MRRM Inc. - Directors' report and management discussion and analysis of the financial condition and results of operations - Interim 2009.Q3 - November 30, 2008



    The following discussion and analysis should be read in conjunction with
    the preceding year's Annual Report. The Company's interim quarterly
    statements for fiscal year 2009 are for the quarter ended as indicated
    above. Included in these documents may be forward-looking statements with
    respect to the Company. These forward-looking statements by their nature
    necessarily involve risks and uncertainties that could cause actual
    results to differ materially from those contemplated by such statements.
    The Company considers the assumptions on which these forward-looking
    statements are based to be reasonable at the time they were prepared but
    cautions the reader that these assumptions regarding future events, many
    of which are beyond the control of the Company, may ultimately prove to
    be incorrect

    The unaudited interim consolidated financial statements were prepared by
    the Company in accordance with Canadian generally accepted accounting
    principles and have not been reviewed by the Company's auditors. Certain
    comparative figures have been reclassified to conform with the
    presentation adopted in the financial statements.

    Additional documents and information are available at the System for
    Electronic Document Analysis and Retrieval (SEDAR) and can be accessed
    through the internet: For MRRM's profile go to www.sedar.com or for
    documents go to www.sedar.com Information is also available on the
    Corporate website at www.MRRM.ca.

    MONTREAL, Jan. 15 /CNW Telbec/ -

    Consolidated Earnings And Comprehensive Income and Retained Earnings
    --------------------------------------------------------------------

    Revenues for this period (last year) were $44,179,000 ($38,126,000)
increasing by $6,053,000 (15.9%). As shown in the segmented information, sales
and income from operating activities amounted to $44,728,000 ($38,119,000)
being 101.2% (100.0%) of total revenues. Income from corporate totaled
$-549,000 ($7,000). Operating Revenues increased by $6,609,000 (17.3%)
compared to last year. Revenue from Corporate decreased by $556,000 of which
$569,000 was attributable to a lower unrealized fair value of investments held
for trading.
    Costs and expenses for this period (last year) were $44,039,000
($37,801,000), an increase of $6,238,000 (16.5%). Costs related to operating
activities, before exchange and interest, increased by $6,304,000 (16.8%).
Expenses related to corporate decreased by $5,000.

    Operating results are discussed later on in this report.

    The impact of the fluctuating Canadian dollar resulted in a currency
exchange gain of $121,000 for the period compared to a gain this period last
year of $20,000. As disclosed in the Notes, the net exposures were as follows:
at November 30, 2008, US($550,000); at November 30, 2007, US($440,000); at
August 31, 2008, US($69,000); at August 31, 2007, US$439,000; at February 29,
2008, US$1,438,000 & February 28, 2007, US($1,148,000). The above US dollars
include the equivalents for euros and pounds sterling which are not material.
    During the first quarter, the Company entered into foreign exchange
futures maturing this fiscal year which cover a significant portion of its USF
requirements. The Company uses the fair value accounting method for such
instruments. Under this method any unrealized gains or losses caused by
fluctuation to the market value are to be recorded in income for the period.
As these fluctuations on an interim basis represent a temporary gain or loss
and will not impact the financial results of the fiscal year, these gains or
losses have not been recorded in the interim financial statements.
    Interest expensed on bank indebtedness and the reducing term loan
amounted to $258,000 compared to $217,000 this period last year for an
increase of $41,000. Interest of $48,000 pertaining to the Time-Wise project
was capitalized in the first quarter last year. Total interest accrued and
paid amounted to $258,000 compared to $265,000 this period last year. Interest
related to the long-term debt was $116,000 compared to $143,000 this period
last year.
    The Earnings before income taxes for this period were $140,000 compared
to $325,000 last year, a decrease of $185,000. Earnings from operating
activities were $830,000 ($464,000), an increase of $366,000. Earnings from
corporate were $-690,000 compared to $-139,000, a decrease of $551,000.
    Income taxes for the period were $82,000 ($121,000). The effective tax
rates are presented in the Notes to the financial statements.
    Net Earnings for the period were $58,000 ($204,000) or $0.02 ($0.08) per
share.
    Dividends paid during the period last year amounted to $127,000. As
indicated in the MD&A for the first quarter, the declaration of the quarterly
dividend has been suspended in order to support the cash requirements
resulting from the Time-Wise investment. The declaration and payment of
dividends is at the discretion of the Board of Directors.

    Summary of Quarterly Results
    ----------------------------

    The following financial summary is derived from the company's financial
statements for each of the eight most recently completed fiscal quarters.

    
    -------------------------------------------------------------------------
    Summary
    of
    Quarterly
    Financial
    Results
    for the
    eight     Nov 30, Aug 31, May 31, Feb 29, Nov 30, Aug 31, May 31, Feb 28,
    most        2008    2008    2008    2008    2007    2007    2007    2007
    recent     (2009.  (2009.  (2009.  (2008.  (2008.  (2008.  (2008.  (2007.
    fiscal        Q3)     Q2)     Q1)     Q4)     Q3)     Q2)     Q1)     Q4)
    quarters ------- ------- ------- ------- ------- ------- ------- -------
    -------------------------------------------------------------------------
    (Expressed     $       $       $       $       $       $       $       $
    in
    thousands,
    except for
    amounts per
    share -
    unaudited)
    -------------------------------------------------------------------------
    Revenues  16,769  13,911  13,499  10,624  12,549  12,810  12,767  13,289
    -------------------------------------------------------------------------
    Net
     Earnings
     (loss)     (343)    287     114    (134)    214     121    (131)    701
    -------------------------------------------------------------------------
    Earnings
     (loss)
     per share (0.14)   0.11    0.05   (0.05)   0.08    0.05   (0.05)   0.28
    -------------------------------------------------------------------------
    Dividends
     per share  0.00    0.00    0.00    0.00    0.00    0.00    0.05    0.20
    -------------------------------------------------------------------------
    

    Revenues for this quarter were $16,769,000 ($12,549,000), an increase of
$4,220,000 (33.6%). Revenue from operating activities amounted to $17,474,000
($12,542,000) being 104.2% (99.9%) of total revenues. Income from corporate
totaled $-705,000 ($7,000). Operating revenues for the quarter increased by
$4,932,000 (39.3%) compared to this quarter last year. Revenue from Corporate
decreased by $712,000 of which $740,000 was attributable to a change in fair
value of investments held for trading.
    Costs and expenses for the quarter were $17,202,000 ($12,224,000), an
increase of $4,978,000 (40.7%). Costs related to operating activities, before
exchange and interest, increased by $5,050,000 (42.1%). Investment in listing
fees of $62,000 related to the expansion into US market was recorded this
quarter whereas $246,000 was recorded last year as part of the Canadian
Time-Wise introduction.
    Included in the financial results for this quarter are investment tax
credits of $21,000 representing 100% of total claimed for Federal and 85% of
total Ontario pertaining to fiscal year 2008. The comparative amount for this
quarter last year was $151,000.
    The currency exchange in this quarter resulted in a gain of $78,000
compared to a gain this quarter last year of $2,000, a variance of $76,000.
    Interest expense for this quarter was $86,000 compared to $76,000 this
quarter last year and was $95,000 in 2009.Q1 and $77,000 in 2009.Q2.
    Earnings (loss) before income taxes for this quarter were ($433,000)
compared to $325,000 last year, a decrease of $758,000. Earnings from
operating activities were $304,000 compared to $361,000 last year, a decrease
of $57,000 and corporate were ($737,000) compared to ($36,000) last year, a
decrease of $701,000.
    Income taxes for the quarter were $-90,000 ($111,000). The effective tax
rates are presented in the Notes to the financial statements.
    Net earnings (loss) for the quarter were ($343,000) compared to $214,000
last year or ($0.14) compared to $0.08 per share last year.

    Consolidated Cash Flows, Liquidity and Balance Sheets
    -----------------------------------------------------

    Cash generated by operating activities, net earnings before changes for
non-cash items was $58,000 for the period compared to $204,000 last year.
Non-cash operating items used $883,000 for the period compared to usage of
$1,065,000 for this period last year.
    In investing activities, the Company added $342,000 of net property,
plant and equipment compared to $800,000 for this period last year; last year,
this amount included $319,000 for the investment in the new value added
Time-Wise rice line which became available for commercial production in June
2007.
    In financing activities, bank indebtedness increased by $1,520,000 of
which $876,000 of funds were used in operations, $154,000 used for investing
activities and $490,000 to cover the long-term debt payments.
    Working capital amounted to $1,721,000 at the end of this period, an
increase of $986,000 compared to $735,000 at last fiscal year-end. This change
was attributable to a net increase in current assets of $8,079,000 and a net
increase in current liabilities of $7,093,000.

    Available credit facilities

    The credit facilities available and reported at last year-end were
unchanged as of the end of this quarter. Subsequent to this quarter as a
result of increases in cost of rice, these facilities were re-negotiated to
increase the revolving line of credit to $6,750,000 CDN compared to $4,750,000
(or its US equivalent) previously. The 5 year reducing term facility initially
borrowed at fiscal year-end 2007 for $3,500,000 remains unchanged. The
revolving line of credit bears interest at either the Canadian prime and/or
U.S. base rates and optionally the Company may take advantage of Bankers
Acceptances. The reducing term facility is at a combined fixed rate for
interest and fees of 5.83% for the term of the loan. The financial covenants
and arrangements relating to these facilities are detailed in the Notes to the
audited consolidated financial statements filed for last year-end. These
covenants are being respected and have been met.
    Receivables increased by $4,796,000 compared to last fiscal year-end.
Account balances are substantially current, there are no anticipated serious
collection issues and any potential write-offs have been provided for in the
accounts.

    Inventories increased by $3,005,000 (40.2%) as a result of the increased
cost of rice while overall volumes of rice decreased by 2.7%.

    Marketable securities - see table below for financial summary and
investment mix.

    Property, plant and equipment decreased by $562,000 comprised of
additions of $343,000, disposals of $8,000, and amortization of $897,000.

    Bank indebtedness was $4,818,000 compared to $3,298,000 at last year-end,
an increase of $1,520,000 as explained above.

    Payables increased by $5,320,000 mainly arising from increase in value of
rice purchases.

    Long-term debt is being repaid in accordance with the arrangements of the
five year reducing term facility agreement as described under credit
facilities.

    Future income taxes, net liability, increased by $32,000 after netting a
decrease of $126,000 for the unrealized change in fair value of investments
held for trading at November 30, 2008.

    Shareholders' equity increased by $58,000 to $16,858,000 from $16,800,000
and represents $6.65 ($6.63) per share.

    Capital stock remained unchanged at $539,000 and represents 2,535,000
issued common shares.

    The MRRM Inc. shares have a very limited distribution and are
    infrequently traded on the TSX-Venture Exchange under the symbol MRR.

    www.TSX-Venture Exchange
    ------------------------

    Critical Accounting Policies:
    -----------------------------

    The Company's critical accounting policies are those that it believes are
the most important in determining its financial condition and results. A
summary of the Company's significant accounting policies, including the
critical accounting policies, is set out in the notes to the consolidated
financial statements in the annual report for the year ended February 29,
2008. An extract of these policies is set out in the notes to the quarterly
consolidated financial statements.

    Future Accounting Changes:
    International Financial Reporting Standards

    In 2005, the Accounting Standards Board of Canada (AcSB) announced that
accounting standards in Canada are to converge with IFRS. In May 2007, the
CICA published an updated version of its "Implementation Plan for
Incorporating International Financial Reporting Standards into Canadian GAAP".
This plan includes an outline of the key decisions that the CICA will need to
make as it implements the Strategic Plan for publicly accountable enterprises
that will converge Canadian generally accepted accounting standards with IFRS.
While IFRS uses a conceptual framework similar to Canadian GAAP, there are
significant differences in accounting policy which must be addressed. The CICA
has confirmed the changeover date from current Canadian GAAP to IFRS to be
January 1, 2011.
    The Company has formed a committee which is currently assessing the
future impact of these new standards on its consolidated financial statements.

    Discussion of Results:
    ----------------------

    In Dainty Foods, net sales increased by $6,302,000 (17.3%) for the period
and by $4,895,000 (41.4%) for the quarter compared to last year while overall
rice sales volumes increased by 6.5% for the period and 11.5% for the quarter.
Costs and expenses increased by $6,139,000 (17.0%) and increased by $4,930,000
(42.3%) for the quarter and earnings before income taxes for the period
increased by $163,000 and decreased by $35,000 compared to this quarter last
year.
    The increase in sales and costs for the period and the quarter were
mainly attributable to increased sales of flour and bagged rice compared to
last year. As indicated in the last Annual Report and MD&A, the cost of rice
had been tracking at an all time high leading into this fiscal year.
    New crop prices softened during this quarter but still remain
approximately 50 percent higher than a year ago. The 2008 American rice
harvest was negatively affected by hurricanes and the availability of new
foreign rice crops has exerted little downward pressure on the North American
cash market price at this time.
    Recent selling price increases on our branded and private label items as
well as price increases that were introduced in the second half of last fiscal
year have contributed to improved margins.
    Although cost of sales increased in line with increased sales, and
operating, selling, and administrative expenses decreased for the period,
earnings before income taxes increased by $163,000.
    The investment in the new Time-Wise rice line continues to produce
encouraging results. The Company anticipates this value added product line
will be a good contributor to margins. The Canadian retailers have listed a
number of Dainty "Stock Keeping Units of Measure" (SKUs) as well as a number
of selected private label items in the second half of last fiscal year. Recent
sales efforts in the United States have been productive. Several retailers
have listed and ordered Time-Wise products during this quarter. We are happy
to report that the first Time-Wise bulk order to a U.S. processor was shipped
on December 18, 2008.
    The company continues to pursue new value-added retail type products some
of which will be outsourced until volumes and economies develop to a point
where in-house production is viable. This outsourcing will minimize capital
investment while enhancing Dainty Foods' offerings in the retail marketplace
for both branded and private label items. New selling relationships are also
being developed that are intended to add strength to our retail sales efforts.
    In Robert Reford, revenue increased by $307,000 (17.7%) for the period
and by $37,000 (5.2%) for the quarter compared to last year.
    Earnings before income taxes for the period increased by $203,000 for the
period and decreased by $22,000 compared to this quarter last year.
    While these increases are very favourable, based on current market
conditions, and recent developments in the Global economies, expectations for
the next quarter remain uncertain.
    As mentioned in the last MD&A, on July 1, 2008 this division entered into
a joint revenue sharing agreement with Norton Lilly International, Inc. to
handle vessel and port operations coast to coast in Canada as well as at U.S.
Great Lakes. This relationship has had a slight positive impact on revenue to
date.
    In Corporate Investments, portfolio income is summarized as follows:

    
                                    For the period         For the quarter
                                    --------------         ---------------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----
    Dividend and interest
     income                     $146,000    $122,000     $47,000     $41,000

    Capital gains                $60,000     $70,000     $57,000     $33,000

    Unrealized change in Fair
     Value                     -$755,000   -$185,000   -$809,000    -$67,000
                               ---------   ---------   ---------   ---------
                               ---------   ---------   ---------   ---------

    Totals:                    -$549,000      $7,000   -$705,000      $7,000
                               ---------   ---------   ---------   ---------

    Global financial markets dipped further into crisis and stock market
values plunged deeply during this last quarter ended Nov. 30, 2008. Our
investment results have been negatively impacted as shown by comparative
figures above. The portfolio remains conservatively invested and no
significant changes are foreseen. Changes to percentages in the investment mix
reflect changes in market values and not in investment strategy. The Corporate
Investments continue to be held with a long term view.

    Investment Mix            FY 2009 Q3  FY 2009 Q2  FY 2009 Q1  FY 2008 Q4

    Cash & Equivalents             15.6%        9.5%        5.0%        8.0%
    Bonds                          20.5%       19.2%       23.1%       23.8%
    Preferred                      13.1%       14.2%       14.0%       14.0%
    Canadian Equities              30.8%       37.3%       38.7%       35.5%
    U.S. & Foreign                 20.0%       19.8%       19.2%       18.7%
    

    Certification

    The Company's management, under the direction and supervision of the
Chief Executive Officer and Chief Financial Officer, continually evaluates the
effectiveness of the Company's disclosure controls and procedures and has
concluded that such disclosure controls and procedures are effective.
    The Company's management is also responsible for establishing and
maintaining internal controls over financial reporting. These controls were
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian GAAP.
    There have been no changes in the Company's internal controls over
financial reporting during this quarter that have materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting.

    Outlook

    Indications are that the Time-Wise products will provide additional
growth and although rice prices are high, the current market still provides an
environment to secure rice at competitive prices and economic conditions are
likely to support growth in the food processing and selling operations. The
markets that the ship agency services experienced a good start so far this
year, however, due to the current market conditions, and recent developments
in the Global economies as previously mentioned, expectations for the next
quarter are uncertain.
    While the Company is anticipating continued growth in food processing and
selling, and while it will be maintaining a strong position within the ship
agency services business, further growth in the fourth quarter of 2009 will be
impacted by several factors including (i) the demand for our new Time-Wise
value added products (ii) the ability of the Company to secure rice from U.S.
rice mills at competitive prices (iii) the ability within the marketplace to
manage price increases to cover increased costs, and (iv) general economic
conditions.

    Risks and Uncertainties

    Overview

    Management of risk includes properly identifying, communicating and
controlling the risks which may cause a serious impact to the business.
Management is confident that the Company employs effective procedures to
address all material risks.
    The following items were discussed in the MD&A in the last Annual Report
and remain principally unchanged. Please refer to these documents for this
information.

    Ability to Achieve Revenue Results
    Ability to Address Cost and Expense Concerns
    Economic Conditions
    Environment

    For further information regarding financial risk management, please refer
to the Notes to the interim financial statements.

    On behalf of the Board

    (signed)                             (signed)

    Nikola M. Reford                     Terry Henderson
    Chairman                             President & Chief Executive Officer

    Dated at Montreal (Westmount), Quebec, January 15, 2009.

    
    MRRM Inc.
    CONSOLIDATED EARNINGS
    And COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)           For the NINE Months Ending  For the Quarter Ending
                          --------------------------  ----------------------
                                November    November    November    November
                                --------    --------    --------    --------
                                      30,         30,         30,         30,
                                      --          --          --          --
                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    Revenues
      Sales                      $44,728     $38,119     $17,474     $12,542
      (Decrease) increase in
       fair value of
       investments held for
       trading                      (549)          7        (705)          7
                                ---------   ---------   ---------   ---------

                                  44,179      38,126      16,769      12,549
                                ---------   ---------   ---------   ---------

    Costs and expenses
      Cost of sales, selling
       and administrative         43,005      36,775      16,894      11,858
      Amortization                   897         829         300         292
      Exchange (gain) loss          (121)        (20)        (78)         (2)
      Interest (a)                   258         217          86          76
                                ---------   ---------   ---------   ---------

                                  44,039      37,801      17,202      12,224
                                ---------   ---------   ---------   ---------

    Earnings (loss) before
     income taxes                    140         325        (433)        325
                                ---------   ---------   ---------   ---------

    Income taxes (recovery)
      Current                         50         190        (122)        200
      Future                          32         (69)         32         (89)
                                ---------   ---------   ---------   ---------

                                      82         121         (90)        111
                                ---------   ---------   ---------   ---------

    Net earnings (loss)              $58        $204       ($343)       $214
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    Basic earnings per
     share                         $0.02       $0.08      ($0.14)      $0.08
                                  -------     -------     -------     -------
                                  -------     -------     -------     -------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) Additional information is included in the Notes to Consolidated
        Financial Statements.


    MRRM  Inc.
    CONSOLIDATED RETAINED EARNINGS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)           For the NINE Months Ending  For the Quarter Ending
                          --------------------------  ----------------------
                                November    November    November    November
                                --------    --------    --------    --------
                                      30,         30,         30,         30,
                                      --          --          --          --
                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    Balance, beginning of
     period                      $16,261     $15,353     $16,662     $16,181
    Adjustment to fair
     value for investments
     held for trading                  0         965           0           0
    Net earnings (loss)               58         204        (343)        214
                                ---------   ---------   ---------   ---------

                                  16,319      16,522      16,319      16,395

    Dividends                          0         127           0           0
                                ---------   ---------   ---------   ---------

    Balance, end of period       $16,319     $16,395     $16,319     $16,395
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MRRM  Inc.
    CONSOLIDATED CASH FLOWS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)           For the NINE Months Ending  For the Quarter Ending
                          --------------------------  ----------------------
                                November    November    November    November
                                --------    --------    --------    --------
                                      30,         30,         30,         30,
                                      --          --          --          --
                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    OPERATING ACTIVITIES

    Net earnings (loss)              $58        $204       ($343)       $214
    Defined benefit plan
     payments                        (51)        (36)        (16)        (28)
                                    -----       -----       -----       -----
                                       7         168        (359)        186
                                    -----       -----       -----       -----

    Non-cash items
      Change in fair value
       of investments held
       for trading                   695         116         752          35
      Loss on disposal of
       equipment                       7           0           0           0
      Amortization                   897         829         300         292
      Accrued benefit cost            22         (66)          7           8
      Future income taxes             32         (69)         31         (89)
                                    -----       -----       -----       -----
                                   1,653         810       1,090         246

      Change in receivables       (4,796)     (1,205)     (2,539)       (587)
      Change in inventories       (3,005)      1,264      (1,715)       (783)
      Change in tax credits
       receivable                   (294)       (335)        (21)       (241)
      Change in prepaids              16         (41)       (100)       (124)
      Change in payables           5,320      (1,660)      3,524         571
      Change in income
       taxes payable                 223         102        (129)        282
                                ---------   ---------   ---------   ---------
      Non-cash operating
       items generated
       (used)                       (883)     (1,065)        110        (636)
                                ---------   ---------   ---------   ---------
    Cash flows from
     operating
     activities (a)                 (876)       (897)       (249)       (450)
                                ---------   ---------   ---------   ---------

    INVESTING ACTIVITIES

    Marketable securities           (220)     (1,090)       (143)       (456)
    Disposals of marketable
     securities                      408         970         131         417
    Property, plant and
     equipment                      (343)       (800)       (131)       (298)
    Disposal of equipment              1           0           0           0
                                ---------   ---------   ---------   ---------

    Cash flows from
     investing activities           (154)       (920)       (143)       (337)
                                ---------   ---------   ---------   ---------

    FINANCING ACTIVITIES

    Bank indebtedness              1,520       2,407         557         945
    Long-term debt                  (490)       (463)       (165)       (158)
    Dividends                          0        (127)          0           0
                                ---------   ---------   ---------   ---------
    Cash flows from
     financing activities          1,030       1,817         392         787
                                ---------   ---------   ---------   ---------

    Net change in cash                 0           0           0           0

    Cash, beginning of
     period                            0           0           0           0
                                ---------   ---------   ---------   ---------

    Cash end of period                $0          $0          $0          $0
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    Dividends per share            $0.00       $0.05       $0.00       $0.00
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) Additional information is included in the Notes to Consolidated
        Financial Statements.


    MRRM Inc.
    (Formerly: Mount Royal Rice Mills Limited)
    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                                            As at       As at
                                                        November    February
                                                        --------    --------
                                                              30,         29,
                                                              --          --
                                                            2008        2008
                                                            ----        ----
                                                            '000        '000

    ASSETS

    Current
      Receivables                                         $8,975      $4,179
      Inventories                                         10,476       7,471
      Tax credits receivable                               1,189         895
      Prepaids                                               156         172
      Future income taxes                                     15          15
                                                        ---------   ---------
                                                          20,811      12,732

    Marketable securities, at fair value (note 2)          4,014       4,897

    Property, plant and equipment, net                    15,258      15,820
                                                        ---------   ---------

                                                         $40,083     $33,449
                                                        ---------   ---------
                                                        ---------   ---------

    LIABILITIES

    Current
      Bank indebtedness                                   $4,818      $3,298
      Payables                                            13,264       7,944
      Income taxes                                           251          28
      Current portion of long-term liabilities               757         727
                                                        ---------   ---------

                                                          19,090      11,997

    Accrued long-term benefit liability                      617         646
    Long-term debt, reducing term loan maturing
     in 2012                                               1,702       2,222
    Future income taxes                                    1,816       1,784
                                                        ---------   ---------

                                                          23,225      16,649
                                                        ---------   ---------

    SHAREHOLDERS' EQUITY

    Capital stock

      Common shares, without nominal or par value
       authorized in an unlimited number

      Issued              2,535,000 shares                   539         539

    Retained earnings                                     16,319      16,261
                                                        ---------   ---------
                                                          16,858      16,800
                                                        ---------   ---------

                                                         $40,083     $33,449
                                                        ---------   ---------
                                                        ---------   ---------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MRRM Inc.
    NOTES To CONSOLIDATED FINANCIAL STATEMENTS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                            November 30,    2008
                                           -----------     ----

    1- Accounting Policies, Financial Risk management and Supplementary
       Information

    The unaudited interim consolidated financial statements were prepared by
the Company in accordance with Canadian generally accepted accounting
principles and have not been reviewed by the Company's auditors.
    The accounting policies and procedures used in preparing these unaudited
interim consolidated financial statements are the same as those used in
preparing the audited annual consolidated financial statements for the year
ended February 29, 2008 except for new accounting policies that have been
adopted effective March 1, 2008. These unaudited interim statements should be
read along with the audited annual statements and notes included in the
Company's last Annual Report. Certain comparative figures have been
reclassified to conform with the presentation adopted at last fiscal year-end.

    Changes in accounting policies

    The Company adopted Canadian Institute of Chartered Accountants (CICA)
Handbook Section 1535, Capital Disclosures; Section 3031, Inventories; Section
3862, Financial Instruments - Disclosures; and Section 3863, Financial
Instruments - Presentation on March 1, 2008.

    Capital Disclosures

    In December 2006, the Canadian Institute of Chartered Accountants (CICA)
published Section 1535, "Capital Disclosures". This new standard establishes
disclosure requirements concerning capital such as: qualitative information
about an entity's objectives, policies and processes for managing capital;
quantitative data about what it regards as capital; whether the entity has
complied with any externally imposed capital requirements and, if not, the
consequences of such non-compliance. The Company has adopted this Section as
of March 1, 2008. Additional informations are presented in Note 7, "Capital
disclosures".

    Inventories

    The Company has adopted section 3031, this section provides more extensive
guidance on measurement, and expands disclosure requirements to increase
transparency.
    Raw materials and supplies are recorded at the lower of cost, determined
on a weighted average basis, and net realizable value, being the estimated
selling price of finished goods less the estimated costs of completion of the
finished goods. Under the previous policy raw materials and supplies were
recorded at the lower of cost, determined on a weighted average basis, and
replacement cost.
    Finished goods are recorded at the lower of cost and net realizable value.
Finished goods include the cost of direct labour, direct materials and
variable and fixed overhead related to production, including amortization,
applied at a standard rate, which approximates actual cost.
    There is no material financial impact to the reported financial statements
as a result of this new standard.
    Inventory valuation follows the accounting policy disclosed in the annual
audited financial statements with the exception of the treatment of temporary
inventory costing fluctuations which are not taken into income as they are
temporary in nature. Fluctuations, if any, in inventory costing resulting from
temporary production cost variances will be absorbed in income by fiscal year
end.

    Future accounting standards

    In February 2008, the CICA issued Section 3064, "Goodwill And Intangible
Assets", which supersedes Section 3062, "Goodwill and other intangible assets"
and Section 3450, "Research and Development Costs". The Section 3064 sets out
standards for recognition, measurement, presentation and disclosure of
goodwill and intangible assets. This accounting standard is effective for
fiscal years beginning on or after October 1, 2008 and the Company will
implement it as of March 1, 2009. The Company is currently assessing the
impact.
    Also in February 2008, Canada's Accounting Standards Board (AcSB)
confirmed that Canadian GAAP, as used by publicly accountable enterprises,
will be superseded by International Financial Reporting Standards (IFRS) for
fiscal years beginning on or after January 1, 2011. The Corporation will be
required to report under IFRS for its interim and annual financial statements
for the fiscal year ending February 29, 2012. The Corporation is currently
preparing its IFRS conversion plan. The plan will be aimed in particular at
identifying the differences between IFRS and the Corporation's accounting
policies, assessing their impact and, where necessary, analyzing the various
policies that the Corporation could elect to adopt.

    2- Financial Instruments and Financial Risk factors

    The Company's financial instruments recognized in the balance sheet
consist of cash, marketable securities, accounts receivable, accounts payable,
accrued liabilities and bank loan. The carrying value of these balance sheet
items approximates their fair market value. The Company is exposed to a number
of different financial risks arising from normal course business exposure, as
well as the Company's use of financial instruments. These risk factors include
credit risk, interest rate risk, liquidity risk, currency risk and price risk.

    Fair value

    Receivables, bank indebtedness and payables are financial instruments
whose fair values approximate their carrying values due to their short- term
maturity. The portfolio of marketable securities has been designated as a
financial asset held for trading. These investments are recorded at fair value
based on the current bid price at the balance sheet date with fair value
changes recorded and disclosed in the Statement of Earnings. The Company uses
an interest rate swap arrangement through its bankers to effectively fix the
variable rate pertaining to the Reducing term loan which matures in February
2012. This arrangement has fixed the interest rate at 5.83% to maturity. Were
the Company to settle this swap agreement at the reporting date, the estimated
fair value based on quotes received from the Company's lender would be
unfavorable by $70,000 net of future income taxes and unfavorable by $40,000
at last fiscal year-end.

    Credit risk

    Credit risk relates to the risk that a party to a financial instrument
will not fulfill some or all of its obligations, thereby, causing the Company
to sustain a financial loss. In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of which are in
the retail and processing markets. The Company performs ongoing credit
evaluations of new and existing customers' financial conditions and reviews
the collectibility of its trade and other accounts receivable in order to
mitigate any possible credit losses. The Company maintains an allowance for
doubtful accounts that represents its estimate of uncollectible amounts. The
components of this allowance include a provision related to specific losses
estimated on individually significant exposures and a provision based on
historical trends of collections.

    Interest rate risk

    Receivables and payables are non-interest bearing. Bank indebtedness bears
interest at either the Canadian prime and/or U.S. base rates and optionally
the Company may take advantage of Bankers Acceptances. The interest rate risk
relating to the reducing term loan is as described under Fair value above. For
this quarter, a 0.5% hypothetical increase in the prime rate on bank
indebtedness would increase interest expense by approximately $5,000. A 0.5%
decrease in the prime rate would have had a reverse effect.

    Liquidity risk

    The Company is subject to debt covenants related to the revolving line of
credit and to the reducing long-term loan. The Company believes that future
cash flows from operations and availability under existing credit facilities
from banking institutions will be sufficient to meet its obligations. Under
senior management's supervision, the Company manages its liquidity according
to financial forecast and expected cash flows.

    Currency risk

    The Company is exposed to foreign currency risks due to its imports of
bulk rice from the USA and overseas. These risks are partially offset by sales
in U.S. funds and by the purchase of forward exchange futures. During the
first quarter, the Company has entered into foreign exchange futures maturing
this fiscal year which cover a significant portion of its USD requirements.
The Company uses the fair value accounting method for such instruments. Under
this method any unrealized gains or losses caused by fluctuation to the market
value are to be recorded in income for the period. As these fluctuations on an
interim basis represent a temporary gain or loss and will not impact the
financial results of the fiscal year, these gains or losses have not been
recorded on the interim financial statements.
    Foreign exchange exposure: As at November 30, 2008, assets denominated in
U.S. dollars consisting of cash, accounts receivable and marketable securities
totalled US$6,398,057, assets denominated in euros consisting of marketable
securities totalled 14,912 euros and assets denominated in pound sterling of
15,790 pounds sterling (US$3,011,000; (25,803 euros and 9,240 pounds sterling
respectively as at February 29, 2008). Bank indebtedness and accounts payable
denominated in U.S. dollars totalled US$6,989,914 (bank indebtedness and
accounts payable totalled US$1,631,000 as at February 29, 2008).

    Price risk

    The Company's price risk arises from changes in raw material prices, which
are significantly influenced by the fluctuating underlying markets. The
Company's objectives in managing its price risk are three fold: i) to protect
its financial results for the period from significant fluctuations in raw
material costs, ii) to anticipate, to the extent possible, and plan for
significant changes in the raw material markets and iii) to ensure sufficient
availability of raw materials required to meet the Company's manufacturing
requirements. To manage its exposure to price risks, the Company closely
monitors current and anticipated changes in market prices and develops
pre-buying strategies and patterns, and seeks to adjust its selling prices
when market conditions permit. Historical results indicate management's
ability to rapidly identify fluctuations in raw material prices and, to the
extent possible, incorporate such fluctuations in the Company's selling
prices.


                          For the NINE Months Ending  For the Quarter Ending
                          --------------------------  ----------------------
                                November    November    November    November
                                --------    --------    --------    --------
                                      30,         30,         30,         30,
                                      --          --          --          --
                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    3- Information included in the Statement Of Earnings

        Income taxes paid
         (received)                 $173        ($88)        ($8)        $82
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

        Investment tax credits       $98        $251         $21        $151
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

        Interest on long-term
         debt                       $116        $143         $36         $44
        Interest on bank
         indebtedness and
         other                       142         122          50          32
                                   ------      ------      ------      ------
        Total Interest paid          258         265          86          76
        Less, interest
         capitalized                   0          48           0           0
                                   ------      ------      ------      ------
        Interest expensed           $258        $217         $86         $76
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    4 - Increase (decrease) in fair value of investments held for trading

        Interest and dividend
         income                     $146        $122         $47         $41
        Net change in fair
         value of investments
         held for trading           (695)       (115)       (752)        (34)
                                   ------      ------      ------      ------
                                   ($549)         $7       ($705)         $7
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    5 - Income Taxes

        Combined basic federal
         and provincial income
         taxes                       $57        $107       ($134)       $107
        Non-taxable portion of
         capital (gains)
         losses                       (9)         19          (8)          6
        Tax-free income (net)        (33)        (27)        (10)         (8)
        Other                         67          22          62           6
                                   ------      ------      ------      ------
                                     $82        $121        ($90)       $111
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

      Effective tax rate            -%(*)       28.9%       28.5%       -%(*)
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    (*) The effective tax rates for these periods are not meaningful and have
        been omitted.

    6- Segmented Information

      Revenue

        Food processing and
         selling                 $42,690     $36,388     $16,724     $11,829
        Ship agency services       2,038       1,731         750         713
                                   ------      ------      ------      ------
        Operating                 44,728      38,119      17,474      12,542
        Corporate                   (549)          7        (705)          7
                                   ------      ------      ------      ------
                                 $44,179     $38,126     $16,769     $12,549
                                 --------    --------    --------    --------
                                 --------    --------    --------    --------

      Earnings

        Food processing and
         selling                    $503        $340        $152        $187
        Ship agency services         327         124         152         174
                                   ------      ------      ------      ------
        Operating                    830         464         304         361
        Corporate                   (690)       (139)       (737)        (36)
                                   ------      ------      ------      ------
      Earnings (loss) before
       income taxes                  140         325        (433)        325
      Income Taxes                    82         121         (90)        111
                                   ------      ------      ------      ------

      Net Earnings (loss)            $58        $204       ($343)       $214
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

      Assets

        Food processing and
         selling                 $34,145     $27,427      $3,226      $1,175
        Ship agency services       1,933       1,233         978         548
                                   ------      ------      ------      ------
        Operating                 36,078      28,660       4,204       1,723
        Corporate                  4,005       5,009        (738)         22
                                  -------     -------     -------     -------
                                 $40,083     $33,669      $3,466      $1,745
                                 --------    --------     -------     -------
                                 --------    --------     -------     -------

      Capital expenditures

        Food processing and
         selling                    $337        $797        $128        $297
        Ship agency services           6           3           3           1
                                   ------      ------      ------      ------
        Operating                    343         800         131         298
        Corporate                      0           0           0           0
                                   ------      ------      ------      ------
                                    $343        $800        $131        $298
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

      Amortization

        Food processing and
         selling                    $857        $799        $287        $280
        Ship agency services          40          30          13          12
                                   ------      ------      ------      ------
                                    $897        $829        $300        $292
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    7- Capital disclosures

    The Company defines its capital as long-term debt (including the current
portion), shareholders' equity, minus cash and cash equivalents. Capital is
calculated as follows:

        Short-term and current
         portion of long-term
         debts                    $5,575      $4,525        $567      $1,026
        Long-term debt             1,702       2,389        (175)       (167)
        Shareholders' equity      16,858      16,934        (343)        214
                                  -------    -------      -------     -------
                                 $24,135     $23,848         $49      $1,073
                                 --------    -------      -------     -------
                                 --------    -------      -------     -------
    

    The Company's objectives for managing its capital structure is to ensure
financial capacity, liquidity and flexibility to maintain a strong capital
base to sustain ongoing development and operations.
    Company's credit facilities are subject to a number of covenants and
those have been met as indicated under "Liquidity risk". Those covenants are
as follows: i) A revolving line of credit secured by accounts receivable and
marketable securities; and ii) Maintain a Debt Service Coverage ratio of not
less than 1.25 on a pre-dividend basis and 1.00 on a post-dividend basis.
    The primary source of capital is shareholders' equity. The credit
facilities available and reported at last year-end were unchanged as of the
end of this quarter. Subsequent to this quarter, these facilities were
re-negotiated to increase the revolving line of credit to $6,750,000 CDN
compared to $4,750,000 (or its US equivalent) previously. The 5 year reducing
term facility initially borrowed at fiscal year-end 2007 for $3,500,000
remains unchanged. The revolving line of credit bears interest at either the
Canadian prime and/or U.S. base rates and optionally the Company may take
advantage of Bankers Acceptances. The reducing term facility is at a combined
fixed rate for interest and fees of 5.83% for the term of the loan. The
financial covenants and arrangements relating to these facilities are detailed
in the Notes to the audited consolidated financial statements filed for last
year-end. These covenants are being respected and have been met. The
Corporation is not subject to any external capital restrictions and has no
commitments to sell common shares.
    %SEDAR: 00009058EF




For further information:

For further information: Lou Younan, Treasurer & CFO, MRRM  Inc., (514)
908-7777, Fax: (514) 906-0220, mr@mrrm.ca

Organization Profile

MRRM Inc.

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