12. SUBSEQUENT EVENTS

During the third quarter, the Company was not able to make the payment that was due July 1, 2014 to Martha Stewart Living Omnimedia pursuant to our license agreement. While we are in discussions to work out terms of payment, we most likely will need to raise additional funds to meet our obligations under the license agreement.

On October 27, 2014, Inergetics, Inc. (the “Company”) issued a convertible debenture in the principal amount of $165,000 (the “Debenture”) to Macallan Partners, LLC (“Macallan”) pursuant to which it borrowed $150,000. The additional $15,000 represents original issue discount.

Principal is due and payable under the Debenture on October 30, 2015. At the option of the Company, the principal may be prepaid before the due date at a premium of 130% (the “Prepayment Penalty”). Upon the occurrence of an “Events of Default” (as such term is defined in the Debenture), Macallan (including hereinafter, any subsequent holder of the Debenture) has the right to accelerate payment of all unpaid principal and interest and any applicable Prepayment Penalty. Interest on the foregoing shall be the lesser of 18% per annum or the highest legal rate.

At any time after six months from the date the Debenture was issued, at the option of Macallan, principal and accrued interest is convertible into shares of the Company’s Common Stock at a price (the “Conversion Price”) equal to the lower of: 55% of the lowest traded price during the 15 trading days prior to the election to convert or 55% of the bid price on the date of the election to convert. If conversion shares are not deliverable by DWAC, then an additional 5% discount will apply to the conversion price. If the shares are ineligible for deposit into the DTC system for any reason and only eligible for “X clearing” then an additional 10% discount will apply to the conversion price. If the Company’s common stock price closes below 0.005 at any time while the Debenture is outstanding then an additional 15% discount will apply to the conversion price. However, if the Company’s common stock price at any time loses “the bid” (e.g., .0001 on “the ask” with zero market makers on the bid as per level 2 quotations), then the conversion price may, in the Lender’s sole and absolute discretion, be reduced to a fixed price equal to par value.

During the fourth quarter of 2014, the 31 Group LLC converted $184,979 of principal and interest into 14,164,787 common shares.