**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-K**
 
 R
              **Annual
                  Report Pursuant to Section 13 or 15(d) of the
                  Securities****Exchange
                  Act of 1934**
 
 **For
        the fiscal year ended December 31, 2007**
 
 £
              **Transition
                  Report Pursuant to Section 13 or 15(d) of the
                  Securities****Exchange
                  Act of 1934**
 
 **For
        the transition period from ____________to __________**
 
 **Commission
        File Number: 33-7106-A**
  
  **NATURADE,
        INC.**
 (Exact
        name of registrant as specified in its charter)
 
 **Delaware**
              **23-2442709**(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)**2099
                  S. State College Blvd., Suite 210, Anaheim, CA**
              **92806**(Address
                  of principal executive offices)
              (Zip
                  code)
 
 Registrant’s
        telephone number, including area code: **(714)
        860-7600**
 
 Securities
        registered pursuant to Section 12(b) of the Act:
 **None**
 
 Securities
        registered pursuant to Section 12 (g) of the Act:
 **None**
  
 Indicate
        by check mark if the registrant is a well-known seasoned issuer, as defined
        in
        Rule 405 of the Securities Act. £ Yes R No
 
 Indicate
        by check mark if the registrant is not required to file reports pursuant
        to
        Section 13 or Section 15(d) of the Act.  R Yes £ No
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes £ No R
 
 Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not be contained, to the
        best
        of registrant’s knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-K or any amendment
        to this
        Form 10-K. R
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Act. (Check
        one):
 
 Large
        accelerated filer £ Non-accelerated filer R Accelerated filer £
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Act). £ Yes R No
 
 As
        of
        June 30, 2007, the last business day of the registrant’s most recently completed
        second quarter, the aggregate market value of Common Stock held by
        non-affiliates was $237,654.66based on the average of the bid and asked price
        on
        that date.
 
 As
        of
        April 9, 2008, 194,908,121 shares of the registrant’s common stock were
        outstanding, including 3,372,345 shares subject to Stop Orders.
 
 
  TABLE
        OF
        CONTENTS
 
 PagePART
                  I
              4Item
                  1. Business
              4Item
                  1A. Risk Factors
              19Item
                  1B. Unresolved Staff Comments
              25Item
                  2. Properties
              25Item
                  3. Legal Proceedings
              26Item
                  4. Submission of Matters to a Vote of Security Holders
              27PART
                  II
              28Item
                  5. Market for the Registrant’s Common Equity and Related Stockholder
                  Matters and Issuer Purchases of Equity Securities
              28Item
                  6. Selected Financial Data
              29Item
                  7. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
              30Item
                  7A. Quantitative and Qualitative Disclosures About Market
                  Risk
              42Item
                  8. Financial Statements and Supplementary Data
              42Item
                  9. Changes in and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              42Item
                  9A (T). Controls and Procedures
              43Item
                  9B. Other Information
              46PART
                  III.
              47Item
                  10. Directors, Executive Officers and Corporate Governance
              47Item
                  11. Executive Compensation
              49Item
                  12. Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              56Item
                  13. Certain Relationships and Related Transactions, and Director
                  Independance
              57Item
                  14. Principal Accountant Fees and Services
              58PART
                  IV.
              59Item
                  15. Exhibits and Financial Statements
              59
  2
  **SPECIAL
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 Except
        for the historical information contained herein, the matters addressed in
        this
        Annual Report on Form 10-K constitute “forward-looking statements.”
Forward-looking statements may be identified by the use of the words
“anticipates,” “expects,” “intends,” “plans,” and variations or similar
        expressions. These forward-looking statements are subject to a variety of
        risks
        and uncertainties, many of which are beyond our control, discussed under
“Item
        1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K, which could
        cause actual results to differ materially from those anticipated by us. In
        addition, the information set forth in the reports we file from time to time
        with the SEC describe certain additional risks and uncertainties that could
        cause actual results to vary materially from the future results covered in
        such
        forward-looking statements. You should not place undue reliance on any of
        these
        forward-looking statements, which speak only as of the date hereof. We undertake
        no obligation to update any of these forward-looking statements to reflect
        events or circumstances after the date hereof or to reflect the occurrence
        of
        unexpected events.
 
 NATURADE®,
        NATURADE TOTAL SOY®, THE DELICIOUS WAY TO GIVE HEART DISEASE THE SHAKETM, THE
        DELICIOUS CHOLESTEROL FIGHTER! ®, NATURADE 100% SOYTM, NATURADE 100% WHEYTM,
        NATURADE VEGTM, NATURADE SOY-FREE VEGTM, NATURADE MILK & EGGTM, NATURADE
        N-R-GTM, NATURADE PURE SOYTM, DIET LEANTM, POWER SHAKE®, FEEL ALIVE®, RIBOTEINTM,
        REVIVEXTM, HEAD STARTTM, AGELESS FOUNDATION LABORATORIES®, SYMCO®, SYMBIOTICS® and
        EXPEC® are trademarks or service marks of Naturade, Inc.
  3
  **PART
        I**
 
 **Item
        1. Business**
 
 **General**
 
 Naturade,
        Inc. (the” Company”) develops and markets branded natural products. The Company
        is focused on innovative products designed to nourish the health and well-being
        of consumers.
 
 The
        Company competes primarily in the market for natural, nutritional supplements.
        The Company’s products include:
 
 **•**
              Naturade
                  Total Soy®,
                  a
                  full line of nutritionally complete meal replacements for weight
                  loss and
                  cholesterol reduction available in several flavors of
                  powders;
 
 **•**
              Naturade®protein powders;
 
 **•**
              ReVivexTMhealthy joint and arthritis pain relief products; As the result
                  of the
                  Company’s inability to adequately fund consumer marketing and promotions,
                  the ReVivexTM brand has lost retailer support and has been discontinued at
                  major retailers. Subsequently, Naturade has discontinued this
                  brand.
 
 **•**
              AgelessTM,
                  a
                  line of anti-aging products;
 
 **•**
              Colostrum
                  PlusTM,
                  a
                  line of products to enhance immune system
                  functions;
 
 **•**
              Diet
                  Lean®products focused on the low carb dieter; and
 
 **•**
              Other
                  niche dietary supplements.
 
 The
        Company’s products are sold to the mass market, the health food market and the
        military in the United States, Canada and selected international markets.
        The
        mass market consists of supermarkets, mass merchandisers, club stores and
        drug
        stores. The health food market consists of natural food supermarkets and
        over
        5,000 independent health food stores.
 
 The
        Company also provides private label products to a limited number of
        customers.
 
 The
        Company exited from reorganization (the “Chapter 11 Bankruptcy”) under Chapter
        11 of the United States Bankruptcy Code (the “Bankruptcy Code”) on November 9,
        2007 (See Recent Developments – *Chapter
        11 Filing* ).
 
 The
        Company’s independent registered public accounting firm issued a going concern
        opinion on the Company’s December 31, 2007 financial statements by including an
        explanatory paragraph in which they expressed substantial doubt about its
        ability to continue as a going concern.
 
 The
        Company was incorporated in 1986 under the laws of the state of Delaware.
        The
        Company’s principal executive offices are located at 2099 S. State College
        Blvd., Suite 210, Anaheim, CA 92806, and its telephone number is (714) 860-7600.
        The Company’s website is located at *www.naturade.com* .
 
 **History
        and Recent Developments**
 
 ***Product
        Introductions***
 
 Naturade
        pioneered the introduction of soy protein powders in the 1950’s. In 1999, the
        FDA authorized qualifying products to claim on their label that “ *25*  *grams
        of soy protein daily, in a diet low in saturated fat and cholesterol,
        may*  *reduce
        the risk of heart disease.* ”
The
        Company introduced its Naturade Total Soy ® meal
        replacement powders featuring this claim on the first day allowed by the
        FDA.
        Naturade currently markets 22 SKUs featuring this claim.
  4
  In
        2002,
        Naturade broadened its focus to target the weight loss market with the
        introduction of the Naturade Total Soy® line of meal replacements for
        cholesterol reduction and weight management. In 2003, the Company introduced
        the
        Diet LeanTM, a product marketed to reduce the absorption of starch calories. In
        2004, this line was extended with additional meal replacement powders and
        dietary supplements.
  **Recent
        Developments**
  ***Memorandum
        of Understanding and Reverse Stock Split***
 
 On
        March
        19, 2008, the Company signed a nonbinding Memorandum of Understanding ( the
        “MOU”) with Redux Holdings, Inc., the Company’s controlling shareholder
        (“Redux”), to enter into a definitive agreement to purchase most of the assets
        and all of the liabilities of Redux for a yet to be determined amount of
        the
        Company’s restricted common stocks. The transaction will be treated as a
        corporate reorganization as defined by Section 368 of the Internal Revenue
        Code.
        The Company
        expects to have the definitive agreement executed and the closing will occur
        during the first half of 2008. Immediately prior to the closing, pursuant
        to
        action of the Company’s Board of Directors, there will be a reverse stock split
        of the Company’s Common Stock on a 6 to 1 basis; e.g., 600 shares will become
        100 shares. All equity ownership of any fractional share will be rounded
        up to
        ownership of a full share (i.e. 100.4 shares after the reverse split would
        be
        issued to the shareholder as 101 shares). The Company has authorized the
        issuance of up to 10,000 additional shares to cover this contingency. The
        effective date for purposes of determining the shares to be included in the
        reverse split was originally March 14, 2008, but the Company’s shares continued
        to trade on a pre-reverse stock split basis. The Board of the Company rescinded
        the reverse stock split and the stock split is now contingent upon a closing
        of
        the MOU (a date yet to be determined), subject to regulatory approval. This
        will
        result in lower costs to both companies as the process will be simplified
        from
        two separate steps into a single transaction and will reduce confusion by
        avoiding the need to change CUSIP numbers twice . The
        new
        effective date for determining shareholders of record is expected to be during
        the second half of 2008; however, the Company will confirm the actual date
        by
        press release and a filing with the SEC (“Revised Effective Date”). Naturade
        will continue to trade on a pre-split basis under its current trading symbol
        until the close of trading on the Revised Effective Date. On the first business
        day following the Revised Effective Date, it is expected that the stock will
        begin trading under a new symbol to be assigned by NASDAQ.  The
        117,264 shares of Company Non-Voting Common Stock will not be subject to
        the
        reverse stock split.
 
 ***Charter
        Amendment***
 
 On
        December 7, 2007, the Company received back from the State of Delaware an
        authenticated copy of the amendment to its certificate of incorporation the
        Company filed with the State of Delaware on November 26, 2007 (the” Amendment”).
        This Amendment was effective as of November 26, 2007. Pursuant to the Amendment,
        the authorized shares of stock which the Company is authorized to issue was
        changed to 300,117,264 shares, 250,000,000 of which shall be Common Stock
        with a
        par value of $.0001 per share, 117,264 of which shall be Non-Voting Common
        Stock
        with a par value of $.0001 per share, and 50,000,000 of which shall be Preferred
        Stock with a par value of $.0001 per share.
 
 On
        March
        2, 2008, the Company received back from the State of Delaware an authenticated
        copy of the amendment to its certificate of incorporation the Company filed
        with
        the State of Delaware on February 20, 2008 (the” Amendment”). This Amendment is
        effective as of February 20, 2008. Pursuant to the Amendment, the authorized
        shares of stock which the Company is authorized to issue, subsequent to a
        6 to 1
        reverse stock split of the Company’s outstanding Common Stock with a par value
        of $.0001 per share (“Common Stock”), will remain the same at 300,117,264 total
        shares, 250,000,000 of which shall be Common Stock,, 117,264 of which shall
        be
        Non-Voting Common Stock with a par value of $.0001 per share, and 50,000,000
        of
        which shall be Preferred Stock with a par value of $.0001 per share.
  ***Chapter
        11 Filing***
 
 On
        August
        31, 2006 (the “ Petition Date”), the Company filed a voluntary petition for
        protection and reorganization (the “Chapter 11 Bankruptcy”) under Chapter 11 of
        the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States
        Bankruptcy Court for the Central District of California (the “Bankruptcy
        Court”). From the Petition Date until November 9, 2007, the Company conducted
        activities as a debtor-in-possession under the Bankruptcy Code. See Note
        1, *Chapter
        11 Bankruptcy Proceedings* for
        additional information.
  5
 
 The
        Company’s Fifth Amended Plan of Reorganization, as modified (the “Plan”) was
        heard in Bankruptcy Court on October 30, 2007, and approved by the United
        States
        Bankruptcy Court, Central District of California, Santa Ana Division (Case
        No.
        SA 06-11493 RK). The Plan received support from the Company’s creditors and
        shareholders as well as support from the Company’s lenders and the Company’s
        Unsecured Creditors Committee. On November 8, 2007, Redux Holdings, Inc,
        (“Redux”), the Company’s controlling shareholder, invested $1.2 million in
        Naturade, as required by the Plan and on November 9, 2007, the Plan became
        effective (the “Effective Date”). A copy of the Plan is posted at www.naturade.com ,
        under
        Investor Relations.
 
 In
        addition to the $1.2 million cash infusion by Redux, of which $700,000 was
        paid
        to the administrative creditors, and most of the remaining balance was allocated
        to the Company’s future working capital needs, the Plan included a comprehensive
        debt restructuring. The Plan also features an equity allocation in Redux
        and
        allows for the retention of an equity interest by existing shareholders in
        the
        Company. All Company Series C Preferred shares, along with its voting and
        control rights, all options, all warrants, and all registration rights, have
        been cancelled as required under the Plan. The Company issued to Redux enough
        shares of common stock to give Redux 95% equity and voting interest in the
        Company, with all remaining shareholders holding a total 5% equity interest
        in
        the Company. Pursuant to the U. S Bankruptcy Code, and the Plan, the new
        common
        shares issued to Redux are exempt from the registration requirements of the
        securities laws. The common shares currently issued will retain their registered
        status. The Company filed a 15c 2-11 statement with NASD in June, 2007, and
        regained its listing on the over-the-counter Bulletin Board on January 15,
        2008.
 
 Pursuant
        to the Plan, the Company agreed to pay the administrative creditors an
        additional $300,000 in $100,000 installments prior to December 31 of 2009,
        2010
        and 2011. The Company also agreed to pay Health Holdings and Botanicals,
        LLC
        (“Health Holdings”) $1,361,000 on November 9, 2012, but Health Holdings has the
        right to convert the obligation into Redux Common Stock. The Company also
        agreed
        to pay the unsecured creditors 5% of their allowed claims on November 9,
        2008,
        5% on November 9, 2009, 10% on November 9, 2010 and 10% on November 9, 2011.
        Total allowed claims as of April 11, 2008 are approximately $1.3 million.
        Certain obligations of the Company under the Plan were guaranteed by Redux,
        and
        in some cases security was posted. See the Plan, posted at www.naturade.com ,
        Investor Relations, A description of the obligations to the principal secured
        lender, Laurus (as hereinafter defined) under “Financing” below.
 
 The
        accompanying financial statements have been prepared in accordance with
        accounting principles generally accepted in the United States (“GAAP”)
        applicable to a going concern, which assume that assets will be realized
        and
        liabilities are discharged in the normal course of business.
 
 Financial
        accounting and reporting during a Chapter 11 Bankruptcy for an entity with
        the
        expectation of reorganizing is prescribed in Statement of Position No. 90-7,
        “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”
(“SOP 90-7”). Unsecured pre-petition liabilities, which may be subject to
        settlement, were classified as liabilities subject to compromise in the
        December 31, 2006, balance sheet. In addition, the Company has reported all
        transactions (other than interest expense) directly related to the Chapter
        11
        Bankruptcy as reorganization items in its statement of operations for the
        period
        ended November 7, 2007, and the year ended December 31, 2006. SOP 90-7's
        definition of reorganization items excludes (1) interest expense and (2)
        transactions required to be reported as discontinued operations or extraordinary
        items in conformity with GAAP.
 
 ***Recapitalization***
 
 On
        July
        22, 2005, the Company entered into a recapitalization with Quincy Investments
        Corp. (“Quincy”) and its then principal stockholders, Health Holdings and
        Westgate Equity Partners, L.P (“Westgate”). In connection with the
        recapitalization, Quincy negotiated, and arranged the financing for, the
        Company’s acquisition of selected assets of Ageless, Symco and Symbiotics
        described below. In addition, the recapitalization involved (1) the issuance
        of
        securities to Quincy, (2) the exchange by Health Holdings and Westgate of
        shares
        of the Company’s common stock and Series B Convertible Preferred Stock (“Series
        B”) for shares of Series C Convertible Preferred Stock (“Series C”) and (3) the
        extension of the maturity date of certain notes held by Health Holdings and
        Bill
        D. Stewart, a director and the Company’s chief executive officer (“Stewart”),
        and David A. Weil (“Weil”). The recapitalization resulted in the availability to
        the Company of additional products, the delay in the Company’s obligation to pay
        such notes with a resulting short-term increase in the Company’s liquidity, and
        a change in control of the Company.
  6
  On
        the Effective Date, all Series C shares, along with their voting and control
        rights, all options, all warrants, and all registration rights, were cancelled
        as required under the Plan. The Company, as required by the Plan, issued
        Redux
        enough shares of the Company’s common stock to give Redux 95% equity and voting
        interest in the Company. All remaining shareholders retained a total of 5%
        equity interest in the Company.
 
 ***Change
        in Control***
 
 On
        August
        10, 2006, Quincy Investments Corp. (“Quincy”), the then principal shareholder of
        the Company, subsequent to executing a Letter of Intent of July 26, 2006
        with
        Redux to transfer to Redux Quincy’s controlling interest in Naturade, as
        reported on the Company’s Form 8-K filed with the Securities and Exchange
        Commission on August 2, 2006, entered into the Quincy Transfer Agreement
        (“the
        Definitive Agreement”) pursuant to which:
 
 ·
              Quincy
                  transferred 28 million shares of the Company’s common stock, 4.2 million
                  shares of Series C and 14 million warrants to purchase common stock
                  to
                  Redux;
 ·
              Redux
                  agreed to make cash contributions up to $500,000, at its sole discretion,
                  to the Company;
 ·
              Redux
                  and Quincy agreed to attempt to complete a Definitive Agreement
                  by August
                  31, 2006.
 ·
              It
                  should be noted that Quincy withheld 3,372,345 shares of Common
                  in
                  violation of the Quincy Transfer Agreement. These shares are subject
                  to
                  Stop Orders by the Company’s transfer agent and will be cancelled when
                  they are tendered to the transfer agent.
 
 Before
        the transactions described above, Quincy owned 31,372,345 shares of the
        Company’s common stock, or 72.4% of the voting power of the Company’s common
        stock. Quincy also owned 4.2 million shares of Series C, which when added
        to
        Quincy’s common stock holdings, represented 55.3% of the combined voting power
        of the Company’s common stock and the Series C. The holders of the Series C were
        entitled to vote along with the holders of the Company’s common stock (on an
        as-converted basis) on all matters, including the election of directors,
        presented to the stockholders. As a result, Quincy had the power to elect
        a
        majority of the Board of Directors and to determine the outcome of any matter
        submitted to the stockholders, subject to the rights of Health Holdings,
        holders
        of 12,600,000 shares of Series C who had the right to elect one director
        and to
        approve certain transactions.
 
 The
        Definitive Agreement contemplated under the Letter of Intent was not entered
        into and the Letter of Intent by its terms has expired. Although Quincy has
        threatened litigation against Redux related to the absence of a Definitive
        Agreement no lawsuit has been commenced. In contrast, the Company has initiated
        a lawsuit against Quincy and Peter Pocklington. See Legal Proceedings.
  On
        August
        31, 2006, Laurus entered into an agreement with Redux, the principal shareholder
        of the Company, (the “Redux Agreement”) pursuant to which:
  ·
              Laurus
                  Master Fund, Ltd. (“Laurus”) transferred 1,050,000 shares of the Company’s
                  common stock to Redux;
 ·
              Laurus
                  transferred warrants to purchase 1,500,000 shares of the Company’s common
                  stock at $0.80 per share to Redux which were cancelled upon
                  transfer;
 ·
              Laurus
                  transferred an option to purchase 8,721,375 shares of the Company’s common
                  stock at $0.001 per share to Redux (“Laurus Options”);
                  and
 ·
              Redux
                  issued 574,787 shares of Redux common stock to Laurus, subject
                  to certain
                  provisions for anti-dilution and piggy back registration
                  rights.
 
 On April
        13, 2007, Redux issued Laurus a cashless warrant to purchase up to 700,000
        shares of Redux common stock in consideration of Laurus waving all prepayment
        penalties and charges associated with the Laurus obligation.
 
 On
        November 16, 2006, Redux acquired 500,000 shares of the Company’s common stock
        and warrants to purchase 3,647,743 shares of common stock from Liberty Company
        Financial, LLC (“Liberty”) and in exchange issued to Liberty 28,116 shares of
        Redux common stock.
 
 As
        a
        result of the transactions described above, Redux controlled voting rights
        of
        29,550,000 shares of the Company’s common stock and 4,200,000 shares of Series
        C, or 68.2% of the voting power of the Company’s common stock, 20.0% of the
        voting power of the Series C, and 52.5% of the combined voting power of the
        Company’s common stock and the Series C. The holders of the Series C were
        entitled to vote along with the Company’s common stock (on an as-converted
        basis) on all matters, including the election of directors, presented to
        the
        stockholders. As a result, prior to the Effective Date, Redux had the power
        to
        elect a majority of the Board of Directors and to determine the outcome of
        any
        matter submitted to the stockholders, subject to the rights of the holders
        of
        the Series C described above. If the Laurus Options were included, these
        percentages would increase.
  7
  On
        the Effective Date, all Company Series C Preferred shares, along with their
        voting and control rights, all options, all warrants, and all registration
        rights, were cancelled as required under the Plan. The Company, as required
        by
        the Plan, issued Redux 150,475,388 shares of common stock, giving Redux
        180,025,388 shares of common stock or 95% equity and voting interest in the
        Company. The remaining shareholders retained a total 5% equity interest in
        the
        Company, with 8,510,388 shares of common stock. The computation did not include
        the 3,372,345 shares of common stock subject to Stop Orders.
 
 ***Financing***
 
 In
        July
        2005, the Company obtained a $4,000,000 convertible financing facility from
        Laurus, consisting of a $3,000,000 revolving credit facility and a $1,000,000
        term loan. In consideration of such financing facility, the Company issued
        to
        Laurus an option to purchase up to 8,721,375 shares of the Company’s common
        stock at $0.001 per share and a warrant to purchase up to 1,500,000 shares
        of
        the Company’s common stock at $0.80 per share. The financing facility was
        amended on January 11, 2006, by among other things, increasing the term loan
        to
        $1,650,000 and eliminated the conversion features on the facility. The Company
        issued Laurus 1,050,000 shares of the Company’s common stock in consideration
        for this amendment. See Note 4 to Financial Statements, “Debt”.
 
 On
        August
        31, 2006, prior to the Company’s filing under Chapter 11 of the US Bankruptcy
        Code, Laurus and Redux agreed to cause the Company to do the following (the
        “Financing Changes”):
 
 ·
              Laurus’
                  claim in the approximate amount of $2,900,000 would be treated
                  as fully
                  secured and the liens granted Laurus pursuant to the Financing
                  Agreement
                  will remain without modification.
 ·
              Laurus
                  would provide debtor in possession financing (“DIP”) pursuant to the terms
                  and conditions of the financing
                  agreement.
 ·
              Interest
                  would continue to accrue on the Term Loan pursuant the terms of
                  the
                  Financing Agreement however, payments were to be suspended until
                  the first
                  day of the first full month after the Effective Date of the Chapter
                  11
                  filing.
 ·
              The
                  maturity date of the Term loan was extended to January 6, 2010
                  and
                  principal payments commenced on December 1, 2007, and are payable
                  in equal
                  monthly installments of $58,271 until the maturity date.
 
 On
        the
        Effective Date, Pursuant to the Plan, the following amounts are outstanding
        with
        Laurus:
 
 ·
              Revolving
                  Loan for $838,937 due in 36 months with interest of Prime plus
                  2%.
 ·
              Term
                  Loan for $1,515,049 payable in 24 equal installments of $58,271
                  with
                  interest equal to prime plus 2%, due January 2, 2010.
 ·
              Revolver
                  Over Advance of $674,023 payable in monthly principal installments
                  of
                  $12,000 per month starting January 2008 until June 2008; $15,000
                  per month
                  in July and August 2008; $25,000 per month starting September 2008
                  until
                  December 2008; $40,000 per month starting January 2009 until May
                  2009 and
                  $45,000 per month starting June 2009 until November 2009 with a
                  final
                  payment of $2,023 in December 2009. Interest is payable at prime
                  plus
                  2%.
 
 ***Control
        by Principal Stockholders and Others***
 
 As
        a
        result of the effectiveness of the Plan, Redux has substantial control over
        Naturade. See Risk Factors – “ *One
        stockholder has the ability to control the Company.”*
 
 ***Acquisitions***
 
 On
        August
        3, 2005, the Company acquired certain assets relating to the health products
        retail business of Symco. On August 5, 2005, the Company acquired certain
        assets
        relating to the health products retail business of Ageless. In these
        acquisitions, Naturade acquired the right to distribute additional new products,
        including the AgelessTM line of anti-aging products and Colostrum PlusTM, a line
        of products reported to enhance immune system functions. For a description
        of
        these acquisitions (including the purchase prices, assets acquired and
        obligations assumed), see Business-“ *Acquisitions* ”
below.
        See also Risk Factors-“ *In
        the Company’s recent acquisitions, the Company assumed substantial
        additional*  *obligations* .” **
  8
  **Business
        Strategy**
 
 Naturade
        is focused on innovative, scientifically supported nutritional supplements
        and
        natural products designed to nourish the health and well being of consumers.
        The
        key elements of our growth strategy include the following:
 
 ***Increase
        focus on weight loss***
 
 Naturade
        is focused on the growth potential of the weight loss category. Clinical
        studies
        on both humans and animals have shown that a low calorie diet containing
        soy
        protein based foods is more effective in promoting weight loss than a low
        calorie diet containing animal protein based foods.
 
 ***Capitalize
        on the health benefits of soy protein***
 
 Naturade
        believes significant growth potential exists in the soy protein foods. In
        1999,
        the U.S Food and Drug Administration (“FDA”) approved the claim that
“ *25
        grams of soy protein daily, in a diet low in saturated fat and
        cholesterol*  *may
        reduce the risk of heart disease.”* This
        claim was approved by the FDA based on studies evaluating the relationship
        between dietary soy protein and the level of blood lipids, particularly
        cholesterol. To carry this claim, one serving of a product must deliver at
        least
        6.25 grams of soy protein with no more than three grams of fat and no more
        than
        one gram of saturated fat. Each of the Company’s soy protein based powders
        contains between 8 and 25 grams of soy protein per serving. The FDA, the
        American Heart Association and the Mayo Clinic all support daily intake of
        25
        grams of soy protein as part of a diet low in saturated fat and cholesterol.
 
 ***Excel
        in relationships with consumers and retailers***
 
 Naturade
        has used its expertise in consumer packaged goods to build a strong relationship
        with its retail customers. The Company complements its broad sales and marketing
        efforts with programs focused on direct-to-consumer communication to generate
        trial use, cross-promote products and build brand loyalty. Despite the negative
        effects of the Company’s filing for and emergence from bankruptcy protection
        under Chapter 11, the Company has maintained strong relationships with most
        of
        its retailers.
 
 ***Pursue
        innovation through science-based new products***
 
 Naturade
        continues to emphasize new products as a long-term growth strategy. These
        include further exploitation of soy protein’s claims to lower cholesterol,
        support weight loss, reduce bone loss, reduce hot flashes and enhance
        performance. In addition, the Company intends to investigate future products
        based on other promising health benefits supported by scientific investigations
        in the weight loss and joint health categories. The Company’s marketing and
        research and development departments spearhead new product development,
        overseeing product formulation, testing and sample production runs carried
        out
        by our third-party manufacturers.
 
 ***Focus
        promotional spending to improve profitability by
        account***
 
 The
        Company manages its spending plans based on an account’s potential, and then
        develops its promotional programs to optimize sales growth while limiting
        brand
        expense. As a result, contribution margins, defined as gross margins less
        direct
        brand expenses, were 46.6% of net sales for 2007 and 17.6% of net sales for
        2006. The increase in contribution margin in 2007 was a result of increased
        margins due to improved stability of product sourcing coupled with reduced
        spending on promotions costs related to the Company’s filing for Chapter 11
        protection.
 
 ***Selectively
        pursue new distribution***
 
 Naturade
        selectively pursues new distribution where initial investment in start-up
        costs
        has a strong expectation of delivering a near-term return. Similarly, the
        Company has elected to exit accounts where minimum profit standards cannot
        be
        met. As a result, Naturade is currently selling to a consolidated U.S. account
        base of approximately 34,000 stores in 2007 and 36,000 in 2006.
  9
  Expansion
        into international markets with a streamlined offering of best selling products
        is being pursued with the same targeted spending strategy.
 
 ***Identify
        and solicit strategic partners for growth***
 
 Naturade
        continues to focus on external growth, making use of the resources of our
        principal shareholders to help identify compatible companies for strategic
        alliances, investments in the Company or acquisitions by the Company. The
        effort
        to identify additional funding in support of internal and external growth
        is
        ongoing.
 
 **Brands
        and Product Lines**
 
 ***Weight
        loss brands***
 
 Naturade
        Total Soy® is the Company’s largest selling brand, positioned for weight loss
        and cholesterol reduction. It is distributed in virtually all of the retail
        outlets serviced by the Company or its distributors. These products include
        shake mix powder products available in a variety of flavors in all natural
        and
        low carbohydrate formulation including original Naturade Total Soy® powder,
        Calcium ShakeTM and Naturade Low Carb Dieters Shake®.
 
 First
        introduced in 1950, Naturade protein boosters are high protein, low carbohydrate
        powders offering consumers a range of protein choices. These powders are
        typically added to smoothies to make high protein drinks, but are also used
        to
        add protein to other foods prepared at home such as cereal, sauces or
        casseroles. We offer a broad selection of protein booster powders based on
        alternate protein sources, including Naturade 100% SoyTM, Naturade VegTM, Naturade
        N-R-GTM, Naturade 100% WheyTM, Naturade Soy-Free VegTM and Naturade Milk &
EggwhiteTM.
 
 Diet
        LeanTM is a new Naturade weight loss brand introduced in 2003. Diet LeanTM offers
        four different SKUs of dietary supplement plus two meal replacement powders.
        These products include Diet Lean® Body Fat Regulator with CLA®, Diet Lean®
Weight Loss Multivitamin, Diet Lean® Fiber Supplement and Diet Lean® Low Carb
        Dieters Shake. The introduction of this brand and the subsequent introduction
        of
        products focused on the low carbohydrate dieter address the needs of consumers
        who will no longer be able to purchase ephedra-based products and will be
        looking for safe and effective dietary supplements that will help them lose
        weight.
 
 Calcium
        Shake is a soy protein-based meal replacement for weight loss that is positioned
        to support bone health with the full daily value of 1000 mg of Calcium per
        serving.
 
 ***Soy
        protein-based products for heart health***
 
 In
        1999,
        the FDA authorized a heart health claim for soy protein. Naturade markets
        26
        different soy protein SKUs that qualify to carry the FDA approved claim that *“25
        grams of soy protein daily, in a diet low in saturated fat and*  *cholesterol,
        may reduce the risk of heart disease.”* These
        products accounted for approximately 51% of our net sales in 2005. Naturade
        Total Soy® was the first soy protein powder brand in the United States to carry
        this claim on the front of retail package labels and differentiates itself
        from
        competitors by continuing to emphasize this life-saving health message on
        its
        packages as well as in its advertising and promotional messages as “the
        delicious cholesterol fighter®.” We offer two soy protein-based nutritional
        supplement products positioned as energy enhancers, Power Shake® and Ribo-teinTM,
        plus Naturade Pure SoyTM, the only widely distributed meal replacement powder
        made with certified organic ingredients. In addition, three of the six low
        carbohydrate protein boosters are made with soy protein and carry the FDA
        heart
        health claim. To carry this claim, one serving of a product must deliver
        at
        least 6.25 grams of soy protein with no more than three grams of fat and
        no more
        than one gram of saturated fat. Each of the Company’s soy protein based powders
        contains between 8 and 25 grams of soy protein per serving.
  10
  ***Immune
        system enhancement products***
 
 In
        2005
        the Company acquired the Colostrum PlusTM line of products from Symco. These
        products utilize bovine Colostrum which is very similar to human Colostrum
        and
        are reported to enhance immune system functions.
 
 ***Other
        products***
 
 Naturade
        offers additional all-natural brands and product lines including sports
        nutrition powders, laxatives, digestive aids, cough/cold products and anti-aging
        products under the AgelessTM line which, cumulatively, account for approximately
        3% of 2007 net sales. These products are distributed almost exclusively through
        independent health food stores and natural supermarkets.
 
 **Competition**
 
 In
        light
        of the 2004 withdrawal of Slim Fast’s soy protein powders, Naturade faces only
        one significant competitor in the mass market powder sector, Genisoy® from MLO
        Products, Inc. Many other companies have entered the category since 1999
        but
        hold only small market shares, including Twinlab, Amerifit, Kashi, Balance,
        EAS,
        Natrol, Rexall Sundown, Schiff (Weider) and Country Life (Hain). The Company
        also competes with Genisoy® and Kashi in the health food segment. In the health
        food sector, Naturade competes indirectly with Spiru-tein®, a brand from
        Nature’s Plus, Inc. Unlike Naturade Total Soy®, Spiru-tein® does not emphasize
        soy protein content in marketing its products and positions them as energy
        boosters rather than products for weight loss or cholesterol reduction.
        Spiru-tein® holds a substantial lead over Naturade’s entries in the energy
        category, Power Shake® and Ribo-teinTM.
 
 **Sales,
        Marketing and Distribution**
 
 In
        fiscal
        2007, the Company’s sales by distribution channel were 30.4% to the mass market,
        63.2% to the health food market and 6.4% in international channels, as compared
        to sales by distribution channel of 33.6% to the mass market, 63.0% to the
        health food market and 3.4% in international channels in fiscal 2006. The
        Company’s products are sold to both the health food market and the mass market
        using a sales management team augmented by independent brokers. Health food
        sales are primarily through distributors, while most mass market sales are
        direct to retailers. Naturade’s sales and distribution in Canada is also handled
        through distributors and brokers.
 
 The
        Company’s direct sales force supervises broker sales organizations in the health
        food market and mass market. While headquarters sales calls are primarily
        the
        responsibility of our sales management, over 12 independent health food broker
        personnel and an additional one independent mass market broker personnel
        carry
        out follow-up calls and retail activity. The Company maintains brokerage
        agreements with its health food and mass market brokers throughout the United
        States. These agreements have a term of one year and may be terminated on
        30
        days prior written notice by either party. In addition, these agreements
        grant
        the brokers exclusive territories to represent us and receive commissions
        on
        sales generated in these territories. Brokers do not take title to the Company’s
        products.
 
 The
        Company sells its products in the health food market through a network of
        16
        independent distributors and approximately 10 smaller independent distributors,
        who together service approximately 15,000 retail health food stores and natural
        supermarkets in the United States. These distributors take title to our products
        combining these products with other companies’ products to serve the health food
        stores in their geographic area. Nine of these key distributors are divisions
        of
        United Natural Foods, Inc. (“UNFI”), a national health food distributor, while
        five other distributors are divisions of Tree of Life, Inc. (“TOL”), another
        national health food distributor. Combined, these two principal health food
        distributors accounted for 30.5% of the Company’s net sales during 2007. Our
        direct sales force, along with brokers, often will solicit business from
        health
        food stores who then acquire our products from these distributors. While
        each of
        these national health food distributors is a corporate legal entity, their
        divisions independently make purchasing decisions on our products and are
        separately invoiced by us. Accordingly, in “Management’s Discussion and Analysis
        of Financial Condition and Results of Operations,” the Company treats these
        divisions as separate customers for purposes of determining the top 40
        customers.
 
 Mass
        market products are sold directly to mass market retailers or their designated
        distributors. One mass market customer, Sam’s Club, represented approximately
        24.6% of the Company’s net sales in 2007.
  11
  The
        loss
        of any one of the Company’s major customers could have a material adverse effect
        on its business.
 
 **Third-Party
        Manufacturers**
 
 Naturade
        out sources all of its manufacturing and, as a result, has been significantly
        dependent on third-party manufacturers such as Nellson Nutraceuticals, Omni-Pak,
        a division of NBTY, Inc., Best Formulations, and Advanced Protein Systems.
        As a
        result of the Company’s filing for bankruptcy protection under Chapter 11, the
        Company encountered significant challenges maintaining, or finding new third
        party manufacturers. Omni Pak and Nellson have ceased manufacturing the
        Company’s products and the Company has been forced to approach new manufacturers
        to source manufacture of its products. As a result, the Company has been
        forced
        to negotiate less favorable purchasing terms including cash in advance or
        cash
        on delivery in order to purchase inventory. This has caused the Company to
        encounter numerous inventory shortages. As the Company begins to operate
        outside
        of bankruptcy, certain vendors are beginning to offer more favorable purchasing
        terms.
 
 The
        Company currently contracts with third-party manufacturers who specialize
        in
        powder, liquid, tablet/capsule, and over-the counter drug production. Naturade
        selects its third-party manufacturers based upon several criteria, including
        quality, capacity, location and cost. Under the direction of the Company’s
        product development team, these third-party manufacturers create product
        formulations and develop sample production runs of prototype products. Naturade
        generally requests that a certificate of analysis, which indicates tested
        levels
        of key microbiological measures, accompany product batches received from
        third-party manufacturers.
 
 **Raw
        Material Supplies**
 
 Due
        to
        outsourcing of production, the Company has eliminated most of its raw material
        inventory. At December 31, 2007, raw material inventory was $63,875. This
        amount
        includes labels, corrugated boxes and shippers. The Company believes that
        the
        raw materials used by its third-party manufacturers are readily available
        from
        multiple supply sources. The Company has experienced significant delays due
        to
        supply problems related to the Chapter 11 filing. As the Company begins to
        emerge from bankruptcy, certain of these vendors are beginning to offer more
        favorable purchasing terms.
 
 **Quality
        Control**
 
 Naturade
        has established quality control standards for its third-party manufacturers,
        including lists of approved raw material suppliers, agreed upon production
        batch
        sizes, microbiological and other contaminant testing criteria, utilization
        of
        industry-specific independent laboratories for sample analysis and a formal
        incubation period for finished products, among other requirements.
 
 **Seasonal
        Fluctuations**
 
 As
        the
        Naturade Total Soy® brand has emphasized weight loss in connection with its meal
        replacement products, sales have become somewhat more seasonal, affected
        by
        higher December and first quarter demand due to intense consumer interest
        in
        dieting and healthy lifestyle following the holiday season, with a softening
        of
        sales in the beginning of the fourth quarter. In addition, the Company’s natural
        cough and cold line fluctuates with the cold season throughout the country.
        Because individual products have seasonal variations, as the Company’s product
        mix changes, it may experience more seasonality in the future. International
        sales tend to fluctuate depending upon economic conditions, seasonal patterns
        and cultural differences within each country.
 
 **Trademarks,
        Copyrights and Other Intellectual Property**
 
 Naturade
        maintains 53 registrations on trademarks with the United States Patent and
        Trademark Office. Naturade also maintains trademark registrations for a variety
        of marks in approximately 12 foreign countries. In addition, the Company
        holds
        other intellectual property rights. Federally registered trademarks have
        perpetual life, provided they are renewed on a timely basis and used properly
        as
        trademarks, subject to the rights of third parties to seek cancellation of
        the
        marks. The Company regards its trademarks and other proprietary rights as
        valuable assets and believes that they have significant value in the marketing
        of the Company’s products. Because of the Company’s limited financial resources,
        it cannot, in all cases, exhaustively monitor the marketplace for trademark
        violations. The Company will evaluate and pursue potential infringements
        on a
        case-by-case basis in accordance with its business needs and financial
        resources. If the Company is not aware of some infringing uses or elect not
        to
        pursue them, the value of its trademarks could be substantially weakened.
  12
  As
        part
        of the acquisition of Symco and Symbiotics, Naturade acquired the exclusive
        right to the trademark “Age Defiance,” and granted Symco and Symbiotics a
        license to use this trademark. See “Business-Acquisitions” for a discussion of
        the acquisition of Symco.
 
 **Recapitalization**
 
 In
        January 2005, Naturade was introduced to Quincy by a public relations firm
        retained by both Quincy and Naturade. Before this introduction, Naturade
        did not
        have any relationship with Quincy. Quincy, in turn, introduced Naturade to
        Ageless and to Symco and Symbiotics. Symco and Symbiotics were related companies
        under common control. Before this introduction, Naturade did not have any
        relationship with Ageless, Symco or Symbiotics.
 
 On
        July
        22, 2005, the Company entered into a Master Investment Agreement (the “Master
        Investment Agreement”), with Quincy, Health Holdings, Westgate, Stewart and
        Weil, pursuant to which:
 
 **•**
              Quincy
                  negotiated, and arranged the financing for, the acquisition by
                  Naturade of
                  selected assets of Ageless, Symco and
                  Symbiotics;
 
 **•**
              Quincy
                  remained a co-obligor on, and a principal of Quincy personally
                  guaranteed,
                  the payment of a portion of the purchase price of each such
                  acquisition;
 
 **•**
              Naturade
                  issued to Quincy (i) 30,972,345 shares of Common Stock, (ii) warrants
                  to
                  purchase 7,000,000 shares of the Company’s common stock at $0.80 per share
                  and additional 7,000,000 shares of the Company’s common stock at $1.02 per
                  share, during the period from July 22, 2006 to July 22, 2015 (the
“Quincy
                  Warrants”), and (iii) 4,200,000 shares of Series C, all in consideration
                  of Quincy negotiating, and arranging the financing for the Company’s
                  acquisition of the selected assets of Ageless, Symco and Symbiotics
                  and
                  guaranteeing the payment of a portion of the purchase price of
                  each such
                  transaction;
 
 **•**
              Health
                  Holdings surrendered the 41,054,267 shares of the Company’s common stock
                  held by it in exchange for (i) 12,600,000 shares of Series C and
                  (ii) a
                  warrant to purchase 10,000,000 shares of the Company’s common stock at
                  $1.00 per share, during the period from July 22, 2006 to July 22,
                  2015
                  (the “HHB Warrant”);
 
 **•**
              Westgate
                  surrendered the 13,540,723 shares of Series B held by it, including
                  any
                  accrued and unpaid dividends, in exchange for 4,200,000 shares
                  of Series
                  C;
 
 **•**
              Health
                  Holdings, Stewart and Weil extended the term of the Secured Promissory
                  Notes issued to them pursuant to that certain Loan Agreement dated
                  April
                  23, 2003, from December 31, 2006 to December 31,
                  2007;
 
 **•**
              Naturade
                  granted to Health Holdings, Westgate and Quincy certain registration
                  rights with respect to the common stock issuable upon conversion
                  of the
                  Series C or exercise of the HHB Warrant or the Quincy Warrants
                  and
 
 **•**
              Quincy
                  granted to Health Holdings and Westgate certain co-sale rights
                  described
                  below.
 
 The
        holders of the Series C voting as a separate class were entitled to elect
        one
        member of our Board of Directors. In addition, in matters presented for a
        vote
        of stockholders, including the election of other directors, the holders of
        the
        Series C voted together with the holders of Common stock as a single class,
        with
        a number of votes equal to the number of shares of common stock into which
        the
        Series C would then be converted. Under Delaware law, the holders of common
        stock and Series C voted as a separate class on any amendment to the Company’s
        Certificate of Incorporation which would (i) increase or decrease the aggregate
        number of authorized shares of such class, (ii) increase or decrease the
        par
        value of the shares of such class, or (iii) alter or change the powers,
        preferences or special rights of the shares of such class so as to affect
        them
        adversely.
  13
  In
        addition, Health Holdings was entitled to receive notice of, and to have
        a
        representative attend, all meetings of the Company’s Board of Directors, so long
        as Health Holdings owned any Series C.
 
 On
        a
        liquidation or sale of Naturade, the holders of Series C were entitled to
        receive a preferential payment equal to $1.00 per share (subject to adjustment),
        plus accrued but unpaid dividends. This preferential payment reduced the
        amount
        available for distribution to the holders of the Company’s common
        stock.
 
 For
        each
        fiscal year, the holders of Series C were entitled to receive a cash dividend
        equal to 20% of the amount, if any, by which the Company’s pre-tax profits for
        such year exceed $10 million, which dividend would have been distributed
        within
        120 days of the end of such fiscal year. This cash dividend would have reduced
        the amount available for other corporate purposes, including the expansion
        of
        the Company’s or distributions to the holders of the Company’s common
        stock
 
 Naturade
        had the right to require the conversion of all shares of Series C into the
        Company’s common stock at any time within ten days following a period of 20
        consecutive trading days for which the closing bid price of the Company’s common
        stock equaled or exceeded $1.50 per share (as adjusted).
 
 At
        any
        time after July 22, 2006, the holders of the Series C had the right to convert
        each share of Series C into one share of the Company’s common stock at $1.00 per
        share (subject to adjustment to prevent dilution). The issuance of these
        shares
        of the Company’s common stock could have caused substantial dilution to the
        other holders of the Company’s common stock and the potential issuance of these
        shares of the Company’s common stock could have depressed the market price of
        the Company’s common stock and impaired the Company’s ability to raise capital
        through the sale of the Company’s common stock
 
 On
        December 31, 2012, Naturade would have been required to redeem the Series
        C for
        $1.00 per share (subject to adjustment), plus accrued but unpaid dividends,
        provided the Company would have then legally able to do so. This cash dividend
        would have reduced the amount available for other corporate purposes, including
        the expansion of the Company’s business or distributions to the holders of its
        common stock.
 
 The
        issuance of the shares of the Company’s common stock under the Master Investment
        Agreement and the shares of pursuant to the HHB Warrant and Quincy Warrants
        could have cause substantial dilution to the other holders of the Company’s
        common stock, and the potential issuance of such shares of the Company’s common
        stock could have adversely affected the market price of the Company’s common
        stock and impaired Naturade’s ability to raise capital through the sale of the
        Company’s common stock.
 
 In
        the
        event Quincy desired to sell any shares of the Company’s common stock received
        pursuant to the Master Investment Agreement, other than a sale in the public
        market at fair market value (as defined in the Master Investment Agreement),
        Health Holdings and Westgate would have had the right to sell to the proposed
        transferee a pro rata portion of the Company’s common stock on the same terms
        and conditions.
 
 Before
        the transactions contemplated by the Master Investment Agreement:
 
 **•**
              Health
                  Holdings beneficially owned 68.8% of the Company’s common stock (assuming
                  the exercise of all options and warrants and the conversion of
                  all
                  convertible securities). In addition, William B. Doyle, Jr. and
                  Lionel P.
                  Boissiere, each of whom was, until August 10, 2005, a director
                  of
                  Naturade, were each a principal and a managing member of Doyle
&
                  Boissiere Fund I, LLC, a controlling shareholder of Health
                  Holdings.
 
 **•**
              Westgate
                  beneficially owned 22.7% of the Company’s common stock (assuming the
                  exercise of all options and warrants and the conversion of all
                  convertible
                  securities). In addition, Jay W. Brown and Robert V. Vitale, each
                  of whom
                  was, until August 10, 2005, a director of Naturade, were each a
                  principal
                  with Westgate Group, LLC, the general partner of
                  Westgate.
 
 **•**
              Bill
                  D. Stewart was the Chairman of the Board and the Chief Executive
                  Officer
                  of Naturade, and David A. Weil was, until August 10, 2005, a director
                  of
                  Naturade.
 
 **•**
              Naturade
                  was indebted to Health Holdings, Stewart and Weil in the amount
                  of
                  $1,075,000, $100,000, and $75,000, respectively, under the Loan
                  Agreement
                  dated April 23, 2003.
 
 **•**
              The
                  public stockholders beneficially owned 6.0% of the Company’s common stock
                  (assuming the exercise of all options and warrants and the conversion
                  of
                  all convertible securities).
  14
 
 As
        a
        result of the recapitalization, Quincy had the ability to elect a majority
        of
        our Board of Directors, control the outcome of all matters requiring stockholder
        approval (except such matters as require a class vote of the Series C) and
        control the Company’s management and affairs (except to the extent the approval
        of Laurus was required under the Financing Agreement as defined below).
 
 ***Change
        in Control***
 
 On
        August
        10, 2006, Quincy Investments Corp. (“Quincy”), the then principal shareholder of
        the Company, subsequent to executing a Letter of Intent of July 26, 2006
        with
        Redux to transfer to Redux Quincy’s controlling interest in Naturade, as
        reported on the Company’s Form 8-K filed with the Securities and Exchange
        Commission on August 2, 2006, entered into the Quincy Transfer Agreement,
        pursuant to which:
 
 ·
              Quincy
                  transferred 28 million shares of the Company’s common stock , 4.2 million
                  shares of Series C and 14 million warrants to purchase to
                  Redux;
 ·
              Redux
                  agreed to make cash contributions up to $500,000, at its sole discretion,
                  to the Company;
 ·
              Redux
                  and Quincy agreed to attempt to complete a Definitive Agreement
                  by August
                  31, 2006.
 ·
              It
                  should be noted that Quincy withheld 3,372,345 shares of Common
                  in
                  violation of the Quincy Transfer Agreement. These shares are subject
                  to
                  Stop Orders by the Company’s transfer agent and will be cancelled when
                  they are tendered to the transfer
                  agent.
 
 Before
        the transactions described above, Quincy owned 31, 372,345 shares of the
        Company’s common stock, or 72.4% of the voting power of the Company’s common
        stock. Quincy also owned 4.2 million shares of Series C, which when added
        to
        Quincy’s common stock represented 55.3%of the combined voting power of the
        Company’s common stock and the Series C. The holders of the Series C were
        entitled to vote along with the Company’s common stock (on an as-converted
        basis) on all matters, including the election of directors, presented to
        the
        stockholders. As a result, Quincy had the power to elect a majority of the
        Board
        of Directors and to determine the outcome of any matter submitted to the
        stockholders, subject to the rights of Health Holdings and Botanicals, LLC
        holders of 12,600,000 shares of Series C who have the right to elect one
        director and to approve certain transactions.
 
 The
        Definitive Agreement contemplated under the Letter of Intent has not been
        entered into and the Letter of Intent, by its terms, has expired. Although
        Quincy has threatened litigation against Redux related to the absence of
        a
        Definitive Agreement, no lawsuit has been commenced. In contrast, the Company
        has initiated a lawsuit against Quincy and Peter Pocklington. See Legal
        Proceedings.
 
 On
        August
        31, 2006 Laurus entered into an agreement with Redux, the principal shareholder
        of the Company, (the “Redux Agreement”) pursuant to which:
 
 ·
              Laurus
                  Master Fund, Ltd. (“Laurus”) transferred 1,050,000 shares of the Company’s
                  common stock to Redux;
 ·
              Laurus
                  transferred warrants to purchase 1,500,000 shares of the Company’s common
                  stock at $0.80 per share to Redux which were cancelled upon
                  transfer;
 ·
              Laurus
                  transferred an option to purchase 8,721,375 shares of the Company’s common
                  stock at $0.001 per share to Redux (the “Laurus Options”);
                  and
 ·
              Redux
                  issued 574,787 shares of Redux common stock to Laurus, subject
                  to certain
                  provisions for anti-dilution and piggy back registration
                  rights.
 
 On
        April
        13, 2007, Redux issued Laurus a cashless warrant to purchase up to 700,000
        shares of Redux common stock, in consideration of Laurus waving all prepayment
        penalties and charges associated with the Laurus obligations.
 
 November
        16, 2006, Redux acquired 500,000 of the Company’s common stock and warrants to
        purchase 3,647,743 shares of Common Stock from Liberty Company Financial,
        LLC
        (“Liberty”) and in exchange issued to Liberty 28,116 shares of Redux Common
        Stock.
 
 As
        a
        result of the transactions described above, prior to the Effective Date,
        Redux
        controlled the voting rights of 29,550,000 shares of the Company’s common stock
        and 4,200,000 shares of Series C, or 68.2% of the voting power of the Company’s
        common stock, 20.0% of the voting power of the Series C, and 52.5% of the
        combined voting power of the Company’s common stock and the Series C. The
        holders of the Series C are entitled to vote along with the Company’s common
        stock (on an as-converted basis) on all matters, including the election of
        directors, presented to the stockholders. As a result, Redux had the power
        to
        elect a majority of the Board of Directors and to determine the outcome of
        any
        matter submitted to the stockholders, subject to the rights of the holders
        of
        the Series C described above. If the Laurus Options were included, these
        percentages would increase.
  15
  On
        the Effective Date, all Company Series C shares, along with their voting
        and
        control rights, all options, all warrants, and all registration rights, were
        cancelled as required under the Plan. The Company, as required by the Plan,
        issued Redux 150,475,388 shares of common stock, giving Redux 180,025,388
        shares
        of common stock or 95% equity and voting interest in the Company. The remaining
        shareholders retained a total 5% equity interest in the Company, with 8,510,388
        shares of common stock. The computation did not include the 3,372,345 shares
        of
        common stock subject to Stop Orders.
 
 **Financing**
 
 In
        July
        2005, the Company obtained a $4,000,000 convertible financing facility from
        Laurus, consisting of a $3,000,000 revolving credit facility and a $1,000,000
        term loan. In consideration of such financing facility, the Company issued
        to
        Laurus an option to purchase up to 8,721,375 shares of the Company’s common
        stock at $0.001 per share and a warrant to purchase up to 1,500,000 shares
        of
        the Company’s at $0.80 per share. The financing facility was amended on January
        11, 2006, by among other things, increasing the term loan to $1,650,000 and
        eliminated the conversion features on the facility. The Company issued Laurus
        1,050,000 shares of its common stock in consideration for this amendment.
        See
        Note 4 to Financial Statements, “Debt”
 
 On
        August
        31, 2006, prior to the Company’s filing under Chapter 11 of the US Bankruptcy
        Code, Laurus and Redux agreed to cause the Company to do the following (the
        “Financing Changes”):
 
 ·
              Laurus’
                  claim in the approximate amount of $2,900,000 would be treated
                  as fully
                  secured and the liens granted Laurus pursuant to the Financing
                  Agreement
                  will remain without modification.
 ·
              Laurus
                  would provide debtor in possession financing (“DIP”) pursuant to the terms
                  and conditions of the financing
                  agreement.
 ·
              Interest
                  would continue to accrue on the Term Loan pursuant the terms of
                  the
                  Financing Agreement however, payments were to be suspended until
                  the first
                  day of the first full month after the Effective Date of the Chapter
                  11
                  filing.
 
 The
        maturity date of the Term loan was extended to January 6, 2010 and principal
        payments commenced on December 1, 2007 and are payable in equal monthly
        installments of $58,271 until the maturity date.
 
 For
        a
        more detailed description of the Financing Agreement, see “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
–
Liquidity and Capital Resources – *Laurus
        Financing* .”
 
 **Principal
        Stockholder**
 
 At
        December 31, 2007, and April 9, 2008, Redux owns 180,025,388 shares of the
        Company’s common stock, or approximately 92.4% of the voting power of the
        Company’s common stock. As a result, the Principal Stockholder has the ability
        to elect all of the Naturade directors, control the outcome of all matters
        requiring stockholder approval and control its management and
        affairs
 
 **Acquisitions**
 
 ***Ageless,
        Symco and Symbiotics***
 
 On
        July
        22, 2005, Quincy, Symco and Symbiotics entered into an Asset Purchase Agreement
        (the “Symco/Symbiotics Agreement”), pursuant to which Quincy had the right to
        acquire substantially all of the assets relating to Symco and Symbiotics’
health-related products retail business. As consideration for the assets,
        Quincy
        would (a) assume current accounts payable ($408,965) and the obligations
        under
        certain contracts, (b) pay all outstanding amounts owed under certain credit
        facilities ($224,313), (c) issue a promissory note payable to Symco and
        Symbiotics in the principal amount of $2,000,000, (x) less the amount necessary
        to repay the credit facilities, and (y) subject to a working capital adjustment,
        (d) pay an additional $60,000 in cash fifteen (15) days after the closing
        date
        and an additional $60,000 every thirty (30) days thereafter until the note
        is
        paid in full and (e) for a three (3) year period following the closing date,
        Quincy would pay to Symco and Symbiotics ten percent (10%) of the amount
        of the
        increase in contribution profit over a baseline amount of $2,000,000 based
        on
        the sale of products for each 12 month period during the three year period.
        The
        promissory note payable to Symco and Symbiotics was guaranteed by Peter H.
        Pocklington, a principal of Quincy, and from August 10, 2005 to August 10,
        2006,
        one of the Company’s directors. In this acquisition, the Company acquired the
        right to distribute, and substantially all of the assets related to, Colostrum
        PlusTM, a line of products reported to enhance immune system
        functions.
  16
  On
        July
        27, 2005, Quincy and Ageless entered into an Asset Purchase Agreement (the
        “Ageless Agreement”), pursuant to which Quincy had the right to acquire
        substantially all of assets relating to Ageless’ health-related products retail
        business. As consideration for the assets, Quincy would (a) assume current
        accounts payable ($173,593), (b) assume an obligation to an employee of the
        company in an amount equal to $600,000 and (c) issue a promissory note payable
        to Ageless in the principal amount of $700,000, subject to a working capital
        adjustment. The promissory note payable to Ageless was guaranteed by Peter
        H.
        Pocklington, a principal of Quincy, and from August 10, 2005 to August 10,
        2006,
        one of the Company’s directors. In this acquisition, the Company acquired the
        right to distribute, and substantially all of the assets related to, the
        AgelessTM line of anti-aging products.
 
 On
        July
        22, 2005, pursuant to an Assignment and Assumption Agreement, Quincy assigned
        to
        Naturade all of its rights, title and interest in and to the Symco/Symbiotics
        Agreement, and Naturade agreed to perform all of Quincy’s obligations under the
        Symco/Symbiotics Agreement. Pursuant to an Assignment and Assumption Agreement
        dated July 28, 2005, Quincy assigned to Naturade all of its rights, title
        and
        interest in and to the Ageless Agreement, and Naturade agreed to perform
        all of
        Quincy’s obligations under the Ageless Agreement. In connection with these
        transactions, the Company entered into consulting agreements with certain
        key
        employees of Symco/Symbiotics and Ageless. In addition, Naturade was a co-maker
        on each of the promissory notes described above. Pursuant to the Consulting
        Agreement entered into by the Company and Naomi Balcombe (“Balcombe”), the
        founder of Ageless, (i) for a three (3) year period following the closing
        date,
        Naturade would pay to Balcombe ten percent (10%) of the amount of the increase
        in contribution profit over a baseline amount of $900,000 based on the sale
        of
        products for each 12 month period during the three year period and (ii) issued
        to Ms. Balcombe 1,800,000 shares of the Company’s common stock. Pursuant to the
        Consulting Agreements entered into by the Company and Douglas Wyatt, the
        founder
        of Symco and Symbiotics, and David W. Brown, the President of Symco and
        Symbiotics, Naturade issued to Messrs. Wyatt and Brown 2,850,000 shares and
        150,000 shares, respectively, of the Company’s common stock.
 
 On
        August
        3, 2005, Naturade closed the acquisition of Symco and Symbiotics. On September
        30, 2005, the Company amended the terms of the acquisition to adjust the
        promissory note to include the subsequent purchase by Naturade of a computer
        system and the payoff of a promissory note in the amount of $274,382. In
        addition, the payments on the promissory note were modified from a balloon
        payment due on February 3, 2006 to nine monthly installments of $3,500 from
        October 1, 2005 and annual payments of $518,500 on June 1, 2006, $450,000
        on
        June 1, 2007 and $476,305 on June 1, 2008. In exchange for the elimination
        of
        the requirement for the Company to pay $60,000 for every thirty days the
        promissory note was outstanding, Naturade agreed to make monthly interest
        payments of $15,000 from October 2005 to May 2006, $10,000 from June 2006
        to May
        2007 and $5,000 from June 2007 to May 2008. On May 31, 2006, the promissory
        note
        was amended and restated whereby the principal amount of $1,000,000 would
        be
        repaid in monthly installments of $33,333 along with monthly interest charges
        of
        7% per annum on the outstanding balance through November 2008.
 
 On
        August
        9, 2005, Naturade closed the acquisition of Ageless.
 
 At
        the
        time of the acquisitions, Quincy and the acquirees had no relationship to
        Naturade and Quincy and the acquirees were not related parties to each other.
        Under the terms of the Master Investment Agreement dated July 22, 2005, Quincy
        acted as a broker and facilitator and agreed to negotiate, and to arrange
        the
        financing for, Naturade’s acquisition of selected assets of Ageless, Symco and
        Symbiotics, and to remain as co-obligor on, and to cause a principal of Quincy
        to guarantee Naturade’s payment of, a portion of the purchase
        price.
 
 In
        consideration of such services, Naturade agreed to issue Quincy 33,972,345
        shares of the Company’s common stock and to assume Quincy’s obligations under
        the Symco/Symbiotics Agreement and the Ageless Agreement. Among the obligations
        assumed by Naturade was the obligation to issue an aggregate of 3,000,000
        shares
        of the Company’s common stock to the founders of Symco and Symbiotics in
        consideration of consulting services to be rendered by them concerning the
        purchased assets. As a result, Naturade issued Quincy 30,972,345 shares of
        the
        Company’s common stock and Symco and Symbiotics a combined 3,000,000 shares of
        Company’s common stock
  17
  For
        further information on the assets and liabilities of Ageless, Symco and
        Symbiotics acquired by the Company, and those not acquired by the Company,
        see
        the Company’s Current Report on Form 8-K/A filed with the SEC on February 28,
        2006. Litigation was subsequently commenced by Ageless and its principal
        against
        the Company, Quincy and Peter Pocklington. The Company has settled this
        litigation with respect to the Company only. Redux has purchased all claims
        filed in the Naturade bankruptcy by Ageless and its principal. See Item 13
        Certain Relationships and Related Transactions.
 
 In
        connection with the foregoing transactions, Naturade and Doyle & Boissiere
        LLC terminated that certain Consulting Agreement dated December 17, 1997,
        Naturade and Westgate terminated that certain Management Services Agreement
        dated January 2, 2002, and Health Holdings and Westgate terminated that certain
        Voting Agreement dated January 2, 2002. In November 2005, Quincy assumed
        the
        consulting agreement with David Brown and the Company issued Quincy 400,000
        shares of the Company’s common stock in compensation.
 
 **Registration
        Rights**
 
 ***Health
        Holdings, Westgate and Quincy***
 
 On
        July
        22, 2005, Naturade entered into a Registration Rights Agreement with Health
        Holdings, Westgate and Quincy providing them with certain rights to require
        the
        Company to register its common stock held by them or issuable to them upon
        the
        conversion of the Series C held by them or the exercise of the HHB Warrant
        or
        the Quincy Warrants. Under this agreement, Health Holdings, Westgate, Quincy
        and
        certain of their transferees had the right at any time after July 22, 2008
        to
        require Naturade to file a registration statement under the Securities Act
        of
        1933 (the “Securities Act”) covering the registrable securities. This agreement
        is no longer effective due to the effectiveness of the Company’s Plan.
 
 ***Laurus***
 
 On
        July
        26, 2005, Naturade entered into a Registration Rights Agreement, which was
        subsequently modified on January 11, 2006 (the “Amended Registration Rights
        Agreement”), with Laurus providing Laurus with certain rights to require the
        Company to register its common stock held by them or issuable to them upon
        the
        exercise of the Laurus Warrant or the Laurus Option. Under this agreement,
        Naturade was required to file a registration statement within 60 days of
        the
        date of the Amended Registration Rights Agreement and have it effective within
        120 days of such date. This agreement is also no longer effective due to
        the
        effectiveness of the Company’s Plan.
 
 **Regulatory
        Matters**
 
 The
        Company’s products are subject to regulation by numerous governmental agencies,
        principally the U.S. Food and Drug Administration (the “FDA”). The Company’s
        products are also subject to regulation by the Consumer Product Safety
        Commission, the U.S. Department of Agriculture, and the Environmental Protection
        Agency. Advertising of our products is subject to regulation by the U.S.
        Federal
        Trade Commission. State local and foreign agencies, regulate Naturade’s products
        where distributed.
 
 Many
        Naturade products, including Naturade Total Soy® and protein powders, are food
        products that are not subject to regulation by the FDA’s drug regulations or the
        Dietary Supplement Health and Education Act of 1994 (“DSHEA”). These food
        products are regulated under the general FDA food regulations and may use
        “structure/function” claims or health claims under appropriate circumstances,
        but unlike dietary supplements, are not required to carry a disclaimer regarding
        an FDA evaluation or disease. Effective October 26, 1999, the FDA approved
        a
        health claim for soy protein allowing the following product label claim: *“25
        grams of soy protein daily, in a diet low in*  *saturated
        fat and cholesterol, may reduce the risk of heart disease*
 
 To
        carry
        this claim, one serving of a product must deliver at least 6.25 grams of
        soy
        protein with no more than three grams of fat and no more than one gram of
        saturated fat. Each of the Company’s soy protein based powders contain between 8
        and 25 grams of soy protein per serving. Naturade is currently shipping products
        that carry this heart disease claim under the brand names of Naturade Total
        Soy®, Naturade 100% SoyTM, Naturade VegTM, Naturade N-R-GTM, and Power
        Shake®.
  18
  The
        Company believes that its products currently are in substantial compliance
        with
        the latest regulations in product labeling, including food (Nutritional Labeling
        Education Act of 1991 or NLEA), dietary supplement (DSHEA), over-the-counter
        drug (OTC Monographs) and cosmetic packaging guidelines. In addition, we
        have
        implemented registration and compliance procedures as required by the recently
        enacted FDA Bioterrorism Act. Naturade retains control of all labels in-house
        and manage label development and usage as an element of quality assurance.
        In
        addition, all formula specifications are developed under the direction of
        the
        Company’s management.
 
 **Backlog**
 
 Naturade
        typically does not carry significant backlog orders and generally maintain
        a
        sufficient supply of the Company’s products to meet customer demands. Naturade’s
        policy is to ship product within seven days of the order being placed. Order
        fill rates had been significantly reduced during bankruptcy due to the Company’s
        inability to secure sufficient regular supply from prior manufacturers. The
        Company has negotiated new supply agreements with two new manufacturers,
        and has
        restored customer order fill rates on most products to normal levels of
        approximately 95% which have not been achieved since  June
        2006 .
 
 **Product
        Research and Development**
 
 Naturade
        has historically devoted substantial resources to new product development
        and
        reformulation. The Company has initiated new product development efforts
        with
        third-party manufacturers who create product formulations, test and develop
        sample production runs of prototype products. Due to industry practice, the
        third-party manufacturers who then negotiate with the Company on final lot
        sizes
        and production costs often absorb these costs. Consequently, Naturade’s direct
        expenses in this area do not reflect the full cost of product research and
        development.
 
 The
        Company’s direct product research and development expenses were $-0- and $48,028
        in the fiscal years ended December 31, 2007and 2006 , respectively.
 
 Naturade
        introduced a carbohydrate blocker in September 2003 under the brand name
        Diet
        LeanTM. Diet Lean Carb Blocker is intended to be the first in a series of
        products to target the weight loss category and to be marketed by us under
        the
        Diet Lean name. In 2004, Naturade introduced a body fat regulator incorporating
        Tonalin® brand Conjugated Linoleic Acid (CLA) that is reported to reduce the
        number of fat cells in the body. Diet Lean® Body Fat Regulator is positioned to
        assist low carbohydrate dieters.
 
 **Employees**
 
 As
        of
        December 31, 2007, Naturade leased, from One World Science Inc., a subsidiary
        of
        Redux, 11 people, including two in administration, seven in sales and marketing
        and three in finance, accounting and information technology. The Company
        began
        leasing employees from One World Science in August 2006 to allow the Company
        to
        maintain continuity of operations during the Bankruptcy, and has no direct
        employees. The Company considers its relations with its leased employees
        to be
        good.
 
 **Item
        1A. Risk Factors**
 
 The
        short
        and long-term success of the Company is subject to certain risks, many of
        which
        are substantial in nature. Shareholders and prospective shareholders in the
        Company should consider carefully the following risk factors, in addition
        to
        other information contained herein. This Annual Report on Form 10-K contains
        forward-looking statements, which are subject to a variety of risks and
        uncertainties. The Company’s actual results could differ materially from those
        anticipated in these forward-looking statements as a result of various factors,
        including those set forth below.
 
 An
        investment in the Company’s common stock involves a high degree of risk. In
        addition to the other information contained in this report, you should  
carefully consider the following risks and uncertainties before purchasing
        the
  Company’s common stock. If any of these risks or uncertainties were to
        occur, the Company’s business, financial condition and operating results could
        suffer   serious harm. In that case, the trading price of the Company’s
        common stock   could decline and you could lose all or part of your
        investment.
  19
  
 ***On
        August 31, 2006 (the “Petition Date”), the Company filed for protection under
        Chapter 11 of the U.S. Bankruptcy Code and emerged from bankruptcy on November
        9
        2007.***
 
 The
        Company’s Plan for emergence form Chapter 11, (see Note 1, *Chapter
        11 Bankruptcy Proceedings* ),
        was
        heard in Bankruptcy Court on October 30, 2007 and approved by the United
        States
        Bankruptcy Court, Central District of California, Santa Ana Division (Case
        No.
        SA 06-11493 RK). The Plan received support from the Company’s creditors and
        shareholders as well as support from the Company’s lenders and the Company’s
        Unsecured Creditors Committee. On November 8, 2007, Redux, the Company’s
        controlling shareholder, invested cash of $1.2 million in Naturade, as required
        by the Plan and on November 9, 2007, the Plan became effective. If for any
        reason the Company cannot satisfy the terms of the Plan, this could have
        an
        adverse impact on the Company, its share price and whether the Company can
        continue as an on going concern.
 
 ***The
        Company may incur future losses which may affect its ability to continue
        as***  ***a
        going concern.***
 
 The
        Company had a net loss of approximately $3.7 million, and $11.3
        million for the fiscal years ended December 31, 2005, and 2006,
        respectively, and a net operating loss of $2,542,649 for the 12 months
        ended December 31, 2007. At December 31, 2007, the Company had an accumulated
        deficit of $601,697, and stockholders’ equity of $5,451,369. The Company may
        incur net losses in the foreseeable future and will need access to additional
        financing for working capital and to expand its business. If unsuccessful
        in
        those efforts, the Company could be forced to cease operations and investors
        in
        its common stock could lose their entire investment. The Company’s independent
        registered public accounting firm issued a going concern opinion on the
        Company’s December 31, 2007 financial statements by including an explanatory
        paragraph in which they expressed substantial doubt about its ability to
        continue as a going concern.
  ***The
        Company’s success depends on current and ongoing financing which may not
        be***  ***available
        or, if available, could result in substantial dilution to
        its***  ***stockholders,
        depress the market price of its common stock and impair
        its***  ***ability
        to raise capital by selling its common stock***
 
 The
        Company’s success is dependent on its current financing as well as new financing
        to support its working capital requirements, acquire additional brands or
        businesses and fund its current operating losses. Additional financing is
        made
        more difficult by the Chapter 11 Bankruptcy since such matter may lower creditor
        confidence in the Company and lending entities may refuse to grant the Company
        a
        loan or line of credit, or if such loan or line of credit is granted, it
        may be
        granted only on terms materially less favorable to the Company than are
        available to its competitors, including, but not limited to, a higher than
        average rate of interest or the issuance of options, warrants or other rights
        to
        acquire its common stock at prices that are, or in the future may be, less
        than
        the market price of its common stock, which could result in substantial dilution
        to its stockholders, depress the market price of its common stock and impair
        its
        ability to raise capital by selling its common stock.
 
 ***The
        Company’s current financial condition could cause third party suppliers
        and***  ***manufacturers
        to refuse to do business with us, or to do so only on
        less***  ***favorable
        terms.***
 
 The
        Company depends upon third-party suppliers and manufacturers, such as Advanced
        Protein Systems and Best Formulations, for its products. The Company does
        not
        have long-term supply agreements and the Chapter 11 Bankruptcy may lower
        vendor
        confidence in it and they may refuse to provide products or do business with
        it,
        or may do so only on less favorable terms, which could cause the Company’s net
        sales to decline. In addition, the Company’s current cash position could result
        in a higher degree of credit risk than normal for its suppliers. As a result,
        supplier pricing may include factors related to this credit risk such as
        the
        absence of cash discounts and the costs of extended terms that increase the
        Company’s cost for product and ultimately decrease our profitability. Any
        unfavorable change in the Company’s cash position could result in additional
        costs for product affecting its profitability. From time to time, the Company
        has experienced difficulties with various vendors requiring it to purchase
        product on cash upon delivery (“COD”) basis. As a result of purchasing on a COD
        basis, The Company could experience significant delays in shipments to its
        customers, which could have a material affect on its operating results. Although
        the Company believes that alternative sources of materials and contract
        manufacturing services are available, the loss of one or more suppliers or
        manufacturers as a result of the Chapter 11 Bankruptcy Matter could have
        a
        material adverse effect on results of operations until an alternative source
        is
        located and has commenced producing the Company’s products. ******
  20
  ***The
        Company’s revenues depend on continued business from the Company’s
        key***  ***customers.***
 
 The
        Company’s three largest customer’s together account for 55.1% of net sales for
        the twelve months ended December 31, 2007. One mass market customer, Sam’s Club,
        represented approximately 24.6% of the Company’s net sales, and two health food
        distributors, United Natural Foods, Inc. (“UNFI”) and Tree of Life, Inc.,
        accounted for 19.5% and 11.0%, respectively, of the Company’s net sales, during
        the twelve months ended December 31, 2007. The loss of any of these customers
        could have a material adverse effect on the Company’s results of operations.
        From time to time, major customers have experienced financial difficulties.
        The
        Company does not have long-term contracts with any of its customers and,
        accordingly, there can be no assurance that any customer will continue to
        place
        orders with the Company to the same extent it has in the past, or at
        all.
  ***If
        the Company’s third-party suppliers or manufacturers fail to timely
        deliver******products
        of acceptable quality or comply with FDA manufacturing guidelines,
        or******raise
        prices, profits may be affected.***
 
 The
        use
        of third-party suppliers and manufacturers and the resulting loss of direct
        control over production could result in the Company’s failure to receive timely
        delivery of products of acceptable quality. Any failure by third party suppliers
        or manufacturers to deliver products, or the delivery of defective products,
        may
        adversely affect the Company’s ability to deliver products to its customers in a
        timely manner and of an acceptable quality. If the Company fails to deliver
        products of acceptable quality in a timely manner, its customers may seek
        alternative sources for its products. The Company’s use of third-party suppliers
        and manufacturers could also reduce its gross profits if the suppliers or
        manufacturers raise prices and the Company cannot find alternative, less
        costly
        sources or pass price increases on to customers.
 
 Although
        the Company requires that the Company’s third-party suppliers and manufacturers
        comply with the FDA manufacturing guidelines, Naturade cannot assure that
        these
        third parties will always act in accordance to these regulations. If the
        manufacturing facilities used by the Company’s third- party suppliers or
        manufacturers did not meet those standards, the production of its products
        could
        be delayed until the necessary modifications are made to comply with those
        standards or alternate suppliers or manufacturers are located. Furthermore,
        the
        potential exists for circumstances to arise which would require the Company
        to
        seek out alternate suppliers or manufacturers who operate in compliance with
        the
        FDA’s requirements.
 
 ***Restrictions
        or requirements imposed by government regulation could result
        in***  ***material
        harm to the Company’s results of operations and financial
        condition.***
 
 The
        Company’s operations, properties and products are subject to regulation by
        various foreign, federal, state and local government entities and agencies,
        including the FDA and the FTC. Among other matters, such regulation is concerned
        with statements and claims made in connection with the packaging, labeling,
        marketing and advertising of the Company’s products. The governmental agencies
        have a variety of processes and remedies available to them, including initiating
        investigations, issuing warning letters and cease and desist orders, requiring
        corrective labeling or advertising, requiring consumer redress, seeking
        injunctive relief or product seizure, imposing civil penalties and commencing
        criminal prosecution.
 
 Weight
        loss products are subject to increased regulatory scrutiny due to intensified
        campaigns by both FTC and FDA. FTC has specifically launched a nation-wide
        law
        enforcement sweep against companies making false weight-loss claims. This
        initiative was created to stop deceptive advertising, provide refunds to
        consumers harmed by unscrupulous weight-loss advertisers, to encourage media
        outlets not to carry advertisements containing bogus weight-loss claims and
        to
        educate consumers to be on their guard against companies promising miraculous
        weight loss without diet or exercise. The FTC campaign identifies seven specific
        claims that they consider suspect, including: “Lose weight without diet or
        exercise”; “Eat what you want and lose weight”; “Weight loss will be permanent”
(even when the user stops using the product); “Block the absorption of fat or
        calories, and lose substantial weight”; “Safely lose more than three pounds per
        week for a period of more than four weeks”; “Substantial weight loss for all
        users”; and “Diet patches, creams, wraps, earrings and other products worn on
        the body or rubbed into the skin that cause substantial weight loss.” If the FDA
        and FTC move beyond their current focus and more closely scrutinize weight
        loss
        products in the retail marketplace, there can be no assurance that this change
        in focus would not have an adverse effect on the sale of the Company’s
        products.
  21
  As
        a
        result of the Company’s efforts to comply with changes in applicable statutes
        and regulations, the Company has from time to time reformulated, eliminated
        or
        relabeled certain of its products and revised certain aspects of its sales,
        marketing and advertising programs. The Company may be subject in the future
        to
        additional laws or regulations administered by federal, state, local or foreign
        regulatory authorities, the repeal or amendment of laws or regulations which
        the
        Company considers favorable, such as the DSHEA, or more stringent
        interpretations of current laws or regulations. The Company cannot predict
        the
        nature of future laws, regulations, interpretations or applications, nor
        can the
        Company predict what effect additional governmental regulations or
        administrative orders, when and if promulgated, would have on its business
        in
        the future. Such future laws and regulations could, however, require the
        reformulation of products to meet new standards, the recall or discontinuance
        of
        products that cannot be reformulated, the imposition of additional record
        keeping requirements, expanded documentation of product efficacy, expanded
        or
        modified labeling and scientific substantiation, including health warnings
        or
        restrictions on benefits described for its products. Any of or all of such
        requirements could hurt sales of the Company’s products or increase its costs,
        resulting in material harm to its results of operations and financial
        condition.
 
 ***The
        Company’s competitors may develop products that are more effective or
        less***  ***costly.***
 
 The
        market for nutraceutical products is highly competitive. Many of the Company’s
        competitors, such as GeniSoy and Health Source by Abbott Labs, have
        substantially greater capital resources, research and development capabilities,
        and manufacturing and marketing resources, capabilities and experience than
        the
        Company. Naturade’s competitors may succeed in developing products that are more
        effective or less costly than any products developed by the Company.
        Additionally, bovine colostrum, the key ingredient in the Symbiotics Brand,
        is a
        very popular health product. Many of the Company’s competitors offer a full line
        of colostrum products in stores and online with claims of high quality at
        low,
        wholesale prices. Success will depend among other things on the Company’s
        ability to out perform the other companies in its marketing and advertising
        efforts.
 
 ***The
        Company’s success depends on its ability to attract and retain
        qualified***  ***personnel.***
 
 The
        Company’s success depends upon its ability to attract and retain qualified
        sales, marketing, scientific and executive management personnel. To
        commercialize its products and product candidates, Naturade must maintain
        and
        expand its personnel, particularly in the areas of product sales and marketing.
        Naturade faces intense competition, and the effects of bankruptcy, for such
        personnel from other companies, academic institutions, government entities
        and
        other research organizations. There can be no assurance that the Company
        will be
        successful in hiring, leasing or retaining qualified personnel. Moreover,
        managing the integration of new personnel could pose significant risks to
        the
        Company’s development and progress and increase its operating
        expenses.
 
 ***Expanding
        the Company’s sales in the mass market resulted in less stable
        demand***  ***for
        the Company’s products and higher costs of
        distribution.***
 
 Although
        traditionally Naturade has been a marketer for the health food market, the
        Company recently built a presence in the mass market. While yielding increased
        revenue, selling to the mass market has also resulted in significant risks
        for
        the Company. Compared to sales in the health food market, the aggregate volume
        of mass market orders can vary significantly from period to period and tends
        to
        be more sensitive to short-term or local variations in market conditions.
        The
        instability can make planning difficult and can cause unexpected reductions
        in
        sales, or in orders that exceed the Company’s short-term capacity, in either
        case resulting in lost revenue. Failure to manage the costs and risks associated
        with the mass market could cause material adverse harm to the Company’s
        business.
 
 ***One
        stockholder has the ability to control the Company.*********
 
 Redux
        (the “Principal Stockholder”) has the ability to control the Company. At
        December 31, 2007, and April 9, 2008, Redux owns 180,025,388 shares of the
        Company’s common stock, or approximately 92.4%. As a result, the Principal
        Stockholder has the ability to elect all of the Company’s directors, control the
        outcome of all matters requiring stockholder approval and control the Company’s
        management and affairs.
  22
  **Future
        sales of equity securities could cause substantial dilution to
        the****Company’s
        stockholders depress the market price of its common stock and
        impair**  ***its
        ability to raise capital by selling its common stock.***
 
 The
        Company may seek to obtain new financing from various sources, including
        the
        sale of its securities. Future sales of common stock or securities convertible
        into common stock at or below recent market prices could result in dilution
        of
        the common stock, depress the market price of the Company’s common stock and
        impair its ability to raise capital by selling its common stock.
 
 ***The
        Company’s future success depends on the Company’s ability to develop
        and***  ***commercialize
        products.***
 
 The
        Company currently is engaged in developing nutraceuticals, which are
        characterized by extensive and costly research and rapid technological progress
        and change. New process developments are expected to continue at a rapid
        pace in
        both industry and academia. The Company’s future success will depend on its
        ability to develop and commercialize its existing product candidates and
        to
        develop new products. There can be no assurance that Naturade will successfully
        complete the development of any of its existing product candidates or that
        any
        of its future products will be commercially viable or achieve market acceptance.
        In addition, research and development and discoveries by others could render
        some or all of our programs or potential product candidates uncompetitive
        or
        obsolete.
 
 ***The
        Company is subject to variability of quarterly results and, therefore,
        its***  ***results
        of operations for any period may not be indicative of future
        periods.***
 
 The
        Company has experienced, and expects to continue to experience, variations
        in
        its net sales and operating results from quarter to quarter. The Company
        believes that the factors that influence this variability of quarterly results
        include the timing of its introduction of new product lines, the level of
        consumer acceptance of each product line, general economic and industry
        conditions that affect consumer spending and retailer purchasing, the
        availability of manufacturing capacity, the timing of trade shows, the product
        mix of customer orders, the timing of placement or cancellation of customer
        orders, the weather, transportation delays, the occurrence of chargeback’s in
        excess of reserves and the timing of expenditures in anticipation of increased
        sales and actions of competitors. Accordingly, a comparison of the Company’s
        results of operations from period to period is not necessarily meaningful,
        and
        its results of operations for any period are not necessarily indicative of
        future performance.
 
 ***The
        Company may not have sufficient resources to address product
        liability***  ***exposure.***
 
 Product
        liability risk is inherent in the testing, manufacture, marketing and sale
        of
        the Company’s products and product candidates, and there can be no assurance
        that the Company will be able to avoid significant product liability exposure.
        The Company may be subject to various product liability claims, including,
        among
        others, that its products include inadequate instructions for use or inadequate
        warnings concerning possible side effects and interactions with other
        substances. Naturade currently maintains general liability insurance and
        product
        liability insurance at levels consistent with industry norms and as required
        by
        the Company’s principal customers. The Company believes such insurance to be
        adequate. There can be no assurance that the Company will be able to maintain
        insurance in sufficient amounts to protect it against such liabilities at
        a
        reasonable cost. Any future product liability claim against the Company could
        result in it paying substantial damages, which may not be covered by insurance
        and may have a material adverse effect on the Company’s business and financial
        condition.
 
 ***The
        Soy protein based foods category is experiencing a decline in
        sales.***
 
 The
        Company’s business consists primarily of selling natural products and functional
        foods, including soy protein-based products. The soy foods category, which
        is a
        significant portion of the Company’s revenues, as a whole has recently
        experienced decreased sales. Other categories of dietary supplements have
        experienced reduced sales in recent periods after several years of dramatic
        growth. In particular, revenues in both the herbal and health food store
        categories have had periods of significant decline. There can be no assurance
        that this general consumer trend will not be experienced by the Company’s
        product categories as well. Even if the Company is successful in increasing
        sales within its market category, a decline in the overall market for natural
        products or functional foods could have a material adverse affect on its
        business.
  23
  ***Adverse
        publicity may affect the Company’s ability to attract and
        retain***  ***distributors.***
 
 The
        Company’s products are formulated with vitamins, minerals, herbs and other
        ingredients that it regards as safe when taken as recommended by the Company
        and
        that scientific studies have suggested may involve health benefits. While
        the
        Company conducts extensive quality control testing on its products, the Company
        generally does not conduct or sponsor clinical studies relating to the benefits
        of its products. The Company is highly dependent upon consumers’ perception of
        the overall integrity of its business, as well as the safety and quality
        of its
        products and similar products distributed by other companies that may not
        adhere
        to the same quality standards as the Company does. The Company could be
        adversely affected if any of its products, or any similar products distributed
        by other companies, should prove harmful or be asserted to be harmful to
        consumers, or should scientific studies provide unfavorable findings regarding
        the effectiveness of such products. The Company’s ability to attract and retain
        distributors could be adversely affected by negative publicity relating to
        it or
        to other direct sales organizations or by the announcement by any governmental
        agency of investigatory proceedings regarding the business practices of the
        Company or other direct sales organizations.
 
 ***The
        Company may not be able to protect its intellectual property which
        could***  ***enable
        other companies to replicate its products.***
 
 The
        Company’s success depends in part on its ability to preserve its trade secrets
        and know-how, and operate without infringing on the property rights of third
        parties. The Company does not have any patents, and as a result another company
        could replicate one or more of its products. The Company’s policy is to pursue
        registrations for all of the trademarks associated with its key products,
        unless
        the cost is prohibitive. The Company relies on common law trademark rights
        to
        protect its unregistered trademarks as well as its trade dress rights. Common
        law trademark rights generally are limited to the geographic area in which
        the
        trademark is actually used, while a U.S. federal registration of a trademark
        enables the registrant to stop the unauthorized use of the trademark by any
        third party anywhere in the United States. The Company is considering the
        registration of its trademarks in certain foreign jurisdictions where its
        products are sold. However, the protection available, if any, in such
        jurisdictions may not be as extensive as the protection available to the
        Company
        in the United States.
  Currently,
        the Company has 53 U.S. trademarks. The Company also maintains trademark
        registrations in approximately 12 foreign countries. Because of its limited
        financial resources, the Company cannot in all cases exhaustively monitor
        the
        marketplace for trademark violations. The Company will evaluate and pursue
        potential infringement on a case-by-case basis in accordance with its business
        needs and financial resources. If the Company is not aware of some infringing
        uses or elects not to pursue them, the value of its trademarks could be
        substantially weakened. If the Company takes action to enforce its intellectual
        property rights, litigation may be necessary. Any such litigation could be
        very
        costly and could distract the Company’s personnel. Due to limited financial
        resources, the Company may be unable to pursue some litigation matters. In
        matters the Company does pursue, it can provide no assurance of a favorable
        outcome. An unfavorable outcome in any proceeding could have a material adverse
        effect on its business, financial condition and results of operations.
  ***New
        products are expensive to introduce and may not be
        successful.***
 
 From
        time
        to time, the Company introduces new products to meet consumer demands and
        counter competitive threats. These new products include product line extensions,
        such as new flavors of currently existing products, as well as new formulations
        or configurations such as Diet Lean® and ReVivexTM. The Company experiences
        significant costs in formulating new products, designing packaging and
        merchandising. There can be no assurance that consumers and retailers will
        accept its new products. In addition, there can be no assurance that once
        new
        products are initially distributed to mass market and health food retailers,
        there will be repeat orders for these new products. Furthermore, expensive
        introductory retailer charges for additional shelf space may negate any initial
        increase in sales.
 
 ***The
        Company’s stock price may be subject to significant
        fluctuations.***
 
 Trading
        in the Company’s common stock is low in volume. The market price of the
        Company’s common stock is likely to be volatile and could be subject to
        significant fluctuations in response to factors such as quarterly variations
        in
        operating results, operating results which vary from the expectations of
        securities analysts and investors, changes in financial estimates, changes
        in
        market valuations of competitors, announcements by the Company or its
        competitors of a material nature, loss of one or more customers, additions
        or
        departures of key personnel, future sales of common stock and stock market
        price
        and volume fluctuations. For the five trading days ended December 31, 2007,
        the
        average daily trading volume of its common stock was 4,000 shares. Additionally,
        investor confidence may be adversely affected by issuance of a going concern
        opinion by the Company’s independent registered public accounting firm, which
        may cause the Company’s stock price to fall. Also, general political and
        economic conditions such as recession, or interest rate or currency rate
        fluctuations, may adversely affect the market price of the Company’s common
        stock.
  24
  ***The
        Company’s common stock is currently deemed to be a “penny stock.” As
        a***  ***result,
        trading of its shares may be subject to special requirements
        which***  ***could
        impede the Company’s stockholders’ ability to resell their
        shares.***
 
 The
        Company’s common stock is a “penny stock” as that term is defined in Rule 3a51-1
        adopted under the Exchange Act because it is selling at a price below $5.00
        per
        share. In the future, if the Company is unable to list its common stock on
        a
        national securities exchange, or the per share sale price is not at least
        $5.00;
        its common stock may continue to be deemed to be a “penny stock.”
 
 Section
        15(g) of the Exchange Act and Rule 15g-2, require broker-dealers dealing
        in
        penny stocks to provide potential investors with a document disclosing the
        risks
        of penny stocks and to obtain a manually signed and dated written receipt
        of the
        document before effecting any transaction in a penny stock for the investor’s
        account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to
        approve
        the account of any investor for transactions in such stocks before selling
        any
        penny stock to that investor. This procedure requires the broker-dealer to
        obtain from the investor information concerning his or her financial situation,
        investment experience and investment objectives; to determine reasonably,
        based
        on that information, that transactions in penny stocks are suitable for the
        investor and that the investor has sufficient knowledge and experience as
        to be
        reasonably capable of evaluating the risks of penny stock transactions; to
        provide the investor with a written statement setting forth the basis on
        which
        the broker-dealer made such determination; and to receive a signed and dated
        copy of such statement from the investor, confirming that it accurately reflects
        the investor’s financial situation, investment experience and investment
        objectives.
 
 Compliance
        with these requirements may make it more difficult for holders of the Company’s
        common stock to resell their shares to third parties or to otherwise dispose
        of
        them.
 
 **Item
        1B. Unresolved Staff Comments**
 
 None.
 
 **Item
        2. Properties**
 
 In
        December 1998, the Company signed a 7 1/2 year lease for a facility including
        new executive offices, sales and marketing offices and warehouse located
        in
        Irvine, California. This 50,000 square foot facility included a 40,000 square
        foot finished goods warehouse area configured with a high-density steel rack
        and
        frame storage floor plan. This maximum cubic space utilization provided the
        Company with reasonably sufficient warehousing capacity for the term of the
        lease, specifically in light of the Company’s decision to outsource production,
        thereby eliminating the need for any manufacturing space. The lease agreement
        included an approximate 9% rent increase after the second, fourth and sixth
        year
        of the lease period, with a 60-month extension after the initial lease term
        at
        the prevailing market rental rate. On November 1, 2005, the Company agreed
        to an
        extension of the lease until September 30, 2013. This extension resulted
        in a
        decrease in the monthly rent from $35,382 per month to $29,900 beginning
        on
        October 1, 2006 increasing to $30, 897 on October 1, 2007, $32,392 on October
        1,
        2008, $33,389 on October 1, 2009, $34,884 on October 1, 2010, $36,379 on
        October
        1, 2011 and $37,874 on October 1, 2012.
 
 As
        a
        result of the Company’s filing for protection under Chapter 11 of the US
        Bankruptcy Code, the Company requested that the Court reject this lease
        agreement; and, in September 2006, the Court approved the
        rejection.
 
 On
        September 1, 2006, the Company entered into a sub-lease agreement with One
        World
        Science Inc, a subsidiary of Redux, whereby the Company sub-leased approximately
        9,000 square feet of office space for its corporate headquarters in Brea,
        California. The lease called for monthly payments of $10,000 (which covered
        office space and many other services) and was on a month to month basis.
        The
        Company vacated these premises on May 18, 2007.
  25
  On
        March
        21, 2007, the Company entered into a sub-lease agreement with First American
        Default Management Solutions, LLC, whereby the Company sub-leases approximately
        5,357 square feet of office space for its corporate headquarters in Anaheim,
        California. The lease calls for monthly payment of $9,479 and has a term
        of two
        years.
 
 **Item
        3. Legal Proceedings**
 
 The
        following litigation matters are currently pending:
 
 **a)
        Naturade, Inc. v. Doyle & Boissiere, LLC; Health Holdings and Botanicals,
        LLC; Quincy Investments Corp.: Peter H. Pocklington: William B. Doyle, Jr.;
        Lionel P. Boissiere; and Does 1-70 (** **Orange
        County Superior Court, State of California, Case No.:
        07CC02752)** ,  The
        lawsuit was filed on February 9, 2007. Health Holdings and Botanicals, LLC
        and
        Doyle & Boissiere, LLC, entered into a Global Settlement Agreement with
        Naturade in connection with the then pending Chapter 11 proceedings by which
        the
        parties compromised and agreed to terms relating to certain claims these
        defendants have against Naturade in the Chapter 11 proceedings. In exchange
        for
        these compromises and terms, Naturade agreed to dismiss Health Holdings and
        Botanicals, LLC and Doyle & Boissiere, LLC as well as defendants Lionel P.
        Boissiere and William B. Doyle from the litigation pending in Orange County
        Superior Court.
 
 Naturade
        would like to dismiss Health Holdings and Botanicals, LLC and Doyle &
Boissiere, LLC, but the Settlement Agreement requires a Motion for Good Faith
        Settlement so these Defendants are still in the Case for that limited purpose.
        In the meantime, Naturade will continue to pursue the litigation against
        Peter
        H. Pocklington and Quincy Investments Corp. until default, judgment, or other
        resolution of the case, and during the week of February 17, 2008, the court
        granted Naturade’s Motion for Leave to Amend the Complaint against the remaining
        defendants amending the complaint, with Redux interceding as a plaintiff
        against
        Quincy Investments Corp. and Peter H. Pocklington. Among the various causes
        of
        action by Redux will be Intentional Misrepresentation (Fraud).
 
 b) **Naturade,
        Inc. v. NBTY, Inc. d/b/a Omni-Pak Industries**  **(United
        States Bankruptcy Court, Adversarial Case No.: SA07-1057RK)** Filed on
        February 15, 2007. This litigation was being prosecuted on behalf of Naturade
        by
        the law firm of WINTHROP COUCHOT the Company’s bankruptcy attorneys. The nature
        of the lawsuit and the progress of the case is as follows:
 
 On
        December 11, 2006, NBTY, Inc. (“NBTY”) filed proof of claim against Naturade’s
        bankruptcy estate alleging a general unsecured claim in the amount of
        $660,774.10 (‘NBTY Claim”). Naturade disputes the NBTY Claim, but has yet to
        file a formal objection to the NBTY Claim.
 
 On
        February 15, 2007, Naturade filed a complaint against NBTY d/b/a/ Omni-Pak
        Industries seeking to avoid and recover approximately $191,480.81 of
        preferential transfers of property under Bankruptcy Code Section 547 and
        550
        (“NBTY Complaint”). On or about November 7, 2007, the case was settled and
        settlement payments were received.
 
 c) **Naturade,
        Inc. v. Yellow Transportation** **(United
        States Bankruptcy Court, Adversarial Case No.: SA07-1055RK).** Filed
        on
        February 14, 2007, this litigation is being prosecuted on behalf of Naturade
        by
        the law firm of Winthrop Couchot, the Company’s bankruptcy attorneys. The nature
        of the lawsuit and the progress of the case is as follows:
 
 On
        November 6, 2006, Yellow Transportation (“YT”) filed proof of claim against
        Naturade’s bankruptcy estate alleging a general unsecured claim in the amount of
        $60,336.88 (“YT Claim”). Naturade disputes the YT Claim, but has yet to file a
        formal objection to the YT Claim.
 
 On
        February 14, 2007, Naturade filed a complaint against YT seeking to avoid
        and
        recover approximately $191,761.02 of preferential transfers of property under
        Bankruptcy Code Section 547 and 550. On or about November 7, 2007, case was
        settled and payments were received.
  26
  d) **Naturade,
        Inc. v. United Parcel Service, Inc.**  **(United
        States Bankruptcy Court, Adversarial Case No.: SA07-1056RK)** Filed on
        February 14, 2007. On November 6, 2006, UPS filed a proof of claim asserting
        an
        unsecured claim in the amount of $11,997.96 (“UPS Claim”). On February 14, 2007,
        the Company filed a complaint against UPS to avoid and recover approximately
        $22,784.68 of preferential transfers of property under Bankruptcy Code Sections
        547 and 550 (“UPS Complaint”). On April 9, 2007, the Company filed and served a
        motion seeking court approval of a settlement agreement with UPS that provides
        for UPS to pay the Company $3,500.00 and waive any and all other claims against
        the Company as consideration for the Company’s dismissal of the UPS Complaint
        with prejudice. The Court approved the settlement.
 
 **e)
        Claims and Other Bankruptcy Related Litigation:** Objections
        to certain claims filed against the Company’s bankruptcy estate have been
        prosecuted by the Company which has resulted in the reduction or elimination
        of
        certain claims filed in the bankruptcy case.
 
 The
        Company has fully accrued the amounts claimed in these suits as of December
        31,
        2007. ****
 
 **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 None
  27





**PART
      II**





**Item
              5.**
            **Market
                for the Registrant’s Common Equity, Related
                Stockholder****Matters
                and Issuer Purchases of Equity
                Securities**





**Market
      Information**





The
      Company’s common stock began trading on the over-the-counter securities market
      in the third quarter of 1991 under the symbol NRDC.OB. The over-the-counter
      market quotations reflect interdealer bid prices, without retail markup,
      markdown or commission, and may not necessarily represent actual transactions.
      The prices appearing below were obtained from the National Quotation Bureau.
      The
      Company’s stock was delisted from the over-the-counter bulletin board on
      September 25, 2006, but regained its listing on January 15, 2008, under the
      symbol NRDCQ.OB





**Fiscal
                2007**
            
            **High**
            
            **Low**1st
                Quarter
            
            $
            .10
            
            $
            022nd
                Quarter
            
            
            .04
            
            
            .023rd
                Quarter
            
            
            .04
            
            
            .024th
                Quarter
            
            
            .05
            
            
            .02





**Fiscal
                2006**
            
            **High**
            
            **Low**1st
                Quarter
            
            $
            .20
            
            $
            .102nd
                Quarter
            
            
            .15
            
            
            .073rd
                Quarter
            
            
            .15
            
            
            .034th
                Quarter
            
            
            .05
            
            
            .03





On
      March
      26, 2008, the last reported price for the Company’s common stock was $.09.
      Stockholders are urged to obtain current market quotations for the Company’s
      common stock.





**Holders**





To
      the
      best knowledge of the Company, the number of record holders of common stock
      as
      of December 31, 2007 was 507 and approximately 250 additional shareholders
      hold
      the common stock in “street name.”





**Dividends**





The
      Company did not pay a cash dividend on its common stock during 2007 and 2006,
      and it does not anticipate paying any cash dividends in the foreseeable future.
      It intends to retain any future earnings to provide funds for the expansion
      of
      its business. The declaration and payment of cash dividends in the future will
      depend upon its earnings, financial condition, capital needs and other factors
      deemed relevant by its board of directors. The Company’s ability to pay
      dividends is limited by the provisions of Delaware law and the approval rights
      granted to Laurus. See “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations - Liquidity and Capital Resources – *Laurus
      Financing.* ”




**Recent
      Sales of Unregistered Securities**





None




28


**Item
      6. Selected Financial Data**





The
      following tables summarize certain selected financial data for the years
      presented and should be read in conjunction with the more detailed information
      and financial statements, including notes thereto, presented elsewhere herein.
      The periods from January 1, 2007 to November 8, 2007 ( Predecessor Company)
      and
      From November 9, 2007 to December 31, 2007 (Successor Company) were audited
      by
      Haskell & White LLP, and the year ended December 31, 2006 (Predecessor
      Company) was audited by Squar, Milner, Peterson, Miranda & Williamson, LLP.
      The following table was derived from such audited financial statements.





**STATEMENT
      OF OPERATIONS DATA**





**Successor Company**
            
            
            
            **Predecessor Company**Period from
              November 9, 2007 to
              December 31, 2007
            
            
            
            Period from
              January 1, 2007 to
              November 8, 2007
            
            
            
            Year ended
              December 31, 2006Net
                Sales
            
            $
            1,332,051
            
            
            100.0
            %
            $
            5,371,539
            
            
            100.0
            %
            $
            9,432,019
            
            
            100.0
            %Gross
                profit
            
            
            457,513
            
            
            34.3
            %
            
            1,894,738
            
            
            35.3
            %
            
            3,315,867
            
            
            35.2
            %Selling,
                general & administrative expenses
            
            
            462,521
            
            
            34.7
            %
            
            2,953,281
            
            
            55.0
            %
            
            7,542,707
            
            
            80.0
            %Impairment
                of goodwill
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            2,694,357
            
            
            28.6
            %Impairment
                of customer lists
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            1,049,336
            
            
            11.1
            %Reorganization
                professional fees
            
            
            -
            
            
            0.0
            %
            
            1,089,260
            
            
            20.3
            %
            
            410,306
            
            
            4.4
            %Depreciation
            
            
            233
            
            
            0.0
            %
            
            12,005
            
            
            0.2
            %
            
            56,723
            
            
            0.6
            %Amortization
            
            
            127,421
            
            
            9.6
            %
            
            250,179
            
            
            4.7
            %
            
            835,681
            
            
            8.9
            %Operating
                loss
            
            
            (132,662
            )
            
            (10.0
            )%
            
            (2,409,987
            )
            
            (44.9
            )%
            
            (9,273,243
            )
            
            (98.3
            )%Other
                income (loss):Gain
                on sale of brand
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %Gain
                on expiration of warrants
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %Reorganization
                items
            
            
            -
            
            
            0.0
            %
            
            6,895,263
            
            
            128.4
            %
            
            -
            
            
            0.0
            %Change
                in derivitive liabilities
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            1,285,797
            
            
            13.6
            %Interest
                expense:
            
            
            
            
            
            0.0
            %
            
            
            
            
            0.0
            %
            
            
            
            
            0.0
            %Interest
                expense:
            
            
            (398,612
            )
            
            (29.9
            )%
            
            (225,768
            )
            
            (4.2
            )%
            
            (726,756
            )
            
            (7.7
            )%Deferred
                financing fees
            
            
            (70,423
            )
            
            (5.3
            )%
            
            (601,865
            )
            
            (11.2
            )%
            
            (2,464,399
            )
            
            (26.1
            )%Total
                interest expense
            
            
            (469,035
            )
            
            (35.2
            )%
            
            (827,633
            )
            
            (15.4
            )%
            
            (3,191,155
            )
            
            (33.8
            )%Loss
                on sale of assets
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            (59,257
            )
            
            (0.6
            )%Other
            
            
            -
            
            
            0.0
            %
            
            17,274
            
            
            0.3
            %
            
            (12,200
            )
            
            (0.1
            )%Income
                (loss) before provision for income taxes and reorganization items
                (Note
                )
            
            
            (601,697
            )
            
            (45.2
            )%
            
            3,674,917
            
            
            68.4
            %
            
            (11,250,058
            )
            
            (119.3
            )%Provision
                for income taxes
            
            
            -
            
            
            0.0
            %
            
            (14,099
            )
            
            (0.3
            )%
            
            800
            
            
            0.0
            %Net
                income (loss)
            
            
            (601,697
            )
            
            (45.2
            )%
            
            3,689,016
            
            
            68.7
            %
            
            (11,250,858
            )
            
            (119.3
            )%Less:Preferred
                stock dividends-Series B
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %Deemed
                dividends-Series B
            
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %
            
            -
            
            
            0.0
            %Deemed
                dividends- Series C
            
            
            -
            
            
            0.0
            %
            
            (2,300,000
            )
            
            (42.8
            )%
            
            (2,760,000
            )
            
            (29.3
            )%Net
                loss attributable to Common Shareholders
            
            $
            (601,697
            )
            
            (45.2
            )%
            $
            1,389,016
            
            
            25.9
            %
            $
            (14,010,858
            )
            
            (148.5
            )%Basic
                and diluted earnings per share
            
            $
            (0.00
            )
            
            
            
            $
            0.03
            
            
            
            
            $
            (0.33
            )Weighted
                average number of shares used in computation of basic and diluted
                net loss
                per share
            
            
            194,908,121
            
            
            
            
            
            43,332,733
            
            
            
            
            
            42,619,350




29


**BALANCE
      SHEET DATA**


**As of:****Successor Company**
              
              **Predecessor Company**December 31, 2007
              
              November 8,
                2007
              
              December 31,
                2006Cash
                  and cash equivalents
              
              $
              274,733
              
              $
              176,131
              
              $
              80,713Working
                  capital (deficiency)
              
              
              (575,255
              )
              
              (10,491,329
              )
              
              (1,728,224
              )Total
                  assets
              
              
              10,807,837
              
              
              2,098,992
              
              
              2,948,553Long
                  term debt
              
              
              4,052,266
              
              
              2,427,137
              
              
              2,015,905Total
                  stockholders' equity (deficit)
              
              $
              5,451,369
              
              $
              (20,297,610
              )
              $
              (16,964,174
              )





**Item
      7. Management’s Discussion and Analysis of Financial Condition and
      Results**  **of
      Operations**





The
      following discussion and analysis of the Company’s financial condition and
      results of operations should be read in conjunction with “Item 6. Selected
      Financial Data” and the financial statements and related notes attached to this
      report. This discussion and analysis contains forward-looking statements that
      involve risks, uncertainties and assumptions. The Company’s actual results may
      differ materially from those anticipated in these forward-looking statements
      as
      a result of certain factors, including, but not limited, to those set forth
      under “Item 1A Risk Factors” and elsewhere in this report.





**General**





The
      Company is a branded natural products marketing company focused on growth
      through innovative products designed to nourish the health and well being of
      consumers. The Company competes in the overall market for natural, nutritional
      supplements primarily in the segment defined by *Nutrition
      Business Journal* (“NBJ”),
      a San Diego-based research publication that specializes in this industry, as
      Supplements.





Within
      the broad soy foods market, segments such as meal replacement drinks, soy milk
      and bars have outperformed other categories. The Company’s products include
      Naturade Total Soy®, a full line of nutritionally complete meal replacements for
      weight loss and cholesterol reduction available in several flavors of powders,
      Naturade® protein powders, ReVivexTM healthy joint and arthritis pain relief
      products, Diet Lean® products focused on the low carb dieter, SportPharma®
sports nutrition products and other niche dietary supplements. The Company’s
      products are sold in supermarkets, mass merchandisers, club stores, drug stores,
      natural food supermarkets and over 5,000 independent health food
      stores.





***Chapter
      11 Filing***





On
      August
      31, 2006, the Company filed a voluntary petition for protection and
      reorganization under Chapter 11 of the Bankruptcy Code in Bankruptcy Court.
      From
      the Petition Date until the Effective Date, the Company conducted its activities
      as a debtor-in-possession under the Bankruptcy Code. See Note 1, *Chapter
      11 Bankruptcy Proceedings* for
      additional information.





The
      Company’s Plan of Reorganization, as modified (the “Plan”) was heard in
      Bankruptcy Court on October 30, 2007 and approved by the Bankruptcy Court,
      Santa
      Ana Division (Case No. SA 06-11493 RK). The Plan received support from the
      Company’s creditors and shareholders as well as support from the Company’s
      lenders and the Company’s Unsecured Creditors Committee. On November 8, 2007,
      Redux, the Company’s controlling shareholder, invested $1.2 million in Naturade,
      as required by the Plan and on November 9, 2007, the Plan became effective.
      A
      copy of the Plan is posted at www.naturade.com ,
      under
      Investor Relations.





In
      addition to the $1.2 million cash infusion by Redux, of which $700,000 was
      paid
      to the administrative creditors, and most of the balance was allocated to the
      Company’s future working capital needs, the Plan included a comprehensive debt
      restructuring. The Plan also features an equity allocation in Redux and allows
      for the retention of an equity interest by existing shareholders in the Company.
      All Company Series C Preferred shares, along with its voting and control rights,
      all options, all warrants, and all registration rights, have been cancelled
      as
      required under the Plan. The Company issued to Redux enough shares of common
      stock to give Redux 95% equity and voting interest in the Company, with all
      remaining shareholders holding a total 5% equity interest in the Company.
      Pursuant to the U. S Bankruptcy Code, and the Plan, the new common shares being
      issued to Redux will be exempt from the registration requirements of the
      securities laws. The common shares currently issued will retain their registered
      status.





The
      accompanying financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States (“GAAP”)
      applicable to a going concern, which assume that assets will be realized and
      liabilities are discharged in the normal course of business. As a result of
      the Chapter 11 Bankruptcy (see Note 1 to the Financial Statements) such
      realization of assets and liquidation of liabilities was subject to uncertainty.
      For financial reporting purposes, those unsecured liabilities and obligations
      whose disposition is dependent on the outcome of the Chapter 11 Bankruptcy
      had
      been segregated and classified as liabilities subject to compromise in the
      December 31, 2006 balance sheet.




30




Financial
      accounting and reporting during a Chapter 11 Bankruptcy for an entity with
      the
      expectation of reorganizing is prescribed in Statement of Position No. 90-7,
      “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”
(“SOP 90-7”). Accordingly, unsecured pre-petition liabilities, which are subject
      to settlement, were classified as liabilities subject to compromise in the
      December 31, 2006 balance sheet. In addition, the Company had reported all
      transactions (other than interest expense) directly related to the Chapter
      11
      Bankruptcy as reorganization items in its statement of operations for the period
      ended November 7, 2007 and the year ended December 31, 2006. SOP 90-7's
      definition of reorganization items excludes (1) interest expense and (2)
      transactions required to be reported as discontinued operations or extraordinary
      items in conformity with GAAP.





On
      September 25, 2006, the Company's common stock was de-listed from the
      over-the-counter Bulletin Board. The Company regained its listing on the
      over-the-counter Bulletin Board on January 15, 2008, under the symbol
      NRDCQ.OB.





***Change
      in Control***




On
      August
      10, 2006, Quincy Investments Corp. (“Quincy”), the then principal shareholder of
      the Company, subsequent to executing a Letter of Intent of July 26, 2006 with
      Redux to transfer to Redux Quincy’s controlling interest in Naturade, as
      reported on the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 2, 2006, entered into the Quincy Transfer Agreement,
      pursuant to which:





·
            Quincy
                transferred 28 million shares of the Company’s common stock,4.2 million
                shares of Series C and 14 million warrants to purchase the Company’s
                common stock to Redux;·
            Redux
                agreed to make cash contributions up to $500,000, at its sole discretion,
                to the Company;·
            Redux
                and Quincy agreed to attempt to complete a Definitive Agreement by
                August
                31, 2006.·
            Quincy
                withheld 3,372,345 shares of the Company’s common stock in violation of
                the Quincy Transfer Agreement.




On
      August
      31, 2006 Laurus entered into an agreement with Redux, the principal shareholder
      of the Company, (the “Redux Agreement”) pursuant to which:





·
            Laurus
                Master Fund, Ltd. (“Laurus”) transferred 1,050,000 shares of the Company’s
                common stock to Redux;·
            Laurus
                transferred warrants to purchase 1,500,000 shares of the Company’s common
                stock at $0.80 per share to Redux which were cancelled upon
                transfer;·
            Laurus
                transferred an option to purchase 8,721,375 shares of the Company’s common
                stock at $0.001 per share to Redux (the “Laurus
                Options”);·
            Redux
                issued 574,787, shares of Redux common stock to Laurus, subject to
                certain
                provisions for anti-dilution.





On
      April
      13, 2007, Redux issued Laurus a cashless warrant to purchase up to 700,000
      shares of Redux common stock, in consideration of Laurus waving all prepayment
      penalties and charges associated with the Laurus obligations.





On
      November 16, 2006, Redux acquired 500,000 shares of the Company’s common stock
      and warrants to purchase 3,647,743 shares of the Company’s common stock from
      Liberty Company Financial, LLC (“Liberty”) and in exchange issued to Liberty
      28,116 shares of Redux common stock.





As
      a
      result of the transactions described above, Redux controlled voting rights
      of
      29,550,000 shares of Company’s common stock and 4,200,000 shares of Series C, or
      68.2% of the voting power of the Company’s common stock, 20.0% of the voting
      power of the Series C, and 52.5% of the combined voting power of the Company’s
      common stock and the Series C. The holders of the Series C were entitled to
      vote
      along with the Company’s common stock (on an as-converted basis) on all matters,
      including the election of directors, presented to the stockholders. As a result,
      prior to the Effective Date, Redux had the power to elect a majority of the
      Company’s Board of Directors and to determine the outcome of any matter
      submitted to the stockholders, subject to the rights of the holders of the
      Series C described above. If the Laurus Options were included, these percentages
      increased.




31




On
      the
      Effective Date, all Company Series C Preferred shares, along with their voting
      and control rights, all options, all warrants, and all registration rights,
      were
      cancelled as required under the Plan. The Company, as required by the Plan,
      issued Redux 150,475,388 shares of common stock, giving Redux 180,025,388 shares
      of common stock or 95% equity and voting interest in the Company. The remaining
      shareholders retained a total 5% equity interest in the Company, with 8,510,388
      shares of common stock. The computation did not include the 3,372,345 shares
      of
      common stock subject to Stop Orders.





**Results
      of Operations**





The
      following table sets forth, for the periods indicated, the percentage which
      certain items in the statement of operations data bear to net
      sales.


**Percent of Net Sales****Successor**
                **Company**
              
              **Predecessor Company**Period from
                November 9,
                2007 to
                December 31,
                2007
              
              Period from
                January 1,
                2007 to
                November 8,
                2007
              
              Year ended
                December 31,
                2006Net
                  Sales
              
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %Gross
                  profit
              
              
              34.3
              %
              
              35.3
              %
              
              35.2
              %Selling,
                  general and administrative expense.
              
              
              34.7
              %
              
              55.0
              %
              
              80.0
              %Goodwill
                  impairment
              
              
              0.0
              %
              
              0.0
              %
              
              28.6
              %Impairment
                  of customer lists
              
              
              0.0
              %
              
              0.0
              %
              
              11.1
              %Reorganization
                  professional fees
              
              
              0.0
              %
              
              20.3
              %
              
              4.4
              %Operating
                  loss
              
              
              (10.0
              )%
              
              (44.9
              )%
              
              (98.3
              )%Interest
                  expense
              
              
              (35.2
              )%
              
              (15.4
              )%
              
              33.8
              %Loss
                  on sale of assets
              
              
              0.0
              %
              
              0.0
              %
              
              0.6
              %Other
                  income (loss)
              
              
              0.0
              %
              
              0.3
              %
              
              0.1
              %Income
                  (loss) before provision for income taxes
              
              
              (45.2
              )%
              
              68.4
              %
              
              (119.3
              )%Provision
                  for income taxes
              
              
              0.0
              %
              
              (0.3
              )%
              
              0.0
              %Net
                  income (loss)
              
              
              (45.2
              )%
              
              25.9
              %
              
              (119.3
              )%




**Major
      trends that affected the Company’s results of operations in
      2007**





The
      major
      trends of our results of operations for the 12 months ended December 31, 2007
      included the following:





•
            The
                filing for and eventual emergence from Chapter 11 Bankruptcy protection
                by
                the Company had a significant effect on revenues and earnings for
                the
                period. The filing resulted in product sourcing delays, customer
                order
                reductions, increased product costs and a significant increase in
                professional fees related to the
                reorganization.





**•**
            The
                general softness in the grocery segment related to competition from
                Wal-Mart and club stores continued to move consumers from historical
                purchasing patterns. We believe this trend is likely to
                continue.





***2007
      Compared to 2006***





The
      following analysis compares the 12 months ended December 31, 2007 which is
      composed of the predecessor company for the period from January 1, 2007 to
      November 8, 2007 and the successor company from November 9, 2007 to December
      31,
      2007.





***Net
      Sales***





Net
      sales
      for 2007 decreased $2,728,429 or 28.9%, to $6,703,590 from $9,432,019 for 2006.
      The decrease in net sales is due principally to the effects of the Chapter
      11
      filing. As a result of the filing, Naturade had difficulty filling orders until
      product sourcing could be secured. Naturade’s ability to meet retailer demands
      was interrupted resulting in a subsequent significant decrease in customer
      orders and revenues. As of December 31, 2007, no significant customers notified
      Naturade that they were discontinuing purchasing from Naturade.





Net
      Sales
      are calculated based upon gross revenues less certain allowances.





For
      2007,
      distributor and promotional allowances were a credit of $12,146, or 0.2% of
      gross sales, compared to an expense of $704,815, or 6.1% of gross sales, for
      the
      same period in 2006.  The
      decrease in distributor and promotional allowances is a result of the decrease
      in sales to mass merchants during the period. Mass merchants generally require
      more promotional allowances than do health food distributors. Damages and
      returns for 2007 were $295,234, or 4.2 % of gross sales, as compared to
      $755,458, or 6.5 % of gross sales, for 2006. Lower sales and the decreased
      sales
      to the mass market have accounted for the reduction in returns. Cash discounts
      for 2007 were $99,674, or 1.4% of gross sales, as compared to $120,784, or
      1.0%
      of gross sales, in the same period of 2006. The decrease in cash discounts
      is
      directly related to the decrease in sales for the period. Slotting charges
      related to new distribution for 2007 were a credit of $4,159, or 0.06% of gross
      sales, as compared to an expense of $198,590, or 1.7% of gross sales, in 2006.
      Coupon and rebate redemption for 2007 was $-0-, as compared to $10,740, or
      0.1%,
      in the same period of 2006.




32




Mass
      market net sales for 2007 increased $761,049, or 22.9%, to $4,090,551 from
      $3,329,502 for 2006. Typically, customers who depend on 100% fill rates to
      maintain sufficient quantity of product for sale to consumers such as mass
      market customers, will be the first to make a product switch when a supplier
      does not invest sufficiently in consumer marketing to “pull” product thru
      retail, and when a supplier files for Chapter 11 protection. Naturade sales
      suffered in 2007 from these factors however, its major mass market customer
      Sam’s Club, continues to carry Naturade Total Soy in a significant number of
      clubs increasing volume sales year over year.





For
      2007,
      health food channel net sales decreased $3,489,478, or 57.2 %, to $2,613,039
      from $6,102,517 for 2006. The sales decrease is due principally to sourcing
      problems related to the Company’s Chapter 11 Bankruptcy filing. In late 2007,
      the Company has secured reliable product sourcing and is increasing its fill
      rates in this channel with a goal to increase revenues in 2008 .





On
      a
      percent of net sales basis, the breakdown of sales between the mass market
      and
      health food channels was 39.0% for the health food channel and 61.0% for the
      mass market channel for 2007 as compared to 64.7% for the health food channel
      and 35.3%, respectively, for the same period in 2006. The increase in the mass
      market as a percent of total sales is due principally to the reduction in sales
      encountered in the health food channel in 2007 as a result of the Chapter 11.
      The majority of the loss in the mass market incurred early in the Chapter 11
      proceedings during fiscal 2006.





For
      2007
      the top 40 customers accounted for $5,553,012, or 78.4%, of net sales, with
      24
      health food customers contributing $3,381,338 or 47.7%, of net sales, 2 mass
      market customers contributing $1,748,161 or 24.7%, of net sales, and 4
      international customers contributing $423,513, or 6.0%, of net sales. This
      compares to the top 40 customers accounting for $8,290,520, or 87.9%, of net
      sales, with 23 health food customers contributing $4,231,801 or 44.8%, of net
      sales, 14 mass market customers contributing $3,780,188 or 40.1%, of net sales,
      and three international customers contributing $278,531, or 3.0%, of net sales
      for 2006.





For
      2007,
      the top 40 products represented $ 5,929,822 or 88.5%, of net sales, with 16
      Symbiotics products contributing $ 2,142,983 or 32.0% of net sales, 4 Naturade
      Total Soy® products contributing $ 1,945,115 or 29.0%, of net sales, 10 protein
      powders contributing $ 851,443 or 12.7 % of net sales, 3 Ageless products
      contributing $ 199,007 or 3.0 % of net sales and 7 other products contributing
      $
      791,275 or 11.8% of net sales. This compares the top 40 products represented
      $6,694,566 or 71.0%, of net sales, with 8 Naturade Total Soy® products
      contributing $2,529,576 or 26.8%, of net sales, 13 protein powders contributing
      $1,741,815 or 18.5% of net sales, 5 ReVivexTM products contributing $432,616 or
      4.6% of net sales, and 14 other products contributing $1,990,559 or 21.1%
 of net sales in 2006.





For
      both
      periods, the Company considers the 10 divisions of UNFI which represented 19.5%
      and 18.4% of net sales for 2007 and 2006 respectively and the six divisions
      of
      Tree of Life which represented 11.0% and 11.6% of net sales for 2007 and 2006
      respectively as separate customers for purposes of this top 40 list, because
      of
      their ability to make independent purchasing decisions regarding the Company’s
      products. In “Item
      1.
      Business—General”, the divisions of these two entities are combined under their
      corporate parent to reflect three major customers.





*Gross
      Profit*





Gross
      profit for 2007 decreased 29.1% to $2,352,251 or 35.1% of net sales, from
      $3,315,867 or 35.2% for 2006. The decrease is principally a result of lower
      sales for the period and the effects of Bankruptcy. Gross profit, as a
      percentage of sales was flat at 35.1% in 2007 as compared to 35.2% of net sales
      in 2006. The stability of gross profit margins as a percent of sales is due
      to
      the Company’s ability to obtain a stable supply source in early
      2007.





*Operating
      Costs and Expenses*





Operating
      costs and expenses for 2007 decreased 61% to $4,894,900, or 93% of net sales,
      from $12,589,110, or 133.5% of net sales for 2006. Operating expense for the
      period includes one-time charges totaling $1,089,260 for reorganization
      professional fees compared to $410,306 in 2006. Selling, general and
      administrative expenses decreased $4,126,906 from $7,542,707 during the year
      ended December 31, 2006, to $3,415,802 during the year ended December 31, 2007.
      This decrease was principally the result of reduced sales and marketing
      expenses, staff reductions and smaller facilities. Additionally, operating
      expense for the period includes a non-cash charge of $277,600 in amortization
      of
      intangible assets acquired in acquisitions as compared to a similar charge
      of
      $835,681 for the same period in 2006. In 2006, the Company incurred impairment
      charges of $2,694,357 in goodwill and $1,049,336 in Customer Lists as a result
      of devaluations due to the Company’s Chapter 11 proceedings. Prospectively,
      management expects future amortization expenses associated with the Company’s
      intangible assets to increase as a result of the Company’s use of Fresh-Start
      Accounting on November 9, 2007.




33




*Interest
      Expense*





Interest
      expense for 2007 decreased $1,894,484 to $1,296,668 from $3,191,155 compared
      to
      the same period in 2006 principally due to the decrease of $1,792,111 in
      amortization of deferred financing fees and debt discounts in 2007 related
      to
      the reduction of deferred financing fees capitalized as a result of the
      Company’s Chapter 11. In addition, a stay on interest on certain borrowings
      related to pre-petition debt resulted in a reduction of interest expense during
      the period. Prospectively, management expects future non-cash interest expenses
      to be significant as debt discounts associated with the Company’s debt
      instruments are amortized into interest expense over their expected
      terms.




***Liquidity
      and Capital Resources***





On
      August
      31, 2006, the Company filed a voluntary petition for protection and
      reorganization under Chapter 11 of the Bankruptcy Code. Since the Petition
      Date
      through November 8, 2007, the Company has conducted activities as a
      debtor-in-possession under the Bankruptcy Code. See Note 1, *Chapter
      11 Bankruptcy Proceedings* for
      additional information.





The
      Company’s credit facility consisted of a three year Credit and Security
      Agreement (the “Credit Agreement”) with Laurus Master Fund, LLP (“Laurus”) which
      was entered into on July 22, 2005. The Credit Agreement allowed for maximum
      borrowings of up to $4,000,000, of which $3,000,000 was a revolving note and
      $1,000,000 was a term note. On January 6, 2006, the Credit Agreement was amended
      whereby the term loan was increased to $1,650,000.





On
      August
      31, 2006, prior to the Company’s filing under Chapter 11 of the US Bankruptcy
      Code, Laurus and Redux agreed to cause the Company to do the following (the
      “Financing Changes”):





·
            Laurus’
                claim in the approximate amount of $2,900,000 would be treated as
                fully
                secured and the liens granted Laurus pursuant to the Financing Agreement
                will remain without modification.


·
            Laurus
                would provide debtor in possession financing (“DIP”) pursuant to the terms
                and conditions of the financing
                agreement.


·
            Interest
                would continue to accrue on the Term Loan pursuant the terms of the
                Financing Agreement however, payments were to be suspended until
                the first
                day of the first full month after the Effective Date of the Chapter
                11
                filing.


·
            The
                maturity date of the Term loan was extended to January 2, 2010 and
                principal payments commenced on December 1, 2007 and are payable
                in equal
                monthly installments of $58, 271 until the maturity date.





On
      the
      Effective Date, the following amounts are outstanding with Laurus:





·
            Revolving
                Loan for $838,937 due in 36 months with interest of Prime plus
                2%.


·
            Term
                Loan for $1,515,049 payable in 24 equal installments of $58,271 with
                interest equal to prime plus 2%, due January 2,
                2010


·
            Revolver
                Over advance of $674,023 payable in monthly principal installments
                of
                $12,000 per month starting January 2008 until June 2008; $15,000
                per month
                in July and August 2008; $25,000 per month starting September 2008
                until
                December 2008; $40,000 per month starting January 2009 until May
                2009 and
                $45,000 per month starting June 2009 until November 2009 with a final
                payment of $2,023 in December 2009. Interest is payable at prime
                plus
                2%.





Borrowings
      on the revolving note are based on certain percentages of eligible accounts
      receivable and inventories and pays interest at prime plus 2% per annum.
      Available borrowings under the Credit Agreement were $-0- at December 31,
      2007.




34




Pursuant
      to the Plan, the Company agreed to pay the administrative creditors an
      additional $300,000 in $100,000 installments prior to December 31 of 2009,
      2010
      and 2011. The Company also agreed to pay Health Holdings and Botanicals, LLC
      (“Health Holdings”) $1,361,000 at November 9, 2012, but Health Holdings has the
      right to convert the obligation into Redux Common Stock. The Company also agreed
      to pay the unsecured creditors 5% of their allowed claims on November 9, 2009,
      5% on November 9, 2009, 10% on November 9, 2010 and 10% on November 9, 2011.
      Total allowed claims as of April 11, 2008 total approximately $1.3 million.
      Certain obligations of the Company under the Plan were guaranteed by Redux,
      and
      in some cases security was posted. See the Plan, posted at www.naturade.com ,
      Investor Relations. A description of the obligations to the principal secured
      lender, Laurus, are described immediately above.





At
      December 31, 2007, the Company had an accumulated deficit of $601,697, a net
      working capital deficit of $575,255, and has incurred recurring net losses.
      These factors, among others, raise substantial doubt about the Company’s ability
      to continue as a going concern. In addition, the Company’s independent
      registered public accounting firm has issued an opinion that substantial doubt
      exists as to the Company’s ability to continue as a going concern. The financial
      statements do not include any adjustments that might result from a negative
      outcome of this uncertainty. The Company believes that cash proceeds from the
      Plan, its current Financing Agreement and growth in its core operations will
      sustain the Company for the next year.





The
      Company used cash of $1,336,761 from operating and
      reorganization activities in the year ended December 31, 2007, compared to
      a source of cash of $648,148 from operating activities for the year ended
      December 31, 2006. This decrease in cash provided by operating activities is
      primarily due to operating losses before reorganization items of $3,206,247and
      an increase in inventories of $795,420, partially offset by a decrease in
      receivables of $132,676 and an increase in accounts payable and accrued expenses
      of $1,331,128 .





Net
      cash
      used in inventories was $795,420 for the year ended December 31, 2007 compared
      to net cash provided by inventories of $160,454 for the year ended December
      31,
      2006. The increase in inventory was a direct result of the Company obtaining
      stable sourcing with credit terms allowing the Company to rebuild inventory
      to
      meet required customer fill ratios.





Net
      cash
      provided by accounts receivable was $132,676 for the year ended December 31,
      2007 compared to net cash provided by accounts receivable of $1,323,849 for
      the
      same period of 2006, principally due to lower sales volume in 2007 as compared
      to sales volume in 2006 as a result of the Company’s Chapter 11. Customer terms
      have remained constant; however there is a slight increase in day’s sales
      outstanding due to customers paying slower than historical averages after the
      Company filed for protection under Chapter 11.





Net
      cash
      provided by accounts payable and accrued expenses was $1,331,128 for the year
      ended December 31, 2007 compared to net cash provided of $3,682,318 for the
      same
      period of 2006. The increase in accounts payable and accrued expenses is a
      direct result of the Company’s ability to obtain certain credit terms to
      purchase inventory during the period.





The
      Company’s working capital deficit decreased from $1,728,224 at December 31, 2006
      to $575,255 at December 31, 2007. This decrease was largely due to an increase
      in accounts payable post emergence from Chapter 11.





The
      Company’s cash provided financing activities was $1,590,800 for the year ended
      December 31, 2007, compared to cash used in financing activities of $605,000
      for
      the same period of 2006. The increased source of cash in 2007 was primarily
      the
      result of the $1,200,000 cash infusion by the majority shareholder at the
      Effective Date plus net borrowings on the revolver of $419,874.





***Laurus
      Financing***





On
      July
      26, 2005, Naturade entered the Financing Agreement with Laurus, providing for
      a
      $3,000,000 revolving credit facility and a $1,000,000 term loan. The
      indebtedness under the revolving facility is evidenced by a convertible
“Revolving Note” and one or more convertible “Minimum Borrowing Notes,” and the
      indebtedness under the term facility is evidenced by a convertible “Term Note.”
The Revolving Note, the Term Note and the Minimum Borrowing Notes are herein
      referred to as the “Laurus Notes.” Gross funds of $2,655,250 were advanced to us
      on July 26, 2005 under the Laurus Notes comprising $1,000,000 under the Term
      Note, $500,000 under the first minimum borrowing note (the “First Minimum
      Borrowing Note”), and $1,155,250 under the Revolving Note. The Company paid fees
      and expenses in cash to Laurus of $193,500 on the closing date, consisting
      of
“closing payment” of $156,000 and reimbursement of Laurus’ legal fees of
      $37,500. Also in connection with the Laurus financing, the Liberty Warrant
      to
      Liberty Company Financial LLC (“Liberty”) for introducing us to Laurus. The
      Liberty Warrant entitles the holder to purchase up to 3,647,743 shares of its
      common stock at a purchase price of $0.08 at any time on or after July 26,
      2006
      through July 26, 2011. On December 31, 2007, $1,276,570 was outstanding under
      the Revolving Note, and $1,350,000 was outstanding under the Term
      Note.




35




The
      Company also issued Laurus a five-year warrant to purchase an aggregate of
      1,500,000 shares of its common stock at an exercise price of $0.80 per share
      and
      an option to purchase 8,721,375 shares of its common stock at an exercise price
      of $0.0001 per share, as described below.





In
      conjunction with the Financing Agreement, Health Holdings, Stewart and Weil
      extended the term of the Secured Promissory Notes issued to them pursuant to
      that certain Loan Agreement dated April 23, 2003, from December 31, 2005 to
      December 31, 2007.





On
      January 11, 2006, the Company and Laurus amended the Financing Agreement
      pursuant to which the parties:





**•**
            Increased
                the Term Note from $1,000,000, of which $909,000 was outstanding
                at
                January 11, 2006, to $1,650,000. Over advances totaling $650,000
                were
                transferred from the Revolving Note to the Term Note with the remaining
                $91,000 utilized as a reduction of the amount outstanding under the
                Revolving Note.





**•**
            Modified
                the payments on the Term Note from $30,000 per month beginning November
                1,
                2005 payable in shares of the Company’s Common Stock or $30,900 per month
                if paid in cash, to $50,000 per month in cash beginning April 1,
                2006.





**•**
            Converted
                the First Minimum Borrowing Note outstanding of $500,000 to the Revolving
                Note.





**•**
            Eliminated
                the ability of Laurus to convert the Term Note, the Revolving Note,
                and
                the First Minimum Borrowing Note into shares of the Company’s common
                stock.





**•**
            Extended
                the term of the Agreement from three years ending on July 26, 2008
                to
                three years ended January 6, 2009.





**•**
            Modified
                the prepayment provisions of the Revolving Note and the Term Note
                from an
                early payment fee of 35% of the loan amounts if paid prior to the
                termination date, to 5% if retired before January 6, 2007, 4% if
                retired
                prior to January 6, 2008 and 3% if retired prior to January 6,
                2009.





In
      consideration for entering into the amendment, Naturade issued to Laurus
      1,050,000 shares of the Company’s common stock.





The
      value
      of the shares issued to Laurus in consideration for the debt modification plus
      the remaining unamortized deferred financing fees are being amortized over
      the
      renewed term of the Financing Agreement.





On
      August
      31, 2006, pursuant to the Company’s filing under Chapter 11 of the US Bankruptcy
      Code, Laurus and Redux agreed to cause the Company to do the
      following:





·
            Laurus’
                claim in the amount of $2,900,000 was treated as fully secured and
                the
                liens granted Laurus pursuant to the Security and Purchase Agreement
                dated
                July 26, 2005 between Laurus and the Company (the “Financing Agreement”)
                will remain without modification.





·
            Laurus
                provided debtor in possession financing (“DIP”) pursuant to the terms and
                conditions of the financing
                agreement.





·
            Interest
                continued to accrue on the Term Loan pursuant the terms of the Financing
                Agreement however, payments will be suspended until the first day
                of the
                first full month after the Effective Date of the Chapter 11
                filing.





·
            The
                maturity date of the Term loan was extended to January 2, 2010 and
                principal payments commenced on December 1, 2007 and are payable
                in equal
                monthly installments of $58,271 until the maturity date
                .




36




·
            To
                the extent that the Laurus DIP financing and/or Naturade’s use of Laurus
                cash collateral is insufficient, Redux shall be responsible for funding
                all payments needed to confirm the plan and for working capital of
                Naturade before and after
                confirmation.





·
            Laurus
                will support the treatment of Laurus’ claims pursuant to Naturade’s Plan,
                and will cast a vote in favor of the confirmation of such Plan, provided
                that the treatment of Laurus’ claims pursuant to the Plan is materially
                the same as that set forth herein.





On
      the
      Effective Date, the following amounts are outstanding with Laurus:





·
            Revolving
                Loan for $838,937 due in 36 months with interest of Prime plus
                2%.


·
            Term
                Loan for $1,515,049 payable in 24 equal installments of $58,271 with
                interest equal to prime plus 2%


·
            Revolver
                Over Advance of $674,023 payable in monthly principal installments
                of
                $12,000 per month starting January 2008 until June 2008; $15,000
                per month
                in July and August 2008; $25,000 per month starting September 2008
                until
                December 2008; $40,000 per month starting January 2009 until May
                2009 and
                $45,000 per month starting June 2009 until November 2009 with a final
                payment of $2,023 in December 2009. Interest is payable at prime
                plus
                2%.





At
      December 31, 2007, $1,149,447 was outstanding under the revolving facility;
      $1,456,778 was outstanding under the term loan and $674,023 was outstanding
      under the Revolver Over Advance.





*Laurus
      Notes.* The
      amount of funds available for borrowings under the Revolving Note are advanced
      pursuant to a formula consisting of (i) 90% of eligible accounts receivable
      (as
      defined in the Financing Agreement) (primarily receivables that are less than
      90
      days old), and (ii) 30% of eligible inventory (as defined in the Financing
      Agreement), up to a maximum inventory advance of $500,000; provided, however,
      that the amount available for borrowing may be limited by such reserves as
      Laurus deems proper based upon significant business developments relating to
      the
      Company or its account debtors. Laurus’ discretionary rights could reduce the
      amount of funds available for borrowing under the Revolving Note.





Principal
      on the Term Note is payable in 25 consecutive monthly installments of $58,271
      commencing on December 1, 2007 and on the first day of each month thereafter,
      subject to acceleration upon the occurrence of an Event of Default or
      termination of the Financing Agreement.





Amounts
      outstanding under the Laurus Notes will mature on January 2, 2010. If the
      Company terminates the Financing Agreement and the loans there under prior
      to
      the maturity date, it will incur an early payment fee equal to 5%, 4% and 3%
      of
      the total investment amount of $4,650,000 if terminated in the first, second
      or
      third year, respectively, of the term of the Financing Agreement. Interest
      on
      the amounts outstanding under the Laurus Notes accrues at the annual rate of
      2%
      above the prime rate, but not less than 6%. The interest rate charged, however,
      will be decreased by 2% (or 200 basis points) for every 25% increase in the
      market price of our common stock above the fixed conversion price of $0.80.
      The
      interest rate may not be reduced beyond 0%.





*Security
      and Events of Default.* The
      Laurus Notes are secured by a lien on substantially all of the Company’s assets.
      The Financing Agreement requires the Company ues to maintain a lock box account
      to receive payments of our accounts receivable, and all funds transmitted to
      the
      lock box account will be applied to amounts outstanding under the Laurus Notes.
      Laurus may verify, inspect or appraise assets constituting the collateral.
      The
      lien granted to Laurus will continue in full force and effect, notwithstanding
      the termination of the Financing Agreement. The Financing Agreement sets forth
      certain circumstances under which the Financing Agreement can be declared in
      default and subject to termination, including among others if (i) there is
      a
      material adverse change in the Company’s condition and affairs (financial or
      otherwise); (ii) an insolvency proceeding is commenced; (iii) it default on
      any
      of its material agreements with third parties or there are material liens or
      attachments levied against its assets; (iv) its common stock ceases to be
      publicly traded; and (v) it fails to comply with the terms, representations
      and
      conditions of the Financing Agreement.





Upon
      the
      occurrence of an Event of Default and for so long as it is continuing, the
      interest rate charged will be increased by 2% per month until the default is
      cured; should the default continue beyond any applicable grace period, then
      Laurus could require the Company to repay 125% of any principal and interest
      outstanding under the Laurus Notes. Following the occurrence of an Event of
      Default, Laurus also has the right to demand repayment in full of all
      obligations owing to Laurus under the Financing Agreement, whether or not
      otherwise due and will retain its lien in the collateral provided by the Company
      until all the obligations have been satisfied.




37




*Affirmative
      and Negative Covenants.* Under
      the
      Financing Agreement, the Company may take certain actions only with the approval
      of Laurus, including the following material actions: incurring additional
      indebtedness (other than trade debt); making any distribution with respect
      to or
      repurchasing any shares of its capital stock; or entering into any merger,
      consolidation or reorganization with or purchasing any assets or stock of any
      other person.





The
      Financing Agreement also provides Laurus with a right of first refusal to
      provide additional financing on terms no less favorable than those offered
      by a
      third party with respect to any additional convertible indebtedness or the
      sale
      or issuance of any equity interests, other than straight equity
      issuances.




Pursuant
      to the Plan, the Company agreed to pay the administrative creditors an
      additional $300,000 in $100,000 installments prior to December 31 of 2009,
      2010
      and 2011. The Company also agreed to pay Health Holdings and Botanicals, LLC
      (“Health Holdings”) $1,361,000 at November 9, 2012, but HHB has the right to
      convert the obligation into Redux Common Stock. The Company also agreed to
      pay
      the unsecured creditors 5% of their allowed claims on November 9, 2009, 5%
      on
      November 9, 2009, 10% on November 9, 2010 and 10% on November 9, 2011. Total
      allowed claims as of April 11, 2008 total approximately $1.3 million Certain
      obligations of the Company under the Plan were guaranteed by Redux, and in
      some
      cases security was posted. See the Plan, posted at www.naturade.com ,
      Investor Relations.




**Critical
      Accounting Policies and Use of Estimates**





The
      Company’s significant accounting policies are described in Note 1 of the
      Company’s Financial Statements for the year ended December 31, 2007, which have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States. In preparing the financial statements, the Company is required
      to
      make estimates and judgments which affect the results of its operations and
      the
      reported value of assets and liabilities. Actual results may differ from these
      estimates. The Company believes that the following summarizes critical
      accounting policies which require significant judgments and estimates in the
      preparation of its financial statements.





***Revenue
      Recognition*** .
      Naturade recognizes revenue in accordance with SEC Staff Accounting Bulletin
      (SAB) No. 104, “Revenue Recognition in Financial Statements,” requires that four
      basic criteria must be met before revenue can be recognized: (1) persuasive
      evidence of an arrangement exists; (2) delivery has occurred or services
      rendered; (3) the fee is fixed and determinable; and (4) collectibility is
      reasonably assured. Determination of criteria (3) and (4) require management’s
      judgments regarding the fixed nature of the fee charged for services rendered
      and products delivered and the collectibility of those fees. To satisfy the
      criteria, Naturade: (1) inputs orders based upon receipt of a customer purchase
      order; (2) records revenue upon shipment of goods when risk of loss and title
      transfer under the Company’s arrangements with customers or otherwise complying
      with the terms of the purchase order; (3) confirms pricing through the customer
      purchase order and; (4) validates creditworthiness through past payment history,
      credit agency reports and other financial data. Other than through warranty
      rights, the Company’s customers do not have explicit or implicit rights of
      return. Should changes in conditions cause management to determine the revenue
      recognition criteria are not met for certain future transactions, such as a
      determination that an outstanding account receivable has become uncollectible,
      revenue recognized for any reporting period could be adversely
      affected.





The
      Company records revenues net of returns and allowances. Gross sales, which
      are
      defined as list price times units sold, include the following reductions for
      returns and allowances:





·
            Distributor
                Allowances





Distributor
      allowances are provided to all distributors as a reduction from list price
      and
      are recorded as a reduction off the invoice at time of billing. Revenues and
      accounts receivable are recorded net of these allowances.




38




**•**
            Promotional
                Allowances





Promotional
      allowances are related to specific promotions offered by Naturade related to
      in
      store promotions being offered by a retailer and distributor promotions being
      offered to retailers. In most cases, the promotion is designed to correspond
      with a similar consumer promotion being offered by the retailer, the cost of
      which is borne by the retailer. Promotional allowances are based upon purchases
      by the retailer or distributor during the promotional period and are deducted
      from the customer invoice at the time of billing. Revenues and accounts
      receivable are recorded net of these allowances. Shipments during the
      promotional period are not subject to return after the end of the promotional
      period.





For
      the
      12 months ended December 31, 2007 and 2006, distributor and promotional
      allowances were a credit of $12,146, or 0.2% of gross sales and an expense
      of
      $704,815, or 6.1% of gross sales, respectively.





**•**
            Damages
                and Returns





In
      the 12
      months ended December 31, 2007 and 2006, damages and returns were charged
      against revenues based upon historical return rates. Actual damages and returns
      are charged against the reserve when the product is returned, charges deducted
      or a consumer deduction is received. On a periodic basis, actual charges are
      compared to the reserve and, if required, the reserve rate is adjusted to
      reflect new trends.





For
      the
      12 months ended December 31, 2007 and 2006, damages and returns charged against
      revenues were $421,925, or 6.0% of gross sales and $755,458, or 6.5% of gross
      sales, respectively.





The
      following is a summary of the damages and returns reserve for the fiscal years
      ended December 31:





**2007**
            
            **2006**Beginning
                balance
            
            $
            389,128
            
            $
            42,910Provision
                for damages and returns
            
            
            421,925
            
            
            755,458Actual
                damages and returns during the period
            
            
            790,535
            
            
            409,240Ending
                balance
            
            $
            20,518
            
            $
            389,128





Damages
      and returns in past years have typically been immaterial to our overall results.
      In 2006 the returns have increased primarily as a result of increased Ageless
      and ReVivexTM product returns. As the returns as a percent of gross sales has
      increased , the reserve has accordingly been increased at December 31, 2007,
      based upon historical run rates in order to properly match revenues and
      deductions.





**•**
            Cash
                Discounts





Cash
      discounts are recorded as deducted by customers from remittances, as the
      customer does not earn them until the customer pays according to
      terms.





For
      the
      12 months ended December 31, 2007 and 2006, cash discounts were $99,674 or
      1.4%
      of gross sales and $120,784 or 1.0% of gross sales, respectively.





**•**
            Slotting





Slotting
      charges related to new distribution (either a new customer or a new product
      introduced to an existing customer) are recorded as a prepaid expense as
      incurred and amortized over 12 months as a reduction of revenues. Should a
      customer cease purchasing from Naturade or discontinue the respective product
      line, the unamortized slotting costs are charged against revenues at that time.
      There have been no significant unamortized slotting charges charged against
      revenues in the periods reported.





For
      the
      12 months ended December 31, 2007 and 2006 slotting costs were a credit of
      $4,159, or 0.06% of gross sales and an expense of $198,590, or 1.7% of gross
      sales, respectively.




39




***Inventory
      Valuation*** .
      Merchandise inventories are stated at the lower of cost (first-in, first-out
      basis) or market. The Company considers cost to include the direct cost of
      finished goods provided by co-packers as well as the cost of those components
      supplied to the co-packers. At each balance sheet date, we evaluate the
      Company’s ending inventories for excess quantities and obsolescence. This
      evaluation includes analyses of forecast sales levels by product and historical
      demand. We write off inventories that are considered obsolete. Remaining
      inventory balances are adjusted to approximate the lower of the Company’s cost
      or market value and result in a new cost basis in such inventory until sold.
      If
      future demand or market conditions are less favorable than the Company’s
      projections, additional inventory write-down may be required, and would be
      reflected in cost of sales in the period the revision is made.





***Accounts
      Receivable and Allowances for Uncollectible Accounts*** .
      Accounts receivable are unsecured, and we are at risk to the extent such amounts
      become uncollectible. Accounts receivable is stated net of applicable reserves
      for returns and allowances, promotional allowances and doubtful accounts. The
      Company regularly reviews and monitors individual account receivable balances
      to
      determine if the reserve amounts are appropriate and provides for an allowance
      for uncollectible accounts by considering historical customer buying patterns,
      invoice aging, specific promotions and seasonal factors.





***Intangible
      Assets, Including Goodwill.*** The
      Company conducts periodic impairment reviews of intangible assets including
      goodwill. Such reviews require the Company to make estimates of future cash
      flows and fair values. These cash flow projections include significant
      assumptions about economic conditions, demand and pricing for the Company’s
      products, and costs. In addition, the determination of whether or not impairment
      exists requires the Company to make certain assumptions and estimates in
      determining fair value of the reporting unit. While significant judgment is
      required, the Company believes that the assumptions and estimates used in its
      impairment reviews are reasonable. However, should these assumptions change
      in
      the future, the fair value models could result in lower fair values for
      intangible assets and goodwill, which could materially affect the value of
      the
      Company’s intangible assets and goodwill and results of operations.





***Impairment
      of Long-Lived Assets –*** In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“ *Accounting
      for the Impairment or*  *Disposal
      of Long-Lived Assets* ,”
the
      Company assesses the recoverability of its long-lived assets upon the occurrence
      of a triggering event by determining whether the depreciation and amortization
      of long-lived assets over their remaining lives can be recovered through
      projected undiscounted future cash flows. The amount of long-lived asset
      impairment, if any, is measured based on fair value and is charged to operations
      in the period in which long-lived asset impairment is determined by management.
      If long-lived assets become impaired, the Company recognizes an impairment
      loss
      measured as the amount by which the carrying value of the assets exceeds the
      estimated fair value of the assets.




***Impact
      of Contractual Obligations and Commercial Commitments***





The
      following summarizes the Company’s contractual obligations at December 31, 2007
      and the effects such obligations are expected to have on liquidity and cash
      flow
      in future periods.





**Payments
                Due by Period****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than 1 Year**
            
            **1-3
                Years**
            
            **4-5
                Years**
            
            **After
                5 Years**Laurus
                Term Loan (a)
            
            $
            1,525,142
            
            $
            790,925
            
            $
            734,217
            
            $
            -0-
            
            $
            -0-Health
                Holdings Loan (a)
            
            
            2,156,275
            
            
            -0-
            
            
            331,740
            
            
            1,824,535
            
            
            -0-Revolving
                Credit (a)
            
            
            1,920,993
            
            
            1,399,830
            
            
            521,163
            
            
            -0-
            
            
            -0-Redux
                Note (a)
            
            
            250,000
            
            
            250,000
            
            
            -0-
            
            
            -0-
            
            
            -0-Notes
                Payable to Professionals (a)
            
            
            378,147
            
            
            100,000
            
            
            278,147
            
            
            -0-
            
            
            -0-Notes
                Payable, Taxes (a)
            
            
            9,449
            
            
            1,811
            
            
            5,036
            
            
            2,602
            
            
            -0-Wald
                Holdings Note (a)
            
            
            151,687
            
            
            -0-
            
            
            23,337
            
            
            128,350
            
            
            -0-Stewart
                Loan Agreement (a)
            
            
            224,158
            
            
            -0-
            
            
            34,486
            
            
            189,672
            
            
            -0-Operating
                Leases
            
            
            157,529
            
            
            118,147
            
            
            39,382
            
            
            -0-
            
            
            -0-Unsecured
                Creditors
            
            
            1,658,785
            
            
            276,464
            
            
            1,382,321
            
            
            -0-
            
            
            -0-Total
                Contractual Cash Obligations
            
            $
            8,432,165
            
            $
            2,,937,177
            
            $
            3,349,829
            
            $
            2,145,159
            
            $
            -0-





(a)
            Includes
                interest.




40




**Impact
      of Inflation**





From
      time
      to time, the Company experiences price increases from third-party manufacturers
      and these increases cannot always be passed on to the Company’s customers. While
      these price increases have not had a material impact on the Company’s historical
      operations or profitability in the past, they could affect sales in the
      future.




**New
      Accounting Pronouncements**





FASB
      Statement No. 157, *Fair
      Value Measurements,* has been
      issued by the Financial Accounting Standards Board (“FASB”). This new standard
      provides guidance for using fair value to measure assets and liabilities. Under
      Statement 157, fair value refers to the price that would be received to sell
      an
      asset or paid to transfer a liability in an orderly transaction between market
      participants in the market in which the reporting entity transacts. In this
      standard, the FASB clarifies the principle that fair value should be based
      on
      the assumptions market participants would use when pricing the asset or
      liability. In support of this principle, Statement 157 establishes a fair value
      hierarchy that prioritizes the information used to develop those assumptions.
      The fair value hierarchy gives the highest priority to quoted prices in active
      markets and the lowest priority to unobservable data, for example, the reporting
      entity’s own data. Under the standard, fair value measurements would be
      separately disclosed by level within the fair value hierarchy. The provisions
      of
      Statement 157 are effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years, and was effective for The Company on the Effective Date.





The
      FASB
      has issued FASB Staff Position (FSP) EITF 00-19-2, *"Accounting
      for Registration Payment Arrangements."* This FSP
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, *Accounting
      for Contingencies.* The
      FSP
      further clarifies that a financial instrument subject to a registration payment
      arrangement should be accounted for in accordance with other applicable GAAP
      without regard to the contingent obligation to transfer consideration pursuant
      to the registration payment arrangement. This FSP amends various authoritative
      literature notably FASB Statement No. 133, *Accounting
      for Derivative Instruments and Hedging Activities,* FASB
      Statement No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of both Liabilities
      and
      Equity,* and
      FASB
      Interpretation No. 45, *Guarantor’s
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others.* This
      FSP
      is effective immediately for registration payment arrangements and the financial
      instruments subject to those arrangements that are entered into or modified
      subsequent to December 21, 2006. For registration payment arrangements and
      financial instruments subject to those arrangements that were entered into
      prior
      to December 21, 2006, the guidance in the FSP is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. The
      adoption of this pronouncement did not have a material effect on the Company’s
      financial statements.





On
      July
      13, 2006, FASB issued Interpretation (FIN) No. 48, *Accounting
      for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
      109,* FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB Statement No. 109, *Accounting
      for Income Taxes.* FIN 48
      also prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. The new FASB standard also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. The
      adoption of this pronouncement did not have a material effect on the Company’s
      financial statements.





On
      February 15, 2007, the FASB issued FASB Statement No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115.* SFAS 159
      permits an entity to choose to measure many financial instruments and certain
      other items at fair value. This option is available to all entities, including
      not-for-profit organizations. Most of the provisions in Statement 159 are
      elective; however, the amendment to FASB Statement No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities,* applies
      to all entities with available-for-sale and trading securities. Some
      requirements apply differently to entities that do not report net income. The
      fair value option established by Statement 159 permits all entities to choose
      to
      measure eligible items at fair value at specified election dates. A business
      entity will report unrealized gains and losses on items for which the fair
      value
      option has been elected in earnings (or another performance indicator if the
      business entity does not report earnings) at each subsequent reporting date..
      The fair value option: ( *a* )
      may be
      applied instrument by instrument, with a few exceptions, such as investments
      otherwise accounted for by the equity method; ( *b* )
      is
      irrevocable (unless a new election date occurs); and ( *c* )
      is
      applied only to entire instruments and not to portions of instruments. Statement
      159 is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007, and was effective for The Company on the
      Effective Date.




41




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *“Business
      Combinations* ”
(“SFAS
      141(R)”). SFAS 141(R) replaces SFAS No. 141, *“Business
      Combinations* ”,
      and is
      effective for the Company for business combinations for which the acquisition
      date is on or after the beginning of the first annual reporting period beginning
      on or after December 15, 2008. SFAS 141(R) requires the new acquiring entity
      to
      recognize all assets acquired and liabilities assumed in the transactions,
      expense all direct transaction costs and account for the estimated fair value
      of
      contingent consideration.  This standard establishes an acquisition-date
      fair value for acquired assets and liabilities and fully discloses to investors
      the financial effect the acquisition will have.  This standard will not
      impact the Company’s present financial position, results of operations and cash
      flows.




In
      December 2007, the FASB issued SFAS No. 160, *“Noncontrolling
      Interests in Consolidated Financial Statements”* (“SFAS
      160”). SFAS 160 requires all entities to report minority interests in
      subsidiaries as equity in the financial statements, and requires that
      transactions between entities and noncontrolling interests be treated as
      equity.  SFAS 160 is effective for the Company as of the beginning of
      fiscal year 2009.  The Company is evaluating the impact of this
      pronouncement on the Company’s financial position, results of operations and
      cash flows.





**Item
      7A. Quantitative and Qualitative Disclosure About Market
      Risk**





In
      the
      normal course of business, the Company is exposed to a variety of risks
      including market risk associated with interest rate movements. The Company’s
      exposure to market risk for changes in interest rates relates primarily to
      the
      Company’s long-term debt.





The
      Company’s long-term debt primarily consists of a (i) a line of credit of $4,350,000
      consisting of a $1,350,000 term loan combined with $3,000,000 revolving debt
      with Laurus entered into on July 27, 2005, and amended on January 11, 2006
      and
      $1,050,000 borrowed under a Loan Agreement with investors entered into on April
      14, 2003. The line of credit bears interest at prime rate plus 2% and the
      Investor Notes bear interest at 15% per annum.





For
      the
      fiscal year ended December 31, 2007, the interest expense on the line of credit
      was $62,956. If the interest rate on the line of credit were to increase by
      one
      percent, this would result in an interest expense of $69,269 or the fiscal
      year
      ended December 31, 2007.




**Item
      8. Financial Statements and Supplementary Data**





The
      Company’s financial statements and the notes thereto, and the Reports of
      Independent Registered Public Accounting Firms, filed with this Annual Report
      on
      Form 10-K in a separate section, Part IV, as shown in the index under Item
      15(a).





**Item
      9. Changes in and Disagreements with Accountants on Accounting
      and**  **Financial
      Disclosure**





On
      October 25, 2007, the Company’s auditors, Squar, Milner, Peterson, Miranda &
Williamson, LLP (“Squar Milner”), resigned as the Company’s independent
      auditors. The stated reasons were twofold. (The Company made the following
      disclosures as required by Item 304(a)(1) of Regulation S-K in a Current Report
      on Form 8-K filed on December 3, 2007. (the “8-K”)




42




First,
      as
      of September 30, 2007 the Company owed Squar Milner approximately $318,000;
      and,
      about $165,000 was past due more than 90 days. Squar Milner believed that the
      magnitude of this receivable could become a threat to its independence. Further
      Squar Milner’s stated intent was to participate in the settlement among the
      Company and the professionals regarding payment of the administrative claims
      in
      the Company’s Chapter 11 Bankruptcy. Under the terms of the settlement and the
      related (proposed) amendment of the Company’s reorganization plan, Squar Milner
      would accept certain contingent and other notes payable (with an expected
      pay-out period) to be issued by the Company in full satisfaction of its
      receivable. Once the Settlement Agreement was consummated after its approval
      by
      the Bankruptcy Court, Squar Milner would become a long-term creditor; and,
      thus
      its independence would be impaired. The Company’s auditor’s reports for fiscal
      year ended December 31, 2006 were unqualified but modified as to
      uncertainty of the Company continuing as a going concern.  The Company’s
      recurring losses from operations, net working capital deficit and stockholders’
capital deficiency, and Chapter 11 bankruptcy filing raised substantial doubt
      about its ability to continue as a going concern. As of December 31, 2006 and
      for fiscal year 2006, the financial statements had been prepared on a
      going-concern basis, which contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business. The financial
      statements did not include any adjustments relating to the recoverability and
      classification of recorded asset amounts or the amounts and classification
      of
      liabilities that might be necessary should the Company be unable to continue
      as
      a going concern.  The Company’s continuation as a going concern depended on
      its ability to generate sufficient cash flow to meet its obligations on a timely
      basis, to comply with the terms and covenants of its financing agreements,
      to
      obtain additional financing or refinancing as may be required and ultimately
      to
      attain successful operations.





Second,
      Squar Milner had indicated it had identified certain material weaknesses in
      the
      Company’s internal control over financial reporting for the year-ending December
      31, 2006 as follows: (i) The CFO/Controller displayed a lack of understanding
      of
      the financial information included in the general ledger and support for
      discrete accounting issues and debt transactions had not been prepared or
      addressed which resulted in numerous adjustments related to incorrect
      accounting. (ii) No systematic method of ensuring that timely and complete
      monthly reconciliations and closing procedures took place which lead to a
      significant number of transactions and journal entries that had not been posted
      into the accounting system prior to the start of Squar Milner’s audit for the
      year ending December 31, 2006. (iii) Difficulty in determining accounts
      receivable balances at year-end because accounting department did not
      record short payments received to individual customer invoices on a timely
      basis.





These
      issues were a direct result of the Company filing for Chapter 11 bankruptcy
      protection and follow significant business reorganization. The Company took
      the
      recommendations of its auditor’s seriously and has implemented steps to address
      and resolve these issues. The Company has not had any disagreements with Squar
      Milner as to any matter of accounting principle or practice, financial statement
      disclosure, or auditing scope or procedure for the fiscal year ended December
      31, 2006, and the quarter ended March 31, 2007. As a result of cash
      constraints, the Company has not had any involvement of Squar Milner for the
      subsequent filing of its second quarter Form 10Q on September 4, 2007; however,
      management is not aware of any disagreements with its auditors regarding
      accounting policy or procedures during this period up to Squar Milner’s
      resignation on October 25, 2007.




The
      Company’s audit committee of its board of directors did not recommend or approve
      a change in the Company’s independent auditors prior to Squar Milner’s
      resignation.





Effective
      January 6, 2008, the Company’s Audit Committee approved the retention of Haskell
      and White, LLP as the Company’s independent accountants.


During
          the Company’s two most recent fiscal years, and any subsequent interim period
          prior to engaging Haskell & White LLP, the Company did not, nor did anyone
          on its behalf, consult Haskell & White LLP regarding: 1) either the
          application of accounting principles to a specified transaction, either
          completed or proposed; or the type of audit opinion that might be rendered
          on
          the registrant’s financial statements, or any accounting, auditing or financial
          reporting issue; or 2) any matter that was either the subject of a disagreement
          or a reportable event as defined in Item 304(a)(I)(iv) or Item
          304(a)(1)(v).


**Item
      9A (T). Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and
      Controller, has evaluated the effectiveness of our disclosure controls and
      procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as amended (the "Exchange Act") as of December
      31, 2007.





Our
      internal controls over financial reporting are designed by, or under the
      supervision of, our Chief Executive Officer and Controller, or persons
      performing similar functions, and effected by our board of directors, management
      and other personnel, to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles. Our
      internal control over financial reporting, and includes those policies and
      procedures that:





1)  Pertain
      to the maintenance of records that in reasonable detail accurately and fairly
      reflect the transactions and dispositions of our assets;





2)  Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being made
      only in accordance with authorizations of our management and directors;
      and




43




3)  Provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use or disposition of our assets that could have a material effect
      on the financial statements.




*Management’s
      Report on Internal Control over Financial Reporting*




Management
      has evaluated the effectiveness of our internal control over financial reporting
      (ICFR) as of December 31, 2007, based on the control criteria established in
      a
      report entitled *Internal
      Control—Integrated Framework* ,
      issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on our assessment and those criteria, our management has concluded that our
      internal control over financial reporting is not effective based on the
      following deficiencies as of December 31, 2007:





1.
            The
                Company did not maintain effective controls to ensure there are adequate
                analysis, documentation, reconciliation, and review of accounting
                records
                and supporting data. The Company did not maintain effective controls
                over
                its financial reporting process. Specifically, the Company lacked
                policies, procedures, and controls for the preparation and review
                of the
                interim and annual financial statements and supporting schedules.
                This control deficiency contributed to the individual material weaknesses
                described below:





a)  Certain
      control procedures were unable to be verified due to performance of the
      procedure not being sufficiently documented.  As an example, some
      procedures requiring review of certain reports could not be verified due to
      there being no written notation on the report by the reviewer.  Because we
      were unable to verify these procedures, we conclude that as of December 31,
      2007
      there were control deficiencies related to the preparation and review of our
      interim and annual financial statements, in particular with respect to
      certain account reconciliations, journal entries and spreadsheets, and the
      authorization of sales transactions and customer billing rates.  While none
      of these control deficiencies resulted in audit adjustments to our 2007 interim
      or annual financial statements, they could result in a material misstatement
      to
      our interim or financial statements that would not be prevented or
      detected, and; therefore, we have determined that these control deficiencies
      constitute material weaknesses.





b)  Certain
      of our personnel had access to various financial application programs and data
      that was beyond the requirements of their individual job responsibilities. 
While this control deficiency did not result in any audit adjustments to our
      2007 interim or annual financial statements, it could result in a material
      misstatement to our interim or financial statements that would not be
      prevented or detected, and; therefore, we have determined that this control
      deficiency constitutes a material weakness.





c)  The
      Company did not maintain effective control over certain spreadsheets utilized
      in
      the period end financial reporting process. Specifically, the Company lacked
      effective controls related to the completeness, accuracy, validity, and
      restricted access to spreadsheets related to: fixed assets, including
      accumulated depreciation; payroll reconciliations and related journal entries;
      revenue and accounts receivable. This control deficiency did not result in
      audit
      adjustments to the 2007 interim or annual financial statements.





d)  The
      Company did not maintain effective controls over the authorization, completeness
      and accuracy of revenue and accounts receivable. Specifically the controls
      over
      the authorization, completeness and accuracy of (i) sales orders; (ii) customer
      billing adjustments including write-offs; and (iii) the approval and processing
      of customer payments, credits and other customer account applications. This
      control deficiency did not result in audit adjustments to the 2007 interim
      or
      annual financial statements. This control deficiency could result in a
      misstatement of revenue or accounts receivable that would result in a material
      misstatement to the Company’s interim or annual financial statements that
      would not be prevented or detected. Accordingly, management has determined
      that
      this control deficiency constitutes a material weakness.





44





In
      summary with respect to the control deficiencies in a) through d) above could
      result in a material misstatement of the aforementioned accounts or disclosures
      that would result in a material misstatement to the Company’s interim or
      annual financial statements that would not be prevented or detected.
      Accordingly, management has determined that each of the control deficiencies
      described in a) through c) above constitutes a material weakness.





2.
            The
                Company did not maintain effective controls over changes to critical
                financial reporting applications and over access to these applications
                and
                related data. Specifically, certain of the Company’s personnel had
                unrestricted access to various financial application programs and
                data
                beyond the requirements of their individual job responsibilities.
                Such
                access was beyond the requirements of their assigned responsibilities
                and
                was not appropriately monitored. This control deficiency did not
                result in
                audit adjustments to the 2007 interim or annual consolidated financial
                statements. However, this control deficiency could result in a material
                misstatement of significant accounts or disclosures, including those
                described above, that would result in a material misstatement to
                the
                Company’s interim or annual consolidated financial statements that would
                not be prevented or detected. Accordingly, management has determined
                that
                this control deficiency constitutes a material
                weakness.


3.
            The
                Company does not maintain a sufficient level of IT personnel to execute
                general computing controls over our information technology structure,
                which include the implementation and assessment of information technology
                policies and procedures, related to change management, operations
                and
                security. This control deficiency did not result in an audit adjustment
                to
                the 2007 interim or annual financial statements, but could result in
                a material misstatement of significant accounts or disclosures, which
                would not have been prevented or detected. Accordingly, management
                has
                determined that this control deficiency constitutes a material
                weakness.


4.
            The
                Company did not maintain adequate segregation of duties within its
                critical financial reporting applications, the related modules and
                financial reporting processes. This control deficiency did not result
                in
                audit adjustments to the 2007 interim or annual financial statements.
                This control deficiency could result in a misstatement of balance
                sheet
                and income statement accounts, in the Company’s interim or
                annual financial statements that would not be prevented or detected.
                Accordingly, management has determined that these control deficiencies
                constitute a material weakness.




*Remediation
      of Material Weakness*





As
      of
      December 31, 2007, there were control deficiencies which constitute as a
      material weakness in our internal control over financial reporting. To the
      extent reasonably possible in our current financial condition, we will seek
      the
      advice of outside consultants and internal resources to implement additional
      internal controls.





In
      addition, we are taking steps to unify the financial reporting process with
      adequate review and approval procedures. We are in the initial planning phase
      of
      creating and implementing new information technology policies and procedures
      relating to general controls over operations, security and change management.


Through
      these steps, we believe we are addressing the deficiencies that affected our
      internal control over financial reporting as of December 31, 2007. Because
      the remedial actions require hiring of additional personnel, upgrading certain
      of our information technology systems, and relying extensively on manual review
      and approval, the successful operation of these controls for at least several
      quarters may be required before management may be able to conclude that the
      material weakness has been remediated. We intend to continue to evaluate and
      strengthen our ICFR systems. These efforts require significant time and
      resources. If we are unable to establish adequate ICFR systems, we may encounter
      difficulties in the audit or review of our financial statements by our
      independent public accountants, which in turn may have a material adverse effect
      on our ability to prepare financial statements in accordance with GAAP and
      to
      comply with our SEC reporting obligations.





*Inherent
      Limitations over Internal Controls*





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect all errors or misstatements and all fraud. Therefore, even
      those systems determined to be effective can provide only reasonable, not
      absolute, assurance that the objectives of the policies and procedures are
      met.
      Also, projections of any evaluation of effectiveness to future periods are
      subject to the risk that controls may become inadequate because of changes
      in
      conditions, or that the degree of compliance with the policies or procedures
      may
      deteriorate.





45





This
      annual report does not include an attestation report of the company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the company's registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the company to provide only management's report
      in this annual report.





*Changes
      in Internal Control over Financial Reporting*


There
      have not been any changes in our internal control over financial reporting
      (as
      such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
      during the fourth quarter of 2007 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




**Item
      9B. Other Information**





None





46


**PART
      III**





**Item
      10. Directors and Executive Officers**





The
      names
      and ages of the directors and executive officers of the Company as of March
      31,
      2008, are as follows:





**Name**
            
            **Age**
            
            **Position**
            
            **Since**\Adam
                M. Michelin
            
            63
            
            Chief
                Executive Officer, Director, Chairman of the Board
            
            2006Gary
                Cannon
            
            56
            
            Director
                and Secretary
            
            2006Richard
                Robinette
            
            46
            
            Chief
                Operating Officer
            
            2007Milos
                Sarcev
            
            44
            
            Chief
                Science Officer
            
            2007Stephen
                L. Scott
            
            56
            
            Director
            
            2007





The
      directors serve until the next annual meeting of stockholders, or until their
      successors are elected. Officers serve at the discretion of the Board of
      Directors.




**Adam
      Michelin** is a
      founding member and CEO of Redux Holdings. He has more than 32 years of
      experience in executive leadership, operations and turnarounds. He is considered
      a leading expert at evaluating, structuring and implementing solutions for
      companies in crisis. He has also served as CEO, COO and CRO for several
      companies both public and private, representing both shareholders and creditors.
      His experience and expertise cut across a wide range of industry sectors,
      including healthcare, retail, light manufacturing, professional services and
      marketing/distribution. His clients have ranged from industry leaders such
      as
      NME and JC Penny to a broad mix of companies generating revenues of $5 million
      to $3.5 billion. Mr. Michelin received his Juris Doctorate from UCLA, his MBA
      from New York University, and a Bachelor of Science from Tri-State
      University.




**Gary
      C. Cannon** became
      the Company’s Secretary and a member of the Company’s Board of Directors on
      August 10, 2006. Mr. Cannon serves as Chairman of the Compensation and
      Governance Committee. Prior to joining the Company, Mr. Cannon was securities
      counsel and compliance officer for The Affordable Energy Group, Inc. from
      November 2004 to May 2005; general and securities counsel for World Transport
      Authority, Inc. from July 2003 to November 2004; and is currently general and
      securities counsel for CryoPort, Inc. and the Company’s controlling shareholder,
      Redux Holdings, Inc. Mr. Cannon was in private practice from August 2000 to
      July
      2003, and has practiced law for the past 20 years, representing all sizes of
      businesses in such areas as, formation, mergers and acquisitions, financing
      transactions, tax planning, and employee relations. Mr. Cannon has done
      extensive securities work and has served as a compliance officer for companies
      with respect to the Sarbanes-Oxley Act, and other compliance matters. Mr. Cannon
      obtained his Juris Doctorate from National University School of Law, his Masters
      of Business degree from National University and his Bachelor of Arts from United
      States International University.





**Rick
      Robinette** brings
      to Naturade nearly 25 years of sales, marketing, operations and finance
      experience within the nutritional supplements industry. He is highly effective
      in establishing new retail distribution channels and networks both nationally
      and internationally, and simultaneously develops back-end logistics and
      supply-chain relationships and process to support front-end business operations.
      During his career, he has worked with leading companies and brand including:
      Leiner Health Products (Private Label), Rexall Sundown (MET-Rx), Next Proteins
      (Designer Whey), and Window Rock Enterprises (Cortislim). Mr. Robinette is
      also
      a co-founder of Koloseum Nutritional Sciences, which recently announced that
      Redux Holdings Inc. will become a 30% equity owner in the Company. He is highly
      respected in the industry and maintains strong relationships with major
      retailers, brokers, distributors and vendors in the nutritional supplements
      market.





**Milos
      Sarcev** is **** a
      co-founder of Koloseum Nutritional Sciences. Milos Sarcev has been involved
      with
      the sport of bodybuilding, fitness and nutrition for nearly three decades and
      his vast knowledge has earned him the title: “The Mind” amongst his peers.
      Besides traveling the world having competed in over 100 bodybuilding shows,
      Milos’ greatest passion is in giving back to the sport and teaching others to be
      the best that they can be. Having conducted lectures throughout the world,
      Milos
      is sought out worldwide as an International Nutrition, Strength and Conditioning
      Consultant.




47




**Stephen
      L. Scott** became a
      director of the Company’s Board of Directors in February 2007 and serves as
      Chairman of the Audit Committee. Mr. Scott is a management and organizational
      consultant with over 20-years experience with diverse manufacturing businesses,
      including a specific background with developmental stage companies. Since 1996,
      Mr. Scott has been President of Technology Acquisition Group, providing
      expertise in corporate growth planning, strategic partner development, finance,
      operations, team building, product opportunity identification, corporate
      re-engineering and mergers and acquisitions. In addition to early stage and
      small companies, he has performed projects with Fortune 1000 firms such as
      IBM,
      GE, AT&T, Bristol-Myers Squibb, Warner-Lambert, Johnson & Johnson and
      Ayerst-Wyeth. Mr. Scott received his Juris Doctorate and Masters of Business
      Administration degrees from National University and his Bachelor of Science
      degree from the University of Akron.





None
      of
      the directors or executive officers were selected pursuant to any arraignment
      or
      understanding, other than with the directors and executive officers of the
      Company acting within their capacity as such. There are no family relationships
      among directors or executive officers of the Company and no directorships are
      held by any director which has a class of securities registered pursuant to
      Section 12 of the Securities and Exchange Act of 1934, as amended (“the Exchange
      Act”), or subject to requirements of Section 15(d) of the Exchange Act or any
      company registered as an investment company under the Investment Company Act
      of
      1940. Officers serve at the discretion of the Board.





In
      2007,
      the Board of Directors held twenty-four meetings and the Audit Committee of
      the
      Board of Directors met four times. The Compensation and Governance Committee
      met
      as part of the Board meetings two times. Overall attendance at such meetings
      was
      100 percent.





A
      special
      committee of the Board of Directors was formed in August 15, 2007, consisting
      of
      Mr. Scott and former directors, Richard Munro and Karen Muller, who served
      as
      Chairman. This Committee evaluated the offers to purchase the Company and/or
      provide financing, so that the Company could emerge from bankruptcy. The
      Committee met nine times and presented its findings to the full Board on October
      8, 2007. The Special Committee then disbanded. The Special Committee was not
      paid any cash compensation for it many meetings and long hours but instead
      each
      member was awarded 1 million shares of restricted stock by the Board of
      Directors in November 2007 for their services.





**Code
      of Ethics**





The
      current Board of Directors adopted a Code of Ethics in March 2007, applicable
      to
      the chief executive officer, the chief financial officer, the controller, as
      well as all of the officers and senior staff. The Code of Ethics of the Company
      is available, free of charge, on request by writing to the Secretary of the
      Company.





**Director
      Compensation**





Effective
      March 23, 2007, each member of the Board of Directors receives $800 per calendar
      quarter for their service, except that Board members who receive cash
      compensation for their services as an officer of employee of Naturade or any
      of
      its affiliates are not paid. Also effective March 23, 2007, each member of
      the
      Audit Committee and the Compensation and Governance Committee receives $800
      per
      calendar quarter for their service, except that the Chairman of each committee
      receives $1,200 and members who receive cash compensation for their services
      as
      an officer or employee of Naturade or any of its affiliates are not paid. For
      services prior to such time, the Board members were paid a quarterly cash
      retainer of $3,125. Directors were also supposed to receive an
      option to purchase Common Stock of the Company with the number of shares
      calculated by dividing $9,375 by the average of the closing price of the
      Company’s Common Stock for each of the last five trading days preceding the
      first Board meeting during the quarter. The exercise price of the option would
      be the average of the closing price of the Company’s Common Stock for each of
      the last five trading days preceding the first Board meeting during the quarter.
      Such options would (i) have a seven year term and (ii) be immediately
      exercisable in whole or part.  This award was not granted in 2007 and the
      Board will reconsider whether it will grant a catch up award when a new equity
      incentive plan is in place in the future.





**Audit
      Committee**





As
      of
      March 31, 2008, the members of the Audit Committee are Steve Scott, Chairman
      and, Adam Michelin. The Company has determined that Adam Michelin qualifies
      as
      an “audit committee financial expert” as defined in Item 401(h) of Regulation
      S-K. Steve Scott, Audit Committee chairman, is “independent” within the meaning
      of Rule 4200(a) (15) of the National Association of Securities Dealers.




48




**Compensation
      and Governance Committee**





**** As
      of
      March 31, 2008, the members of the Compensation and Governance Committee are
      Gary Cannon, Chairman, and Adam Michelin.




**Nominating
      Procedures and Criteria**





The
      Company does not have a nominating committee. The Board of Directors has
      determined that this is appropriate in light of the fact that one principal
      stockholder of the Company has sufficient voting power to elect all of the
      directors of the Company and, like all stockholders of the Company, has the
      power to nominate candidates at meetings of stockholders. Each of the directors
      takes part in the nomination of candidates for election as directors at the
      annual meeting, although it is anticipated that in the future this function
      will
      be handled by the newly established Compensation and Governance
      Committee.





**Item
      11. Executive Compensation**





**Compensation
      Discussion and Analysis**





The
      Compensation and Governance Committee, consisting of two members of the Board
      of
      Directors, administers the executive compensation program. The role of the
      Compensation Governance Committee is to oversee the Company’s compensation and
      benefit plans and policies, administer stock and option plans and review and
      approve annually all compensation decisions relating to the executive officers
      of the Company. In addition, the Compensation and Governance Committee oversees
      the corporate governance policies of the Board and the Company.





The
      compensation programs are designed to remunerate the Company’s executives and
      are intended to provide incentive to the senior executives and other employees
      to maximize stakeholder value, which in turn effects the overall compensation
      earned by the Company’s management. The Company has adopted compensation
      programs designed to achieve the following:





·
            Attract,
                motivate and retain superior
                talent;


·
            Encourage
                high performance and promote
                accountability


·
            Ensure
                that compensation is commensurate with the company’s annual
                performance


·
            Provide
                performance awards for the achievement of financial and operational
                targets and strategic objectives, essential to the Company’s long-term
                growth.





From
      the
      Petition Date until the Effective Date, the components of employee compensation
      have included base salaries only. There are currently no employment contracts
      in
      place. Additionally, since August 14, 2006, the Company has leased its personnel
      from One World Science. Under this employee leasing arrangement, the Company
      maintains control over the compensation decisions of the leased employees.





The
      Compensation and Governance Committee has not adopted any formal or informal
      policies or guidelines for compensation due to the constraints of operating
      under Chapter 11 of the Bankruptcy Code. The Company emerged from Bankruptcy
      proceedings on November 9, 2007. During 2008, the Compensation and Governance
      Committee hopes to evaluate the compensation plans for executive officers taking
      into account strategic goals and performance metrics. In addition the
      Compensation and Governance Committee will attempt to perform reviews of all
      Company compensation policies, including policies and strategy relating to
      executive compensation, as well as the appropriate mix of base salary, and
      incentive compensation. These efforts will be balanced with the need for the
      Company to channel its efforts into surviving as a going concern under the
      Plan.





**Elements
      of Compensation**





Executive
      compensation consists of the following elements:




49




***Base
      Salary-*** Base
      salaries for the Company’s executives are generally established based on the
      scope of their responsibilities, level of experience and individual performance,
      taking into account both external competitiveness and internal equity
      considerations. The goal for the base salary component is to compensate
      employees at a level that approximates the median salaries of individuals in
      comparable positions at similarly situated companies. Base Salaries are reviewed
      by the Compensation Committee and may be adjusted from time to time at the
      Compensation and Governance Committee’s discretion.





***Stock
      Options -*** In
      1998,
      the Company adopted the 1998 Incentive Stock Option Plan (the “Incentive Plan”).
      The Incentive Plan provides for the issuance of incentive stock options within
      the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
      (the
“Code”). The purpose of the Incentive Plan is to enable the Company to attract,
      retain and motivate its employees by providing for performance-based benefits.
      At the 2000 annual stockholders’ meeting, the number of shares of the Company’s
      Common Stock that may be subject to awards granted under the Incentive Plan
      was
      increased to 850,000. At the 2001 annual stockholders’ meeting, the number was
      further increased to 2,000,000.





The
      Incentive Plan was administered by the Compensation Committee consisting of
      two
      members of the Board of Directors or administered by the full Board of
      Directors. The administrator had the power to construe and interpret the
      Incentive Plan and, subject to provisions of the Incentive Plan, to determine
      the persons to whom and the dates on which awards will be granted, the number
      of
      shares to be subject to each award, the times during the term of each award
      within which all or a portion of the award may be exercised, the exercise price,
      the type of consideration and other terms and conditions of the award. The
      exercise price of stock options under the Incentive Plan could not be less
      than
      the fair market value of the Common Stock subject to the option on the date
      of
      the option grant and in some cases could not be less that 110% of fair market
      value. The maximum term of the Incentive Plan was ten years, except that the
      Board could terminate the Incentive Plan earlier. The term of each individual
      award will depend upon the written agreement between the Company and the grantee
      setting forth the terms of the awards.





The
      Incentive Plan and the awards were cancelled when the Company’s Plan became
      effective. The Compensation and Governance Committee plans to adopt a new equity
      based award plan for employees in the future.





***General
      Benefits -*** The
      Company’s executives are eligible to participate in all employee benefit plans,
      such as medical and dental. Prior to the Company’s filing for Chapter 11
      Bankruptcy protection, the Company offered additional benefits to its executive
      officers such as life insurance and vehicle allowances.





***401(k)
      Plan*** *-* The
      Company maintains a 401(k) profit sharing plan (“401(k) Plan”) for the benefit
      of all employees who meet certain age and length of service requirements. The
      401(k) Plan provides for Company matching contributions equal to 25% of each
      employee participant’s contribution not to exceed 6% of the employee
      participant’s compensation.





On
      September 1, 2006, management voluntary suspended the 401(k) Plan as the Company
      began leasing its personnel from One World Science and no longer had any direct
      employees.





**2007
      Executive Base Salary and Incentive Compensation
      Determinations**





***Richard
      Munro***


Mr.
      Munro
      served as the Company’s Chief Executive Officer from August, 2006 until November
      9, 2007. Mr. Munro had an annual base salary of $200,000. No additional
      incentive compensation was granted to Mr. Munro, except in his role as a member
      of the Special Committee of the Board of Directors (see above and below). Mr.
      Munro did not have an employment agreement with the Company.





***Adam
      Michelin***


Mr.
      Michelin began serving as the Company Chief Executive Office on November 14,
      2007. Mr. Michelin has an annual base salary of $150,000. No additional
      incentive compensation has been granted to Mr. Michelin. Mr. Michelin does
      not
      have an employment contract with the Company.




50


***Richard
        Robinette***
 Mr.
        Robinette began serving as the Company’s Chief Operating Officer on November 14,
        2007. Mr. Robinette has an annual base salary of $150,000. No additional
        incentive compensation has been granted to Mr. Robinette. Mr. Robinette has
        does
        not have an employment contract with the Company.
 
 ***Milos
        Sarcev***
 Mr.
        began
        serving as the Company’s Chief Science Officer on November 12, 2007. Mr. Sarcev
        has an annual base salary of $150,000. No additional incentive compensation
        has
        been granted to Mr. Sarcev. Mr. Sarcev has does not have an employment contract
        with the Company.
 
 See
        “ **Security
        Ownership of Certain Beneficial Owners and Management**  **and
        Related Stockholder Matters”** for
        additional information on the control person status of each of Messrs. Michelin,
        Robinette and Sarcev.
  ***Dee
        Kelly***
 Dee
        Kelly
        served as the Company’s Chief Financial Officer from January 3, 2007 to April
        15, 2007. Ms. Kelly was an independent contractor and was paid a fee of $4,000
        per month. No additional incentive compensation was granted to Ms. Kelly.
        Ms.
        Kelly did not have an employment agreement with the Company.
 
 **2007
        SUMMARY COMPENSATION TABLE**
 
 The
        table
        below summarizes the total compensation paid or earned by the Company’s Chief
        Executive Officer, and three other most highly compensated executive officers
        for the year ended December 31, 2007.
 
 **Name and**
                **Principal Position**
              
              **Year**
              
              **Salary**
                **$**
              
              **Bonus**
                **$**
              
              **Stock**
                **Awards**
                **$**
              
              **Option**
                **Awards**
                **$ (6)**
              
              **Non-Equity**
                **Incentive Plan**
                **Compensation**
                **$**
              
              **Change in**
                **Pension Value**
                **and**
                **Nonqualified**
                **Deferred**
                **Compensation**
                **Earnings**
                **$**
              
              **All Other**
                **Compensation**
                **$**
              
              **Total**
                **$**Richard
                  L. Munro,
                Chief
                  Executive Officer (1)
              
              
              2007
              
              $
              182,336
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              15,385
              
              $
              197,721Adam
                  Michelin ,
                Chief
                  Executive (2)
              
              
              2007
              
              $
              23,077
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              23,077Richard
                  Robinette,
                Chief
                  Operating Officer (3)
              
              
              2007
              
              $
              19,320
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              19,320Milos
                  Sarcev,
                Chief
                  Science Officer (3)
              
              
              2007
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0Dee
                  S. Kelly,
                Former
                  Chief Financial Officer (4)
              
              
              2007
              
              $
              19,000
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              19,000
  
 (1)
                Mr.
                    Munro resigned as Chief Executive Officer November 9, 2007.(2)
                Mr.
                    Michelin became Chief Executive Officer on November 14, 2007.(3)
                Mr.
                    Robinette became Chief Operating Officer on November 14, 2007.
                    (4) Mr.
                    Sarcev became Chief Science Officer on November 14, 2007.(4)
                Ms.
                    Kelly served as Chief Financial Officer from January 3, 2007
                    to April 15,
                    2007.
  51
 
 **2007
        Grants of Plan-Based Awards**
 
 The
        Company made no grants of plan-based awards to any of the named executive
        officers during 2007.
 
 **Outstanding
        Equity Awards at December 31, 2007**
 
 The
        Company had no outstanding equity awards at December 31, 2007, other than
        the
        payment of three million shares of restricted stock to three directors for
        their
        services on a Special Committee.
 
 **Option
        Exercises and Stock Vested**
 
 None
        of
        the Company’s named executive officers or former executive officers exercised
        any stock options or similar awards during the fiscal year 2007. All formerly
        outstanding stock options to named executive officers or former executive
        officers expired upon termination of employment and all other option awards
        were
        cancelled on the Effective Date. In addition, the Company had no unvested
        stock
        awards outstanding to any named executive officers or former executive officers.
 
 **Pension
        Benefits**
 
 None
        of
        the Company’s named executive officers or former executive officers are covered
        by a pension plan or other similar benefit plan that provides for payments
        or
        other benefits.
 
 **Nonqualified
        Deferred Compensation**
 
 The
        Company does not have any non-qualified deferred compensation
        plans.
 
 **Potential
        Payments upon Termination or Change in Control**
 
 The
        Company currently has no employment agreements which would cause potential
        payments upon termination or change in control.
 
 **Compensation
        of Directors**
 
 On
        December 16, 2005 the Board approved a compensation plan for non-management
        directors whereby, all non-management directors, except Mr. Pocklington,
        received directors fees of a quarterly cash retainer of $3,125 plus an option
        to
        purchase Common Stock of the Company with the number of shares calculated
        by
        dividing $9,375 by the average of the closing price of the Company’s Common
        Stock for each of the last five trading days preceding the first Board meeting
        during the quarter. The exercise price of the option will be the average
        of the
        closing price of the Company’s Common Stock for each of the last five trading
        days preceding the first Board meeting during the quarter. Such options shall
        (i) have a seven year term and (ii) be immediately exercisable in whole or
        part.
        This plan was in effective until March 23, 2007. During 2007, t he
        option
        award was not granted and the Board will reconsider whether it will grant
        a
        catch up award when a new equity incentive plan is in place in the future.
 
 Effective
        March 23, 2007, each member of the Board of Directors receives $800 per calendar
        quarter for their service, except that Board members who receive cash
        compensation for their services as an officer of employee of Naturade or
        any of
        its affiliates are not paid. Also effective March 23, 2007, each member of
        the
        Audit Committee and the Compensation and Governance Committee receive $800
        per
        calendar quarter for their service, except that the Chairman of each committee
        receives $1,200 and members who receive cash compensation for their services
        as
        an officer or employee of Naturade or any of its affiliates are not
        paid.
  52
  **Director
        Compensation Table (1)**
 
 Director Name
              
              Fees Earned or
                Paid in Cash
              
              Stock Awards (2)
              
              Option Awards
              
              TotalAdam
                  M. Michelin (3)
              
              $
              12,722
              
              
              —
              
              
              —
              
              $
              12,722Stephen
                  L. Scott (4)
              
              $
              4,178
              
              $
              20,000
              
              
              —
              
              $
              24,178Gary
                  C. Cannon(5)
              
              $
              11,051
              
              
              —
              
              
              —
              
              $
              11,051Karen
                  Muller (6)
              
              $
              10,775
              
              $
              20,000
              
              
              —
              
              $
              30,775Richard
                  Munro (7)
              
              
              
              
              $
              20,000
              
              
              
              
              $
              20,000










(1)
            Director
                Compensation was paid in 2007 for services rendered from August 10,
                2006
                through September 30, 2007. No fees for the period September 30,
                2007 to
                December 31, 2007 have yet been paid.





(2)
            On
                November 7, 2007, the Board made a special award of restricted stock
                to
                Messrs. Munro and Scott and Ms. Muller.A
                special committee of the Board of Directors was formed on August
                15, 2007,
                consisting of Mr. Scott and former directors, Richard Munro and Karen
                Muller, who served as Chairman. This Committee evaluated the offers
                to
                purchase the Company and/or provide financing, so that the Company
                could
                emerge from bankruptcy. The Committee met nine times and presented
                its
                findings to the full Board on October 8, 2007. The Special Committee
                then
                disbanded.The
                Special Committee was not paid any cash compensation for its many
                meetings
                and extremely long hours which typically extended beyond normal business
                hours on a sustained basis. Instead, each member was awarded 1 million
                shares of restricted stock (or at their option, 1 million warrants
                exercisable at 2 cents) by the Board of Directors for their services.
                Each
                of the three Directors thereafter opted for restricted stock, which
                on the
                date of the award was trading at a market price of 2
                cents.





(3)
            Mr.
                Michelin was paid for the period August 10, 2006 to March 23, 2007,
                on a
                prorated basis, at the old rate of $3,125 per calendar quarter. No
                options
                were granted (see above). He was also paid for the period from March
                23,
                2007 to September 30, 2007, on a prorated basis, at the rate of $800
                per
                quarter for services as a director and as a member of both the Audit
                and
                Compensation and Governance Committees, he was paid for the period
                March
                23, 2007 to September 30, 2007, on a prorated basis, at the rate
                of $1,600
                per calendar quarter.


.


(4)
            Mr.
                Scott joined the Board and was named Chairman of the Audit Committee
                on
                March 23, 2007. Mr. Scott was paid for the period from March 23,
                2007 to
                September 30, 2007,on
                a prorated basis, at the rate of $800 per calendar quarter for services
                as
                a director and as Chairman of the Audit Committee, he was paid for
                the
                period March 23, 2007 to September 30, 2007, on a prorated basis,
                at the
                rate of $1,200 per calendar quarter. See also the equity award in
                footnote
                (4) below.




(5)
            Mr.
                Cannonwas paid for the period August 10, 2006, to March 23, 2007, on a
                prorated
                basis, at the old rate of $3,125 per calendar quarter. No options
                were
                granted (see above). He was also paid for the period from March 23,
                2007,
                to September 30, 2007, on a prorated basis, at the rate of $800 per
                calendar quarter for services as a director and as a member of
                Compensation and Governance Committee. He was paid for the period
                March
                23, 2007, to September 30, 2007, on a prorated basis, at the rate
                of $800
                per calendar quarter. Mr. Cannon serves as General Counsel for the
                Company
                and its controlling shareholder, Redux, pursuant to a retainer
                arrangement. For the period of August 10, 2006, to December 31, 2007,
                the
                retainer payments were $68,000. A significant portion of the retainer
                payment is allocated to the Company by Redux.


(6)
            Ms.
              Muller served on the Board of Directors and as Chairman of the
              Compensation and Governance Committee from August 10, 2006 to April
              12,
              2007 and rejoined the Board on June 1, 2007. Ms. Muller was paid for
              the
              period August 10, 2006 to March 23, 2007, on a prorated basis, at the
              old
              rate of $3,125 per calendar quarter. No options were granted (see above).
              She was also paid for the periods from March 23, 2007 to April 10,
              2007
              and from June 1, 2007 to September 30, 2007, on a prorated basis, at
              the
              rate of $800 per calendar quarter for services as a director and as
              Chairman of the Compensation and Governance Committee, she was paid
              for
              the periods from March 23, 2007 to April 10, 2007 and from June 1,
              2007
              September 30, 2007, on a prorated basis, at the rate of $1,200 per
              calendar quarter. Ms. Muller voluntarily resigned her Board seat on
              January 18, 2008. See also the equity award in footnote (4)
              above.





53




(7)
            Mr.
                Munro served on the Board of Directors and as a member of the Audit
                Committee from August 10, 2006 to January, 2008, at which time he
                voluntarily resigned his position as a director of the Company. As
                a
                salaried employee, he was not eligible for regular director fees
                until his
                resignation as Chief Executive Officer of the Company on November
                9, 2007.
                No fees for the period of November 9, 2007 to January 18, 2008 have
                yet
                been paid. See also the equity award in footnote (4) above.





**Employment
      Contracts, Termination of Employment and Change-In-Control**  **Arrangements**





There
      are
      no employment contracts, and there are no terminations of employment and
      change-in-control arrangements.





**Incentive
      Stock Option Plan**





In
      1998,
      the Company adopted the 1998 Incentive Stock Option Plan (the “Incentive Plan”).
      The Incentive Plan provides for the issuance of incentive stock options within
      the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
      (the
“Code”). The purpose of the Incentive Plan is to enable the Company to attract,
      retain and motivate its employees by providing for performance-based benefits.
      At the 2000 annual stockholders’ meeting, the number of shares of the Company’s
      Common Stock that may be subject to awards granted under the Incentive Plan
      was
      increased to 850,000. At the 2001 annual stockholders’ meeting, the number was
      further increased to 2,000,000. Immediately prior to the Effective Date, 81,000
      options to purchase shares of the Company’s Common Stock were outstanding under
      the Incentive Plan, of which 49,000 options to purchase shares (subject to
      adjustment to prevent dilution) had vested, and 1,919,000 shares were available
      for future awards under the Incentive Plan.





The
      Incentive Plan was administered by a committee consisting of three members
      of
      the Board of Directors or administered by the full Board of Directors. The
      administrator had the power to construe and interpret the Incentive Plan and,
      subject to provisions of the Incentive Plan, to determine the persons to whom
      and the dates on which awards would be granted, the number of shares which
      would
      be subject to each award, the times during the term of each award within which
      all or a portion of the award could be exercised, the exercise price, the type
      of consideration and other terms and conditions of the award. The exercise
      price
      of stock options under the Incentive Plan could not be less than the fair market
      value of the Common Stock subject to the option on the date of the option grant
      and in some cases could not be less that 110% of fair market value. The maximum
      term of the Incentive Plan is ten years, except that the Board could terminate
      the Incentive Plan earlier. The term of each individual award depended upon
      the
      written agreement between the Company and the grantee setting forth the terms
      of
      the awards.





The
      Incentive Plan and the awards were cancelled on the Effective Date.





**401(k)
      Plan**





Prior
      to
      the Petition Date, the Company maintained a 401(k) profit sharing plan (“401(k)
      Plan”) for the benefit of all employees who meet certain age and length of
      service requirements. The 401(k) Plan provided for Company matching
      contributions equal to 25% of each employee participant’s contribution not to
      exceed 6% of the employee participant’s compensation.





On
      September 1, 2006, the Company voluntarily suspended the 401(k) Plan as the
      Company began leasing its personnel from One World Science and no longer had
      any
      direct employees.





54





**REPORT
      OF THE COMPENSATION COMMITTEE**




The
      Compensation and Governance Committee was established on March 23, 2007. Given
      the cash constraints on the Company, which operated under Chapter 11 for most
      of
      2007, the Committee left all salary arrangements for employees leased from
      One
      World Science in place. Other than the most basic medical and dental plan,
      the
      employees had no other benefits and were not granted any equity incentives
      approved by the Committee. No cash bonuses were paid and none of the salaries
      was above market. During 2008, the Compensation and Governance Committee will
      review all existing compensation arrangements at the Company and make any
      changes it deems appropriate.





The
      Compensation Committee has reviewed and discussed the foregoing Compensation
      Discussion and Analysis required by Item 402(b) of Regulation S-K with
      management. Based on such review and discussions, the Compensation and
      Governance Committee recommended to the Board of Directors that the Compensation
      Discussion and Analysis be included into Naturade’s Annual Report on Form 10-K
      for the year ended December 31, 2007.





THE
      COMPENSATION COMMITTEE


Gary
      Cannon, Chairman


Adam
      Michelin





55




**Compensation
      and Governance Committee Interlocks and Insider
      Participation**





Mr.
      Michelin is the Chief Executive Officer of the Company and Mr. Cannon is
      Secretary and serves as outside General Counsel to the Company pursuant to
      a
      retainer agreement with Redux. Mr. Michelin is one of the principal owners
      of
      Redux, the controlling shareholder of the Company. Under the NASD Rules for
      Bulletin Board Companies, where there is a majority controlling shareholder,
      the
      Compensation Committee need not consist of independent directors.





**Item 12.** **Security
        Ownership of Certain Beneficial Owners and Management**  **and
        Related Stockholder Matters**





The
      following table sets forth information regarding beneficial ownership, as of
      December 31, 2007, of the Company’s outstanding Common Stock by (i) any person
      who is known to the Company to be the beneficial owner of more than 5% of the
      Company’s voting securities, (ii) each director and each of the Named Executive
      Officers, and (iii) by the directors and executive officers of the Company
      as a
      group. Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission. In computing the number of shares
      beneficially owned by a person and the percentage of ownership of that person,
      shares of Common Stock subject to options or warrants held by that person that
      are currently exercisable or will become exercisable within 60 days are deemed
      outstanding but are not deemed to be outstanding as to any other
      person.





On
      December 7, 2007, Naturade, Inc. (the “Company”) received back from the State of
      Delaware an authenticated copy of the amendment to its certificate of
      incorporation the Company filed with the State of Delaware on November 26,
      2007
      (the” Amendment”). This Amendment was effective as of November 26, 2007.
      Pursuant to the Amendment, the authorized shares of stock which the Company
      is
      authorized to issue was be changed to 300,117,264 shares, 250,000,000 of which
      shall be Common Stock with a par value of $.0001 per share, 117,264 of which
      shall be Non-Voting Common Stock with a par value of $.0001 per share, and
      50,000,000 of which shall be Preferred Stock with a par value of $.0001 per
      share.  At the Effective Date, the Company issued 150,475,388 shares of
      Common Stock to Redux Holdings, Inc.  (“Redux”), so that Redux would hold
      95%, or 180,025,388 of the issued Common Stock, at the time that the Company
      emerged from bankruptcy. 8,510,388 shares of Common Stock, or 5%, will be held
      by third parties. 3,372,345 shares of Common Stock that should have been
      transferred to Redux by Quincy Investments Corp. pursuant to contract are under
      stop orders with the Company’s transfer agent. These shares were not included in
      the computation of the 95% position. Redux and Naturade are taking steps to
      have
      the 3,372,345 shares cancelled. Subsequent to the Company’s emergence from
      bankruptcy, an additional three million shares of Common Stock were issued
      to
      Directors as compensation, see above.  Accordingly, the number of shares of
      the Company’s Common Stock that are issued and outstanding increased to
      194,908,121. All of these actions were pursuant to the Section 7.5 of the
      Company’s Plan Also pursuant to the Section 6.8.3 of the Plan and under
      Section 1145(a) of the Federal Bankruptcy Code; all of the shares of Common
      Stock issued to Redux are exempt from the registration requirements of the
      securities statutes. .





**Name and Address of Beneficial  Owner(1)**
            
            **Common Stock**
            
            **Percent of Common**
              **Stock**Redux
                Holdings, Inc
              11726
                San Vicente Blvd., Suite 300 Los Angeles, CA 90049
            
            
            180,025,388
            (2)
            
            92.4
            %Adam
                Michelin, Director and Chief Executive Officer
            
            
            180,025,388
            (2)
            
            92.4
            %Steve
                Scott, Director
            
            
            1,000,000
            
            
            .55
            %Gary
                Cannon, Director
            
            
            -0-
            
            
            0Rick
                Robinette, Chief Operating Officer
            
            
            180,025,388
            (2)
            
            92.4
            %Milos
                Sarcev, Chief Science Officer
            
            
            180,025,388
            (2)
            
            92.4
            %Executive
                officers and directors as a group (3 persons)
            
            
            180,025,388
            (3)
            
            92.95
            %




56







(1)
            Except
                as otherwise indicated, the address of each person named in the above
                table is in care of Naturade, Inc., 2099 S. State College Blvd.,
                Suite
                210, Anaheim, CA.





(2)
            Messrs
                Michelin, Robinette and Sarcev are the principal stockholders of
                Redux,
                which is the controlling shareholder of the Company. Messrs. Michelin,
                Robinette and Sarcev disclaim beneficial ownership of the common
                stock
                held by Redux except to the extent of each of their indirect pecuniary
                interest in the shares. The common stock held by Redux was acquired
                as
                part of the recapitalization, see “Business—Recapitalization” and the
                Plan, See “Recent Developments.”





(3)
            Includes
                shares of common stock beneficially owned by Redux, see note (2)
                above.




**Item
      13. Certain Relationships and Related Transactions**





Redux,
      as
      part of its infusion of cash and other services to the Company during its
      bankruptcy, has provided legal services to the Company in the form of its
      General Counsel, Gary Curtis Cannon. Mr. Cannon is retained by Redux to act
      as
      its General Counsel and SEC attorney for $12,000 per month. Redux provides
      Mr.
      Cannon’s services as the Company’s General Counsel and SEC attorney under his
      current retainer agreement with Redux.





During
      the Company’s Chapter 11 Bankruptcy and to facilitate the Company’s
      reorganization, Redux has made corporate guarantees to one of the Company’s
      vendors to allow the Company to purchase formula in order to continue to produce
      and distribute certain of its products. Redux provided a corporate guarantee
      to
      Best Formulations, Inc., to allow the Company to purchase certain of its
      products from it. Redux also provided a guarantee to the Unsecured Creditors
      and
      the Unsecured Creditors Committee under the Plan as part of its financial
      infusion and support of the Company reorganization. Redux has also guaranteed
      the Company’s obligations to certain administrative claimants under the Plan.





Redux
      assisted Naturade’s emergence from Bankruptcy by enhancing the credit worthiness
      of debts associated with the Bankruptcy process. These enhancements have taken
      the form of 1) loan guarantees, 2) Shares/Warrants, and 3) note conversion
      rights.


1.
            Guarantees –
                Redux has guaranteed the payment of the following obligations of
                Naturade.


a.
            Unsecured
                creditor payments


b.
            Health
                Holdings secured note


c.
            Deferred
                Administrative expenses


2.
            Shares/Warrants –
                Certain creditors and Preferred Shareholders were permitted to convert
                their obligations to Redux Common
                Stock.


a.
            Laurus
                converted Naturade shares to Redux
                shares


b.
            Laurus
                converted Naturade warrants to Redux
                warrants


c.
            Preferred
                shareholders converted their Naturade Preferred shares to Redux Common
                Stock


3.
            Note
                Conversion – certain note holders were granted the right to convert
                Naturade notes to Redux Common
                Stock.


a.
            Health
                Holdings secured note has right to convert to Redux Common
                Stock.


b.
            Bill
                Stewart secured note has right to convert to Redux Common
                Stock. c.
            Howard
              Shao secured note has right to convert to Redux Common
              Stock.




On
      April
      14, 2003, the Company entered into a loan agreement (the “Loan Agreement”) with
      Health Holdings and Botanicals, LLC, a principal stockholder of Naturade, and
      David A. Weil, a past director and stockholder of the Company (the “Lender
      Group”), pursuant to which the Lender Group has agreed to lend the Company
      $450,000 and, subject to the discretion of the Lender Group, up to an additional
      $300,000. All advances under the Loan Agreement bear interest at the rate of
      15%
      per annum, are due on December 31, 2005, and are secured by substantially all
      of
      the Company’s assets. This due date was extended as discussed
      below.





57





On
      April
      14, 2004, the terms of the Loan Agreement were modified by the Joinder of Bill
      D. Stewart, our Chief Executive Officer as a member of the Lender Group, subject
      to all of the terms and conditions of the Loan Agreement, and the Lender Group
      advanced an additional $200,000, of which Bill D. Stewart advanced $100,000.
      Further, on May 3, 2004, the Lender Group advanced the Company an additional
      $100,000. Further, on August 16, 2004, advances allowed under the Loan Agreement
      were increased to a total of $950,000 and the Lender Group advanced an
      additional $200,000 to Naturade. There are no additional amounts available
      to
      advance under the Loan Agreement. Proceeds of the advances were used for working
      capital. On January 26, 2005, the terms of the Loan Agreement were modified
      to
      extend the due date to December 31, 2005. Pursuant to the recapitalization
      in
      July, 2005, Health Holdings, Stewart and Weil agreed to extend the term of
      the
      Secured Promissory Notes issued to them under the Loan Agreement from December
      31, 2005 to December 31, 2006. The Secured Promissory Notes became claims under
      the Company’s Chapter 11 bankruptcy proceedings in August 2006.





On
      August
      30, 2005, the Company entered into a consulting agreement with Quincy,
      Naturade’s then largest stockholder, whereby Quincy would provide advice to the
      Company and its affiliates regarding acquisitions, strategic planning,
      operations and financing. For its services, Quincy would receive a Consulting
      Fee of $300,000 per year payable in monthly installments. In addition, Quincy
      would receive Acquisition Fees equal to 2% of the purchase price of any
      acquisitions completed or equity capital raised during the term of the
      consulting agreement. When earned, 50% of such Acquisition Fees would be
      credited by us against future Consulting Fees. The consulting agreement was
      terminated in August 2006, pursuant to the assumption of control of the
      Company’s common stock voting rights by Redux Holdings, Inc.





On
      August
      16, 2006, the Company entered into a Services Agreement with One World Science,
      Inc., a subsidiary of Redux, whereby One World Science would provide various
      services including among others, advertising, sales, compliance and customer
      service to Company for an amount of the fully burden costs of the services
      plus
      up to 25% of such costs. The Company continues to lease all of its employees
      from One World Science.





On
      September 1, 2006, the Company entered into a Sublease and Occupancy Agreement
      with One World Science, Inc. whereby One World Science subleases to the Company
      approximately 9,000 square feet of office space including all necessary services
      for $10,000 per month in Brea, California. The Company vacated this space on
      May
      18, 2007, and moved to its current office space of 5,357 square feet in Anaheim,
      California, which it subleases from First American Default Management Solutions,
      LLC for $9,479 per month.





On
      February 28, 2007, Redux purchased from Naomi Balcombe and Ageless (Balcombe
      and
      Ageless are collectively, referred to herein as the “Ageless Parties”) the
      $1,248,234 claim the Ageless parties submitted in the Naturade
      bankruptcy.


Ms.
        Muller, a former director of Naturade had a consulting agreement, entered
        into
        in July 2006, with Redux, pursuant to which she was issued warrants for Redux
        common stock subsequent to her resignation in January 2008.


**Item
      14. Principal Accountant Fees and Services**





The
      Company incurred the following fees to Squar, Milner, Peterson, Miranda &
Williamson LLP during fiscal years 2006 and 2007:





**Year ended**
                **December 31,**
              **2006**
            
            **Year ended**
                **December 31,**
              **2007**Audit
                Fees
            
            $
            210,000
            
            $
            101,024Tax-related
                Fees (Tax return preparation)
            
            
            -0-
            
            
            17,171Audit
                Related Expenses
            
            
            10,000
            
            
            -0-Special
              Projects
            
            
            -0-
            
            
            24,489





The
      Company incurred the following fees to Haskell & White LLP during fiscal
      year 2007:





**Year ended**
                **December 31,**
              **2007**Audit
                Fees
            
            $
            -0-Tax-related
                Fees (Tax return preparation)
            
            
            -0-Audit
                Related Fees
            
            
            -0-





The
      Audit
      Committee administers the Company’s engagement of independent auditors and
      pre-approves all audit and permissible non-audit services on a case-by-case
      basis. In approving non-audit services, the Audit Committee considers whether
      the engagement could compromise the independence of said auditors, and whether
      for reasons of efficiency or convenience it is in the best interest of the
      Company to engage its independent auditor to perform the services. The Audit
      Committee has determined that performance by Haskell & White LLP and Squar,
      Milner, Peterson, Miranda & Williamson LLP of the non-audit services related
      to the fees on the table above did not affect their independence.




The
      Audit
      Committee has not approved any non-audit services pursuant to Paragraph (c)
      (7)
      (i) (C) of Rule 2-01 of Regulation S-X.





58





**PART
      IV**





**Item
      15.** **Exhibits and Financial Statements**





(a)
      See
      the Index to Financial Statements on page F-1 for a list of financial statements
      filed as part of this report.





Financial
      statement schedules have been omitted because they either are not applicable
      or
      the required information is shown in the Company’s financial statements or the
      related notes thereto.





(b)  Exhibits:
      The following is a list of exhibits filed as a part of this
      report:





**Exhibit**
              **Number**
            
            **Document**3.1
            
            Certificate
                of Incorporation of Naturade, Inc., together with amendments and
                Certificates of Designation relating thereto, incorporated by reference
                to
                Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal
                year ended September 30, 1997.3.2
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on December 20, 2001, and incorporated
                by
                reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed
                on January 3, 2002.3.3
            
            Certificate
                of Designation of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on December 20, 2001,
                and
                incorporated by reference to Exhibit 3.5 to the Company’s Current Report
                on Form 8-K filed on January 3, 2002.3.4
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on December 28, 2001, and incorporated
                by
                reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed
                on January 3, 2002.3.5
            
            Certificate
                of Elimination of Series A Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on January 3, 2002 incorporated
                by reference to Exhibit 3.5 to Form SB-2 (File No.
                333-127397).3.6
            
            Certificate
                of Amendment of Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on May 15, 2003 incorporated by reference
                to Exhibit 3.6 to Form SB-2 (File No. 333-127397).3.7
            
            Certificate
                of Amendment of Certificate of Designation of Series B Convertible
                Preferred Stock of Naturade, Inc., filed with the Delaware Secretary
                of
                State on May 15, 2003 incorporated by reference to Exhibit 3.7 to
                Form
                SB-2 (File No. 333-127397).3.8
            
            Certificate
                of Decrease of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005 incorporated
                by reference to Exhibit 3.8 to Form SB-2 (File No.
                333-127397).3.9
            
            Certificate
                of Designation of Series C Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005, and
                incorporated by reference to Exhibit 3.1 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.3.10
            
            Certificate
                of Elimination of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005, and
                incorporated by reference to Exhibit 3.2 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.3.11
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on November 26, 2007 and incorporated
                by
                reference to Exhibit 9.1.1 to the Company’s Current Report on Form 8-K
                filed on December 12, 2007.3.12
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on February 20, 2008, and incorporated
                by
                reference to Exhibit 99.1 to the Company’s Current Report on From 8-K
                filed on March 13, 2008.3.13
            
            Amended
                and Restated Bylaws of Naturade, Inc., as amended December 7, 2001,
                incorporated by reference to Exhibit 3.6 to the Company’s Current Report
                on Form 8-K filed on January 3,
                2002.




59




**Exhibit**
              **Number**
            
            **Document**4.1
            
            Form
                of certificate of common stock, par value $0.0001 per share incorporated
                by reference to Exhibit 4.1 to Form SB-2 (File No.
                333-127397).10.1
            
            Asset
                Purchase Agreement, dated November 2, 2004, between the Company and
                L.O.D.C. Group, LTD, incorporated by reference to Exhibit 10.54 to
                the
                Company’s Current Report on Form 8-K filed on November 9,
                2004.10.2
            
            Asset
                Purchase Agreement, dated as of July 22, 2005, by and among Quincy
                Investments Corp., Symco, Inc. and Symbiotics, Inc., incorporated
                by
                reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
                filed on July 28, 2005.10.3
            
            Assignment
                and Assumption Agreement dated, as of July 22, 2005, by and among
                the
                Company, Quincy Investments Corp., Symco, Inc. and Symbiotics, Inc.,
                incorporated by reference to Exhibit 10.7 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.10.4
            
            Asset
                Purchase Agreement, dated as of July 27, 2005, by and between Quincy
                Investments Corp. and The Ageless Foundation, Inc., incorporated
                by
                reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K
                filed on July 28, 2005.10.5
            
            Assignment
                and Assumption Agreement, dated as of July 28, 2005, by and among
                the
                Company, Quincy Investments Corp. and The Ageless Foundation, Inc.,
                incorporated by reference to Exhibit 10.9 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.10.6
            
            Promissory
                Note in the amount of $1,775, 687.46, dated August 3, 2005, by Quincy
                Investments Corp. and the Company payable to Symbiotics, Inc.,
                incorporated by reference to Exhibit 4.1 to the Company’s Current Report
                on Form 8-K filed on August 9, 2005.10.7
            
            Promissory
                Note in the amount of $648,234.00, dated August 5, 2005, by Quincy
                Investments Corp. and the Company payable to The Ageless Foundation,
                Inc.,
                incorporated by reference to Exhibit 4.2 to the Company’s Current Report
                on Form 8-K filed on August 9, 2005.10.8
            
            Guaranty
                of Promissory Note, dated as of August 3, 2005, by Peter H. Pocklington
                for the benefit of each of Symco Inc. and Symbiotics, Inc., incorporated
                by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005.10.9
            
            Guaranty
                of Promissory Note, dated as of August 5, 2005, by Peter H. Pocklington
                for the benefit of The Ageless Foundation, Inc., incorporated by
                reference
                to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on
                August 9, 2005.10.10
            
            Trademark
                License Agreement, dated August 3, 2005, by and among the Company,
                Symco,
                Inc. and Symbiotics, Inc., incorporated by reference to Exhibit 10.9
                to
                the Company’s Current Report on Form 8-K filed on August 9,
                2005.10.11
            
            Independent
                Contractor Proprietary Information and Inventions Agreement dated
                August
                5, 2005, by and between Naturade, Inc. and Naomi Balcombe, incorporated
                by
                reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005.10.12
            
            Transition
                Agreement, entered into as of August 3, 2005, by and between Naturade,
                Inc., Symco, Inc. and Symbiotics, Inc. incorporated by reference
                to
                Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August
                9, 2005.10.13
            
            Independent
                Contractor Proprietary Information and Inventions Agreement, dated
                August
                3, 2005, by and between Naturade, Inc. and Douglas Wyatt incorporated
                by
                reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005,10.14
            
            Independent
                Contractor Proprietary Information and Inventions Agreement, dated
                August
                3, 2005, by and between Naturade, Inc. and David Brown and Symbiotics,
                Inc. incorporated by reference to Exhibit 10.6 to the Company’s Current
                Report on Form 8-K filed on August 9, 2005.10.15
            
            Agreement,
                dated May 31, 2006, by and among Quincy Investments Corp., Naturade,
                Inc.,
                Symbiotics, Inc. and Symco, Incorporated, incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 31,
                200610.16
            
            Amended
                and Restated Promissory Note, dated May 31, 2006, by and among Quincy
                Investments Corp., Naturade, Inc., Symbiotics, Inc. and Symco,
                incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                on Form 8-K filed on May 31, 2006




60




**Exhibit**
              **Number**
            
            **Document**10.17
            
            Agreement
                dated August 10, 2006, by and among Redux Holdings, Inc. and Quincy
                Investments Corp., incorporated by reference to Exhibit 10.1 to the
                Company’s Current Report on Form 8-K filed on August 10,
                200610.18
            
            Services
                Agreement between One World Science, Inc. , a wholly owned subsidiary
                of
                Redux Holdings, Inc. and the Company dated August 16, 2006, requiring
                One
                World Science, Inc. to provide services to the Company, including,
                but not
                limited to, Manufacturing and Packing Coordination Services; Warehouse,
                Inventory Management and Distribution Services; Advertising Services;
                Customer Support Services; Sales Services; and Management, Financial
                and
                Legal Services, incorporated by reference to Exhibit 10.74 to the
                Company’s Annual Report on Form 10-K filed on April 17,
                200710.19
            
            Letter
                Agreement Dated November 16, 2006 between Laurus Master Fund, LLC
                and
                Redux Holdings, Inc. to waive Default and Fees owed by the Company
                and for
                Redux Holding, Inc to acquire all of Laurus Master Fund, LLC’s Company
                Common Stock and Warrants for shares of Redux Holdings, Inc. Common
                Stock,
                , incorporated by reference to Exhibit 10.75 to the Company’s Annual
                Report on Form 10-K filed on April 17, 200710.20
            
            Security
                Agreement between Laurus Master Fund, LTD. and Naturade, Inc. dated
                November 6, 2007, incorporated by reference to Exhibit 10.83 to the
                Company’s Quarterly Report on Form 10-Q for the Quarterly Period ended
                September 30, 200710.21
            
            Secured
                Revolving Note Agreement dated November 6, 2007 by and between Laurus
                Master Fund, LTD. and Naturade, Inc. incorporated by reference to
                Exhibit
                10.84 to the Company’s Quarterly Report on Form 10-Q for the Quarterly
                Period ended September 30, 200710.22
            
            Secured
                Term Note dated November 6, 2007 by and between Laurus Master Fund,
                LTD.
                and Naturade, Inc., incorporated by reference to Exhibit 10.85 to
                the
                Company’s Quarterly Report on Form 10-Q for the Quarterly Period ended
                September 30, 200710.23
            
            Grant
                of Security Interest in Patents and Trademarks by Naturade, Inc.
                to Laurus
                Master Fund, Inc. dated November 6, 2007, incorporated by reference
                to
                Exhibit 10.86 to the Company’s Quarterly Report on Form 10-Q for the
                Quarterly Period ended September 30, 200710.24
            
            Lockbox
                Agreement by and between Naturade, Inc. and Laurus Master Fund, LTD.
                dated
                November
              6,
                2007, incorporated by reference to Exhibit 10.87 to the Company’s
                Quarterly Report on Form 10-Q for the Quarterly Period ended September
                30,
                200710.25
            
            Global
                Settlement Agreement Dated February 14, 2007 between the Company,
                Redux
                Holdings, Inc., the Official Committee of Unsecured Creditors appointed
                in
                the Creditors Chapter 11 Case, Health Holdings & Botanicals, LLC and
                Doyle & Boissiere LLC settling claims of secured and unsecured
                creditors in the Company’s Chapter 11 Bankruptcy, incorporated by
                reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K
                filed on April 17, 200710.26
            
            Stipulation
                between Debtor and Window Rock Enterprises, Inc. Re Resolution of
                Objections to Confirmation of Debtors Fourth Amended Chapter 11 Plan
                of
                Reorganization and Order thereon Dated February 28, 2007 resolving
                all
                disputed claims between the Company and Window Rock Enterprises,
                Inc.,
                incorporated by reference to Exhibit 10.79 to the Company’s Annual Report
                on Form 10-K filed on April 17, 200710.27
            
            Signature
                page for Stipulation of Debtor and Window Rock Enterprises set forth
                in
                Exhibit 10.80, incorporated by reference to Exhibit 10.26 to the
                Company’s
                Annual Report on Form 10-K filed on April 17, 200710.28
            
            Assignment
                of Claim Agreement, Dated February 28, 2006 by Ageless Foundation,
                Inc.
                and Naomi Balcombe, to Redux Holdings, Inc., incorporated by reference
                to
                Exhibit 10.81 to the Company’s Annual Report on Form 10-K filed on April
                17, 200710.29
            
            Memorandum
                of Understanding signed by Naturade, Inc. and Redux Holdings, Inc.
                on
                March 19, 2008, incorporated by reference to Exhibit 99.2 to the
                Company’s
                Current Report on Form 8-K filed on March 20, 2008.
              Sublease
                between the Company and First American Default Management Solutions,
                LLC
                dated March 21, 2007.**10.30
            
            Sublease
              between the Company and First American Default Management Solutions,
              LLC
              dated March 21, 2007.




61




**Exhibit**
              **Number**
            
            **Document**14.1
            
            Code
                of Financial Ethics incorporated by reference to Exhibit 14 to the
                Company’s Annual Report on Form 10-K for the fiscal year ended December
                31, 200314.2
            
            Charter
                of Audit Committee adopted by the Company Board of Directors on March
                23,
                2007, incorporated by reference to Exhibit 14.2 to the Company’s Annual
                Report on Form 10-K filed on April 17, 2007.14.3
            
            Charter
                of Compensation and Governance Committee adopted by the Company Board
                of
                Directors on March 23, 2007, , incorporated by reference to Exhibit
                14.3
                to the Company’s Annual Report on Form 10-K filed on April 17,
                2007.**31.1
            
            Certification
                Pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934,
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**31.2
            
            Certification
                Pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934,
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**32.1
            
            Certification
                Pursuant to 18 U.S.C. 1350, Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002**32.2
            
            Certification
                Pursuant to 18 U.S.C. 1350, Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




**  Filed
      herewith.





62




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





NATURADE,
                INC.Date:
                April 15, 2008
            /s/ Adam M. MichelinAdam
                M. Michelin,Chief
                Executive Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      duly signed below by the following persons on behalf of the registrant and
      in
      the capacities and dates indicated.





**Signature**
            
            **Title**
            
            **Date**/s/ Adam M. Michelin
            
            Director
                ,Chief Executive Officer and Chairman of the Board
            
            April 15, 2008Adam Michelin
            
            (Principal
                Executive Officer)/s/ Adam M. Michelin
            
            Chief
                Financial Officer
            
            April 15, 2008Adam Michelin
            
            (Principal
                Accounting Officer)/s/ Stephen L. Scott
            
            Director
            
            April 15, 2008Stephen L. Scott
            
            (Chairman
                of the Audit Committee)/s/ Gary C. Cannon
            
            Director
                and Secretary
            
            April 15, 2008Gary C. Cannon




63





**INDEX
      OF FINANCIAL STATEMENTS**





Reports
                of Independent Registered Public Accounting Firms
            F-1Balance
                Sheets
            F-3Statements
                of Operations
            F-4Statements
                of Stockholders’ Equity (Deficit)
            F-5Statements
                of Cash Flows
            F-6Notes
                to Financial Statements
            F-7











**Report
      of Independent Registered Public Accounting Firm**





To
      the
      Board of Directors and Stockholders


Naturade,
      Inc.





We
      have
      audited the accompanying balance sheet of Naturade, Inc. (the “Company”) as of
      December 31, 2007 and the related statements of operations, stockholders’
equity, and cash flows for the period from January 1, 2007 to November 8, 2007
      (Predecessor Company) and the period from November 9, 2007 to December 31,
      2007
      (Successor Company). These financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for expressing an opinion on the
      effectiveness of the Company’s internal control over financial reporting.
      Accordingly, we express no such opinion. An audit also includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audit provides a reasonable basis for our
      opinion.


As
        described in Note 1 to the accompanying financial statements, the Bankruptcy
        Court entered an order confirming the plan of reorganization, which became
        effective on November 9, 2007. Accordingly, the accompanying financial financial
        statements have been prepared in conformity with AICPA Statement of Position
        90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy
        Code,” for the Successor Company as a new entity with assets, liabilities and
        capital structure having carrying values not comparable with prior periods,
        as
        described in Note 1.





In
      our
      opinion, such financial statements present fairly, in all material respects,
      the
      financial position of the Company as of December 31, 2007 and the results of
      its
      operations and its cash flows for the period from January 1, 2007 to November
      8,
      2007 (Predecessor Company) and the period from November 9, 2007 to December
      31,
      2007 (Successor Company), in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company’s recurring losses from operations, net working capital
      deficit and recent Chapter 11 bankruptcy filing raise substantial doubt about
      its ability to continue as a going concern. Management’s plans concerning these
      matters are also described in Note 1. The financial statements do not include
      any adjustments that might result from the outcome of these
      uncertainties.





/s/Haskell
      & White LLP





Irvine,
      California


April
      14,
      2008





F-1





**Report
      of Independent Registered Public Accounting Firm**





To
      the
      Board of Directors and Stockholders


Naturade,
      Inc


Brea,
      California





We
      have
      audited the accompanying balance sheet of Naturade, Inc. (the “Company”) as of
      December 31, 2006 and the related statements of operations, stockholders’
deficit, and cash flows for the year then ended. These financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these financial statements based on our audit.





We
      conducted our audit in accordance with auditing standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal controls
      over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for expressing an opinion on the
      effectiveness of the Company’s internal control over financial reporting.
      Accordingly, we express no such opinion. An audit also includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audit provides a reasonable basis for our
      opinion.





In
      our
      opinion, such financial statements present fairly, in all material respects,
      the
      financial position of the Company as of December 31, 2006 and the results of
      its
      operations and its cash flows for the year then ended, in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company’s recurring losses from operations, net working capital
      deficit and stockholders’ capital deficiency, and Chapter 11 bankruptcy filing
      raise substantial doubt about its ability to continue as a going concern.
      Management’s plans concerning these matters are also described in Note 1. The
      financial statements do not include any adjustments that might result from
      the
      outcome of these uncertainties.





/s/
      Squar, Milner, Peterson, Miranda & Williamson, LLP





Newport
      Beach, California


March
      30,
      2007




F-2


**NATURADE,
        INC.**
 **Balance
        Sheets**
 
 Successor
                Company
                December 31,
                2007
              
              Predecessor
                Company
                December 31,
                2006ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              274,733
              
              $
              80,713Accounts
                  receivable, net
              
              
              740,046
              
              
              838,381Inventories,
                  net
              
              
              1,054,401
              
              
              258,981Prepaid
                  expenses and other current assets
              
              
              37,228
              
              
              56,101Total
                  current assets
              
              
              2,106,408
              
              
              1,234,176Property
                  and equipment, net
              
              
              4,350
              
              
              51,547Goodwill
              
              
              1,693,830
              
              
              -Customer
                  lists and trademarks, net
              
              
              6,781,510
              
              
              419,266Deferred
                  financing fees, net
              
              
              171,542
              
              
              1,239,900Other
                  assets
              
              
              50,197
              
              
              3,664Total
                  assets
              
              $
              10,807,837
              
              $
              2,948,553LIABILITIES,
                  REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY
                  (DEFICIT)Current
                  liabilities:Accounts
                  payable
              
              $
              1,542,824
              
              $
              777,307Accrued
                  expenses
              
              
              181,389
              
              
              499,428Revolving
                  credit, net of debt discount of $446,943, at December 31,
                  2007
              
              
              702,504
              
              
              1,276,570Note
                  payable related party
              
              
              250,000
              
              
              -Current
                  portion of long term debt, net of debt discount of $1,362,781,
                  at December
                  31, 2007
              
              
              4,946
              
              
              409,095Total
                  current liabilities
              
              
              2,681,663
              
              
              2,962,400Long-term
                  debt, less current maturities, net of debt discount of $1,377,461,
                  at
                  December 31, 2007
              
              
              2,674,805
              
              
              2,015,905Total
                  liabilities not subject to compromise
              
              
              5,356,468
              
              
              4,978,305Liabilities
                  subject to compromise (Note1)
              
              
              -
              
              
              9,344,422Total
                  liabilities
              
              
              5,356,468
              
              
              14,322,727COMMITMENTS
                  AND CONTINGENCIESREDEEMABLE
                  CONVERTIBLE PREFERRED STOCKRedeemable
                  convertible preferred stock, Series C including accumulated preferred
                  stock dividends of $-0- at December 31, 2007 and $3,910,000 at
                  December
                  31, 2006; par value $0.0001 per share: authorized, -0- shares at
                  December
                  31, 2007 and 50,000,000 shares at December 31, 2006; issued and
                  outstanding, -0- shares at December 31, 2007 and 21,000,000 shares
                  at
                  December 31, 2006 ( $21,000,000 redemption value)
              
              
              -
              
              
              5,590,000STOCKHOLDERS
                  EQUITY (DEFICIT):Common
                  stock, par value $0.0001 per share; authorized 250,000,000 shares
                  at
                  December 31, 2007 and 100,000,000 shares at December 31, 2006;
                  issued/issuable and outstanding, 194,908,121 shares at December
                  31, 2007
                  and 43,332,733 shares at December 31, 2006
              
              
              19,491
              
              
              4,334Non-voting
                  common stock, par value $0.0001 per share, authorized 117,284 shares
                  at
                  December 31, 2007 and 2,000,000 shares at December 31, 2006; issued
                  and
                  outstanding -0- at December 31, 2007 and 117,284 at December 31,
                  2006
              
              
              -
              
              
              12Additional
                  paid in capital
              
              
              6,033,575
              
              
              22,990,945Accumulated
                  deficit
              
              
              (601,697
              )
              
              (39,959,465
              )Total
                  stockholders equity (deficit)
              
              
              5,451,369
              
              
              (16,964,174
              )Total
                  liabilities, redeemable convertible preferred stock and stockholders
                  equity (deficit)
              
              $
              10,807,837
              
              $
              2,948,553
 
 See
        accompanying notes to financial statements
 
 F-3
 
 **NATURADE,
        INC.**
 **Statements
        of Operations**
 
 **Successor Company**
              
              **Predecessor Company****From November 9, 2007**
                **to December 31, 2007**
              
              **From January 1, 2007 to**
                **November 8, 2007**
              
              **Year Ended**
                **December 31, 2006**Net
                  sales
              
              $
              1,332,051
              
              $
              5,371,539
              
              $
              9,432,019Cost
                  of sales
              
              
              874,538
              
              
              3,476,801
              
              
              6,116,152Gross
                  profit
              
              
              457,513
              
              
              1,894,738
              
              
              3,315,867Costs
                  and expenses:Selling
                  , general and administrative expenses
              
              
              462,521
              
              
              2,953,281
              
              
              7,542,707Impairment
                  of goodwill
              
              
              -
              
              
              -
              
              
              2,694,357Impairment
                  of customer lists
              
              
              -
              
              
              -
              
              
              1,049,336Reorganization
                    expense-professional fees
              
              
              -
              
              
              1,089,260
              
              
              410,306Depreciation
              
              
              233
              
              
              12,005
              
              
              56,723Amortization
              
              
              127,421
              
              
              250,179
              
              
              835,681Total
                  operating costs and expenses
              
              
              590,175
              
              
              4,304,725
              
              
              12,589,110Operating
                  loss
              
              
              (132,662
              )
              
              (2,409,987
              )
              
              (9,273,243
              )Other
                  expense (income):Change
                  in derivative warrant liability
              
              
              -
              
              
              -
              
              
              (1,285,797
              )Loss
                  on sale of assets
              
              
              -
              
              
              -
              
              
              59,257Other
                  expense (income)
              
              
              -
              
              
              (17,274
              )
              
              12,200Total
                  other expense (income)
              
              
              -
              
              
              (17,274
              )
              
              (1,214,340
              )Interest
                  expense:Interest
              
              
              398,612
              
              
              225,768
              
              
              726,756Amortization
                  of deferred financing fees
              
              
              70,423
              
              
              601,865
              
              
              2,464,399Total
                  interest expense
              
              
              469,035
              
              
              827,633
              
              
              3,191,155Income
                  (loss) before reorganization items and provision for income
                  taxes
              
              
              (601,697
              )
              
              (3,220,346
              )
              
              (11,250,058
              )Reorganization
                  items, net
              
              
              -
              
              
              6,895,263
              
              
              -Income
                  (loss) before provision for income taxes
              
              
              (601,697
              )
              
              3,674,917
              
              
              (11,250,058
              )Provision
                  for income taxes
              
              
              -
              
              
              14,099
              
              
              800Net
                  income (loss)
              
              $
              (601,697
              )
              $
              3,689,016
              
              $
              (11,250,858
              )Less:Deemed
                  dividend-Series C
              
              $
              -
              
              $
              (2,300,000
              )
              $
              (2,760,000
              )Net
                  loss attributable to common shareholders
              
              $
              (601,697
              )
              $
              1,389,016
              
              $
              (14,010,858
              )Basic
                  and diluted net loss per share
              
              $
              (0.00
              )
              $
              0.03
              
              $
              (0.33
              )Weighted
                  average number of shares used in computation of basic and diluted
                  net loss
                  per share
              
              
              194,908,121
              
              
              43,332,733
              
              
              42,619,350
 
 See
        accompanying notes to financial statements
 
 F-4
 **NATURADE,
          INC.**
 **Statements
          of Stockholders’ Deficit**
 Common
                    Stock
                
                Non-voting
                    Common StockShares
                
                Amount
                
                Shares
                
                Amount
                
                Additional
                  Paid-In
                  Capital
                
                Accumulated
                  Earnings
                  (Deficit)
                
                TotalBALANCE
                    JANUARY 1, 2006(Predecessor
                    Company)
                
                
                39,651,964
                
                $
                3,965
                
                
                117,284
                
                $
                12
                
                $
                21,883,842
                
                $
                (25,948,607
                )
                $
                (4,060,788
                )Cancellation
                    of warrant derivative liability
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                569,384
                
                
                
                
                
                569,384Stock
                    based compensation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                97,510
                
                
                -
                
                
                97,510Stock
                    issued to settle consulting agreement
                
                
                1,130,769
                
                
                114
                
                
                
                
                
                
                
                
                112,964
                
                
                
                
                
                113,078Stock
                    issued to restructure debt agreement
                
                
                2,550,000
                
                
                255
                
                
                
                
                
                
                
                
                327,245
                
                
                
                
                
                327,500Accretion
                    of Preferres Stock Series C
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,760,000
                )
                
                (2,760,000
                )Net
                    Loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (11,250,858
                )
                
                (11,250,858
                )BALANCE
                    DECEMBER 31, 2006(Predecessor
                    Company)
                
                
                43,332,733
                
                
                4,334
                
                
                117,284
                
                
                12
                
                
                22,990,945
                
                
                (39,959,465
                )
                
                (16,964,174
                )Net
                    loss before reorganization items - November 8, 2007
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (3,206,247
                )
                
                (3,206,247
                )Reorganization
                    items
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                6,895,263
                
                
                6,895,263Accretion
                    of Preferres Stock Series C
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,300,000
                )
                
                (2,300,000
                )SUBTOTAL
                    (Predecessor Company)
                
                
                43,332,733
                
                
                4,334
                
                
                117,284
                
                
                12
                
                
                22,990,945
                
                
                (38,570,449
                )
                
                (15,575,158
                )Fresh
                    start adjustmentsUnsecured
                    claims and debt discharge
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                4,803,933
                
                
                4,803,933Valuation
                    adjustments, net
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                4,249,412
                
                
                8,427,361
                
                
                12,676,773Elimination
                    of PredecessorCompany
                    accumulated defict
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                25,339,155
                
                
                25,339,155Cancellation
                    of common stock
                
                
                (43,332,733
                )
                
                (4,334
                )
                
                
                
                
                
                
                
                (23,050,945
                )
                
                
                
                
                (23,055,279
                )Cancellation
                    of non-voting common stock
                
                
                
                
                
                
                
                
                (117,284
                )
                
                (12
                )
                
                
                
                
                
                
                
                (12
                )Issuance
                    of new equity interests in connection with emergence from Chapter
                    11
                
                
                191,908,121
                
                
                19,191
                
                
                
                
                
                
                
                
                1,784,463
                
                
                
                
                
                1,803,654BALANCE
                    NOVEMBER 6, 2007(Successor
                    Company)
                
                
                191,908,121
                
                
                19,191
                
                
                -
                
                
                -
                
                
                5,973,875
                
                
                -
                
                
                5,993,066Issuance
                    of common stock to directors
                
                
                3,000,000
                
                
                300
                
                
                
                
                
                
                
                
                59,700
                
                
                
                
                
                60,000Net
                    Loss for the period from November 9, 2007 to December 31,
                    2007
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (601,697
                )
                
                (601,697
                )BALANCE
                    DECEMBER 31, 2007(Successor
                    Company)
                
                
                194,908,121
                
                $
                19,491
                
                
                -
                
                $
                -
                
                $
                6,033,575
                
                $
                (601,697
                )
                $
                5,451,369
 
 See
          accompanying notes to financial statements
 
 F-5
 
 **NATURADE,
        INC.**
 **Statements
        of Cash Flows**
 
 **Successor****Company**
              
              **Predecessor Company****From November 9,**
                **2007 to December 31,**
                **2007**
              
              **From January 1,**
                **2007 to November 8,**
                **2007**
              
              **Year Ended**
                **December 31,**
                **2006**Cash
                  flows from operating activities:Net
                  Income (loss)
              
              $
              (601,697
              )
              $
              3,689,016
              
              $
              (11,250,858
              )Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:Depreciation
                  and amortization
              
              
              127,654
              
              
              262,184
              
              
              892,404Changes
                  in warrant liability
              
              
              -
              
              
              -
              
              
              (1,285,797
              )Amortization
                  of loan discounts and deferred financing fees
              
              
              392,650
              
              
              997,936
              
              
              2,464,399Loss
                  on retirement of property and equipment
              
              
              -
              
              
              -
              
              
              59,257Provision
                  for excess and obsolete inventories
              
              
              -
              
              
              -
              
              
              476,738Issuance
                  of common stock for consulting
              
              
              -
              
              
              -
              
              
              113,077Stock
                  based compensation
              
              
              -
              
              
              60,000
              
              
              97,510Impairment
                  of goodwill
              
              
              -
              
              
              -
              
              
              2,694,357Impairment
                  of customer lists
              
              
              -
              
              
              -
              
              
              1,049,336Changes
                  in operating assets and liabilitiesAccounts
                  receivable
              
              
              (37,150
              )
              
              169,826
              
              
              1,323,849Inventories
              
              
              (376,893
              )
              
              (418,527
              )
              
              160,454Prepaid
                  expenses and other current assets
              
              
              28,714
              
              
              (9,841
              )
              
              173,293Other
                  assets
              
              
              (7,290
              )
              
              (49,208
              )
              
              (2,188
              )Accounts
                  payable and accrued expenses
              
              
              (934,676
              )
              
              2,205,804
              
              
              3,682,317Net
                  cash provided by (used in) operating activities
              
              
              (1,408,688
              )
              
              6,907,190
              
              
              648,148Cash
                  flows provided by (used in) reorganization activities:Reorganization
                  items, net
              
              
              
              
              
              (6,895,263
              )
              
              -Net
                  cash provided by (used in) reorganization activities
              
              
              -
              
              
              (6,895,263
              )
              
              -Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              -
              
              
              -
              
              
              (23,226
              )Net
                  cash provided by (used in) investing activities
              
              
              -
              
              
              -
              
              
              (23,226
              )Cash
                  flows from financing activities:Net
                  borrowings (repayments) under revolving credit line
              
              
              336,383
              
              
              83,491
              
              
              (1,189,526
              )Proceeds
                  from issuance of related party debt
              
              
              -
              
              
              -
              
              
              483,000Proceeds
                  on issuance of common stock
              
              
              1,200,000
              
              
              -
              
              
              -Payments
                  on long-term debt
              
              
              (29,093
              )
              
              -
              
              
              (47,000
              )Deferred
                  financing fees
              
              
              -
              
              
              -
              
              
              (34,856
              )Net
                  proceeds (repayment) from term loan
              
              
              
              
              
              
              
              
              148,775Net
                  cash provided by (used in) financing activities
              
              
              1,507,290
              
              
              83,491
              
              
              (639,607
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              98,602
              
              
              95,418
              
              
              (14,685
              )Cash
                  and cash equivalents, beginning of the period
              
              
              176,131
              
              
              80,713
              
              
              95,398Cash
                  and cash equivalents, end of the period
              
              $
              274,733
              
              $
              176,131
              
              $
              80,713**Supplemental
                  Disclosures of Cash Flow Information**Cash
                  paid during the year for:Interest
              
              $
              22,107
              
              $
              65,379
              
              $
              303,991Income
                  taxes
              
              $
              1,344
              
              
              
              
              $
              800Non-cash
                  financing transactions:Deemed
                  dividend Series C
              
              $
              -
              
              $
              2,300,000
              
              $
              2,760,000Acquired
                  business non-cash consideration (Note 8)Fair
                  value of common stock issued
              
              $
              -
              
              $
              -
              
              $
              -Fair
                  value of preferred stock
              
              $
              -
              
              $
              -
              
              $
              -Notes
                  payable
              
              $
              -
              
              $
              -
              
              $
              -Write
                  off of warrant liability
              
              $
              -
              
              $
              -
              
              $
              569,384Stock
                  issued in settlement of debt
              
              $
              -
              
              $
              -
              
              $
              120,000
 
 See
        accompanying notes to financial statements
  F-6
  **NATURADE,
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 **1.**  **ORGANIZATION
        AND SIGNIFICANT ACCOUNTING POLICIES**
 
 ***Organization –*** Naturade,
        Inc., a Delaware corporation (the “Company” or “Naturade”), is a branded
        nutraceuticals marketing company focused on high growth, innovative natural
        products that are positioned to health conscious consumers. The Company’s
        products include low carbohydrate, high protein powders, nutritional
        supplements, joint health and arthritis pain relief products, and soy protein
        based powders. Its products are sold to the health food and mass market channels
        through distributors and directly to retailers in the United States and
        overseas.
  ***Voluntary
        Reorganization under Chapter 11*** ****
  On
        August
        31, 2006 (the “Petition Date”), Naturade, the “Debtor”, filed a voluntary
        petition to reorganize itsr business under Chapter 11 of the United States
        Bankruptcy Code in the United States Bankruptcy Court for the Central District
        of California (the “Bankruptcy Court”). On October 30, 2007, the Bankruptcy
        Court confirmed the Debtor’s Fifth Amended Joint Plan of Reorganization Pursuant
        to Chapter 11 of the United States Bankruptcy Code (the “Plan of
        Reorganization”). The Plan of Reorganization became effective and the Debtor
        emerged from bankruptcy protection on November 9, 2007 (the “Effective Date”).
        On the Effective Date, Naturade implemented fresh-start reporting.
  The
        Plan
        of Reorganization generally provided for the full payment or reinstatement
        of
        allowed administrative claims, priority claims and secured claims, and the
        distribution of Redux Holdings, Inc. (majority owner) (“Redux”) equity the
        Debtor’s creditors in satisfaction of allowed unsecured and deemed claims. The
        Plan received support from the Company’s creditors and shareholders as well as
        support from the Company’s lenders and the Company’s Unsecured Creditors
        Committee.
  The
        confirmed plan provided for the following:
  **Allowed
        Secured Claims**
  On
        the
        Effective Date, all accrued interest, calculated at the non-default rate,
        fees,
        costs and charges owed under the terms of the Company’s Revolving Note Payable
        to Laurus, was added to the principal balance of the Revolving Note, and,
        on the
        Effective Date, the Company delivered to Laurus an amended and restated
        promissory note evidencing such loan amount (“Post-Confirmation Revolving
        Note”). The Post-Confirmation Revolving Note incorporated the provisions of the
        original Revolving Note Payable (see Note 4—Debt). The Post-Confirmation
        Revolving Note matures on January 1, 2010.
  On
        the
        Effective Date, all accrued interest, calculated at the non-default rate,
        fees,
        costs and charges owed under the terms of the Company’s Term Note Payable to
        Laurus, was added to the principal balance of the Term Note, and, on the
        Effective Date, the Company shall deliver to Laurus an amended and restated
        promissory note (“Post-Confirmation Term Note”). The Post-Confirmation Term Note
        incorporated the provisions of the original term note (see Note 4—Debt). The
        Post-Confirmation Term Note matures on January 1, 2010.
  In
        connection with the amended notes payable to Laurus, Laurus received 574,787
        shares of Redux common stock (95% shareholder of the Company) and warrants
        to
        purchase an additional 700,000 shares of Redux common stock at $0.01 per
        share.
        The fair value of such amounts were recorded as debt discounts and are amortized
        over the expected term of the obligation (See Note 4—Debt).
  On
        the
        Effective Date, in full satisfaction and discharge of an allowed secured
        claim,
        the Company issued a $1,361,000 note payable to secured creditor. The note
        bears
        interest at a rate of 10% per annum. The note is payable as
        follows:
  ·
              For
                  a period of twenty-four full months from and after the Effective
                  Date, the
                  interest on the note shall not be paid, but shall be added to the
                  principal balance of the note.
  ·
              Commencing
                  on the first day of the first fiscal quarter following the end
                  of the
                  twenty-fourth full month after the Effective Date, and continuing
                  on the
                  first day of each fiscal quarter thereafter, through and including
                  the
                  last fiscal quarter prior to the sixtieth full month following
                  the
                  Effective Date, the Company shall pay the interest which accrued
                  during
                  the prior fiscal quarter.
  F-7
  ·
              The
                  note shall mature on the first day of the sixtieth full month following
                  the Effective Date.
  ·
              The
                  Note shall be secured by liens encumbering all assets of the Company,
                  with
                  priority junior only to Laurus’s liens and any purchase money liens
                  encumbering any equipment that may be acquired in the ordinary
                  course by
                  the Company after the Effective
                  Date.
  ·
              The
                  note is convertible into shares of Redux common stock. The conversion
                  rate
                  is based upon 70% of the trailing six-month average trading price
                  of Redux
                  common stock. The note can be converted as follows: (i) in the
                  first year
                  following the Effective Date, three times the outstanding balance
                  of the
                  note (including any unpaid interest and chargeable costs); (ii)
                  in the
                  second year following the Effective Date, two times the outstanding
                  note
                  balance (including any unpaid interest and chargeable costs); and
                  (iii) at
                  anytime thereafter until the note is fully paid and satisfied,
                  dollar-for-dollar based upon the outstanding balance of the note
                  (including any unpaid interest and chargeable costs). The fair
                  market
                  value of the beneficial conversion feature was recorded as a debt
                  document
                  and is amortized over the life of the Note (See Note 4—Debt).
  On
        the
        Effective Date, the Company delivered two notes to secured creditors in full
        settlement and discharge of their secured claims totaling $237,226. The notes
        bear interest at a rate of 10% per annum. The notes are payable as
        follows:
  ·
              For
                  a period of twenty-four full months from and after the Effective
                  Date, the
                  interest on the note shall not be paid, but shall be added to the
                  principal balance of the notes.
  ·
              Commencing
                  on the first day of the first fiscal quarter following the end
                  of the
                  twenty-fourth full month after the Effective Date, and continuing
                  on the
                  first day of each fiscal quarter thereafter, through and including
                  the
                  last fiscal quarter prior to the sixtieth full month following
                  the
                  Effective Date, the Company shall pay the interest which accrued
                  during
                  the prior fiscal quarter.
  ·
              The
                  notes shall mature on the first day of the sixtieth full month
                  following
                  the Effective Date.
  ·
              The
                  Notes shall be secured by liens encumbering all assets of the Company,
                  with priority junior only to Laurus’s liens and any purchase money liens
                  encumbering any equipment that may be acquired in the ordinary
                  course by
                  the Company after the Effective
                  Date.
  ·
              The
                  notes are convertible into shares of Redux common stock. The conversion
                  rate is based upon 70% of the trailing six-month average trading
                  price of
                  Redux common stock. The notes can be converted as follows: (i)
                  in the
                  first year following the Effective Date, three times the outstanding
                  balance of the note (including any unpaid interest and chargeable
                  costs);
                  (ii) in the second year following the Effective Date, two times
                  the
                  outstanding note balance (including any unpaid interest and chargeable
                  costs); and (iii) at anytime thereafter until the note is fully
                  paid and
                  satisfied, dollar-for-dollar based upon the outstanding balance
                  of the
                  note (including any unpaid interest and chargeable costs). The
                  fair market
                  value of the beneficial conversion feature was recorded as a debt
                  document
                  and is amortized over the life of the Note (See Note 4—Debt).
  **Allowed
        Secured Claims for Taxes**
  Each
        creditor will receive cash installment payment of a value, as of the Effective
        Date, of its Allowed Secured Claim. The outstanding and unpaid amount of
        each
        Allowed Secured Claim shall bear interest, commencing on the Effective Date
        and
        continuing until such Allowed Secured Claim is paid in full, at the rate
        provided by Section 6621(a) of the Internal Revenue Code on the Effective
        Date.
        Payment of the Allowed Secured Claims shall commence on the later of the
        following dates: (a) the first day of the first full quarter following the
        Effective Date; or (b) the tenth business day after the entry of Final Order
        allowing the Secured Claim. Such payments shall continue on the first day
        of
        each quarter thereafter. On the Effective Date, the Company accrued $7,247
        in
        settlement of the Secured Claims for Taxes.
  F-8
  **Allowed
        Secured Claims- Related Parties**
  On
        the
        Effective Date, the Allowed Secured Administrative Claim of Redux in the
        amount
        of $133,381 was waived and contributed to the Company in the form of a capital
        contribution. On the Effective Date, the Allowed Secured Administrative Claim
        of
        One World Science, Inc., a company controlled by Redux, in the amount of
        $380,090 was contributed to the Company in the form of a capital
        contribution.
  **Allowed
        General Unsecured Claims**
  Creditors
        shall receive distributions of cash on their Allowed General Unsecured Claims
        as
        follows:
  ·
              On
                  the first-year anniversary of the Effective Date, the Company shall
                  pay
                  each Allowed General Unsecured Claim five percent (5.0%) of the
                  amount of
                  such Allowed General Unsecured
                  Claim.
  ·
              On
                  the second-year anniversary of the Effective Date, the Company
                  shall pay
                  each Allowed General Unsecured Claim an additional five percent
                  (5.0%) of
                  the amount of such Allowed General Unsecured
                  Claim.
  ·
              On
                  the third-year anniversary of the Effective Date, the Company shall
                  pay
                  each Allowed General Unsecured Claim an additional ten percent
                  (10.0%) of
                  the amount of such Allowed General Unsecured
                  Claim.
  ·
              On
                  the fourth-year anniversary of the Effective Date, the Company
                  shall pay
                  each Allowed General Unsecured Claim an additional ten percent
                  (10.0%) of
                  the amount of such Allowed General Unsecured
                  Claim.
  ·
              The
                  distributions to the Unsecured Creditors are unconditionally guaranteed
                  by
                  Redux.
  **Preferred
        Stock**
  Under
        the
        Plan, all preferred stock of the Company shall be canceled, and instead each
        holder of preferred stock shall be issued one (1) share of common stock in
        Redux
        for every thirty-four (34) shares of preferred stock held by such holder.
        Unless
        a longer period of time is agreed upon by the Company, the holder of the
        preferred stock, the shares of Redux common stock issuable under the Plan
        shall
        be subject to a lockup for a period of eighteen (18) months from the date
        of
        issuance of such stock, and the holders of such stock shall not be able to
        sell,
        pledge or hypothecate such stock for such eighteen (18) month period. After
        the
        expiration of the eighteen (18) month period following the issuance of such
        stock, sales of such stock shall be subject to Rule 144 of the Securities
        Act of
        1933 and shall have a legend on each share certificate. On the Effective
        Date,
        the Company recognized a capital contribution of $740,000 from Redux based
        on
        the fair value of Redux common stock on the grant date.
  **Common
        Stock**
  Pursuant
        to the Plan, holders of common stock of the Company shall retain common stock
        in
        the reorganized Company equivalent to five percent (5%) of the issued and
        outstanding shares of common stock in the Reorganized Company as of the
        Effective Date.
  Under
        the
        Plan, on the Effective Date, the Company was authorized to issue common stock
        to
        Redux equivalent to 95% of the issued and outstanding shares of common stock
        in
        the Reorganized Company as of the Effective Date.
  On
        November 8, 2007, Redux Holdings, Inc, (“Redux”), the Company’s controlling
        shareholder, invested $1.2 million in Naturade, as required by the Plan and
        on
        November 9, 2007, the Plan became effective (the “Effective Date”). A copy of
        the Plan is posted at www.naturade.com ,
        under
        Investor Relations.
  **Cash
        Infusion After the Effective Date**
  Under
        the
        Plan, Redux was required to provide a $1.2 million cash infusion, of which
        $700,000 was paid to the administrative creditors, and most of the balance
        was
        allocated to the Company’s future working capital needs.
  F-9
  ***Financial
        Statement Presentation.***  ** The
        Company has prepared the accompanying consolidated financial statements in
        accordance with SOP 90-7 and on a going-concern basis, which assumes continuity
        of operations, realization of assets and satisfaction of liabilities in the
        ordinary course of business.
  SOP
        90-7
        requires that the financial statements for periods after a Chapter 11 filing
        separate transactions and events that are directly associated with the
        reorganization from the ongoing operations of the business. Accordingly,
        all
        transactions (including, but not limited to, all professional fees, realized
        gains and losses and provisions for losses) directly associated with the
        reorganization and restructuring of the business are reported separately
        in the
        financial statements as reorganization items, net. For the period January
        1,
        2007 through November 9, 2007 and the year ended December 31, 2006, the
        Predecessor Company recognized the following primarily non-cash reorganization
        income (expense) in its financial statements:
 
 Period From
                January
                  1 to
                November 8, 2007
              
              Year Ended
                December 31, 2006Discharge
                  of claims and liabilities (a)
              
              $
              4,803,933
              
              
              -Write-off
                  of Symbiotics Note Payable (b)
              
              
              1,042,963
              
              
              -Assignment
                  of Balcombe and Ageless Note Payables (c)
              
              
              1,129,681
              
              
              -Revaluation
                  of other assets and liabilities (d)
              
              
              (81,314
              )
              
              410,306$
              6,895,263
              
              
              410,306
  a)
              The
                  discharge of claims and liabilities primarily relates to those
                  unsecured
                  claims arising during the bankruptcy process, such as those arising
                  from
                  the termination and settlement of unsecured claims to creditors
                  and
                  employees. Accordingly, the Company recognized a non-cash reorganization
                  gain of $4,803,933.
  b)
              Extinguishment
                  of Symbiotics Note Payable in the amount of $1,414,972. As the
                  result of
                  Symbiotics failure to submit a valid claim with the Bankruptcy
                  Court, the
                  amount owed Symbiotics was deemed to have been forfeited, resulting
                  with
                  the Company writing off the note payable to reorganization income,
                  recognizing a gain of $1,042,963, net of deferred financing
                  fees.
  c)
              In
                  February 2007, Naomi Balcombe and Ageless entered into an Assignment
                  of
                  Claim Agreement with (the Agreement) with Redux for the assignment
                  of
                  their rights, title and interest in, to and under the Claim. The
                  aggregate
                  claim filed with the Bankruptcy Court was $1,248,234, of which
                  $600,000
                  was claimed by Naomi Balcombe and $648,234 was claimed by Ageless.
  In
        consideration for the assignment, Redux paid $250,000, of which $100,000
        was
        deposited on February 9, 2007 in a trust account, with the deposit due to
        be
        released upon the entry of an order of the Bankruptcy Court, prior to June
        1,
        2007 confirming the Plan and such order being final and non-appealable (the
        Order); the remaining $150,000 was paid in the form of a Secured Promissory
        Note
        (the Note). The Company recorded a provision of $998,234 to write-down the
        carrying value of the note from $1,248,234 to $250,000 (which represents
        the
        consideration paid by Redux and reimbursable by the Company) was recorded
        as
        reorganization income and is shown in the accompanying statements of operations
        (predecessor) for the period January 1, 2007 through November 8, 2007. In
        addition the Company wrote-off $133,447 of accrued interest payable to on
        the
        notes, which was recorded as reorganization income in the accompanying
        statements of operations (predecessor) for the period January 1, 2007 through
        November 8, 2007.
  d)
              In
                  accordance with fresh-start reporting the Company revalued its
                  assets at
                  their estimated fair value and liabilities at estimated fair value
                  or
                  present value of amounts to be paid. This resulted in a non-cash
                  reorganization loss of $81,314.
  The
        accompanying balance sheets distinguish pre-petition liabilities subject
        to
        compromise from both those pre-petition liabilities that are not subject
        to
        compromise and from post-petition liabilities. Liabilities subject to compromise
        were reported at the amounts expected to be allowed by the Bankruptcy Court,
        even if they were settled for lesser amounts.
  F-10
  At
        December 31, 2006, the Company had liabilities subject to compromise
        consisting of the following:
 
 Accounts
                  payable
              
              $
              5,155,049Notes
                  payable for acquisitions
              
              
              2,663,206Accrued
                  interest
              
              
              695,343Notes
                  payable to related parties
              
              
              658,381Accrued
                  commissions
              
              
              172,443Total
              
              $
              9,344,422
  **Fresh-Start
        Reporting.**  ****** Upon
        emergence from its Chapter 11 proceedings on November 9, 2007, the Company
        adopted fresh-start reporting in accordance with SOP 90-7. The Company’s
        emergence from Chapter 11 resulted in a new reporting entity with no
        retained earnings or accumulated deficit. Accordingly, the Company’s financial
        statements on or after November 9, 2007 are not comparable to its pre-emergence
        financial statements because they are, in effect, those of a new
        entity.
  Fresh **-** Start
        reporting reflects the value of the Company as determined in the confirmed
        Plan
        of Reorganization. Under fresh **-** start
        reporting, the Company’s asset values are measured using fair value and are
        allocated in conformity with Statement of Financial Accounting Standards
        No. 141, “Business *Combinations* ”
        (“SFAS 141”). The excess of reorganization value over the fair value of net
        tangible and identifiable intangible assets and liabilities is recorded as
        goodwill. In addition, fresh **-** start
        reporting also requires that all liabilities, other than deferred taxes,
        should
        be stated at fair value or at the present values of the amounts to be paid
        using
        appropriate market interest rates. Deferred taxes are determined in conformity
        with Statement of Financial Accounting Standards No. 109,
“Accounting *for
        Income Taxes* ”
        (“SFAS 109”).
 The
          reorganization value of the Company was determined by management after
          considering various valuation methods and other factors, including (1)
          an
          analysis of the reorganized debt structure and Redux’s capital infusion; (ii) a
          comparison of the Company and its projected sales growth, competition and
          general economic conditions including discounted cash flow valuation methods.
          The estimates and assumptions made in this valuation are inherently subject
          to
          significant uncertainties and the resolution of contingencies beyond the
          reasonable control of management; accordingly, actual results could vary
          materially.
 Estimates
            of fair value represent the Company’s best estimates, which are based on
            industry data and trends and by reference to relevant market rates and
            transactions, and discounted cash flow valuation methods, among other
            factors.
            The foregoing estimates and assumptions are inherently subject to significant
            uncertainties and contingencies beyond the control of the Company. Accordingly,
            the Company cannot provide assurance that the estimates, assumptions
            and values
            reflected in the valuations will be realized and actual results could
            vary
            materially. In accordance with SFAS 141, the preliminary allocation of
            the
            reorganization value was subject to additional adjustment within one
            year after
            emergence from bankruptcy to provide the Company with the time to complete
            the
            valuation of its assets and liabilities.
 
 To
            facilitate the calculation of the enterprise value of the Successor Company,
            the
            Company developed financial projections for 2008 and 2009. Based on these
            financial projections, the equity value was determined by the Company,
            using
            various valuation methods, including (i) a review and analysis of several
            recent
            transactions of companies in similar industries to the Company; and (ii)
            a
            calculation of the present value of the future cash flows of certain
            of the
            Company’s significant assets.
 
 The
            estimated enterprise value, and corresponding equity value, is highly
            dependent
            upon achieving the future financial results set forth in the projections
            as well
            as the realization of certain other assumptions. The estimates and assumptions
            made in this valuation are inherently subject to significant uncertainties
            and
            the resolution of contingencies beyond the reasonable control of the
            Company.
            Accordingly, there can be no assurance that the estimates, assumptions
            and
            amounts reflected in the valuations will be realized, and actual results
            could
            vary materially.
 In
        accordance with SOP 90-7, the Company was required to adopt, on the effective
        date, all accounting guidance that was going to become effective within the
        subsequent twelve-month period. See Note 2(o), “Summary of Significant
        Accounting Policies—Adopted Accounting Pronouncements.”
  F-11
 
 The
        implementation of the Plan of Reorganization and the effects of the consummation
        of the transactions contemplated therein, which included settlement of various
        liabilities, issuance of certain securities, incurrence of new indebtedness,
        repayment of old indebtedness, and other cash payments and the adoption of
        fresh-start reporting in the Company’s Balance Sheet are as follows:
 **Predecessor**
                
                **Settlement of**
                  **Unsecured**
                  **Claims**
                  **(a)**
                
                **Reinstatement**
                  **of**
                  **Liabilities**
                  **(b)**
                
                **Revaluation of**
                  **Assets and**
                  **Liabilities**
                  **(c)**
                
                **Successor**Cash
                
                $
                176,131
                
                $
                500,000
                
                $
                
                
                $
                
                
                $
                676,131Accounts
                    receivable, net
                
                
                640,967
                
                
                
                
                
                
                
                
                
                
                
                640,967Inventory,
                    net
                
                
                677,509
                
                
                
                
                
                
                
                
                
                
                
                677,509Other
                    receivables
                
                
                27,588
                
                
                55,731
                
                
                
                
                
                (21,390
                )
                
                61,929Prepaid
                    expenses and other current assets
                
                
                65,941
                
                
                
                
                
                
                
                
                
                
                
                65,941Total
                    current assets
                
                
                1,588,136
                
                
                555,731
                
                
                -
                
                
                (21,390
                )
                
                2,122,477Property
                    and equipment
                
                
                601,457
                
                
                
                
                
                
                
                
                (596,874
                )
                
                4,583Less
                    accumulated depreciation
                
                
                (563,131
                )
                
                
                
                
                
                
                
                563,131
                
                
                -38,326
                
                
                -
                
                
                -
                
                
                (33,743
                )
                
                4,583Copyrights,
                      patents & trademarks
                
                
                100,000
                
                
                
                
                
                
                
                
                25,000
                
                
                125,000Less
                      accumulated amortization
                
                
                (75,000
                )
                
                
                
                
                
                
                
                75,000
                
                
                -25,000
                
                
                -
                
                
                -
                
                
                100,000
                
                
                125,000Customer
                    lists
                
                
                953,866
                
                
                
                
                
                
                
                
                5,830,731
                
                
                6,784,597Less
                      accumulated amortization
                
                
                (807,898
                )
                
                
                
                
                
                
                
                807,898
                
                
                -145,968
                
                
                -
                
                
                -
                
                
                6,638,629
                
                
                6,784,597Fomulations
                
                
                200,000
                
                
                
                
                
                
                
                
                (200,000
                )
                
                -Less
                      accumulated amortization
                
                
                (200,000
                )
                
                
                
                
                
                
                
                200,000
                
                
                --
                
                
                -
                
                
                -
                
                
                -
                
                
                -Goodwill
                
                
                
                
                
                
                
                
                
                
                
                1,693,829
                
                
                1,753,829Deposits
                    and other assets
                
                
                52,871
                
                
                
                
                
                
                
                
                (9,964
                )
                
                42,907Deferred
                    financing fees
                
                
                248,691
                
                
                
                
                
                
                
                
                
                
                
                248,691Total
                    Assets
                
                $
                2,098,992
                
                $
                555,731
                
                $
                -
                
                $
                8,367,361
                
                $
                11,022,084
  F-12
  **Predecessor**
                
                **Settlement of**
                  **Unsecured**
                  **Claims**
                  **(a)**
                
                **Reinstatement**
                  **of**
                  **Liabilities**
                  **(b)**
                
                **Revaluation of**
                  **Assets and**
                  **Liabilities**
                  **(c)**
                
                **Successor**Accounts
                    payable, post-petition
                
                $
                2,978,199
                
                $
                (1,524,970
                )
                $
                -
                
                $
                -
                
                $
                1,453,229Accrued
                    expenses
                
                
                899,169
                
                
                
                
                
                
                
                
                (356,437
                )
                
                542,732Revolving
                    note, post-petition
                
                
                838,939
                
                
                
                
                
                
                
                
                (543,480
                )
                
                295,459Revolving
                    note, pre-petition
                
                
                521,122
                
                
                
                
                
                
                
                
                (276,188
                )
                
                244,934Total
                    Current Liabilities
                
                
                5,237,429
                
                
                (1,524,970
                )
                
                -
                
                
                (1,176,105
                )
                
                2,536,354Liabilities
                    subject to compromiseAccounts
                    payable, pre-petition
                
                
                5,125,453
                
                
                (3,856,323
                )
                
                (1,269,130
                )
                
                
                
                
                -Accrured
                    interest
                
                
                539,834
                
                
                (26,798
                )
                
                (513,036
                )
                
                -
                
                
                -Notes
                    payable to related parties
                
                
                908,381
                
                
                (483,381
                )
                
                (175,000
                )
                
                -
                
                
                250,000Accrued
                    liabilities
                
                
                268,368
                
                
                (268,368
                )
                
                
                
                
                
                
                
                -6,842,036
                
                
                (4,634,870
                )
                
                (1,957,166
                )
                
                -
                
                
                250,000Long-term
                      Debt
                
                
                2,427,137
                
                
                198,167
                
                
                1,957,166
                
                
                (2,399,806
                )
                
                2,182,664Total
                      Liabilities
                
                
                14,506,602
                
                
                (5,961,673
                )
                
                -
                
                
                (3,575,911
                )
                
                4,969,018Redeemable
                      preferred stock
                
                
                7,890,000
                
                
                -
                
                
                -
                
                
                (7,890,000
                )
                
                -Stockholders'
                    DeficitCommon
                    stock
                
                
                4,334
                
                
                19,191
                
                
                
                
                
                (,334
                )
                
                19,191Non-voting
                    common stock
                
                
                12
                
                
                
                
                
                
                
                
                (12
                )
                
                -Additional
                    paid-in-capital
                
                
                22,990,945
                
                
                1,694,280
                
                
                
                
                
                (18,651,350
                )
                
                6,033,875Accumulated
                    deficit
                
                
                (43,292,901
                )
                
                4,803,933
                
                
                
                
                
                38,488,968
                
                
                -Total
                    Stocholders' Deficit
                
                
                (20,297,610
                )
                
                6,517,404
                
                
                -
                
                
                19,833,272
                
                
                6,053,066Total
                    Libilities, Redemable preferred stock and Stockholder's Deficit
                
                $
                2,098,992
                
                $
                555,731
                
                $
                -
                
                $
                (8,367,361
                
                $
                11,022,084
 
 a)
              **Settlement
                  of Unsecured Claims**.  
                  This column reflects a discharge of $4,803,933 of liabilities subject
                  to
                  compromise pursuant to the terms of the Plan of Reorganization
                  along with
                  other creditor and employee claims incurred through the bankruptcy
                  proceedings.This
                  column also reflects a $1.2 million cash infusion by Redux, Redux’s
                  contribution of Administrative Claims and payment of $700,000 in
                  Administrative Claims.
  b)
              **Reinstatement
                  of liabilities**-
                  This column reflects the reinstatement of certain secured liabilities
                  pursuant to the terms of the Plan of Reorganization. As a result
                  of the
                  reinstatement of liabilities, the Company reclassified $1,269,130
                  of
                  liabilities subject to compromise.
  c)
              **Revaluation
                  of Assets and Liabilities -**Fresh-start adjustments are made to reflect asset values at their
                  estimated fair value and liabilities at estimated fair value or
                  the
                  present value of amounts to be paid,
                  including:
  ·
              Recognition
                  of the estimated fair value of $6,784,597 for customer relationships,
                  and trade names and as identifiable intangible
                  assets,
  ·
              Adjustments
                  of $33,743 to reduce the values of property and equipment to their
                  estimated fair market value, and
  ·
              The
                  elimination of the Predecessor Company’s equity accounts, and
                  establishment of the opening equity of the Successor
                  Company.
  Additionally,
        goodwill of $1,693,830 was recorded upon our exit from bankruptcy to reflect
        the
        excess of the Successor Company’s reorganization value over the estimated fair
        value of net tangible and identifiable intangible assets and liabilities.
 
 F-13
  ***Going
        Concern–*** The
        Company emerged from bankruptcy under Chapter 11 of the U.S. Bankruptcy Code
        on
        November 9, 2007 and continuation as a going concern is contingent upon,
        among
        other things, the Company’s ability to (i) comply with the terms of the Plan;
        (ii) return to profitability; (iii) generate sufficient cash flows from
        operations; and (iv) obtain financing sources to meet the Company’s future
        obligations. These matters create substantial doubt about the Company’s ability
        to continue as a going concern. The financial statements do not reflect any
        adjustments relating to the recoverability and classification of recorded
        asset
        amounts or the amounts and classifications of liabilities that might result
        from
        the outcome of these uncertainties. The Company’s continuation as a going
        concern will depend on additional financing from Redux and additional investors,
        continuing tight management of cash and profitable operations and continuing
        to
        obtain favorable credit terms from vendors. Management expects that vendors
        will
        begin to extend further credit after the Company emerges from bankruptcy
        with
        refinancing, and that the Company will return to normal levels of customer
        order
        fill rates in the second quarter 2008 and be profitable with a lower overhead
        structure. Additionally, Company management has taken cost containment measures
        to reduce operating costs and improve financial performance.
  As
        of
        December 31, 2007, the accompanying financial statements have been prepared
        on a
        going-concern basis, which contemplates the realization of assets and the
        satisfaction of liabilities in the normal course of business. At December
        31,
        2007, the Company has an accumulated deficit of $601,697, a net working capital
        deficit of $(575,255), a stockholders’ capital of $5,451,369 and has incurred
        recurring net losses. These factors, among others, raise substantial doubt
        about
        the Company’s ability to continue as a going concern.
 
 The
        financial statements do not include any adjustments relating to the
        recoverability and classification of recorded asset amounts or the amounts
        and
        classification of liabilities that might be necessary should the Company
        be
        unable to continue as a going concern. The Company’s continuation as a going
        concern depends on its ability to generate sufficient cash flow to meet its
        obligations on a timely basis, to comply with the terms and covenants of
        its
        financing agreements, to obtain additional financing or refinancing as may
        be
        required and ultimately to attain successful operations.
  ***Change
        in Control –*** On
        August
        10, 2006, Quincy Investments Corp. (“Quincy”), the then principal shareholder of
        the Company, subsequent to executing a Letter of Intent of July 26, 2006
        with
        Redux to transfer to Redux, Quincy’s controlling interest in Naturade, as
        reported on the Company’s Form 8-K filed with the Securities and Exchange
        Commission on August 2, 2006, entered into the Quincy Transfer Agreement
        (“the
        Definitive Agreement”) pursuant to which:
 
 ·
              Quincy
                  transferred 28 million shares of the Company’s common stock ,4.2 million
                  shares of Series C Convertible Preferred Stock (“Series C”) and 14 million
                  warrants to purchase common stock to
                  Redux;
 ·
              Redux
                  agreed to make cash contributions up to $500,000, at its sole discretion,
                  to the Company;
 ·
              Redux
                  and Quincy agreed to attempt to complete a Definitive Agreement
                  by August
                  31, 2006.
 ·
              Quincy
                  withheld 3,372,345 shares of Common Stock in violation of the Quincy
                  Transfer Agreement. These shares are subject to Stop Orders by
                  the
                  Company’s transfer agent and will be cancelled when they are tendered to
                  the transfer agent.
 
 Before
        the transactions described above, Quincy owned 31,372,345 shares of the
        Company’s common stock, or 72.4% of the voting power of the Company’s common
        stock. Quincy also owned 4.2 million shares of Series C, which when added
        to
        Quincy’s common stock holdings, represented 55.3% of the combined voting power
        of the Company’s common stock and the Series C. The holders of the Series C were
        entitled to vote along with the holders of the Company’s common stock (on an
        as-converted basis) on all matters, including the election of directors,
        presented to the stockholders. As a result, Quincy had the power to elect
        a
        majority of the Board of Directors and to determine the outcome of any matter
        submitted to the stockholders, subject to the rights of Health Holdings and
        Botanicals, LLC holders of 12,600,000 shares of Series C who have the right
        to
        elect one director and to approve certain transactions.
 
 The
        Definitive Agreement contemplated under the Letter of Intent was not entered
        into and the Letter of Intent by its terms has expired. Although Quincy has
        threatened litigation against Redux related to the absence of a Definitive
        Agreement no lawsuit has been commenced. In contrast, the Company has initiated
        a lawsuit against Quincy and Peter Pocklington, the principal shareholder
        of
        Quincy. See Note 11, Legal Proceedings.
  On
        August
        31, 2006 Laurus entered into an agreement with Redux, the principal shareholder
        of the Company, (the “Redux Agreement”) pursuant to which:
  F-14
 
 ·
              Laurus
                  Master Fund, Ltd. (“Laurus”) transferred 1,050,000 shares of the Company’s
                  common stock to Redux;
 ·
              Laurus
                  transferred warrants to purchase 1,500,000 shares of the Company’s common
                  stock at $0.80 per share to Redux which were cancelled upon
                  transfer;
 ·
              Laurus
                  transferred an option to purchase 8,721,375 shares of the Company’s common
                  stock at $0.001 per share to Redux (“Laurus Options”);
                  and
 ·
              Redux
                  issued 574,787 shares of Redux common stock to Laurus, subject
                  to certain
                  provisions for anti-dilution and piggy back registration
                  rights.
 
 On
        November 16, 2006, Redux acquired 500,000 shares of the Company’s common stock
        and warrants to purchase 3,647,743 shares of common stock from Liberty Company
        Financial, LLC (“Liberty”) and in exchange issued to Liberty 28,116 shares of
        Redux common stock.
 
 On April
        13, 2007, Redux issued Laurus a cashless warrant to purchase up to 700,000
        shares of Redux common stock, in consideration of Laurus waving all prepayment
        penalties and charges associated with the Laurus obligations (See Note
        4—Debt).
 
 As
        a
        result of the transactions described above, Redux controlled voting rights
        of
        29,550,000 shares of the Company’s common stock and 4,200,000 shares of Series
        C, or 68.2% of the voting power of the Company’s common stock, 20.0% of the
        voting power of the Series C, and 52.5% of the combined voting power of the
        Company’s common stock and the Series C. The holders of the Series C were
        entitled to vote along with the Company’s common stock (on an as-converted
        basis) on all matters, including the election of directors, presented to
        the
        stockholders. As a result, Redux had the power to elect a majority of the
        Board
        of Directors and to determine the outcome of any matter submitted to the
        stockholders, subject to the rights of the holders of the Series C described
        above. If the Laurus Options were included, these percentages increased.
 
 On
        the Effective Date, all Company Series C shares, along with their voting
        and
        control rights, all options, all warrants, and all registration rights, were
        cancelled as required under the Plan. The Company, as required by the Plan,
        issued Redux 150,475,388 shares of common stock, giving Redux 180,025,388
        shares
        of common stock or 95% equity and voting interest in the Company. The remaining
        existing shareholders retained a total 5% equity interest in the Company,
        with
        9,510,388 shares of common stock. The computation did not include the 3,372,345
        shares of common stock subject to Stop Orders.
 
 ***Liabilities
        Subject to Compromise –*** Under
        Chapter 11 of the U.S. Bankruptcy Code, certain claims against the Company
        in
        existence prior to the filing of the petition for relief under the federal
        bankruptcy laws are stayed while the Company continued business operations
        as a
        debtor-in-possession. These estimated claims are reflected in the December
        31,
        2006 Balance Sheet as Liabilities Subject to Compromise and are summarized
        in
        the table below. Such claims remain subject to future adjustments. Adjustments
        may result from actions of the bankruptcy court, negotiations, rejection
        or
        acceptance of executory contracts, determination of value of any collateral
        securing claims, proofs of claim or other events.
 
 The
        Company has received approval from the bankruptcy court to pay or otherwise
        honor certain of its pre-petition obligations, including approval to pay
        payroll
        and other business related expenses of ongoing employees in the ordinary
        course
        of business. Accordingly, these pre-petition items have been excluded from
        Liabilities Subject to Compromise as of December 31, 2006.
 
 The
        liabilities subject to compromise consisted of the following items at December
        31, 2006:
  Accounts
                  payable
              
              $
              5,155,049Notes
                  payable for acquisitions
              
              
              2,663,206Accrued
                  interest
              
              
              695,343Notes
                  payable to related parties
              
              
              658,381Accrued
                  commissions
              
              
              172,443Total
                  liabilities subject to compromise
              
              $
              9,344,422
  F-15
  ***Reorganization
        Items –*** Reorganization items are presented separately in the Statement of Operations
        and
        represent items of expense that are realized or incurred by the Company because
        it is in reorganization under Chapter 11 of the U.S. Bankruptcy Code.
  ***Cash
        and Cash Equivalents –*** The
        Company considers all highly liquid investments with maturities of three
        months
        or less when purchased to be cash equivalents.
 
 ***Use
        of Estimates and Assumptions –*** The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ materially from those estimates.
 
 ***Concentration
        of Credit Risk –*** Financial
        instruments that subject Naturade to concentration of credit risk consist
        primarily of cash and accounts receivable. The Company had sales to three
        major
        customers in excess of 10% of the Company’s total net sales in 2007; however the
        Company does not consider this a significant risk based on the strong financial
        resources of these well established companies. Credit risk with respect to
        the
        remaining trade accounts receivable is generally diversified due to the large
        number of entities comprising the Company’s remaining customer base and their
        geographic dispersion. Naturade performs ongoing credit evaluations of its
        customers and maintains an allowance for estimated credit losses. The Company
        maintains cash balances with financial institutions that are in excess of
        federally insured limits.
 
 ***Fair
        Value of Financial Instruments –*** The
        Company’s balance sheets include the following financial instruments: cash and
        cash equivalents, trade accounts receivable, trade accounts payable and
        long-term debt. The Company considers the carrying amounts in the financial
        statements to approximate fair value of these financial instruments due to
        the
        relatively short period of time between the origination of the instruments
        and
        their expected realization or the interest rates which approximate current
        market rates.
 
 ***Accounts
        Receivable –*** Accounts
        receivable is stated net of applicable reserves for returns and allowances,
        promotional allowances and doubtful accounts. The Company regularly reviews
        and
        monitors individual account receivable balances to determine if the reserve
        amounts are appropriate and provides for an allowance for uncollectible accounts
        by considering historical customer buying patterns, invoice aging, specific
        promotions and seasonal factors. Accounts receivable are presented net of
        an
        allowance for doubtful accounts of $10,894 at December 31, 2007 and $46,225
        at
        December 31, 2006, and net of an allowance for returns and allowances of
        $67,098
        and $736,985 at December 31, 2007 and December 31, 2006, respectively. The
        allowance for doubtful accounts and returns and allowances includes the
        following:
 
 Balance
                  as of January 1, 2006
              
              $
              323,609Provision
                  for doubtful accounts and returns and allowances
              
              
              1,694,379Deductions
              
              
              (1,234,778
              )Balance
                  as of December 31, 2006
              
              
              783,210Provision
                  for doubtful accounts and returns and allowances
              
              
              421,497Deductions
              
              
              (1,126,715
              )Balance
                  as of December 31, 2007
              
              $
              77,992
 
 ***Inventories –*** Inventories
        are valued at the lower of cost or market. The weighted average method is
        used
        to determine cost. The reserve for excess and obsolete inventories includes
        the
        following:
 
 Balance
                  as of January 1, 2006
              
              $
              183,654Provision
                  for excess and obsolete inventory
              
              
              476,738Write-offs
              
              
              (578,746
              )Balance
                  as of December 31, 2006
              
              
              81,646Provision
                  for excess and obsolete inventory
              
              
              4,513Write-offs
              
              
              (34,670
              )Balance
                  as of December 31, 2007
              
              $
              51,489
 
 F-16
 
 ***Property
        and Equipment –*** Property
        and equipment (subsequent to the Effective Date) are stated at cost, less
        accumulated depreciation and amortization computed using the straight-line
        method over the estimated useful lives of the related assets ranging from
        five
        to ten years. Leasehold improvements are amortized on a straight-line basis
        over
        the lesser of the lease term or estimated useful life. Expenditures for
        maintenance and repairs are charged to operations as incurred.
 
 ***Intangible
        Assets, Including Goodwill.*** The
        Company accounts for goodwill under SFAS No. 142, *Goodwill
        and Other Intangible Assets.* Under
        SFAS No. 142, goodwill and other intangible assets with indefinite useful
        lives
        are not amortized, but are reviewed annually for impairment or more frequently
        if impairment indicators arise. The Company uses a discounted cash flow
        projection as its primary method for determining the fair value of the reporting
        unit or Company for impairment evaluation.
 
 ***Impairment
        of Long-Lived Assets –*** In
        accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“ *Accounting
        for the Impairment or*  *Disposal
        of Long-Lived Assets* ,”
the
        Company assesses the recoverability of its long-lived assets upon the occurrence
        of a triggering event by determining whether the depreciation and amortization
        of long-lived assets over their remaining lives can be recovered through
        projected undiscounted future cash flows. The amount of long-lived asset
        impairment, if any, is measured based on fair value and is charged to operations
        in the period in which long-lived asset impairment is determined by management.
        If long-lived assets become impaired, the Company recognizes an impairment
        loss
        measured as the amount by which the carrying value of the assets exceeds
        the
        estimated fair value of the assets.
 
 ***Income
        Taxes –*** The
        Company accounts for income taxes under the provisions of SFAS 109, *Accounting
        for Income Taxes* .
        Under
        this method, deferred income taxes are recognized for the tax consequences
        in
        future years of differences between the tax bases of assets and liabilities
        and
        their financial reporting amounts at each year-end based on enacted tax laws
        and
        statutory rates applicable to the periods in which the differences are expected
        to affect taxable income. Valuation allowances are established, when necessary,
        to reduce deferred tax assets to the amount expected to be
        realized.
 
 ***Revenue
        Recognition -*** Sales
        are recognized upon shipment and passage of title. This is when the customer
        has
        made the fixed commitment to purchase the goods, the products are shipped
        per
        the customers’ instructions, the sales price is fixed and determinable, and
        collection is reasonably assured. The Company accrues for estimated returns
        at
        the time of sale. The Company accounts for certain promotional allowances
        such
        as consumer coupons and rebates, $-0- and $3,802 in 2007 and 2006, respectively,
        and customer slotting fees of $(4,159) and $198,590 in 2007 and 2006,
        respectively, as a reduction of sales and new store opening costs of $-0-
        and
        $10,998 in 2007 and 2006, respectively, are recorded as cost of goods sold
        in
        the period incurred in accordance with Emerging Issues Task Force (“EITF”) issue
        No. 01-09.
 
 ***Net
        Income (Loss) Per Share –*** Basic
        earnings (loss) per share (“EPS”) excludes dilution and is computed by dividing
        net income or loss attributable to common stockholders by the weighted average
        of common shares outstanding for the period. Diluted EPS reflects the potential
        dilution that could occur if securities or other contracts to issue common
        stock
        (i.e., convertible preferred stock, warrants to purchase common stock and
        common
        stock options using the treasury stock method) were exercised or converted
        into
        common stock. Potentially dilutive securities, representing convertible
        preferred stock, warrants and options to purchase -0- and 59,637,618 shares
        of
        common stock for the years ended December 31, 2007 and 2006, respectively
        are
        excluded in EPS as their effect would be anti-dilutive.
 
 ***Research
        and Development –*** Research
        and development costs are expensed when incurred and amounted to $-0- and
        $48,028 for the years ended December 31, 2007 and 2006,
        respectively.
 
 ***Advertising
        and Promotion –*** The
        Company complies with EITF issue No. 01-9, whereby certain payments to customers
        are presented as a reduction of sales. These payments amounted to $381,049
        and
        $1,462,246 for the years ended December 31, 2007 and 2006,
        respectively.
  F-17
  ***Advertising –*** The
        Company expenses the cost of advertising as incurred. Advertising expenses
        amounted to $3,000 and $188,857 for the years ended December 31, 2007and
        2006,
        respectively.
 
 ***Guarantees –*** In
        November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation Number (“FIN”) 45 “ *Guarantor’s
        Accounting*  *and
        Disclosure Requirements for Guarantees, including Indirect Guarantees
        of*  *Indebtedness
        of Others — an interpretation of FASB Statements No. 5, 57 and
        107*  *and
        rescission of FIN 34* .”
The
        following is a summary of the Company’s agreements that the Company has
        determined are within the scope of FIN 45.
 
 Under
        its
        bylaws, the Company has agreed to indemnify its officers and directors for
        certain events or occurrences arising as a result of an officer’s or director’s
        serving in such capacity. The term of the indemnification period is the
        officer’s or director’s lifetime. The maximum potential amount of future
        payments the Company could be required to make under these indemnification
        agreements is unlimited. However, the Company has a directors’ and officers’
liability insurance policy that limits its exposure and enables it to recover
        a
        portion of any future amounts paid. The Company believes the estimated fair
        value of these indemnification agreements is minimal and has no liability
        recorded for these agreements as of December 31, 2007.
 
 The
        Company enters into indemnification provisions under (i) its agreements with
        other companies in its ordinary course of business, typically business partners,
        contractors, customers and landlords, and (ii) its agreements with investors.
        Under these provisions the Company generally agrees to indemnify and hold
        harmless the indemnified party for losses suffered or incurred by the
        indemnified party as a result of the Company’s activities or, in some cases, as
        a result of the indemnified party’s activities under the agreement. These
        indemnification provisions often include indemnifications relating to
        representations made by the Company with regard to intellectual property
        rights.
        These indemnification provisions generally survive the termination of the
        underlying agreement. In addition, in some cases, the Company has agreed
        to
        reimburse employees for certain expenses and to provide salary continuation
        during short-term disability. The maximum potential amount of future payments
        the Company could be required to make under these indemnification provisions
        is
        unlimited. The Company has not incurred material costs to defend lawsuits
        or
        settle claims related to these indemnification provisions. As a result, the
        Company believes the estimated fair value of these provisions is minimal.
        Accordingly, the Company has no liabilities recorded for these agreements
        as of
        December 31, 2007.
 
 ***Major
        Customers –*** During
        the fiscal years ended December 31, 2007 and 2006, the Company had sales
        to
        three customers in excess of 10% of the Company’s total net sales as shown in
        the following table.
 
 Major
        Customers Table
 
 **Customer One**
              
              **Customer Two**
              
              **Customer Three****Sales**
              
              **Accounts**
                **Receivable**
                **Balance**
                **Year-end**
              
              **Sales**
              
              **Accounts**
                **Receivable**
                **Balance**
                **Year-end**
              
              **Sales**
              
              **Accounts**
                **Receivable**
                **Balance**
                **Year-end**December
                  31, 2007
              
              $
              1,651,473
              
              $
              308,952
              
              $
              1,307,082
              
              $
              122,178
              
              $
              736,412
              
              $
              37,623December
                  31, 2006
              
              $
              2,435,842
              
              $
              315,195
              
              $
              1,733,290
              
              $
              291,426
              
              $
              1,091,516
              
              $
              65,060
 
 The
        loss
        of any one of these customers could have a material adverse effect on the
        Company’s results of operations. The Company does not have long-term contracts
        with any of its customers and, accordingly, there can be no assurance that
        any
        customer will continue to place orders with the Company to the same extent
        it
        has in the past, or at all.
 
 ***Accounting
        for Stock-Based Compensation***
 
 Effective
        January 1, 2006, the Company began recording compensation expense associated
        with stock options for employees in accordance with SFAS No. 123R, *“Share-Based
        Payment”* (“SFAS
        123R”). Prior to January 1, 2006, the Company accounted for stock-based
        compensation related to stock options using the intrinsic value method of
        accounting for stock-based awards granted to employees and directors in
        accordance with APB Opinion No. 25, *“Accounting
        for Stock Issued to Employees,”* and
        related interpretations in accounting for its stock option plan. The Company
        has
        adopted the modified prospective transition method provided under SFAS 123R,
        and
        as a result, has not retroactively adjusted results from prior periods. Under
        this transition method, compensation expense associated with stock options
        recognized in the year ended December 31, 2006 includes expense related to
        the
        remaining unvested portion of all stock option awards granted prior to January
        1, 2006, based on the grant date fair value estimated in accordance with
        the
        original provisions of SFAS 123, *“Accounting
        for Stock Based Compensation”* (“SFAS
        123”).
  F-18
  As
        a
        result of the adoption of SFAS 123R, the Company’s net loss for the year ended
        December 31, 2007 and 2006 includes $-0- and $97,510 of compensation expense
        respectively, related to the Company’s stock options. All outstanding options
        were cancelled on the Effective Date. The compensation expense related to
        all of
        the Company’s stock-based compensation arrangements is recorded as a component
        of selling, general and administrative expenses. As the Company is currently
        in
        a tax loss carryover position, no tax benefits were recorded for the
        compensation expense under SFAS 123R.
 
 ***Recently
        Issued Accounting Standards*** ***–*** FASB
        Statement No. 157, *Fair
        Value Measurements,* has been
        issued by the Financial Accounting Standards Board (“FASB”). This new standard
        provides guidance for using fair value to measure assets and liabilities.
        Under
        Statement 157, fair value refers to the price that would be received to sell
        an
        asset or paid to transfer a liability in an orderly transaction between market
        participants in the market in which the reporting entity transacts. In this
        standard, the FASB clarifies the principle that fair value should be based
        on
        the assumptions market participants would use when pricing the asset or
        liability. In support of this principle, Statement 157 establishes a fair
        value
        hierarchy that prioritizes the information used to develop those assumptions.
        The fair value hierarchy gives the highest priority to quoted prices in active
        markets and the lowest priority to unobservable data, for example, the reporting
        entity’s own data. Under the standard, fair value measurements would be
        separately disclosed by level within the fair value hierarchy. The provisions
        of
        Statement 157 are effective for financial statements issued for fiscal years
        beginning after November 15, 2007, and interim periods within those fiscal
        years. As a result of Fresh-Start accounting, the Company adopted the statement
        on the Effective Date and its adoption did not have a material impact on
        the
        Company.
 
 The
        FASB
        has issued FASB Staff Position (FSP) EITF 00-19-2, *"Accounting
        for Registration Payment Arrangements."* This FSP
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement, whether
        issued
        as a separate agreement or included as a provision of a financial instrument
        or
        other agreement, should be separately recognized and measured in accordance
        with
        FASB Statement No. 5, *Accounting
        for Contingencies.* The
        FSP
        further clarifies that a financial instrument subject to a registration payment
        arrangement should be accounted for in accordance with other applicable GAAP
        without regard to the contingent obligation to transfer consideration pursuant
        to the registration payment arrangement. This FSP amends various authoritative
        literature notably FASB Statement No. 133, *Accounting
        for Derivative Instruments and Hedging Activities,* FASB
        Statement No. 150, *Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity,* and
        FASB
        Interpretation No. 45, *Guarantor’s
        Accounting and Disclosure Requirements for Guarantees, Including Indirect
        Guarantees of Indebtedness of Others.* This
        FSP
        is effective immediately for registration payment arrangements and the financial
        instruments subject to those arrangements that are entered into or modified
        subsequent to December 21, 2006. For registration payment arrangements and
        financial instruments subject to those arrangements that were entered into
        prior
        to December 21, 2006, the guidance in the FSP is effective for financial
        statements issued for fiscal years beginning after December 15, 2006, and
        interim periods within those fiscal years. The
        adoption of this pronouncement did not have a material effect on the Company’s
        financial statements.
 
 On
        July
        13, 2006, FASB issued Interpretation (FIN) No. 48, *Accounting
        for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
        109,* FIN 48
        clarifies the accounting for uncertainty in income taxes recognized in an
        enterprise’s financial statements in accordance with FASB Statement No. 109, *Accounting
        for Income Taxes.* FIN 48
        also prescribes a recognition threshold and measurement attribute for the
        financial statement recognition and measurement of a tax position taken or
        expected to be taken in a tax return. The new FASB standard also provides
        guidance on de-recognition, classification, interest and penalties, accounting
        in interim periods, disclosure, and transition. The provisions of FIN 48
        are
        effective for fiscal years beginning after December 15, 2006. The
        adoption of this pronouncement did not have a material effect on the Company’s
        financial statements.
  F-19
  On
        February 15, 2007, the FASB issued FASB Statement No. 159, *The
        Fair Value Option for Financial Assets and Financial Liabilities - Including
        an
        Amendment of FASB Statement No. 115.* SFAS 159
        permits an entity to choose to measure many financial instruments and certain
        other items at fair value. This option is available to all entities, including
        not-for-profit organizations. Most of the provisions in Statement 159 are
        elective; however, the amendment to FASB Statement No. 115, *Accounting
        for Certain Investments in Debt and Equity Securities,* applies
        to all entities with available-for-sale and trading securities. Some
        requirements apply differently to entities that do not report net income.
        The
        fair value option established by Statement 159 permits all entities to choose
        to
        measure eligible items at fair value at specified election dates. A business
        entity will report unrealized gains and losses on items for which the fair
        value
        option has been elected in earnings (or another performance indicator if
        the
        business entity does not report earnings) at each subsequent reporting date..
        The fair value option: ( *a* )
        may be
        applied instrument by instrument, with a few exceptions, such as investments
        otherwise accounted for by the equity method; ( *b* )
        is
        irrevocable (unless a new election date occurs); and ( *c* )
        is
        applied only to entire instruments and not to portions of instruments. Statement
        159 is effective as of the beginning of an entity’s first fiscal year that
        begins after November 15, 2007. The
        adoption of this pronouncement on the Effective Date did not have a material
        effect on the Company’s financial statements *.*
 
 In
        December 2007, the FASB issued SFAS No. 141 (revised 2007), “ *Business
        Combinations* ”
(“SFAS
        141(R)”). SFAS 141(R) replaces SFAS No. 141, “ *Business
        Combinations* ”,
        and is
        effective for the Company for business combinations for which the acquisition
        date is on or after the beginning of the first annual reporting period beginning
        on or after December 15, 2008. SFAS 141(R) requires the new acquiring entity
        to
        recognize all assets acquired and liabilities assumed in the transactions,
        expense all direct transaction costs and account for the estimated fair value
        of
        contingent consideration.  This standard establishes an acquisition-date
        fair value for acquired assets and liabilities and fully discloses to investors
        the financial effect the acquisition will have.  This standard will not
        impact the Company’s present financial position, results of operations and cash
        flows.
  In
        December 2007, the FASB issued SFAS No. 160, “ *Noncontrolling
        Interests in Consolidated Financial Statements”* (“SFAS
        160”). SFAS 160 requires all entities to report minority interests in
        subsidiaries as equity in the financial statements, and requires that
        transactions between entities and noncontrolling interests be treated as
        equity.  SFAS 160 is effective for the Company as of the beginning of
        fiscal year 2009.  The Company is evaluating the impact of this
        pronouncement on the Company’s financial position, results of operations and
        cash flows.
 
 **2.**  **INVENTORIES**
 
 Inventories
        are stated at the lower of weighted average cost or market. Weighted average
        cost is determined on a first-in, first-out basis. Inventories at December
        31,
        2007 and December 31, 2006 consisted of the following:
 
 **December 31, 2007**
              
              **December 31, 2006**Raw
                  materials
              
              $
              63,875
              
              $
              49,879Finished
                  goods
              
              
              1,042,014
              
              
              290,748Subtotal
              
              
              1,105,889
              
              
              340,627Less:
                  Reserve for excess and obsolete inventories
              
              
              (51,489
              )
              
              (81,646
              )$
              1,054,401
              
              $
              258,981
 
 **3.**  **PROPERTY
        AND EQUIPMENT**
 
 Property
        and equipment at December 31, 2007 and December 31, 2006 consisted of the
        following:
 
 **December 31, 2007**
              
              **December 31, 2006**Machinery
                  and equipment
              
              $
              4,583
              
              $
              517,477Building
                  and improvements
              
              
              —
              
              
              —Automobiles
              
              
              —
              
              
              83,980Total
              
              
              4,583
              
              
              601,457Less
                  accumulated depreciation and amortization
              
              
              (233
              )
              
              (549,910
              )Property
                  and equipment, net
              
              $
              4,350
              
              $
              51,547
 
 Depreciation
        expenses amounted to $12,238, and $56,723 for the fiscal years ended December
        31, 2007 and 2006, respectively.
 
 F-20


**4.**  **DEBT**





Long-term
      debt consists of the following at December 31, 2007 and 2006.





**December 31, 2007**
            
            **December 31, 2006**Revolving
                note
            
            $
            1,149,447
            
            $
            1,276,570Term
                loan
            
            
            1,456,778
            
            
            1,350,000Revolver
                Over Advance
            
            
            674,023
            
            
            —Loan
                agreement
            
            
            1,622,736
            
            
            1,075,000Note
                with majority shareholder
            
            
            250,000
            
            
            —Notes
                to Professionals
            
            
            360,332
            
            
            —Laurus
                Expenses
            
            
            29,678
            
            
            —Tax
                Notes
            
            
            7,314
            
            
            —Class
                8 unsecured claims
            
            
            1,269,130
            
            
            —6,819,438
            
            
            3,701,570Less:
                revolving note, note with majority shareholder and current portion of
                long-term debt
            
            
            (957,391
            )
            
            (1,685,665
            )Less:
                Debt discounts – current
            
            
            (1,809,781
            )
            
            —Less:
                Debt discounts – long term
            
            
            (1,377,461
            )
            
            —Long-term
                debt
            
            $
            2,674,805
            
            $
            2,015,905





Future
      minimum principal payments under long-term debt as of December 31, 2007 are
      as
      follows:





**Year
                Ending December 31**2008
            
            $
            2,547,5582009
            
            
            1,433,8102010
            
            
            636,8702011
            
            
            506,8082012
                and thereafter
            
            
            1,599,682Total
            
            $
            6,819
                438




***Financing
      Agreement***– In
      July
      2005, the Company obtained a $4,000,000 convertible financing facility from
      Laurus, consisting of a $3,000,000 revolving credit facility and a $1,000,000
      term loan. In consideration of such financing facility, The Company issued
      to
      Laurus an option to purchase up to 8,721,375 shares of the Company’s common
      stock at $0.0001 per share and a warrant to purchase up to 1,500,000 shares
      of
      the Company’s common stock at $0.80 per share. The financing facility was
      amended on January 11, 2006, by among other things, increasing the term loan
      to
      $1,650,000 and eliminated the conversion features on the facility. The Company
      issued Laurus 1,050,000 shares of the Company’s common stock in consideration
      for this amendment.





Indebtedness
      under the revolving facility is based upon 35% of eligible inventory and 90%
      of
      eligible accounts receivable. The financing facility had a term of three years
      ending on July 26, 2008. As part of the Chapter 11 restructuring, Laurus agreed
      to extend the period for the repayment for the Term Loan to be repaid in
      equal monthly installments beginning the first day of the first full month
      following the Effective Date of the Plan through and including January
      2010. The financing facility carries an interest rate of prime
      plus 2% per annum (10.25% at December 31, 2007), subject to certain reductions
      based upon growth of the Company’s stock price.





The
      Company is subject to certain reporting covenants (such as the timely filing
      of
      financial reports with the Securities and Exchange Commission, monthly financial
      reporting deadlines and collateral reporting), is required to obtain Laurus’
approval of certain actions (such as incurring additional indebtedness, making
      any distribution on or repurchasing any common stock or merging with or
      purchasing any assets of stock of any person) and has granted Laurus a right
      of
      first refusal with respect to certain future financings. Management believes
      the
      Company is in compliance with all covenants at December 31, 2007.





In
      consideration for entering into the Financing Agreement, the Company issued
      to
      Laurus, an option (the “Laurus Option”) and a warrant (the “Laurus Warrant”) to
      purchase shares of the Company’s common stock. The Laurus Option entitled the
      holder to purchase up to 8,721,375 shares of common stock, subject to certain
      limitations on the amount of common stock held by Laurus, at a purchase price
      of
      $0.001 per share at any time on or after July 26, 2005. The Laurus Warrant
      entitled the holder to purchase up to 1,500,000 shares of common stock at a
      purchase price of $0.80 per share at any time on or after July 26, 2005 through
      July 26, 2010. The number of shares of common stock issuable upon exercise
      of
      the Laurus Option and the Laurus Warrant was subject to adjustment to prevent
      dilution upon stock splits, stock dividends, and other events. The exercise
      price of the Laurus Option and the Laurus Warrant may be paid, at the option
      of
      Laurus, by the cancellation of indebtedness under the financing
      facility.




F-21





The
      Company paid to Laurus in cash a total of $193,500 in fees and expenses,
      existing of a “closing payment” of $156,000 and reimbursement of $37,500 of
      Laurus legal fees. Also in connection with the Laurus financing, the Company
      issued a warrant to Liberty Company Financial LLC (“Liberty”) for introducing
      the Company to Laurus (the “Liberty Warrant”). The Liberty Warrant entitled the
      holder to purchase up to 3,647,743 shares of common stock at a purchase price
      of
      $0.08 at any time on or after July 26, 2006 through July 26, 2011.





The
      value
      of the warrants and options issued to Laurus, using Black Scholes, equaled
      $786,036 and was composed of the value of the Laurus Option at $694,106 and
      the
      Laurus Warrant at $91,930 and was classified as a discount and is amortized
      as
      interest expense over 36 months using the interest method. Based on assessment
      of the terms of this exchange, the Company determined that there was no
      beneficial conversion feature of this exchange.





The
      value
      of the warrant issued to Liberty of $223,555 using the Black Scholes valuation
      model was capitalized as deferred finance fees and is amortized over 36 months
      using the interest method.





On
      January 11, 2006 the Company and Laurus amended the Financing Agreement,
      pursuant to which the parties:





·
            Increased
                the term loan from $1,000,000, of which $909,000 was outstanding
                at
                January 11, 2006, to $1,650,000. Over advances totaling $650,000
                were
                transferred from the Revolving Note to the Term Note with the remaining
                $91,000 utilized as a reduction of the amount outstanding under the
                Revolving Note.





·
            Modified
                the payments on the Term Note from $30,000 per month beginning November
                1,
                2005 payable in shares of the Company’s common stock or $30,900 per month
                if paid in cash, to $50,000 per month in cash beginning April 1,
                2006.





·
            Eliminated
                the First Minimum Borrowing Note outstanding of
                $500,000.





·
            Eliminated
                the ability of Laurus to convert the Term Note, the Revolving Note,
                and
                the Minimum Borrowing Notes into shares of the Company’s common
                stock.





·
            Extended
                the term of the Financing Agreement from three years ending on July
                26,
                2008 to three years ending January 6,
                2009.





·
            Modified
                the prepayment provisions of the Revolving Note and the Term Note
                from an
                early payment fee of 35% of the loan amounts if paid prior to the
                termination date, to 5% if retired before January 6, 2007, 4% if
                retired
                prior to January 6, 2008 and 3% if retired prior to January 6,
                2009.





·
            In
                consideration for entering into the amendment, the Company issued
                to
                Laurus 1,050,000 shares of common
                stock.





The
      value
      of the shares issued to Laurus in consideration for the debt modification plus
      the remaining unamortized deferred financing fees are being amortized over
      the
      renewed term of the Financing Agreement.





On
      August
      31, 2006, pursuant to the Company’s filing under Chapter 11 of the US Bankruptcy
      Code, Laurus and Redux agreed to cause the Company to do the
      following:





·
            Laurus’
                claim in the amount of $2,900,000 would be treated as fully secured
                and
                the liens granted Laurus pursuant to the Security and Purchase Agreement
                dated July 26, 2005 between Laurus and the Company (the “Financing
                Agreement”) would remain without
                modification.




F-22




·
            Laurus
                would provide debtor in possession financing (“DIP”) pursuant to the terms
                and conditions of the financing
                agreement.




·
            Interest
                would continue to accrue on the Term Loan pursuant the terms of the
                Financing Agreement however, payments would be suspended until the
                first
                day of the first full month after the Effective Date of the Chapter
                11
                filing.





·
            The
                maturity date of the Term loan would be extended to January 6, 2010
                and
                principal payments would commence on the first day of the first full
                month
                after the Effective Date of the Chapter 11 filing and be payable
                in equal
                monthly installments until the maturity date
                .





·
            To
                the extent that the Laurus DIP financing and/or Naturade’s use of Laurus
                cash collateral was insufficient, Redux would be responsible for
                funding
                all payments needed to confirm the plan and for working capital of
                Naturade before and after
                confirmation.





·
            Laurus
                supported the treatment of Laurus’ claims pursuant to Naturade’s Plan, and
                would cast a vote in favor of the confirmation of such Plan, provided
                that
                the treatment of Laurus’ claims pursuant to the Plan is materially the
                same as that set forth herein.





In
      addition, the Plan provided that Redux issue to Laurus, 574,784 shares of its
      common stock with an estimated fair value on the date of grant of $862,181
      and
      700,000 Redux common stock purchase warrants with an exercise price of $0.01
      per
      share with an estimated fair value of $1,049,000 on the date of the grant.
      The
      estimated fair values of these instruments (aggregate value of $1,911,181)
      have
      been recorded as debt discounts and are amortized to interest expense over
      the
      expected life of the debt using the effective interest method.





As
      of the
      Effective Date, the following amounts were agreed to with Laurus:





·
            Revolving
                Loan for $838,937 due in 36 months with interest of Prime plus
                2%.


·
            Term
                Loan for $1,515,049 payable in 24 equal installments of $58,271 with
                interest equal to prime plus 2%


·
            Revolver
                Over advance of $674,023 payable in monthly principal installments
                of
                $12,000 per month starting January 2008 until June 2008; $15,000
                per month
                in July and August 2008; $25,000 per month starting September 2008
                until
                December 2008; $40,000 per month starting January 2009 until May
                2009 and
                $45,000 per month starting June 2009 until November 2009 with a final
                payment of $2,023 in December 2009. Interest is payable at prime
                plus
                2%.





At
      December 31, 2007, $1,149,447 was outstanding under the revolving facility;
      $1,456,778 was outstanding under the term loan and $674,023 was outstanding
      under the Revolver Over Advance. The loans are secured by all of the assets
      of
      the Company. The term loan is guaranteed by Peter H. Pocklington, a principal
      of
      Quincy, and a former director of the Company.





***Loan
      Agreements***– On
      April
      14, 2003, the Company entered into a Loan Agreement (the “2003 Loan Agreement”)
      with Health Holdings and certain other lenders (the “2003 Lender Group”),
      pursuant to which the 2003 Lender Group agreed to lend the Company $450,000
      and,
      subject to the discretion of the 2003 Lender Group, up to an additional
      $300,000. All advances under the 2003 Loan Agreement bore interest at the rate
      of 15% per annum, were secured by substantially all of the assets of the
      Company, and were subordinated to the Company’s indebtedness to Laurus. In
      consideration of the extension of credit under the 2003 Loan Agreement, Wells
      Fargo waived all defaults of the Company as of December 31, 2003 under the
      Credit Agreement.




F-23





On
      April
      14, 2004, the terms of the 2003 Loan Agreement were modified by the Joinder
      of
      Bill D. Stewart, the then Chief Executive Officer of the Company, as a member
      of
      the 2003 Lender Group, subject to all of the terms and conditions of the 2003
      Loan Agreement, and the 2003 Lender Group advanced an additional $200,000,
      of
      which Bill D. Stewart advanced $100,000. Further, on May 3, 2004, the 2003
      Lender Group advanced the Company an additional $100,000. On August 16, 2004,
      advances allowed under the 2003 Loan Agreement were increased to a total of
      $950,000 and the 2003 Lender Group advanced an additional $200,000 to the
      Company. In July 2005, advances allowed under the 2003 Loan Agreement were
      increased to a total of $1,250,000 and the 2003 Lender Group advanced an
      additional $300,000 to the Company. There are no additional amounts available
      to
      advance under the 2003 Loan Agreement. Proceeds of the advances have been used
      for working capital. On January 26, 2005, the terms of the 2003 Loan Agreement
      were modified to extend the due date to December 31, 2005. On July 22, 2005,
      pursuant to the acquisitions of Ageless and Symco, the terms of the 2003 Loan
      Agreement were again modified to extend the due date to December 31, 2006.
      On
      August 31, 2006 these loans became claims pursuant to the Company’s filing under
      Chapter 11 of the U.S. Bankruptcy Code. As of December 31, 2007, there is
      $1,250,000 outstanding under the 2003 Loan Agreement of which $1,075,000 is
      treated as fully secured and is included in Long Term Debt. Interest on the
      $1,075,000 of 10%  began
      to
      accrue on the Effective Date of the Company’s Chapter 11 filing, to be paid
      monthly with monthly principal payments to begin two years from the Effective
      Date. The remaining $175,000 is included in Liabilities Subject to Compromise.





In
      April
      2006, the Company’s then principal shareholder, Quincy, loaned the Company
      $350,000. This loan is payable on demand and does not carry a stated interest
      charge. At December 31, 2007, $350,000 was outstanding on this unsecured loan
      and is accordingly included in Liabilities Subject to Compromise. There is
      no
      written agreement for this loan between Quincy and the Company.





On
      the
      effective date, the following amounts were payable under the Loan
      Agreement:





·
            Health
                Holdings - $1,361,000, due November 2012, with interest payable in
                installments starting January 2010, of 10%
                annually.


·
            Bill
                D. Stewart - $141,484, due November 2012, with interest payable in
                quarterly installments starting January 2010, of 10% annually.


·
            David
                A. Weil - $95,742, due November 2012, with interest payable in quarterly
                installments starting January 2010, of 10%
                annually.





Pursuant
      to the Plan, the obligations described above in the aggregate amount of
      $1,598,226 are convertible at the option of the creditors into common stock
      of
      Redux using 70% of the trailing six month average stock price. The amount
      convertible by the creditors shall be multiplied by three times the obligation
      if converted within the first year of the Effective Date, two times the
      obligation if converted between the first and second years after the Effective
      Date, and one time the obligation two years after the Effective Date. As a
      result of this conversion right contributed by Redux, the Company recognized
      a
      debt discount of $1,598,226 that is amortized into interest expense over the
      expected life of the obligation using the effective interest
      method.




***Note
      with majority shareholder*** –
On
      November 6, 2007, Redux Holdings purchased the Bankruptcy Claim from Ageless
      Foundation and Naomi Balcombe in the total amount of $1,248,234 for $240,000.
      That claim has a face value of $374,470 (30% of claim amount). On November
      9,
      2007, Redux Holdings assigned the note and Claim to Naturade, Inc.





***Notes
      to Professionals***– Note
      payable to professionals engaged in Chapter 11 filing totaling $300,000 on
      the
      Effective Date with interest accruing at 10% annually compounded monthly.
      Payments of $100,000 each, in December 2008 and 2009 with a final payment of
      $178,147 in December 2010. This note is guaranteed by Redux. The Company is
      also
      contingently liable to the professionals in the event that the Company achieves
      defined sales targets or completes an equity raise.





***Laurus
      Expenses***– Laurus
      incurred $29,678.20 in legal expenses during the Bankruptcy proceeding. Naturade
      and Laurus agreed to fold that amount into the Term Loan; hence, the term loan
      increased by that amount.





***Tax
      Notes***– Notes
      payable to taxing authorities on the Effective Date of $7,247 payable in 20
      quarterly principal payments of $362, beginning January, 2008, plus accrued
      interest of 6% annually.





***Class
      8 unsecured claims***– Unsecured
      creditor claims at the Effective Date of $1,675,504 with a present value of
      $1,269,130, payable in annual installments of $279,251 on November 6, 2008,
      $279,251 on November 6, 2009, $558,501 on November 6, 2010 and $558,501 on
      November 6, 2011.




F-24





**5.**  **RECAPITALIZATION**





In
      January 2005, Naturade was introduced to Quincy by a public relations firm
      retained by both Quincy and Naturade. Before this introduction, Naturade did
      not
      have any relationship with Quincy. Quincy, in turn, introduced Naturade to
      Ageless and to Symco and Symbiotics. Symco and Symbiotics were related companies
      under common control. Before this introduction, Naturade did not have any
      relationship with Ageless, Symco or Symbiotics.





On
      July
      22, 2005, the Company entered into a Master Investment Agreement (the “Master
      Investment Agreement”), with Quincy, Health Holdings, Westgate, Stewart and
      Weil, pursuant to which:





**•**
            Quincy
                negotiated, and arranged the financing for, the acquisition by Naturade
                of
                selected assets of Ageless, Symco and
                Symbiotics;





**•**
            Quincy
                remained a co-obligor on, and a principal of Quincy personally guaranteed,
                the payment of a portion of the purchase price of each such
                acquisition;





**•**
            Naturade
                issued to Quincy (i) 30,972,345 shares of Common Stock, (ii) warrants
                to
                purchase 7,000,000 shares of the Company’s common stock at $0.80 per share
                and additional 7,000,000 shares of the Company’s common stock at $1.02 per
                share, during the period from July 22, 2006 to July 22, 2015 (the
“Quincy
                Warrants”), and (iii) 4,200,000 shares of Series C, all in consideration
                of Quincy negotiating and arranging the financing for the Company’s
                acquisition of the selected assets of Ageless, Symco and Symbiotics
                and
                guaranteeing the payment of a portion of the purchase price of each
                such
                transaction;





**•**
            Health
                Holdings surrendered the 41,054,267 shares of the Company’s common stock
                held by it in exchange for (i) 12,600,000 shares of Series C and
                (ii) a
                warrant to purchase 10,000,000 shares of the Company’s common stock at
                $1.00 per share, during the period from July 22, 2006 to July 22,
                2015
                (the “HHB Warrant”);





**•**
            Westgate
                surrendered the 13,540,723 shares of Series B held by it, including
                any
                accrued and unpaid dividends, in exchange for 4,200,000 shares of
                Series
                C;





**•**
            Health
                Holdings, Stewart and Weil extended the term of the Secured Promissory
                Notes issued to them pursuant to that certain Loan Agreement dated
                April
                23, 2003, from December 31, 2006 to December 31,
                2007;





**•**
            Naturade
                granted to Health Holdings, Westgate and Quincy certain registration
                rights with respect to the common stock issuable upon conversion
                of the
                Series C or exercise of the HHB Warrant or the Quincy Warrants (see
                “Business – Registration Rights”);
                and





**•**
            Quincy
                would grant to Health Holdings and Westgate certain co-sale rights
                described below.





The holders
        of the Series C voting as a separate class were entitled to elect one member
        of
        the Company’s Board of Directors. In addition, in matters presented for a vote
        of stockholders, including the election of other directors, the holders of
        the
        Series C voted together with the holders of Common stock as a single class,
        with
        a number of votes equal to the number of shares of common stock into which
        the
        Series C could then be converted. Under Delaware law, the holders of common
        stock and Series C voted as a separate class on any amendment to the Company’s
        Certificate of Incorporation which would (i) increase or decrease the aggregate
        number of authorized shares of such class, (ii) increase or decrease the
        par
        value of the shares of such class, or (iii) alter or change the powers,
        preferences or special rights of the shares of such class so as to affect
        them
        adversely.





In
      addition, Health Holdings was entitled to receive notice of, and to have a
      representative attend, all meetings of the Company’s Board of Directors, so long
      as Health Holdings owns any Series C.





On
      a
      liquidation or sale of Naturade, the holders of Series C would have been
      entitled to receive a preferential payment equal to $1.00 per share (subject
      to
      adjustment), plus accrued but unpaid dividends. This preferential payment would
      have reduced the amount available for distribution to the holders of the
      Company’s common stock.




F-25





For
      each
      fiscal year, the holders of Series C would have been entitled to receive a
      cash
      dividend equal to 20% of the amount, if any, by which the Company’s pre-tax
      profits for such year exceeded $10 million, which dividend would have been
      distributed within 120 days of the end of such fiscal year. This cash dividend
      would have reduced the amount available for other corporate purposes, including
      the expansion of our business or distributions to the holders of the Company’s
      common stock





Naturade
      had the right to require the conversion of all shares of Series C into the
      Company’s common stock at any time within ten days following a period of 20
      consecutive trading days for which the closing bid price of the Company’s common
      stock equaled or exceeded $1.50 per share (as adjusted).





On
      December 31, 2012, Naturade would have been required to redeem the Series C
      for
      $1.00 per share (subject to adjustment), plus accrued but unpaid dividends,
      provided the Company would then be legally able to do so. This cash dividend
      would reduce the amount available for other corporate purposes, including the
      expansion of the Company’s business or distributions to the holders of its
      equity.





The
      issuance of the shares of the Company’s common stock under the Master Investment
      Agreement and the shares of pursuant to the HHB Warrant and Quincy Warrants
      could have caused substantial dilution to the other holders of the Company’s
      common stock, and the potential issuance of all such shares of the Company’s
      common stock could have adversely affected the market price of the Company’s
      common stock and impaired the Company’s ability to raise capital through the
      sale of the Company’s common stock.





In
      the
      event Quincy desired to sell any shares of the Company’s common stock received
      pursuant to the Master Investment Agreement, other than a sale in the public
      market at fair market value (as defined in the Master Investment Agreement),
      Health Holdings and Westgate had the right to sell to the proposed transferee
      a
      pro rata portion of the Company’s common stock on the same terms and
      conditions.





As
      a
      result of the recapitalization, Quincy had the ability to elect a majority
      of
      our Board of Directors, control the outcome of all matters requiring stockholder
      approval (except such matters as require a class vote of the Series C) and
      control the Company’s management and affairs (except to the extent the approval
      of Laurus was required under the Financing Agreement as defined below).




**6.**  **WARRANT
      LIABILITY**





The
      warrants issued to Quincy, Laurus (including Laurus options) and Liberty had
      certain registration rights which require the Company to register the common
      stock deliverable upon exercise of the warrants and options. Due to the
      requirement to issue registered shares, these instruments were determined to
      be
      liabilities. The total shares deliverable under these instruments of 27,869,118
      was determined to have a fair market value of $1,855,181 by using a
      Black-Scholes valuation model and was recorded as liabilities.





On
      August
      10, 2006, the Laurus warrant (for up to 1,500,000 shares) was transferred to
      Redux (see Note 1, *Change
      in Control* )
      and
      then cancelled. The carrying value of the Laurus warrant liability of $91,930
      was written off to other income (change in warrant liability).





As
      of
      September 30, 2006, the Company determined that as a result of the bankruptcy
      filing and in consideration of the Company’s Initial Plan of Reorganization, the
      remaining warrant and option instruments were likely to be cancelled. Based
      on
      this evaluation, the Company determined that the registration rights were
      effectively eliminated. The Company determined the fair value of the remaining
      warrant and option liability to be $569,737 which was reclassified to additional
      paid in capital. The mark-to-market adjustment to fair value on the remaining
      warrant and option liability of $1,285,797 was recorded to other income (change
      in warrant liability).





On
      the Effective Date, all options and warrants, and all registration rights,
      were
      cancelled as required under the Plan.




F-26





**7.**  **ACQUISITIONS**





On
      July
      22, 2005, Quincy, Symco and Symbiotics entered into an Asset Purchase Agreement
      (the “Symco/Symbiotics Agreement”), pursuant to which Quincy had the right to
      acquire substantially all of the assets relating to Symco and Symbiotics’
health-related products retail business. As consideration for the assets, Quincy
      would (a) assume current accounts payable ($408,965) and the obligations under
      certain contracts, (b) pay all outstanding amounts owed under certain credit
      facilities ($224,313), (c) issue a promissory note payable to Symco and
      Symbiotics in the principal amount of $2,000,000, (x) less the amount necessary
      to repay the credit facilities, and (y) subject to a working capital adjustment,
      (d) pay an additional $60,000 in cash fifteen (15) days after the closing date
      and an additional $60,000 every thirty (30) days thereafter until the note
      is
      paid in full and (e) for a three (3) year period following the closing date,
      Quincy would pay to Symco and Symbiotics ten percent (10%) of the amount of
      the
      increase in contribution profit over a baseline amount of $2,000,000 based
      on
      the sale of products for each 12 month period during the three year period.
      The
      promissory note payable to Symco and Symbiotics is guaranteed by Peter H.
      Pocklington, a principal of Quincy, and from August 10, 2005 to August 10,
      2006,
      one of the Company’s directors. In this acquisition, the Company acquired the
      right to distribute, and substantially all of the assets related to, Colostrum
      PlusTM, a line of products reported to enhance immune system
      functions.





On
      July
      27, 2005, Quincy and Ageless entered into an Asset Purchase Agreement (the
      “Ageless Agreement”), pursuant to which Quincy had the right to acquire
      substantially all of assets relating to Ageless’ health-related products retail
      business. As consideration for the assets, Quincy would (a) assume current
      accounts payable ($173,593), (b) assume an obligation to an employee of the
      company in an amount equal to $600,000 and (c) issue a promissory note payable
      to Ageless in the principal amount of $700,000, subject to a working capital
      adjustment. The promissory note payable to Ageless is guaranteed by Peter H.
      Pocklington, a principal of Quincy, and from August 10, 2005 to August 10,
      2006,
      one of the Company’s directors. In this acquisition, the Company acquired the
      right to distribute, and substantially all of the assets related to, the
      AgelessTM line of anti-aging products.





On
      July
      22, 2005, pursuant to an Assignment and Assumption Agreement, Quincy assigned
      to
      Naturade all of its rights, title and interest in and to the Symco/Symbiotics
      Agreement, and Naturade agreed to perform all of Quincy’s obligations under the
      Symco/Symbiotics Agreement. Pursuant to an Assignment and Assumption Agreement
      dated July 28, 2005, Quincy assigned to Naturade all of its rights, title and
      interest in and to the Ageless Agreement, and Naturade agreed to perform all
      of
      Quincy’s obligations under the Ageless Agreement. In connection with these
      transactions, the Company entered into consulting agreements with certain key
      employees of Symco/Symbiotics and Ageless. In addition, Naturade is a co-maker
      on each of the promissory notes described above. Pursuant to the Consulting
      Agreement entered into by the Company and Naomi Balcombe (“Balcombe”), the
      founder of Ageless, (i) for a three (3) year period following the closing date,
      Naturade will pay to Balcombe ten percent (10%) of the amount of the increase
      in
      contribution profit over a baseline amount of $900,000 based on the sale of
      products for each 12 month period during the three year period and (ii) issued
      to Ms. Balcombe 1,800,000 shares of the Company’s common stock. Pursuant to the
      Consulting Agreements entered into by the Company and Douglas Wyatt, the founder
      of Symco and Symbiotics, and David W. Brown, the President of Symco and
      Symbiotics, Naturade issued to Messrs. Wyatt and Brown 2,850,000 shares and
      150,000 shares, respectively, of the Company’s common stock.





On
      August
      3, 2005, Naturade closed the acquisition of Symco and Symbiotics. On September
      30, 2005, the Company amended the terms of the acquisition to adjust the
      promissory note to include the subsequent purchase by Naturade of a computer
      system and the payoff of a promissory note in the amount of $274,382. In
      addition, the payments on the promissory note were modified from a balloon
      payment due on February 3, 2006 to nine monthly installments of $3,500 from
      October 1, 2005 and annual payments of $518,500 on June 1, 2006, $450,000 on
      June 1, 2007 and $476,305 on June 1, 2008. In exchange for the elimination
      of
      the requirement for the Company to pay $60,000 for every thirty days the
      promissory note was outstanding, Naturade agreed to make monthly interest
      payments of $15,000 from October 2005 to May 2006, $10,000 from June 2006 to
      May
      2007 and $5,000 from June 2007 to May 2008. On May 31, 2006, the promissory
      note
      was amended and restated whereby the principal amount of $1,000,000 would be
      repaid in monthly installments of $33,333 along with monthly interest charges
      of
      7% per annum on the outstanding balance through November 2008.





On
      August
      9, 2005, Naturade closed the acquisition of Ageless.




F-27





At
      the
      time of the acquisitions, Quincy and the acquirees had no relationship to
      Naturade and Quincy and the acquirees were not related parties to each other.
      Under the terms of the Master Investment Agreement dated July 22, 2005, Quincy
      acted as a broker and facilitator and agreed to negotiate, and to arrange the
      financing for, Naturade’s acquisition of selected assets of Ageless, Symco and
      Symbiotics, and to remain as co-obligor on, and to cause a principal of Quincy
      to guarantee Naturade’s payment of, a portion of the purchase
      price.





In
      consideration of such services, Naturade agreed to issue Quincy 33,972,345
      shares of the Company’s common stock and to assume Quincy’s obligations under
      the Symco/Symbiotics Agreement and the Ageless Agreement. Among the obligations
      assumed by Naturade was the obligation to issue an aggregate of 3,000,000 shares
      of the Company’s common stock to the founders of Symco and Symbiotics in
      consideration of consulting services to be rendered by them concerning the
      purchased assets. As a result, Naturade issued Quincy 30,972,345 shares of
      the
      Company’s common stock and Symco and Symbiotics a combined 3,000,000 shares of
      Company’s common stock





For
      further information on the assets and liabilities of Ageless, Symco and
      Symbiotics acquired by the Company, and those not acquired by the Company,
      see
      the Company’s Current Report on Form 8-K/A filed with the SEC on February 28,
      2006. Litigation was subsequently commenced by Ageless and its principal against
      the Company, Quincy and Peter Pocklington. The Company has settled this
      litigation with respect to the Company only. Redux has purchased all claims
      filed in the Naturade bankruptcy by Ageless and its principal.





In
      connection with the foregoing transactions, Naturade and Doyle & Boissiere
      LLC terminated that certain Consulting Agreement dated December 17, 1997,
      Naturade and Westgate terminated that certain Management Services Agreement
      dated January 2, 2002, and Health Holdings and Westgate terminated that certain
      Voting Agreement dated January 2, 2002. In November 2005, Quincy assumed the
      consulting agreement with David Brown and the Company issued Quincy 400,000
      shares of the Company’s common stock in compensation.





**8.**  **IMPAIRMENT
      OF GOODWILL AND INTANGIBLES**





On
      June
      30, 2006, due to the Company’s continuing poor financial condition, management
      assessed the recoverability of the carrying value of goodwill in accordance
      with
      Statement of Financial Accounting Standards No. 142, *Goodwill
      and Other Intangible Assets* .
      Based
      on this assessment, the Company concluded that all goodwill of $2,694,357 was
      fully impaired. The impairment loss reflects the amount by which the carrying
      value of goodwill exceeded its estimated fair value determined by the estimated
      future discounted cash flows.





On
      September 30, 2006, based upon the Company's assessment and in accordance with
      SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      Company concluded that the carrying value of the intangible customer lists
      associated with the Ageless and Symco acquisitions (see Note 7), exceeded the
      fair market values as determined by the Company’s assessment of the estimated
      future discounted cash flows. Consequently, an impairment loss in the amount
      of
      $666,033 was recorded at that time to reflect the estimated reduction in the
      fair values of the Ageless and Symco customer lists at that time. On December
      31, 2006, the Company determined further impairment of the customer lists had
      occurred and an impairment loss in the amount of $383,303 was recorded at that
      time.





**9.
      STOCK OPTIONS AND WARRANTS**





***Employee
      Stock Option Plan*** In
      February 1998, the Company adopted an Incentive Stock Option Plan (the “Plan”)
      to enable participating employees to acquire shares of the Company’s common
      stock. The Plan provided for the granting of incentive stock options up to
      an
      aggregate of 850,000 shares, as amended. In October 2001, the Company amended
      the Plan by increasing to 2,000,000 the number of shares of the Company’s common
      stock that may be subject to awards granted pursuant to the Plan. The actual
      number of incentive stock options that could be granted to employees was
      determined by the Compensation Committee based on the parameters set forth
      in
      the Plan. Under the terms of the Plan, incentive stock options could be granted
      at not less than 100% of the fair market value at the date of the grant (110%
      in
      the case of 10% shareholders). Incentive options granted under the Plan vested
      over a four-year period from the date of grant. As of November, 5, 2007, 81,000
      incentive stock options under the Plan were outstanding at the weighted average
      exercise price per share of $0.13. These options were canceled on the Effective
      Date.


F-28





***Director
      Stock Options***– In
      October 1999, options to purchase 87,500 shares of common stock were granted
      to
      each of two then new board members at an exercise price of $1.03. These options
      expired on October 14, 2006.





***Senior
      Management Options*** **-** On
      December 16, 2005, the Board of Directors (the “Board”) awarded Bill D. Stewart,
      the then Chief Executive Officer of the Company, an option to purchase 1,620,000
      shares of common stock and Stephen M. Kasprisin, the then Chief Operating/Chief
      Financial Officer of the Company, an option to purchase 1,616,500 shares of
      common stock. The options had a seven year term, vested in equal quarterly
      increments over two years and were granted at an exercise price equal to the
      closing price of the Company’s common stock on December 16, 2005. The options
      were granted pursuant to the 1998 Incentive Stock Option Plan of the Company.
      Mr. Stewart and Mr. Kasprisin terminated their employment with the Company
      on
      August 30, 2006 pursuant with the change in control by Redux. All unexercised
      options under these senior management option grants expired upon their
      termination of employment.





The
      estimated fair value of each option award granted was determined on the date
      of
      grant using the Black-Scholes option valuation model with the following
      weighted-average assumptions for option grants during the year ended December
      31, 2006.




Risk-free
                interest rate
            
            
            4.42
            %Expected
                volatility of common stock
            
            
            17.77
            %Dividend
                yield rate
            
            
            -0-Expected
                option term
            
            
            5
                years





The
      computation of the expected term is based on a weighted average calculation
      of
      the estimated average life of unexercised options. The expected volatility
      is
      based on the historical volatility of the S&P small capital 600 fund for the
      12 months prior to the end of the quarter options were granted. The Company
      elected to use this index as a result of the relative small number of shares
      held by non-affiliate shareholders (2,586,102) as compared to total outstanding
      shares (43,332,733). The Company believes this index is a more accurate
      indicator of the volatility of similar companies of similar size versus the
      movement of the Company’s stock with limited trading volume. The risk free
      interest is based upon the implied yield on U.S. Treasury constant maturities
      with a remaining term equal to the expected term of the option. The dividend
      yield rate is projected to be zero. The estimated forfeiture rate on stock
      options was zero and was based upon past history of the Company.





A
      summary
      of the Company’s outstanding stock options is as follows:





**Number
                of**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per**
              **Share**
            
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per**
              **Share**Outstanding
                at January 1, 2006
            
            
            13,874,875
            
            $
            0.09
            
            
            10,369,625
            
            $
            0.03Granted
            
            
            220,000
            
            $
            0.12Exercised
            
            
            -0-
            
            $
            0.00Expired
            
            
            (5,292,500
            )
            $
            0.19Outstanding
                at December 31, 2006**
            
            
            8,802,375
            
            $
            0.002
            
            
            8,770,375
            
            $
            0.002Granted
            
            
            0-Exercised
            
            
            -0-Expired
            
            
            (8,802,375
            )
            $
            0.002Outstanding
                at December 31, 2007
            
            
            -0-


____________


**Includes
      8,721,375 fully vested options issued to Laurus. – None at
      12/31/07





There
      are
      no stock options outstanding at December 31, 2007.




F-29





The
      weighted average fair value of the options granted to employees for the years
      ended December 31, 2007, and 2006 estimated using the Black-Scholes option
      valuation model was $0.00 and $0.12 per option, respectively.





At
      December 31, 2007, there was no unamortized compensation costs related to
      non-vested stock options which is expected to be recognized in the
      future.





The
      aggregate intrinsic value of options outstanding and exercisable at December
      31,
      2007 was $0.00.





There
      are
      no non-vested options at December 31, 2007.





***Warrants***– In
      consideration for entering into the Financing Agreement described in Note 4,
      the
      Company issued to Laurus, an option (the “Laurus Option”) and a warrant (the
“Laurus Warrant”) to purchase shares of the Company’s common stock. The Laurus
      Option entitled the holder to purchase up to 8,721,375 shares of common stock,
      subject to certain limitations on the amount of common stock held by Laurus,
      at
      a purchase price of $0.001 per share at any time on or after July 26, 2005.
      The
      Laurus Warrant entitled the holder to purchase up to 1,500,000 shares of common
      stock at a purchase price of $0.80 per share at any time on or after July 26,
      2005 through July 26, 2010. Redux acquired the Laurus Option and the Laurus
      Warrant on December 1, 2006.





On
      July
      26, 2005, the Company issued to Liberty a warrant to purchase up to 3,647,743
      shares of the Company’s common stock at a purchase price of $0.08 per share for
      introducing the Company to Laurus. Redux acquired Liberty’s warrant on November
      16, 2006.





As
      of the
      Effective Date, all outstanding warrants were cancelled.





A
      summary
      of the Company’s outstanding warrants is as follows:





**Number
                of**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per**
              **Share**
            
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per**
              **Share**Outstanding
                at January 1, 2006
            
            
            29,747,743
            
            $
            0.83
            
            
            2,100,000
            
            $
            0.86Granted
            
            
            -0-
            
            $
            0Exercised
            
            
            -0-
            
            $
            0Expired
            
            
            -0-
            
            $
            0Cancelled
            
            
            (1,500,000
            )
            $
            0.80Outstanding
                at December 31, 2006
            
            
            28,247,743
            
            $
            0.83
            
            
            29,747,743
            
            $
            0.83Granted
            
            
            -0-Exercised
            
            
            -0-Expired
            
            
            -0-Cancelled
            
            
            (28,247,743
            )
            $
            0.83Outstanding
                at December 31, 2007
            
            
            -0-





There
      are
      no warrants outstanding at December 31, 2007.





**10.**  **INCOME TAXES**





The
      provision for income taxes for the years ended December 31, 2007and 2006
      consists of the following:


**Year
                  Ended**
                **December
                  31, 2007**
              
              **Year
                  Ended**Sucessor
              
              
              Predecessor
              
              **December
                  31,**
                **2006**CurrentFederal
              
              $
              0
              
              $
              0
              
              $
              0State
              
              
              0
              
              
              800
              
              
              800Total
                  current
              
              
              0
              
              
              800
              
              
              800DeferredFederal
              
              
              0
              
              
              0
              
              
              0State
              
              
              0
              
              
              0
              
              
              0Total
                  deferred
              
              
              0
              
              
              0
              
              
              0Total
                  provision
              
              $
              0
              
              $
              800
              
              $
              800




F-30




The
      Company has no foreign operations and all international sales are transacted
      in
      the United States and paid in U.S. Dollars. As a result, the Company has no
      provision for foreign taxes.





The
      income tax provision differs from the amount of income tax determined by
      applying the U.S. federal income tax rate to income before income taxes due
      to
      the following:





**Year
                Ended**
              **December
                31, 2007**
            
            **Year
                Ended**
              **December
                31, 2006**Sucessor
            
            
            PredecessorComputed
                tax (benefit) expense
            
            $
            (51,696
            )
            $
            (335,819
            )
            $
            (3,825,092
            )Increase
                (decrease) in income taxes resulting from:Nondeductible
                expenses
            
            
            402
            
            
            2,216
            
            
            3,549State
                income taxes, net of federal tax benefit
            
            
            (3,101
            )
            
            (20,149
            )
            
            (675,816
            )Federal/state
                true ups
            
            
            
            
            
            2,249,104
            
            
            —State
                NOL disallowance and others
            
            
            
            
            
            
            
            
            392,211Change
                in valuation allowance
            
            
            54,395
            
            
            (1,895,352
            )
            
            4,105,148State
                minimum franchise tax
            
            
            -0-
            
            
            800
            
            
            800$
            
            
            $
            800
            
            $
            800





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. The significant components of the
      net
      deferred tax assets and liabilities were as follows:





**As
                of**
              **December
                31, 2007**
            
            **As
                of**
              **December
                31, 2006**Current
                deferred tax assets (liabilities)Uniform
                capitalization
            
            $
            19,060
            
            $
            10,340Accounts
                receivable
            
            
            31,197
            
            
            313,284Accruals
            
            
            104,679
            
            
            369,154Inventory
                reserve
            
            
            20,596
            
            
            -0-State
                taxes
            
            
            -0-
            
            
            155Other
            
            
            -0-
            
            
            39,308Valuation
                allowance
            
            
            (175,532
            )
            
            (732,241
            )Total
                current
            
            
            —
            
            
            —Non-current
                deferred tax assets (liabilities):Net
                operating losses and credit carry forwards
            
            
            9,481,865
            
            
            11,246,120Depreciation
            
            
            -0-
            
            
            (4,666
            )Intangibles
            
            
            1,497,477
            
            
            1,061,140Other
            
            
            39,004
            
            
            -0-Valuation
                allowance
            
            
            (11,018,346
            )
            
            (12,302,594
            )Total
                non-current
            
            
            —
            
            
            —Total
            
            $
            —
            
            $
            —





The
      following is a summary of the change in the valuation allowance:





December
                31, 2005
            
            $
            8,929,686Change
                in the valuation allowance
            
            
            4,105,109December
                31, 2006
            
            
            13,034,835Change
                in the valuation allowance
            
            
            (1,840,957
            )December
                31, 2007
            
            
            11,193,878




F-31




As
      of
      December 31, 2007, the Company had federal net operating loss carry forwards
      of
      $26,143,300 that begin expiring in 2018 and state net operating loss carry
      forwards of $15,950,000 that begin expiring in 2010. A valuation allowance
      for
      the full amount of net deferred taxes has been provided because it is more
      likely than not that the deferred taxes will not be realized. Under Section
      382
      of the Internal Revenue Code, certain significant changes in ownership, such
      as
      the Company’s recent recapitalization, may restrict the future utilization of
      these tax loss carry forwards. As a result, federal net operating losses may
      expire before the Company is able to fully utilize them. As the Company is
      currently in a loss position this limit is not applicable. Management expects
      to
      obtain a more detailed calculation will be prepared once the Company has taxable
      income for federal purposes.





**11.**  **COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS**





***Employment
      Agreements –***





The
      Company does not currently have any active employment agreements.





***Operating
      Leases –*** In
      December 1998, the Company signed a 7 1/2 year lease for a facility including
      new executive offices, sales and marketing offices and warehouse located in
      Irvine, California. The rent expense related to this lease for fiscal year
      ended
      December 31, 2007 was $371,470. The lease agreement includes an approximate
      9%
      rent increase after the second, fourth and sixth year of the lease period,
      with
      a 60-month extension after the initial lease term at the prevailing market
      rental rate. On November 1, 2005, the Company agreed to an extension of the
      lease until September 30, 2013. This extension resulted in a decrease in the
      monthly rent from $35,382 per month to $29,900 beginning on October 1, 2006
      increasing to $30, 897 on October 1, 2007, $32,392 on October 1, 2008, $33,389
      on October 1, 2009, $34,884 on October 1, 2010, $36,379 on October 1, 2011
      and
      $37,874 on October 1, 2012. As a result of the Company’s filing for protection
      under Chapter 11 of the US Bankruptcy Code, the Company requested that the
      Court
      reject this lease agreement and in September 2006, the Court approved the
      rejection.





On
      September 1, 2006, the Company entered into a sub-lease agreement with One
      World
      Science Inc, a subsidiary of Redux, whereby the Company leased certain space
      in
      Brea, California. The lease called for monthly payments of $10,000 and was
      on a
      month to month basis. The Company vacated these premises on May 18,
      2007.





On
      May
      18, 2007 the Company sublet 5,357square feet of office space from First American
      Default Management Solutions LLC in Anaheim, California, for $9,479 a month,
      for
      a term of two years.





Rental
      expenses charged to operations were $127,669 and $381,470 for the years ended
      December 31, 2007and 2006, respectively.





***Legal
      Proceedings*** .
      While
      any litigation contains an element of uncertainty, management believes that
      the
      ultimate outcome of these claims and litigation will not have a material adverse
      effect on the Company’s results of operations or financial condition.





**a)
      Naturade, Inc. v. Doyle & Boissiere, LLC; Health Holdings and Botanicals,
      LLC; Quincy Investments Corp** **.:
      Peter H. Pocklington: William B. Doyle, Jr.; Lionel P. Boissiere; and Does
      1-70
      (** **Orange
      County Superior Court, State of California, Case No.:
      07CC02752)** ,  The
      lawsuit was filed on February 9, 2007. Health Holdings and Botanicals, LLC
      and
      Doyle & Boissiere, LLC, entered into a Global Settlement Agreement with
      Naturade in connection with the then pending Chapter 11 proceedings by which
      the
      parties compromised and agreed to terms relating to certain claims these
      defendants have against Naturade in the Chapter 11 proceedings. In exchange
      for
      these compromises and terms, Naturade agreed to dismiss Health Holdings and
      Botanicals, LLC and Doyle & Boissiere, LLC as well as defendants Lionel P.
      Boissiere and William B. Doyle from the litigation pending in Orange County
      Superior Court.





Naturade
      would like to dismiss Health Holdings and Botanicals, LLC and Doyle &
Boissiere, LLC, but the Settlement Agreement requires a Motion for Good Faith
      Settlement so these Defendants are still in the Case for that limited purpose.
      In the meantime, Naturade will continue to pursue the litigation against Peter
      H. Pocklington and Quincy Investments Corp. until default, judgment, or other
      resolution of the case, and during the week of February 17, 2008, the court
      granted Naturade’s Motion for Leave to Amend the Complaint against the remaining
      defendants amending the complaint, with Redux interceding as a plaintiff against
      Quincy Investments Corp. and Peter H. Pocklington. Among the various causes
      of
      action by Redux will be Intentional Misrepresentation (Fraud).




F-32





b) **Naturade,
      Inc. v. NBTY, Inc. d/b/a Omni-Pak Industries**  **(United
      States Bankruptcy Court, Adversarial Case No.: SA07-1057RK)** Filed on
      February 15, 2007. This litigation was being prosecuted on behalf of Naturade
      by
      the law firm of Winthrop Couchot, the Company’s bankruptcy attorneys. The nature
      of the lawsuit and the progress of the case is as follows:





On
      December 11, 2006, NBTY, Inc. (“NBTY”) filed proof of claim against Naturade’s
      bankruptcy estate alleging a general unsecured claim in the amount of $660,774
      (‘NBTY Claim”). Naturade disputes the NBTY Claim, but has yet to file a formal
      objection to the NBTY Claim.





On
      February 15, 2007, Naturade filed a complaint against NBTY d/b/a/ Omni-Pak
      Industries seeking to avoid and recover approximately $191,481 of preferential
      transfers of property under Bankruptcy Code Section 547 and 550 (“NBTY
      Complaint”). On or about November 7, 2007, the case was settled and settlement
      payments were received.





c) **Naturade,
      Inc. v. Yellow Transportation** **(United
      States Bankruptcy Court, Adversarial Case No.: SA07-1055RK).** Filed
      on
      February 14, 2007, this litigation is being prosecuted on behalf of Naturade
      by
      the law firm of Winthrop Couchot, the Company’s bankruptcy attorneys. The nature
      of the lawsuit and the progress of the case are as follows:





On
      November 6, 2006, Yellow Transportation (“YT”) filed proof of claim against
      Naturade’s bankruptcy estate alleging a general unsecured claim in the amount of
      $60,337 (“YT Claim”). Naturade disputes the YT Claim, but has yet to file a
      formal objection to the YT Claim.





On
      February 14, 2007, Naturade filed a complaint against YT seeking to avoid and
      recover approximately $191,761 of preferential transfers of property under
      Bankruptcy Code Section 547 and 550. On or about November 7, 2007, case was
      settled and payments were received.





d) **Naturade,
      Inc. v. United Parcel Service, Inc.**  **(United
      States Bankruptcy Court, Adversarial Case No.: SA07-1056RK)** Filed on
      February 14, 2007. On November 6, 2006, UPS filed a proof of claim asserting
      an
      unsecured claim in the amount of $11,998 (“UPS Claim”). On February 14, 2007,
      the Company filed a complaint against UPS to avoid and recover approximately
      $22,785 of preferential transfers of property under Bankruptcy Code Sections
      547
      and 550 (“UPS Complaint”). On April 9, 2007, the Company filed and served a
      motion seeking court approval of a settlement agreement with UPS that provides
      for UPS to pay the Company $3,500 and waive any and all other claims against
      the
      Company as consideration for the Company’s dismissal of the UPS Complaint with
      prejudice. The Court approved the settlement.





**e)
      Claims and Other Bankruptcy Related Litigation:** Objections
      to certain claims filed against the Company’s bankruptcy estate have been
      prosecuted by the Company which have resulted in the reduction or elimination
      of
      certain claims filed in the bankruptcy case. ****





The
      Company has fully accrued the amounts claimed in these suits as of December
      31,
      2007. ****





***Related
      Party Transactions –*** Redux
      controls voting rights of 180,025,388 shares of Common Stock or approximately
      92.4% of the voting common. As a result, Redux has the power to elect a majority
      of the Board of Directors.





Redux
      as
      part of its infusion of cash and other services to the Company during its
      bankruptcy, has provide legal services to the Company in the form of its General
      Counsel Gary Curtis Cannon. Mr. Cannon is retained by Redux to act as its
      General Counsel and SEC attorney for $12,000 per month. Redux provides Mr.
      Cannon’s services as the Company’s General Counsel and SEC attorney under his
      current retainer agreement with Redux.




F-33





During
      the Company’s Chapter 11 Bankruptcy and to facilitate the Company’s
      reorganization, Redux has made corporate guarantees to one of the Company’s
      vendors to allow the Company to purchase formula to continue to produce and
      distribute certain of its products. Redux provided a corporate guarantee to
      Best
      Formulations Inc. to allow the Company to purchase certain of its formula from
      it. Redux also provided a guarantee to the Unsecured Creditors and the Unsecured
      Creditors Committee under the Plan as part of its financial infusion and support
      of the Company reorganization.





On
      April
      14, 2003, the Company entered into a loan agreement (the “Loan Agreement”) with
      Health Holdings and Botanicals, LLC, a principal stockholder of Naturade, and
      David A. Weil, a past director and stockholder of the Company (the “Lender
      Group”), pursuant to which the Lender Group has agreed to lend the Company
      $450,000 and, subject to the discretion of the Lender Group, up to an additional
      $300,000. All advances under the Loan Agreement bore interest at the rate of
      15%
      per annum, were due on December 31, 2005, and were secured by substantially
      all
      of the Company’s assets. This due date was extended as discussed
      below.





On
      April
      14, 2004, the terms of the Loan Agreement were modified by the Joinder of Bill
      D. Stewart, our Chief Executive Officer as a member of the Lender Group, subject
      to all of the terms and conditions of the Loan Agreement, and the Lender Group
      advanced an additional $200,000, of which Bill D. Stewart advanced $100,000.
      Further, on May 3, 2004, the Lender Group advanced the Company an additional
      $100,000. Further, on August 16, 2004, advances allowed under the Loan Agreement
      were increased to a total of $950,000 and the Lender Group advanced an
      additional $200,000 to Naturade. There are no additional amounts available
      to
      advance under the Loan Agreement. Proceeds of the advances were used for working
      capital. On January 26, 2005, the terms of the Loan Agreement were modified
      to
      extend the due date to December 31, 2005. Pursuant to the recapitalization
      in
      July, 2005, Health Holdings, Stewart and Weil agreed to extend the term of
      the
      Secured Promissory Notes issued to them under the Loan Agreement from December
      31, 2005 to December 31, 2006. The Secured Promissory Notes became claims under
      the Company’s Chapter 11 bankruptcy proceedings in August 2006.





On
      August
      30, 2005, the Company entered into a consulting agreement with Quincy,
      Naturade’s then largest stockholder, whereby Quincy would provide advice to the
      Company and its affiliates regarding acquisitions, strategic planning,
      operations and financing. For its services, Quincy would receive a Consulting
      Fee of $300,000 per year payable in monthly installments. In addition, Quincy
      would receive Acquisition Fees equal to 2% of the purchase price of any
      acquisitions completed or equity capital raised during the term of the
      consulting agreement. When earned, 50% of such Acquisition Fees would be
      credited by us against future Consulting Fees. The consulting agreement was
      terminated in August 2006, pursuant to the assumption of control of the
      Company’s common stock voting rights by Redux Holdings, Inc.





On
      August
      16, 2006, the Company entered into a Services Agreement with One World Science,
      Inc., a subsidiary of Redux, whereby One World Science would provide various
      services including among others, advertising, sales, compliance and customer
      services to Company for an amount of the fully burden costs of the services
      plus
      up to 25% of such costs. The Company continues to lease all of its employees
      from One World Science.





On
      September 1, 2006, the Company entered into a Sublease and Occupancy Agreement
      with One World Science, Inc. whereby One World Science subleased to the Company
      approximately 9,000 square feet of office space including all necessary services
      for $10,000 per month. The Company vacated this space in Brea, California on
      May
      18, 2007. On May 18, 2007 the Company sublet 5,357 square feet of office space
      from First American Default Management Solutions LLC, in Anaheim, California,
      for $9,479 a month, for a term of two years.




On
      February 28, 2007, Redux purchased from Naomi Balcombe and Ageless (Balcombe
      and
      Ageless are collectively, referred to herein as the “Ageless Parties”) the
      $1,248,234 claim the Ageless parties submitted in the Naturade
      bankruptcy.


Ms.
        Muller, a former director of Naturade had a consulting agreement, entered
        into
        in July 2006, with Redux, pursuant to which she was issued warrants for Redux
        common stock subsequent to her resignation in January 2008.





**12.**  **401(k)
      PLAN**





The
      Company had a 401(k) profit sharing plan that is available to all employees
      of
      the Company who meet certain age and length of service requirements. The plan
      provides for Company matching contributions equal to 25% of each employee
      participant’s contribution not to exceed 6% of the employee participant’s
      compensation. The Company’s contribution to the plan was $0 and $20,859 for the
      years ended December 31, 2007 and 2006, respectively.




F-34





On
      September 1, 2006, management voluntary suspended the 401(k) Plan as the Company
      began leasing its personnel from One World Science and no longer had any direct
      employees. Company continues to lease all of its employees from One World
      Science.





**13.**  **SEGMENT
      REPORTING**





Operating
      segments are defined as components of an enterprise about which separate
      financial information is available that is evaluated regularly by the Company’s
      chief operating decision-maker, or decision-making group, in deciding how to
      allocate resources and in assessing performance. The Company’s chief operating
      decision-maker is the CEO.





The
      Company’s reportable operating segments include health food specialty stores and
      mass market categories. The Company does not allocate operating expenses to
      these segments, nor does it allocate specific assets to these segments.
      Therefore, segment information reported includes only sales, cost of sales
      and
      gross profit. Operating segment data for the years ended December 31, 2007,
      and
      2006 are as follows:





Distribution
      Channels




**Health Food**
            
            **Mass**
            
            **Total****Successor
                Company**Period
                from November 9, 2007 to December 31, 2007Sales
            
            $
            713,575
            
            $
            618,476
            
            $
            1,332,051Cost
                of sales
            
            
            437,242
            
            
            437,296
            
            
            874,538Gross
                profit
            
            $
            276,333
            
            $
            181,180
            
            $
            457,513





**Health
                Food**
            
            
            **Mass**
            
            
            **Total****Predecessor
                Company**Period
                from January 1, 2007 to November 8, 2007Sales
            
            $
            1,899,464
            
            $
            3,472,075
            
            $
            5,371,539Cost
                of sales
            
            
            1,404,417
            
            
            2.072,384
            
            
            3,476,801Gross
                profit
            
            $
            495,047
            
            $
            1,399,691
            
            $
            1,894,738


Year
                ended December 31, 2006Sales
            
            $
            6,102,517
            
            $
            3,329,502
            
            $
            9,432,019Cost
                of sales
            
            
            3,973,743
            
            
            2,142,409
            
            
            6,116,152Gross
                profit
            
            $
            2,128,774
            
            $
            1,187,093
            
            $
            3,315,867





Sales
      are
      attributed to geographic areas based on the location of the entity to which
      the
      products were sold. All of the Company’s assets are located in the United
      States. Geographic segment data for the years ended December 31, 2007and 2006
      are as follows:





**United States**
            
            **International**
            
            **Total****Successor
                Company**Period
                from November 9, 2007 to December 31, 2007Sales
            
            $
            1,275,629
            
            $
            56,422
            
            $
            1,332,051Cost
                of sales
            
            
            843,901
            
            
            30,637
            
            
            874,538Gross
                profit
            
            $
            431,728
            
            $
            25,786
            
            $
            457,513**Predecessor
                Company**Period
                from January 1, 2007 to November 8, 2007Sales
            
            $
            5,003,899
            
            $
            367,640
            
            $
            5,371,539Cost
                of sales
            
            
            3,329,317
            
            
            147,484
            
            
            3,476,801Gross
                profit
            
            $
            1,674,582
            
            $
            171,829
            
            $
            1,894,738Year
                ended December 31, 2006Sales
            
            $
            8,828,309
            
            $
            603,710
            
            $
            9,432,019Cost
                of sales
            
            
            5,832,408
            
            
            283,744
            
            
            6,116,152Gross
                profit
            
            $
            2,995,901
            
            $
            319,966
            
            $
            3,315,867




F-35




**14** .  **SUBSEQUENT
      EVENTS**





On
      February 14, 2008, and again on March 7, 2008, the Board of Directors of
      Naturade, Inc. (the “Company”) voted to authorize a reverse stock split of the
      Company’s Common Stock on a 6 to 1 basis.





That
      reverse stock split was delayed to better align with the closing of the recently
      announced Memorandum of Understanding to purchase the assets of Redux Holdings,
      Inc. (OTCPK: RDXH ).
      The
      reverse stock split will remain 6 to 1 and the exchange will remain a mandatory
      exchange payable upon surrender should the contemplated transaction close.





On
      March
      19, 2008, Naturade, Inc. (the “Company”) signed a nonbinding Memorandum of
      Understanding with Redux Holdings, Inc., the Company’s controlling shareholder,
      to enter into a definitive agreement to purchase most of the assets and all
      of
      the liabilities of Redux for a yet to be determined amount of the Company’s
      restricted common stocks. The transaction will be treated as a corporate
      reorganization as defined by Section 368 of the Internal Revenue Code. The
      Company expects to have the definitive agreement executed and the closing to
      occur no later than April 30, 2008.





Naturade
      will combine the effective date of the reverse stock split to occur in
      conjunction with the closing of the transaction between Naturade Inc., and
      Redux, Inc., subject to regulatory approval.




F-36


**EXHIBIT
      INDEX –**





**Exhibit**
              **Number**
            
            **Document**3.1
            
            Certificate
                of Incorporation of Naturade, Inc., together with amendments and
                Certificates of Designation relating thereto, incorporated by reference
                to
                Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal
                year ended September 30, 1997.3.2
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on December 20, 2001, and incorporated
                by
                reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed
                on January 3, 2002.3.3
            
            Certificate
                of Designation of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on December 20, 2001,
                and
                incorporated by reference to Exhibit 3.5 to the Company’s Current Report
                on Form 8-K filed on January 3, 2002.3.4
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on December 28, 2001, and incorporated
                by
                reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed
                on January 3, 2002.3.5
            
            Certificate
                of Elimination of Series A Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on January 3, 2002 incorporated
                by reference to Exhibit 3.5 to Form SB-2 (File No.
                333-127397).3.6
            
            Certificate
                of Amendment of Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on May 15, 2003 incorporated by reference
                to Exhibit 3.6 to Form SB-2 (File No. 333-127397).3.7
            
            Certificate
                of Amendment of Certificate of Designation of Series B Convertible
                Preferred Stock of Naturade, Inc., filed with the Delaware Secretary
                of
                State on May 15, 2003 incorporated by reference to Exhibit 3.7 to
                Form
                SB-2 (File No. 333-127397).3.8
            
            Certificate
                of Decrease of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005 incorporated
                by reference to Exhibit 3.8 to Form SB-2 (File No.
                333-127397).3.9
            
            Certificate
                of Designation of Series C Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005, and
                incorporated by reference to Exhibit 3.1 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.3.10
            
            Certificate
                of Elimination of Series B Convertible Preferred Stock of Naturade,
                Inc.,
                filed with the Delaware Secretary of State on July 28, 2005, and
                incorporated by reference to Exhibit 3.2 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.3.11
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on November 26, 2007 and incorporated
                by
                reference to Exhibit 9.1.1 to the Company’s Current Report on Form 8-K
                filed on December 12, 2007.3.12
            
            Certificate
                of Amendment to Certificate of Incorporation of Naturade, Inc., filed
                with
                the Delaware Secretary of State on February 20, 2008, and incorporated
                by
                reference to Exhibit 99.1 to the Company’s Current Report on From 8-K
                filed on March 13, 2008.3.13
            
            Amended
                and Restated Bylaws of Naturade, Inc., as amended December 7, 2001,
                incorporated by reference to Exhibit 3.6 to the Company’s Current Report
                on Form 8-K filed on January 3, 2002.4.1
            
            Form
                of certificate of common stock, par value $0.0001 per share incorporated
                by reference to Exhibit 4.1 to Form SB-2 (File No.
                333-127397).10.1
            
            Asset
                Purchase Agreement, dated November 2, 2004, between the Company and
                L.O.D.C. Group, LTD, incorporated by reference to Exhibit 10.54 to
                the
                Company’s Current Report on Form 8-K filed on November 9,
                2004.10.2
            
            Asset
                Purchase Agreement, dated as of July 22, 2005, by and among Quincy
                Investments Corp., Symco, Inc. and Symbiotics, Inc., incorporated
                by
                reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
                filed on July 28, 2005.10.3
            
            Assignment
                and Assumption Agreement dated, as of July 22, 2005, by and among
                the
                Company, Quincy Investments Corp., Symco, Inc. and Symbiotics, Inc.,
                incorporated by reference to Exhibit 10.7 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.











**Exhibit**
              **Number**
            ****
            **Document**10.4
            
            Asset
                Purchase Agreement, dated as of July 27, 2005, by and between Quincy
                Investments Corp. and The Ageless Foundation, Inc., incorporated
                by
                reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K
                filed on July 28, 2005.10.5
            
            Assignment
                and Assumption Agreement, dated as of July 28, 2005, by and among
                the
                Company, Quincy Investments Corp. and The Ageless Foundation, Inc.,
                incorporated by reference to Exhibit 10.9 to the Company’s Current Report
                on Form 8-K filed on July 28, 2005.10.6
            
            Promissory
                Note in the amount of $1,775, 687.46, dated August 3, 2005, by Quincy
                Investments Corp. and the Company payable to Symbiotics, Inc.,
                incorporated by reference to Exhibit 4.1 to the Company’s Current Report
                on Form 8-K filed on August 9, 2005.10.7
            
            Promissory
                Note in the amount of $648,234.00, dated August 5, 2005, by Quincy
                Investments Corp. and the Company payable to The Ageless Foundation,
                Inc.,
                incorporated by reference to Exhibit 4.2 to the Company’s Current Report
                on Form 8-K filed on August 9, 2005.10.8
            
            Guaranty
                of Promissory Note, dated as of August 3, 2005, by Peter H. Pocklington
                for the benefit of each of Symco Inc. and Symbiotics, Inc., incorporated
                by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005.10.9
            
            Guaranty
                of Promissory Note, dated as of August 5, 2005, by Peter H. Pocklington
                for the benefit of The Ageless Foundation, Inc., incorporated by
                reference
                to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on
                August 9, 2005.10.10
            
            Trademark
                License Agreement, dated August 3, 2005, by and among the Company,
                Symco,
                Inc. and Symbiotics, Inc., incorporated by reference to Exhibit 10.9
                to
                the Company’s Current Report on Form 8-K filed on August 9,
                2005.10.11
            
            Independent
                Contractor Proprietary Information and Inventions Agreement, dated
                August
                5, 2005, by and between Naturade, Inc. and Naomi Balcombe incorporated
                by
                reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005.10.12
            
            Transition
                Agreement, entered into as of August 3, 2005, by and between Naturade,
                Inc., Symco, Inc. and Symbiotics, Inc. incorporated by reference
                to
                Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August
                9, 2005.10.13
            
            Independent
                Contractor Proprietary Information and Inventions Agreement, dated
                August
                3, 2005, by and between Naturade, Inc. and Douglas Wyatt incorporated
                by
                reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
                filed on August 9, 2005,10.14
            
            Independent
                Contractor Proprietary Information and Inventions Agreement, dated
                August
                3, 2005, by and between Naturade, Inc. and David Brown and Symbiotics,
                Inc. incorporated by reference to Exhibit 10.6 to the Company’s Current
                Report on Form 8-K filed on August 9, 2005,10.15
            
            Agreement,
                dated May 31, 2006, by and among Quincy Investments Corp., Naturade,
                Inc.,
                Symbiotics, Inc. and Symco, Incorporated, incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 31,
                200610.16
            
            Amended
                and Restated Promissory Note, dated May 31, 2006, by and among Quincy
                Investments Corp., Naturade, Inc., Symbiotics, Inc. and Symco,
                incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                on Form 8-K filed on May 31, 200610.17
            
            Agreement
                dated August 10, 2006, by and among Redux Holdings, Inc. and Quincy
                Investments Corp. incorporated by reference to Exhibit 10.1 to the
                Company’s Current Report on Form 8-K filed on August 10,
                200610.18
            
            Services
                Agreement between One World Science, Inc. , a wholly owned subsidiary
                of
                Redux Holdings, Inc. and the Company dated August 16, 2006, requiring
                One
                World Science, Inc. to provide services to the Company, including,
                but not
                limited to, Manufacturing and Packing Coordination Services; Warehouse,
                Inventory Management and Distribution Services; Advertising Services;
                Customer Support Services; Sales Services; and Management, Financial
                and
                Legal Services, incorporated by reference to Exhibit 10.74 to the
                Company’s Annual Report on Form 10-K filed on April 11,
                2008.











**Exhibit**
              **Number**
            
            **Document**10.19
            
            Letter
                Agreement Dated November 16, 2006 between Laurus Master Fund, LLC
                and
                Redux Holdings, Inc. to waive Default and Fees owed by the Company
                and for
                Redux Holding, Inc to acquire all of Laurus Master Fund, LLC’s Company
                Common Stock and Warrants for shares of Redux Holdings, Inc. Common
                Stock,
                incorporated by reference to Exhibit 10.75 to the Company’s Annual Report
                on Form 10-K filed on April 11, 2008.10.20
            
            Security
                Agreement between Laurus Master Fund, LTD. and Naturade, Inc. dated
                November 6, 2007, incorporated by reference to Exhibit 10.83 to the
                Company’s Quarterly Report on Form 10-Q for the Quarterly Period ended
                September 30, 2007.10.21
            
            Secured
                Revolving Note Agreement dated November 6, 2007 by and between Laurus
                Master Fund, LTD. and Naturade, Inc. incorporated by reference to
                Exhibit
                10.84 to the Company’s Quarterly Report on Form 10-Q for the Quarterly
                Period ended September 30, 200710.22
            
            Secured
                Term Note dated November 6, 2007 by and between Laurus Master Fund,
                LTD.
                and Naturade, Inc., incorporated by reference to Exhibit 10.85 to
                the
                Company’s Quarterly Report on Form 10-Q forthe
                Quarterly Period ended September 30, 200710.23
            
            Grant
                of Security Interest in Patents and Trademarks by Naturade, Inc.
                to Laurus
                Master Fund, Inc. dated November 6, 2007, incorporated by reference
                to
                Exhibit 10.86 to the Company’s Quarterly Report on Form 10-Q for the
                Quarterly Period ended September 30, 200710.24
            
            Lockbox
                Agreement by and between Naturade, Inc. and Laurus Master Fund, LTD.
                dated
                November
              6,
                2007, incorporated by reference to Exhibit 10.87 to the Company’s
                Quarterly Report on Form 10-Q for the Quarterly Period ended September
                30,
                200710.25
            
            Global
                Settlement Agreement Dated February 14, 2007 between the Company,
                Redux
                Holdings, Inc., the Official Committee of Unsecured Creditors appointed
                in
                the Creditors Chapter 11 Case, Health Holdings & Botanicals, LLC and
                Doyle & Boissiere LLC settling claims of secured and unsecured
                creditors in the Company’s Chapter 11 Bankruptcy, incorporated by
                reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K
                filed on April 11, 2008.10.26
            
            Stipulation
                between Debtor and Window Rock Enterprises, Inc. Re Resolution of
                Objections to Confirmation of Debtors Fourth Amended Chapter 11 Plan
                of
                Reorganization and Order thereon Dated February 28, 2007 resolving
                all
                disputed claims between the Company and Window Rock Enterprises,
                Inc. ,
                incorporated by reference to Exhibit 10.79 to the Company’s Annual Report
                on Form 10-K filed on April 11, 2008.10.27
            
            Signature
                page for Stipulation of Debtor and Window Rock Enterprises set forth
                in
                Exhibit 10.26,incorporated by reference to Exhibit 10.74 to the Company’s
                Annual Report on Form 10-K filed on April 11, 2008.10.28
            
            Assignment
                of Claim Agreement, Dated February 28, 2006 by Ageless Foundation,
                Inc.
                and Naomi Balcombe, to Redux Holdings, Inc.incorporated by reference
                to
                Exhibit 10.81 to the Company’s Annual Report on Form 10-K filed on April
                11, 2008.10.29
            
            Memorandum
                of Understanding signed by Naturade, Inc. and Redux Holdings, Inc.
                on
                March 19, 2008, incorporated by reference to Exhibit 99.2 to the
                Company’s
                Current Report on Form 8-K filed on March 20, 2008.**10.30
            
            Sublease
                between the Company and First American Default Management Solutions,
                LLC
                dated March 21, 2007.14.1
            
            Code
                of Financial Ethics incorporated by reference to Exhibit 14 to the
                Company’s Annual Report on Form 10-K for the fiscal year ended December
                31, 2003








**Exhibit**
              **Number**
            
            **Document**14.2
            
            Charter
                of Audit Committee adopted by the Company Board of Directors on March
                23,
                2007, Incorporated by reference to Exhibit 14.2 to the Company’s Annual
                Report on Form 10-K filed on April 11, 2008..14.3
            
            Charter
                of Compensation and Governance Committee adopted by the Company Board
                of
                Directors on March 23, 2007,incorporated by reference to Exhibit
                14.3 to
                the Company’s Annual Report on Form 10-K filed on April 11,
                2008.**31.1
            
            Certification
                Pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934,
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**31.2
            
            Certification
                Pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934,
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**32.1
            
            Certification
                Pursuant to 18 U.S.C. 1350, Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002**32.2
            
            Certification
                Pursuant to 18 U.S.C. 1350, Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




____________


*  Management
      contracts or compensatory plan or arrangement.


**  Filed
      herewith.