hydrolyzed
collagen. Private label sales decreased to approximately $1,822,700 from
$2,088,600 for the comparable prior year period.

Cost
of sales for the fiscal year ended January 31, 2008 was $5,994,900 or 46.8% of
sales, as compared with $5,007,000 for the fiscal year ended January 31, 2007,
or 47.5% of sales. Gross profit percentage increased from 52.5% to 53.2% for
the fiscal year ended January 31, 2008 compared to the fiscal year ended
January 31, 2007. This increase in gross profit percentage was primarily due to
an increase in the sales of branded products which have a higher gross margin
than the Companys private label products.

Selling,
general and administrative expenses (SG&A) for the fiscal year ended
January 31, 2008, increased by $1,147,100 to $5,763,700, from $4,616,600 for
the fiscal year ended January 31, 2007. This increase was primarily
attributable to an increase in selling and marketing expenses of $508,800. This
increase in selling and marketing is due to expanded marketing of the Companys
branded products. Included in SG&A is stock based compensation expense
which was $1,062,000 and $690,400 for the fiscal years ended January 31, 2008
and 2007, respectively. This increase is due to the Company adding two
executive officers in late fiscal 2007. The Company does not expect this expense
to increase significantly on a going forward basis.

Research
and development expenses for the fiscal year ended January 31, 2008 was
$108,000 in comparison to $273,500 for the prior fiscal year. The Company
sponsored two academic university clinical studies that began in fiscal 2007.
The results of the studies are anticipated to be published in fiscal 2009.

For
the fiscal year ended January 31, 2008, the Company had operating income of
$934,000 as compared to an operating income of $634,200 for the fiscal year
ended January 31, 2007.

Interest
income for the fiscal year ended January 31, 2008 increased to $416,000 in
comparison to $273,800 for the year ended January 31, 2007. This increase is
due mainly to the higher average cash and investments balance during the year
and cash generated from operations. Interest expense was $2,862,600 for the
fiscal year ended January 31, 2007 and was primarily due to the non-cash
amortization of debt discount for the fiscal year ended January 31, 2007. There
was no interest expense for the year ended January 31, 2008.

The
Company recorded a tax provision of $480,900 for the year ended January 31,
2008. For tax purposes, certain expenses for stock based compensation are not deductible.
In fiscal year ended January 31, 2007, the Company recorded a tax benefit in
the amount of $1,692,600 as the Company reduced the valuation allowance to zero
on its deferred tax assets because of their expected realizability based on the
Companys both current and projected taxable income at that time.

The
Company net income for the fiscal year ended January 31, 2008 of $869,100 or
$0.06 per share, compared to a net loss for the fiscal year ended January 31,
2007 of $294,300 or $0.03 per share.

Liquidity and Capital Resources

At
January 31, 2008, the Company had cash and cash equivalents and short-term
investments of $9,544,800 as compared to $8,103,300 at January 31, 2007. At
January 31, 2008, approximately 98% of accounts receivable were less than 30
days past due. Cash provided by operations during the fiscal year ended January
31, 2008 was $1,972,800 as compared to $1,626,400 in the comparable prior
fiscal year.

12

---



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

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

Critical Accounting Policies:

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

Share Based Compensation- Effective February
1, 2006, the Company implemented SFAS No.123(R), Share-Based Payment, using
the modified prospective transition method. Under this transition method, the
compensation expense recognized for the year ended January 31, 2007 includes:
1) compensation expense for all stock-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) all stock-based payments
granted subsequent to February 1, 2006, based on the grant date fair value estimated
in accordance with Statement 123(R). Stock-based compensation expense is
generally recognized ratably over the requisite service period.

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 September
2006, the FASB issued Statement No. 157, Fair Value Measurements (FAS 157),
which addresses how companies should measure fair value when they are required
to use a fair value measure for recognition or disclosure purposes under
generally accepted accounting principles (GAAP). As a result of FAS 157,
there is now a common definition of fair value to be used throughout GAAP,
which is expected to make the measurement of fair value more consistent and
comparable. FAS 157 is effective for the first fiscal year beginning after
November 15, 2007, which is the Companys fiscal year beginning February 1,
2008. We are currently evaluating the effect, if any, of adoption on our
financial statements but it is not expected to be significant.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (FAS 159). FAS 159 permits companies to choose to
measure certain financial instruments and certain other items at fair value.
The standard requires that unrealized gains and losses on items for which the
fair value option has been elected be reported in earnings. FAS 159 is effective
as of the beginning of the entitys fiscal year that begins after November 15,
2007, which will be our fiscal year beginning February 1, 2008. We are
currently evaluating the impact of adopting FAS 159 on our financial
statements.

13

---



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

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

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

|        |                     
|------- | --------------------
|Item 7: | FINANCIAL STATEMENTS

See the
Companys 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

None

14

---



|         |                        
|-------- | -----------------------
|Item 8A: | CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Medical Nutrition USA, Inc. has
evaluated the effectiveness of its disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of
January 31, 2008, and, based upon this evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these controls and procedures
are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial
Reporting

Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Medical Nutrition USA, Inc. has
evaluated changes in internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the fiscal quarter ended January 31, 2008 and have concluded that no
change has materially affected, or is reasonably likely to materially affect,
internal control over financial reporting.

Managements Annual Report On Internal
Control Over Financial Reporting

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

Medical
Nutrition USA, Inc.s management, including the Chief Executive Officer and
Chief Financial Officer, has conducted an evaluation of the effectiveness of
its internal control over financial reporting as of January 31, 2008 based on
the framework in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, management concluded that our internal control over financial
reporting was effective as of January 31, 2008.

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

15

---



Limitations on the Effectiveness of Controls.

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

|         |                  
|-------- | -----------------
|Item 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 2008 Annual
Meeting of Shareholders to be held June 4, 2008. 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

None.

|         |         
|-------- | --------
|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
under the caption Audit Fees in the proxy statement. Such information is
incorporated herein by reference.

16

---



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: April
  28, 2008 | 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.

|                        |                                     |                                                |  |  |  |  | 
|----------------------- | ----------------------------------- | ---------------------------------------------- |  |  |  |  | 
|Signature               | Title                               | Date                                           | 
|                        |                                     |                                                |  |  |  | 
|                       
|/s/ FRANCIS
  A. NEWMAN | Chairman,
  Chief Executive Officer | April 28,
  2008                               | 
|                        |                                     | and Director
  (Principal Executive Officer)   |  | 
|Francis A.
  Newman     |                                     |                                                | 
|                        |                                     |                                                | 
|/s/ ALAN
  LEVY         | Chief
  Financial Officer           | April 28,
  2008                               | 
|                        |                                     | (Principal
  Accounting and Financial Officer) |  | 
|Alan Levy               |                                     |                                                | 
|                        |                                     |                                                | 
|/s/ BERNARD
  KORMAN    | Director                            | April 28,
  2008                               | 
|                        |                                     |                                                |  | 
|Bernard
  Korman        |                                     |                                                | 
|                        |                                     |                                                | 
|/s/ ANDREW
  HOROWITZ   | Director                            | April 28,
  2008                               | 
|                        |                                     |                                                | 
|Andrew
  Horowitz       |                                     |                                                | 
|                        |                                     |                                                | 
|/s/ MARK H.
  ROSENBERG | Director                            | April 28,
  2008                               | 
|                        |                                     |                                                |  | 
|Mark H.
  Rosenberg     |                                     |                                                | 

17

---



MEDICAL NUTRITION USA, INC.

INDEX TO FINANCIAL STATEMENTS

|                                                                                 |  |             |    
|-------------------------------------------------------------------------------- |  | ----------- | ---
|                                                                                 |  | Page(s)    
|                                                                                 |  |            
|Report of Independent Registered Public Accounting Firm                          |  |             | F-2
|                                                                                 |  |             |    
|Balance Sheets at January 31, 2008 and 2007                                      |  |             | F-3
|                                                                                 |  |             |    
|Statements of Operations for the Years Ended January 31, 2008 and 2007           |  |             | F-4
|                                                                                 |  |             |    
|Statements of Cash Flows for the Years Ended January 31, 2008 and 2007           |  |             | F-5
|                                                                                 |  |             |    
|Statements of Stockholders Equity for the Years Ended January 31, 2008 and 2007 |  |             | F-6
|                                                                                 |  |             |    
|Notes to Financial Statements                                                    |  | F-7 to F-21

F-1

---



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of
Directors and Stockholders
Medical Nutrition USA, Inc.

We have
audited the accompanying balance sheets of Medical Nutrition USA, Inc. as of
January 31, 2008 and 2007, and the related statements of operations, cash
flows, and stockholders equity for the years then ended. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Medical Nutrition USA, Inc. as
of January 31, 2008 and 2007, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

As discussed
in Note 2 to the financial statements, effective February 1, 2006, the Company
adopted the provisions of Financial Accounting Standard No. 123R (new 2004)
Stock Based Compensation. As discussed in Note 10 to the financial
statements, effective February 1, 2007, the Company adopted the provisions of
Financial Interpretation (FIN) No. 48 Accounting for Uncertainty in Income
Taxes - an interpretation of Statement of Financial Accounting Standards No.
109.

|                        |                                      
|----------------------- | -------------------------------------
|                        | /s/ AMPER,
 POLITZINER & MATTIA, P.C.
|                        |                                      
|April 28,
 2008         |                                      
|Hackensack,
 New Jersey |                                      

F-2

---



MEDICAL NUTRITION USA, INC.

BALANCE
SHEETS

|                                                                                                                    |  |             |             |      |   |             |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----------- | ---- | - | ----------- | -
|                                                                                                                    |  | January
31, |            
|                                                                                                                    |  |             |            
|                                                                                                                    |  | 2008        |             | 2007 |  
|                                                                                                                    |  |             |             |      |  
|                                                                                                                    |  |             |             |      |  
|ASSETS                                                                                                              |  |             |             |      |   |             |  
|                                                                                                                   
|Current Assets:                                                                                                     |  |             |             |      |   |             |  
|Cash and cash equivalents                                                                                           |  | $           | 5,208,000   |      | $ | 8,103,300   |  
|Short-term investments                                                                                              |  |             | 4,336,800   |      |   |            |  
|Accounts receivable, net of allowance of $45,000 and

 $44,200, respectively                                        |  |             | 1,054,500   |      |   | 1,050,300   |  
|Inventories                                                                                                         |  |             | 401,800     |      |   | 496,200     |  
|Deferred income taxes                                                                                               |  |             | 877,700     |      |   | 250,500     |  
|Prepaid income taxes                                                                                                |  |             | 232,000     |      |   |            |  
|Other current assets                                                                                                |  |             | 179,800     |      |   | 57,800      |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|Total current assets                                                                                                |  |             | 12,290,600  |      |   | 9,958,100   |  
|                                                                                                                    |  |             |             |      |   |             |  
|Fixed assets, net of accumulated depreciation and
 amortization of 
 $248,500 and $189,200, respectively            |  |             | 199,000     |      |   | 162,700     |  
|                                                                                                                    |  |             |             |      |   |             |  
|Other assets:                                                                                                       |  |             |             |      |   |             |  
|Deferred income taxes                                                                                               |  |             | 480,000     |      |   | 1,442,100   |  
|Security deposits                                                                                                   |  |             | 15,300      |      |   | 15,300      |  
|Investment in Organics Corporation of
America                                                                       |  |             | 125,000     |      |   | 125,000     |  
|Intangible assets, net of amortization                                                                              |  |             | 252,700     |      |   | 240,700     |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  | $           | 13,362,600  |      | $ | 11,943,900  |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|Current Liabilities:                                                                                                |  |             |             |      |   |             |  
|Accounts payable                                                                                                    |  | $           | 364,800     |      | $ | 653,200     |  
|Accrued expenses                                                                                                    |  |             | 466,000     |      |   | 276,600     |  
|Accrued rebates                                                                                                     |  |             | 61,700      |      |   | 94,000      |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|Total current liabilities                                                                                           |  |             | 892,500     |      |   | 1,023,800   |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             |             |      |   |             |  
|Stockholders Equity:                                                                                               |  |             |             |      |   |             |  
|Preferred stock $0.001 par value, 5,000,000 shares

 authorized; no shares outstanding at January 31, 2008 and 2007 |  |             |            |      |   |            |  
|Common stock, $0.001 par value; 20,000,000 shares
authorized,
 14,045,483 and 14,050,145 issued, respectively       |  |             | 14,000      |      |   | 14,000      |  
|Additional paid-in-capital                                                                                          |  |             | 24,687,900  |      |   | 23,884,400  |  
|Accumulated deficit                                                                                                 |  |             | (12,005,800 | )    |   | (12,874,900 | )
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  |             | 12,696,100  |      |   | 11,023,500  |  
|Less: treasury stock, at cost; 52,562 and 22,851
shares, respectively                                               |  |             | (226,000    | )    |   | (103,400    | )
|                                                                                                                    |  |             |             |      |   |             |  
|Total stockholders equity                                                                                          |  |             | 12,470,100  |      |   | 10,920,100  |  
|                                                                                                                    |  |             |             |      |   |             |  
|                                                                                                                    |  | $           | 13,362,600  |      | $ | 11,943,900  |  
|                                                                                                                    |  |             |             |      |   |             |  

See notes to the financial statements.
F-3

---



MEDICAL NUTRITION USA, INC.

STATEMENTS
OF OPERATIONS

|                                                      |  |                         |            |      |   |            |  
|----------------------------------------------------- |  | ----------------------- | ---------- | ---- | - | ---------- | -
|                                                      |  | Years
Ended January 31, |           
|                                                      |  |                         |           
|                                                      |  | 2008                    |            | 2007 |  
|                                                      |  |                         |            |      |  
|                                                      |  |                         |            |      |   |            |  
|Sales                                                 |  | $                       | 12,800,600 |      | $ | 10,531,300 |  
|Cost of sales                                         |  |                         | 5,994,900  |      |   | 5,007,000  |  
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Gross profit                                          |  |                         | 6,805,700  |      |   | 5,524,300  |  
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Selling, general and
 administrative expenses         |  |                         | 5,763,700  |      |   | 4,616,600  |  
|                                                      |  |                         |            |      |   |            |  
|Research and development                              |  |                         | 108,000    |      |   | 273,500    |  
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Operating income                                      |  |                         | 934,000    |      |   | 634,200    |  
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Other income (expense):                               |  |                         |            |      |   |            |  
|Interest income                                       |  |                         | 416,000    |      |   | 273,800    |  
|Interest expense including debt discount
amortization |  |                         |           |      |   | (2,862,600 | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Total other income
 (expense)                         |  |                         | 416,000    |      |   | (2,588,800 | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Income (loss) before income
 tax provision (benefit)  |  |                         | 1,350,000  |      |   | (1,954,600 | )
|                                                      |  |                         |            |      |   |            |  
|Income tax provision
 (benefit)                       |  |                         | 480,900    |      |   | (1,660,300 | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Net income (loss)                                     |  | $                       | 869,100    |      | $ | (294,300   | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Earnings (loss) per common
 share:                    |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Basic                                                 |  | $                       | 0.06       |      | $ | (0.03      | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Diluted                                               |  | $                       | 0.06       |      | $ | (0.03      | )
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Weighted average common
 shares outstanding           |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Basic                                                 |  |                         | 14,128,601 |      |   | 10,800,383 |  
|                                                      |  |                         |            |      |   |            |  
|                                                      |  |                         |            |      |   |            |  
|Diluted                                               |  |                         | 15,553,755 |      |   | 10,800,383 |  
|                                                      |  |                         |            |      |   |            |  

See notes to the financial statements.
F-4

---



MEDICAL NUTRITION USA, INC.

STATEMENTS
OF CASH FLOWS

|                                                                                                                                           |  |                         |            |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ---------- | ---- | - | ---------- | -
|                                                                                                                                           |  | Years
Ended January 31, |           
|                                                                                                                                           |  |                         |           
|                                                                                                                                           |  | 2008                    |            | 2007 |  
|                                                                                                                                           |  |                         |            |      |  
|Operating
 Activities:                                                                                                                     |  |                         |            |      |   |            |  
|Net income (loss)                                                                                                                          |  | $                       | 869,100    |      | $ | (294,300   | )
|Adjustments to reconcile net cash provided by operating activities:                                                                        |  |                         |            |      |   |            |  
|Depreciation and amortization expense                                                                                                      |  |                         | 101,900    |      |   | 71,300     |  
|Provision for losses on accounts
receivable                                                                                                |  |                         | 800        |      |   | 14,600     |  
|Deferred income taxes                                                                                                                      |  |                         | 334,900    |      |   | (1,692,600 | )
|Interest expense paid with common stock                                                                                                    |  |                         |           |      |   | 93,300     |  
|Interest expense from debt discount
amortization                                                                                           |  |                         |           |      |   | 2,769,300  |  
|Stock based compensation                                                                                                                   |  |                         | 1,062,000  |      |   | 690,400    |  
|Changes in operating assets and
liabilities                                                                                                |  |                         |            |      |   |            |  
|Accounts receivable                                                                                                                        |  |                         | (5,000     | )    |   | (353,400   | )
|Inventories                                                                                                                                |  |                         | 94,400     |      |   | (224,500   | )
|Prepaid income taxes                                                                                                                       |  |                         | (232,000   | )    |   |           |  
|Other current assets                                                                                                                       |  |                         | (122,000   | )    |   | 14,600     |  
|Accounts payable                                                                                                                           |  |                         | (288,400   | )    |   | 425,200    |  
|Accrued expenses                                                                                                                           |  |                         | 189,400    |      |   | 70,800     |  
|Accrued rebates                                                                                                                            |  |                         | (32,300    | )    |   | 41,700     |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Net cash provided by
 operating activities                                                                                                 |  |                         | 1,972,800  |      |   | 1,626,400  |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Investing
 Activities:                                                                                                                     |  |                         |            |      |   |            |  
|Acquisition of fixed assets                                                                                                                |  |                         | (95,600    | )    |   | (111,500   | )
|Website development costs                                                                                                                  |  |                         | (1,700     | )    |   | (12,200    | )
|Trademark costs                                                                                                                            |  |                         | (13,300    | )    |   | (4,500     | )
|Capitalized patent costs                                                                                                                   |  |                         | (39,600    | )    |   | (3,400     | )
|Purchase of treasury bill                                                                                                                  |  |                         | (4,336,800 | )    |   | (2,994,700 | )
|Redemption of treasury bill                                                                                                                |  |                         |           |      |   | 2,994,700  |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Net
 cash (used in) investing activities                                                                                                   |  |                         | (4,487,000 | )    |   | (131,600   | )
|                                                                                                                                           |  |                         |            |      |   |            |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Financing
 Activities:                                                                                                                     |  |                         |            |      |   |            |  
|Proceeds from exercise of warrants, net of expenses
of $93,800                                                                             |  |                         |           |      |   | 4,096,000  |  
|Proceeds from exercise of options                                                                                                          |  |                         | 203,200    |      |   | 254,700    |  
|Income tax benefit from exercise of stock
options                                                                                          |  |                         | 133,700    |      |   |           |  
|Stock repurchase plan                                                                                                                      |  |                         | (595,400   | )    |   |           |  
|Purchase of treasury stock                                                                                                                 |  |                         | (122,600   | )    |   | (103,400   | )
|                                                                                                                                           |  |                         |            |      |   |            |  
|Net cash (used for)
 provided by financing activities                                                                                      |  |                         | (381,100   | )    |   | 4,247,300  |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Net (decrease) increase in
 cash                                                                                                           |  |                         | (2,895,300 | )    |   | 5,742,100  |  
|Cash and cash equivalents
 - beginning of year                                                                                             |  |                         | 8,103,300  |      |   | 2,361,200  |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Cash and cash equivalents
 - end of year                                                                                                   |  | $                       | 5,208,000  |      | $ | 8,103,300  |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|Supplemental information:                                                                                                                  |  |                         |            |      |   |            |  
|Taxes paid during the period                                                                                                               |  | $                       | 258,800    |      | $ | 32,308     |  
|                                                                                                                                           |  |                         |            |      |   |            |  
|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. |  |                         |            |      |   |            |  

See notes to the financial statements.

F-5

---



MEDICAL NUTRITION
USA, INC.

STATEMENTS OF
STOCKHOLDERS EQUITY

YEARS ENDED
JANUARY 31, 2008 AND 2007

|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|------------------------------------------------------------------------ |  | -------------- | ---------- | ---------------------------- | - | --------------------- | - | ---------------- | ---------- | ------------------------------ | - | ----------- | - | - | -------- | - | - | ---------- | -
|                                                                         |  | Common
  Stock |            |                              |   |                       |   |                  |            | Total
  Stockholders
  Equity |  
|                                                                         |  |                |            | Additional
  Paid-in-capital |   | Accumulated
  Deficit |   | Treasury
  Stock |            |                               
|                                                                         |  | Shares         |            | Amount                       |   |                       |   |                  |           
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|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 |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|Exercise of options                                                      |  |                | 125,266    |                              |   | 200                   |   |                  | 203,000    |                                |   |            |   |   |         |   |   | 203,200    |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|Stock based
  compensation                                               |  |                | 56,955     |                              |   |                      |   |                  | 1,062,000  |                                |   |            |   |   |         |   |   | 1,062,000  |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|Income tax benefit from
  exercise of stock options                      |  |                |           |                              |   |                      |   |                  | 133,700    |                                |   |            |   |   |         |   |   | 133,700    |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|Stock repurchase plan                                                    |  |                | (186,000   | )                            |   | (200                  | ) |                  | (595,200   | )                              |   |            |   |   |         |   |   | (595,400   | )
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |           |  
|Purchase of treasury
  stock                                             |  |                | (30,594    | )                            |   |                      |   |                  |           |                                |   |            |   |   | (122,600 | ) |   | (122,600   | )
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |           |  
|Net income                                                               |  |                |           |                              |   |                      |   |                  |           |                                |   | 869,100     |   |   |         |   |   | 869,100    |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  
|Balance at January 31,
  2008                                            |  |                | 13,992,921 |                              | $ | 14,000                |   | $                | 24,687,900 |                                | $ | (12,005,800 | ) | $ | (226,000 | ) | $ | 12,470,100 |  
|                                                                         |  |                |            |                              |   |                       |   |                  |            |                                |   |             |   |   |          |   |   |            |  

See notes to the
financial statements

F-6

---



MEDICAL NUTRITION USA, INC. NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2008

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:

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, 2008,
the Company had approximately $5.0 million in excess of FDIC insured limits.

The other 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, 2008
and 2007.

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

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

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

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

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

F-7

---



MEDICAL NUTRITION
USA, INC. NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

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. Other deferred costs are being amortized
on a straight line basis over a five year period. Trademarks costs are stated
at cost and are amortized over 17 years. Website Costs are stated at cost and
are amortized over 5 years.

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

Income Taxes
 The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards 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. 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 implemented SFAS No.123(R),
Share-Based Payment, using the modified prospective transition method. Under
this transition method, the compensation expense recognized for the year ended
January 31, 2007 includes: 1) compensation expense for all stock-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) all stock-based payments granted subsequent to February 1, 2006, based on
the grant date fair value estimated in accordance with Statement 123(R).
Stock-based compensation expense is generally recognized ratably over the
requisite service period.

F-8

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 2. Significant
Accounting Policies (continued):

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

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

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

|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|--------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---- | -- | ---------- | - |  |  | 
|                                                                                  |  | Year ended
  January 31, |            |      |    |           
|                                                                                  |  | 2008                     |            | 2007 |    |            |   | 
|                                                                                  |  |                          |            |      |    |            |   | 
|Numerator:                                                                        |  |                          |            |      |    |            |   |  |  | 
|Net income (loss)                                                                 |  | $                        | 869,100    |      | ($ | 294,300    | ) |  |  | 
|Denominator:                                                                      |  |                          |            |      |    |            |   |  |  | 
|Weighted average common shares (Basic)                                            |  |                          | 14,128,601 |      |    | 10,800,383 |   |  |  | 
|Dilutive effect of outstanding options and nonvested shares of
  restricted stock |  |                          | 1,425,154  |      |    |           |   |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|Weighted average common shares including assumed conversions
(Diluted)            |  |                          | 15,553,755 |      |    | 10,800,383 |   |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|Basic net income (loss) per share                                                 |  | $                        | 0.06       |      | $  | (0.03      | ) |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 
|Diluted net income (loss) per share                                               |  | $                        | 0.06       |      | $  | (0.03      | ) |  |  | 
|                                                                                  |  |                          |            |      |    |            |   |  |  | 

F-9

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 2. Significant
Accounting Policies (continued):

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

Use of Estimates - In preparing financial
statements in conformity with accounting principles generally accepted in the
United States of America, management is required to make estimates and
assumptions that affect the reported amounts of assets and the disclosures of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual results could differ
from those estimates.

New Accounting Pronouncements

In September
2006, the FASB issued Statement No. 157, Fair Value Measurements (FAS 157),
which addresses how companies should measure fair value when they are required
to use a fair value measure for recognition or disclosure purposes under
generally accepted accounting principles (GAAP). As a result of FAS 157,
there is now a common definition of fair value to be used throughout GAAP,
which is expected to make the measurement of fair value more consistent and
comparable. FAS 157 is effective for the first fiscal year beginning after
November 15, 2007, which is the Companys fiscal year beginning February 1,
2008. We are currently evaluating the effect, if any, of adoption on our
financial statements but it is not expected to be significant.

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

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

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

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

F-10

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 3. Fixed
Assets:

Fixed
assets consisted of the following at January 31, 2008 and 2007, respectively:

| |                                                   |  |             |         |      |   |         | 
| | ------------------------------------------------- |  | ----------- | ------- | ---- | - | ------- | 
| |                                                   |  | January 31, |        
| |                                                   |  |             |        
| |                                                   |  | 2008        |         | 2007 |  
| |                                                   |  |             |         |      |  
| | Furniture,
  fixtures and equipment               |  | $           | 397,100 |      | $ | 304,800 | 
| | Leasehold
  improvements                          |  |             | 50,400  |      |   | 47,100  | 
| |                                                   |  |             |         |      |   |         | 
| |                                                   |  |             | 447,500 |      |   | 351,900 | 
| | Less:
  Accumulated depreciation and amortization |  |             | 248,500 |      |   | 189,200 | 
| |                                                   |  |             |         |      |   |         | 
| |                                                   |  | $           | 199,000 |      | $ | 162,700 | 
| |                                                   |  |             |         |      |   |         | 

Depreciation
and amortization expense was $59,300 and $31,900 for the fiscal years ended
January 31, 2008 and 2007, respectively.

Note 4. Intangible
Assets:

Intangible assets consisted of
the following at January 31, 2008 and 2007, respectively:

| |                                  |  |             |         |      |   |         | 
| | -------------------------------- |  | ----------- | ------- | ---- | - | ------- | 
| |                                  |  | January 31, |        
| |                                  |  |             |        
| |                                  |  | 2008        |         | 2007 |  
| |                                  |  |             |         |      |  
| | Patent
  application costs       |  | $           | 260,000 |      | $ | 220,400 | 
| | Trademarks                       |  |             | 62,000  |      |   | 48,700  | 
| |                                  |  |             |         |      |   |         | 
| | Website
  development costs      |  |             | 20,200  |      |   | 18,500  | 
| |                                  |  |             |         |      |   |         | 
| |                                  |  |             | 342,200 |      |   | 287,600 | 
| |                                  |  |             |         |      |   |         | 
| | Less:
  Accumulated amortization |  |             | 89,500  |      |   | 46,900  | 
| |                                  |  |             |         |      |   |         | 
| |                                  |  | $           | 252,700 |      | $ | 240,700 | 
| |                                  |  |             |         |      |   |         | 

Intangible
amortization expense was $42,600 and $39,400 for the fiscal years ended January
31, 2008 and 2007, respectively.

The future estimated
amortization charges are as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended January 31, |  |   |         | 
|                        |  |   |         | 
|2009                    |  | $ | 55,400  | 
|2010                    |  |   | 55,400  | 
|2011                    |  |   | 55,400  | 
|2012                    |  |   | 52,200  | 
|2013                    |  |   | 3,700   | 
|Thereafter              |  |   | 30,600  | 
|                        |  |   |         | 
|                        |  | $ | 252,700 | 
|                        |  |   |         | 

F-11

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

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, 2008 and 2007, purchases made from Organics totaled
$4,837,500 and $4,609,300, respectively. As of January 31, 2008 and 2007, the
Company owed Organics $246,100 and $590,000, 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. 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, 2008 and
2007, respectively, 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, 2008 and 2007, were $0 and $2,525,600,
respectively.

F-12

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

Note 6. Notes
Payable (continued):

The
Company recorded $2,769,300 in non-cash charges to interest expense for the
year ended January 31, 2007. There were no notes payable during the fiscal year
ended January 31, 2008.

Note 7. Major
Customers and Major Vendor:

Major Customers

For
the fiscal year ended January 31, 2008, two customers accounted for
approximately 32% of total revenues, representing $4,040,700 of sales as
compared to 29% or $3,103,300 of sales in the prior year for the same
customers.

As
of January 31, 2008, these customers had an open accounts receivable balance of
$377,300 which represented 36% of the Companys total accounts receivable.

Major Vendor

During
the years ended January 31, 2008 and 2007, the Company purchased $4,837,500 and
$4,609,300, respectively, of finished goods from Organics Corporation of
America (Organics), an approximate 1% shareholder of the Company, under a
supply agreement. As of January 31, 2008, the Company had an accounts payable
balance with Organics of $246,100. The Company owns approximately 5% of the
outstanding stock of Organics.

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, 2008 and 2007 was approximately $95,700 and $136,900, respectively.

The future
minimum lease payments are as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended
January 31, |  |   |         | 
|                        |  |   |         | 
|2009                    |  | $ | 85,000  | 
|2010                    |  |   | 80,100  | 
|                        |  |   |         | 
|                        |  | $ | 165,100 | 
|                        |  |   |         | 

F-13

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

Note 8. Lease
Commitments (continued):

The
Company leases vehicles and equipment under various operating leases expiring
through 2011. During the years ended January 31, 2008 and 2007, the total
payments under such leases were $16,500 and $7,800, respectively.

The
future minimum lease payments are as follows:

|                        |  |   |        | 
|----------------------- |  | - | ------ | 
|Years Ended
January 31, |  |   |        | 
|                        |  |   |        | 
|2009                    |  | $ | 14,200 | 
|2010                    |  |   | 11,600 | 
|2011                    |  |   | 6,100  | 
|                        |  |   |        | 
|                        |  | $ | 31,900 | 
|                        |  |   |        | 

Note 9. Stockholders
Equity:

MNI Stock Repurchase Plan

In
December 2007, the Companys Board of Directors approved the Medical Nutrition
USA, Inc. Stock Repurchase Plan (the Plan). The Plan allows for the purchase
of up to 500,000 shares of Company stock on the open market and from employees.
The Plan allows for a maximum weekly market purchase of 25,000 shares
with no more than 50,000 shares in any calendar month. Private transactions
with employees can not exceed 50% of the total shares to be purchased with no
one individual employee exceeding 25% of the total. For the year ended January
31, 2008, the Company has purchased 184,000 shares from officers of the Company
and 2,000 shares on the open market. These purchased shares are being
considered as unissued shares available for issuance. There are 314,000 shares
available for purchase under the Plan as of January 31, 2008. Through April 17,
2008, the Company had purchased 184,000 shares from officers of the Company and
141,100 shares on the open market, 174,900 shares remain available for purchase
under the Plan.

F-14

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

Note 9. Stockholders
Equity (continued):

2000 Long-Term Incentive Stock Plan

On
October 19, 2000, the stockholders approved the 2000 Long-Term Incentive Stock
Plan (the 2000 Plan). Under the 2000 Plan, the Company may grant stock
options, stock appreciation rights (SARs) or stock awards. All employees of
the Company are eligible to participate in the 2000 Plan. The 2000 Plan
authorizes the issuance, in the aggregate, of up to 240,000 shares of common
stock. No stock option, SAR or other award, may be granted under the 2000 Plan
after October 27, 2009. The maximum number of shares for which awards may be
granted to any person in any fiscal year is 12,000. The purchase price per
share for each stock option may not be less than 100% of the fair market value
on the date of grant and may not be for more than ten years. In the case of
incentive stock options granted to an optionee who, at the time of grant, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company, the exercise price per share may not be less
than 110% of the fair market value on the date of grant and the option may not
be exercisable for more than five years. At January 31, 2008, 39,000 stock option
grants were outstanding under the 2000 Plan.

2003 Omnibus Equity Incentive Plan

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

Initially,
the 2003 Plan authorized the issuance, in the aggregate, of up to 1,000,000
shares of common stock, increased by 250,000 additional shares of common stock
as of January 1, 2004. At the 2004 Annual Meeting, the 2003 Plan was amended to
provide that as of January 31 of each year, commencing with January 31, 2005,
the aggregate number of Common Shares reserved for issuance under the 2003 Plan
would automatically increase in an amount equal to the number of Common Shares
issued by reason of awards being granted, exercised or settled, as applicable,
during the immediately preceding fiscal year. At January 31, 2008, 2,307,881
options were issued and outstanding under the 2003 Plan.

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

F-15

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

Note 9. Stockholders
Equity (continued):

Stock Options

During
the year ended January 31, 2008, the Company granted options to purchase 42,500
shares of its common stock with a three year vesting schedule at exercise
prices ranging from $4.40 to $5.96 per share to 5 employees as consideration
for their efforts. One member of the Medical Advisory Board was 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 $4.45 per
share. 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 $4.45. All of these grants were priced at
the fair market value of the common stock on the date of grant.

The following
table summarizes the outstanding and exercisable options at January 31, 2008
(contractual life in years):

|                |  |                     |           |                                 |  |                                 |  |                         |      |        |   |                                 |  |                         |           |  |   |      |  |   |      | 
|--------------- |  | ------------------- | --------- | ------------------------------- |  | ------------------------------- |  | ----------------------- | ---- | ------ | - | ------------------------------- |  | ----------------------- | --------- |  | - | ---- |  | - | ---- | 
|                |  | Options Outstanding |           | Options Exercisable             | 
|                |  |                     |           |                                 | 
|Range of prices |  | Number              |           | Weighted
average
remaining
life |  | Weighted
average
exercise
price |  | Average
intrinsic
value |      | Number |   | Weighted
average
exercise
price |  | Average
intrinsic
value |          
|                |  |                     |           |                                 |  |                                 |  |                         |      |        |   |                                 |  |                         |           |  |   |      |  |   |      | 
|$0.50-$3.00     |  |                     | 2,442,997 |                                 |  | 6                               |  | $                       | 2.10 |        |   |                                 |  |                         | 2,271,162 |  | $ | 2.52 |  |   |      | 
|$3.01-$5.96     |  |                     | 357,484   |                                 |  | 9                               |  |                         | 4.14 |        |   |                                 |  |                         | 150,547   |  |   | 3.83 |  |   |      | 
|                |  |                     |           |                                 |  |                                 |  |                         |      |        |   |                                 |  |                         |           |  |   |      |  |   |      | 
|$0.50-$5.96     |  |                     | 2,800,481 |                                 |  | 8                               |  | $                       | 2.36 |        | $ | 1.03                            |  |                         | 2,421,709 |  | $ | 2.78 |  | $ | 0.61 | 
|                |  |                     |           |                                 |  |                                 |  |                         |      |        |   |                                 |  |                         |           |  |   |      |  |   |      | 

For
the year ended January 31, 2008 and 2007, the Company recognized share -based
compensation cost of $1,062,000 and $690,400, respectively. These costs are
included in selling, general and administrative expense.

F-16

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 9. Stockholders
Equity (continued):

A
summary of option transactions for the two years ended January 31, 2008,
follows:

|                                |  |         |           |                                 |   |                     |  |                                 |           |  |   |      | 
|------------------------------- |  | ------- | --------- | ------------------------------- | - | ------------------- |  | ------------------------------- | --------- |  | - | ---- | 
|                                |  | Options |           | Weighted
Average
exercise
price |   | Options
Exercisable |  | Weighted
Average
exercise
price |          
|                                |  |         |           |                                 |   |                     |  |                                 |          
|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                |  |                                 |           |  |   |      | 
|                                |  |         |           |                                 |   |                     |  |                                 |           |  |   |      | 
|Granted                         |  |         | 107,500   |                                 |   | 4.83                |  |                                 |           |  |   |      | 
|Exercised                       |  |         | (125,266  | )                               |   | 1.62                |  |                                 |           |  |   |      | 
|Expired or Surrendered          |  |         | (66,450   | )                               |   | 3.67                |  |                                 |           |  |   |      | 
|                                |  |         |           |                                 |   |                     |  |                                 |           |  |   |      | 
|Outstanding at January 31, 2008 |  |         | 2,800,481 |                                 | $ | 2.36                |  |                                 | 2,421,709 |  | $ | 2.78 | 
|                                |  |         |           |                                 |   |                     |  |                                 |           |  |   |      | 

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

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years Ended January 31, |  |   |         | 
|                        |  |   |         | 
|2009                    |  | $ | 523,600 | 
|2010                    |  |   | 122,400 | 
|2011                    |  |   | 22,800  | 
|                        |  |   |         | 
|                        |  | $ | 668,800 | 
|                        |  |   |         | 

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

Cash
received from options exercised under all share-based payment arrangements for
the years ended January 31, 2008 was $203,200.

The
income tax benefits derived from the exercise of non-qualified stock options
and disqualifying dispositions of incentive stock options in excess of any
amounts previously classified as a deferred tax asset, when realized, are
credited to additional paid -in capital. The tax benefit realized on the tax
deductions from option exercises under stock-based compensation arrangements
was approximately $133,700 and is recorded as additional paid in capital.

For
the years ended January 31, 2008 and 2007, the Company has estimated the fair
value of each option award on the date of grant using the Black-Scholes model.
For the years ended January 31, 2008 and 2007, respectively, the expected
volatility was based on both historical volatility and implied volatility of
the Companys stock. The expected term of options granted represents the
period of time that options granted are expected to be outstanding. The Company
used historical data to estimate expected option exercise and post-vesting
employment termination behavior. The Company utilized the risk-free interest
rate for periods equal to the expected term of the option based upon the U.S.
treasury yield curve in effect at the time of the grant. The Company has no
intention of declaring any dividends.

F-17

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 9. Stockholders
Equity (continued):

The
fair value of stock-based awards was estimated using the Black-Scholes model
with the following weighted-average assumptions for stock options granted in
the years ended January 31, 2008 and 2007:

|                                           |  |                             |   |                             |       |   | 
|------------------------------------------ |  | --------------------------- | - | --------------------------- | ----- | - | 
|                                           |  | Year Ended
January 31, 2008 |   | Year Ended
January 31, 2007 |      
|                                           |  |                             |   |                             |      
|                                           |  |                             |   |                             |       |   | 
|Expected
  term until exercised, years     |  | 6                           |   |                             | 6     |   | 
|Expected
  stock price volatility, average |  | 77                          | % |                             | 30    | % | 
|Risk-free
  interest rate                  |  | 4                           | % |                             | 5     | % | 
|Expected
  Dividend yield                  |  | 0                           |   |                             | 0     |   | 
|Weighted-average
  fair value per option   |  | $3.05                       |   |                             | $2.26 |   | 

Restricted Stock Awards

During
the years ended January 31, 2008 and 2007, the Company granted restricted stock
awards totaling 142,500 and 282,000 shares of its common stock with a three
year vesting schedule to 9 and 23 employees, respectively, as consideration for
their services. The shares become vested yearly based upon continued
employment. The shares have been valued at $4.40 and $4.15 per share,
respectively, which was the fair market value at the date of the approval of
the grant. The Company is amortizing the expense over the vesting period.

The
following table summarizes the status of Restricted stock as of January 31,
2008, and changes during the year then ended:

|                              |  |        |         |                                        |   |      | 
|----------------------------- |  | ------ | ------- | -------------------------------------- | - | ---- | 
|                              |  | Shares |         | Weighted
Average
Grant
Date Fair
Value |  
|                              |  |        |         |                                        |  
|Nonvested at January 31, 2006 |  |        | 0       |                                        |   |      | 
|Granted                       |  |        | 282,000 |                                        | $ | 4.15 | 
|                              |  |        |         |                                        |   |      | 
|Nonvested at January 31, 2007 |  |        | 282,000 |                                        |   | 4.15 | 
|Granted                       |  |        | 142,500 |                                        |   | 4.40 | 
|Vested                        |  |        | (86,667 | )                                      |   | 4.15 | 
|Forfeited                     |  |        | (12,000 | )                                      |   | 4.15 | 
|                              |  |        |         |                                        |   |      | 
|Nonvested at January 31, 2008 |  |        | 325,833 |                                        | $ | 4.26 | 
|                              |  |        |         |                                        |   |      | 

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

|                        |  |   |           | 
|----------------------- |  | - | --------- | 
|Years Ended January 31, |  |   |           | 
|                        |  |   |           | 
|2009                    |  | $ | 618,500   | 
|2010                    |  |   | 553,000   | 
|2011                    |  |   | 195,500   | 
|                        |  |   |           | 
|                        |  | $ | 1,367,000 | 
|                        |  |   |           | 

F-18

---



MEDICAL NUTRITION USA, INC. 
NOTES TO FINANCIAL STATEMENTS 
JANUARY 31, 2008

Note 10. Income
Taxes:

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

|                               |  |                             |         |                             |    |            |  
|------------------------------ |  | --------------------------- | ------- | --------------------------- | -- | ---------- | -
|                               |  | Year Ended
January 31,
2008 |         | Year Ended
January 31,
2007 |   
|                               |  |                             |         |                             |   
|                               |  |                             |         |                             |    |            |  
|Current -
  Federal            |  | $                           | 0       |                             | $  | 0          |  
|Current -
  State              |  |                             | 12,300  |                             |    | 32,300     |  
|Deferred -
  Federal           |  |                             | 386,900 |                             |    | (1,551,900 | )
|Deferred -
  State             |  |                             | 81,700  |                             |    | (140,700   | )
|                               |  |                             |         |                             |    |            |  
|Income tax
  expense (benefit) |  | $                           | 480,900 |                             | ($ | 1,660,300  | )
|                               |  |                             |         |                             |    |            |  

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

|                                                    |  |                             |      |                             |  |       |  
|--------------------------------------------------- |  | --------------------------- | ---- | --------------------------- |  | ----- | -
|                                                    |  |                             |      |                             |  |       |  
|                                                    |  | Year Ended
January 31,
2008 |      | Year Ended
January 31,
2007 | 
|                                                    |  |                             |      |                             | 
|                                                    |  |                             |      |                             |  |       |  
|Statutory
  Federal income tax rate                 |  |                             | 34.0 | %                           |  | -34.0 | %
|State taxes,
  net of Federal benefit               |  |                             | 3.5  | %                           |  | 1.6   | %
|Other                                               |  |                             | -1.9 | %                           |  |      |  
|Change in
  deferred tax assets valuation allowance |  |                             | 0.0  | %                           |  | -52.5 | %
|                                                    |  |                             |      |                             |  |       |  
|Effective
  income tax rate                         |  |                             | 35.6 | %                           |  | -84.9 | %
|                                                    |  |                             |      |                             |  |       |  

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

F-19

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

Note 10.
Income Taxes (continued):

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

|                                              |  |                             |           |                             |   |           | 
|--------------------------------------------- |  | --------------------------- | --------- | --------------------------- | - | --------- | 
|                                              |  | Year Ended
January 31,
2008 |           | Year Ended
January 31,
2007 |  
|                                              |  |                             |           |                             |  
|Current
  Deferred Taxes                      |  |                             |           |                             |   |           | 
|Provision
  for losses on accounts receivable |  | $                           | 5,800     |                             |   |          | 
|Net
  operating losses                        |  |                             | 871,900   |                             |   | 250,500   | 
|                                              |  |                             |           |                             |   |           | 
|Total
  Current Deferred                      |  |                             | 877,700   |                             |   | 250,500   | 
|                                              |  |                             |           |                             |   |           | 
|NonCurrent
  Deferred Taxes                   |  |                             |           |                             |   |           | 
|Depreciable
  assets                          |  |                             | (46,500   | )                           |   |          | 
|Amortizable
  assets                          |  |                             | 18,600    |                             |   |          | 
|Stock based
  compensation                    |  |                             | 286,600   |                             |   |          | 
|Net
  operating losses                        |  |                             | 221,300   |                             |   | 1,442,100 | 
|                                              |  |                             |           |                             |   |           | 
|                                              |  |                             | 480,000   |                             |   | 1,442,100 | 
|                                              |  |                             |           |                             |   |           | 
|Total
  Deferred Taxes                        |  | $                           | 1,357,700 |                             | $ | 1,692,600 | 
|                                              |  |                             |           |                             |   |           | 

The
Company has Federal income tax loss carryforwards as of January 31, 2008 of
approximately $3,091,700. The Federal Net Operating Loss (NOL) carryforwards
expire beginning in 2020 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 at that time, the deferred tax
benefit of $1,692,600 was recorded in the financial statements for the fiscal
year ended January 31, 2007, as a result the valuation allowance was reduced to
zero.

The
Company has various state NOLs of approximately $702,000 which expire at
various times throughout 2012.

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

The
tax years 2003-2007 remain open to examination by the major taxing
jurisdictions to which the Company is subject.

F-20

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

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.

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 years ended
January 31, 2008 and 2007, the Company expensed $147,800 and $34,100 in bonuses
based on this plan, respectively.

401(k) Plan

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

F-21

---



Exhibit
Index

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

F-22

---



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

* Previously filed.

** Filed herewith.

# Indicates management contract or compensatory plan or arrangement.

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

F-23

---



MEDICAL NUTRITION USA, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2008

|     |                                                                                                                             
|---- | ----------------------------------------------------------------------------------------------------------------------------
|(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-24

---