NOTES PAYABLE

3 Months Ended

Mar. 31, 2012

NOTE 5-

NOTES PAYABLE

SBA Loan

On July 22, 2003, the Company and the U.S. Small Business Administration (“SBA”) entered into a Note (the “Note”) under the SBA’s Secured Disaster Loan program in the amount of $377,100. Under the Note, the Company agreed to pay principal and interest at an annual rate of 4% per annum, of $1,868 every month commencing twenty-five (25) months from the date of the Note (commencing August 2005). The Note matures July 2034.

The Company must comply with the default provisions contained in the Note. The Company is in default under the Note if it does not make a payment under the Note, or if it: a) fails to comply with any provision of the Note, the Loan Authorization and Agreement, or other Loan documents; b) defaults on any other SBA loan; c) sells or otherwise transfers, or does not preserve or account to SBA’s satisfaction for, any of the collateral (as defined therein) or its proceeds; d) does not disclose, or anyone acting on their behalf does not disclose, any material fact to the SBA; e) makes, or anyone acting on their behalf makes, a materially false or misleading representation to the SBA; f) defaults on any loan or agreement with another creditor, if the SBA believes the default may materially affect the Company’s ability to pay this Note; g) fails to pay any taxes when due; h) becomes the subject of a proceeding under any bankruptcy or insolvency law; i) has a receiver or liquidator appointed for any part of their business or property; j) makes an assignment for the benefit of creditors; k) has any adverse change in financial condition or business operation that the SBA believes may materially affect the Company’s ability to pay this Note; l) dies; m) reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the SBA’s prior written consent; or n) becomes the subject of a civil or criminal action that the SBA believes may materially affect the Company’s ability to pay this Note. The Company is not in default and current on its obligation.

As of March 31, 2012, the Company has an outstanding principal balance of $347,739.

Other

The Company had four notes payables totaling $65,000 at June 30, 2011. Of those four notes payable, three were convertible into shares of common stock at $0.06 per share and accrue interest at the rate of 8% per year and one note payable is not convertible and accrues interest at the rate of 5% per year. In July 2011 two convertible notes, totaling $20,000, and all their accrued interest were converted into shares. the total outstanding note payable balance as of March 31, 2012 of $45,000 ($30,000 of which is convertible and $15,000 non-convertible).

Due to the Company’s need for additional financing, the Board of Directors on February 24, 2012, approved the receipt of investment funds from two new investors in the amount of $20,000 each. The investments are in the form of 8% promissory notes due in six months, on June 22 and July 22, 2012, respectfully. Additionally, the note holders received upon issuance of the Note, 20,000 shares of the Company’s common stock, par value $0.0001 per share. The Company also agreed that should the Company fail to pay interest and principal due at the maturity date, the Note Holder shall receive an additional 40,000 shares of Common Stock. The Company received on December 22, 2011, $20,000 under a promissory note from an individual; then the Company received another $20,000 on January 22, 2012, under a promissory note similar to the one received on December 22, 2011.

The total outstanding note payable balance as of March 31, 2012 is $85,000 ($30,000 of which is convertible and $55,000 non-convertible).

The following represent the maturities of the notes payable for the next five years

			SBA		Other		Total
2013	$	8,657.38			$	85,000.00	$	93,657.38
2014			$	9,010.09			$	9,010.09
2015			$	9,377.18			$	9,377.18
2016			$	9,759.22			$	9,759.22
2017			$	10,156.82			$	10,156.82
Thereafter			$	300,777.92			$	300,777.92

							$	432,738.61

In April 2010, the Company entered into two separate promissory notes with the Company’s President who loaned the Company a total of $26,000 on April 16, 2010 and $24,600 on April 30, 2010. Payments of $1,000 per month commenced July 1, 2010 for five months and the balance due on December 1, 2010. Interest is calculated at 1.5% per month; escalating to 2.5% per month should the monthly $1,000 payments not be made timely. The Company has not made the required $1,000 payments, thus the interest, effective July 1, 2010 on these notes has been accrued at 2.5% per month in accordance with the note agreements. These notes originally due on December 1, 2010 were extended; and the Company agreed to increase the interest rate to 5% per annum. The company has negotiated an extension with the note holder to extend the note at the same 5% interest rate until September 30, 2012.

On February 24, 2012, the Board of Directors approved the loan of a related party, Vijay Suri, President & CEO, in the amount of $8,750 for the specific purposes of financing critical payroll and other payment obligations. The Board authorized the Company to issue a third Promissory note with a principal amount of $8,750 with interest to accrue at 5% per annum; and payable in six months. Further, since the Company has been unable to repay any amounts toward principal related to Mr. Suri’s promissory notes, the Company was forced to reset the interest rate to the penalty rate of 5%.

The total outstanding note payable – related party balance as of March 31, 2012 is $59,350.

INFERX CORP 10-Q