NOTE 12. LONG TERM DEBT

The Company assumed several long-term debt obligations in connection with its acquisition of the business assets of Unified Payments on April 16, 2013, which are summarized in the below tables.

The components of the Company’s outstanding long-term debt as of December 31, 2013 are as follows:

MBF Merchant Capital LLC	$	5,000,584
RBL Capital Group, LLC		2,565,306
Capital Sources		2,300,000
Georgia Notes, LLC		11,098,066
Other		107,668
Subtotal	$	21,071,624
Less: Current Portion		(3,816,093)
Long Term Debt	$	17,255,531

MBF Merchant Capital, LLC

The note payable to MBF Merchant Capital, LLC has a loan balance of $5,000,584, with a stated interest rate of 9.75 % and monthly principal and interest payments of $82,371 per month through March 15, 2016 and a balloon payment of $3,641,767 (includes accrued interest), which is due on March 15, 2016.

RBL Capital Group, LLC

The Company assumed two long-term notes with RBL Capital Group, LLC:

One note provided for a 15.635 % interest rate and an assumed balance of the note, which was $1,532,853 at the acquisition date. The note requires monthly payments of $77,560 per month and is secured by the residuals received by a legacy processor of Process Pink. The Company assumed an amendment whereby, in the event that the cash flow ratio, as defined in the loan agreement is at the end of any calendar month less than 2:1 for two consecutive months, then the Company will be obligated to increase the monthly principal and interest payment to be $125,000 until such time the ratio falls below 2:1 for two consecutive months. Certain prepayment penalties exist, up to a maximum of 4% of the amount pre-paid, if the note is paid prior to maturity. The loan is collateralized by a security agreement whereby the lender has a senior priority security interest in the assets of the borrower. As of December 31, 2013, the lender has agreed not to accelerate any payments. The Company has been making interest payment only since July 2013. In addition the Company was required to accrue and recognize $70,750 of additional restructuring interest. Per subsequent events in Note 19, the loan has been fully repaid as of April 7, 2014. The Company paid RBL $1,567,693 in principal, interest and fees to settle this note.

The second note provided for a 15.635 % interest rate and an assumed balance of the note, which was $ 1,673,485 at the acquisition date. The note requires monthly payments of $84,584 per month and is secured by residuals received by a legacy processor of TOT BPS, LLC. The Company assumed an amendment whereby, in the event of the cash flow ratio, as defined in the loan agreement, is at the end of any calendar month less than 1.7:1 for 3 consecutive months, then the Company will be obligated to increase the monthly principal and interest payment to be $ 125,000 until such time the ratio falls below 1.7:1 for two consecutive months. As of December 31, 2013, the lender has agreed not to accelerate any payments. In addition the Company was required to accrue and recognize $77,157 of additional restructuring interest. Per subsequent events in Note 19, the loan has been fully repaid as of April 7, 2014. The Company paid RBL $1,034,150 in principal, interest and fees to settle this note.

Capital Sources of New York

The Company assumed the outstanding note payable of $2,300,000 in principal due to Capital Sources of New York. Under the terms of the note, the note is interest only through February 1, 2014, at which time principal and interest is payable in 24 equal installments of $111,519. The note bears interest at a rate of 15% per annum. The note is unsecured. The total principal outstanding under the note was $2,300,000 as of December 31, 2013. The Company has accrued interest related to the note of $234,250 as of December 31, 2013.

K 1 Holding Limited

On May 14, 2013, the Company executed and delivered to K 1 Holding Limited (“K1 Holding”) a promissory note, dated May 13, 2013, in the principal amount of $ 2 million, in connection with a loan in such amount made by K1 Holding to the Company. Proceeds from the loan are required to be used for general business purposes of the Company. Since there is no interest stated on this note, the Company used the effective interest method to calculate imputed interest at an effective rate of 13.25 %. The Company recognized a discount on the loan of $ 463,358, resulting in an initial present value of $ 1,536,642. This discount will be amortized over the life of the loan as interest expense. K1 Holding is an affiliate of Igor Yakovlevich Krutoy. Mr. Krutoy, through K1 Holding, owns a 33 % interest in the Company’s former subsidiary OOO Music1. At the time the K1 Note was entered into by the Company and the related loan made by K1 Holding to the Company, the Company was negotiating a letter agreement dated May 13, 2013 with TGR Capital, LLC (a company owned and controlled by Mike Zoi) and K1 Holding. The draft of that letter agreement at that time provided that, as a condition to K1 Holding making the foregoing loan to the Company and to K1 Holding entering into an agreement to provide certain business development consulting services to the Company, (i) the Company would issue to K1 Holding a number of restricted shares of common stock of the Company equal to 2% of the total issued and outstanding shares of common stock of the Company at the time of issuance and (ii) TGR Capital, LLC would transfer to K1 Holding such number of restricted shares of common stock of the Company as is needed to bring K1 Holding’s and Mr. Krutoy’s aggregate beneficial ownership of common stock of the Company to 10% of the total issued and outstanding shares of common stock of the Company at the time of such transfer. TGR Capital, LLC is an affiliate of Mike Zoi. The foregoing letter agreement was not finalized nor entered into by the parties at that time.

On September 25, 2013, the K1 Note was assumed by T1T Lab in connection with divesture of entertainment assets on that date. At that time, the parties continued negotiating that letter agreement and agreed in principal that, pursuant to that letter agreement, (i) the Company would issue to K1 Holding a number of restricted shares of common stock of the Company equal to 4% (instead of 2% as initially contemplated) of the total issued and outstanding shares of common stock of the Company at the time of issuance and (ii) TGR Capital, LLC would transfer to K1 Holding such number of restricted shares of common stock of the Company as is needed to bring K1 Holding's and Mr. Krutoy's aggregate beneficial ownership of common stock of the Company to 10% of the total issued and outstanding shares of common stock of the Company at the time of such transfer (decreasing the amount of shares required to be transferred by TGR Capital, LLC to K1 Holding from 8% to 6% of the total issued and outstanding shares of common stock of the Company).

On December 5, 2013, the Company entered into (i) a letter agreement (the "K1 Agreement") with TGR Capital, LLC and K 1 Holding and (ii) a Services Agreement with K1 Holding (the "Services Agreement"). The K1 Agreement requires the Company to issue to K1 Holding a number of restricted shares of common stock of the Company equal to 4% of the total issued and outstanding shares of common stock of the Company at the time of issuance. Mr. Krutoy, through K1 Holding, owns a 33% equity interest in MUSIC 1 LLC (a/k/a OOO Music1), a former subsidiary of the Company. Further, the K1 Agreement requires TGR Capital, LLC to transfer to K1 Holding such number of restricted shares of common stock of the Company as is needed to bring K1 Holding's and Mr. Krutoy's aggregate beneficial ownership of common stock of the Company to 10% of the total issued and outstanding shares of common stock of the Company at the time of such transfer. The issuance and transfer of such shares of common stock to K1 Holding is consideration for the services to be provided pursuant to the Services Agreement (as described below) and for making a $2 million loan to the Company that was made on May 14, 2013 (the related promissory note was subsequently assumed by T1T Lab, LLC in connection with the Company's disposition of its online media subsidiaries to T1T Lab, LLC on September 25, 2013). T1T Lab, LLC is an affiliate of Mike Zoi. The issuance by the Company of any shares of its common stock to K1 Holding pursuant to the K1 Agreement was approved by the Company’s shareholders at the 2013 annual meeting of shareholders of the Company. The Services Agreement provides that K1 Holding will provide investor relations services for the Company and its affiliates outside the United States and that K1 Holding will assist the Company and its affiliates with future negotiations and maintaining their relationship with Mobile TeleSystems OJSC, MegaFon OJSC, OJSC VimpelCom (a/k/a Beeline) and their respective affiliates (collectively, the "Mobile Carriers"). The Company's subsidiary, TOT Money, has agreements to provide mobile payment processing services for electronic payments using SMS (short message services, which is a text messaging service) and MMS (multimedia message services) initiated by the mobile phone subscribers of each of the Mobile Carriers in Russia. The term of the Services Agreement expires on December 5, 2015.

Georgia Notes, LLC

Pursuant to the Contribution Agreement entered into by the Company on April 16, 2013 with Unified Payments, TOT Group, Oleg Firer and Georgia Notes 18 LLC, on January 1, 2014, the preferred membership interest in Unified Payments plus payable in kind interest accrued thereon was converted into a 8 % interest only loan with a face value of approximately $ 13.3 million (interest compounding annually with a balloon payment of approximately $13.3 million due on January 1, 2017). This convertible preferred membership interest is classified as long term debt in the accompanying consolidated balance sheets, at its present value of $11,098,066, which includes accrued interest, in accordance with the Contribution Agreement.

Scheduled Debt Principal Repayment

Scheduled principal repayments on all debt, including Georgia Notes, LLC as of December 31, 2013 are as follows:

2014	$	3,816,093
2015		2,411,407
2016		3,746,058
2017		13,268,000
Subtotal	$	23,241,558
Less: Unamortized debt discount		(2,169,934)
Balance as of December 31, 2013	$	21,071,624