ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
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 the Companys estimates and assumptions only
as of the date of this report. The Company does not intend, and undertakes no
obligation, to update any forward-looking statements.
Although
the Company believes that the expectations reflected in any of the forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed or any of the Companys forward-looking statements. The
Companys 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 in Item 1A-Risk Factors, of the Companys Annual Report on Form
10-K for the fiscal year ended January 31, 2009.
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.
Three Months Ended April 30, 2009 Compared to
Three Months Ended April 30, 2008
Sales
for the three months ended April 30, 2009 were $3,427,700 as compared with
$3,309,600 for the three months ended April 30, 2008, an increase of 118,100 or
4%. This increase was primarily attributable to an increase in branded product
sales offset by a decrease in private label sales. Branded product sales
increased by approximately $219,900 or 8% to $3,112,400 for the three months
ended April 30, 2009, as compared to $2,892,500 for the three months ended
April 30, 2008. Effective March 1, 2008, the Company reduced the price of
certain Pro-Stat® formulas by approximately 12% on a weighted average basis.
This decrease was implemented to allow the Company to more aggressively
increase its market share and to strengthen its competitive position. The
Company sold 10% more units of branded product for the quarter ended April 30,
2009 as compared to the three months ended April 30, 2008. Almost all of the
Companys branded product sales were from formulations of hydrolyzed collagen.
Private label sales decreased by 101,800 or 24%, to approximately $315,300 for
the three months ended April 30, 2009, as compared to $417,100 for the three
months ended April 30, 2008.
Cost
of sales for the three months ended April 30, 2009 was $1,610,300 or 47% of
sales, as compared with $1,540,200 for the three months ended April 30, 2008,
or 47% of sales. Gross profit percentage was 53% for both periods primarily due
to the increased sales of higher margin branded products and the Companys
continuous efforts to control product costs.
Selling,
general and administrative expenses for the three months ended April 30, 2009,
decreased by $79,500 to $1,857,900 from $1,937,400 for the three months ended
April 30, 2008. This decrease was primarily attributable to a decrease in stock
based compensation expenses as historical grants became fully vested, offset by
an increase in retail marketing development expenses.
Research
and development expenses for the three months ended April 30, 2009 increased by
$95,600 to $147,100 from $51,500 for the three months ended April 30, 2008. The
increase is primarily due to the timing of certain clinical trials.
For
the three months ended April 30, 2009, the Company had an operating loss of
$187,600 as compared to operating loss of $219,500 for the three months ended
April 30, 2008. The decrease in operating loss is primarily due to a higher
gross profit on higher sales volume and a decrease in selling, general and
administrative expenses, as discussed previously.
17
Interest
income was $37,600 for the three months ended April 30, 2009, compared to
$68,900 for the three months ended April 30, 2008. The decrease is due to
reduced interest rates.
The
Company recorded a tax benefit of $6,100 for the quarter ended April 30, 2009
at an effective tax rate of (4.1) % compared to a tax benefit of $29,200 at an
effective rate of (19.4) % for the quarter ended April 30, 2008. For tax
purposes, the Companys income is calculated prior to certain GAAP charges for
stock-based compensation, which are not tax deductible. The Company has a
deferred tax asset of $1,382,200 and $1,417,600 as of April 30, 2009 and 2008,
respectively, resulting from previous net operating losses, which will be
applied against income taxes due.
The
Companys net loss for the three months ended April 30, 2009 was $143,900, or
$(0.01) per share, compared to a net loss for the three months ended April 30,
2008 of $121,400 or $(0.01) per share. The decrease in income is due to the
reasons described above.
Liquidity and Capital Resources
At
April 30, 2009, the Company had cash, cash equivalents and short term
investments of $9,599,100 as compared to $9,654,300 at January 31, 2009. At
April 30, 2009, approximately 95% of accounts receivable were less than 30 days
past due. Cash used in operations during the three months ended April 30, 2009
was $16,100 as compared to cash provided by operations of $459,100 for the
three months ended April 30, 2008. The decrease in cash provided by operations
is primarily due to a federal tax refund received in the three months ended
April 30, 2008 of approximately $200,000, higher bonus payments paid in the
three months ended April 30, 2009 related to prior year bonus accruals of
approximately $144,000 and lower income provided by operations after excluding
non-cash expenses of approximately $100,000.
The
Companys 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 potential expansion
into retail markets, 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 the Companys operations.
18
Off-Balance Sheet Arrangements
As
of April 30, 2009, the Company did not have any off-balance sheet financing
arrangements or any equity interests in any variable entity or other minority
owned ventures.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Cash
and cash equivalents at April 30, 2009 totaled $9.6 million. These amounts are
primarily invested in money market accounts. The Companys operations are not
subject to risks of material foreign currency fluctuations, nor does it use
derivative financial instruments in its investment practices. The Company
places its marketable investments in instruments that meet high credit quality
standards. The Company does not expect material losses with respect to its
investment portfolio or exposure to market risks associated with interest
rates. The impact on the Companys results of one percentage point change in
short-term interest rates would not have a material impact on the Companys
future earnings, fair value, or cash flows related to investments in cash
equivalents or interest-earning marketable securities. The fair value of our
investment portfolio or related income would not be significantly impacted by
changes in interest rates due mainly to the short-term nature of our investment
portfolio.
ITEM 4T. 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, as amended, (the Exchange Act) is recorded, processed, summarized,
and reported within the time periods specified by the Commissions 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 April 30, 2009, and, based upon this evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these controls and procedures
are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial
Reporting
Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, Medical Nutrition USA, Inc. has
evaluated changes in internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the fiscal quarter ended April 30, 2009 and have concluded that no
change has materially affected, or is reasonably likely to materially affect,
internal control over financial reporting.
19
PART II. OTHER INFORMATION
1-A The effect of general economic conditions
and the current financial crisis
Recent
distress in the financial markets has resulted in declines in institutional
spending, which can affect demand for the Companys products. Healthcare
institutions are exhibiting more stringent cost concerns and implementing
aggressive cost reductions. If the national economy or credit markets in
general were to deteriorate further, it is possible that such changes could put
negative pressure on our customers, affecting our cash flows. There can be no
assurance that our liquidity will not be affected by changes in the financial
markets and the global economy.
While we do
not anticipate that we will need additional financing or equity during the next
fiscal year, tightening of the credit markets could make it more difficult for
us to enter into agreements for new indebtedness or obtain funding through the
issuance of our securities. The effects of these changes could also require us
to make additional changes to our current plans and strategy.
In addition,
the current credit crisis is having a significant negative impact on businesses
around the world, and the impact of this crisis on our major raw material
suppliers cannot be predicted. The inability of key suppliers to access
liquidity, or the insolvency of key suppliers, could lead to their failure to
deliver products or services. If we are unable to procure products and services
when needed, or if we experience deterioration in demand for our products over
an extended period of time, our sales and cash flows could be negatively
impacted in future periods.
ITEM 6. Exhibits
|
|
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
Of 2002 and Rules 13a-14 and 15d-14 under the Securities Exchange Act of
1934
|
|
|
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
Of 2002 and Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
|
|
|
|
|
32.1
|
Certification
of Periodic Financial Reports by the Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
|
20
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
MEDICAL NUTRITION USA, INC.
|
|
|
|
Dated: June 12, 2009
|
By:
|
/s/ Frank J. Kimmerling
|
|
|
|
|
|
Frank J. Kimmerling
|
|
|
Chief Financial Officer
|
21
Medical Nutrition Usa (MM) (NASDAQ:MDNU)
Historical Stock Chart
From Jun 2024 to Jul 2024
Medical Nutrition Usa (MM) (NASDAQ:MDNU)
Historical Stock Chart
From Jul 2023 to Jul 2024