FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

Commission file number 0-3338

INERGETICS, INC.

(Exact Name of Registrant as Specified in its Charter)

	Delaware	22-1558317
	(State or other Jurisdiction of	(IRS Employer
	Incorporation or Organization)	Identification No.)

550 Broad Street, Suite 1212, Newark, NJ 07102

(Address of Principal Executive Office) (Zip Code)

(908) 604-2500

(Registrant’s telephone number including area code)

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨	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

As of August 18, 2015, 852,302,469 shares of Common Stock, $0.001 par value.

INERGETICS, INC. AND SUBSIDIARY

INDEX

	Page
	Number

PART 1 - FINANCIAL INFORMATION

Item 1 Financial Statements (unaudited):

Condensed Consolidated Balance Sheets - June 30, 2015 and December 31, 2014	3

Condensed Consolidated Statements of Operations - Six months ended June 30, 2015 and 2014	4

Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2015 and 2014	5

Notes to Condensed Consolidated Financial Statements	6 – 13

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3 Quantitative and Qualitative Disclosures about Market Risk	16

Item 4 Controls and Procedures	17

PART II - OTHER INFORMATION	17

Item 1 Legal Proceedings	17

Item 1A. Risk Factors	17

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3 Defaults Upon Senior Securities	18

Item 4 Mine Safety Disclosures	18

Item 5 Other Information	18

Item 6 Exhibits	18

SIGNATURES	19

PART I - Item 1

INERGETICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			December 31,
	2015			2014
Assets
Current Assets:
Cash	$	2,067		$	5,762
Accounts receivable, net		166,336			342,607
Receivable from the Technology Business Tax Certificate Transfer Program		-			375,645
Inventories, net		112,792			686,275
Prepaid expenses		8,412			133,486
Total Current Assets		289,607			1,543,775

Patents and intangible assets, net		106,027			147,815
Goodwill		135,000			135,000
Deposits		113,684			101,508
Total Assets	$	644,318		$	1,928,098
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable and accrued expenses	$	5,720,471		$	4,416,724
Obligations to be settled in stock		876,033			553,812
Derivative liability		-			910,590
Short-term debt, net of unamortized debt discount		2,696,559			2,462,528
Short-term debt to affiliates, net of unamortized debt discount		3,829,075			3,829,075
Total Current Liabilities		13,122,138			12,172,729

Commitments and Contingencies
Preferred stock, Convertible Series B, par value $2; 65,141 shares issued and outstanding		130,282			130,282
Preferred stock, Convertible Series G, authorized 400,000 par $1, stated Value $50: 400,000 and 246,976 shares issued and outstanding		8,466,305			8,952,711
Stockholders’ Deficit
Preferred stock:
Cumulative Series C, par value $1; 64,763 shares issued and outstanding		64,763			64,763
Common stock, par value $0.001; authorized 2,000,000,000 shares; issued and outstanding 559,022,648 and 143,301,039 shares, respectively		559,020			143,301
Additional paid-in capital		74,987,921			73,319,330
Accumulated Deficit		(96,686,111	)		(92,855,018	)
Total Stockholders’ Deficit		(21,074,407	)		(19,327,624	)
Total Liabilities and Stockholders’ Deficit	$	644,318		$	1,928,098

The accompanying notes are an integral part of the condensed consolidated financial statements.

INERGETICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Total Revenues	$	200,105		$	523,615		$	483,882		$	1,003,417
Cost of Goods Sold		154,213			310,437			903,841			673,040
Gross Profit		45,892			213,178			(419,959	)		330,377

Research and development		842			8,521			27,383			12,929
Selling, general and administrative expense		514,363			1,555,511			2,162,393			4,696,231
Total operating expenses		515,205			1,564,032			2,189,776			4,709,160
Loss from Operations		(469,313	)		(1,350,854	)		(2,609,735	)		(4,378,783	)

Other Income (Expense)
Amortization of debt discount		(524,986	)		(35,650	)		(1,091,221	)		(169,003	)
Gain (Loss) on extinguishment of debt		(362,050	)		2,787			(1,064,643	)		18,378
Loss from derivatives issued with debt greater than debt carrying value		(195,000	)		-			(377,000	)		-
Gain (Loss) on fair market valuation of derivatives		2,335,000			542,000			1,725,520			(472,000	)
Interest and financing cost, net		(205,988	)		(400,970	)		(414,014	)		(768,340	)
Total Other Income (Expense)		1,046,976			108,167			(1,221,358	)		(1,390,965	)
Net Income (Loss)		577,663			(1,242,687	)		(3,831,093	)		(5,769,748	)
Preferred Dividend		(63,047	)		(321,525	)		(389,606	)		(579,963	)
Net Income (Loss) applicable to common shareholders	$	514,616		$	(1,564,212	)	$	(4,220,699	)	$	(6,349,711	)

Net Income (Loss) per Common Share - Basic and Diluted	$	0.00		$	(0.02	)	$	(0.02	)	$	(0.09	)

Weighted Average Number of common shares outstanding - Basic and Diluted		297,553,100			78,183,619			237,967,782			71,135,031

The accompanying notes are an integral part of the condensed consolidated financial statements.

INERGETICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2015			2014
Cash Flows from Operating Activities
Net Loss	$	(3,831,093	)	$	(5,769,746	)
Adjustments to Reconcile Net Loss to
Net Cash Used In Operations
(Gain) Loss on fair market valuation of derivatives		(1,725,520	)		472,000
Depreciation and amortization		788			788
Common Stock issued for financing expenses		-			17,365
Preferred Stock issued for financing expenses		-			262,418
Common Stock issued for services		15,699			199,609
Common stock issued for compensation		4,941			1,332,883
Loss (Gain) on extinguishment of debt		1,064,643			(18,378	)
Accretion of debt discount		1,091,221			169,003
Loss on issuance of convertible debt		377,000			-
Inventory reserve		559,987			-
Intangible asset impairment		41,000			-

Changes in Assets and Liabilities
Decrease (Increase) in accounts receivable		176,271			(111,000	)
Decrease in receivable from Technology Business Tax Certificate Transfer Program		375,645			3,357,144
Decrease (Increase) in inventories		13,496			(552,340	)
Decrease in deferred cost of goods sold		-			75,497
Decrease (Increase) in prepaid expenses		125,074			(215,103	)
(Increase) Decrease in deposits		(12,176	)		220,092
Increase (Decrease) in accounts payable and accrued expenses		1,311,829			(304,434	)
Decrease in deferred revenue		-			(194,288	)

Net Cash Used in Operating Activities		(411,195	)		(1,058,490	)

Cash Flows from Financing Activities
Proceeds from debt		632,500			1,495,030
Repayment of debt		(225,000	)		(528,000	)
Net Cash Provided by Financing Activities		407,500			967,030

Net Decrease in Cash		(3,695	)		(91,460	)
Cash at beginning of period		5,762			106,774
Cash at end of period	$	2,067		$	15,313

Supplemental Disclosure of Cash Flow information:
Cash paid during the period for:
Interest Expense	$	15,264		$	213,621
Income Taxes	$	-		$	-
Non-cash
Issuance of G shares as Preferred dividend (160,927 and 9,851 shares)	$	389,606		$	579,963
Change in liability of stock to be Issued	$	322,221		$	150,348

The accompanying notes are an integral part of the condensed consolidated financial statements.

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

On March 15, 2010 the Company changed its name to Inergetics, Inc. Inergetics, Inc. (the Company or "Inergetics"), formerly Millennium Biotechnologies Group, Inc., is a holding company for its subsidiary Millennium Biotechnologies, Inc. ("Millennium").

Millennium was incorporated in the State of Delaware on November 9, 2000 and is located in New Jersey. Millennium is a research based bio-nutraceutical corporation involved in the field of nutritional science. Millennium’s principal source of revenue is from sales of its nutraceutical supplements, Resurgex Select® and Resurgex Essential™ and Resurgex Essential Plus™ which serve as a nutritional support for immuno-compromised individuals undergoing medical treatment for chronic debilitating diseases. Millennium has developed Surgex for the sport nutritional market. The Company acquired Bikini Ready®, a leader in weight loss lifestyle solutions and SlimTrim™, the affordable, premium value diet brand. The Company’s efforts going forward will focus on sales of Surgex in powder and pill forms as well as powder and pills for Bikini Ready and pills for SlimTrim and OmEssentials®.

The accompanying unaudited condensed consolidated financial statements include the accounts of Inergetics, Inc. and its subsidiary. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiary are prepared in accordance with accounting principles generally accepted in the United States. All significant inter-company transactions and balances have been eliminated.

Certain information in footnote disclosure normally included in the financial statements have been condensed or omitted and the financial statements might not be indicative of a full year’s results. The Company believes the disclosures are adequate to make the information presented not misleading.

The financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for fiscal year-ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed on April 15, 2015.

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Use of Estimates

The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Goodwill

Goodwill and other acquired intangible assets with indefinite lives are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is December 31. We test goodwill for impairment by first comparing the carrying value of net assets to the fair value of the related operations. If the fair value is determined to be less than carrying value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment. Intangibles consist of brand and trade names acquired in business combinations. We test these intangibles for impairment by comparing their carrying value to current projections of discounted cash flows attributable to the brand and trade names. Any excess carrying value over the amount of discounted cash flows represents the amount of the impairment.

Income Taxes

The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Loss Per Common Share

Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. During a loss period, the effect of the potential exercise of stock options, warrants, convertible preferred stock and convertible debt are not considered in the diluted income (loss) per share calculation since the effect would be anti-dilutive.

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Fair Value of Financial Instruments

For financial instruments including cash, accounts receivable, prepaid expenses, debt, accounts payable and accrued expenses, the carrying values approximated their fair value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Patents and Intangible Assets

Patents are capitalized and amortized over 240 months. Amortization expense for the six months ended June 30, 2015 and 2014 was $788 and $788, respectively.

Intangible assets with indefinite lives are not amortized, but are tested for impairment. During the quarter ended March 31, 2015 the company wrote off the Martha Stewart intangible asset in the amount of $41,000 due to the notice received in the second quarter of 2015 terminating the license agreement.

2 . GOING CONCERN AND LIQUIDITY ISSUES

The Company’s future success is dependent upon its ability to achieve profitable operations and generate cash from operating activities, and upon additional financing. Management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive.

However, the Company has a working capital deficit, significant debt outstanding, incurred substantial net losses for the six months ended June 30, 2015 and 2014 and has accumulated a deficit of approximately $97 million at June 30, 2015. The Company has not been able to generate sufficient cash from operating activities to fund its ongoing operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern.

3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

The Company maintains cash balances in several financial institutions which are insured by the Federal Deposit Insurance Corporation up to certain federal limitations.

The Company provides credit in the normal course of business to customers located throughout the U. S. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. INVENTORIES

Inventories are stated at the lower of cost or market on a first in, first out basis. Inventories consist of work-in-process, raw materials, finished goods, and packaging for the Company’s Martha Stewart Essentials, SURGEX®, Bikini Ready®, SlimTrim™ and Om Essentials® product lines. Inventories consist of the following:

	June 30,		December 31,
	2015		2014
Finished Goods	$	646,789	$	634,578
Packaging		25,990		51,697
		672,779		686,275
Less: Reserve for obsolescence		559,987		-
Total	$	112,792	$	686,275

5. PREPAID EXPENSES

Prepaid expenses are for services that have been paid in advance primarily with stock that are amortized over the life of the contract. The agreements pertain to pricing structure, distribution, warehousing, inventory management, financial advisory services, pro athlete endorsements and licensing agreements.

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	June 30,		December 31,
	2015		2014
Accounts payable	$	3,918,159	$	3,067,081
Accrued interest		1,196,385		833,215
Accrued rent expense		135,874		135,874
Accrued salaries, bonuses and payroll taxes		210,534		125,391
Accrued professional fees		219,794		218,593
Owed to officers		39,725		36,570
	$	5,720,471	$	4,416,724

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. SHORT TERM DEBT, NET OF DEBT DISCOUNT

In the first six months of 2015, the Company realized gross proceeds of $632,500 in new cash. Proceeds from the sale of its 4% to 12% twelve month Unsecured Convertible Notes, in the aggregate original principal amount of $632,500 (the “Notes”) to accredited investors (the “Investors”). Interest on the outstanding principal balance of the Notes is payable upon maturity of the notes. For the convertible notes, the outstanding principal balance of the Notes and all accrued but unpaid interest thereon may be converted at any time at the option of each Investors into shares of Common Stock at the Conversion Price ranging from 62% to 55% of the lowest trading price of the Common Stock as quoted by Bloomberg L.P. for the ten trading days immediately preceding the date of conversion (subject to adjustments as provided in the Note. The Company may prepay the Notes at any time with a penalty to the Investors ranging from zero to 40% of the outstanding principal and accrued interest.

Unsecured Notes, net debt discount, consist of the following:

	June 30,			December 31,
	2015			2014
Unsecured Convertible Notes	$	3,150,919		$	3,510,416
Debt discount		(454,360	)		(1,047,888	)
	$	2,696,559		$	2,462,528

The Company during the six months ended June 30, 2015 recorded a debt discount of $539,000. At June 30, 2015, approximately $3.2 million of notes are in default. Management is working with the creditors to modify the terms of these defaulted notes.

Loss on Troubled Debt Restructuring

2015 Modification of Debt

The following debt instruments were modified in 2015. The modification of debt included the addition of a conversion feature therefore requiring the Company to record the transaction in accordance with ASC 470 “Debt” modification of debt accounting.

At June 30, 2015, the Company had promissory notes issued to four affiliated investors with an outstanding balance of $1,455,128, which were due as of March 31, 2015. During April 2015, the Company reached an agreement with the investors to extend the debt for thirteen months. At the date of extension, the new debt payable was $1,455,128. The new debt incurred origination fees paid through the issuance of Series G preferred stock valued at $160,288, resulting in an adjustment to Stockholders’ Deficit.

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. FAIR VALUE MEASUREMENTS

The following table represents the fair value hierarchy for those financial assets measured at fair value on a recurring basis

	Fair Value at
	June 30,		Fair Value Measurement Using
	2015		Level 1		Level 2		Level 3
Derivative liability – Conversion Feature	$	-		-		-	$	-
	$	-		-		-	$	-

	Fair Value at
	December 31,		Fair Value Measurement Using
	2014		Level 1		Level 2		Level 3
Derivative liability – Conversion Feature	$	910,590		-		-	$	910,590
	$	910,590		-		-	$	910,590

Liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level3):

	June 30,
	2015
Balance at December 31, 2014	$	910,590
Issuance of notes with derivatives		916,000
Derivative debt converted into equity		(101,070	)
Loss on fair market valuation of derivatives		(1,725,520	)
Balance at June 30, 2015	$	-

INERGETICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE MEASUREMENTS, Continued

9. WARRANTS

Warrant activity for the six months ended June 30, 2015 is as follows:

				Weighted
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual Term In		Intrinsic
	Warrants			Price		Months		Value
Outstanding at December 31, 2014		21,292,144		$	0.223		46	$	-

Granted		-			-		-		-

Exercised		-			-		-		-

Expired or cancelled		(3,087,500	)		.200		-		-

Outstanding and exercisable at June 30, 2015		18,204,644		$	0.202		50	$	-

10. SUBSEQUENT EVENTS

The Company entered into a securities purchase agreement (“SPA”), dated as of July 16, 2015, with two (2) accredited investors (“Buyers 1 & 2”). Pursuant to the terms of SPA, Buyers 1 & 2 each purchased from the Company, a 12% convertible promissory notes of the Company, in the aggregate principal amount of $145,500 per note or $291,000 in the aggregate (“Notes 1 and 2”) which were paid for by Buyer 1 &2 on July 14, 2015 and July 16, 2015, respectively.

Notes 1 and 2 mature on July 13, 2016 and are convertible in whole or in part into shares of the Company's common stock, at the option of Buyers 1 & 2, respectively, at any time prior to the maturity dates thereof at a conversion price (collectively, the “Conversion Price”) equal to the lower of (i) a 38% discount from the lowest Trading Price of the Company’s common stock for the 10 trading days prior to the date that the holder requests a conversion and (ii) $0.07. The Conversion Price is subject to anti-dilution protection as provided in the SPA.

Notes 1 and 2 are each subject to prepayment at any time by the Company, but if such prepayment occurs at any time beginning 75 days after the issue date of Notes 1 and 2 respectively, but prior to the maturity dates thereof, the Company may prepay Notes 1 and 2 by paying to Buyers 1 & 2 an amount equal to 130% of the outstanding principal amount of Notes 1 & 2, respectively. Upon a Qualified Offering (as defined in Notes 1 and 2), the Company is required to prepay Notes 1 and 2 on the terms provided in Notes 1 and 2.

The Company entered into a securities purchase agreement (“SPA 2”), dated as of July 31, 2015, with two (2) accredited investors (“Buyers 1 & 2”). Pursuant to the terms of SPA 2, Buyers 1 & 2 each purchased from the Company, a 12% convertible promissory notes of the Company, in the aggregate principal amount of $52,500 per note or $105,000 in the aggregate (“Notes 3 and 4”) which were paid for by Buyer 1 &2 on August 3, 2015 and August 4, 2015, respectively.

Notes 3 and 4 mature on July 31, 2016 and are convertible in whole or in part into shares of the Company's common stock, at the option of Buyers 1 & 2, respectively, at any time prior to the maturity dates thereof at a conversion price (collectively, the “Conversion Price”) equal to the lower of (i) a 38% discount from the lowest Trading Price of the Company’s common stock for the 10 trading days prior to the date that the holder requests a conversion and (ii) $0.07. The Conversion Price is subject to anti-dilution protection as provided in the SPA.

Notes 3 and 4 are each subject to prepayment at any time by the Company, but if such prepayment occurs at any time beginning 75 days after the issue date of Notes 3 and 4 respectively, but prior to the maturity dates thereof, the Company may prepay Notes 3 and 4 by paying to Buyers 1 & 2 an amount equal to 130% of the outstanding principal amount of Notes 3 & 4, respectively. Upon a Qualified Offering (as defined in Notes 1 and 2), the Company is required to prepay Notes 3 and 4 on the terms provided in Notes 3 and 4.

In order to provide financing to have the Company’s manufacturers produce certain of the Company’s products, the Company is currently negotiating the terms of a purchase order financing arrangement with Buyers 1 & 2 (the “Potential PO Lenders”), pursuant to which the Potential PO Lenders would make available up to $1,000,000 in purchase order financing to the Company against purchase orders for the Company’s products by the Company’s customers, which purchase orders would need to be approved by the Potential PO Lenders. No assurances can be given when, if ever, a purchase order arrangement will be entered into or the terms thereof. If, a purchase order arrangement is entered into, the PO Lenders have discussed with the Company converting and/or exchanging Notes 1 and 2 into notes and/or financial obligations of the Company having the same or similar terms as the terms for any purchase order financing the Potential PO Lenders would receive if they and the Company enter into a purchasing order financing arrangement. Such Potential PO Lenders have discussed preliminarily providing the Company with an account receivable financing facility to provide the Company with funding for working capital and general corporate purposes.

The Company was not able to issue the full Series G Preferred dividend due to the amount of shares authorized. Management is looking to amend the Certificate of Designation so that the balance of the dividend as of June 30, 2015 due in the amount of $332,208 can be issued. The dividend due has been accrued in obligations to be settled in stock as of June 30, 2015.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Pursuant To "Safe Harbor" Provisions
Of Section 21e Of The Securities Exchange Act Of 1934

Except for historical information, the Company's reports to the Securities and Exchange Commission on Form 10-K and Form 10-Q and periodic press releases, as well as other public documents and statements, contain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements. These risks and uncertainties include general economic and business conditions, development and market acceptance of the Company's products, current dependence on the willingness of investors to continue to fund operations of the Company and other risks and uncertainties identified in the risk factors discussed below and in the Company's other reports to the Securities and Exchange Commission, periodic press releases, or other public documents or statements.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

Results of Operations for the quarter ended June 30, 2015 compared to the quarter ended June 30, 2014:

Total revenues generated from the sales of Surgex™, Bikini Ready®, SlimTrim™ and Martha Stewart Essentials™ for the quarter ended June 30, 2015 totaled $200,105 a decrease of 62% from the quarter ended June 30, 2014 which totaled $523,615. The primary reason for the decrease was due to the Company’s loss of distribution of Martha Stewart Essentials which accounted for $274,847 of the decline in addition to a decrease in the house brands Surgex, Bikini Ready, SlimTrim and Om Essentials in the amount of $48,663 to the retailers during the quarter ended June 30, 2015.

At this stage in the Company’s development, revenues are not yet sufficient to cover ongoing operating expenses.

Gross profit for the quarter ended June 30, 2015 amounted to $45,892. Gross profit decreased $167,286 for the quarter ended June 30, 2015 compared to a gross margin of $213,178 for the quarter ended June 30, 2014. The decrease in gross profit is a result of lower sales with lower margins on the products sold in the quarter ended June 30, 2015.

Research and development cost and selling, general and administrative expenses were $515,205 compared to $1,564,032 or a decrease of $1,048,827. The decrease was attributable to reduced promotional cost of $292,012, reduced commission expense of $10,121, reduced consultants of $11,363, reduced compensation, payroll taxes and benefits in the amount of $205,847 due to reduced number of employees and less common stock issued in the quarter ended June 30, 2015. Other professional fees were reduced by $111,448. There was a decrease in licensing fee in the amount of $271,642 due to MSLO due to the agreement being terminated in the second quarter but accrued for in the first quarter of 2015. Warehouse expense was reduced by $10,367, temporary help was reduced by $10,640, travel and entertainment was reduced by $44,958 and director fees were reduced by $34,375. Management reduced expenses due to lack of proper funding.

The Company realized an operating loss of $469,313 in the quarter ended June 30, 2015 versus an operating loss of $1,350,854 in 2014.

Non-operating income totaled $1,046,976 for the quarter ended June 30, 2015 an increase of $938,909 as compared to $108,167 for the quarter ended June 30, 2014. The increase in non-operating income of $938,809 was due to an increased gain on fair market valuation of derivatives in the amount of $1,793,000. There was a decrease in interest expense of $194,982 for the three months ended June 30, 2015 versus the same period in 2014. Other expenses increased in accretion of debt discount in the amount of $489,336 and a Loss on extinguishment of debt in the amount of $362,050 in 2015 versus a gain of $2,787 in 2014 for a net decrease of $364,837. There was a loss from derivatives issued with debt greater than debt carrying value in the amount of $195,000 versus zero in the prior year.

The net result for the quarter ended June 30, 2015 was income of $514,616 or $0.00 per share which included a preferred dividend on the Series G stock in the amount of $63,047, compared to a loss of $1,564,212 or $0.02 per share for the first quarter of 2014. The net gain for the second quarter of 2015 increased by $2,078,828 as compared to the second quarter loss in 2014. The Company was not able to issue the full Series G Preferred dividend due to the amount of shares authorized. Management is looking to amend the Certificate of Designation so that the balance of the dividend due in the amount of $332,208 can be issued. Management will continue to make an effort to lower operating expenses and increase revenue. The Company will continue to invest in further expanding its operations and a comprehensive marketing campaign with the goal of accelerating the education of potential clients and promoting the name and products of the Company. Given the fact that most of the operating expenses are fixed or have quasi-fixed character management expects them to significantly decrease as a percentage of revenues as revenues increase.

Results of Operations for the six months ended June 30, 2015 compared to the six months ended June 30, 2014:

Total revenues generated from the sales of Surgex™, Bikini Ready®, SlimTrim™ and Martha Stewart Essentials™ for the six months ended June 30, 2015 totaled $483,882 a decrease of 52% from the six months ended June 30, 2014 which totaled $1,003,417. The primary reason for the decrease was due to the Company’s loss of distribution of Martha Stewart Essentials which accounted for $596,914 of the decline offset by an increase in the house brands Surgex, Bikini Ready, SlimTrim and Om Essentials in the amount of $77,379 to the retailers during the six months ended June 30, 2015.

At this stage in the Company’s development, revenues are not yet sufficient to cover ongoing operating expenses.

Gross profit for the six months ended June 30, 2015 amounted to a negative $419,959. Gross profit decreased $750,336 for the six months ended June 30, 2015 compared to a gross margin of $330,377 for the six months ended June 30, 2014. The decrease in gross profit is a result of a 100% reserve against the Martha Stewart Essentials inventory in the amount of $559,987 in the six months ended June 30, 2015.

Research and development cost and selling, general and administrative expenses were $2,189,776 compared to $4,709,160 or a decrease of $2,519,384. The decrease was attributable to reduced promotional cost of $683,028, reduced commission expense of $13,745, reduced computer cost of $29,170, reduced consultants of $32,003, reduced compensation, payroll taxes and benefits in the amount of $1,669,400 due to reduced number of employees and less common stock issued in the six months ended June 30, 2015. Other professional fees were reduced by $210,298. Warehouse expense was reduced by $8,807, temporary help was reduced by $21,280 and travel and entertainment was reduced by $51,134. Management reduced expenses due to lack of proper funding. The decreases were offset by an increase of licensing fee in the amount of $247,201 due to MSLO terminating the licensing agreement and there was an impairment of intangible assets in the amount of $41,000 related to the MSLO agreement.

The Company realized an operating loss of $2,609,735 in the six months ending June 30, 2015 versus an operating loss of $4,378,783 in 2014.

Non-operating expenses totaled $1,221,358 for the six months ended June 30, 2015 a decrease of $169,607 as compared to an expense of $1,390,965 for the six months ended June 30, 2014. The decrease in non-operating income of $169,607 was due to the increase in accretion of debt discount in the amount of $922,218 and a Loss on extinguishment of debt in the amount of $1,064,643 in 2015 versus a gain of $18,378 in 2014 for a net increase of $1,083,021. There was a loss from derivatives issued with debt greater than debt carrying value in the amount of $377,000 versus zero in the prior year. There was a gain of $1,725,520 from the fair value of the derivative instruments issued with the convertible debt in 2015 versus a loss of $472,000 for the six months ended June 30, 2014 for net gain of $2,197,520. There was a decrease in interest expense of $354,326 for the six months ended June 30, 2015.

The net result for the six months ended June 30, 2015 was a loss of $4,220,699 or $0.02 per share which included a preferred dividend on the Series G stock in the amount of $389,606, compared to a loss of $6,349,711 or $0.09 per share for the first six months of 2014. The net loss for the first six months of 2015 decreased by $2,129,012 or 34% as compared to the first six months of 2014. The Company was not able to issue the full Series G Preferred dividend due to the amount of shares authorized. Management is looking to amend the Certificate of Designation so that the balance of the dividend due in the amount of $332,208 can be issued. Management will continue to make an effort to lower operating expenses and increase revenue. The Company will continue to invest in further expanding its operations and a comprehensive marketing campaign with the goal of accelerating the education of potential clients and promoting the name and products of the Company. Given the fact that most of the operating expenses are fixed or have quasi-fixed character management expects them to significantly decrease as a percentage of revenues as revenues increase.

Disclosure About Off-Balance Sheet Arrangements

We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.

Critical Accounting Estimates

Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this report.

Liquidity and Capital Resources

The Company incurred substantial net losses for the six months ended June 30, 2015 and the year ended December 31, 2014 and has accumulated a deficit of $96,686,111 at June 30, 2015. The Company has not been able to generate sufficient cash from operating activities to fund its ongoing operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company has never reported Net Income.

The Company’s business operations generally have been financed by debt investments through promissory notes with accredited investors. During the six months of 2015, the Company obtained new debt from the issuance of promissory notes that supplied the funds that were needed to finance operations during the reporting period. The new issuance of debt requires conversion of existing debt which may not be able to convert on favorable terms. Such new borrowings resulted in the receipt by the Company of $632,500. While these funds sufficed to compensate for the negative cash flow from operations they were not sufficient to build up a liquidity reserve. As a result, the Company’s financial position at the end of the reporting period showed a working capital deficit of $12,832,531. During the first six months of 2015 the Company obtained new financing sufficient to fund ongoing working capital requirements. We need to continue to raise funds to cover working capital requirements until we are able to raise revenues to a point of positive cash flow.

The Company was not able to make the payments that were due July 1, 2014, January 1, 2015 and April 1, 2015 to Martha Stewart Living Omnimedia (“MSLO”) pursuant to our license agreement. On April 25, 2015, the Company received notice from MSLO that the license agreement shall terminate on May 16, 2015. The Company has the right to sell off the licensed products for a period of six months. All MSLO inventory has been 100% reserved in the accompanying financial statements. The Company has an accrued liability of $1,237,500 of licensing fees due to MSLO through the end of the agreement as of June 30, 2015.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4. Control and Procedures

Evaluation of disclosure controls and procedures

Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weakness and significant deficiencies in our internal control over financial reporting, our disclosure controls and procedures were not effective, as of the June 30, 2015, to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting, other than what has been reported above.

PART II - OTHER INFORMATION

Item 1 Legal Proceedings

Creative Healthcare Solutions, LLC vs. Millennium Biotechnologies Inc, Ct. of Common Pleas of Delaware County Ohio, Case No. 07 CV H 11 1420) Millennium was not satisfied with the service rendered by Creative Healthcare Solutions, LLC in 2005 which were associated with the development of Resurgex Select collateral materials developed in December of 2005. Millennium subsequently was forced to destroy and dispose of over 80% of the materials provided by Creative Healthcare Solutions due to the poor quality of the materials. Millennium has been unsuccessful in resolving the dispute and subsequently Creative Healthcare Solutions, LLC has filed legal action for demand of payment in the amount of $63,718 for services rendered. Millennium continues to negotiate a settlement through counsel with regards to this legal proceeding.

Robert Half International vs. Millennium Biotechnologies, Inc. filed on March 31, 2009 in the Superior Court of New Jersey, Law Division, Middlesex County. Robert Half International claims a total of $18,507 plus costs and fees based upon the Millennium Biotechnologies, Inc.’s failure to pay the plaintiff the fees associated with the full time hiring of an employee.

Item 1A Risk Factors

Not Applicable

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

See Note 7 and Note 10 to the Condensed Consolidated Financial Statements in Part I above.

Item 3 Defaults Upon Senior Securities

See Note 7 to the Condensed Consolidated Financial Statements in Part I above.

Item 4 Mine Safety Disclosures

Not Applicable

Item 5 Other Information

- None

Item 6 a) Exhibits

	31.1		Certification of Michael C. James, Chief Executive Officer and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1		Certification of Michael C. James, Chief Executive Officer and Chief Financial Officer, pursuant to Sections 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

	101.INS		XBRL Instance Document

	101.SCH		XBRL Taxonomy Extension Schema

	101.CAL		XBRL Taxonomy Extension Calculation Linkbase

	101.DEF		XBRL Taxonomy Extension Definition Linkbase

	101.LAB		XBRL Taxonomy Extension Label Linkbase

	101.PRE		XBRL Taxonomy Extension Presentation Linkbase

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INERGETICS, INC.

Date: August 19, 2015	By:	/s/ Michael C. James
		Michael C. James
		Chief Executive Officer
		Chief Financial Officer

INERGETICS INC 10-Q