6. Notes Payable

12 Months Ended

Mar. 31, 2012

Debt Disclosure [Abstract]

6. Notes Payable

Notes Payable owed by Morris consisted of the following:

	March 31, 2012		March 31, 2011
Notes payable to Daimler Truck Financial, payable in monthly installments ranging from $569 to $5,687 including interest, through May 2013, with interest rates ranging from 5.34% to 8.07%, secured by equipment	$	383,868	$	1,191,577
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		669,204		450,942
Note payable to Chrysler Credit, payable in monthly installments of $5,687 including interest, through November 2011, with interest at 6.9%, secured by equipment		-		50,298
Note 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		379,702		92,606
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.		360,269		-
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.		92,327		-
Note 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		911,054		-
Note payable to a local dealer, payable in monthly installments of $499 though April 2013		12,027		-
Totals	$	2,808,451	$	1,785,423

Notes payable owed by Smith consisted of the following:

	March 31, 2012		March 31, 2011
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	$	1,430,596	$	1,803,578
Notes payable to bank,  payable in monthly instaments including interest, through June 2011, with interest at 6.5%, collateralized by substantially all of Smith assets		1,507,639		1,530,191
Note payable to Platte Valley National Bank, payable in monthly installments of $1,471 with interest, through  May 2011, with interest at 6.75%, collateralized by vehicle.		-		19,689
Note payable to Floyds, payable in monthly installments of $2,084, through November 2012, with interest at 8%, secured by a vehicle.		70,564		37,062
Note payable to Nissan Motors, payable in monthly installments of $505 including interest, through June 2011, with interest at 5.6%, secured by a vehicle.		-		1,225
Capitalized leases payable to Penske, payable in monthly installments of $1,671 to $2,577 including interest, through April 2018, with interest at 9%		1,518,728
Note payable to Ally, payable in monthly installments of $599 including interest, through December 2015, with interest at 6%, secured by a vehicle.		24,242		30,113
Unsecured, non-interest bearing note payable to Colorado Holdings Valley Bank, payable in monthly installments of $5,000, through 2023.		652,942		686,999
Total	$	5,204,711	$	4,108,857

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

	March 31, 2012			March 31, 2011
Various notes payable with maturity dates ranging from 05/10/10 to 12/28/11.  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.	$	1,133,101		$	1,160,476
Note payable to Ford Credit, payable in monthly installments of $885 including interest, through Octber 2013, with interest at 16.84%, collateralized by a truck, used by an executive.		-			25,141
Note payable to Ally, payable in monthly installments of $715 including interest, through October 2016, with interest at 7.74%, collateralized by a truck, used by former executive.		-			38,821
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, through March 2012 and a final payment of $222,640 on June 30, 2012, with interest at 7.50%, secured by 1,056,300 shares of Integrated Freight Corporation stock		572,500			-
Convertible promissory notes with an investment firm, simple interest
of 8%, due in May 2012, convertible at the option of the holder at
prices as defined.		186,555
Original Issue Discount Senior Debenture with an investment firm, due
April 2012, secured by Equipment.		343,200
Less: unamortized discount on notes payable		(12,402	)		(219,480	)
Totals	$	2,268,069		$	1,050,073

Summary

	IFC		Morris		Smith		Total
Current portion of notes payable  & other	$	2,268,069	$	909,025	$	936,060	$	4,113,154
Notes payable, net of current portion		-		1,899,426		4,268,651		6,168,077
Total as of March 31, 2012	$	2,268,069	$	2,808,451	$	5,204,711	$	10,281,231
Current portion of notes payable	$	1,001,284	$	1,115,818	$	592,009	$	2,709,111
Notes payable, net of current portion		48,789		669,605		3,516,848		4,235,242
Total as of March 31, 2011	$	1,050,073	$	1,785,423	$	4,108,857	$	6,944,353
	Year Ending				Capital
	March 31,		Debt		Lease		Total
		2013	$	3,773,564	$	339,590	$	4,113,154
		2014		3,907,217		279,894		4,187,111
		2015		368,335		172,094		540,429
		2016		395,856		188,238		584,094
		2017		317,532		99,780		417,312
	Thereafter			-		439,131		439,131

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.

The Company has a significant amount of its long-term obligations that are in default for either nonpayment of interest or debt obligations in which the maturity dates have passed that have been triggered in status to current. 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. See Note 10 -Subsequent Events – for an overview of the results of such negotiations since March 31, 2012.

During the year ended March 31, 2011, the Company entered into convertible notes (the “Agreements”) with an investor (the “Investor”) pursuant to which the Investor purchased an aggregate principal amount of $189,000 (the “Convertible notes”). The convertible notes bear interest at 15% and maturity dates of  one year from the date of issuance. The convertible notes , along with other notes from the same investor in previous years are convertible at the option of the holder at any time into shares of common stock, at a conversion price equal to $0.30, which would be approximately 3.3 million shares at March 31, 2012.

During the year ended March 31, 2012, the Company entered into convertible notes with an investor pursuant to which the Investor purchased an aggregate principal amount of $184,000 (the “Convertible notes”). These convertible notes bear interest at 8% (effective rate of 13%)  and maturity dates six months from the dates of issuance. The convertible notes are convertible at the option of the holder at any time into shares of common stock, at a conversion price equal to an average of 53% of market. These notes were convertible into approximately 7.0 million shares at March 31, 2012.

The conversion price of the convertible note is subject to full ratchet and anti-dilution adjustment for subsequent lower price issuances by the Company, as well as customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like.

As a result of the convertible note, the Company has determined that the conversion feature 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, 2012 and March 31, 2011 was $65,651 and $513,471, respectively and are reflected on the Consolidated Balance Sheets. During the year ended March 31, 2012 the change in fair value of $447,820 was comprised of $208,000 of stock issued in payment of previously described “full ratchet” provisions and $207,956 change in fair value reflected on the Consolidated Statements of Operations.