**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

**0-14983**

**NUTRITION      21, INC**

| **New                York**                                                                  |   | **11-2653613**                                                |
|----------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| (State                or other jurisdiction of incorporation or                organization) |   | (I.R.S.                Employer Identification                No.) |
|                                                                                         |   |                                                               |
| **4                Manhattanville Road****Purchase,                New York**           |   | **10577-2197**                                                     |
| (Address                of Principal Executive                Offices)                       |   | (Zip                Code)                                          |

**(914)      701-4500**

**None**

| Class                                                                  |   | Outstanding                at February 10,                2007 |
|------------------------------------------------------------------------|--------|----------------------------------------------------------------|
| Common                Stock, $0.005 par value per                share |   | 60,116,346                shares                               |

----

**NUTRITION      21, INC.**

|    |                                                                                                                  |                                                                                                                                                   |   | PAGE    |
|---------|-----------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| PART I  | FINANCIAL              INFORMATION                                                                                    |                                                                                                                                                   |   |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 1  | Financial Statements                                                                                                  |                                                                                                                                                   |   |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
|    | (a)                                                                                                                   | Condensed Consolidated Balance              Sheets at December 31, 2006 and              June 30, 2006                                                 |   | 3&4 |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
|    | (b)                                                                                                                   | Condensed Consolidated Statements              of Operations for the three and              six month periods ended December 31, 2006 and 2005         |   | 5       |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
|    | (c)                                                                                                                   | Condensed Consolidated Statement              of              Stockholders’ Equity for the              six month period ended December 31, 2006 |   | 6       |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
|    | (d)                                                                                                                   | Condensed Consolidated Statements              of Cash Flows for the six month              periods ended December 31, 2006 and 2005                   |   | 7       |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
|    | (e)                                                                                                                   | Notes to Condensed Consolidated              Financial Statements                                                                                      |   | 8       |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 2  | Management’s              Discussion and Analysis of Financial              Condition and Results of Operations |                                                                                                                                                   | 15     |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 3  | Quantitative and Qualitative              Disclosures About              Market Risk                                  |                                                                                                                                                   | 17     |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 4  | Controls and Procedures                                                                                               |                                                                                                                                                   | 17     |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| PART II | OTHER INFORMATION                                                                                                     |                                                                                                                                                   |   |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 4  | Submission of Matters to              a Vote of              Security Holders                                         |                                                                                                                                                   | 18     |
|    |                                                                                                                  |                                                                                                                                                   |   |    |
| ITEM 6  | Exhibits                                                                                                              |                                                                                                                                                   | 18     |

----

**NUTRITION      21, INC.**

|                                                                                                                                                                                                             |   | December                31,2006(unaudited) |   | June                30,2006(Note                1) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                       |   |                                       |   |                                               |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |
| Current                assets:                                                                                                                                                                                   |   |                                       |   |                                               |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |
| Cash                and cash equivalents                                                                                                                                                                         |   | $                                          | 4,800  |                                               | $      | 2,414 |   |
| Short-term                investments                                                                                                                                                                            |   |                                       | 6,000  |                                               |   | 11,500 |   |
| Accounts                receivable (less allowances for doubtful accounts and returns of                $320 at                December 31, 2006 and $9 at June 30, 2006)                                        |   |                                       | 2,477  |                                               |   | 2,600 |   |
| Other                receivables                                                                                                                                                                                 |   |                                       | 225    |                                               |   | 205 |   |
| Inventories                                                                                                                                                                                                      |   |                                       | 1,842  |                                               |   | 963 |   |
| Prepaid                expenses and other current assets                                                                                                                                                         |   |                                       | 1,620  |                                               |   | 392 |   |
| Total                current assets                                                                                                                                                                              |   |                                       | 16,964 |                                               |   | 18,074 |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |   |   |
| Property                and equipment, net                                                                                                                                                                       |   |                                       | 87     |                                               |   | 116 |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |   |   |
| Patents,                trademarks and other amortizable intangibles (net of accumulated                amortization of $21,107 at December 31, 2006 and $19,511 at June                30,                2006) |   |                                       | 5,275  |                                               |   | 5,375 |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |   |   |
| Goodwill                                                                                                                                                                                                         |   |                                       | 12,111 |                                               |   | -- |   |
| Other                intangibles with indefinite lives                                                                                                                                                           |   |                                       | 5,379  |                                               |   | -- |   |
| Other                assets                                                                                                                                                                                      |   |                                       | 374    |                                               |   | 291 |   |
|                                                                                                                                                                                                             |   |                                       |   |                                               |   |   |   |
| TOTAL                ASSETS                                                                                                                                                                                      |   | $                                          | 40,190 |                                               | $      | 23,856 |   |

----

**NUTRITION      21, INC. **

|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | December                31,2006(unaudited) |    | June                30, 2006(Note                1) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|----------------------------------------------------------|--------|
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                      |   |                                       |    |                                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                       |    |                                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |
| Current                liabilities:                                                                                                                                                                                                                                                                                                                                                                                          |   |                                       |    |                                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |
| Accounts                payable                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                          | 5,326   |                                                     | $      | 2,282 |   |
| Accrued                expenses                                                                                                                                                                                                                                                                                                                                                                                              |   |                                       | 711     |                                                     |   | 914 |   |
| Deferred                income                                                                                                                                                                                                                                                                                                                                                                                               |   |                                       | 4,149   |                                                     |   | 1,710 |   |
| Total                current liabilities                                                                                                                                                                                                                                                                                                                                                                                     |   |                                       | 10,186  |                                                     |   | 4,906 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |   |   |
| Long                term debt                                                                                                                                                                                                                                                                                                                                                                                                |   |                                       | 2,347   |                                                     |   | -- |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |   |   |
| 6%                Series I convertible preferred stock subject to mandatory redemption                (redemption value $5,647 and $6,586 at December 31, 2006 and June                30,                2006, respectively)                                                                                                                                                                                                |   |                                       | 4,121   |                                                     |   | 4,410 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |   |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                                                                                                             |   |                                       | 16,654  |                                                     |   | 9,316 |   |
| Commitments                and contingencies                                                                                                                                                                                                                                                                                                                                                                                 |   |                                       |    |                                                     |   |   |   |
|  STOCKHOLDERS’                EQUITY:                                                                                                                                                                                                                                                                                                                                                                             |   |                                       |    |                                                     |   |   |   |
| Preferred                stock, $0.01 par value, authorized 5,000,000 shares, 100,000 shares                designated as Series H, none issued and outstanding, 9,600 shares                designated as Series I convertible preferred stock, 9,600 shares                issued                and 5,922 and 6,586 shares outstanding at December 31, 2006 and June                30,                2006, respectively |   |                                       | --      |                                                     |   | -- |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                       |    |                                                     |   |   |   |
| Common                stock, $0.005 par value, authorized 100,000,000 shares; 58,382,237                shares                issued and outstanding at December 31, 2006 and 48,783,220 issued                and                outstanding at June 30, 2006                                                                                                                                                               |   |                                       | 291     |                                                     |   | 243 |   |
| Additional                paid-in capital                                                                                                                                                                                                                                                                                                                                                                                    |   |                                       | 104,321 |                                                     |   | 86,582 |   |
| Accumulated                deficit                                                                                                                                                                                                                                                                                                                                                                                           |   |                                       | (81,076 | )                                                        |   | (72,285 | ) |
| Total                stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                              |   |                                       | 23,536  |                                                     |   | 14,540 |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                              |   | $                                          | 40,190  |                                                     | $      | 23,856 |   |

----

**NUTRITION      21, INC.**

|                                                                        |   | Three                Months Ended |       | Six                Months Ended |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------|------------|---------------------------------|--------|
|                                                                        |   | December                31,       |       | December                31,     |   |
|                                                                        |   | 2006                              |       | 2005                            |   | 2006 |   | 2005 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |
| Net                sales                                                    |   | $                                 | 9,297      |                            | $      | 1,986 |   | $ | 13,845 |   | $ | 5,528 |   |
| Other                revenues                                               |   |                              | 137        |                            |   | 113 |   |   | 273 |   |   | 172 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| TOTAL                REVENUES                                               |   |                              | 9,434      |                            |   | 2,099 |   |   | 14,118 |   |   | 5,700 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| COSTS                AND EXPENSES                                           |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| Cost                of revenues                                             |   |                              | 2,426      |                            |   | 651 |   |   | 3,807 |   |   | 1,276 |   |
| Selling,                general and administrative expenses                 |   |                              | 10,087     |                            |   | 3,153 |   |   | 16,028 |   |   | 5,925 |   |
| Research                and development expenses                            |   |                              | 302        |                            |   | 421 |   |   | 690 |   |   | 828 |   |
| Depreciation                and amortization                                |   |                              | 950        |                            |   | 574 |   |   | 1,631 |   |   | 1,136 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| TOTAL                COSTS AND EXPENSES                                     |   |                              | 13,765     |                            |   | 4,799 |   |   | 22,156 |   |   | 9,165 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| OPERATING                LOSS                                               |   |                              | (4,331     | )                               |   | (2,700 | ) |   | (8,038 | ) |   | (3,465 | ) |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| Interest                income                                              |   |                              | 122        |                            |   | 75 |   |   | 260 |   |   | 129 |   |
| Interest                expense                                             |   |                              | 467        |                            |   | 473 |   |   | 1,007 |   |   | 900 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| LOSS                BEFORE INCOME TAXES                                     |   |                              | (4,676     | )                               |   | (3,098 | ) |   | (8,785 | ) |   | (4,236 | ) |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| Income                taxes                                                 |   |                              | 3          |                            |   | 5 |   |   | 6 |   |   | 5 |   |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| NET                LOSS                                                     |   | $                                 | (4,679     | )                               | $      | (3,103 | ) | $ | (8,791 | ) | $ | (4,241 | ) |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| Basic                and diluted loss per common share                      |   | $                                 | (0.08      | )                               | $      | (0.08 | ) | $ | (0.16 | ) | $ | (0.11 | ) |
|                                                                        |   |                              |       |                            |   |   |   |   |   |   |   |   |   |
| Weighted                average number of common shares - basic and diluted |   |                              | 58,037,158 |                            |   | 38,490,452 |   |   | 55,194,895 |   |   | 38,360,269 |   |

----

**NUTRITION      21, INC.**

|                                                                                                                                    |   | Common                Stock |       | AdditionalPaid-InCapital |   | AccumulatedDeficit |   | Total  |    |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|--------------------------|--------|--------------------|--------|--------|---------|
|                                                                                                                                    |   | Shares                      |       | $                        |   | $                  |   | $      |    | $ |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Balance                at June 30, 2006                                                                                                 |   |                        | 48,783,220 |                     | $      | 243                |   | $      | 86,582  |   | $ | (72,285 | ) | $ | 14,540 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Conversion                of 939 shares of Series I convertible preferred stock to shares of                common                stock |   |                        | 754,926    |                     |   | 4                  |   |   | 944     |   |   | ---- |   |   | 948 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Issuance                of common stock for dividends on Series I preferred stock                                                       |   |                        | 111,091    |                     |   | 1                  |   |   | 177     |   |   | ---- |   |   | 178 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Issuance                of common stock for the purchase of Iceland                Health, Inc.                                         |   |                        | 8,000,000  |                     |   | 40                 |   |   | 15,432  |   |   | ---- |   |   | 15,472 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Stock-based                compensation expense                                                                                         |   |                        | ----       |                     |   | ----               |   |   | 308     |   |   | ---- |   |   | 308 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Exercise                of stock options and warrants                                                                                   |   |                        | 733,000    |                     |   | 3                  |   |   | 878     |   |   | ---- |   |   | 881 |   |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Net                loss for the period                                                                                                  |   |                        | ----       |                     |   | ----               |   |   | ----    |   |   | (8,791 | ) |   | (8,791 | ) |
|                                                                                                                                    |   |                        |       |                     |   |               |   |   |    |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                                             |   |                        | 58,382,237 |                     | $      | 291                |   | $      | 104,321 |   | $ | (81,076 | ) | $ | 23,536 |   |

----

**NUTRITION      21, INC.**

|                                                                                                                                             |   | Six                Months EndedDecember                31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                                                                                                             |   |  2006                                                 |   |  2005 |   |
| Cash                flows from operating activities:                                                                                             |   |                                                       |   |   |   |
| Net                loss                                                                                                                          |   | $                                                          | (8,791 | ) | $ | (4,241 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:                                        |   |                                                       |   |   |   |   |   |
| Depreciation                of property and equipment                                                                                            |   |                                                       | 35     |   |   | 89 |   |
| Amortization                of intangibles                                                                                                       |   |                                                       | 1,596  |   |   | 1,047 |   |
| Accretion                of preferred stock and amortization of deferred financing                costs                                          |   |                                                       | 761    |   |   | 599 |   |
| Non-cash                interest expense on note payable to Iceland Health                                                                       |   |                                                       | 50     |   |   | -- |   |
| Series                I convertible preferred stock dividend charged as interest                expense                                          |   |                                                       | 178    |   |   | 287 |   |
| Stock-based                compensation expense                                                                                                  |   |                                                       | 308    |   |   | 225 |   |
| Charge                for stock appreciation rights                                                                                              |   |                                                       | --     |   |   | 14 |   |
| Non-cash                income recognized in the period                                                                                          |   |                                                       | (161   | ) |   | -- |   |
| Proceeds                from cash portion of settlement of patent infringement                lawsuit                                            |   |                                                       | 2,600  |   |   | -- |   |
| Changes                in operating assets and liabilities, net of effects of acquisition                of                Iceland Health, Inc.: |   |                                                       |   |   |   |   |   |
| Accounts                receivable                                                                                                               |   |                                                       | 143    |   |   | 62 |   |
| Other                receivables                                                                                                                 |   |                                                       | (20    | ) |   | 126 |   |
| Inventories                                                                                                                                      |   |                                                       | (412   | ) |   | 95 |   |
| Prepaid                expenses and other assets                                                                                                 |   |                                                       | (967   | ) |   | (121 | ) |
| Accounts                payable                                                                                                                  |   |                                                       | 1,565  |   |   | (927 | ) |
| Accrued                expenses                                                                                                                  |   |                                                       | (203   | ) |   | -- |   |
| Net                cash used in operating activities                                                                                             |   |                                                       | (3,318 | ) |   | (2,745 | ) |
| Cash                flows from investing activities:                                                                                             |   |                                                       |   |   |   |   |   |
| Contingent                payments for acquisitions                                                                                              |   |                                                       | (113   | ) |   | (96 | ) |
| Purchases                of property and equipment                                                                                               |   |                                                       | (6     | ) |   | (10 | ) |
| Payments                for patents and trademarks                                                                                               |   |                                                       | (112   | ) |   | (89 | ) |
| Redemption                of investments available for sale                                                                                      |   |                                                       | 5,500  |   |   | 2,000 |   |
| Increase                in restricted cash                                                                                                       |   |                                                       | --     |   |   | 1,225 |   |
| Cash                portion of purchase price for Iceland Health, Inc., net of cash                acquired                                      |   |                                                       | (446   | ) |   | -- |   |
| Net                cash provided by investing activities                                                                                         |   |                                                       | 4,823  |   |   | 3,030 |   |
| Cash                flows from financing activities:                                                                                             |   |                                                       |   |   |   |   |   |
| Proceeds                from stock option and warrant exercises                                                                                  |   |                                                       | 881    |   |   | 34 |   |
| Additional                issuance costs related to Series I convertible preferred                stock                                          |   |                                                       | --     |   |   | (83 | ) |
| Net                cash provided by (used in) financing activities                                                                               |   |                                                       | 881    |   |   | (49 | ) |
| Net                increase in cash and cash equivalents                                                                                         |   |                                                       | 2,386  |   |   | 236 |   |
| Cash                and cash equivalents at beginning of period                                                                                  |   |                                                       | 2,414  |   |   | 675 |   |
| Cash                and cash equivalents at end of period                                                                                        |   | $                                                          | 4,800  |   | $ | 911 |   |

----

**NUTRITION      21, INC.**

| Note                1 | BASIS                OF PRESENTATION |
|-----------------------|--------------------------------------|

|   | The                accompanying unaudited condensed consolidated financial statements                have                been prepared pursuant to the rules and regulations of the Securities                and                Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q of                Regulation S-X and do not include all of the information and note                disclosures required by accounting principles generally accepted                in the                United States of America. Accordingly, the unaudited condensed                consolidated financial statements should be read in conjunction with                the                Company’s audited consolidated financial statements and notes thereto for                the fiscal year ended June 30, 2006 included in the Company’s Annual                Report on Form 10-K and the Form 8-K/A relating to the acquisition                of                Iceland Health, Inc. (“IH”) (see Note 5) filed on November 8, 2006. The                accompanying unaudited condensed consolidated financial statements                reflect                all adjustments (consisting of normal recurring adjustments) which                are, in                the opinion of the management, considered necessary for a fair                presentation of financial position, results of operations and cash                flows                for the interim periods. The June 30, 2006 balance sheet has been                derived                from the audited financial statements included in the Company’s Annual                Report on Form 10-K. Operating results for the three and six month                periods                ended December 31, 2006 are not necessarily indicative of the results                that                may be expected for the fiscal year ending June 30,                2007. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                accompanying unaudited condensed consolidated financial statements                include                the accounts of Nutrition 21, Inc. and its subsidiaries, including                Iceland                Health, LLC from August 26, 2006, date of acquisition, collectively                the                “Company”. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note              2 | SHORT-TERM                INVESTMENTS |
|---------------------|---------------------------------------|

|   | Investments                in marketable debt securities with maturities of less than three                months                are classified as current assets because of their highly-liquid nature.                All short-term investments are classified as available for sale and                are                recorded at market value. Realized gains and losses are determined                using                the specific identification method. Unrealized gains and losses would                be                reflected in Accumulated Other Comprehensive Income, if                material. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Short-term                investments are comprised as follows (in                thousands): |
|--------|-----------------------------------------------------------------------------------------------|

|                                                   |   | December                31,2006 |   | June                30,2006 |   |
|--------------------------------------------------------|--------|---------------------------------|--------|-----------------------------|--------|
| 3.87%                corporate bond, maturing 12/15/06 |   | $                               | ---    |                        | $      | 1,000 |   |
| Auction                rate securities (1)             |   |                            | 6,000  |                        |   | 10,500 |   |
|                                                   |   | $                               | 6,000  |                        | $      | 11,500 |   |

|   | (1)                Included                in investments as available-for-sale securities at December 31, 2006                and                June 30, 2006 are investments in auction rate securities with short-term                interest rates that generally can be reset every 28 days. The auction                rate                securities have long-term maturity dates and provide the Company                with                enhanced yields. However, we believe we have the ability to quickly                liquidate them at their original cost, although there is no guaranty                and,                accordingly, they are carried at cost which approximates fair value,                and                classified as current assets. All income generated from these investments                is recorded as interest income. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note                3 | STOCK-BASED                COMPENSATION |
|-----------------------|-----------------------------------------|

|   | In                December 2004, the Financial Accounting Standards Board (“FASB”)                revised                Statement of Financial Accounting Standards No. 123 (FAS 123R),                “Share-Based Payment,” which establishes accounting for share-based awards                exchanged for employee services and requires companies to expense                the                estimated fair value of these awards over the requisite employee                service                period. On April 14, 2005, the US Securities and Exchange Commission                adopted a new rule amending the effective dates for FAS 123R. In                accordance with the new rule, the Company adopted the accounting                provisions of FAS 123R beginning in the first quarter of fiscal year                2006.                Prior to adopting FAS 123R, the Company used the intrinsic value                method of                accounting for employee stock                options. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NUTRITION      21, INC.**

| Note                3 | STOCK-BASED                COMPENSATION (continued) |
|-----------------------|-----------------------------------------------------|

|   | Under                FAS 123R, share-based compensation cost is measured at the grant                date,                based on the estimated fair value of the award, and is recognized                as                expense over the employee’s requisite service period. The Company has no                awards with market or performance conditions. The Company adopted                the                provisions of FAS 123R on July 1, 2005, the first day of the Company’s                fiscal year, using modified prospective application, which provides                for                certain changes to the method for valuing share-based compensation.                Under                modified prospective application, prior periods are not revised for                comparative purposes. The valuation provisions of FAS123R apply to                new                awards and to awards that are outstanding on the effective date and                subsequently modified or cancelled. Estimated compensation                expense for awards outstanding on the effective date are being recognized                over the remaining service period using the compensation cost as                of the                grant date originally calculated for pro forma disclosure purposes                under                FAS Statement No. 123, “Accounting for Stock-Based Compensation” (FAS                123). The Company has used the Block-Scholes option pricing model                to                calculate the fair value of stock options under FAS 123R and FAS                123. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On                November 10, 2005, the FASB issued FASB Staff Position No. FAS 123R-3,                “Transition Election Related to Accounting for Tax Effects of Share-Based                Payment Awards.” The Company has elected to adopt the alternative                transition method provided in this FASB Staff Position for calculating                the                tax effects of share-based compensation pursuant to FAS 123R. The                alternative transition method includes a simplified method to establish                the beginning balance of the additional paid-in capital pool (APIC                pool)                related to the tax effects of employee share-based compensation,                which is                available to absorb tax deficiencies recognized subsequent to the                adoption                of FAS 123R. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Share-Based                Compensation Information under FAS                123R |
|--------|-----------------------------------------------------------------------------------|

|   | The                assumptions used in the Company’s Black-Scholes option pricing model                related to stock option grants were expected option life 2.5 years,                volatility factor percentage of market price 95.5% and interest rate                5.2%.. The Company has not paid, nor does it contemplate paying a                dividend                in the near future. As such a 0% dividend yield appears appropriate.                The                post vesting forfeiture rate and the years of expected life are based                on                the Company’s historical option cancellation and employee exercise                information, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As                share-based compensation expense recognized in the condensed consolidated                statement of operations for the three month and six month periods                ended                December 31, 2006 is based on awards ultimately expected to vest,                it                should be reduced for estimated forfeitures. FAS 123R requires forfeitures                to be estimated at the time of grant and revised, if necessary, in                subsequent periods if actual forfeitures differ from those estimates.                Pre-vesting forfeitures are estimated to be approximately 5%, based                on                historical experience. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company recorded $0.3 million and $44 thousand in share-based compensation                expense in the three month periods ended December 31, 2006 and 2005,                respectively, and $0.3 million and $93 thousand in the six month                periods                ended December 31, 2006 and 2005, respectively. Share-based compensation                expense related to share-based awards granted prior to fiscal year                2007                for the three and six months periods ended December 31, 2006 and                2005, was                $27 thousand and $54 thousand and $0.2 million and $0.2 million,                respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At                December 31, 2006, total unrecognized compensation cost related to                non-vested awards was $0.5 million, which is expected to be recognized                over a weighted average period of 3.0                years. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                following is a summary of option activity for the six month period                ended                December 31, 2006. During the six month period ended December 31,                2006,                the Company granted 650,000 stock options with an exercise price                equal to                the market price at the date of grant with a fair value of $0.6 million                based on the market price at the date of                grant. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**NUTRITION      21, INC.**

| Note                3 | STOCK-BASED                COMPENSATION (continued) |
|-----------------------|-----------------------------------------------------|

|  **Options**                               |   | **Shares****(000)** |   | **Weighted-Average****Exercise Price** |   | **Weighted-Average                Remaining****Contractual                Term** |   | **Aggregate****Intrinsic                Value****($000)** |   |
|-------------------------------------------------|--------|---------------------|--------|----------------------------------------|--------|----------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Outstanding                at July 1, 2006      |   |                | 4,623  |                                   | $      | 0.91                                                                             |   |                                                      |   |   |   |   |   |
| Granted                                         |   |                | 650    |                                   | $      | 1.56                                                                             |   |                                                      |   |   |   |   |   |
| Exercised                                       |   |                | (694   | )                                      | $      | 1.17                                                                             |   |                                                      |   |   |   |   |   |
| Forfeited                or expired             |   |                | (180   | )                                      | $      | 2.84                                                                             |   |                                                      |   |   |   |   |   |
| Outstanding                at December 31, 2006 |   |                | 4,399  |                                   | $      | 0.89                                                                             |   |                                                      | 6.6    |   | $ | 3,661 |   |
| Exercisable                at December 31, 2006 |   |                | 3,427  |                                   | $      | 0.80                                                                             |   |                                                      | 6.1    |   | $ | 3,092 |   |

|  **Restricted                Stock**       |   | **Shares****(000)** |   | **Weighted-Average****Exercise Price** |   | **Weighted-Average                Remaining****Contractual                Term** |   | **Aggregate****Intrinsic                Value****($000)** |   |
|-------------------------------------------------|--------|---------------------|--------|----------------------------------------|--------|----------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Outstanding                at July 1, 2006      |   |                | -0-    |                                   |   | --                                                                               |   |                                                      |   |   |   |   |   |
| Granted                                         |   |                | 500    |                                   | $      | 1.56                                                                             |   |                                                      |   |   |   |   |   |
| Exercised                                       |   |                | --     |                                   |   | --                                                                               |   |                                                      |   |   |   |   |   |
| Forfeited                or expired             |   |                | --     |                                   |   | --                                                                               |   |                                                      |   |   |   |   |   |
| Outstanding                at December 31, 2006 |   |                | 500    |                                   | $      | 1.56                                                                             |   |                                                      | 3.0    |   |   | 70 |   |
| Exercisable                at December 31, 2006 |   |                | -0-    |                                   |   | --                                                                               |   |                                                      | --     |   |   | -0- |   |

| Note              4 | RECENTLY                ISSUED ACCOUNTING                PRONOUNCEMENTS |
|---------------------|-------------------------------------------------------------------------|

* *

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**NUTRITION      21, INC.**

| Note              4 | RECENTLY                ISSUED ACCOUNTING PRONOUNCEMENTS                (continued) |
|---------------------|-------------------------------------------------------------------------------------|

| Note              5 | ACQUISITION                OF ICELAND HEALTH, INC. |
|---------------------|----------------------------------------------------|

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**NUTRITION      21, INC.**

| Note                5 | ACQUISITION                  OF ICELAND HEALTH, INC.                  (continued) |
|-----------------------|-----------------------------------------------------------------------------------|

| Net                  identifiable tangible assets                                     |   | $      | 181    |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Trade                  names                                                          |   |   | 5,379  |   |
| Customer                  relationships                                               |   |   | 924    |   |
| Non-compete                  agreements                                               |   |   | 375    |   |
| Goodwill                  and other intangible assets                                 |   |   | 12,111 |   |
|          Purchase                  Price |   | $      | 18,970 |   |

|                                                   |   | Consolidated                Pro-forma |   |
|--------------------------------------------------------|--------|---------------------------------------|--------|
|                                                   |   | Six                Months Ended       |   |
|                                                   |   | December                31,           |   | December                31, |   |
|                                                   |   | 2006                                  |   | 2005 |   |
|                                                   |   |                                  |   |   |   |
| Total                revenues                          |   | $                                     | 17,938 |   | $ | 18,229 |   |
|                                                   |   |                                  |   |   |   |   |   |
| Net                loss                                |   |                                  | (8,516 | ) |   | (5,036 | ) |
| Basic                and diluted loss per common share |   | $                                     | (0.15  | ) | $ | (0.13 | ) |

| Note              6 | INVENTORIES |
|---------------------|-------------|

| Note              7 | LOSS                PER COMMON SHARE |
|---------------------|--------------------------------------|

----

**NUTRITION      21, INC.**

| Note              8 | SUPPLEMENTAL                CASH FLOW INFORMATION |
|---------------------|---------------------------------------------------|

|                                                                                                                       |   | Six                months endedDecember                31, |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                                                                                       |   |
|                                                                                                                       |   |                  2006                                 |   | 2005 |   |
| Supplemental                disclosure of cash flow information:                                                           |   |                                                       |   |   |   |
|                                                                                                                       |   |                                                       |   |   |   |
| Cash                paid for income taxes                                                                                  |   | $                                                          | 7      |   | $ | 5 |   |
|  Supplemental                schedule of non-cash financing activities:                                               |   |                                                       |   |   |   |   |   |
| Obligation                for N21 contingent payments                                                                      |   | $                                                          | 85     |   | $ | 67 |   |
| Issuance                of common shares on conversion of 939 shares of Series Iconvertible                preferred stock |   | $                                                          | 948    |   | $ | 51 |   |
| Issuance                of common stock and notes payable for acquisition of Iceland                Health, Inc.           |   | $                                                          | 17,754 |   |   | --- |   |

| Note              9 | 6%                SERIES I CONVERTIBLE PREFERRED                STOCK |
|---------------------|-----------------------------------------------------------------------|

| Note              10 | SEGMENT                REPORTING |
|----------------------|----------------------------------|

----

**NUTRITION      21, INC.**

| Note              10 | SEGMENT                REPORTING (continued) |
|----------------------|----------------------------------------------|

|                                             |   | Three                MonthsEnded |   | Six                MonthsEnded |   |
|--------------------------------------------------|--------|----------------------------------|--------|--------------------------------|--------|
|                                             |   | December                31,      |   | December                31,    |   | December                31, |   | December                31, |   |
|                                             |   | 2006                             |   | 2005                           |   | 2006 |   | 2005 |   |
| Net                sales                         |   |                             |   |                           |   |   |   |   |   |
| Ingredients                Group                 |   | $                                | 1,987  |                           | $      | 1,960 |   | $ | 3,221 |   | $ | 5,482 |   |
| Branded                Products Group            |   |                             | 7,310  |                           |   | 26 |   |   | 10,624 |   |   | 46 |   |
|                                             |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Sales                to external customers       |   |                             | 9,297  |                           |   | 1,986 |   |   | 13,845 |   |   | 5,528 |   |
| Other                revenues                    |   |                             | 137    |                           |   | 113 |   |   | 273 |   |   | 172 |   |
|                                             |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Total                Revenues                    |   | $                                | 9,434  |                           | $      | 2,099 |   | $ | 14,118 |   | $ | 5,700 |   |
|                                             |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Ingredients                Group                 |   |                             | 1,130  |                           |   | 1,137 |   |   | 2,003 |   |   | 3,766 |   |
| Branded                Products Group            |   |                             | (2,336 | )                              |   | (1,051 | ) |   | (4,577 | ) |   | (2,476 | ) |
| Unallocated                corporate expenses    |   |                             | (3,470 | )                              |   | (3,184 | ) |   | (6,211 | ) |   | (5,526 | ) |
|                                             |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Loss                before income taxes          |   | $                                | (4,676 | )                              | $      | (3,098 | ) | $ | (8,785 | ) | $ | (4,236 | ) |
|                                             |   |                             |   |                           |   |   |   |   |   |   |   |   |   |
| Unallocated                corporate assets      |   | $                                | 40,190 |                           | $      | 15,606 |   |   |   |   |   |   |   |

| Note              11 | SETTLEMENT                OF PATENT LAWSUIT |
|----------------------|---------------------------------------------|

----

**Item      2 - Management’s Discussion and Analysis of Financial Condition and Results of      Operations**

**Forward-Looking      Statements and Risk Factors**

**General**

|   | Cost                of revenues includes both direct and indirect manufacturing costs.                Research and development expenses include internal expenditures as                well as                expenses associated with third party providers. Selling, general                and                administrative expenses include salaries and overhead, third party                fees                and expenses, and costs associated with the selling of the Company’s                products. The Company capitalizes patent costs and intangible assets                with                finite lives, and amortizes them over periods not to exceed seventeen                years. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Results                of Operations** |
|--------|------------------------------------------|

----

**Item      2 - Management’s Discussion and Analysis of Financial Condition and Results of      Operations (continued)**

----

**Item      2 - Management’s Discussion and Analysis of Financial Condition and Results of      Operations (continued)**

**Item      3 - Quantitative and Qualitative Disclosures about Market      Risk**

**Item      4 - Controls and Procedures**

----

**P      ART II - OTHER INFORMATION**

**Items      1, 1A, 2, 3, and 5 and are not applicable and have been      omitted**

**Item      4 - Submission of Matters to a Vote of Security Holders**

|                                    |   |   | Votes                  For |   |   | Withheld |   |
|-----------------------------------------|--------|--------|----------------------------|--------|--------|----------|--------|
|                                    |   |   |                       |   |   |     |   |
| P.                  George Benson, Ph.D |   |   | 45,537,135                 |   |   | 340,445  |   |
| John                  L. Cassis         |   |   | 45,538,812                 |   |   | 338,968  |   |
| Warren                  D. Cooper       |   |   | 45,536,370                 |   |   | 341,410  |   |
| Audrey                  T. Cross, Ph.D  |   |   | 45,532,970                 |   |   | 344,810  |   |
| John                  H. Gutfreund      |   |   | 45,528,335                 |   |   | 349,445  |   |
| Marvin                  Moser, M.D      |   |   | 45,072,509                 |   |   | 805,271  |   |

**Item      6 - Exhibits **

|  | **(a)** | **Exhibits** |
|--|---------|--------------|

|  | 31.1 | Certifications                of the President and Chief Executive Officer pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 31.2 | Certifications                of the Chief Financial Officer pursuant to Section 302 of the                Sarbanes-Oxley Act                of 2002. |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 32.1 | Certifications                of the President and Chief Executive Officer pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 32.2 | Certification                of the Chief Financial Officer pursuant to Section 906 of the                Sarbanes-Oxley Act                of 2002. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                 |                                                                    |                                  |
|--------------------------------------|-------------------------------------------------------------------------|---------------------------------------|
|                                 | NUTRITION                21, INC.Registrant                             |
|                            |                                                               |                             |
| Date:              February 14, 2007 | By:                                                           | /s/ Paul              Intlekofer |
|                                 | Paul              Intlekofer                                            |
|                                 | President                  and Chief                  Executive Officer |
|                                 | (Principal Executive Officer)                                      |

----