UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
One)




xQuarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934




For
quarterly period ended June 30,
2009




 ̈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 033-24138-D




IMAGENETIX,
INC.


(Exact
name of registrant as specified in its charter)




NEVADA
                
                87-0463772(State
      or other jurisdiction of incorporation or
                  organization)
                
                (I.R.S.
      Employer Identification
No.)





10845
Rancho Bernardo Road, Suite 105


San Diego,
California  92127


(Address
of principal executive offices)




Registrant’s
telephone number (including area code)  (858)
674-8455




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.


Yes xNo ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes  ̈                                No
x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.





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




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  ̈ Nox




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




Common Stock, $.001 par
    value
                
                11,010,788(Class)
                
                Outstanding
      at August 10, 2009









Imagenetix,
Inc.




INDEX





PagePART
      I.
                                FINANCIAL
      INFORMATIONItem
      1.
                                Financial
      Statements:Condensed
      Consolidated Balance Sheets as of June 30, 2009 (unaudited) and March 31,
      2009
                                3Condensed
      Consolidated Statements of Operations for the three months ended June 30,
      2009 and 2008 (unaudited)
                                4Condensed
      Consolidated Statements of Cash Flows for the three months ended June 30,
      2009 and 2008 (unaudited)
                                5Notes
      to Unaudited Condensed Consolidated Financial Statements
                                6Item
      2.
                                Management’s
      Discussion and Analysis or Plan of Operation
                                11Item
      3.
                                Quantitative
      and Qualitative Disclosures About Market Risk
                                *Item
      4T.
                                Controls
      and Procedures
                                18PART
      II.
                                OTHER
      INFORMATIONItem
      1.
                                Legal
      Proceedings
                                *Item 1A.
                                Risk
      Factors
                                16Item
      2.
                                Unregistered
      Sales of Equity Securities and Use of Proceeds
                                *Item
      3.
                                Defaults
      Upon Senior Securities
                                *Item
      4.
                                Submission
      of Matters to a Vote of Security Holders
                                *Item
      5.
                                Other
      Information
                                *Item
      6.
                                Exhibits
                                19SIGNATURES*       
      No
      information provided due to inapplicability of the item.


2




PART
I – FINANCIAL INFORMATION




Item 1.  Financial
Statements




Imagenetix, Inc.


Condensed Consolidated Balance
Sheets





June
      30,
                    
                    
                    March
      31,2009
                    
                    
                    2009(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    913,069
                    
                    
                    $
                    1,225,723Accounts
      receivable, net
                    
                    
                    862,313
                    
                    
                    
                    1,095,946Inventories,
      net
                    
                    
                    1,517,569
                    
                    
                    
                    1,337,241Prepaid
      expenses and other current assets
                    
                    
                    84,977
                    
                    
                    
                    109,028Deferred
      tax asset
                    
                    
                    817,100
                    
                    
                    
                    535,200Total
      current assets
                    
                    
                    4,195,028
                    
                    
                    
                    4,303,138Property and equipment,net
                    
                    
                    107,598
                    
                    
                    
                    115,918Long-term
      prepaid expenses
                    
                    
                    27,000
                    
                    
                    
                    30,000Other
      assets
                    
                    
                    129,491
                    
                    
                    
                    134,356Total
      Assets
                    
                    $
                    4,459,117
                    
                    
                    $
                    4,583,412LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                    
                    $
                    611,335
                    
                    
                    $
                    274,311Accrued
      liabilities
                    
                    
                    66,814
                    
                    
                    
                    80,696Income
      tax payable
                    
                    
                    -
                    
                    
                    
                    69,803Customer
      deposits
                    
                    
                    84,220
                    
                    
                    
                    58,850Contract
      payable
                    
                    
                    21,823
                    
                    
                    
                    43,645Short
      term license payable
                    
                    
                    -
                    
                    
                    
                    2,980Total
      Current Liabilities
                    
                    
                    784,192
                    
                    
                    
                    530,285Stockholders'
      equityPreferred
      stock, $.001 par value; 5,000,000 shares authorized: none
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $.001par value; 50,000,000 shares authorized: 11,010,788 issued and
      outstanding at June 30 and March 31, 2009, respectively
                    
                    
                    11,010
                    
                    
                    
                    11,010Capital
      in excess of par value
                    
                    
                    12,688,396
                    
                    
                    
                    12,651,936Accumulated
      deficit
                    
                    
                    (9,024,481
                    )
                    
                    
                    (8,609,819
                    )Total
      stockholders' equity
                    
                    
                    3,674,925
                    
                    
                    
                    4,053,127Total
      Liabilities and Stockholders' Equity
                    
                    $
                    4,459,117
                    
                    
                    $
                    4,583,412


See
accompanying  notes to unaudited condensed consolidated financial
statements.


3




Imagenetix,
Inc.


Condensed
Consolidated Statements of Operations


(Unaudited)





Three
      Months EndedJune
      30,
                          
                          
                          June
      30,2009
                          
                          
                          2008Net
      sales
                          
                          $
                          1,702,290
                          
                          
                          $
                          1,394,358Cost
      of sales
                          
                          
                          1,055,198
                          
                          
                          
                          819,711Gross
      profit
                          
                          
                          647,092
                          
                          
                          
                          574,647Operating
      expenses:General
      and administrative
                          
                          
                          807,949
                          
                          
                          
                          605,472Payroll
      expense
                          
                          
                          254,417
                          
                          
                          
                          372,190Consulting
      expense
                          
                          
                          280,400
                          
                          
                          
                          345,761Operating
      expenses
                          
                          
                          1,342,766
                          
                          
                          
                          1,323,423Operating
      income (loss)
                          
                          
                          (695,674
                          )
                          
                          
                          (748,776
                          )Other
      income (expense):Other
      income
                          
                          
                          1,417
                          
                          
                          
                          7,742Settlement
      income
                          
                          
                          -
                          
                          
                          
                          1,785,000Interest
      expense
                          
                          
                          (2,405
                          )
                          
                          
                          (690
                          )Other
      income
                          
                          
                          (988
                          )
                          
                          
                          1,792,052Income
      (loss) before income taxes
                          
                          
                          (696,662
                          )
                          
                          
                          1,043,276Income
      tax expense (benefit)
                          
                          
                          (282,000
                          )
                          
                          
                          456,200Income
      (loss)
                          
                          $
                          (414,662
                          )
                          
                          $
                          587,076Basic
      income (loss) per share
                          
                          $
                          (0.04
                          )
                          
                          $
                          0.05Diluted
      income (loss) per share
                          
                          $
                          (0.04
                          )
                          
                          $
                          0.05Basic
      weighted average common shares outstanding
                          
                          
                          11,010,788
                          
                          
                          
                          10,960,788Diluted
      weighted average common shares outstanding
                          
                          
                          11,010,788
                          
                          
                          
                          11,021,173





See
accompanying  notes to unaudited condensed consolidated financial
statements.


4




Imagenetix,
Inc.


Consolidated
Statements of Cash Flows


(Unaudited)





Three
      Months EndedJune
      30, 2009
                  
                  
                  June
      30, 2008Operating
      activities:Net
      income (loss)
                  
                  $
                  (414,662
                  )
                  
                  $
                  587,076Adjustments
      to reconcile net income (loss) to cash provided by (used in) operating
      activities:Amortization
      and depreciation
                  
                  
                  13,285
                  
                  
                  
                  10,188Provision
      for inventory obsolescence
                  
                  
                  20,089
                  
                  
                  
                  (12,003
                  )Non
      cash expense related to issuance of warrants and granting of stock
      options
                  
                  
                  36,460
                  
                  
                  
                  76,666Changes
      in assets and liabilities:(Increase)
      decrease in accounts receivable
                  
                  
                  233,633
                  
                  
                  
                  (484,111
                  )(Increase)
      decrease in employee receivable
                  
                  
                  -
                  
                  
                  
                  845(Increase)
      decrease in inventories
                  
                  
                  (200,417
                  )
                  
                  
                  (125,003
                  )(Increase)
      decrease in other assets
                  
                  
                  27,051
                  
                  
                  
                  84,171(Increase)
      decrease in deferred taxes
                  
                  
                  (282,000
                  )
                  
                  
                  456,200Increase
      (decrease) in accounts payable
                  
                  
                  337,024
                  
                  
                  
                  261,055Increase
      (decrease) in accrued liabilities
                  
                  
                  (13,882
                  )
                  
                  
                  19,577Increase
      (decrease) in income taxes payable
                  
                  
                  (69,803
                  )
                  
                  
                  -Increase
      (decrease) in customer deposits
                  
                  
                  25,370
                  
                  
                  
                  199,450Net
      cash (used in) provided by operating activities
                  
                  
                  (287,852
                  )
                  
                  
                  1,074,111Investing
      activities
                  
                  
                  -
                  
                  
                  
                  -Financing
      activities:Payments
      on contracts payable
                  
                  
                  (21,822
                  )
                  
                  
                  (23,100
                  )Payments
      on patent license financed
                  
                  
                  (2,980
                  )
                  
                  
                  (8,310
                  )Net
      cash used in financing activities
                  
                  
                  (24,802
                  )
                  
                  
                  (31,410
                  )Net
      (decrease) increase in cash and cash equivalents
                  
                  
                  (312,654
                  )
                  
                  
                  1,042,701Cash and cash
      equivalents, beginning of period
                  
                  
                  1,225,723
                  
                  
                  
                  1,022,555Cash and cash
      equivalents, end of period
                  
                  $
                  913,069
                  
                  
                  $
                  2,065,256Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                  
                  $
                  2,405
                  
                  
                  $
                  690Income
      taxes
                  
                  $
                  69,803
                  
                  
                  $
                  -





See
accompanying  notes to unaudited condensed consolidated financial
statements.


5


IMAGENETIX,
INC.


Notes
to the Unaudited Condensed Consolidated Financial Statements





1.
            BASIS OF
      PRESENTATION





The
consolidated financial statements of Imagenetix, Inc. ("Imagenetix") presented
herein have been prepared pursuant to the rules of the Securities and Exchange
Commission for quarterly reports on Form 10-Q and do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America. These statements should be read in conjunction
with our audited consolidated financial statements and notes thereto included in
Form 10-K for the year ended March 31, 2009.





In the
opinion of management, the interim consolidated financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of the
results for interim periods. Operating results for the three month period are
not necessarily indicative of the results that may be expected for the
year.





Earnings Per
Share





We follow
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." Under SFAS No. 128, basic earnings per share is calculated as earnings
available to common stockholders divided by the weighted average number of
common shares outstanding. Diluted earnings per share is calculated as net
income divided by the diluted weighted average number of common shares. The
diluted weighted average number of common shares is calculated using the
treasury stock method for common stock issuable pursuant to outstanding stock
options and common stock warrants. See Note 6 for discussion of commitments to
issue additional shares of common stock and warrants.





Stock Based
Compensation





We
account for stock based compensation under the provisions of FASB Statement No.
123R, “Accounting for Stock-Based Compensation” (“SFAS 123R”). SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based on their fair
values.





We have
selected the Black-Scholes method of valuation for share-based compensation. The
charge is recognized in non-cash compensation, which is included in stock-based
compensation expense, on a straight-line basis over the remaining service period
based on the options’ original estimate of fair value.





We apply
SFAS No. 123 in valuing options granted to consultants and estimate the fair
value of such options using the Black-Scholes option-pricing model. The fair
value is recorded as consulting expense as services are provided. Options
granted to consultants for which vesting is contingent based on future
performance are measured at their then current fair value at each period end,
until vested.





2.
            RECENT
      ACCOUNTING PRONOUNCEMENTS





In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own
Stock.  EITF No. 07-5 provides that an entity should use a two
step approach to evaluate whether equity-linked financial instrument (embedded
feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions. It also clarifies on the impact
of foreign currency denominated strike prices and market-based employee stock
option valuation instruments on the evaluation.  EITF No. 07-5 is
effective for years beginning after December 15, 2008.  The Company
does not expect that the adoption of EITF No. 07-5 will have a material effect
on its consolidated financial statements.


6


IMAGENETIX,
INC.


Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No.
28, Interim Financial Reporting, to require those disclosures in summarized
financial information at interim reporting periods. The Company will comply with
the additional disclosure requirements beginning in the first quarter of fiscal
2010.





In April
2009, the FASB issued FSP No. SFAS 115-2 and SFAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment guidance in U.S. GAAP for debt and equity
securities in the financial statements. This FSP does not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity securities. This FSP shall be effective for interim and annual
reporting periods ending after June 15, 2009. The Company currently does not
have any financial assets that are other-than-temporary impaired.





In April
2009, the SEC released SAB No. 111 ("SAB 111"), which amends SAB Topic 5-M. SAB
111 notes that SFAS No. 115-2 and SFAS 124-2 were scoped to debt securities
only, and the FSP referred readers to SEC SAB Topic 5-M for factors to consider
with respect to other-than-temporary impairments for equity securities. With the
amendments in SAB 111, debt securities are excluded from the scope of Topic 5-M,
but the SEC staff's views on equity securities are still included within the
topic. The Company currently does not have any financial assets that are
other-than-temporary impaired.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” which establishes the
principles and requirements for evaluating and reporting subsequent events,
including the period subject to evaluation for subsequent events, the
circumstances requiring recognition of subsequent events in the financial
statements, and the required disclosures. This SFAS was effective for interim
and annual periods ending after June 15, 2009, which was June 30, 2009 for the
Company. The Company has evaluated subsequent events in accordance with the
Statement through the filing of this Quarterly Report on Form 10-Q on
August 10, 2009.





A variety
of proposed or otherwise potential accounting standards are currently under
study by standard-setting organizations and various regulatory
agencies.  Because of the tentative and preliminary nature of these
proposed standards, management has not determined whether implementation of such
proposed standards would be material to the Company’s consolidated financials
statements.





3.
            ACCOUNTS
      RECEIVABLE





Accounts
receivable are carried at the expected realizable value. Accounts receivable
consisted of the following:


June 30,
                        
                        
                        March 31,2009
                        
                        
                        2009Accounts receivable -
      trade
                        
                        $
                        923,313
                        
                        
                        $
                        1,156,946Allowance for doubtful
      accounts
                        
                        
                        (61,000
                        )
                        
                        
                        (61,000
                        )Accounts receivable,
      net
                        
                        $
                        862,313
                        
                        
                        $
                        1,095,946





At June
30, 2009, we had four customers which accounted for 19%, 16%, 16% and 15%,
respectfully, of our accounts receivable balances.At March 31,
2009, we had four customers which accounted for 29%, 26%, 17% and 15%,
respectfully, of our accounts receivable balances.


7


IMAGENETIX,
INC.


Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)





For the
three months ended June 30, 2009, we had four significant customers which
accounted for 36%, 12%, 11% and 10%, respectfully, of sales.  For the
three months ended June 30, 2008, we had two significant customers which
accounted for 48% and 26%, respectfully, of sales.





4.           INVENTORIES





Inventories
consist of the following:





June 30,
                    
                    
                    March 31,2009
                    
                    
                    2009Raw
    materials
                    
                    $
                    990,195
                    
                    
                    $
                    802,117Finished
      products
                    
                    
                    411,524
                    
                    
                    
                    417,024Boxes, labels, tubes &
      bottles
                    
                    
                    284,521
                    
                    
                    
                    266,6821,686,240
                    
                    
                    
                    1,485,823Reserve for
      obsolescence
                    
                    
                    (168,671
                    )
                    
                    
                    (148,582
                    )$
                    1,517,569
                    
                    
                    $
                    1,337,241





5.
            OTHER
      ASSETS





The
following is a summary of intangible assets which are included in “Other Assets”
on the face of the balance sheet:


June 30,
                    
                    
                    March 31,2009
                    
                    
                    2009Trademarks
                    
                    $
                    13,032
                    
                    
                    $
                    13,032Patent
                    
                    
                    172,965
                    
                    
                    
                    172,965Deferred tax
      asset
                    
                    
                    14,600
                    
                    
                    
                    14,500200,597
                    
                    
                    
                    200,497Less accumulated
      amortization
                    
                    
                    71,106
                    
                    
                    
                    66,141$
                    129,491
                    
                    
                    $
                    134,356




6.           EQUITY
TRANSACTIONS





We
recorded non-cash compensation expense for stock options and warrants issued to
employees and consultants of $36,460 for the three months ended June 30, 2009
and $76,666 for the three months ended June 30, 2008.





The
significant assumptions used in the Black-Scholes model to estimate the
compensation and general and administrative expense for the issuance of stock
options and warrants are as follows:





Three months ended June 30,2009
                  
                  
                  2008Expected
      term of options and warrants
                  
                  5
      years
                  
                  
                  5
      yearsExpected
      volatility
                  
                  
                  73
                  %
                  
                  
                  61
                  %Expected
      dividends
                  
                  None
                  
                  
                  NoneRisk-free
      interest rate
                  
                  
                  2.95
                  %
                  
                  3.36 to 3.54%Forfeitures
                  
                  
                  0
                  %
                  
                  
                  0
                  %




8


IMAGENETIX,
INC.


Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)





A summary
of the options outstanding follows:





For the Three Months
      EndedJune 30,
    2009WeightedAverageExerciseOptions
                    
                    Shares
                    
                    
                    PriceOutstanding at beginning of
      year
                    
                    
                    1,249,000
                    
                    
                    $
                    1.49Granted
                    
                    
                    240,000
                    
                    
                    
                    0.31Cancelled
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Outstanding at end of the
      period
                    
                    
                    1,489,000
                    
                    
                    
                    1.30Exercisable at end of the the
      period
                    
                    
                    1,369,000
                    
                    
                    $
                    1.39Weighted average fair value of
      options granted during the period
                    
                    
                    240,000
                    
                    
                    $
                    0.19





As of
June 30, 2009, the unamortized portion of stock compensation expense on all
existing stock options was $22,819.





A summary
of warrants outstanding follows:





For the Three Months
      EndedJune 30,
    2009WeightedAverageExerciseWarrants
                        
                        Shares
                        
                        
                        PriceOutstanding at beginning of
      year
                        
                        
                        4,077,957
                        
                        
                        $
                        1.18Granted
                        
                        
                        -
                        
                        
                        
                        -Cancelled
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -Outstanding at end of the
      period
                        
                        
                        4,077,957
                        
                        
                        
                        1.18Exercisable at end of the the
      period
                        
                        
                        4,077,957
                        
                        
                        $
                        1.18Weighted average fair value of
      warrants granted during the period
                        
                        
                        -
                        
                        
                        $
                        -





7.           INCOME
TAXES





We have
adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income
taxes (FIN 48).  FIN 48 prescribes a comprehensive model of how
a company should recognize, measure, present, and disclose in its financial
statements uncertain tax positions that the company has taken or expects to take
on a tax return.  FIN 48 states that a tax benefit from an uncertain
position may be recognized if it is "more likely than not" that the position is
sustainable, based upon its technical merits. The tax benefit of a qualifying
position is the largest amount of tax benefit that is greater than 50 percent
likely of being realized upon ultimate settlement with a taxing authority having
full knowledge of all relevant information.


9


IMAGENETIX,
INC.


Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)





Upon
adoption of FIN 48, there was no impact to our consolidated financial
statements.  We estimate that the unrecognized tax benefit will not
change significantly within the next twelve months.  We will continue
to classify income tax penalties and interest as part of general and
administrative expense in our statements of operations.  Accrued
interest on uncertain tax positions is not significant.  There are no
penalties accrued as of June 30, 2009.  The following table summarizes
the open tax years for each major jurisdiction:





Jurisdiction
                          
                          Open Tax
                            YearsFederal
                          
                          2006
      – 2008California
                          
                          2006
      – 2008





As we
have had significant net operating loss carry forwards, even if certain of our
tax positions were disallowed, it is not foreseen that we would have to pay any
taxes in the near future. Consequently, we do not calculate the impact of
interest or penalties on amounts that might be disallowed.




8.           SUBSEQUENT
EVENTS
 
 On August
7, 2009, our Board of Directors approved the amendment of our by-laws and
approved two employment and one engagement contract for our three executive
officers.


10


ITEM
2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.





THE
FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO OUR
FUTURE FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CURRENTLY ANTICIPATED AND FROM HISTORICAL RESULTS DEPENDING UPON A VARIETY OF
FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "RISK FACTORS."
SEE ALSO OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31,
2009.




Overview




We
develop, formulate and market over-the-counter, natural-based nutritional
supplements and skin care products. Our products are proprietary, often
supported by scientific studies which we request and are offered through
multiple channels of distribution, including direct marketing companies, also
known as network marketing or multi-level marketing companies, and chain store
retailers. Our primary product is Celadrin® a product formulation which we sell
to the mass market through retailers and on a private label basis to wholesale
customers.





A key
part of our marketing strategy is to provide to our wholesale customers a
"turnkey" approach to the marketing and distribution of our products. This
turnkey approach provides these customers with all the services necessary to
market our products, including developing specific product formulations,
providing supporting scientific studies regarding the effectiveness of the
product and arranging for the manufacture and marketing of the
product.





We sell
directly to the mass markets through retailers InflameAway, our own Celadrin®
branded product.  We also develop and sell products and formulations
to businesses and organizations that market these products through multiple
channels of distribution, including direct marketing companies, mass marketing
companies, medical, health and nutritional professionals, medical newsletters
and direct response radio and television. We also offer Celadrin® products
through wholesale customers that in turn offer their products containing
Celadrin® to mass market retailers.





Management's discussion and analysis or
plan of operation is based upon the Company's financial statements. These
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America. These principles require management to
make certain estimates, judgments and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates based on historical experience and various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.





Critical Accounting Policies and
Estimates





We have identified four accounting
principles that we believe are key to an understanding of our financial
statements. These important accounting policies require management's most
difficult, subjective judgments.





1.   Accounts
receivable.


Accounts
receivable are carried at the expected net realizable value. The allowance for
doubtful accounts is based on management’s assessment of the collectibility of
specific customer accounts and the aging of the accounts receivable. If there
were a deterioration of a major customer’s creditworthiness, or actual defaults
were higher than historical experience, our estimates of the recoverability of
amounts due to us could be overstated, which could have a negative impact on
operations.





2.   Inventory


Inventory
is carried at the lower of cost or market. Cost is determined by the first-in
first-out method.  At each period end, management adjusts the
inventory allowance based on estimates.  These estimates take into
account


spoilage,
yields, obsolescence and overstocked inventory amounts.


11


3.   Revenue
Recognition




We
recognize revenue in accordance with the SEC’s Staff Accounting Bulletin
No. 104, “Revenue Recognition in Financial Statements” (SAB104), Statement
of Financial Accounting Standards No. 48, “Revenue Recognition When Right
of Return Exists” (SFAS 48), and Emerging Issues Task Force Abstract (EITF)
No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor’s Products.” SAB 104 requires that four
basic criteria be met before revenue can be recognized: 1) there is evidence
that an arrangement exists; 2) delivery has occurred; 3) the fee is fixed or
determinable; and 4) collectibility is reasonably assured. SFAS 48 states that
revenue from sales transactions where the buyer has the right to return the
product shall be recognized at the time of sale only if (1) the seller’s
price to the buyer is substantially fixed or determinable at the date of sale;
(2) the buyer has paid the seller, or the buyer is obligated to pay the
seller and the obligation is not contingent on resale of
the product; (3) the buyer’s obligation to the seller would not be changed
in the event of theft or physical destruction or damage of the product;
(4) the buyer acquiring the product for resale has economic substance apart
from that provided by the seller; (5) the seller does not have significant
obligations for future performance to directly bring about resale of the product
by the buyer; and (6) the amount of future returns can be reasonably
estimated. We recognize revenue upon determination that all criteria for revenue
recognition have been met. The criteria are usually met at the time title passes
to the customer, which usually occurs upon shipment. Revenue from shipments
where title passes upon delivery is deferred until the shipment has been
delivered.




We
account for payments made to customers in accordance with EITF 01-09, which
states that cash consideration (including a sales incentive) given by a vendor
to a customer is presumed to be a reduction of the selling prices of the
vendor’s products or services and, therefore, should be characterized as a
reduction of revenue when recognized in the vendor’s income statement, rather
than a sales and marketing expense. We have various agreements with customers
that provide for discounts and rebates. These agreements are classified as a
reduction of revenue. Certain other costs associated with customers that meet
the requirements of EITF 01-09 are recorded as sales and marketing
expense.




We
guarantee customer satisfaction. Our policy requires the customer to return the
unused product to the retailer from whom they originally purchased
it.  We pay the retailer for the returned product plus a handling
cost. We periodically assess the adequacy of this policy and will record a
liability as necessary.   For the three months ended June 30,
2009, there were no returns that would suggest a liability needed to be
recorded.




We review
gross revenue for estimated returns of private label contract manufacturing
products and direct-to-consumer products. The estimated returns are based upon
the trailing six months of private label contract manufacturing gross sales and
our historical experience for both private label contract manufacturing and
direct-to-consumer product returns. However, the estimate for product returns
does not reflect the impact of a large product recall resulting from product
nonconformance or other factors as such events are not predictable nor is the
related economic impact estimable.   For the three months ended
June 30, 2009, there were no returns that would suggest a liability needed to be
recorded.




As part
of the services we provide to our private label contract manufacturing
customers, we may perform, but are not required to perform, certain research and
development activities related to the development or improvement of their
products. While our customers typically do not pay directly for this service,
the cost of this service is included as a component of the price we charge to
manufacture and deliver their products.





4.   Income
Taxes


Deferred
income taxes are provided using the liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences.  Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  Deferred tax
assets and liabilities are adjusted for the effects of the changes in tax laws
and rates of the date of enactment.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.  Tax positions taken are
not offset or aggregated with other portions.  Tax positions that meet
the more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority.  The portion of the
benefits associated with the tax positions taken that exceed the amount measured
as described above is reflected as a liability for unrecognized tax benefits in
the accompanying balance sheet along with any associated interest and penalties
that would be payable to the taxing authorities upon
examination.


12




Selected
Financial Information




Results
of Operations




Three
Months Ended June 30, 2009 Compared to Three Months Ended June 30,
2008




Three Months Ended
                    
                    
                    Increase6/30/09
                    
                    
                    6/30/08
                    
                    
                    (Decrease)
                    
                    
                    %Statements
      of Operations:Net
      sales
                    
                    $
                    1,702,290
                    
                    
                    $
                    1,394,358
                    
                    
                    $
                    307,932
                    
                    
                    
                    22.1
                    %Cost
      of goods sold
                    
                    
                    1,055,198
                    
                    
                    
                    819,711
                    
                    
                    
                    235,487
                    
                    
                    
                    28.7
                    %%
      of net sales
                    
                    
                    62
                    %
                    
                    
                    59
                    %
                    
                    
                    3
                    %
                    
                    
                    5.4
                    %Gross
      profit
                    
                    
                    647,092
                    
                    
                    
                    574,647
                    
                    
                    
                    72,445
                    
                    
                    
                    12.6
                    %%
      of net sales
                    
                    
                    38
                    %
                    
                    
                    41
                    %
                    
                    
                    -3
                    %
                    
                    
                    -7.8
                    %Operating
      expensesGeneral
      and administrative
                    
                    
                    807,949
                    
                    
                    
                    605,472
                    
                    
                    
                    202,477
                    
                    
                    
                    33.4
                    %Payroll
      expense
                    
                    
                    254,417
                    
                    
                    
                    372,190
                    
                    
                    
                    (117,773
                    )
                    
                    
                    -31.6
                    %Consulting
      expense
                    
                    
                    280,400
                    
                    
                    
                    345,761
                    
                    
                    
                    (65,361
                    )
                    
                    
                    -18.9
                    %Total
      operating expenses
                    
                    
                    1,342,766
                    
                    
                    
                    1,323,423
                    
                    
                    
                    19,343
                    
                    
                    
                    1.5
                    %Interest
      expense
                    
                    
                    (2,405
                    )
                    
                    
                    (690
                    )
                    
                    
                    1,715
                    
                    
                    
                    248.6
                    %Settlement
      income
                    
                    
                    -
                    
                    
                    
                    1,785,000
                    
                    
                    
                    (1,785,000
                    )
                    
                    NMOther
      income
                    
                    
                    1,417
                    
                    
                    
                    7,742
                    
                    
                    
                    (6,325
                    )
                    
                    
                    -81.7
                    %Provision
      for (benefit from) taxes
                    
                    
                    (282,000
                    )
                    
                    
                    456,200
                    
                    
                    
                    738,200
                    
                    
                    NMNet
      income (loss)
                    
                    
                    (414,662
                    )
                    
                    
                    587,076
                    
                    
                    
                    (1,001,738
                    )
                    
                    NMNet
      income (loss) per share basic
                    
                    
                    (0.04
                    )
                    
                    
                    0.05
                    
                    
                    
                    (0.09
                    )
                    
                    NM




Net
Sales




Net sales
for the quarter ended June 30, 2009 increased $307,932, a 22.1% increase, to
$1,702,290 compared to $1,394,358 for the quarter ended June 30,
2008.  The primary reasons for the sales increase was attributed to
increased sales of our weight loss product of approximately $617,000 and sales
of our own branded product, Inflame Away, that identifies Celadrinâ as its marquee ingredient,
to the mass market segment of approximately $154,000 offset by a reduction in
wholesale product revenue of approximately $298,000 and sales to distributors of
approximately $165,000.   We anticipate, the new marketing
program for the mass market segment coupled with additional distribution
agreements to wholesale and multi-level marketing customers to result in
improved sales during the balance of our current fiscal year.




Cost of Goods
Sold




Cost of
goods sold as a percentage of net sales increased from 59% for the quarter ended
June 30, 2008 to 62% for the quarter ended June 30, 2009.  This
increase was primarily due to the mass market rebate and giveaway strategy for
the InflameAway product coupled with the change in product mix to more weight
loss product vs. distribution agreement sales.  Rebate and giveaway
programs are customary in the mass market distribution channel.  We
anticipate levels of promotional activities used to launch the awareness of
InflameAway will be reduced in the future.


13




General and
Administrative




General
and administrative expenses increased by $202,477, a 33.4% increase, to $807,949
for the quarter ended June 30, 2009 from $605,472 for the quarter ended June 30,
2008.  The primary reason for the increase was an approximate $196,000
increase in advertising expenses related to the launch of
InflameAway.  We anticipate continued increases in general and
administrative expenses as a result of increasing our advertising campaign for
our Inflame Away product and an increase in clinical research
studies.




Payroll
Expense




Payroll
expense decreased to $254,417 for the quarter ended June 30, 2009, a decrease of
31.6% or $117,773, compared to $372,190 for the quarter ended June 30,
2008.   This decrease was a result of bonuses during the previous
fiscal period as a result of a legal settlement not being duplicated during the
current fiscal period.




Consulting
Expenses




Consulting
expenses decreased to $280,400 for the quarter ended June 30, 2009, a decrease
of 18.9% or $65,361 compared to $345,761 for the quarter ended June 30,
2008.  This decrease was a result of litigation expenses related to
the settlement of a potential trademark infringement case during the prior
fiscal year period not being duplicated during the current fiscal year
period.




Settlement
Income




During
the quarter ended June 30, 2008, we received $2,100,000 ($1,785,000 after costs)
as a result of entering into a settlement agreement with a company we alleged
was infringing on the Celadrin trademark.  In addition, we entered
into a supply agreement with the same company whereby we provide Celadrin for
use in their products.




Provision for Income
Taxes




As a
result of losses for the quarter ended June 30, 2009, an income tax benefit of
$282,000 was recognized during the current quarter compared to $456,200 of
income tax expense recognized during the quarter ended June 30,
2008.


14




Capital
Resources




Working
Capital





Increase6/30/09
                  
                  
                  3/31/09
                  
                  
                  (Decrease)Current
      assets
                  
                  $
                  4,195,028
                  
                  
                  $
                  4,303,138
                  
                  
                  $
                  (108,110
                  )Current
      liabilities
                  
                  
                  784,192
                  
                  
                  
                  530,285
                  
                  
                  
                  253,907Working
      capital
                  
                  $
                  3,410,836
                  
                  
                  $
                  3,772,853
                  
                  
                  $
                  (362,017
                  )Long-term
      debt
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Stockholders'
      equity
                  
                  $
                  3,674,925
                  
                  
                  $
                  4,053,127
                  
                  
                  $
                  (378,202
                  )





Statements
of Cash Flows Select Information





Three Months Ended
                  
                  
                  Increase6/30/09
                  
                  
                  6/30/08
                  
                  
                  (Decrease)Net
      cash provided by (used in):Operating
      activities
                  
                  $
                  (287,852
                  )
                  
                  $
                  1,074,111
                  
                  
                  $
                  (1,361,963
                  )Investing
      activities
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Financing
      activities
                  
                  $
                  (24,802
                  )
                  
                  $
                  (31,410
                  )
                  
                  $
                  6,608





Balance
Sheet Select Information





Increase6/30/09
                  
                  
                  3/31/09
                  
                  
                  (Decrease)Cash
      and cash equivalients
                  
                  $
                  913,069
                  
                  
                  $
                  1,225,723
                  
                  
                  $
                  (312,654
                  )Accounts
      receivable, net
                  
                  $
                  862,313
                  
                  
                  $
                  1,095,946
                  
                  
                  $
                  (233,633
                  )Inventories,
      net
                  
                  $
                  1,517,569
                  
                  
                  $
                  1,337,241
                  
                  
                  $
                  180,328Accounts
      payable and accrued expenses
                  
                  $
                  678,149
                  
                  
                  $
                  355,007
                  
                  
                  $
                  323,142




Liquidity




We have
historically financed our operations internally and through debt and equity
financings. At June 30, 2009, we had cash holdings of $913,069, a decrease of
$312,654 compared to March 31, 2009. Our net working capital position at June
30, 2009, was $3,410,836 compared to $3,772,853 as of March 31,
2009.  We have initiated a direct mass market strategy with our own
product, InflameAway.  Although, a significant portion of our working
capital may be needed to implement this strategy, we believe that our cash
position is sufficient to fund our operating activities for at least the next 12
months.





New
Accounting Pronouncements





See Note
2- Recent Accounting Pronouncements- to our condensed consolidated financial
statements included in Item 1 of this Form 10-Q for discussion of recent
accounting pronouncements.


15





ITEM
1A.  RISK FACTORS.




Risk
Factors




You
should consider the following discussion of risks as well as other information
regarding our common stock. The risks and uncertainties described below are not
the only ones. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impair our business operations. If
any of the following risks actually occur, our business could be
harmed.





There
Is Only One Supplier for Celadrin®. If We Are Unable to Purchase Celadrin® from
This Supplier, Our Business Would Be Harmed.





There is
only one supplier for Celadrin®, which we use in approximately 66% of our
products and which represented approximately 74% of our sales for the year ended
March 31, 2009. We will rely upon Celadrin® to expand our product lines and
revenue in the future. If our Celadrin® supplier goes out of business or elects
for any reason not to supply us with Celadrin®, we would have to find another
Celadrin® supplier or suffer a significant reduction in our
revenue.





We
Rely upon a Limited Number of Customers the Loss of Which Would Reduce Our
Revenue and Any Earnings.





Our
largest customers accounted for 23%, 19% and 17% of our net sales for the year
ended March 31, 2009 and 29% and 16% for the year ended March 31,
2008.  The loss of any of these customers could significantly reduce
our revenue and adversely affect our cash flow and earnings, if
any.





We
Rely upon Other Outside Suppliers to Produce Our Products Which Could Delay Our
Product Deliveries.





All of
our products are produced by outside manufacturers who process ingredients
provided to them by our suppliers and with whom we have contracts. Our profit
margins and our ability to deliver products on a timely basis are dependent upon
these manufacturers and suppliers. Should any of these manufacturers or
suppliers fail to provide us with product, we would be required to obtain new
manufacturers and suppliers, which would be costly and time consuming and could
delay our product deliveries.





Product
Liability Claims Against Us Could Be Costly.





Some of
our nutritional supplements contain newly-introduced ingredients or combinations
of ingredients, and we have little long-term health information about
individuals consuming those ingredients. If any of these products were thought
or proved to be harmful, we could be subject to litigation. Although we carry
product liability insurance in the face amount of $1,000,000 per occurrence and
$2,000,000 in the aggregate and require our suppliers and manufacturers to
include us as insured parties on their product liability insurance policies, our
coverage may not be adequate to protect us from potential product liability
claims and costs of defense.





We
Are Subject to Intense Competition from Other Nutritional Supplement Marketers
Which Could Reduce Our Revenue and Profit Margins.





Competition
in the nutritional supplement market is intense. We compete with numerous
companies that have longer operating histories, more products and greater name
recognition and financial resources than we do. In order to compete, we could be
forced to lower our product prices, which would reduce our revenue and profit
margins.





We
Are Highly Regulated, Which Increases Our Costs of Doing Business.





We are
subject to laws and regulations which cover:





•
            the
      formulation, manufacturing, packaging, labeling, distribution,
      importation, sale and storage ofour
      products;


16





•
            the
      health and safety of food and
drugs;





•
            trade
      practice and direct selling laws;
and





•
            product claims and advertising by
      us; or for which we may be held
  responsible.





Compliance
with these laws and regulations is time consuming and expensive. Moreover, new
regulations could be adopted that would severely restrict the products we sell
or our ability to continue our business. We are unable to predict the nature of
any future laws, regulations, interpretations or applications, nor can we
predict what effect additional governmental regulations or administrative
orders, when and if promulgated, would have on our business in the future. These
future changes could, however, require the reformulation or elimination of
certain products; imposition of additional record keeping and documentation
requirements; imposition of new federal reporting and application requirements;
modified methods of importing, manufacturing, storing or distributing certain
products; and expanded or different labeling and substantiation requirements for
certain products and ingredients. Any or all of these requirements could harm
our business.





There
Are Limitations on the Liability of Our Officers and Directors Which May
Restrict Our Stockholders from Bringing Claims.





Our
Bylaws substantially limit the liability of our officers and directors to us and
our stockholders for negligence and breach of fiduciary or other duties to us.
This limitation may prevent stockholders from bringing claims against our
officers and directors in the future.





Shares
of Our Common Stock Which Are Eligible for Sale by Our Stockholders May Decrease
the Price of Our Common Stock.





We have
11,010,788 common shares outstanding which are freely tradeable or saleable
under Rule 144.  We also have outstanding common stock warrants and
stock options exercisable into up to 5,566,957 shares of common stock which
could become free trading if exercised.   If our stockholders
sell substantial amounts of our common stock, the market price of our common
stock could decrease.





There
is a Limited but Potentially Volatile Trading Market in Our Common Stock, Which
May Adversely Affect Our Stock Price.





Our
common stock trades on the Electronic Bulletin Board. The Bulletin Board tends
to be highly illiquid, in part because there is no national quotation system by
which potential investors can track the market price of shares except through
information received or generated by a limited number of broker-dealers that
make a market in particular stocks. There is a greater chance of market
volatility for securities that trade on the Bulletin Board as opposed to a
national exchange or quotation system. This volatility may be caused by a
variety of factors, including:





•
            The
      lack of readily available price
quotations;





•
            The
      absence of consistent administrative supervision of "bid" and "ask"
      quotations;





•
            Lower
      trading volume; and





•
            Market
      conditions.





There
could be wide fluctuations in the market price of our common stock. These
fluctuations may have an extremely negative effect on the market price of our
securities and may prevent an investor from obtaining a market price equal to
his purchase price when he attempts to sell our securities in the open market.
In these situations, the investor may be required to either sell our securities
at a market price which is lower than his purchase price, or to hold our
securities for a longer period of time than he planned.


17





Because
Our Common Stock May Be Classified as "Penny Stock," Trading in it Could Be
Limited, and Our Stock Price Could Decline.





In the
future, our common stock may fall under the definition of "penny stock" if our
net tangible assets decline below $2,500,000. In such event, trading in our
common stock would be limited because broker-dealers will be required to provide
their customers with disclosure documents prior to allowing them to participate
in transactions involving our common stock. These disclosure requirements are
burdensome to broker-dealers and may discourage them from allowing their
customers to participate in transactions involving our common
stock.





"Penny
stocks" are equity securities with a market price below $5.00 per share, other
than a security that is registered on a national exchange or included for
quotation on the Nasdaq system, unless, as in our case, the issuer has net
tangible assets of more than $2,000,000 and has been in continuous operation for
greater than three years. Issuers who have been in operation for less than three
years must have net tangible assets of at least $5,000,000.





Rules
promulgated by the Securities and Exchange Commission under Section 15(g) of the
Exchange Act require broker-dealers engaging in transactions in penny stocks, to
first provide to their customers a series of disclosures and documents,
including:





•
            A
      standardized risk disclosure document identifying the risks inherent in
      investment in pennystocks;





•
            All
      compensation received by the broker-dealer in connection with the
      transaction;





•
            Current
      quotation prices and other relevant market data;
  and





•
            Monthly
      account statements reflecting the fair market value of the securities. In
      addition, theserules
      require that a broker-dealer obtain financial and other information from a
      customer, determinethat
      transactions in penny stocks are suitable for such customer and deliver a
      written statement tosuch
      customer setting forth the basis for this
  determination.




ITEM
4T.     CONTROLS AND PROCEDURES.




Disclosure Controls and
Procedures


The
Company maintains disclosure controls and procedures that are designed to
provide reasonable assurance that information required to be disclosed in
reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is
recorded, processed, summarized, and reported within the specified time periods
and accumulated and communicated to the Company’s management, including its
Principal Executive Officer and Principal Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.





The
Company’s management, under the supervision and with the participation of its
Principal Executive Officer and its Principal Financial Officer, evaluated the
effectiveness of its disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of the
end of the period covered by this report. Based on that evaluation, the
Company’s Principal Executive Officer and Principal Financial Officer concluded
that the Company’s disclosure controls and procedures were effective as of June
30, 2009 to provide reasonable assurance in the Company’s financial
reporting.





Management
believes that there are no material inaccuracies or omissions of material fact
and, to the best of its knowledge, believes that the condensed consolidated
financial statements for the quarter ended June 30, 2009, fairly present in all
material respects the financial condition and results of operations for the
Company in conformity with accounting principles generally accepted in the
United States of America.


18





There
have not been any other changes in the Company’s internal control over financial
reporting during the quarter ended June 30, 2009, which have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.





Limitations on the Effectiveness of
Controls





A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system’s objectives will be met. The
Company’s management, including its Principal Executive Officer and its
Principal Financial Officer, do not expect that the Company’s disclosure
controls will prevent or detect all errors and all fraud. 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. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of any system of
controls 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 deterioration
in the degree of compliance with associated policies or procedures. Because of
the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and not be detected.




PART
II. OTHER
INFORMATION




ITEM
6.     EXHIBITS.




Exhibit No.
                              
                              Title3.04
                              
                              By
      laws, as amended10.23
                              
                              Employment
      Agreement with William P. Spencer dated August 7, 200910.24
                              
                              Employment
      Agreement with Debra L. Spencer dated August 7,
200910.25
                              
                              Engagement
      Agreement with Lowell W. Giffhorn dated August 7,
  200931.1
                              
                              302
      Certification of William P. Spencer, Chief Executive
    Officer31.2
                              
                              302
      Certification of Lowell W. Giffhorn, Chief Financial
    Officer32.1
                              
                              906
      Certification of William P. Spencer, Chief Executive
    Officer32.2
                              
                              906
      Certification of Lowell W. Giffhorn, Chief Financial
    Officer


19




SIGNATURES
  In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 IMAGENETIX,
      INC.a
      Nevada corporationDate:  August
      10, 2009
                  
                  By:
                  /s/ WILLIAM P. SPENCERWilliam
      P. SpencerChief
      Executive Officer(Principal
      Executive Officer and duly authorizedto
      sign on behalf of the
Registrant)




EX-1