**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





þ
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the
                Securities****Exchange
                Act of 1934**





**For
      the quarterly period ended March 31, 2008**





o
            **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**








Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer o
            Smaller
                reporting company x





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court. Yes x No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). o Yes
x No





As
      of May
      15, 2008, 194,908,121 shares of the registrant’s Common Stock were issued and
      outstanding.










FORM
      10-Q





**QUARTERLY
      REPORT**


**Quarter
      Ended March 31, 2008**





**TABLE
      OF CONTENTS**




**PAGE**PART
                I.. FINANCIAL INFORMATIONItem
                1.
            Financial
                StatementsCondensed
                Balance Sheets as of March 31, 2008 (Unaudited) and December 31,
                2007
            
            3Condensed
                Statements of Operations for the three months ended March 31, 2008
                and
                March 31, 2007 (Unaudited)
            
            4Condensed
                Statements of Cash Flows for the three months ended March 31, 2008
                and
                March 31, 2007 (Unaudited)
            
            5Notes
                to Condensed Financial Statements
            
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            17Item
                3.
            Controls
                and Procedures
            
            27PART
                II. OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            
            30Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            31Item
                3.
            Defaults
                Upon Senior Securities
            
            31Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            31Item
                5.
            Other
                Information
            
            31Item
                6.
            Exhibits
            
            31SIGNATURES
            
            31EXHIBITS
                AND CERTIFICATIONS




2


**Part
      I. Financial Information**


**Item
      1. Financial Statements**




**NATURADE,
      INC.**


**Condensed
      Balance Sheets**


**As
      of March 31, 2008 (Unaudited) and December 31, 2007**




March
                31,
              2008
            
            December 31,
              2007(Unaudited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            32,477
            
            $
            274,733Accounts
                receivable, net
            
            
            730,192
            
            
            740,046Inventories,
                net
            
            
            869,337
            
            
            1,054,401Prepaid
                expenses and other current assets
            
            
            75,754
            
            
            37,228Total
                current assets
            
            
            1,707,760
            
            
            2,106,408Property
                and equipment, net
            
            
            3,968
            
            
            4,350Goodwill
            
            
            1,693,830
            
            
            1,693,830Customer
                lists and trademarks, net
            
            
            6,575,330
            
            
            6,781,510Deferred
                financing fees, net
            
            
            82,851
            
            
            171,542Other
                assets
            
            
            14,898
            
            
            50,197Total
                assets
            
            $
            10,078,637
            
            $
            10,807,837LIABILITIES
                AND STOCKHOLDER’S EQUITY (DEFICIT)Current
                liabilities:Accounts
                payable
            
            $
            1,852,604
            
            $
            1,542,824Accrued
                expenses
            
            
            161,396
            
            
            181,389Revolving
                credit, net of debt discount of $338,426 at March 31, 2008, and $446,943,
                at December 31, 2007
            
            
            537,875
            
            
            702,504Note
                payable related party
            
            
            360,125
            
            
            250,000Current
                portion of long term debt, net of debt discount of $1,249,574 at
                March 31,
                2008, and $1,362,781, at December 31, 2007
            
            
            199,133
            
            
            4,946Total
                current liabilities
            
            
            3,111,133
            
            
            2,681,663Long-term
                debt, less current maturities, net of debt discount of $1,096,864
                at March
                31, 2008 and $1,377,461, at December 31, 2007
            
            
            2,717,429
            
            
            2,674,805Total
                liabilities
            
            
            5,828,562
            
            
            5,356,468COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDER’S
                EQUITY (DEFICIT):Common
                stock, par value $0.0001 per share; authorized 250,000,000 shares
                at March
                31, 2008 and December 31, 2007; issued/issuable and outstanding,194,908,121shares
                at March 31, 2008 and December 31, 2007
            
            
            19,491
            
            
            19,491Additional
                paid in capital
            
            
            6,033,575
            
            
            6,033,575Accumulated
                deficit
            
            
            (1,802,991
            )
            
            (601,697
            )Total
                stockholder’s equity (deficit)
            
            
            4,250,075
            
            
            5,451,369
            )Total
                liabilities and stockholder’s equity (deficit)
            
            $
            10,078,637
            
            $
            10,807,837




See
      accompanying notes to condensed financial statements.




3





**NATURADE,
                INC.****Condensed
                Statements of Operations for the Three Months****Ended
                March 31, 2008, and March 31, 2007
                (Unaudited)**




Three Months
              
              Three MonthsEnded
              
              EndedSuccessor
                Company
              
              Predecessor
                CompanyMarch 31, 2008
              
              March 31, 2007(Unaudited)
              
              (Unaudited)Net
                  sales
              
              $
              2,021,636
              
              $
              1,397,890Cost
                  of sales
              
              
              1,340,723
              
              
              897,575Gross
                  profit
              
              
              680,913
              
              
              500,315Costs
                  and expenses:Selling,
                  general and administrative expenses
              
              
              962,160
              
              
              1,414,403Depreciation
              
              
              382
              
              
              4,711Amortization
              
              
              206,180
              
              
              81,989Total
                  operating costs and expenses
              
              
              1,168,722
              
              
              1,501,103Operating
                  loss
              
              
              (487,809
              )
              
              (1,000,788
              )Other
                  income(expense):Other
                  expense
              
              
              —
              
              
              1,455Reorganization
                  income
              
              
              —
              
              
              2,172,645Interest
                  expense:Interest
                  expense
              
              
              (122,475
              )
              
              (64,664
              )Amortization
                  of deferred financing fees and debt discounts
              
              
              (591,010
              )
              
              (214,895
              )Total
                  other income (expense)
              
              
              (713,485
              )
              
              1,894,540(Loss)
                  income before provision for income taxes
              
              
              (1,201,294
              )
              
              893,752Provision
                  for income taxes
              
              
              —
              
              
              —Net
                  income (loss)
              
              $
              (1,201,294
              )
              $
              893,752Less:Deemed
                  Dividend-Series C
              
              $
              —
              
              $
              (690,000
              )Net
                  (Loss) Income Attributable to Common Shareholders
              
              $
              (1,201,294
              )
              $
              203,752Earnings
                  (loss) per share- basic
              
              $
              (0.01
              )
              $
              0.01Earnings
                  (loss) per share-diluted
              
              $
              (0.01
              )
              $
              0.00Weighted
                  Average Number of Shares used in Computation ofEarnings
                  ( loss) per share- basic
              
              
              194,908,121
              
              
              43,332,733Earnings
                  ( loss) per share -diluted
              
              
              194,908,121
              
              
              51,816,253




See
      accompanying notes to condensed financial statements




4




**Naturade,
      Inc.**


**Condensed
                Statements of Cash Flows for the Three
                Months****Ended
                March 31, 2008 and March 31, 2007
                (unaudited)**




Three months
            
            Three monthsEnded
            
            EndedSuccessor
              Company
            
            Predecessor
              CompanyMarch 31,  2008
            
            March  31, 2007(Unaudited)
            
            (Unaudited)Cash
                flows from operating activities:Net
                (loss) income
            
            $
            (1,201,294
            )
            $
            893,752Adjustments
                to reconcile net (loss) income tonet cash provided by (used in) operating activities:Depreciation
                and amortization
            
            
            206,562
            
            
            86,700Amortization
                of loan discounts and deferred financing fees
            
            
            591,010
            
            
            214,895Changes
                in operating assets and liabilities:Accounts receivable
            
            
            9,854
            
            
            348,461Inventories
            
            
            185,064
            
            
            6,337Prepaid expenses and other current assets
            
            
            (38,526
            )
            
            (79,624
            )Other assets
            
            
            35,299
            
            
            (9,934
            )Liabilities
                subject to compromise
            
            
            -0-
            
            
            (2,598,310
            )Accounts payable and accrued liabilities
            
            
            289,786
            
            
            998,233Net
                cash provided by (used in) operating activities
            
            
            77,775
            
            
            (139,490
            )Cash
                flows from investing activities:Net
                cash used in investing activities
            
            
            -0-
            
            
            -0-Cash
                flows from financing activities:Repayments under the revolving credit line
            
            
            (164,629
            )
            
            (309,702
            )Borrowings on note payable to related parties
            
            
            110,125
            
            
            -0-Deferred financing fees
            
            
            -0-
            
            
            396,071Repayments under term loan
            
            
            (265,507
            )
            
            -0-Net
                cash (used in) provided by financing activities
            
            
            (320,011
            )
            
            86,369Net
                decrease in cash and cash equivalents
            
            
            (242,256
            )
            
            (53,121
            )Cash
                and cash equivalents, beginning of period
            
            
            274,733
            
            
            80,713Cash
                and cash equivalents, end of period
            
            $
            32,477
            
            $
            27,592**Supplemental
                Disclosures of Cash Flow Information****Cash
                paid during the period for:**Interest
            
            $
            79,742
            
            $
            64,664Income
                taxes
            
            $
            -0-
            
            $
            -0-**Non-cash
                financing transactions:**Deemed
                dividend-Series C
            
            $
            -0-
            
            $
            690,000




See
      accompanying notes to condensed financial statements.




5




**NATURADE,
      INC.**


**Notes
      to Condensed Financial Statements**


**(Unaudited)**




1.  **ORGANIZATION
      AND BASIS OF PRESENTATION**





***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.





The
      accompanying unaudited condensed financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America (GAAP) for interim financial information and with the instructions
      to
      Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
      all
      of the information and footnotes required by accounting principles generally
      accepted in the United States for complete financial statements. The preparation
      of financial statements in conformity with accounting principles generally
      accepted in the United States requires management to make estimates and
      assumptions that affect the amounts reported in the financial statements and
      accompanying notes. Actual results could differ from those
      estimates.





The
      accompanying condensed balance sheet at March 31, 2008, and the condensed
      statements of operations and cash flows for the periods ended March 31, 2008
      and
      2007 are unaudited. Such financial statements have been prepared on the same
      basis as the Company's audited financial statements and, in the opinion of
      management, reflect all adjustments, consisting only of normal recurring
      adjustments necessary for a fair presentation of the financial position and
      results of operations for such periods. However, the accompanying financial
      statements for the period ended March 31, 2007, do not include any adjustments
      that may be required in connection with restructuring the Company under Chapter
      11 of the Bankruptcy Code. These unaudited condensed financial statements should
      be read in conjunction with the December 31, 2007 audited financial statements
      included in the Company's Form 10-K as previously filed with the Securities
      and
      Exchange Commission on April 15, 2008, and subsequently amended on April 30,
      2008.





***Voluntary
      Reorganization under Chapter 11***  ****




On
      August
      31, 2006 (the “Petition Date”), Naturade, the “Debtor”, filed a voluntary
      petition to reorganize its 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 to 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 Master Fund, Ltd (“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
      3—Financing Agreement). 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 3—Financing
      Agreement). The Post-Confirmation Term Note matures on January 1,
      2010.




6




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 values of such amounts were recorded as debt discounts and are
      amortized over the expected term of the obligation (See Note 3—Financing
      Agreement).





On
      the
      Effective Date, in full satisfaction and discharge of an allowed secured claim,
      the Company issued a $1,361,000 note payable to a 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.





·
            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 value
                of
                the beneficial conversion feature was recorded as a debt discount
                and is
                amortized over the life of the Note (see Note 3—Financing
                Agreement).




On
      the
      Effective Date, the Company delivered two notes to secured creditors in the
      aggregate amount of $237,226 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
                value
                of the beneficial conversion feature was recorded as a debt discount
                and
                is amortized over the life of the Note (see Note 3—Financing
                Agreement).




**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.




7





**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. 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.





**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.




8




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.





***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 March 31,
      2008,
      the Company has an accumulated deficit of $1,802,991, a net working capital
      deficit of $1,403,373, stockholders’ capital of $4,250,075 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.




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 March 31,
      2008
      and December 31, 2007 consisted of the following:





**March 31, 2008**
            
            **December
                31,**
              **2007****(Unaudited)**Raw
                Materials
            
            $
            40,772
            
            $
            63,875Finished
                Goods
            
            
            880,054
            
            
            1,042,014Subtotal
            
            
            920,826
            
            
            1,105,889Less:
                Reserve for Excess and Obsolete Inventories
            
            
            (51,489
            )
            
            (51,489
            )$
            869,337
            
            $
            1,054,401





3.  ****** **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.




9


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 (See Note
      1),
      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 (7.25% at March 31, 2008), 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 March 31, 2008.





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.




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.




10


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.





·
            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
      March
      31, 2008, $876,301 was outstanding under the revolving facility; $1,281,965
      was
      outstanding under the term loan and $638,023 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.





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 amounts
      due unsecured creditors.




11




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 March 31, 2008, $350,000 was outstanding on this unsecured loan
      and
      is accordingly included in amounts due unsecured creditors. 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 are due 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 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.




4.  **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.





***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.




12


***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.





There
      are
      no stock options outstanding at December 31, 2007, or March 31,
      2008.





No
      options were granted for the year ended December 31, 2007, or the three months
      ended March 31, 2008.





***Warrants*** ***–***
      In consideration for entering into the Financing Agreement described in Note
      3,
      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.




There
      are
      no warrants outstanding at December 31, 2007, or March 31, 2008.




5.  **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 decision-maker, or decision-making group, in deciding how to allocate
      resources and in assessing performance. The Company’s chief decision maker is
      the Chief Executive Officer.





The
      Company has two reportable operating segments: health food specialty stores
      and
      mass market stores. 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 three month periods ended March 31, 2008 and 2007 was
      as
      follows:




**Distribution
                Channels****Health Food**
            
            **Mass Market**
            
            **Total**Three
                months ended March 31, 2008 (Successor Company)Sales
            
            $
            1,026,725
            
            $
            994,911
            
            $
            2,021,636Cost
                of sales
            
            
            641,569
            
            
            699,154
            
            
            1,340,723Gross
                profit
            
            $
            385,156
            
            $
            295,757
            
            $
            680,913Three
                months ended March 31, 2007 (Predecessor Company)Sales
            
            $
            886,344
            
            $
            511,546
            
            $
            1,397,890Cost
                of sales
            
            
            569,154
            
            
            328,421
            
            
            897,575Gross
                profit
            
            $
            317,190
            
            $
            183,125
            
            
            500,315




13




Sales
      are
      attributed to geographic areas based on the location of the entity to which
      the
      products were sold. Geographic segment data for the three month periods ended
      March 31, 2008 and 2007 was as follows:





**United
                States**
            
            **International**
            
            **Total**Three
                months ended March 31, 2008 (Successor Company)Sales
            
            $
            1,912,476
            
            $
            109,160
            
            $
            2,021,636Cost
                of sales
            
            
            1,290,873
            
            
            49,850
            
            
            1,340,723Gross
                profit
            
            $
            621,603
            
            $
            59,310
            
            $
            680,913Three
                months ended March 31, 2007 (Predecessor Company)Sales
            
            $
            1,243,493
            
            $
            154,397
            
            $
            1,397,890Cost
                of sales
            
            
            798,438
            
            
            99,137
            
            
            897,575Gross
                profit
            
            $
            445,055
            
            $
            55,260
            
            $
            500,315




During
      the three months ended March 31, 2008 and 2007, the Company had sales to three
      customers whose purchases exceed 10% of the Company’s total net sales as shown
      in the table below.




**Major
                Customer Table****Customer
                One**
            
            **Customer
                Two**
            
            **Customer
                Three****Sales**
            
            **Accounts**
              **Receivable**
              **Balance**
              **Quarter-end**
            
            **Sales**
            
            **Accounts**
              **Receivable**
              **Balance**
              **Quarter-end**
            
            **Sales**
            
            **Accounts**
              **Receivable**
              **Balance**
              **Quarter-end**Three
                Months ended March 31, 2008 (Successor Company)
            
            $
            653,809
            
            $
            393,491
            
            $
            351,518
            
            $
            62,075
            
            $
            153,413
            
            $
            74,580Three
                Months ended March 31, 2007 (Predecessor Company)
            
            $
            248,972
            
            $
            145,787
            
            $
            217,754
            
            $
            150,230
            
            $
            90,250
            
            $
            36,200




6.**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.





Pursuant
      to its bylaws, the Company has agreed to indemnify the current officers and
      directors of the Company 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 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. As a result of its insurance
      policy coverage, 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 and March 31, 2008.





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 and March 31, 2008.




14




7.  **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).




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. ****




15




The
      Company has fully accrued the amounts claimed in these suits as of December
      31,
      2007 and March 31, 2008. ****





8.**SUBSEQUENT
      EVENT**





On
      April
      30, 2008, Health Holdings entered into an agreement with Redux, the principal
      shareholder of the Company, to assign its Note with the Company to Redux
      Holdings for shares of Redux common stock. The agreed price is equal to
      4,363,983 shares of Redux common stock. As a result of this agreement, the
      Company’s note payable to Health Holdings in the amount of $1,361,000 has been
      assigned to Redux, and the Redux guarantee to Health Holdings of the Company's
      Note has been retired.




16


**ITEM
      2. Management’s Discussion and Analysis of Financial Condition and
      Results**  **of
      Operations**





*This
      discussion contains “forward-looking statements.” Although the
      Company*  *believes
      that the expectations reflected in such forward-looking statements
      are*  *reasonable,
      such statements are inherently subject to risk and the Company
      can*  *give
      no assurances that such expectations will prove to be correct.
      Such*  *forward-looking
      statements involve risks and uncertainties, and actual results*  *could
      differ from those described herein. Future results may be subject
      to*  *numerous
      factors many of which are beyond the Company’s control. Such
      risk*  *factors
      include, without limitation, the risks set forth below under
“Risk*  *Factors.”
      The Company undertakes no obligation to publicly release the
      result*  *of
      any revisions to these forward-looking statements that may be made
      to*  *reflect
      events or circumstances after the date hereof or to reflect the*  *occurrence
      of unexpected events.*





All
      comparisons below are for the three month period ended March 31, 2008 compared
      to the three month period ended March 31, 2007.





**The
      Company**





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;





·
            Diet
                Lean® products focused on the low carb
                dieter;





·
            Ageless
                Foundation Laboratories the Anti-Aging Company® anti-aging
                products;





·
            Symbiotics®
                Colostrum products; and





·
            Other
                niche dietary supplements.





The
      Company’s products are sold to the mass market and the health food market 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’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* .





**Recent
      Developments**





**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.




17


***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.





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 Unaudited Condensed 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.




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.





***Voluntary
      Reorganization under Chapter 11***




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 to 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 Master Fund, Ltd (“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
      3—Financing Agreement). The Post-Confirmation Revolving Note matures on January
      1, 2010.




18




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 3—Financing
      Agreement). 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 values of such amounts were recorded as debt discounts and are
      amortized over the expected term of the obligation (See Note 3—Financing
      Agreement).





On
      the
      Effective Date, in full satisfaction and discharge of an allowed secured claim,
      the Company issued a $1,361,000 note payable to a 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.





·
            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 3—Financing
                Agreement).




On
      the
      Effective Date, the Company delivered two notes to secured creditors in the
      aggregate amount of $237,226 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
                value
                of the beneficial conversion feature was recorded as a debt document
                and
                is amortized over the life of the Note (see Note 3—Financing
                Agreement).




19




**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.




**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. A copy of the Plan is posted at
      www.naturade.com , under Investor Relations.




20




**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.





**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





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.





**Critical
      Accounting Policies and Use of Estimates**





In
      preparing the financial statements, the Company is required to make estimates
      and judgments that 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 the critical accounting policies
      that require significant judgments and estimates in the preparation of the
      Company’s financial statements.





*Revenue
      Recognition* . The
      Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
      (“SAB”) No. 101, *Revenue
      Recognition in Financial*  *Statements* , as
      amended by SAB No. 101A, No. 101B and No. 104. SAB No. 101 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, the Company: (1) inputs orders based upon receipt of a customer
      purchase order; (2) record revenue upon shipment of goods when risk of loss
      and
      title transfer under the Company’s arrangements with customers or otherwise
      comply with the terms of the purchase order; (3) confirm pricing through the
      customer purchase order and; (4) validate 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 us 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.





·
            Promotional
                Allowances




21




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
      three months ended March 31, 2008 and 2007, there were no distributor and
      promotional allowances.





·
            Damages
                and Returns





In
      the
      three months ended March 31, 2008, and 2007, 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 three months ended March 31, 2008 and 2007, damages
      and returns charged against revenues were $60,775, or 4.1% of gross sales,
      and
      $167,600, or 3.9% of gross sales, respectively. The increase as a percentage
      of
      sales is related principally to lower sales levels coupled with increased
      retailer returns related to the Company’s Chapter 11 filing.




The
      following is a summary of the unaudited damages and returns
      reserve:





Three
                Months
              Ended
              March 31, 2008
            
            Three
                Months
              Ended
              March 31, 2007Beginning
                balance
            
            $
            20,518
            
            $
            736,985Provision
                for damages and returns
            
            
            (26,771
            )
            
            (57,892
            )Actual
                damages and returns during the period
            
            
            21,290
            
            
            60,775Ending
                balance
            
            $
            15,037
            
            $
            618,318





Damages
      and returns are typically immaterial to the Company’s overall results. As the
      majority of returns represent consumer returns, which trail sales by about
      a
      month, the reserve has been set based upon specific review of potential returns
      which are higher than normal as a result of the Company’s Chapter 11
      filing.





·
            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
      three months ended March 31, 2008, and 2007, cash discounts were $29,499 or
      1.4%
      of gross sales, and $24,907 or 1.5% 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
      three months ended March 31, 2008, and 2007, slotting costs were $146, and
      $9,771, or .6 % of gross sales, respectively.




22




·
            Coupon
                and Rebate Redemption





Coupon
      and rebate costs are charged against revenues as redeemed. Historically,
      Naturade has incurred insignificant redemption of its consumer coupons or
      rebates.





For
      the
      three months ended March 31, 2008 and 2007, there were no coupon and rebate
      costs.





*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, the Company evaluates
      its ending inventories for excess quantities and obsolescence. This evaluation
      includes analyses of forecast sales levels by product and historical demand.
      The
      Company writes off inventories that are considered obsolete. Remaining inventory
      balances are adjusted to approximate the lower of 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 the Company is at risk to the extent
      such
      amounts become uncollectible. Accounts receivable are stated net of applicable
      reserves for returns and allowances, bill backs and doubtful accounts.
      Management 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.




*Share-Based
      Payments* —Accounting
      for stock options, warrants and conversion rights primarily follows the
      provisions of SFAS No. 123R, *Share-Based
      Payment* ,
      as well
      as EITF 96-18, *Accounting
      for Equity Instruments That are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* . 
      SFAS 123R requires an entity to measure the cost of an award of equity
      instruments based on the grant-date fair value of the award.  In general,
      that cost will be recognized over the period during which the recipient is
      required to provide service in exchange for the award. We use the Black-Scholes
      option pricing model to measure the fair value of stock options and warrants.
      This model requires significant estimates related to the award’s expected life
      and future stock price volatility of the underlying equity security .





**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 and the
      percentage dollar increase (decrease) of such items from period to
      period.


**Percent of Net Sales**
                **Three Months Ended March 31,**
              
              **Percentage Dollar Increase**
                **(Decrease)**
                **Three Months Ended March 31,****2008**
                **Successor**
                **Company**
              
              **2007**
                **Predecessor**
                **Company**
              
              **2008**
                **Successor**
                **Company**
              
              **2007**
                **Predecessor**
                **Company**Net
                  sales
              
              
              100
              %
              
              100
              %
              
              45
              %
              
              (63
              )%Gross
                  profit
              
              
              34
              %
              
              36
              %
              
              36
              %
              
              (73
              )%Selling,
                  general and administrative expenses
              
              
              48
              %
              
              101
              %
              
              (32
              )%
              
              (31
              )%Depreciation
                  & amortization.
              
              
              10
              %
              
              6
              %
              
              60
              %
              
              (83
              )%Operating
                  loss
              
              
              (24
              )%
              
              (72
              )%
              
              (51
              )%
              
              124
              %Interest
                  expense
              
              
              35
              %
              
              20
              %
              
              155
              %
              
              (67
              )%Net
                  Income (loss) before provision for income taxes
              
              
              (59
              )%
              
              64
              %
              
              (234
              )%
              
              (169
              )%Provision
                  for income taxes
              
              
              0
              %
              
              0
              %
              
              0
              %
              
              0
              %Net
                  Income (loss)
              
              
              (59
              )%
              
              64
              %
              
              (234
              )%
              
              (169
              )%


**Major
      trends that affected the Company’s results of operations in
      2008**





The
      major
      trends affecting the Company’s results of operations in the three months ended
      March 31, 2008 included the following:





·
            The
                Company’s filing for protection and subsequent exit from Chapter 11
                Bankruptcy has had a negative effect on the Company’s ability to purchase
                inventory for the three months ended March 31, 2008. The Company
                believes
                this trend is likely to continue until the Company can provide its
                vendors
                with a record of timely payments.




23




·
            The
                Company’s lack of sufficient cash to maintain proper inventory levels has
                had a negative effect on the Company’s revenues for the three months
                ended March 31, 2008. The Company believes this trend is likely to
                continue unless the Company obtains sufficient capital to bring inventory
                levels back to historical levels.





*Net
      Sales*





Net
      sales
      for the three months ended March 31, 2008 of $2,021,636 increased $623,746
      or
      44.6% as compared to net sales of $1,397,890 for the three months ended March
      31, 2007. The increase in net sales for this period is due principally to the
      Company’s exit from Chapter 11 protection under the US Bankruptcy Code and the
      subsequent increase in credit terms and reliability of service levels.





*Mass
      Market Net Sales* .
      For the
      three months ended March 31, 2008, mass market revenues increased $483,365
      or
      94% to $994,911 from $511,546 for the three months ended March 31,
      2007. The increase in net sales during the period is related to the increased
      inventory levels resulting from the Company’s emergence from Chapter 11 allowing
      the Company to secure reliable sources of product. This allowed the Company
      to
      increase its fill rates in the mass channel and consequently, increase
      revenues.





*Health
      Food Net Sales.* For the
      three months ended March 31, 2008, health food channel net sales increased
      $140,381 or16%, to $1,026,725 from $886,344 for the three months ended March
      31,
      2007. the increased inventory levels resulting from the Company’s emergence from
      Chapter 11 allowing the Company to secure reliable sources of product. This
      allowed the Company to increase its fill rates and consequently, increase
      revenues.





*Channels
      of Distribution.* On a
      percent of net sales basis, the breakdown of sales between the mass market
      and
      health food channels was 49% for the health food channel and 51 % for mass
      market channel for the three months periods ended March 31, 2008 as compared
      to
      63% for the health food channel and 37% for the mass market channel,
      respectively, for the same period in 2007. The change in sales by channel is
      principally related to the effects of the Chapter 11 filing during the 3 months
      ended March 31, 2007 as compared to the same period in 2008. The mass channel
      requires high levels of order fill rates which resulted in more market share
      loss in this channel as a result of the uncertainty of continued service levels
      due to product sourcing issues.





For
      the
      three months ended March 31, 2008, domestic net sales increased $668,983 or
      54%,
      to $1,912,476 from $1,243,493 for the three months ended March 31, 2007. The
      increase in domestic net sales is principally due to sales increases in the
      mass
      channel. For the three months ended March 31, 2008, international sales
      decreased $45,237 or 29% to $109,160 from $154,397. International sales for
      the
      both periods decreased principally due to the emphasis placed on improving
      the
      domestic market upon the emergence from Chapter 11 protection in November
      2007.




*Gross
      Profit*





Gross
      profit for the three months ended March 31, 2008 increased $180,598 or 36%
      to
      $680,913 as compared to $500,315 for the same period in 2007. The increase
      for
      the period is principally a result of increased revenues for the period. Gross
      profit, as a percentage of sales decreased from 36% to 34% of net sales in
      the
      three month period ended March 31, 2008 compared to the three month period
      ended
      March 31, 2007, due to lower margins related to increased sales in the mass
      channel which traditionally have lower margins.





*Operating
      Costs and Expenses*





Operating
      costs and expenses for the three months ended March 31, 2008 decreased $332,381
      or 22% to $1,168,722, or 58% of net sales, from $1,501,103, or 107% of net
      sales, for the same period in 2007. Operating expenses decreased both in gross
      dollars and as a percent of sales as a result of the Company’s continuing
      efforts to reduce costs to be in line with current revenue levels subsequent
      to
      the Company’s exit from Chapter 11.





*Interest
      Expense*




Interest
      expense for the three months ended March 31, 2008 increased $433,926 to $713,485
      from $279,559 compared to the same period in 2007 principally due to an increase
      in the amortization of deferred financing fees and debt discounts of $376,115.
      The amortization is related to the recapitalization of the Company resulting
      from the Plan of reorganization effective November 2007.Deferred
      financing fees are amortized over the life of the related debt and debt
      discounts are amortizes over 36 months using the interest method. Total
      amortization of debt discounts and deferred financing fees totaled $591,010
      for
      the three months ended March 31, 2008.




24


*Net
      Loss*





Net
      loss
      increased $2,095,047 to $1,201,294 for the three months ended March 31, 2008,
      as
      compared to a net income of $893,752, for the same period in 2007. In 2007,
      the
      Company had a one time gain of $2,172,645 related to the early extinguishment
      of
      debt.





**Liquidity
      and Capital Resources**





On
      August
      31, 2006 (the “Petition Date”), the Company filed a voluntary petition for
      protection and reorganization (the “Chapter 11 Matter”) 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”). Since the Petition Date until November 9, 2007, the Effective Date of
      the Company’s Reorganization Plan, the Company has conducted activities as a
      debtor-in-possession under the Bankruptcy Code.





The
      Company’s operating activities provided cash of $77,755 in the three ended March
      31, 2008, compared to cash used of $139,490 from operating activities in the
      three months ended March 31, 2007. This increase in cash used from operating
      activities is primarily due to an increase in operating profits before
      interest expense related to debt discounts during the period.





Net
      cash
      provided by inventories was $185,064 for the three months ended March 31, 2008,
      compared with net cash used by inventories of $6,337 for the three months ended
      March 31, 2007. Increased shipments in the period combined with conservative
      buying patterns resulted in a reduction of inventory during the
      period.




Net
      cash
      provided by accounts receivable was $9,854 for the three month period ended
      March 31, 2008 compared to net cash used by accounts receivable of $348,461
      for
      the same period of 2007, principally due increased sales during the three months
      ended March 31, 2008 versus the same period in 2007. General customer terms,
      receivable days outstanding and the Company’s collection policies have remained
      constant.




Net
      cash
      provided by accounts payable and accrued expenses was $289,786 for the three
      month period ended March 31, 2008 compared to net cash provided of $998,233
      for
      the same period of 2007, principally due to an increase in accounts
      payable vendor days outstanding as a result of the Company’s cash position
      during the period.




The
      Company’s working capital deficit increased $828,118 from $575,255 at December
      31, 2007, to $1,403,373 at March 31, 2008. This increase was largely due to
      a decrease in inventories of $185,064 related to increased sales during the
      period coupled with an increase in accounts payable of $309,780 and decrease
      in
      cash of $242,256 due to credit constraints on the Company partially offset
      by
      repayments of $164,629 on the revolving debt during the period.




The
      Company’s cash used in financing activities was $408,702 for the three months
      ended March 31, 2008, compared to cash provided by financing activities of
      $86,369 for the same period of 2007 principally due to repayments on the
      revolving credit line of $164,629 and long term debt of $354,198 in 2008 as
      compared to repayments of $309,702 on the credit line partially offset by
      additional deferred financing fess of $396,071 in 2007.





As
      of
      March 31, 2008, the Company was in compliance with all of the covenants of
      the
      Credit Agreement with Laurus.





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 March 31, 2008, the Company had a working
      capital deficit, an accumulated deficit of $1,802,991, and stockholders’ capital
      of $4,250,075. 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 that might result from the outcome of this
      uncertainty. The Company’s independent registered public accounting firm
      qualified their opinion on the Company’s December 31, 2007 financial statements
      by including an explanatory paragraph in which they expressed substantial doubt
      about the Company’s ability to continue as a going concern.





The
      Company’s liquidity would be adversely affected if the Company commits a default
      under the Financing Agreement and Laurus exercises its right to terminate,
      or
      demand immediate payment of all amounts outstanding under, the Financing
      Agreement as a result of a default. In addition, if the Company continues to
      incur declines in revenues, the Company could encounter a shortage in cash
      reserves required to meet current commitments. This could result in the Company
      being unable to obtain products necessary to fulfill customer orders. The
      Company and/or its principal shareholder are seeking to raise additional
      capital. No assurance can be given that additional financing will be available
      in the future or that, if available, such financing will be obtainable on terms
      acceptable to the Company or its stockholders.




25




**Impact
      of Contractual Obligations and Commercial Commitments**





The
      following summarizes the Company’s contractual obligations at March 31, 2008 and
      the effects such obligations are expected to have on liquidity and cash flow
      in
      future periods.





**Payments
                Due by Period****Total**
            
            **Less than 1 Year**
            
            **1-3
                Years**
            
            **4-5
                Years**
            
            **After 5 Years***Contractual
                Obligations*Laurus
                Term Loan (a)
            
            $
            1,312,411
            
            $
            768,960
            
            $
            543,451
            
            $
            -0-
            
            $
            -0-Health
                Holdings Loan (a)
            
            
            2,156,275
            
            
            -0-
            
            
            373,208
            
            
            1,783,067
            
            
            -0-Redux
                Note(a)
            
            
            360,125
            
            
            360,125
            
            
            -0-
            
            
            -0-
            
            
            -0-Revolving
                Credit (a)
            
            
            876,301
            
            
            876,301
            
            
            -0-
            
            
            -0-
            
            
            -0-Laurus
                Pre Petition Revolver (a)
            
            
            745,531
            
            
            325,278
            
            
            420,253
            
            
            -0-
            
            
            -0-Wald
                Holdings Note (a)
            
            
            151,687
            
            
            -0-
            
            
            26,254
            
            
            125,433
            
            
            -0-Stewart
                Loan Agreement(a)
            
            
            224,158
            
            
            -0-
            
            
            38,797
            
            
            185,361
            
            
            -0-Notes
                Payable to Professionals (a)
            
            
            378,147
            
            
            100,000
            
            
            278,147
            
            
            -0-
            
            
            -0-Other
                Notes (a)
            
            
            40,471
            
            
            34,380
            
            
            4,971
            
            
            1,120
            
            
            -0-Operating
                leases
            
            
            127,993
            
            
            118,147
            
            
            9,846
            
            
            -0-
            
            
            -0-Unsecured
                Creditors
            
            
            1,658,785
            
            
            276,464
            
            
            1,382,321
            
            
            -0-
            
            
            -0-Total
                Contractual Cash Obligations
            
            $
            8,031,884
            
            $
            2,859,655
            
            $
            3,077,248
            
            $
            2,094,981
            
            $
            -0-










(a)  Includes
      interest.





**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 were adopted by the Company on the Effective Date.





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.




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.




26


**Forward
      Looking Statements**





Except
      for the historical information contained herein, the matters addressed in this
      Quarterly Report on Form 10-Q 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 the control of the Company,
      including those discussed below under “Risk Factors” and elsewhere in this
      Quarterly Report on Form 10-Q, which could cause actual results to differ
      materially from those anticipated by the Company’s management. In addition, the
      information set forth in the reports the Company files with the SEC from time
      to
      time, describe certain additional risks and uncertainties that could cause
      actual results to vary materially from the future results covered in such
      forward-looking statements. Readers are cautioned not to place undue reliance
      on
      any of these forward-looking statements, which speak only as of the date of
      this
      report. The Company undertakes no obligation to update any of these
      forward-looking statements to reflect events or circumstances after the date
      of
      this report or to reflect the occurrence of unexpected events.




***ITEM
      3*** . **Controls
      and Procedures** .





DISCLOSURE
      CONTROLS AND PROCEDURES





As
      required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive/Principal
      Accounting Officer carried out an evaluation under the supervision and with
      the
      participation of our management, of the effectiveness of the design and
      operation of our disclosure controls and procedures as of the end of the period
      covered by this report. Based on the foregoing evaluation, we have concluded
      that our disclosure controls and procedures are not effective as of March 31,
      2008, and that they do not allow for information required to be disclosed by
      the
      company in the reports that it files or submits under the Exchange Act to be
      recorded, processed, summarized and reported, within the time periods specified
      in the SEC's rules and forms. Based on the foregoing, our principal executive
      officer and our principal financial officer concluded that our disclosure
      controls and procedures were not effective. Specifically, the Company material
      weaknesses in our internal control over financial reporting as described in
      Item
      8A and 8A(T) in our annual report on Form 10-KSB filed with the SEC on April
      15,
      2008. Disclosure controls and procedures include, without limitation, controls
      and procedures designed to ensure that information required to be disclosed
      by
      the company in the reports that it files or submits under the Exchange Act
      is
      accumulated and communicated to the Company’s management, including its Chief
      Executive/Principal Accounting Officer as appropriate to allow timely decisions
      regarding required disclosure.





Our
      management does not expect that our disclosure controls and procedures or our
      internal control over financial reporting will necessarily prevent all fraud
      and
      material error. Our disclosure controls and procedures are designed to provide
      reasonable assurance of achieving our objectives and our Chief Executive
      Officer/Principal Accounting Officer concluded that our disclosure controls
      and
      procedures are effective at that reasonable assurance level. Further, the design
      of a control system must reflect the fact that there are resource constraints,
      and the benefits of controls must be considered relative to their costs. Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that all control issues and instances of fraud,
      if any, within the Company have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the internal control. The design
      of
      any system of controls also is based in part upon certain assumptions about
      the
      likelihood of future events; and, there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions.
      Over time, controls may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may
      deteriorate.




INTERNAL
      CONTROL OVER FINANCIAL REPORTING




Pursuant
      to Rule 13a-15(d) or Rule 15d-15(d) of the Exchange Act, our management, with
      participation with the Company’s Chief Executive/Principal Accounting Officer,
      is responsible for evaluating any change in the Company's internal control
      over
      financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the
      Exchange Act), that occurred during each of our fiscal quarters that has
      materially affected, or is reasonably likely to materially affect, the Company's
      internal control over financial reporting.





Our
      internal control over financial reporting is designed 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 and includes those policies and procedures that:
      (i) Pertain to the maintenance of records that in reasonable detail accurately
      and fairly reflect the transactions and dispositions of the assets of the
      company; (ii) Provide reasonable assurance that transactions are recorded as
      necessary to permit preparation of financial statements in accordance with
      generally accepted accounting principles, and that receipts and expenditures
      of
      the company are being made only in accordance with authorizations of management
      and directors of the company; and (iii) Provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of the company’s assets that could have a material effect on the financial
      statements. Our internal controls framework is based on the criteria set forth
      in the Internal Control - Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission (COSO).




27




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. 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.





Based
      on
      the foregoing evaluation, the Company has concluded that there was no change
      in
      our internal control over financial reporting that occurred during the fiscal
      quarter ended March 31, 2008, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial reporting.





We
      continue to have the following material weaknesses in our internal control
      over
      financial reporting, as described in Item 8A and 8A(T) in our annual report
      on
      Form 10-KSB filed with the SEC on April 15, 2008..





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.





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 d) 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.




28




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 Weaknesses*





As
      of
      December 31, 2007, and March 31, 2008, there were control deficiencies
      which constitutes material weaknesses 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, and
      March 31, 2008. 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 weaknesses have 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.




29


**PART
      II. Other Information**





***ITEM
      1*** **.
      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).




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. ****




30


The
      Company has fully accrued the amounts claimed in these suits as of December
      31,
      2007, and March 31, 2008. ****





***ITEM
      2*****.
      Unregistered Sales of Equity Securities and Use of
      Proceeds**




NONE





***ITEM
      3*****.
      Defaults Upon Senior Equity Securities**





NONE.





***ITEM
      4*** **.
      Submission of Matters to a Vote of Security Holders**





NONE





***ITEM
      5*** **.
      Other Information**





NONE





***ITEM
      6*****.
      Exhibits**





(a)
      Exhibits





**Exhibit**
              **Number**
            **Document****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**32.1
            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**32
            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.




**SIGNATURES**





Pursuant
      to the requirements 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.(Registrant)DATE:
                May 15, 2008
            By
            */s/*Adam MichelinAdam
                MichelinChief
                Executive OfficerDATE:
                May 15, 2008
            By
            */s/*Adam
                MichelinPrincipal
                Accounting Officer




31




**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            **Document****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**32.1
            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**32
            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.




32