1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and business

On March 15, 2010 the Company changed its name to Inergetics, Inc. Inergetics, Inc. (the Company or "Inergetics"), formerly Millennium Biotechnologies Group, Inc., which is the 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’s efforts going forward will focus on sales of Surgex in powder, bar and ready to drink forms.

In January 2011 the board of directors approved a reverse stock split of 1 for 80 on the Company’s issued and outstanding common stock. These consolidated financial statements have retroactively restated common shares to the earliest presentation reported along with the earnings per share calculation to reflect the 1 for 80 split.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the financial statements in conformity with 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. We base our estimates and judgments on our experience and on various assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions.

Cash and Cash Equivalents

Cash and all highly liquid investments with a maturity of three months or less from the date of purchase, including money market mutual funds, short-term time deposits, and government agency and corporate obligations, are classified as cash and cash equivalents.

Accounts Receivable

We continuously monitor collections and payments from our customers and regularly adjust credit limits of customers based upon payment history and a customer’s current credit worthiness, as judged by us. We maintain a provision for estimated credit losses, as necessary.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation, which includes amortization of assets under capital leases, is calculated using the straight-line method over the estimated useful lives of the assets: 3-8 years for machinery and equipment, leasehold improvements are amortized over the shorter of the estimated useful lives or the underlying lease term. Repairs and maintenance expenditures which do not extend the useful lives of related assets are expensed as incurred.

Patents

Patents are capitalized and amortized over 240 months. Amortization expense was $576 for 2011 and 2010, respectively.

Revenue Recognition

Revenue is recognized net of discounts, rebates, promotional adjustments, price adjustments and estimated returns and upon transfer of title and risk to the customer which occurs at shipping (F.O.B. terms). Upon shipment, the Company has no further performance obligations and collection is reasonably assured as the majority of sales are paid for prior to shipping.

Advertising costs

Advertising costs are charged to operations when incurred. Advertising expense was $1,350 and $7,169 for the years ended December 31, 2011 and 2010, respectively.

Shipping and Handling Costs

Shipping costs of $30,748 and $18,195 are included in cost of sales for the years ended December 31, 2011 and 2010, respectively. Handling costs of $25,918 and $33,469 are included in general and administrative expenses for the years ended December 31, 2011 and 2010, respectively.

Equity Based Compensation

Equity based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). Compensation expense is recognized based on the estimated grant date fair value method using the Black-Scholes valuation model. The Company issued 7,533,406 warrants during the year ended December 31, 2011 for an expense of $1,280,679 and 0 warrants for an expense of $0 during the year ended December 31, 2010. The Company did not issue any stock options during the year ended December 31, 2011 and 2010, respectively.

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. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the years ended December 31, 2011 and 2010.

Loss Per Common Share

Basic and diluted loss per common share are computed by dividing net loss by the weighted average number of common shares outstanding during the periods. Potential common shares used in computing diluted earnings per share related to stock options, warrants, convertible preferred stock and convertible debt which, if exercised, would have an anti- dilutive effect on earnings per share, and therefore have not been included. Anti-dilutive securities not included in net loss per share calculations for the years presented include:

	December 31,
	2011		2010
Potentially dilutive securities:
Convertible debt and accrued interest		8,447,094		-
Liability of shares to be issued		3,281,250		968,750
Convertible Preferred stock		30,337,032		130,282
Common Stock Subscribed		2,240,200		-
Outstanding time-based stock options		-		-
Outstanding time-based warrants		7,631,544		241,030

Research and Development

Research and development costs are expenses as incurred.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on net assets or income.