Note 7. Notes Payable

9 Months Ended

Dec. 31, 2014

Notes

Note 7. Notes Payable

Note 7. Notes Payable

Notes Payable owed by Morris consisted of the following:

	December 31, 2014		March 31, 2014
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535 including interest, with interest rates ranging from 6.69% to 8.53%, secured by equipment		93,584		149,364
Notes payable to Wells Fargo Bank, payable in monthly installments  ranging from $569 to $5,687 including interest, with interest rates ranging from 7.00% to 7.25%, secured by equipment		423,366		574,547
Note payable to Mack Financial Services, payable in monthly installments of $8,359 including interest, 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, with interest at 7.19% secured by equipment.		50.051		59,096
Notes payable to Volvo Financial Services, payable in monthly installments ranging from $1,884 to $6,408 including interest, with interest rates ranging from 7.00% to 7.50%,  secured by equipment		364,023		859,337
Totals	$	931,024	$	1,845,692

Notes payable owed by Smith consisted of the following:

	December 31, 2014		March 31, 2014
Notes payable to bank,  payable in monthly installments of $60,000 including interest,  with interest at 9%, collateralized by substantially all of Smith assets	$	637,914	$	977,484
Notes payable to bank,  payable in monthly installments including interest, with interest at 6.5%, collateralized by substantially all of Smith assets		1,402,753		1,447,753
Note payable to Ally, payable in monthly installments of $599 including interest, with interest at 6%, secured by a vehicle.		6,432		11,503
Notes payable to John Deere, payable monthly including interest, secured by equipment		514		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	$	2,749,183	$	3,143,445

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

	December 31, 2014		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.	$	903,476	$	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		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		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 $23,334		6,666		-
Totals	$	2,085,112	$	2,218,071

Summary

	IFC		Morris		Smith				Total
Notes payable, current portion	$	2,085,112	$	427,175	$	2,598,273			$	5,110,560
Notes payable, net of current portion		-		503,849		150,910				654,759
Total as of December 31, 2014	$	2,085,112	$	931,024	$	2,749,183			$	5,765,319
Principal maturities of long term debt for the next five years are as follows			Year Ending
			December 31,				Total
			2015				$	5,110,560
			2016					422,076
			2017					167,515
			2018					65,168
			2019					-
			Thereafter					-
								5,765,319

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 parent company has certain 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 convertible notes and warrants issued with 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 December 31, 2014 and March 31, 2014 was $14,540 and $8,874, respectively and are reflected on the Consolidated Balance Sheets.