Note 3. Notes Payable

The following table reflects our third party debt activity, including our convertible debt, for the six months ended June 30, 2013:

December 31, 2012	$	3,705,678
Repayments of third party notes		(1,448,558)
Borrowings from third parties		1,834,150
June 30, 2013	$	4,091,270

On January 9, 2013, NOW Solutions completed a financing transaction in the aggregate amount of $1,759,150, which amount was utilized to pay off existing indebtedness of the Company and NOW Solutions to Tara Financial Services and Robert Farias, an employee of the Company and all security interests granted to Tara Financial Services and Robert Farias were cancelled.

In connection with this financing, the Company and several of its subsidiaries entered into a loan agreement (the “Loan Agreement”), dated as of January 9, 2013 with Lakeshore Investment, LLC (“Lakeshore”) under which NOW Solutions issued a secured10-year promissory note (the “Lakeshore Note”) bearing interest at 11% per annum to Lakeshore in the amount of $1,759,150 payable in equal monthly installments of $24,232 until January 31, 2022. The Lakeshore Note contains provisions requiring additional principal reductions in the event sales by NOW Solutions exceed certain financial thresholds. The Loan Agreement contains provisions requiring certain additional principal prepayments toward the Lakeshore Note by the Company from any litigation or settlement proceeds regarding its SiteFlash technology less any attorney fees and direct costs (“Net Claim Proceeds”) and a 5% interest due to Lakeshore (as described below) and a 2% interest due to the inventor of SiteFlash.

Pursuant to the Loan Agreement, as amended, the Company also agreed to make certain principal payments toward the Lakeshore Note of (a) $90,000 by February 15, 2013, which was secured by 15% interest in the Company’s ownership of Priority Time and this payment was timely made to Lakeshore and (b) $600,000 by March 15, 2013, which was secured by 25% of the Company’s ownership interest in NOW Solutions and this payment was not made to Lakeshore.

The Lakeshore Note is secured by the assets of the Company’s subsidiaries, NOW Solutions, Priority Time, SnAPPnet, Inc. (“SnAPPnet”) and the Company’s SiteFlash technology and cross-collateralized. Upon the aggregate principal payment of $290,000 toward the Lakeshore Note, the Company has the option to have Lakeshore release either the Priority Time collateral or the SiteFlash collateral. Upon payment of the aggregate principal $590,000 toward the Lakeshore Note, Lakeshore shall release either the Priority Time collateral or the SiteFlash collateral (whichever is remaining). Upon payment of the aggregate principal $890,000 toward the Lakeshore Note, Lakeshore shall release the SnAPPnet collateral and upon full payment of the Lakeshore Note, Lakeshore shall release the NOW Solutions collateral.

As additional consideration for the loan, the Company granted a 5% interest in Net Claim Proceeds (less any attorney’s fees and direct costs) from any litigation or settlement proceeds related to the SiteFlash technology to Lakeshore. In addition, until the Note is paid in full, NOW Solutions agreed to pay a Lakeshore royalty of 6% of its annual gross revenues in excess of $5 million dollars up to a maximum of $1,759,150. Management estimated the fair value of the royalty to be nominal.

During the second quarter of 2013, the company borrowed $45,000 and $30,000 from a third party lender. The notes are unsecured, bear interest at 11% per annum and are due on demand.

During the six months ended June 30, 2013 and 2012, the Company made interest payments of $169,018 and $157,270, respectively.

For subsequent events involving the Loan Agreement with Lakeshore and additional financing, please see “Subsequent Events” in Note 9.