| 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)                           |

| Class                                         |   | Outstanding at May 12,  2009 |
|-----------------------------------------------|--------|------------------------------|
| Common      Stock, $0.005 par value per share |   | 71,231,450      shares       |

----

|           |                                                                                                             |  PAGE                                                                                                                                          |
|----------------|------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| PART I         | FINANCIAL INFORMATION                                                                                            |                                                                                                                                                     |
|           |                                                                                                             |                                                                                                                                                |
| ITEM      1    | Financial      Statements                                                                                        |                                                                                                                                                |
|           |                                                                                                             |                                                                                                                                                |   |
|           | (a)                                                                                                              | Condensed      Consolidated Balance Sheets at March 31, 2009 (unaudited) and June 30,      2008                                                     | 3      & 4 |
|           |                                                                                                             |                                                                                                                                                |   |
|           | (b)                                                                                                              | Condensed      Consolidated Statements of Operations for the three  and nine      month periods ended March 31, 2009 and 2008 (unaudited) | 5 |
|           |                                                                                                             |                                                                                                                                                |   |
|           | (c)                                                                                                              | Condensed      Consolidated Statement of Stockholders’ Equity for the nine month period      ended March 31, 2009 (unaudited)                 | 6 |
|           |                                                                                                             |                                                                                                                                                |   |
|           | (d)                                                                                                              | Condensed      Consolidated Statements of Cash Flows for the nine month periods ended      March 31, 2009 and 2008 (unaudited)                      | 7 |
|           |                                                                                                             |                                                                                                                                                |   |
|           | (e)                                                                                                              | Notes      to Condensed Consolidated Financial Statements (unaudited)                                                                               | 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(T) | Controls      and Procedures                                                                                     | 17                                                                                                                                                  |
|           |                                                                                                             |                                                                                                                                                |
| PART II        | OTHER INFORMATION                                                                                                |                                                                                                                                                |
|           |                                                                                                             |                                                                                                                                                |
| ITEM      1    | Legal      Proceedings                                                                                           | 18                                                                                                                                                  |
|           |                                                                                                             |                                                                                                                                                |
| ITEM      1A   | Risk      Factors                                                                                                | 18                                                                                                                                                  |
|           |                                                                                                             |                                                                                                                                                |
| ITEM      6    | Exhibits                                                                                                         | 19                                                                                                                                                  |

----

|                                                                                                                                                                            |   | March 31,2009      |    |   | June 30,2008         |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|---------------------------|--------|
|                                                                                                                                                                            |   |   (unaudited) |    |   |   (Note 1) |   |
| ASSETS                                                                                                                                                                          |   |                    |    |   |                      |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |
| Current      assets:                                                                                                                                                            |   |                    |    |   |                      |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |
| Cash      and cash equivalents                                                                                                                                                  |   | $                       | 2,694   |   |                      | $      | 4,817 |   |
| Accounts      receivable (less allowances for doubtful accounts and returns of $536 and      $1,148 at March 31, 2009 and June 30, 2008, respectively)                          |   |                    | 3,763   |   |                      |   | 2,922 |   |
| Other      receivables                                                                                                                                                          |   |                    | 576     |   |                      |   | 286 |   |
| Inventories                                                                                                                                                                     |   |                    | 3,097   |   |                      |   | 1,014 |   |
| Prepaid      expenses and other current assets                                                                                                                                  |   |                    | 772     |   |                      |   | 1,483 |   |
| Total      current assets                                                                                                                                                       |   |                    | 10,902  |   |                      |   | 10,522 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Property      and equipment, net                                                                                                                                                |   |                    | 53      |   |                      |   | 69 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Patents,      trademarks and other amortizable intangibles (net of accumulated      amortization of $26,455 and $25,568 at March 31, 2009 and June 30, 2008,      respectively) |   |                    | 850     |   |                      |   | 1,540 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Goodwill                                                                                                                                                                        |   |                    | 15,607  |   |                      |   | 15,395 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Other      intangibles with indefinite lives                                                                                                                                    |   |                    | 5,379   |   |                      |   | 5,379 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Other      assets                                                                                                                                                               |   |                    | 1,711   |   |                      |   | 2,981 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| Investment      in auction rate securities                                                                                                                                      |   |                    | — |   |                      |   | 3,740 |   |
|                                                                                                                                                                            |   |                    |    |   |                      |   |   |   |
| TOTAL      ASSETS                                                                                                                                                               |   | $                       | 34,502  |   |                      | $      | 39,626 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | March 31, 2009 |     |   | June 30, 2008 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|----------|--------|-------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |  (unaudited)        |     |   |  (Note 1)     |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                     |     |   |                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                     |     |   |                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                     |     |   |                    |   |
| Short-term      borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                        | —  |   |                    | $      | 3,000 |   |
| Current      portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                     | 2,470    |   |                    |   | — |   |
| Accounts      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                     | 3,507    |   |                    |   | 4,221 |   |
| Accrued      expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                     | 2,138    |   |                    |   | 2,575 |   |
| Deferred      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     | 578      |   |                    |   | 1,228 |   |
| 6%      Series I convertible preferred stock subject to mandatory redemption      (redemption value $3,594 at June 30, 2008)                                                                                                                                                                                                                                                                                                                                                                                                    |   |                     | —  |   |                    |   | 3,270 |   |
| Total      current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                     | 8,693    |   |                    |   | 14,294 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Long-term      debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                     | 1,735    |   |                    |   | 4,185 |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                     | 2,152    |   |                    |   | 2,152 |   |
| 8%      Series J convertible preferred stock subject to mandatory redemption      (redemption value $17,750 at March 31, 2009 and June 30,    2008)                                                                                                                                                                                                                                                                                                                                                                             |   |                     | 12,792   |   |                    |   | 11,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Total      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                     | 25,372   |   |                    |   | 32,225 |   |
| 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 at      March 31, 2009 and June 30, 2008, and 3,594 shares outstanding at June 30,      2008.(see      liabilities above); 17,750 shares designated as Series J convertible      preferred stock issued and outstanding at March 31, 2009 and June 30, 2008      (see liabilities above) |   |                     | —  |   |                    |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Common      stock, $0.005 par value, authorized 150,000,000 shares; 68,408,484 shares      and 63,583,205 issued and outstanding at March 31, 2009 and June 30, 2008,      respectively                                                                                                                                                                                                                                                                                                                                         |   |                     | 339      |   |                    |   | 315 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Additional      paid-in capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                     | 117,254  |   |                    |   | 115,721 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Accumulated      deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                     | (108,463 | )      |                    |   | (108,375 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Accumulated      other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                     | —  |   |                    |   | (260 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| Total      stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                     | 9,130    |   |                    |   | 7,401 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     |     |   |                    |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                        | 34,502   |   |                    | $      | 39,626 |   |

----

|                                                                    |   | Three Months Ended |       |   | Nine MonthsEnded |   |
|-------------------------------------------------------------------------|--------|------------------------------|------------|--------|-----------------------|--------|
|                                                                    |   | March      31,               |       |   | March      31,        |   |
|                                                                    |   | 2009                         |       |   | 2008                  |   |   | 2009 |   |   | 2008 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |
| Net      sales                                                          |   | $                            | 8,509      |   |                  | $      | 10,891 |   |   | $ | 33,915 |   |   | $ | 35,457 |   |
| Other      revenues                                                     |   |                         | 114        |   |                  |   | (71 | ) |   |   | 242 |   |   |   | 569 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      REVENUES                                                     |   |                         | 8,623      |   |                  |   | 10,820 |   |   |   | 34,157 |   |   |   | 36,026 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| COSTS      AND EXPENSES                                                 |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of revenues                                                   |   |                         | 2,891      |   |                  |   | 6,064 |   |   |   | 13,164 |   |   |   | 14,194 |   |
| Advertising      and promotion expenses                                 |   |                         | 3,643      |   |                  |   | 8,568 |   |   |   | 13,811 |   |   |   | 28,139 |   |
| General      and administrative expenses                                |   |                         | 982        |   |                  |   | 2,358 |   |   |   | 2,742 |   |   |   | 4,767 |   |
| Research      and development expenses                                  |   |                         | 94         |   |                  |   | 330 |   |   |   | 266 |   |   |   | 845 |   |
| Depreciation      and amortization                                      |   |                         | 264        |   |                  |   | 604 |   |   |   | 910 |   |   |   | 1,707 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL      COSTS AND EXPENSES                                           |   |                         | 7,874      |   |                  |   | 17,924 |   |   |   | 30,893 |   |   |   | 49,652 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      PROFIT (LOSS)                                            |   |                         | 749        |   |                  |   | (7,104 | ) |   |   | 3,264 |   |   |   | (13,626 | ) |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                                    |   |                         | 8          |   |                  |   | 95 |   |   |   | 86 |   |   |   | 241 |   |
| Interest      expense                                                   |   |                         | (1,161     | )      |                  |   | (1,159 | ) |   |   | (3,438 | ) |   |   | (2,649 | ) |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| LOSS      BEFORE INCOME TAXES                                           |   |                         | (404       | )      |                  |   | (8,168 | ) |   |   | (88 | ) |   |   | (16,034 | ) |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      taxes                                                       |   |                         | —    |   |                  |   | 7 |   |   |   | — |   |   |   | 13 |   |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS                                                           |   | $                            | (404       | )      |                  | $      | (8,175 | ) |   | $ | (88 | ) |   | $ | (16,047 | ) |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted loss per common share                            |   | $                            | (0.01      | )      |                  | $      | (0.13 | ) |   | $ | (0.00 | ) |   | $ | (0.26 | ) |
|                                                                    |   |                         |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of common shares – basic and diluted |   |                         | 67,746,755 |   |                  |   | 62,176,195 |   |   |   | 65,738,852 |   |   |   | 61,796,508 |   |

----

| NUTRITION      21, INC. |
|-------------------------|

| (in      thousands, except share data) |
|----------------------------------------|

| (unaudited) |
|-------------|

|                                                                                 |   | Common Stock |           |   | AdditionalPaid-InCapital |   |           | AccumulatedDeficit |   |   | AccumulatedOtherComprehensiveLoss |   |   | Total  |           |
|--------------------------------------------------------------------------------------|--------|--------------|----------------|--------|--------------------------|--------|----------------|--------------------|--------|--------|-----------------------------------|--------|--------|--------|----------------|
|                                                                                 |   | Shares       |           |   | $                        |   |           | $                  |   |   | $                                 |   |   | $      |           |   |   | $ |   |
| Balance      at June 30, 2008                                                        |   |         | 63,583,205     |   |                     |   | 315            |               |   |   | 115,721                           |   |   |   | (108,375       | ) |   |   | (260 | ) |   |   | 7,401 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for dividends on Series I preferred stock              |   |         | 706,894        |   |                     |   | 4              |               |   |   | 158                               |   |   |   | —        |   |   |   | — |   |   |   | 162 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for dividends on Series      J preferred stock         |   |         | 4,108,385      |   |                     |   | 20             |               |   |   | 1,044                             |   |   |   | —        |   |   |   | — |   |   |   | 1,064 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Exercise      of stock options                                                       |   |         | 10,000         |   |                     |   | —        |               |   |   | 4                                 |   |   |   | —        |   |   |   | — |   |   |   | 4 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Stock-based      compensation expense                                                |   |         | —        |   |                     |   | —        |               |   |   | 327                               |   |   |   | —        |   |   |   | — |   |   |   | 327 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Reversal      of temporary impairment on investments      in auction rate securities |   |         |   — |   |                     |   |   — |               |   |   |   —                    |   |   |   |   — |   |   |   |   260 |   |   |   |   260 |   |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Net      loss for the period                                                         |   |         | —        |   |                     |   | —        |               |   |   | —                           |   |   |   | (88            | ) |   |   | — |   |   |   | (88 | ) |
|                                                                                 |   |         |           |   |                     |   |           |               |   |   |                              |   |   |   |           |   |   |   |   |   |   |   |   |   |
| Balance      at March 31, 2009                                                       |   |         | 68,408,484     |   |                     | $      | 339            |               |   | $      | 117,254                           |   |   | $      | (108,463       | ) |   | $ | — |   |   | $ | 9,130 |   |

----

|                                                                                                        |   | Nine      Months EndedMarch      31, |        |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-------------|
|                                                                                                        |   | 2009                                 |        |   | 2008 |   |
| Cash      flows from operating activities:                                                                  |   |                                 |        |   |   |   |
| Net      loss                                                                                               |   | $                                    | (88         | ) |   | $ | (16,047 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities:                       |   |                                 |        |   |   |   |   |   |
| Depreciation      of property and equipment                                                                 |   |                                 | 22          |   |   |   | 29 |   |
| Amortization      of intangibles                                                                            |   |                                 | 888         |   |   |   | 1,678 |   |
| Accretion      of preferred stock and amortization of deferred financing      costs                         |   |                                 | 1,792       |   |   |   | 1,194 |   |
| Accretion      on note payable to Iceland Health                                                            |   |                                 | 55          |   |   |   | 54 |   |
| Convertible      preferred stock dividends paid in common stock charged asinterest      expense             |   |                                 |  1,226 |   |   |   |  162 |   |
| Stock-based      compensation expense                                                                       |   |                                 | 327         |   |   |   | 555 |   |
| Changes      in operating assets and liabilities:                                                           |   |                                 |        |   |   |   |   |   |
| Accounts      receivable                                                                                    |   |                                 | (841        | ) |   |   | (2,874 | ) |
| Other      receivables                                                                                      |   |                                 | (290        | ) |   |   | (75 | ) |
| Inventories                                                                                                 |   |                                 | (2,083      | ) |   |   | 2,740 |   |
| Prepaid      expenses and other current assets                                                              |   |                                 | 711         |   |   |   | (828 | ) |
| Accounts      payable                                                                                       |   |                                 | (733        | ) |   |   | (1,632 | ) |
| Accrued      expenses                                                                                       |   |                                 | (437        | ) |   |   | 2,082 |   |
| Deferred      income                                                                                        |   |                                 | (650        | ) |   |   | (1,485 | ) |
| Net      cash used in operating activities                                                                  |   |                                 | (101        | ) |   |   | (14,447 | ) |
| Cash      flows from investing activities:                                                                  |   |                                 |        |   |   |   |   |   |
| Contingent      payments for acquisitions, allocated to goodwill, patents and      trademarks               |   |                                 | (340        | ) |   |   | (640 | ) |
| Purchases      of property and equipment                                                                    |   |                                 | (6          | ) |   |   | (42 | ) |
| Payments      for patents and trademarks                                                                    |   |                                 | (51         | ) |   |   | (164 | ) |
| Decrease      (increase) in restricted cash                                                                 |   |                                 | 1,000       |   |   |   | (1,000 | ) |
| Purchase      of investments available for sale                                                             |   |                                 | —     |   |   |   | (3,000 | ) |
| Proceeds      from sale of auction rate securities                                                          |   |                                 | 4,000       |   |   |   |  — |   |
|                                                                                                        |   |                                 |        |   |   |   |   |   |
| Net      cash provided by (used in) provided by investingactivities                                         |   |                                 | 4,603       |   |   |   | (4,846 | ) |
|                                                                                                        |   |                                 |        |   |   |   |   |   |
| Cash      flows from financing activities:                                                                  |   |                                 |        |   |   |   |   |   |
| Proceeds      from stock option exercises                                                                   |   |                                 | 4           |   |   |   | 47 |   |
| Proceeds      from private placement of 8% Series J convertible preferred stock, net of      issuance costs |   |                                 | —     |   |   |   |  16,602 |   |
| (Repayments)      proceeds of long-term debt, net                                                           |   |                                 | (35         | ) |   |   | 1,808 |   |
| Repayment      of short-term borrowings                                                                     |   |                                 | (3,000      | ) |   |   | — |   |
| Redemption      of 6% Series I convertible preferred stock                                                  |   |                                 | (3,594      | ) |   |   |  — |   |
| Net      cash (used in) provided by financing activities                                                    |   |                                 | (6,625      | ) |   |   | 18,457 |   |
| Net      decrease in cash and cash equivalents                                                              |   |                                 | (2,123      | ) |   |   | (836 | ) |
| Cash      and cash equivalents at beginning of period                                                       |   |                                 | 4,817       |   |   |   | 2,417 |   |
| Cash      and cash equivalents at end of period                                                             |   | $                                    | 2,694       |   |   | $ | 1,581 |   |

----

| 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 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, 2008 included in the Company’s Annual Report on Form      10-K filed on September 29, 2008 as amended in the Report on Form 10-K/A      filed on October 3, 2008 (the “Form 10-K/A”).  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, 2008 balance sheet has been derived from      the audited consolidated financial statements included in the Form 10-K/A.      Operating results for the three and nine month periods ended March 31,      2009 are not necessarily indicative of the results that may be expected      for the fiscal year ending June 30,2009. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We      have used significant cash in our operations and we may need to raise      additional funds.  During the fiscal year ended June 30, 2008      cash used in operations was $14.8 million, and during the nine-month      period from July 1, 2008 through March 31, 2009 cash used in operations      was $0.1 million.  To fund our cash flows and to support the      marketing and other expenses we envision, we may need to raise      funds.  There is no assurance that additional funds will be      available on terms favorable to the Company and its stockholders, or at      all.  The Series J preferred stock agreement limits our ability      to incur indebtedness and to issue additional preferred    stock. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note      2  | INVESTMENTS |
|-------------------|-------------|

|   | At      June 30, 2008, the Company reported its auction rate securities (“ARS”) at      fair value.  All of the Company’s ARSs were collateralized by      student loan portfolios (substantially all of which are guaranteed by the      United States Government).  During the quarter ended December      31, 2008, the Company’s ARS were sold at face value plus accrued and      unpaid interest. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | The      Company accounts for its stock-based compensation arrangements in      accordance with the provisions of revised Statement of Financial      Accounting Standards No. 123 (“SFAS 123R”) “Share-Based      Payments”.  Stock-based employee compensation cost is measured      at the grant date, based on the estimated fair value of the award, and is      recognized as expense over the requisite service period. The Company has      no awards with market or performance conditions.  The valuation      provisions of SFAS 123R apply to new awards and to awards that were      outstanding on the effective date and subsequently modified or      cancelled. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company granted 1.2 million stock options during the nine-month period      ended March 31, 2009 with an exercise price equal to the market price at      the date of grant and a fair value of $0.4 million based on the      Black-Scholes option pricing model. There were no options granted in the      quarter ended March 31, 2009. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Stock-based      compensation expense recognized in the condensed consolidated statements      of operations for the nine-month period ended March 31, 2009 is based on      awards ultimately expected to vest, and is reduced for estimated      forfeitures.  SFAS 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 16%, based on historical      experience. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company recorded $0.3 million and $0.6 million in stock-based compensation      expense for stock options and restricted stock awards during the      nine-month periods ended March 31, 2009 and 2008,      respectively.  Stock-based compensation expense is recorded in      general and administrativeexpenses. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      following is a summary of option activity for the nine-month period ended      March 31, 2009. |
|--------|---------------------------------------------------------------------------------------------------------|

|   Options                |   |  Shares(000) |       |   |  Weighted-AverageExercise Price |   |   | Weighted–AverageRemainingContractualTerm (Yrs.) |   |   |  AggregateIntrinsic Value($000) |   |
|------------------------------------|--------|-------------------|------------|--------|-------------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|-------------------------------------------|--------|
| Outstanding      at July 1, 2008   |   |              | 3,511      |   |                                      | $      | 0.91   |                                                       |   |   |                                      |   |   |   |
| Granted                            |   |              | 1,175      |   |                                      | $      | 0.34   |                                                       |   |   |                                      |   |   |   |
| Exercised                          |   |              | (10        | )      |                                      | $      | 0.38   |                                                       |   |   |                                      |   |   |   |
| Forfeited      or expired          |   |              |  (376 | )      |                                      | $      | 1.12   |                                                       |   |   |                                      |   |   |   |
| Outstanding      at March 31, 2009 |   |              | 4,300      |   |                                      | $      | 0.73   |                                                       |   |   | 6.4                                       |   |   | $ | 0 |   |
| Exercisable      at March 31, 2009 |   |              | 2,846      |   |                                      | $      | 0.86   |                                                       |   |   | 5.0                                       |   |   | $ | 0 |   |

|   Restricted Stock     |   |  Shares(000) |          |   |  Weighted-AverageExercise Price |   |    | Weighted–AverageRemainingContractualTerm (Yrs.) |   |   |  AggregateIntrinsic Value($000’s) |   |
|---------------------------------------|--------|-------------------|---------------|--------|-------------------------------------------|--------|---------|------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|
| Outstanding      at July 1, 2008      |   |              | 329           |   |                                      | $      | 1.57    |                                                       |   |   |                                              |   |   |   |
| Granted                               |   |              | —       |   |                                      |   | — |                                                       |   |   |                                              |   |   |   |
| Exercised                             |   |              | —       |   |                                      |   | — |                                                       |   |   |                                              |   |   |   |
| Forfeited      / expired or cancelled |   |              |  — |   |                                      |   | — |                                                       |   |   |                                              |   |   |   |
| Outstanding      at March 31, 2009    |   |              | 329           |   |                                      | $      | 1.57    |                                                       |   |   | 2.0                                               |   |   | $ | — |   |
| Exercisable      at March 31, 2009    |   |              | 159           |   |                                      | $      | 0.77    |                                                       |   |   | —                                           |   |   |   | — |   |

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

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

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

|                                                                    |   | Nine months endedMarch 31, |    |
|-------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                    |   | 2009                                      |    |   | 2008 |   |
| Supplemental      disclosure of cash flow information:                  |   |                                      |    |   |   |   |
|                                                                    |   |                                      |    |   |   |   |
| Cash      paid for income taxes                                         |   |                                      | — |   |   |   | — |   |
| Cash      paid for interest                                             |   | $                                         | 248     |   |   | $ | 261 |   |
|                                                                    |   |                                      |    |   |   |   |   |   |
| Supplemental      schedule of non-cash financing activities:       |   |                                      |    |   |   |   |   |   |
| Increase      in obligation for Nutrition 21 contingent payments        |   | $                                         | 147     |   |   | $ | 81 |   |
| Issuance      of common stock for dividends on Series I preferred stock |   | $                                         | 162     |   |   | $ | 162 |   |
| Issuance      of common stock for dividends on Series J preferred stock |   | $                                         | 1,064   |   |   |   | — |   |

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| Note      12 | SEGMENT      REPORTING |
|--------------|------------------------|

|                                   |   | Three Months Ended |   |   | Nine Months Ended |   |
|----------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                                   |   | March 31,               |   |   | March 31,              |   |
|                                   |   | 2009                         |   |   | 2008                        |   |   | 2009 |   |   | 2008 |   |
| Net      sales                         |   |                         |   |   |                        |   |   |   |   |   |   |   |
| Ingredients      Products Group        |   | $                            | 1,914  |   |                        | $      | 2,034 |   |   | $ | 5,255 |   |   | $ | 5,729 |   |
| Branded      Products Group            |   |                         | 6,595  |   |                        |   | 8,857 |   |   |   | 28,660 |   |   |   | 29,728 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Sales      to external customers       |   |                         | 8,509  |   |                        |   | 10,891 |   |   |   | 33,915 |   |   |   | 35,457 |   |
| Other      revenues                    |   |                         | 114    |   |                        |   | (71 | ) |   |   | 242 |   |   |   | 569 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Total      revenues                    |   | $                            | 8,623  |   |                        | $      | 10,820 |   |   | $ | 34,157 |   |   | $ | 36,026 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before income taxes |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Ingredients      Products Group        |   | $                            | 1,278  |   |                        | $      | 1,345 |   |   |   | 3,102 |   |   | $ | 3,145 |   |
| Branded      Products Group            |   |                         | 696    |   |                        |   | (5,088 | ) |   |   | 3,837 |   |   |   | (10,021 | ) |
| Unallocated      corporate expenses    |   |                         | (2,378 | )      |                        |   | (4,425 | ) |   |   | (7,027 | ) |   |   | (9,158 | ) |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income taxes          |   | $                            | (404   | )      |                        | $      | (8,168 | ) |   | $ | (88 | ) |   | $ | (16,034 | ) |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated      corporate assets      |   | $                            | 34,502 |   |                        | $      | 38,167 |   |   |   |   |   |   |   |   |   |

|                                                              |   | Three Months Ended |          |   | Nine Months Ended |   |
|-------------------------------------------------------------------|--------|------------------------------|---------------|--------|-----------------------------|--------|
|                                                              |   | March 31,               |          |   | March 31,              |   |
|                                                              |   | 2009                         |          |   | 2008                        |   |   | 2009 |   |   | 2008 |   |
| Net      loss                                                     |   | $                            | (404          | )      |                        | $      | (8,175 | ) |   | $ | (88 | ) |   | $ | (16,047 | ) |
| Other      comprehensive income (loss):                           |   |                         |          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Change      in unrealized losses on available-for-sale securities |   |                         |  — |   |                        |   | (1,000 | ) |   |   | 260 |   |   |   |  (1,000 | ) |
|                                                              |   |                         |          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income (loss)                                  |   | $                            | (404          | )      |                        | $      | (9,175 | ) |   | $ | 172 |   |   | $ | (17,047 | ) |

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|  | (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 of2002. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

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| Date:  May      15, 2009 | By:    | /s/ Michael A. Zeher               |
|------------------------------------|--------|------------------------------------|
|                               |   | Michael      A. Zeher              |
|                               |   | President      and                 |
|                               |   | Chief      Executive Officer       |
|                               |   | (Principal      Executive Officer) |

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