<PAGE>

===============================================================================


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-QSB

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

[   ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________

COMMISSION FILE NUMBER 0-22247

                             NUTRITION MEDICAL, INC.
        (Exact name of Small Business Issuer as specified in its charter)


          MINNESOTA                                     41-1756256
(State or other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                 Identification Number)

            9850 51ST AVENUE NORTH, SUITE 110, MINNEAPOLIS, MN  55442
                    (Address of principal executive offices)

                                 (612) 551-9595
                           (Issuer's telephone number)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes    X     No
     -----          -----

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:

          Class                         Outstanding as of August 8, 1997
          -----                         --------------------------------
Common Stock, $.01 par value                   5,455,024 shares

Transitional Small Business Disclosure Format (Check one):  Yes      No     X
                                                               -----      -----

===============================================================================

<PAGE>

                             NUTRITION MEDICAL, INC.

                                      INDEX


                         PART I - FINANCIAL INFORMATION



Item 1.   Financial Statements                                         Page No.
                                                                       --------

               Condensed Statements of Operations (Unaudited) For the
                    Three and Six Months Ended June 30, 1997 and 1996      2

               Condensed Balance Sheets (Unaudited) As of
                    June 30, 1997 and December 31, 1996                    3

               Condensed Statements of Cash Flows (Unaudited)
                    For the Six Months Ended June 30, 1997 and 1996        4

               Notes to Condensed Financial Statements (Unaudited)         5

Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         7

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                               13

Item 2.   Changes in Securities                                           13

Item 4.   Submission of Matters to a Vote of Security Holders             14

Item 6.   Exhibits and Reports on Form 8-K                                14


                                        1

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                             NUTRITION MEDICAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                            Three months ended            Six months ended
                                                                 June 30,                      June 30,
                                                                 --------                      --------
                                                          1997            1996            1997           1996
                                                          ----            ----            ----            ----

<S>                                                 <C>               <C>             <C>              <C>
     Net sales                                      $   1,329,978     $  381,126      $  2,543,978     $1,086,049
     Cost of goods sold                                 1,031,829        249,215         1,931,434        682,194
                                                    -------------     ----------      ------------     ----------

     Gross profit                                         298,149        131,911           612,544        403,855

     Operating expenses:
          Selling, general and administrative             635,617        265,514         1,280,103        577,679
          Research and development                        119,813         44,436           237,004         96,155
                                                    -------------     ----------      ------------     ----------
                                                          755,430        309,950         1,517,107        673,834
                                                    -------------     ----------      ------------     ----------

     Operating loss                                      (457,281)      (178,039)         (904,563)      (269,979)

     Other income (expense):
          Interest income                                  38,449          8,813            87,118         19,468
          Interest expense                                (49,737)        (1,479)          (91,145)        (2,904)
                                                    -------------     ----------      ------------     ----------
                                                          (11,288)         7,334            (4,027)        16,564
                                                    -------------     ----------      ------------     ----------

     Net loss                                       $    (468,569)    $ (170,705)     $   (908,590)    $ (253,415)
                                                    -------------     ----------      ------------     ----------
                                                    -------------     ----------      ------------     ----------

     Net loss per share                             $        (.08)    $     (.05)     $       (.17)    $     (.06)
                                                    -------------     ----------      ------------     ----------
                                                    -------------     ----------      ------------     ----------

     Weighted average number of shares
        outstanding                                     5,452,835      3,105,524         5,393,430      4,220,816
                                                    -------------     ----------      ------------     ----------
                                                    -------------     ----------      ------------     ----------
</TABLE>

            See accompanying notes to condensed financial statements

                                        2

<PAGE>

                             NUTRITION MEDICAL, INC.
                            CONDENSED BALANCE SHEETS

                                                       June 30,    December 31,
                                                         1997          1996
                                                         ----          ----
                                                      (Unaudited)     (Note)
                                     ASSETS

Current assets:
     Cash and cash equivalents                       $  2,778,946  $  2,553,955
     Short-term investments                                  ----     1,671,596
     Accounts receivable (net)                            903,730       356,240
     Inventories                                        1,762,243       460,115
     Prepaid expenses                                     318,369        34,039
                                                     ------------  ------------

          Total current assets                          5,763,288     5,075,945

Equipment and office furniture (net)                      949,217       132,369
Goodwill (net)                                          3,346,601            --
                                                     ------------  ------------

               Total assets                          $ 10,059,106  $  5,208,314
                                                     ------------  ------------
                                                     ------------  ------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                $  1,097,477  $    269,037
     Accrued expenses                                     314,588       240,041
                                                     ------------  ------------

          Total current liabilities                     1,412,065       509,078

Subordinated note payable (net)                         1,643,145            --

Shareholders' equity:
     Common stock, $.01 par value, 20,000,000
       shares authorized, 5,455,024 and 4,593,024
       issued and outstanding in 1997 and 1996             54,550        45,930
     Additional paid-in capital                        10,147,917     6,943,287
     Accumulated deficit                               (3,198,571)   (2,289,981)
                                                     ------------  ------------

          Total shareholders' equity                    7,003,896     4,699,236
                                                     ------------  ------------

                Total liabilities and shareholders'
                    equity                           $ 10,059,106  $  5,208,314
                                                     ------------  ------------
                                                     ------------  ------------

Note:  The balance sheet at December 31, 1996 has
   been derived from the audited financial
   statements at that date but does not include all
   of the information and footnotes required by
   generally accepted accounting principles for
   complete financial statements.

            See accompanying notes to condensed financial statements

                                        3

<PAGE>

                             NUTRITION MEDICAL, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                            Six months ended
                                                                June 30,
                                                                --------
                                                           1997         1996
                                                           ----         ----
OPERATING ACTIVITIES
   Net loss                                           $  (908,590)  $  (253,415)
   Adjustments to reconcile net loss to net cash
        used in operating activities:
     Amortization                                         210,968            --
     Depreciation                                         122,673        11,359
     Value of options and warrants granted
        for services performed                                 --        14,500
     Changes in operating assets and liabilities:
          Accounts receivable                            (547,490)      (78,544)
          Inventories                                    (802,128)       82,479
          Prepaid expenses                               (284,330)      (32,121)
          Accounts payable                                828,440       (82,032)
          Accrued expenses                                 74,547       (15,293)
                                                      -----------   -----------
Net cash used in operating activities                  (1,305,910)     (353,067)

INVESTING ACTIVITIES
   Proceeds from sale of short-term investments         1,671,596            --
   Purchase of goodwill                                   (58,174)           --
   Purchase of equipment and office furniture             (89,521)       (9,148)
                                                      -----------   -----------
Net cash provided by (used in) investing activities     1,523,901        (9,148)

FINANCING ACTIVITIES
   Proceeds from issuance of common stock                   7,000       125,000
                                                      -----------   -----------
Net cash provided by financing activities                   7,000       125,000
                                                      -----------   -----------

Increase (decrease) in cash                               224,991      (237,215)
Cash and cash equivalents at beginning of period        2,553,955     1,127,247
                                                      -----------   -----------

Cash and cash equivalents at end of period            $ 2,778,946   $   890,032
                                                      -----------   -----------
                                                      -----------   -----------


SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTMENT AND
     FINANCING ACTIVITIES
   Acquisition of Elan Pharma, Inc. product
        line through:
     Issuance of note payable                         $ 1,593,750
     Issuance of common stock                           3,206,250



            See accompanying notes to condensed financial statements

                                        4

<PAGE>

                             NUTRITION MEDICAL, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   BASIS OF PRESENTATION

     The condensed financial statements as of June 30, 1997 and for the three
and six-month periods ended June 30, 1997 and 1996 included in this Form 10-QSB
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations.  These financial statements should be
read in conjunction with the financial statements and related notes thereto
included in the Company's December 31, 1996 Annual Report on Form 10-KSB.

     The condensed financial statements presented herein as of June 30, 1997 and
for the three and six-month periods ended June 30, 1997 and 1996 are unaudited,
but in the opinion of management, reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position,
results of operations and cash flows for the periods presented.  The results of
operations for any interim period are not necessarily indicative of results for
the full year.


2.   PRODUCT LINE ACQUISITION

     On January 13, 1997, the Company executed an Asset Purchase Agreement (the
"Agreement") whereby the Company acquired certain assets from Elan Pharma, Inc.
("Elan"), a U.S. subsidiary of Ireland-based Elan Corporation, plc.  The assets
purchased pursuant to the Agreement include the inventory and fixed assets
relating to the production of the enteral (tube feeding) products (the "Acquired
Products") of Elan as well as exclusive rights to manufacture and market the
Acquired Products. In exchange for the Acquired Products and related assets, the
Company issued Elan a subordinated promissory note in the amount of $3,000,000
(due in seven years along with interest accruing at three percent per annum) and
855,000 shares of the Company's common stock.  The Agreement allows for the
forgiveness of up to 100% of the promissory note based upon the Company's future
stock performance and contains provisions which restrict Elan's ability to vote
or sell the shares of Common Stock.  Total value of the transaction, after
taking into consideration market interest rates on the note payable, and $58,174
in acquisition expenses associated with the purchase, was $4,858,174.


                                        5

<PAGE>


                             NUTRITION MEDICAL, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


2.   PRODUCT LINE ACQUISITION (CONTINUED)

      Based upon management's estimates of asset values, taking into
consideration market values and condition of the assets as well as the future
cash flows estimated to be generated from the Acquired Products, the following
represents an allocation of the purchase price to the acquired assets, with the
excess of the purchase price over the assets allocated to goodwill:

          Inventory                  $  500,000
          Manufacturing equipment       500,000
          Leased pumps                  350,000
          Goodwill                    3,508,174
                                     ----------
                                     $4,858,174
                                     ----------
                                     ----------

3.  NET LOSS PER SHARE

     Net loss per share is computed using the weighted average number of common
shares outstanding during the period.  Common equivalent shares from stock
options and warrants are excluded from the computation as their effect is
antidilutive.  In February 1997, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 128, "EARNINGS PER SHARE".  This Statement replaces
the presentation of primary earnings per share (EPS) with basic EPS and also
requires dual presentation of basic and dilutive EPS for entities with complex
capital structures.  This Statement is effective for the fiscal year ending
December 31, 1997.  For the quarter ended June 30, 1997,  there is no difference
between basic earnings per share under Statement No. 128 and primary net loss
per share as reported.

                                        6

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS


CAUTIONARY STATEMENT

     This Quarterly Report on form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  When used in
this Form 10-QSB and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes", "anticipates", "intends", "will likely result", "estimates",
"projects" or similar expressions are intended to identify such forward -looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve risks and uncertainties that may cause
the Company's actual results to differ materially from the results discussed in
the forward-looking statements.  The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made.  The Company undertakes no obligation to revise any forward-
looking statements in order to reflect events or circumstances after the date of
such statements.  Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business.  Such forward-looking statements are qualified in their entirety by
the cautions and risk factors set forth under the "Cautionary Statement" filed
as exhibit 99.1 to this Form 10-QSB.

GENERAL

     The Company develops and sells nutrition products marketed primarily as
cost-effective, generic alternatives to equivalent national branded products.
Products to date have focused on clinical products for the healthcare industry
and adult nutrition supplements generally sold to large retailers under private
label arrangements.  In addition, the Company is currently developing an infant
formula.

CLINICAL PRODUCTS
     The Company's initial product development efforts centered on branded
generic products for the critical care and disease specific nutrition market.
These products are sold to hospitals and other health care providers to feed
critically ill or disabled patients who cannot consume adequate nutrients orally
and consequently require specialized feeding via tubes into the intestinal
tract.  As of June 30, 1997, the Company had developed eight such products.
Critical care and disease specific nutrition products are generally purchased by
a relatively large customer base which typically places orders in relatively
small order quantities.

     On January 13, 1997, the Company expanded its clinical products line by
acquiring the inventory and fixed assets associated with the production of the
enteral (tube feeding) products of Elan Pharma, Inc. as well as the exclusive
rights to manufacture and market approximately 40

                                        7

<PAGE>

enteral products consisting of special formulas, disposable administration
hardware and the related delivery pumps.

     During the quarter ended June 30, 1997, the Company added two formulas to
its clinical product line.  In May 1997, the Company launched, Pro-Peptide-TM-
For Kids, a critical care formula designed specifically for gastrointestinally-
impaired children between the ages of one and ten.  This product will be
marketed primarily to hospitals, particularly those with active pediatric
programs.  In June 1997,  the Company introduced Gluco-Pro-TM-, a disease
specific formula for people with hyperglycemia and diabetes.  This formula will
also be marketed to hospitals, but, unlike many of the Company's critical care
products, it also has many applications in long-term care and home-care
environments.  As with other new products, the Company expects that customer
trial and acceptance will vary.

RETAIL PRODUCTS-PRIVATE LABEL NUTRITION PRODUCTS
     In October 1995, the Company introduced an adult nutrition supplement
product line.  Adult nutrition supplements are designed to provide balanced
nutrition in beverage form as a supplement or substitute for solid food for
healthy individuals as well as those recovering from or affected by illness.
These products are marketed to retail chains and are generally packaged using
the retailer's proprietary store brand label. Such private label products allow
the retailer to offer quality, low cost alternatives to national branded adult
nutrition products.  The Company's private label nutrition product line
currently consists of three adult nutrition supplements, each of which is
available in three flavors.  "Light" versions of these products are currently
under development. Adult nutrition supplements are generally purchased by a
relatively small customer base which typically places relatively large orders.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1997 AND 1996

     NET SALES.  The Company's net sales for the three months ended June 30, 
1997 totaled $1,329,978, representing an increase of $948,852, or 249%, over 
net sales of $381,126 in the corresponding 1996 period.  Sales of the 
Company's clinical products, which in the 1996 period totaled $268,589, 
increased 154% to $683,626 in the three months ended June 30, 1997.  Of this 
increase, a substantial portion is attributable to sales of the products 
acquired from Elan Pharma, Inc. in January 1997, with the balance associated 
with increased sales to existing customers, newly converted customers and 
sales of new products. Sales of the Company's retail products totaled 
$646,352  in the three months ended June 30, 1997, an increase of $533,815, 
or 474% over the corresponding 1996 period sales of $112,537. The 1997 period 
sales increase is principally the result of a larger customer base and 
increased order levels within this customer base.

     The prices of the Company's products remained relatively stable within 
and between the two reporting periods. In response to the Company's strategy 
of marketing its critical care nutrition products as less expensive 
alternatives to established brands, one competitor of the Company, in late 
1996, lowered its prices to select customers of its branded products, 
offsetting part or all of the price advantage of the Company's three 
competing products.  Although the Company

                                        8

<PAGE>

continues to experience overall sales growth of these products, management 
believes that these selective price reductions resulted in lost sales and 
slowed the rate of sales growth of the Company's three competing products, 
and that this competitor will continue to use this form of selective price 
competition. Management further believes that the current impact of this 
competitor's price reductions on total sales has been reduced due to the 
Company's introduction of additional non-competing products in 1997.

     GROSS PROFIT.  The Company's gross profit increased 126% to $298,149 for
the three months ended June 30, 1997, compared with $131,911 in the same period
in 1996.  The following table sets forth the gross profit and gross profit
percentage, by product line, for the three months ended June 30, 1997 and 1996:


                                     Three months ended June 30,
                                     ---------------------------
                                 1997                          1996
                       ------------------------      -------------------------
 Product Line          Gross profit  % of Sales      Gross Profit   % of Sales
 ------------          ------------------------      -------------------------
Clinical Products        $205,230       30.0%          $143,010       53.2%
Retail Products            92,919       14.4%           (11,099)      (9.9)%
                       ------------------------      -------------------------
     Total               $298,149       22.4%          $131,911       34.6%


The decrease in overall gross profit, as a percentage of sales, is related to
product mix differences between the two periods and increased indirect
production and distribution overhead costs.  The gross profit generated by the
Company's clinical products decreased as a percentage of clinical sales,
principally as a result of the introduction in the 1997 period of the lower
gross margin products acquired from Elan.  These products generated a lower than
expected gross profit in the second quarter of 1997 due to higher than
anticipated freight costs and an increase in fixed costs as a percentage of
sales .  Management expects that while increased sales of these acquired
products will continue to generate an increase in the clinical product gross
profit contribution, the overall gross profit, as a percentage of sales, may
decline, particularly if sales of the lower gross profit acquired products
increase as a proportion of total clinical product sales.  The retail gross
profit, as a percentage of sales, of 14.4% for the three months ended June 30,
1997 is consistent with overall historical performance levels. The negative
gross profit generated in the 1996 period was the result of low sales volume
generated during that period which was unable to cover the related product line
fixed costs.

     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and 
administrative expenses in the three months ended June 30, 1997, increased by 
$370,103, or 139% to $635,617, compared with the same period in 1996. The 
increase is related to higher costs resulting from the continued development 
of the Company's sales and administration infrastructure, including costs 
associated with marketing the infant formula product line currently under 
development, and approximately $117,000 in depreciation and goodwill 
amortization charges related to the Elan Pharma, Inc. product line. These 
increases were offset by a $145,000 insurance reimbursement received in the 
current period for legal fees incurred by the Company in two previously 
settled lawsuits.

                                        9

<PAGE>

     RESEARCH AND DEVELOPMENT.  Research and development costs increased 169% to
$119,813 for the three months ended June 30, 1997, compared with $44,436 in the
corresponding 1996 period.  The increase is attributable to higher costs
associated with the Company's development of several infant formula products.

SIX MONTHS ENDED JUNE 30, 1997 AND 1996

     NET SALES.  Net sales for the six months ended June 30, 1997 totaled 
$2,543,978, compared to $1,086,049 for the same period in 1996,  an increase 
of $1,457,929, or 134%.  Sales of the Company's clinical products increased 
$898,943, or 165%, from $545,521 in the six months ended June 30, 1996  to 
$1,444,464 in corresponding 1997 period. A substantial portion of the 
increase is attributable to sales of the products acquired from Elan Pharma, 
Inc. in January 1997, with the balance attributable to an increased customer 
base and new products. Sales of the Company's retail products increased 
$558,986, or 103%, to $1,099,514 in the six months ended June 30, 1997 
compared to sales of $540,528 in the corresponding 1996 period. The 1997 
period sales increase is principally the result of a larger customer base and 
increased order levels within this customer base.

     GROSS PROFIT.  The Company's gross profit increased 52% to $612,544 for the
six months ended June 30, 1997, compared with $403,855 in the same period in
1996.  The following table sets forth the gross profit and gross profit
percentage, by product line, for the six  months ended June 30, 1997 and 1996:


                                      Six months ended June 30,
                                      -------------------------
                                 1997                          1996
                       ------------------------      ------------------------
  Product Line         Gross profit  % of Sales      Gross Profit  % of Sales
  ------------         ------------------------      ------------------------
Clinical Products        $472,264       32.7%          $306,896       56.3%
Retail Products           140,280       12.8%            96,959       17.9%
                       ------------------------      ------------------------
     Total               $612,544       24.1%          $403,855       37.2%


The decrease in overall gross profit, as a percentage of sales, is related to
product mix differences between the two periods as well as certain indirect
production and distribution overhead costs.  As a result of combining the lower
gross margin products acquired from Elan Pharma Inc. in January 1997 with the
Company's previous clinical product offerings, the gross profit, as a percentage
of sales has declined. The gross profit, as a percentage of sales, on products
offered in both periods remained relatively consistent between the periods
presented. Management expects that while increased sales of the  Elan acquired
products will continue to generate an increase in the clinical product gross
profit contribution, the overall gross profit, as a percentage of sales, will
decline, particularly if sales of the lower gross profit acquired products
increase as a proportion of total clinical product sales.  The decrease in gross
profit as a percentage of retail product sales in the 1997 period is
attributable to a $40,000 write-off of dated product in the first quarter of
1997 and a gross profit percentage in the 1996 period that exceeded historical
levels.

                                       10

<PAGE>

The 1997 retail product gross profit, excluding the aforementioned write-off,
was within the historical product line gross profit range.

     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses in the six months ended June 30, 1997 totaled $1,280,103, an increase
of $702,424, or 122%, over the $577,679 expensed in the corresponding 1996
period.  The increase is related to higher costs resulting from the continued
development of the Company's sales and administration infrastructure in support
of new products and approximately $216,000 in depreciation and goodwill
amortization charges related to the Elan Pharma, Inc. product acquisition.

     RESEARCH AND DEVELOPMENT.  Research and development costs increased
$140,849, or 146%, to $237,004 for the six months ended June 30, 1997, compared
with $96,155 in the corresponding 1996 period.  The increase is attributable to
higher costs associated with the Company's development of several infant formula
products.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company has incurred net losses and negative cash
flows from operations. On September 26, 1996, the Company's initial public
offering was declared effective by the Securities and Exchange Commission. The
Company sold pursuant to this registration statement, in a transaction that
closed on October 1, 1996, 1,437,500 shares of the Company's Common Stock at
$3.50 per share, including an overallotment of 197,500 shares.  Net proceeds to
the Company, after deducting all offering costs, totaled $4.24 million. Unused
funds are invested in U.S. Treasury bills with maturities ranging from one to
six months.

     Prior to the initial public offering, the Company's principal source of
cash and working capital had been from the private placement of Common Stock,
through which the Company received approximately $2,800,000 in net proceeds.
The Company also obtained loans from the City of Buffalo, Minnesota totaling
$100,000. These loans were repaid in July 1996 when the Company relocated to
Minneapolis, Minnesota.

     On January 13, 1997, the Company executed an Asset Purchase Agreement
whereby the Company acquired certain assets from Elan Pharma, Inc. ("Elan"), a
U.S. subsidiary of the Ireland-based Elan Corporation, plc. The agreement
provides for the sale to the Company of the inventory and fixed assets relating
to the production of the enteral (tube feeding) products of Elan as well as
exclusive rights to manufacture the products. In exchange for the product rights
and related assets, the Company issued the seller 855,000 shares of common stock
and a subordinated promissory note in the amount of $3,000,000.  The note, along
with all interest, which accrues at 3% per annum, is due in seven years.

     In connection with the above described activities and results of
operations, the Company's net cash used by operations in the six months ended
June 30, 1997 totaled $1,305,910.  Cash and cash equivalents as of June 30, 1997
totaled $2,778,946. The Company utilizes several contract manufacturers to
produce its products. Two of these contractors have scheduled production line
shutdowns in the third quarter of 1997. As a result of these shutdowns and
several large customer shipments which required delivery dates just subsequent
to June 30,

                                       11

<PAGE>

1997, the Company increased its inventory levels as of June 30, 1997 of products
affected by these events.  Management believes that this temporary impact on
inventory levels has resulted in inventory levels that, as of June 30, 1997,
were approximately $500,000 above desired levels.

     The Company expects that the existing cash balances will be sufficient to
fund operations of the Company through 1997. However, the Company's future
liquidity and capital requirements will depend on numerous factors including
competition, the extent to which the Company's products gain market acceptance
and the costs and timing of expansion of sales, marketing and product
development activities. There can be no assurance that the Company will not be
required to raise additional capital before the end of 1997 or any time
thereafter, or that such capital will be available on acceptable terms, or at
all. The Company's strategy for 1997 includes pursuing the establishment of a
bank line of credit to secure additional operating funds, should they be needed.
There can be no assurance that such a credit line, if needed, can be secured on
terms acceptable to the Company.

                                       12

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In August 1995, the Company was named as a defendant in a patent 
infringement lawsuit brought by Novartis, formerly Sandoz Nurtrition, in the 
United States District Court for the District of Minnesota. The complaint 
asserts that one of the Company's products, L-Emental-TM- Plus, infringes on 
two patents held by Novartis and asks for relief in the form of an injunction 
that would prevent the Company from selling the product as well as damages 
of an unspecified amount. Both patents were issued subsequent to the 
Company's introduction of L-Emental Plus. The Company responded with a 
counterclaim seeking a declaration of invalidity, unenforceability, 
non-infringement and inventorship of the subject patents. A court order has 
stayed the litigation pending the reexamination by the United States patent 
and Trademark Office of both patents. On August 13, 1997 the Company received 
notification that the United States Patent and Trademark Office will reissue 
the two patents under review. The Company expects that the litigation which 
was stayed pending this determination will resume and intends to continue to 
defend vigorously against the claim. Sales of L-Elemental Plus constituted 
$298,000, or 35% and $458,000 or 19 percent, of the Company's net sales in 
1995 and 1996, respectively and $203,000 or 8 percent of sales in the six 
months ended June 30, 1997. It is not possible at this time to predict the 
outcome of the lawsuit, including whether the Company will have to cease 
selling L-Emental Plus, or to estimate the amount or range of potential loss, 
if any. To date, no injunction has been issued.


ITEM 2.  CHANGES IN SECURITIES

          c)   Options exercised within the period from April 1, 1997 to June
               30, 1997:

                 Date:                  Number of Shares Exercised:

                 April 4, 1997                    1,000
                 April 9, 1997                    1,000
                 April 15, 1997                   1,000
                 April 22, 1997                   1,000
                 April 30, 1997                   1,000
                 May 28, 1997                     1,000
                 June 5, 1997                     1,000

                                        13
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The annual meeting of Shareholders of the Company was held on May 8, 1997
at which time (i) four nominees were elected to the Board of  Directors for one-
year terms and (ii) the appointment of Ernst & Young LLP as the independent
auditors of the Company was, approved.  Proxies for the Company were solicited
pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended,
and there was no solicitation in opposition to management's solicitations.  All
nominees for directors as listed in the proxy statement were elected.  The
voting results were as follows:


Election of Directors:

                              For            Withhold Authority
                           ---------         ------------------
William L. Rush            3,690,161              3,000
George E. Kline            3,690,161              3,000
Kenneth L. Evenstad        3,690,161              3,000
Lawrence A. Lehmkuhl       3,690,161              3,000

Approval of Independent Auditors:
                       For      Against      Abstain   Broker Non-Vote
                       ---      -------      -------   ---------------
Ernst & Young LLP   3,690,161      0          3,000          0


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


          a)   The following exhibits are included with this quarterly report on
               Form 10-QSB as required by Item 601 of Regulation S-B.

               Exhibit
               Number                     Description
               -------                    -----------

               11                  Calculation of loss per share
               27                  Financial data schedule
               99.1                Cautionary Statement

          b)   Reports on Form 8-K.

               There were no reports on Form 8-K filed during the quarter ended
               June 30, 1997.

                                       14

<PAGE>

                                    SIGNATURE

     In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                              NUTRITION MEDICAL, INC.

     Dated:   August 11, 1997           By:/s/   Richard J. Hegstrand
                                           --------------------------
                                        Richard J. Hegstrand
                                        Chief Financial Officer

                                       15

<PAGE>

                                  EXHIBIT INDEX



               Exhibit
               Number              Description
               -------             -----------

               11             Calculation of loss per share
               27             Financial data schedule
               99.1           Cautionary Statement


                                       16