Note 7. Notes Payable

12 Months Ended

Mar. 31, 2015

Notes

Note 7. Notes Payable

Note 7. Notes Payable

Notes Payable owed by Morris consisted of the following:

	March 31, 2015		March 31, 2014
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535 including interest, through April 2013, with interest rates ranging from 6.69% to 8.53%, secured by equipment		-		149,364
Notes payable to Wells Fargo Bank, payable in monthly installments  ranging from $569 to $5,687 including interest, through March 2017, with interest rates ranging from 7.00% to 7.25%, secured by equipment		298,803		574,547
Note payable to Mack Financial Services, payable in monthly installments of $8,359 including interest, through May 2016, with interest at 7.19% secured by equipment.		-		203,348
Note payable to Mack Financial Services, payable in monthly installments of $2,105 including interest, through May 2016, with interest at 7.19% secured by equipment.		-		59,096
Notes payable to Volvo Financial Services, payable in monthly installments ranging from $1,884 to $6,408 including interest, through October 2016, with interest rates ranging from 7.00% to 7.50%,  secured by equipment		266,344		859,337
Totals	$	565,147	$	1,845,692

Notes payable owed by Smith consisted of the following:

	March 31, 2015		March 31, 2014
Notes payable to bank,  payable in monthly installments of $60,000 including interest,  through December 2012, with interest at 9%, collateralized by substantially all of Smith assets	$	628,262	$	977,484
Notes payable to bank,  payable in monthly installments including interest, through June 2011, with interest at 6.5%, collateralized by substantially all of Smith assets		1,392,754		1,447,753
Note payable to Ally, payable in monthly installments of $599 including interest, through December 2015, with interest at 6%, secured by a vehicle.		4,707		11,503
Notes payable to John Deere, payable monthly including interest, secured by equipment		-		5,135
Unsecured, non-interest bearing note payable to Colorado Holdings Valley Bank, payable in monthly installments of $5,000, through 2023.		701,570		701,570
Total	$	2,727,293	$	3,143,445

Notes payable owed by Integrated Freight Corporation consisted of the following:

	March 31, 2015		March 31, 2014
Various notes payable currently payable on demand.  Interest rates ranging from 4.0% to 18%.  Various warrants issued with an exercise price ranging between $0.10 and $0.50 per share.  Various notes contain a conversion feature allowing the holder to convert the debt into shares of common stock at a strike price between $0.30 and $0.50 per share.	$	792,476	$	1,083,101
Note payable to a former related party, with interest at 12.00%, a default judgment has been awarded to the holder; the Company intends to comply with the judgment when funds are available.		-		45,115
Note payable to Robins Consulting, payable in quarterly installments of  $60,000, currently payable on demand, with interest at 7.50%, secured by 1,056,300 shares of Integrated Freight Corporation stock		572,500		572,500
Convertible promissory notes with an investment firm, simple interest of 8%, currently payable on demand, convertible at the option of the holder at prices as defined.		-		151,155
Original Issue Discount Senior Debenture with an investment firm, currently payable on demand, secured by equipment		343,200		343,200
Convertible note payable to Wall Street Angel Partners LLC dated August 16, 2012, bearing interest at 8%, currently payable on demand		23,000		23,000
Convertible promissory notes with an investment firm, non-interest bearing, currently payable on demand, convertible at the option of the holder at prices as defined.		40,000		-
Various convertible promissory notes dated November 5, 2014 totaling $30,000, non-interest, with a maturity date of August 5, 2015, convertible at the option of the holder at prices as defined, net of unamortized discount of $13,333		16,666		-
Convertible promissory note with an investment firm, dated March 11, 2015, interest at 8%, with a maturity date of March 11, 2016.		20,000		-
Totals	$	1,807,842	$	2,218,071

Summary

	IFC		Morris		Smith		Total
Current portion of notes payable  & other	$	1,807,842	$	238,858	$	2,015,714	$	4,062,414
Notes payable, net of current portion		-		326,289		711,579		1,037,868
Total as of March 31, 2015	$	1,807,842	$	565,147	$	2,727,293	$	5,100,282

Principal maturities of long term debt for the next five years are as follows	Year Ending
	March 31,	Total
2016		$	4,062,414
2017			344,619
2018			138,768
2019			83,464
2020			38,742
Thereafter			432,275
			5,100,282

The Company valued the Notes Payable at their face value and calculated the beneficial conversion feature of the warrants using Black Scholes in deriving a discount that is being amortized over the term of the Notes as interest expense using a straight line method.

While there are no defaults of any obligations at the Company's two subsidiaries, the Company's parent company has a significant amount of its long-term obligations that are in default, and currently payable on demand.  The Company is currently in negotiation with these debt holders and intends to extend the terms of the maturity dates or convert the debt into equity.

The Company has determined that the conversion features of the convertible notes and the warrants issued with the convertible debentures are embedded derivative instruments pursuant to ASC 815-40-05 "Derivatives and Hedging-Contracts in Entity's Own Equity" and ASC 815-10-05 "Derivatives and Hedging – Overall," the accounting treatment of these derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the note agreements and at fair value as of each subsequent balance sheet date as a liability. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date.

The fair value of the derivative liability at March 31, 2015 and March 31, 2014 was $3,634 and $8,874, respectively and are reflected on the Consolidated Balance Sheets.