**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-Q**




(Mark
      One)




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




For
      quarterly period ended **June
      30, 2008**




 ̈ 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 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 **x** **No**  ̈





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 filero
            
            Accelerated
                filero
            
            Non-accelerated
                filero
            
            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  ̈  **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
            
            10,960,788(Class)
            
            Outstanding
                at August 13, 2008









**Imagenetix,
      Inc.**




**INDEX**





PagePART
                I. FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements:Condensed
                Consolidated Balance Sheets as of June 30, 2008 (unaudited) and March
                31,
                2008
            3Condensed
                Consolidated Statements of Operations for the three months ended
                June 30,
                2008 and 2007 (unaudited)
            4Condensed
                Consolidated Statements of Cash Flows for the three months ended
                June 30,
                2008 and 2007 (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
            *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
            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 31,2008
            
            2008(Unaudited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            2,065,256
            
            $
            1,022,555Accounts
                receivable, net
            
            
            1,249,603
            
            
            765,492Inventories,
                net
            
            
            1,246,851
            
            
            1,109,845Prepaid
                expenses and other current assets
            
            
            170,121
            
            
            252,138Deferred
                tax asset
            
            
            390,097
            
            
            862,497Total
                current assets
            
            
            5,121,928
            
            
            4,012,527Property
                and equipment, net
            
            
            104,652
            
            
            112,190Long-term
                prepaid expenses
            
            
            39,000
            
            
            42,000Other
                assets
            
            
            231,705
            
            
            218,155Total
                Assets
            
            $
            5,497,285
            
            $
            4,384,872LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            974,378
            
            $
            713,324Accrued
                liabilities
            
            
            91,878
            
            
            72,301Customer
                deposits
            
            
            262,666
            
            
            63,216Contract
                payable
            
            
            23,100
            
            
            46,200Short
                term license payable
            
            
            28,929
            
            
            34,259Total
                current liabilities
            
            
            1,380,951
            
            
            929,300Long
                term license payable
            
            
            -
            
            
            2,980Total
                Liabilities
            
            
            1,380,951
            
            
            932,280Stockholders'
                equityPreferred
                stock, $.001 par value; 5,000,000 sharesauthorized:
                none outstanding
            
            
            -
            
            
            -Common
                stock, $.001par value; 50,000,000 sharesauthorized:
                10,960,788 issued and outstanding atJune
                30 and March 31, 2008
            
            
            10,960
            
            
            10,960Capital
                in excess of par value
            
            
            12,558,073
            
            
            12,481,407Accumulated
                deficit
            
            
            (8,452,699
            )
            
            (9,039,775
            )Total
                stockholders' equity
            
            
            4,116,334
            
            
            3,452,592Total
                Liabilities and Stockholders' Equity
            
            $
            5,497,285
            
            $
            4,384,872


*See
      accompanying notes to unaudited condensed consolidated financial
      statements.*


3




**Imagenetix,
      Inc.**


**Condensed
      Consolidated Statements of Operations**


(Unaudited)





Three Months EndedJune 30,
            
            June 30,2008
            
            2007Net
                sales
            
            $
            1,394,358
            
            $
            1,126,991Cost
                of sales
            
            
            819,711
            
            
            536,604Gross
                profit
            
            
            574,647
            
            
            590,387Operating
                expenses:General
                and administrative
            
            
            605,472
            
            
            646,509Payroll
                expense
            
            
            372,190
            
            
            356,497Consulting
                expense
            
            
            345,761
            
            
            251,524Operating
                expenses
            
            
            1,323,423
            
            
            1,254,530Operating
                income (loss)
            
            
            (748,776
            )
            
            (664,143
            )Other
                income (expense):Other
                income
            
            
            7,742
            
            
            6,944Settlement
                income
            
            
            1,785,000
            
            
            -Interest
                expense
            
            
            (690
            )
            
            (1,327
            )Other
                income
            
            
            1,792,052
            
            
            5,617Income
                (loss) before income taxes
            
            
            1,043,276
            
            
            (658,526
            )Income
                tax expense (benefit)
            
            
            456,200
            
            
            (223,000
            )Income
                (loss)
            
            $
            587,076
            
            $
            (435,526
            )Basic
                income (loss) per share
            
            $
            0.05
            
            $
            (0.04
            )Diluted
                income (loss) per share
            
            $
            0.05
            
            $
            (0.04
            )Basic
                weighted average common shares outstanding
            
            
            10,960,788
            
            
            10,871,400Diluted
                weighted average common shares outstanding
            
            
            11,021,173
            
            
            10,871,400





*See
      accompanying notes to unaudited condensed consolidated financial
      statements.*


4


**Imagenetix,
      Inc.**


**Consolidated
      Statements of Cash Flows**


(Unaudited)





Three Months EndedJune 30, 2008
            
            June 30, 2007**Operating activities:**Net
                income (loss)
            
            $
            587,076
            
            $
            (435,526
            )Adjustments
                to reconcile net income (loss)to
                cash provided by (used in) operating activities:Amortization
                and depreciation
            
            
            10,188
            
            
            12,176Provision
                for doubtful accounts
            
            
            -
            
            
            15,000Provision
                for inventory obsolescence
            
            
            (12,003
            )
            
            22,105Non
                cash expense related to issuance of warrantsand
                granting of stock options
            
            
            76,666
            
            
            304,607Changes
                in assets and liabilities:(Increase)
                decrease in accounts receivable
            
            
            (484,111
            )
            
            656,053(Increase)
                decrease in employee receivable
            
            
            845
            
            
            764(Increase)
                decrease in inventories
            
            
            (125,003
            )
            
            (152,389
            )(Increase)
                decrease in other assets
            
            
            84,171
            
            
            (11,434
            )(Increase)
                decrease in deferred taxes
            
            
            456,200
            
            
            (223,000
            )Increase
                (decrease) in accounts payable
            
            
            261,055
            
            
            57,410Increase
                (decrease) in accrued liabilities
            
            
            19,577
            
            
            11,319Increase
                (decrease) in customer deposits
            
            
            199,450
            
            
            375,000Net
                cash provided by operating activities
            
            
            1,074,111
            
            
            632,085**Investing
                activities:**Purchases
                of property and equipment
            
            
            -
            
            
            (12,840
            )Net
                cash used in investing activities
            
            
            -
            
            
            (12,840
            )**Financing
                activities:**Payments
                on contracts payable
            
            
            (23,100
            )
            
            (24,985
            )Payments
                on patent license financed
            
            
            (8,310
            )
            
            (7,673
            )Net
                cash used in financing activities
            
            
            (31,410
            )
            
            (32,658
            )**Net
                increase in cash and cash equivalents**
            
            
            1,042,701
            
            
            586,587**Cash
                and cash equivalents**,
                beginning of period
            
            
            1,022,555
            
            
            958,896**Cash
                and cash equivalents,**end of period
            
            $
            2,065,256
            
            $
            1,545,483**Supplemental
                Disclosure of Cash Flow Information:**Cash
                paid during the period for:Interest
            
            $
            690
            
            **$**
            1,327Income
                taxes
            
            $
            -
            
            **$**
            -





*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-KSB for the year ended March 31, 2008.





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 6 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
      March 2008, the FASB issued SFAS No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities” (SFAS No. 161”). SFAS
      No. 161 amends and expands the disclosure requirement for FASB Statement
      No. 133, “Derivative Instruments and Hedging Activities” (“SFAS
      No. 133”). It requires enhanced disclosure about (i) how and why an
      entity uses derivative instruments, (ii) how derivative instruments and
      related hedge items are accounted for under SFAS No. 133 and its related
      interpretations, and (iii) how derivative instruments and related hedge
      items affect an entity’s financial position, financial performance, and cash
      flows. SFAS No. 161 is effective for the Company as of April 1, 2009.
      The Company is currently assessing the impact of SFAS 161 on its consolidated
      financial position and results of operations.


6





**IMAGENETIX,
      INC.**


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





In
      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
      Accepted Accounting Principles.” SFAS No. 162 identifies the sources of
      accounting principles and provides entities with a framework for selecting
      the
      principles used in preparation of financial statements that are presented in
      conformity with GAAP. The current GAAP hierarchy has been criticized because
      it
      is directed to the auditor rather than the entity, it is complex, and it ranks
      FASB Statements of Financial Accounting Concepts, which are subject to the
      same
      level of due process as FASB Statements of Financial Accounting Standards,
      below
      industry practices that are widely recognized as generally accepted but that
      are
      not subject to due process. The Board believes the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditors) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. The adoption of FASB 162 is not expected
      to have a material impact on the Company’s consolidated financial position and
      results of operations.





In
      April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of
      Intangible Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be
      considered in developing renewal or extension assumptions used to determine
      the
      useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
      and Other Intangible Assets”. FSP 142-3 is effective for fiscal years beginning
      after December 15, 2008. The Company is currently assessing the impact of
      FSP 142-3 on its consolidated financial position and results of operations.





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





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




June 30,
                2008
            
            March 31,
                2008Accounts
                receivable - trade
            
            $
            1,354,603
            
            $
            870,492Allowance
                for doubtful accounts
            
            
            (105,000
            )
            
            (105,000
            )Accounts
                receivable, net
            
            $
            1,249,603
            
            $
            765,492




At
      June
      30, 2008, we had two customers which accounted for 46% and 19% of our accounts
      receivable balances.  At
      March
      31, 2008, we had two customers which accounted for 16% and 12% of our accounts
      receivable balances.





For
      the
      three months ended June 30, 2008, we had two significant customers which
      accounted for 48%, and 26% of sales. For the three months ended June 30, 2007,
      we had three significant customers which accounted for 28%, 11% and 11% of
      sales.


7


**IMAGENETIX,
      INC.**


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




**4.**  **INVENTORIES**





Inventories
      consist of the following:





June 30,
            
            March 31,2008
            
            2008Raw
                materials
            
            $
            940,746
            
            $
            824,807Finished
                products
            
            
            236,242
            
            
            295,615Boxes,
                labels, tubes & bottles
            
            
            208,402
            
            
            139,9651,385,390
            
            
            1,260,387Reserve
                for obsolescence
            
            
            (138,539
            )
            
            (150,542
            )$
            1,246,851
            
            $
            1,109,845








**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 31,2008
            
            2008Trademarks
            
            $
            13,032
            
            $
            13,032Patent
            
            
            172,965
            
            
            172,965Deferred
                tax asset
            
            
            103,900
            
            
            87,700289,897
            
            
            273,697Less
                accumulated amortization
            
            
            58,192
            
            
            55,542$
            231,705
            
            $
            218,155





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





We
      recorded non-cash compensation expense for stock options and warrants issued
      to
      employees and consultants of $76,666 for the three months ended June 30, 2008
      and $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 are as follows:




Three
                months ended June 30,2008
            
            2007Expected
                term of options and warrants
            
            
            5
                years
            
            
            5
                yearsExpected
                volatility
            
            
            61
            %
            
            71
            %Expected
                dividends
            
            
            None
            
            
            NoneRisk-free
                interest rate
            
            
            3.36
                to 3.54
            %
            
            4.55
            %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, 2008WeightedAverageExerciseOptions
            
            
            Shares
            
            
            PriceOutstanding
                at beginning of year
            
            
            944,000
            
            $
            1.00Granted
            
            
            305,000
            
            
            0.65Cancelled
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Outstanding
                at end of the period
            
            
            1,249,000
            
            
            0.92Exercisable
                at end of the the period
            
            
            1,096,500
            
            $
            0.95Weighted
                average fair value of options granted during the period
            
            
            305,000
            
            $
            0.36




As
      of
      June 30, 2008, the unamortized portion of stock compensation expense on all
      existing stock options was $54,562.





A
      summary
      of warrants outstanding follows:





For the Three Months EndedJune 30, 2008WeightedAverageExerciseWarrants
            
            
            Shares
            
            
            PriceOutstanding
                at beginning of year
            
            
            3,902,957
            
            $
            1.18Granted
            
            
            25,000
            
            
            1.20Cancelled
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Outstanding
                at end of the period
            
            
            3,927,957
            
            
            1.18Exercisable
                at end of the the period
            
            
            3,927,957
            
            $
            1.18Weighted
                average fair value of warrants granted during the period
            
            
            25,000
            
            $
            0.42





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





We
      file
      income tax returns in the U.S. federal jurisdiction and the state of California.
      With few exceptions, we are no longer subject to U.S. federal, state and local
      or non-U.S. income tax examinations by tax authorities for years before
      2004.





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 did not recognize an increase


9


**IMAGENETIX,
      INC.**


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





Included
      in the balance at April 1, 2007, were no tax positions for which the ultimate
      deductibility is highly certain but for which there is uncertainty about the
      timing of such deductibility. Because of the impact of deferred tax accounting,
      other than interest and penalties, the disallowance of the shorter deductibility
      period would not affect the annual effective tax rate but would accelerate
      the
      payment of cash to the taxing authority to an earlier period.





Our
      policy is to recognize interest accrued related to unrecognized tax benefits
      in
      interest expense and penalties in operating expenses.




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-KSB FOR THE YEAR ENDED MARCH 31,
      2008.




**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, 2008, 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, 2008,
      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, 2008 Compared to Three Months Ended June 30,
      2007*




Three
                Months EndedIncrease6/30/08
            
            6/30/07
            
            (Decrease)
            
            %Statements
                of Operations:Net
                sales
            
            $
            1,394,358
            
            $
            1,126,991
            
            $
            267,367
            
            
            23.7
            %Cost
                of goods sold
            
            
            819,711
            
            
            536,604
            
            
            283,107
            
            
            52.8
            %%
                of net sales
            
            
            59
            %
            
            48
            %
            
            11
            %
            
            23.5
            %Gross
                profit
            
            
            574,647
            
            
            590,387
            
            
            (15,740
            )
            
            -2.7
            %%
                of net sales
            
            
            41
            %
            
            52
            %
            
            -11
            %
            
            -21.3
            %Operating
                expensesGeneral
                and administrative
            
            
            605,472
            
            
            646,509
            
            
            (41,037
            )
            
            -6.3
            %Payroll
                expense
            
            
            372,190
            
            
            356,497
            
            
            15,693
            
            
            4.4
            %Consulting
                expense
            
            
            345,761
            
            
            251,524
            
            
            94,237
            
            
            37.5
            %Total
                operating expenses
            
            
            1,323,423
            
            
            1,254,530
            
            
            68,893
            
            
            5.5
            %Interest
                expense
            
            
            (690
            )
            
            (1,327
            )
            
            (637
            )
            
            -48.0
            %Settlement
                income
            
            
            1,785,000
            
            
            -
            
            
            1,785,000
            
            
            NMOther
                income
            
            
            7,742
            
            
            6,944
            
            
            798
            
            
            11.5
            %Provision
                for (benefit from) taxes
            
            
            456,200
            
            
            (223,000
            )
            
            (679,200
            )
            
            NMNet
                income (loss)
            
            
            587,076
            
            
            (435,526
            )
            
            1,022,602
            
            
            NMNet
                income (loss) per share basic
            
            
            0.05
            
            
            (0.04
            )
            
            0.09
            
            
            NM




Net
      Sales




Net
      sales
      for the quarter ended June 30, 2008 increased $267,367, a 23.7% increase, to
      $1,394,358 compared to $1,126,991 for the quarter ended June 30, 2007. The
      primary reason for the sales increase was attributed to increased sales to
      a
      distributor of our raw material. Sales of our own branded product, Inflame
      Away,
      that identifies Celadrin â as its
      marquee ingredient, continued to increase but was offset by product rebates
      and
      giveaways in support of marketing InflameAway through retail distribution
      channels. In addition, sales of our weight loss product increased during the
      first fiscal quarter. We anticipate, the new marketing program 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 48% for the quarter
      ended
      June 30, 2007 to 59% for the quarter ended June 30, 2008. This increase was
      primarily due to the rebate and giveaway marketing strategy discussed above
      which resulted in InflameAway product being provided at no cost to the eventual
      customer. 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 decreased by $41,037, a 6.3% decrease, to $605,472
      for the quarter ended June 30, 2008 from $646,509 for the quarter ended June
      30,
      2007. The primary reasons for the decrease were an approximate $73,000 decrease
      in advertising expenses related to the launch of InflameAway offset by an
      increase in expenses related to clinical research studies and travel expenses.
      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 increased to $372,190 for the quarter ended June 30, 2008, an increase
      of 4.4% or $15,693, compared to $356,497 for the quarter ended June 30, 2007.
      This increase was a result of normal salary increases.




Consulting
      Expenses




Consulting
      expenses increased to $345,761 for the quarter ended June 30, 2008, an increase
      of 37.5% or $94,237 compared to $251,524 for the quarter ended June 30, 2007.
      This increase was a result of increased litigation expenses related to the
      settlement of a potential trademark infringement case coupled with increased
      audit fees related to requirements to include management’s assessment of
      internal controls in financial statements. We anticipate consulting fees to
      decrease since litigation has been successfully concluded.




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 will provide Celadrin for use in
      their products.




Provision
      for Income Taxes




As
      a
      result of income for the quarter ended June 30, 2008, an income tax expense
      of
      $456,200 was recognized during the current quarter compared to $223,000 of
      income tax benefit being recognized during the quarter ended June 30, 2007.


14




**Capital
      Resources**




Working
                CapitalIncrease6/30/08
            
            3/31/08
            
            (Decrease)Current
                assets
            
            $
            5,121,928
            
            $
            4,012,527
            
            $
            1,109,401Current
                liabilities
            
            
            1,380,951
            
            
            929,300
            
            
            451,651Working
                capital
            
            $
            3,740,977
            
            $
            3,083,227
            
            $
            657,750Long-term
                debt
            
            $
            -
            
            $
            2,980
            
            $
            (2,980
            )Stockholders'
                equity
            
            $
            4,116,334
            
            $
            3,452,592
            
            $
            663,742





Statements
      of Cash Flows Select Information




Thre
                  e Months Ended
              
              Increase6/30/08
              
              6/30/07
              
              (Decrease)Net
                  cash provided by (used in):Operating
                  activities
              
              $
              1,074,111
              
              $
              632,085
              
              $
              442,026Investing
                  activities
              
              $
              -
              
              $
              (12,840
              )
              $
              12,840Financing
                  activities
              
              $
              (31,410
              )
              $
              (32,658
              )
              $
              1,248




Balance
      Sheet Select Information





Increase6/30/08
            
            3/31/08
            
            (Decrease)Cash
                and cash equivalients
            
            $
            2,065,256
            
            $
            1,022,555
            
            $
            1,042,701Accounts
                receivable, net
            
            $
            1,249,603
            
            $
            765,492
            
            $
            484,111Inventories,
                net
            
            $
            1,246,851
            
            $
            1,109,845
            
            $
            137,006Accounts
                payable and accrued expenses
            
            $
            1,089,388
            
            $
            785,625
            
            $
            303,763




**Liquidity**




We
      have
      historically financed our operations internally and through debt and equity
      financings. At June 30, 2008, we had cash holdings of $2,065,256, an increase
      of
      $1,042,701 compared to March 31, 2008. Our net working capital position at
      June
      30, 2008, was $3,740,977 compared to $3,083,227 as of March 31, 2008. 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**





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




**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 58% of our
      products and which represented approximately 74% of our sales for the year
      ended
      March 31, 2008. 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 29% and 16% of our net sales for the year ended
      March 31, 2008 and 48% and 26% of our net sales for the three months ended
      June
      30, 2008. 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.





**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;





•
            the
                health and safety of food and drugs;





•
            trade
                practice and direct selling laws; and


16


•
            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
      10,960,788 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 5,176,957 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 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.


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, 2008 to provide reasonable assurance in the Company’s financial
      reporting.




**Remediation
      of Certain Weaknesses and Changes in Internal Controls**





As
      discussed in the Company’s Annual Report on Form 10-KSB for the year ended March
      31, 2008, filed with the SEC on June 25, 2008, during the financial reporting
      process for the fiscal year end March 31, 2008, the following weaknesses in
      the
      Company’s internal control over financial reporting were
      identified:





(1)
      Deficiencies in Segregation of Duties. The Chief Executive Officer and the
      Chief
      Financial Officer are actively involved in the preparation of the financial
      statements, and therefore cannot provide an independent review and quality
      assurance function within the accounting and financial reporting group. The
      limited number of qualified accounting personnel discussed above results in
      an
      inability to have independent review and approval of financial accounting
      entries. Furthermore, management and financial accounting personnel have
      wide-spread access to create and post entries in the Company’s financial
      accounting system. There is a risk that a material misstatement of the financial
      statements could be caused, or at least not be detected in a timely manner,
      due
      to insufficient segregation of duties, and


18


(2) Our
      financial statement closing process did not identify all the journal entries
      that needed to be recorded as part of the closing process for certain complex
      and non-routine transactions. As part of the audit, our independent registered
      public accounting firm proposed certain entries that should have been recorded
      as part of the normal closing process. Our internal control over financial
      reporting did not detect such matters and, therefore, was not effective in
      detecting misstatements in the financial statements.





To
      address the material weakness, during the quarter ended June 30, 2008, we
      performed additional analysis and other post-closing procedures in an effort
      to
      ensure our consolidated financial statements included in this quarterly report
      have been prepared in accordance with generally accepted accounting principles.
      We continue to implement a plan whereby during fiscal year 2009 sufficient
      testing to satisfy COSO requirements will be performed. The absence of the
      ability to conclude as to the sufficiency of internal controls, is a material
      weakness.





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, 2008, 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.





Other
      than as described above, there have not been any other changes in the Company’s
      internal control over financial reporting during the quarter ended June 30,
      2008, 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.**
            
            **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


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 13,
                2008
            
            By:
            /s/
                WILLIAM P. SPENCERWilliam
                P. SpencerChief
                Executive Officer(Principal
                Executive Officer and duly authorizedto
                sign on behalf of the
                Registrant)


20