**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-QSB**




(Mark
      One)




x Quarterly
      Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of
      1934




For
      quarterly period ended **June
      30, 2007**




o Transition
      Report Under 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 small business issuer 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)




Issuer's
      telephone number **(858)
      674-8455**




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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**  **x**  **No** o




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




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
            
            10,871,400(Class)
            
            Outstanding
                at August 10, 2007




Transitional
      Small Business Disclosure Format (Check one): Yes o  **No** **x**









**Imagenetix,
      Inc.**




**INDEX**


PagePART
                I.   FINANCIAL INFORMATIONItem
                  1.   Financial Statements:Condensed
                  Consolidated Balance Sheets as of June 30, 2007 (unaudited)
                  and March 31, 2007
              
              3Condensed
                  Consolidated Statements of Operations for the threeMonths
                  ended June 30, 2007 and 2006 (unaudited)
              
              4Condensed
                  Consolidated Statements of Cash Flows for the threeMonths
                  ended June 30, 2007 and 2006 (unaudited)
              
              5Notes
                  to Unaudited Condensed Consolidated Financial Statements
              
              6Item
                  2.   Management’s Discussion and Analysis or Plan of
                  Operation
              
              10Item
                  3.   Controls and Procedures
              
              17
 PART
                  II.  OTHER INFORMATION
 Item
                  1.   Legal Proceedings
              
              *Item
                  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
              
              18SIGNATURES
              
              19
 *  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
                  31,2007
              
              2007(Unaudited)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              1,545,483
              
              $
              958,896Accounts
                  receivable, net
              
              
              905,588
              
              
              1,576,641Inventories,
                  net
              
              
              1,414,742
              
              
              1,284,458Prepaid
                  expenses
              
              
              393,888
              
              
              384,217Income
                  tax receivable
              
              
              269,140
              
              
              269,140Deferred
                  tax asset
              
              
              194,397
              
              
              109,797Total
                  current assets
              
              
              4,723,238
              
              
              4,583,149Property
                  and equipment, net
              
              
              130,483
              
              
              125,456Other
                  assets
              
              
              687,034
              
              
              551,998$
              5,540,755
              
              $
              5,260,603LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable
              
              $
              425,499
              
              $
              368,089Accrued
                  liabilities
              
              
              75,584
              
              
              64,265Customer
                  deposits
              
              
              511,645
              
              
              136,645Contract
                  payable
              
              
              24,985
              
              
              49,970Short
                  term license payable
              
              
              32,270
              
              
              31,633Total
                  current liabilities
              
              
              1,069,983
              
              
              650,602Long
                  term license payable
              
              
              28,929
              
              
              37,239Total
                  liabilities
              
              
              1,098,912
              
              
              687,841Stockholders'
                  equityPreferred
                  stock, $.001 par value; 5,000,000 sharesauthorized:
                  none outstanding
              
              
              -
              
              
              -Common
                  stock, $.001 par value; 50,000,000 sharesauthorized:
                  10,871,400 issued and outstanding atJune
                  30 and March 31, 2007
              
              
              10,871
              
              
              10,871Capital
                  in excess of par value
              
              
              11,039,552
              
              
              10,734,945Accumulated
                  deficit
              
              
              (6,608,580
              )
              
              (6,173,054
              )Total
                  stockholders' equity
              
              
              4,441,843
              
              
              4,572,762$
              5,540,755
              
              $
              5,260,603




*See
        accompanying notes to unaudtied condensed consolidated financial
        statements.*
  3




Imagenetix,
      Inc.


**Condensed
          Consolidated Statements of Operations**
 (Unaudited)
  Three
                  Months EndedJune
                  30,
              
              June
                  30,2007
              
              2006Net
                  sales
              
              $
              1,126,991
              
              $
              931,569Cost
                  of sales
              
              
              536,604
              
              
              503,800Gross
                  profit
              
              
              590,387
              
              
              427,769Operating
                  expenses:General
                  and administrative
              
              
              646,509
              
              
              378,268Payroll
                  expense
              
              
              356,497
              
              
              160,483Consulting
                  expense
              
              
              251,524
              
              
              323,550Operating
                  expenses
              
              
              1,254,530
              
              
              862,301Operating
                  income
              
              
              (664,143
              )
              
              (434,532
              )Other
                  income (expense):Other
                  income
              
              
              6,944
              
              
              9,889Interest
                  expense
              
              
              (1,327
              )
              
              (1,915
              )Other
                  income (expense)
              
              
              5,617
              
              
              7,974Loss
                  before income taxes
              
              
              (658,526
              )
              
              (426,558
              )Income
                  tax benefit
              
              
              (223,000
              )
              
              (48,721
              )Loss
              
              $
              (435,526
              )
              $
              (377,837
              )Basic
                  and diluted weighted average common shares outstanding
              
              $
              10,871,400
              
              $
              10,721,400


*See
        accompanying notes to unaudtied condensed consolidated financial
        statements.*
  4


**Imagenetix,
        Inc.**
 **Consolidated
        Statements of Cash Flows**
 (Unaudited)
  Three
                  Months EndedJune
                  30, 2007
              
              June
                  30, 2006**Operating
                  activities:**Net
                  loss
              
              $
              (435,526
              )
              $
              (377,837
              )Adjustments
                  to reconcile net loss to
                  cash provided by (used in) operating activities:Amortization
                  and depreciation
              
              
              12,176
              
              
              9,071Provision
                  for doubtful accounts
              
              
              15,000
              
              
              -Provision
                  for inventory obsolescence
              
              
              22,105
              
              
              32,412Non
                  cash expense related to issuance of warrants and
                  granting of stock options
              
              
              304,607
              
              
              -Change
                  in deferred taxes
              
              
              (223,000
              )
              
              (62,559
              )Changes
                  in assets and liabilities:(Increase)
                  decrease in accounts receivable
              
              
              656,053
              
              
              81,314(Increase)
                  decrease in employee receivable
              
              
              764
              
              
              (11,982
              )(Increase)
                  decrease in inventory
              
              
              (152,389
              )
              
              (350,868
              )(Increase)
                  decrease in other assets
              
              
              (11,434
              )
              
              62,121Increase
                  (decrease) in accounts payable
              
              
              57,410
              
              
              (146,773
              )Increase
                  (decrease) in accrued liabilities
              
              
              11,319
              
              
              8,341Increase
                  (decrease) in customer deposits
              
              
              375,000
              
              
              22,814Increase
                  (decrease) in income taxes payable
              
              
              -
              
              
              12,953Net
                  cash provided by (used in) operating activities
              
              
              632,085
              
              
              (720,993
              )**Investing
                  activities:**Property
                  and equipment
              
              
              (12,840
              )
              
              -Net
                  cash used in investing activities
              
              
              (12,840
              )
              
              -**Financing
                  activities:**Payments
                  on contracts payable
              
              
              (24,985
              )
              
              -Payments
                  on patent license financed
              
              
              (7,673
              )
              
              (7,086
              )Net
                  cash provided by (used in) financing activities
              
              
              (32,658
              )
              
              (7,086
              )**Net
                  increase (decrease) in cash and cash equivalents**
              
              
              586,587
              
              
              (728,079
              )**Cash
                  and cash equivalents**,
                  beginning of period
              
              
              958,896
              
              
              1,808,016**Cash
                  and cash equivalents,**end of period
              
              $
              1,545,483
              
              $
              1,079,937**Supplemental
                  Disclosure of Cash Flow Information:**Cash
                  paid during the period for:Interest
              
              $
              1,327
              
              $
              1,915Income
                  taxes
              
              $
              -
              
              $
              885**Non
                  Cash Investing and Financing Activities:**Non-cash
                  dividend issued to certain warrant holders
              
              $
              -
              
              $
              2,346




*See
        accompanying notes to unaudtied 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-QSB 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-KSB for the year ended March 31, 2007.





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 is
      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 8 for discussion of commitments
      to
      issue additional shares of common stock and warrants.





**Stock
      Based Compensation**





Effective
      January 1, 2006, we adopted 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 and restricted stock,
      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
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007, which for us will be the fiscal year
      beginning April 1, 2008. We are currently assessing the impact of SFAS No.
      159
      on our financial position and results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”.
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally GAAP, expands disclosures about fair
      value measurements, and applies under other accounting pronouncements that
      require or permit fair value measurements. SFAS No. 157 does not
      require any new fair value measurements. However, the FASB anticipates that
      for
      some entities, the application of SFAS No. 157 will change current
      practice. SFAS No. 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, which for us will be the fiscal
      year beginning April 1, 2008. We are currently evaluating the impact of
      SFAS No. 157 but do not expect that it will have a material impact on
      our financial statements.




6




**IMAGENETIX,
      INC.**


**Notes
      to the Unaudited Condensed Consolidated Financial Statements
      (Continued)**




In
      June
      2006, the FASB issued FASB Interpretation Number 48, "Accounting for Uncertainty
      in Income Taxes - an interpretation of FASB Statement No. 109."  This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with FASB
      Statement No. 109, "Accounting for Income Taxes."  This Interpretation is
      effective for fiscal years beginning after December 15, 2006, which for us
      was
      the fiscal year beginning April 1, 2007. The implementation of this
      Interpretation has had no material impact on our financial
      statements.





**3.**  **ACCOUNTS
      RECEIVABLE**





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


June
                    30,
                
                
                March
                    31,2007
                
                
                2007Accounts
                    receivable - trade
                
                $
                1,010,588
                
                $
                1,666,641Allowance
                    for doubtful accounts
                
                
                (105,000
                )
                
                (90,000
                )Accounts
                    receivable, net
                
                $
                905,588
                
                $
                1,576,641




At
      June
      30, 2007, we had two customers which accounted for 31% and 11% of our accounts
      receivable balances.





For
      the
      three months ended June 30, 2007, we had three significant customers which
      accounted for 28%, 11% and 11% of sales.




**4.**  **INVENTORY**





Inventory
      consists of the following:


June
                  30,
              
              March
                  31,2007
              
              2007Raw
                  materials
              
              $
              973,687
              
              $
              797,498Finished
                  products
              
              
              370,674
              
              
              401,895Boxes,
                  labels, tubes & bottles
              
              
              227,574
              
              
              220,1531,571,935
              
              
              1,419,546Reserve
                  for obsolescence
              
              
              (157,193
              )
              
              (135,088
              )$
              1,414,742
              
              $
              1,284,458




7




**IMAGENETIX,
      INC.**


**Notes
      to the Unaudited Condensed Consolidated Financial Statements
      (Continued)**





**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
                  31,2007
              
              2007Trademarks
              
              $
              13,032
              
              $
              13,032Patent
              
              
              161,353
              
              
              161,353Deferred
                  tax asset
              
              
              553,500
              
              
              415,100Other
              
              
              1,000
              
              
              -728,885
              
              
              589,485Less
                  accumulated amortization
              
              
              41,851
              
              
              37,487$
              687,034
              
              $
              551,998





**6.**  **EQUITY
      TRANSACTIONS**





We
      recorded non-cash compensation expense for stock options issued to employees
      and
      consultants of $164,019 for the three months ended June 30, 2007. Also, we
      recorded non-cash general and administrative expense for warrants granted to
      individuals of $140,588 for the three months ended June 30, 2007.





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 during the current fiscal quarter are as
      follows:


Expected
                  term of options and warrants
              
              
              5
                  yearsExpected
                  volatility
              
              
              71
              %Expected
                  dividends
              
              
              NoneRisk-free
                  interest rate
              
              
              4.55
              %Forfeitures
              
              
              0
              %




8





**IMAGENETIX,
      INC.**


**Notes
      to the Unaudited Condensed Consolidated Financial Statements
      (Continued)**




A
          summary
          of the options outstanding follows:
  For
                    the Three Months Ended
                  June
                    30, 2007WeightedAverageExerciseOptions
                
                Shares
                
                PriceOutstanding
                    at beginning of year
                
                
                1,129,000
                
                $
                1.74Granted
                
                
                350,000
                
                
                1.30Cancelled
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -Outstanding
                    at end of the period
                
                
                1,479,000
                
                
                1.64Exercisable
                    at end of the the period
                
                
                1,304,000
                
                $
                1.68Weighted
                    average fair value of options granted
                    during the period
                
                
                350,000
                
                $
                0.80
 As
          of
          June 30, 2007, the unamortized portion of stock compensation expense on
          all
          existing stock options was $117,157.
 A
          summary
          of warrants outstanding follows:
  For
                    the Three Months EndedJune
                    30, 2007Warrants
                
                Shares
                
                Weighted
                  Average
                  Exercise
                  PriceOutstanding
                    at beginning of year
                
                
                4,357,100
                
                $
                1.26Granted
                
                
                175,000
                
                
                1.30Cancelled
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -Outstanding
                    at end of the period
                
                
                4,532,100
                
                
                1.26Exercisable
                    at end of the the period
                
                
                4,532,100
                
                $
                1.26




**7.**  **INCOME
      TAXES**





We
      or one
      of our subsidiaries file income tax returns in the U.S. federal jurisdiction
      and
      various state jurisdictions.




We
      adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes,* on April
      1, 2007. As a result of the implementation of Interpretation 48, we do not
      recognize an increase in the liability for unrecognized tax benefits. No
      unrecognized tax benefits are being reported for the quarter ended June 30,
      2007.





Included
      in the balance at April 1, 2007 is a Net Operating Loss carryforward in the
      amount of $353,778 which will be used to offset future tax liabilities.




9


**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-KSB FOR THE YEAR ENDED MARCH 31,
      2007.




**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.





10





*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, 2007, 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, 2007,
      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.





11


**Selected
      Financial Information**




**Results
      of Operations**




*Three
      Months Ended June 30, 2007 Compared to Three Months Ended June 30,
      2006*


Three
                  Months Ended
              
              Increase6/30/07
              
              6/30/06
              
              (Decrease)
              
              %Statements
                  of Operations:Net
                  sales
              
              $
              1,126,991
              
              $
              931,569
              
              $
              195,422
              
              
              21.0
              %Cost
                  of goods sold
              
              
              536,604
              
              
              503,800
              
              
              32,804
              
              
              6.5
              %%
                  of net sales
              
              
              48
              %
              
              54
              %
              
              -6
              %
              
              -12.0
              %Gross
                  profit
              
              
              590,387
              
              
              427,769
              
              
              162,618
              
              
              38.0
              %%
                  of net sales
              
              
              52
              %
              
              46
              %
              
              6
              %
              
              14.1
              %Operating
                  expensesGeneral
                  and administrative
              
              
              646,509
              
              
              378,268
              
              
              268,241
              
              
              70.9
              %Payroll
                  expense
              
              
              356,497
              
              
              160,483
              
              
              196,014
              
              
              122.1
              %Consulting
                  expense
              
              
              251,524
              
              
              323,550
              
              
              (72,026
              )
              
              -22.3
              %Total
                  operating expenses
              
              
              1,254,530
              
              
              862,301
              
              
              392,229
              
              
              45.5
              %Interest
                  expense
              
              
              (1,327
              )
              
              (1,915
              )
              
              (588
              )
              
              -30.7
              %Other
                  income
              
              
              6,944
              
              
              9,889
              
              
              (2,945
              )
              
              -29.8
              %Provision
                  for (benefit from) taxes
              
              
              (223,000
              )
              
              (48,721
              )
              
              174,279
              
              
              357.7
              %Net
                  income (loss)
              
              
              (435,526
              )
              
              (377,837
              )
              
              (57,689
              )
              
              15.3
              %Net
                  income (loss) per share basic
              
              
              (0.04
              )
              
              (0.04
              )
              
              -
              
              
              0.0
              %Net
                  income (loss) per share diluted
              
              
              (0.04
              )
              
              (0.04
              )
              
              -
              
              
              0.0
              %




Net
      Sales




Net
      sales
      for the quarter ended June 30, 2007 increased $195,422, a 21.0% increase, to
      $1,126,991 compared to $931,569 for the quarter ended June 30, 2006. One reason
      for the sales increase was sales related to our direct mass market strategy
      with
      our own product, Inflame Away, that identifies Celadrin â as its
      marquee ingredient. The strategy consisted of a nationwide launch supported
      by a
      continuing advertising campaign. In addition, sales of our weight loss product
      increased by approximately $123,000 during the first fiscal quarter. We
      anticipate, if the new marketing program continues to successfully penetrate
      the
      market, that Inflame Away will result in improved sales for the balance of
      our
      fiscal year.




Cost
      of Goods Sold




Cost
      of
      goods sold as a percentage of net sales decreased from 54% for the quarter
      ended
      June 30, 2006 to 48% for the quarter ended June 30, 2007. This decrease was
      primarily due to the lower cost of goods sold associated with InflameAway
      coupled with sales under a distribution agreement which maintained improved
      margins. We anticipate the cost of goods sold as a percentage of net sales
      will
      decrease proportionately to the increase in sales of Inflame Away to the mass
      markets.




12


General
      and Administrative




General
      and administrative expenses increased by $268,241, a 70.9% increase, to $646,509
      for the quarter ended June 30, 2007 from $378,268 for the quarter ended June
      30,
      2006. The primary reasons for the increase were an approximate $204,000 increase
      in advertising expenses related to the launch of InflameAway and an approximate
      $141,000 increase to non-cash expenses related to the issuance of warrants
      to
      individuals involved in the marketing of InflameAway offset by a reduction
      in
      expenses related to clinical research studies. We anticipate increases in
      general and administrative expenses as a result of our advertising campaign
      for
      our Inflame Away product and an increase in clinical research
      studies.




Payroll
      Expense




Payroll
      expense increased to $356,497 for the quarter ended June 30, 2007, an increase
      of 122.1% or $196,014, compared to $160,483 for the quarter ended June 30,
      2006.
      This increase was a result of expensing approximately $164,000 as non-cash
      compensation the value of stock options granted to employees and consultants.
      We
      anticipate payroll to decrease in subsequent periods since the amortization
      of
      the value of the stock options over their vesting period will result in lower
      non-cash compensation compared to the current quarter.




Consulting
      Expenses




Consulting
      expenses decreased to $251,524 for the quarter ended June 30, 2007, a decrease
      of 22.3% or $72,026 compared to $323,550 for the quarter ended June 30, 2006.
      This decrease was a result the termination of several consulting agreements
      coupled with a reduction in the costs of our annual audit fees. We anticipate
      consulting fees will remain stable during the remainder of our fiscal
      year.




Provision
      for Income Taxes




As
      a
      result of the loss for the quarter ended June 30, 2007, an income tax benefit
      of
      $223,000 was recognized during the current quarter compared to $48,721 of income
      tax benefit being recognized during the quarter ended June 30, 2006. If we
      incur
      a taxable loss for the current fiscal year, we will be able to carry forward
      as
      a deferred tax asset the amount of the tax benefit for federal and state tax
      purposes.




13




**Capital
      Resources**




Working
                  CapitalIncrease6/30/07
              
              3/31/07
              
              (Decrease)Current
                  assets
              
              $
              4,723,238
              
              $
              4,583,149
              
              $
              140,089Current
                  liabilities
              
              
              1,069,983
              
              
              650,602
              
              
              419,381Working
                  capital
              
              $
              3,653,255
              
              $
              3,932,547
              
              $
              (279,292
              )Long-term
                  debt
              
              $
              28,929
              
              $
              37,239
              
              $
              (8,310
              )Stockholders'
                  equity
              
              $
              4,441,843
              
              $
              4,572,762
              
              $
              (130,919
              )
  Statements
                  of Cash Flows Select InformationThree
                  Months Ended
              
              Increase6/30/07
              
              6/30/06
              
              (Decrease)Net
                  cash provided by (used in):Operating
                  activities
              
              $
              632,085
              
              $
              (720,993
              )
              $
              1,353,078Investing
                  activities
              
              $
              (12,840
              )
              $
              -
              
              $
              (12,840
              )Financing
                  activities
              
              $
              (32,658
              )
              $
              (7,086
              )
              $
              (25,572
              )
  Balance
                  Sheet Select InformationIncrease6/30/07
              
              3/31/07
              
              (Decrease)Cash
                  and cash equivalients
              
              $
              1,545,483
              
              $
              958,896
              
              $
              586,587Accounts
                  receivable, net
              
              $
              905,588
              
              $
              1,576,641
              
              $
              (671,053
              )Inventory,
                  net
              
              $
              1,414,742
              
              $
              1,284,458
              
              $
              130,284Accounts
                  payable and accrued expenses
              
              $
              501,083
              
              $
              432,354
              
              $
              68,729




**Liquidity**




We
      have
      historically financed our operations internally and through debt and equity
      financings. At June 30, 2007, we had cash holdings of $1,545,483, an increase
      of
      $586,587 compared to March 31, 2007. Our net working capital position at June
      30, 2007, was $3,653,255 compared to $3,932,547 as of March 31, 2007. We have
      initiated a direct mass market strategy with our own product, Inflame Away.
      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**





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007, which for us will be the fiscal year
      beginning April 1, 2008. We are currently assessing the impact of SFAS No.
      159
      on our financial position and results of operations.





14


In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”.
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally GAAP, expands disclosures about fair value measurements,
      and
      applies under other accounting pronouncements that require or permit fair value
      measurements. SFAS No. 157 does not require any new fair value
      measurements. However, the FASB anticipates that for some entities, the
      application of SFAS No. 157 will change current practice. SFAS No. 157
      is effective for financial statements issued for fiscal years beginning after
      November 15, 2007, which for us will be the fiscal year beginning April 1,
      2008. We are currently evaluating the impact of SFAS No. 157 but do
      not expect that it will have a material impact on our financial statements.





In
      June
      2006, the FASB issued FASB Interpretation Number 48, "Accounting for Uncertainty
      in Income Taxes - an interpretation of FASB Statement No. 109."  This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with FASB
      Statement No. 109, "Accounting for Income Taxes."  This Interpretation is
      effective for fiscal years beginning after December 15, 2006, which for us
      was
      the fiscal year beginning April 1, 2007. The implementation of this
      Interpretation has had no material impact on our financial
      statements.




**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 69% of our
      products and which represented approximately 75% of our sales for the year
      ended
      March 31, 2007. 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
      two
      largest customers accounted for 23% and 15% of our net sales for the year ended
      March 31, 2007. The loss 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.





15


**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 of our products;




·
                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
      10,871,400 common shares outstanding, of which 10,721,400 are freely tradeable
      or saleable under Rule 144. We also have outstanding common stock warrants
      and
      stock options exercisable into up to 5,486,100 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;


16
 
  ·
              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 you from obtaining a market price equal to your
      purchase price when you attempt to sell our securities in the open market.
      In
      these situations, you may be required to either sell our securities at a market
      price which is lower than your purchase price, or to hold our securities for
      a
      longer period of time than you planned.





**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
      3.     CONTROLS AND PROCEDURES.**




(a)
            Evaluation
                of disclosure controls and procedures. Our Chief Executive Officer
                and
                Principal Financial Officer, after evaluating the effectiveness of
                our
                "disclosure controls and procedures" (as defined in the Securities
                Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end
                of the
                period covered by this Quarterly Report on Form 10-QSB (the "Evaluation
                Date"), have concluded that as of the Evaluation Date, our disclosure
                controls and procedures are effective to provide reasonable assurance
                that
                information we are required to disclose in reports that we file or
                submit
                under the Exchange Act is recorded, processed, summarized and reported
                within the time periods specified in the Securities and Exchange
                Commission rules and forms, and that such information is accumulated
                and
                communicated to our management, including our Chief Executive Officer
                and
                Principal Financial Officer, as appropriate, to allow timely decisions
                regarding required disclosure.




(b)
            Changes
                in internal control over financial reporting. There were no significant
                changes in our internal control over financial reporting during our
                most
                recent fiscal quarter that materially affected, or were reasonablylikely
                to materially affect, our internal control over financial
                reporting.


17


**PART
      II.**  **OTHER
      INFORMATION**




**ITEM
      6.****EXHIBITS.**




**Exhibit
                No.**
            
            **Title**31.1
            
            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




18




**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 13, 2007
            By:
            /s/ WILLIAM
              P. SPENCERWilliam
              P. SpencerChief Executive Officer(Principal
                Executive Officer and duly authorized
              to
                sign on behalf of the Registrant)




19