UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

AMENDMENT NO. 2

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: For the fiscal year ended September 30, 2009
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000–14273

PLANGRAPHICS, INC.

(Exact name of registrant as specified in its charter)

Colorado	84–0868815
State or other jurisdiction of incorporation or organization	I.R.S. Employer Identification No.

Suite 200, 6371 Business Boulevard Sarasota, Florida	34240
(Address of principal executive offices)	(Zip code)

Issuer’s telephone number: (888) 623-4378

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Title of each class:	Name of Exchange on which registered:
Common Stock, no par value	(None)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes o	No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	Yes o	No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes x	No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	Yes x	No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.		o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer		o
Non-accelerated filer	o	Smaller reporting company		x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).				Yes o	No x
The aggregate market value* of the voting and non-voting common equity held by non-affiliates:			$235,001
* Computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
The number of shares of our common stock outstanding at January 11, 2010 was:			1,907,000,462

Table of Contents
		Page
	Part I
Item 1.	Business	4
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	20
	Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 8.	Financial Statements and Supplementary Data	27
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	27
Item 9A.	Controls and Procedures	27
Item 9A(T).	Evaluation of Disclosure Controls and Procedures	27
Item 9B.	Other Information	29
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	29
Item 11.	Executive Compensation	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence	34
Item 14.	Principal Accounting Fees and Services	35
	Part IV
Item 15.	Exhibits, Financial Statement Schedules	36
	Signatures	39

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DOCUMENTS INCORPORATED BY REFERENCE

We have not incorporated any documents by reference.

SUMMARIES OF REFERENCED DOCUMENTS

This annual report on Form 10-K contains references to, summaries of and selected information from agreements and other documents. These agreements and documents are not incorporated by reference; but, they are filed as exhibits to this annual report or to other reports we have filed with the U.S. Securities and Exchange Commission. The summaries of and selected information from those agreements and other documents are qualified in their entirely by the full text of the agreements and documents, which you may obtain from the Public Reference Section of or online from the Commission. See “Where You Can Find Additional Information About Us And Exhibits” for instructions as to how to access and obtain this information. Whenever we make reference in this annual report to any of our agreements and other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement of which this annual report is a part for copies of the actual contract, agreement or other document.

FORWARD-LOOKING STATEMENTS

This annual report on Form 10–K and the information incorporated by reference may include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. We intend the forward–looking statements to be covered by the safe harbor provisions for forward–looking statements in these sections.

This annual report contains forward-looking statements that involve risks and uncertainties. We use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” or “may,” or other such words, verbs in the future tense and words and phrases that convey similar meaning and uncertainty of future events or outcomes to identify these forward-looking statements. There are a number of important factors beyond our control that could cause actual results to differ materially from the results anticipated by these forward-looking statements. While we make these forward–looking statements based on various factors and derived using numerous assumptions, we have no assurance the factors and assumptions will prove to be materially accurate when the events they anticipate actually occur in the future.

These important factors include those that we discuss in this annual report under the caption “Risk Factors”, as well as elsewhere in this annual report. You should read these factors and the other cautionary statements made in this annual report as being applicable to all related forward-looking statements wherever they appear in this annual report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

WHERE YOU CAN FINDAGREEMENTS AND OTHER DOCUMENTS REFERRED TO

IN THIS ANNUAL REPORT

We file reports with the U.S. Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934. You may read and copy any reports and other materials we have filed with the Commission at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site at which you may obtain all reports, proxy and information statements, and other information that we file with the Commission. The address of that web site is http://www.sec.gov.

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PART I

Item 1. Business.

Our corporate and business history -

“We”, “our” and “us", as used in this annual report, refer to PlanGraphics, Inc., and includes the following wholly owned subsidiaries, during the applicable periods:

PlanGraphics, Inc., a Maryland corporation, (“PGI-MD”) our only subsidiary until December 27, 2009, when we sold it.

Integrated Freight Corporation, a Florida corporation, between December 3 and 23, 2009, when we acquired it as a wholly owned subsidiary and then merged Integrated Freight into us.

Morris Transportation, Inc., an Arkansas corporation, beginning December 23, 2009, when we acquired it as a wholly owned subsidiary by merger with Integrated Freight.

Smith Systems Transportation, Inc., a Nebraska corporation, beginning December 23, 2009, when we acquired it as a wholly owned subsidiary by merger with Integrated Freight.

The address of our principal executive office is Suite 200, 6371 Business Boulevard, Sarasota, Florida 34240, and our telephone number at that address is 888-623-4378. The address of our web site is www.integrated-freight.com.  We transferred the web site at www.plangraphics.com to PGI-MD when we sold that company on December 27, 2009.

We were incorporated as DCX, Inc. in Colorado in 1981. In 1997, we acquired all of the outstanding shares of PGI–MD and, in 1998, changed our name to Integrated Spatial Information Solutions, Inc. from DCX, Inc. In 2002, we changed our name to PlanGraphics, Inc. from Integrated Spatial Information Solutions, Inc.

As of May 1, 2009, Integrated Freight acquired 401,599,467 shares, or 80.2 percent, of our issued and outstanding common stock, in redemption of 500 shares of our issued and outstanding preferred stock which we had sold for $500,000 to the Nutmeg/Fortuna Fund LLLP in 2006. Nutmeg/Fortuna Fund is a private investment company, which we believe is now in receivership in Chicago, Illinois. Integrated Freight paid Nutmeg/Fortuna Fund 1,307,822 shares of its common stock and a one-year promissory note in the amount of $167,000 to purchase our preferred stock. At the date of this transaction, the preferred stock had a cash redemption value of $562,573.12, including accrued and unpaid dividends, which we were unable and had no reasonable expectation of being able to pay upon demand. The redemption request we received from Nutmeg/Fortuna Fund included an offer for redemption of the preferred stock and accrued and unpaid dividends by the issuance of our common stock, the number of shares to be determined by dividing the redemption value by $0.0016, which represented the per share volume weighted average of the highest and lowest closing prices for our common stock published by OTC Bulletin Board for the period of February 15 to April 15, 2009.  

Negotiations for the sale and purchase of our preferred stock and the related transactions were conducted over a period of several months. The negotiations involved Nutmeg/Fortuna Fund’s management company and the management of Integrated Freight and our prior management. Prior to the commencement of the negotiations, there was no then existing or former relationship between and among any of the parties to the negotiations or their respective controlling stockholders. At and prior to the commencement of negotiations, Integrated Freight had been exploring “reverse mergers” with reporting “shell companies”, as defined in the federal securities laws and quotation of its stock on the OTC Bulletin Board, as a means of acquiring a public stockholder base and an existing public market. By itself, Integrated Freight had only seventeen stockholders at that time, an insufficient number it believed to initiate a public market of its own by filing a Form 10 registration statement with the Commission. As a publicly traded company, Integrated Freight’s management believed it would be able to more easily obtain equity and debt funding than it could as a privately held company, and publicly traded stock would be more readily acceptable to stockholders of privately owned companies Integrated Freight would want to acquire at least partially for stock. Furthermore, the two acquisitions it had made included an obligation for Integrated Freight to become a publicly traded company. Integrated Freight had been offered control of “public shell companies” for prices in the range of $300,000. Integrated Freight decided to utilize us as its vehicle to achieve a public market, because we do not have the stigma of having been a “shell company”. Valuing its stock at $0.10 per share at that time, Integrated Freight concluded that the stock and note it was able to negotiate with Nutmeg/Fortuna Fund was within the price range it would have to pay for an alternative, reporting, OTC Bulletin Board shell company, with the added benefit of deferring the cash portion of the price with the one-year note.

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Integrated Freight originally intended to merge us into itself, thus succeeding to our registration under the Securities Exchange Act of 1934 and our public market. In a related transaction, we were to sell PGI-MD to our then director and chief executive officer, John C. Antenucci. Integrated Freight was not interested in continuing the business of PGI-MD, which had been experiencing poor financial performance as a publicly traded company and was facing either bankruptcy or voluntary termination of its securities registration, or both. Mr. Antenucci believed that PGI-MD represented a viable business as a privately owned company, and as its founder, was interested in purchasing PGI-MD from us. See “Terms of our sale of PGI-MD”, below.

This merger and the related reverse stock split and sale of PGI-MD (as our only substantial asset, at that time) required stockholder approval under Colorado corporation law pursuant to an effective registration statement on Form S-4 under the Securities Act of 1933. This created uncertainty as to when an effective date for the registration statement and the stockholder vote would occur. As a consequence of this uncertainty, Integrated Freight found it could not obtain sufficient debt or equity funding it needed (a) to complete the audits and reviews of financial statements required to amend the then pending registration statement on Form S-4 and (b) pursue and close additional acquisitions it was negotiating.

We restructured our combination with Integrated Freight as a parent – subsidiary merger under Colorado and Florida law, thus eliminating the need for stockholder approval of the merger and the sale of PGI-MD (no longer a substantial asset, after the merger) and an effective registration statement on Form S-4. The new structure was approved by both Integrated Freight and us concurrently on November 10, 2009. At that date, the same five persons served on Integrated Freight’s board and on our board.

In furtherance of the restructured transaction, we acquired 93.797 percent of the issued and outstanding common stock of Integrated Freight, including all of the stock it was obligated to issue, in exchange for 1,406,284,229 shares of our authorized but unissued common stock. We acquired the Integrated Freight stock from The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”) established to hold all of Integrated Freight’s common stock for purposes of the exchange and all of our stock which was owned by Integrated Freight. At the conclusion of this transaction, the Trust now owns 94.8 percent of our issued and outstanding common stock. On December 23, 2009, we merged Integrated Freight into us.

In order to achieve the additional outcomes that would have resulted from the original transaction structure, we have filed a preliminary Schedule 14C information statement with the Commission for a special stockholders meeting at which the following actions will be approved by the Trust, as our majority stockholder:

• a reverse stock split in a ratio of one new share for each 244.8598 shares of our issued and outstanding common stock;

• a change of our name to Integrated Freight Corporation; and

• a change in our state of incorporation to Florida from Colorado.

We must hold a meeting to approve these actions because Colorado corporation law requires that action written consent receive unanimous stockholder approval.  We view it as unlikely that 100 percent of our stockholders would even respond to a request for consents.  These outcomes were part of the original transaction structure and were described in Integrated Freight’s registration statement on Form S-4.

Following the approval of these actions by our stockholders, we will issue an additional number of our shares of common stock to:

•     the Trust so that it can transfer to its beneficiaries one of our shares for each share of Integrated Freight deposited into the Trust and which would have been deposited into the Trust by persons to whom Integrated Freight was obligated to issue shares but had not yet delivered certificates;

•     two other stockholders of Integrated Freight who held an aggregate of 1,337,882 shares they did not deposit into the Trust, one of our shares for each share of Integrated Freight which they owned prior to the merger.

The reverse stock split ratio was based on two factors. First, the number of shares held after the merger by Integrated Freight’s stockholders at May 1, 2009 were be equal to the number of shares they held on May 1, 2009. Second, the number of shares held after the merger by Integrated Freight’s stockholders at May 1, 2009 would be equal to ninety percent of our issued and outstanding common stock as of May 1, 2009. The balance of ten percent would be held by public stockholders, the Nutmeg/Fortuna Fund, PGI-MD, Mr. Antenucci and Frederick G. Beisser. See “Terms of our sale of PGI-MD”, below. The 90:10 ratio was in the range of stock ownership percentages that Integrated Freight had been offered in transactions with alternative, reporting, OTC Bulletin Board shell companies.

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The restructured transaction and the additional actions to be taken subject to stockholder approval, as described above, will have the same outcome for stockholders and the constituent companies as the original structure of the transactions.

The principal business of PGI–MD beginning at inception to the present is life–cycle systems integration and implementation, providing a broad range of services in the design and implementation of information technology solutions within the public and commercial sectors. Its customers have primarily included federal, state and local governments, utility companies, and commercial enterprises in the United States and foreign markets. PGI-MD’s focus and specialty is on spatial information management technologies, including web–enabled GIS and applications. Spatial information management systems, which include GIS, provide a means for accessing, managing, integrating, analyzing and interpreting disparate data sets that require locational or “spatial” information by relating the geographic location of a feature or event to other descriptive information. GIS software allows data, in both graphic or map format and alphanumeric data to be combined, segregated, modeled, analyzed and displayed, thus becoming useful information for managers. This was also our only business until December 3, 2009, when we acquired the stock of Integrated Freight. We completed the sale of MDI-PG to Mr. Antenucci on December 27, 2009.

Integrated Freight was incorporated in Florida on May 13, 2008 by Paul A. Henley, its founder, under the name of “Integrated Freight System, Inc.” Integrated Freight changed its name to Integrated Freight Corporation on July 27, 2009. Mr. Henley is currently one of our directors and our chief executive officer. Mr. Henley founded Integrated Freight for the purpose of acquiring and consolidating operating motor freight companies. Integrated Freight acquired our two existing business units, which are:

Company Name	Year Established	Acquisition Date
Morris Transportation, Inc.	1998	As of September 1, 2008
Smith Systems Transportation, Inc.	1992	As of September 1, 2008

We are operating these subsidiaries as independent companies under the management of their founders and original stockholders from whom we purchased them. We expect this management arrangement to continue until we have sufficient working capital to pay the costs associated with combining and consolidating the elements of their operations that are duplicative.

Overview of Our Truck Transportation Business

We are, beginning December 27, 2009, exclusively a motor freight carrier providing truck load service primarily in two markets in the mid-West United States. We do not specialize in any specific types of freight or commodities. We carry dry freight, refrigerated freight and hazmat and hazwaste (hazardous materials and waste). We provide long-haul, regional and local service to our customers.

Our Strategy

Truck transportation in general has suffered during the recent economic recession. According to Transportation Topics (___), over 6,200 trucking companies are believed to have ceased operations between September 2007 and January 2010. We believe the trucking companies that have survived in the current economic recession, whether presently profitable or marginally unprofitable, represent good future value at the prices for which we believe many of them can be acquired. Our management believes that many of them will require debt and equity funding and cost reductions which they may be unlikely to obtain individually. We believe that the demand for truck transportation services will return to pre recession levels, with an initially inadequate supply of trucks to meet demand. The American Trucking Association Tonnage Index reported a 3.5 percent increase in tonnage of freight shipped in the first two months of 2010. (Transportation Topics, March 29, 2010). We believe our strategy we will position us to fill part of the demand for over-the-road freight services.

We intend to continue acquiring well established trucking companies when we can do so at prices which we deem to be advantageous. In the alternative, we may acquire assets. We also plan to expand beyond our truckload service through acquisitions into logistics, brokering, less than a load (LTL) and expedite/just-in-time services, as opportunities are presented to us.

We believe that we can achieve savings in operating costs by centralizing certain common functions of our subsidiaries, such as administration, fuel and tire purchasing, billing and collections, dispatching, maintenance scheduling and other functions. We believe that with a larger service territory and customer base than any one subsidiary would have working alone, we will be able to achieve greater efficiencies in route and equipment utilization.

We expect to face increasing competition for acquisitions. In 2007, seventy-six acquisitions were completed, compared to less than fifty in 2009. Transportation Topics predicts a increase in merger and acquisition activity as the economy recovers. Transpiration Topics (April 12, 2010).

6

Our Markets

Historically our subsidiary companies have operated in well-established geographic traffic lanes or routes. These lanes are defined by our customers’ distribution patterns. Because there is some overlap within the most heavily traveled lanes, especially between points in the upper Midwest and Texas, our management believes that we will be able to realize increased cost and productivity improvements.

The following map displays information about the lanes our trucks most routinely or most frequently travel.

*A drop yard is a temporary or semi permanent location we rent where we store trailers when not in use between pick-ups and deliveries. Typically, we rent drop yards in terminal facilities of other motor freight carriers, which provide security.

Our Customers and Marketing

We serve approximately 175 customers on a regular basis. The following table presents information regarding our relationship with our customers based on percentage-of-revenue concentration derived from analysis of our operating data. Although we do not have contracts with any of these customers, we have long-standing relationships with most of them.

Number of customers	% of revenue
Four customers	Up to 35%
All other customers	65% or more

The following table presents information regarding the average length of our trips.

Longest haul (overnight)	1,950 miles
Shortest haul	175 miles
Average haul	850 miles

Ninety-eight percent of the freight we haul is dry van freight. The following table presents information regarding the approximate percentage makeup of the freight we haul.

Forest and paper products	38%
Hazmat and hazwaste	39%
All other freight (freight of all kinds – FAK)	23%

Marketing

Mr. Morris, Mr. Smith and one sales person specializing in hazmat and hazwaste constitute our sales and marketing force. We do not have a formal marketing plan at the present time. We attend relevant trade shows and trade association meetings, and seek to maintain good relations with our existing customers. As we grow our carrier base, of which there is no assurance, we plan to establish a central marketing group that will support the sales and customer service efforts of each subsidiary.

7

Our People

We believe our employees are our most important asset. The following table presents information about our full-time employees.

Drivers - company	75
Drivers – independent contract*	48
Platform and warehouse	2
Fleet technicians	6
Dispatch	6
Sales	1
Office	3
Administrative and Executive	4

None of our employees are represented by a collective bargaining unit. We consider relations with our employees to be good. We offer basic health insurance coverage to all employees.

Our Drivers

We believe that maintaining a safe and productive professional driver group is essential to providing excellent customer service and achieving profitability. All of our drivers must have three years of verifiable driving experience, a hazmat endorsement (if hauling hazmat or hazwaste), no major violation in the previous thirty-six months and comply with all requirements of employment by U.S. Department of Transportation and applicable state laws. We maintain complete driver histories and are prepared to comply with the soon-to-be-implemented comprehensive safety analysis reporting program (USDOT known as "CSA 2010".

We select drivers, including independent contractors, using our specific guidelines for safety records, driving experience, and personal evaluations. We maintain stringent screening, training, and testing procedures for our drivers to reduce the potential for accidents and the corresponding costs of insurance and claims. We train new drivers in all phases of our policies and operations, as well as in safety techniques and fuel-efficient operation of the equipment. All new drivers also must pass USDOT required tests prior to assignment to a vehicle.

We primarily pay company-employed drivers a fixed rate per mile. The rate increases based on length of service. Drivers also are eligible for bonuses based upon safe, efficient driving. We also pay independent contractors a fixed rate per mile. Independent contractors pay for their own fuel, insurance, maintenance, and repairs.

Competition in the trucking industry for qualified drivers is normally intense. Our operations have been impacted, and from time-to-time we have experienced under-utilization of our equipment and increased expense, as a result of a shortage of qualified drivers. We place a high priority on the recruitment and retention of an adequate supply of qualified drivers. Our average annual turn-over rate is less than twenty percent, compared to an industry average of forty-four percent for the fourth quarter of 2009, as published in Transport Topics, March 29, 2010.

Our Operations

We currently conduct all of our freight transportation operations, including dispatch and accounting functions, from the headquarters facilities of our operating subsidiaries, using different information management systems and personnel that were employed when we acquired them as our operating subsidiaries. These arrangements produce many overlaps and duplications in facilities, office systems and personnel. We believe that these operating arrangements provide less than optimal results. We intend to centralize many of these functions, as noted above. Centralization is subject to obtaining adequate internal or external financing, of which there is no assurance.

8

Our Revenue Equipment

The following table presents information regarding our revenue producing equipment.

Power units (tractors) – sleeper		84
Power units (tractors) – day cab		2
Trailers
	Flatbed	6
	Dry van	329
	Refrigerated	30
	Other specialized	9
	Tanker	9

The average age of our power units is approximately 3.6 years. All of our power units are GPS equipped. The majority of our power units are Freightliner vehicles. This uniformity allows for reduced inventory of parts required by our maintenance departments. In addition, the training required for our technicians is greater focused on a primary product line. We replace our power units at approximately four years of age. The average age of our trailers is approximately 4.5 years for general freight and ten years (as needed) for hazmat and hazwaste which may sit idle for extended periods of time. We maintain all of our revenue producing equipment in good order and repair.

We believe we have an optimal tractor to trailer ratio based upon our current and anticipate customer activity.

Acquisition of assets in the bankruptcy of Gulf Coast Transport and affiliated companies of Sunnyvale, Texas

We submitted an Asset Purchase Agreement to the Bankruptcy Court for the Northern District of Texas covering the purchase of certain assets of Gulf Coast Transport of Dallas Texas.  Recently, the proceeding was converted to a liquidation.  There is no assurance as to whether or not we will be able to acquire any or how many, if  any, of the tractors and trailers from the creditors taking possession from Gulf Coast Transport.

Diesel Fuel Availability and Cost

Our operations are heavily dependent upon the use of diesel fuel. The price and availability of diesel fuel can vary and are subject to political, economic, and market factors that are beyond our control.  Fuel prices have fluctuated dramatically and quickly at various times during the last three years. They remain high based on historical standards and can be expected to increase with increased demand for truck transportation in a recovering economy.  We actively manage our fuel costs with volume purchasing arrangements with national fuel centers that allow our drivers to purchase fuel at a discount while in transit.  During 2008 and 2009, over eighty-five percent of our fuel purchases were made at contracted locations. 

To help further reduce fuel consumption, we began installing auxiliary power units in our tractors during 2007.  These units reduce fuel consumption by providing quiet climate control and electrical power for our drivers without idling the tractor engine.  We anticipate having these units installed in approximately ninety-six percent of our company-owned fleet by December 31, 2010.

Our cost-cutting measures include utilizing technology such as Peoplenet and Carrierweb to monitor travel speed/idling/rpms/high overspeed operations. In addition, governing the top speed of our power units helps reduce our fuel costs. We are installing the newly designed roll resistant, and thus more fuel efficient, tires as replacements are needed.

We further manage our exposure to changes in fuel prices through fuel surcharge programs with our customers and other measures that we have implemented.  We have historically been able to pass through most long-term increases in fuel prices and related taxes to customers in the form of fuel surcharges.  These fuel  surcharges, which adjust with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase, except for non-revenue miles, out-of-route miles or fuel used while the tractor is idling. As of December 31, 2009 (our most recently completed fiscal year), we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

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Our Competition and Industry

Trucks provide transportation services to virtually every industry operating in the United States and generally offer higher levels of reliability and faster transit times than other surface transportation options. Trucks hauled 68.8 percent of all freight, with estimated total revenues from this industry sector are $660.3 billion in 2008, according to American Transportation Research Institute. The transportation industry is highly competitive on the basis of both price and service. The trucking industry is comprised principally of two types of motor carriers: truckload and less-than-a-load, generally identified as LTL. Truckload carriers generally provide an entire trailer to one customer from origin to destination. LTL carriers pick up multiple shipments from multiple customers on a single truck and then route those shipments through service centers, where freight may be transferred to other trucks with similar destinations for delivery. All of our service is truckload service.

The surface freight transportation market in which we operate is frequently referred to as highly fragmented and competitive. There are an estimated 227,000 for-hire motor freight companies on file with USDOT, with ninety-six percent operating twenty-eight or fewer trucks. Even the largest motor freight companies haul a small percentage of the total freight. The following table presents information regarding the estimated percentage of freight hauled by the largest trucking companies compared to all other trucking companies.

[Information obtained from the American Transportation Research Institute.]

Ten largest trucking companies	16.4%
All other trucking companies	83.6%
*Transportation Topics 2009 Top 100 Survey

Competition in the motor freight industry is based primarily on service (including on-time pickup and delivery), price, equipment availability and business relationships. We believe that we are able to compete effectively in our markets by providing high-quality and timely service at competitive prices. We believe our relationships with our customers are good. We compete with smaller and several larger transportation service providers. Our larger competitors may have more equipment, a broader coverage network and a wider range of services than we have. They may also have greater financial resources and, in general, the ability to reduce prices to gain business, especially during times of reduced growth rates in the economy. This could potentially limit our ability to maintain or increase prices, and could also limit our growth in shipments and tonnage.

We believe that we do not compete with transportation by train, barge or ship, which we believe are not options for our existing customers.

Regulation

Our operations as a for-hire motor freight carrier are subject to regulation by the U.S. Department of Transportation (USDOT) and its agency, the Federal Motor Carrier Safety Administration, and certain business is also subject to state rules and regulations.  These agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, safety and insurance requirements. The USDOT periodically conducts reviews and audits to ensure our compliance with all federal safety requirements, and we report certain accident and other information to the USDOT.

Our company drivers and independent contract drivers also must comply with the safety and fitness regulations promulgated by the USDOT, including those relating to drug and alcohol testing and hours-of-service. In November 2008, the USDOT adopted final rule concerning hours of service for commercial vehicle drivers.  This a final rule allows drivers to continue to drive up to eleven hours within a fourteen-hour non-extendable window from the start of the workday, following at least ten consecutive hours off duty.  The rule also allows motor freight carriers and drivers to continue to restart calculations of weekly on-duty limits after the driver has at least thirty-four consecutive hours off duty.  The rule was effective January 19, 2009.  We believe these regulations will not have a significant negative impact on our operations or financial results in fiscal year 2010.

We are also subject to various environmental laws and regulations dealing with the handling of hazardous materials, air emissions from our vehicles and facilities, engine idling, and discharge and retention of storm water.  These regulations have not had a significant impact on our operations or financial results and we do not expect a negative impact in the future.

Terms of Our Acquisitions

We acquired Morris Transportation and Smith Systems Transportation in the merger with Integrated Freight. The following table describes the material terms of these acquisitions by Integrated Freight, as amended and in effect at the filing date of this amended annual report.

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	Morris Transportation	Smith Systems Transportation
Shares of our stock	3,000,000 shares	825,000 shares
Note amount	$600,000 (1)(2)(4)	$250,000 (5)
Note amount	$400,000 (3)(2)(4)
Refinancing of equipment	Required by (6)	Required by (5)

(1)   The interest rate on the note is eight percent per annum.  We have paid $100,000 of the original principal amount of $600,000 has been reduced to $500,000 by the cash payment of $100,000 in January 2010.  Payments of the balance of the note are as follows:  $25,000 on February 18, 2010; $125,000 on April 20, 2010 and $350,000 on May 1, 2010.  Security for the note in stock of Morris was terminated.

(2)   The notes and accrued interest are convertible at the election of Mr. Morris into our common stock at $1 per share.  In the event the market price of our common stock is less than $1 per share one year after conversion, then Mr. Morris will be entitled to receive additional shares such that the aggregate market price of all shares received will equal the dollar amount converted into common stock.

(3)  The interest rate on the note is eight percent per annum.  We issued the note in lieu of cash payments we incurred at closing. This note represents an aggregate of a $150,000 cash payment and a $250,000 cash payment, both due by amendment on October 31, 2009, and is due on May 1, 2010.

(4)  The two notes have been consolidated with payments to be made as follows: $41,000-June 1, 2010; $100,000-September 1, 2010; $150,000-December 1, 2010; $250,000-February 1, 20111; and $400,000-May 1, 2011. 

(5)  Two notes of $125,000, one payable to Mr. Smith and the other payable to Ms. Smith, due by amendment on May 15, 2011.  The notes are secured by a pledge of the Smith Systems Transportation stock.

(6)   For the purpose of eliminating personal guaranties. At the present time, there is no deadline by which personal guaranties must be eliminate, as long as we are pursuing commercially reasonable mesa of doing so.

Terms of our sale of PGI-MD

The agreement to sell PGI-MD to Mr. Antenucci was made on an arm’s length basis in connection with Integrated Freight’s purchase of our preferred stock from Nutmeg/Fortuna Fund described above. The agreement included the following provisions, as modified due to delays in completing the merger with Integrated Freight, which were satisfied in the completion of the sale on December 27, 2009:

• We transferred all of our assets to PGI-MD with a depreciated book value of nil, excluding the stock we owned in PGI and the assets we acquired by merger with Integrated Freight.

• PGI-MD assumed all of our operating debts and obligations as of May 1, 2009, totaling $88,340, excluding $28,000 in accrued auditing fees and our operating costs incurred subsequent to May 1, 2009.

• We issued a promissory note to PGI-MD for $51,739.95 of our operating costs incurred subsequent to May 1, 2009 which PGI-MD had paid.

• We are subject, as a result of the merger, to Integrated Freight’s obligation to issue 177,170 shares of common stock and 177,170 common stock purchase warrants good for two years at a price of $0.50 per share in consideration for PGI-MD’s release of us from our obligation to repay inter-company loans totaling $684,311.

We accepted Mr. Antenucci’s termination of his employment agreement as our chief executive officer, which included an obligation for us to pay him approximately $335,000 in severance, as full payment for his purchase of PGI-MD.

As a result of the merger, we are subject to Integrated Freight’s obligation to issue to Mr. Antenucci 59,327 shares of common stock and 59,327 common stock purchase warrants good for two years at a price of $0.50 per share in consideration for Mr. Antenucci’s release of us from payment of his deferred compensation and expense reimbursement in the amount of $88,954.

As a result of the merger, we are subject also to Integrated Freight’s obligation to issue to Frederick G. Beisser, our former senior vice president - finance, 75,525 shares of common stock and 75,525 common stock purchase warrants good for two years at a price of $0.50 per share in consideration for Mr. Beisser’s release of us from payment of his deferred compensation in the amount of $112,830. (but not including unpaid wages, automobile allowance and reimbursable expenses totaling $24,126 owed to him at November 9, 2009).

We are also required to maintain directors and officers’ tail coverage for three years for the benefit of Messrs. Antenucci and Beisser.

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Integrated Freight had no interest in maintaining, managing and funding the business of PGI-MD as a subsidiary company. The transactions outlined above resulted in our relief from liabilities in an aggregate amount of $1,309,435, in consideration for common stock which Integrated Freight valued at the time of negotiations at $0.10 per share (the price at which it was selling its common stock at that time in private placements), for an aggregate value of $31,175, before valuing the warrants. Furthermore, the sale of PGI-MD removed approximately $3,281,679 in liabilities from our consolidated balance sheet that were liabilities of PGI-MD and relieved us of all the operational and business difficulties centered in PGI-MD. We did not obtain an independent appraisal of PGI-MD. Nor, did we seek other buyers for PGI-MD or its business and technologies. We believe that our management composed of Mr. Antenucci during our negotiations with Integrated Freight would have been less interested or uninterested in entering into the transactions with Integrated Freight, as compared to declaring bankruptcy or terminating our reporting status under the Securities Exchange Act, if the transactions had not involved our sale of PGI-MD to Mr. Antenucci. Notwithstanding the foregoing, at May 1, 2009, our management, the management of Integrated Freight and Mr. Antenucci believed that these related transactions were fair and acceptable to all parties. We believe the negotiations for our sale of PGI-MD were conducted at arms’ length, because fundamentally Mr. Antenucci was not negotiating against us, when he was our sole director and chief executive officer, but was negotiating against Integrated Freight.

Item 1A. Risk Factors.

In addition to the forward-looking statements outlined previously in this annual report and other comments regarding risks and uncertainties included in the description of our business, the following risk factors should be carefully considered when evaluating our business. Our business, financial condition or financial results could be materially and adversely affected by any of these risks.

The terms of our amended acquisition note enable the Mr. and Ms. Smith to recover ownership of Smith Systems Transportation, which would represent a significant loss of business.

The amended $150,000 promissory notes ($250,000 total) we have given to Mr. and Ms. Smith the purchase Smith Systems Transportation are secured by a pledge of the stock in the acquired company. The maturity date of the notes has been amended to May 15, 2011. We expect to require additional equity or debt funding, of which there is no assurance, in order to satisfy our financial obligations under the acquisition notes. In the event we are unable to pay the acquisition notes by maturity and the Smiths exercise their security interests, they would recover their ownership of Smith Systems Transportation. In that event we would lose one of our operating subsidiaries resulting in a material reduction in our business.

We may experience difficulty in combining and consolidating the management and operations of our acquired companies which could have a material adverse impact on our operations and financial performance.

We have purchased our operating subsidiaries and expect any additional subsidiaries we purchase to be made from the founders and management of the acquired companies, all of whom have been responsible for their own businesses and methods of operations as independent business owners. While these individuals will continue to be responsible to a degree for the continuing operations of our operating subsidiaries, we intend to centralize and standardize many areas of operations. Notwithstanding that many of these individuals from whom we have and plan to acquire our operating subsidiaries will serve on our board of directors, we may be unable to develop a cohesive corporate culture in which these individuals will be willing to forego their former independence. Our inability to successfully combine and consolidate the policies, procedures and operations of our subsidiaries can be expected to have a material adverse effect on our business and prospects, financial and otherwise.

Our information management systems are diverse, may prove inadequate and may be difficult to integrate or replace.

We depend upon our information management systems for many aspects of our business. Each company we acquire will have its own information management system with which its employees are acquainted. None of these systems may be adequate to our consolidated operations and may not be compatible with a centralized information management system. We expect to require additional software to initially integrate existing systems or to ultimately replace these diverse systems. Switching to new information management systems is often difficult, resulting in disruption, delays and lost productivity, which could impact our dispatching, collections and other operations. Our business will be materially and adversely affected if our information management systems are disrupted or if we are unable to improve, upgrade, integrate, expand or replace our systems as we continue to execute our growth strategy.

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Our management information systems are subject to certain risks that we cannot control.

Our management information systems, including dispatching and accounting systems, are dependent upon third-party software, global communications providers, telephone systems and other aspects of technology and Internet infrastructure that are susceptible to failure. Our management information systems is susceptible to outages, computer viruses, break-ins and similar disruptions that may inhibit our ability to provide services to our customers and the ability of our customers to access our systems. This may result in the loss of customers or a reduction in demand for our services.

If we are unable to successfully execute our growth strategy, our business and future results of operations may suffer.

Our growth strategy includes the acquisition of additional motor freight companies to increase revenues, to selectively expand our geographic footprint and to broaden the scope of our service offerings. If we are unable to acquire additional motor freight companies at prices that meet our financial model, our growth will be limited to expanding sales and reducing expenses in our existing subsidiaries. In connection with our growth strategy, we may purchase additional equipment, expand and upgrade service centers, hire additional personnel and increase our sales and marketing efforts.

Our growth strategy exposes us to a number of risks, including the following:

• geographic expansion and acquisitions require start-up costs that could expose us to temporary losses;

• growth and geographic expansion is dependent on the availability of real estate. Shortages of suitable real estate may limit our geographic expansion and might cause congestion in our service center network, which could result in increased operating expenses;

• growth may strain our management, capital resources, information systems and customer service;

• hiring new employees may increase training costs and may result in temporary inefficiencies until those employees become proficient in their jobs;

• expanding our service offerings may require us to enter into new markets and encounter new competitive challenges; and

• growth through acquisition could require us to temporarily match existing freight rates of the acquiree’s markets, which may be lower than the rates that we would typically charge for our services.

We have no assurance we will overcome the risks associated with our growth. If we fail to overcome those risks, we may not realize additional revenue or profits from our efforts, we may incur additional expenses and therefore our financial position and results of operations could be materially and adversely affected.

We are significantly dependent on the continued services of Paul A. Henley to realize our growth strategy.

We are dependent upon the vision and efforts of Mr. Henley, our founder and principal stockholder, for the realization of our growth strategy. In the event Mr. Henley’s services were to be unavailable to us, our continued activity to expand our business operations through acquisition could be substantially impaired or be abandoned.

Our management owns more than a majority of our outstanding common stock and outside stockholders will be unable to influence management decisions or elect their nominees to our board of directors, if they should so desire.

Our management will control fifty-six percent of our common stock after the reverse stock split and the issue of the additional shares required by our plan of merge with Integrated Freight. All corporate actions involving amendment of our articles of incorporation (such as name change and increase in authorized shares), election of directors and other extraordinary actions and transactions such as certain mergers, consolidations and recapitalizations and sales of all or substantially all of our assets, require the approval of only a majority of the issued and outstanding shares of our common stock. Accordingly, our management will be able to approve any such actions and transactions and elect all directors even if all of the outside stockholders oppose such transactions, or in the case of directors, nominate other persons for election. Our minority stockholders will be unable to effect changes in our management or in our business.

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We have significant ongoing cash requirements and expect to incur additional cash requirements that could limit our growth and adversely affect our profitability if we are unable to obtain sufficient financing.

Our business is capital intensive, involving the frequent purchase of new power units and trailers. In 2008, 2009 and to date in fiscal year 2010, we made capital expenditures for new equipment of approximately $50,000 in each year. We anticipate that we may spend as much as $250,000 in new equipment in fiscal year 2011. In addition, we have issued promissory notes to cover part of the costs of our acquisitions and expect to continue issuing promissory notes for part of the cost of acquisitions. We expect to pay for projected capital expenditures with cash flows from operations and borrowings under credit facilities, which at the date of this annual report are $is estimated at $250,000. Due to the existing uncertainty in the capital and credit markets, capital and loans may not be available on terms acceptable to us. If we are unable in the future to generate sufficient cash flow from operations or borrow the necessary capital to fund our operations and acquisitions, we will be forced to operate our equipment for longer periods of time and to limit our growth, which could have a material adverse effect on our operating results. In addition, our business has significant operating cash requirements. If our cash requirements are high or our cash flow from operations is low during particular periods, we may need to seek additional financing, which may be costly or difficult to obtain. If any of the financial institutions that have extended credit commitments to us are or continue to be adversely affected by current economic conditions and disruption to the capital and credit markets, they may become unable to fund borrowings under their credit commitments or otherwise fulfill their obligations to us, which could have a material and adverse impact on our financial condition and our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions and other corporate purposes.

Recent instability of the credit markets and the resulting effects on the economy could have a material adverse effect on our operating results.

Recently, there has been widespread concern over the instability of the credit markets and the current credit market effects on the economy. If the economy and credit markets continue to weaken, our business, financial results, and results of operations could be materially and adversely affected, especially if consumer confidence declines and domestic spending decreases.  Although we think it is unlikely given our current cash position, we may need to incur indebtedness, which may include drawing on our Credit Facility, or issue debt securities in the future to fund working capital requirements, make investments, or for general corporate purposes.  Additionally, the stresses in the credit market have caused uncertainty in the equity markets, which may result in volatility of the market price for our securities.

We derive thirty-five percent of our revenue from four customers, the loss of one or more of which could have a material adverse effect on our business.

For the six months ended September 30, 2009, our top four customers, based on revenue, accounted for approximately twenty-five percent of our revenue. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business and operating results. A default in payments of invoices by one or more of these customers could have a material adverse effect on our financial condition. See “Our Business – Our customers and marketing”.

We operate in a highly competitive and fragmented industry, and our business will suffer if we are unable to adequately address potential downward pricing pressures and other factors that may adversely affect our operations and profitability.

We compete with many other truckload carriers that provide dry-van and temperature-sensitive service of varying sizes and, to a lesser extent, with less-than-truckload carriers, railroads and other transportation companies, many of which have more equipment, a wider range of services and greater capital resources than we do or have other competitive advantages. In particular, several of the largest truckload carriers that offer primarily dry-van service also offer temperature-sensitive service, and these carriers could attempt to increase their business in the temperature-sensitive market. Numerous other competitive factors could impair our ability to maintain our revenues and achieve profitability. These factors include, but are not limited to, the following:

• we compete with many other transportation service providers of varying sizes, some of which may have more equipment, a broader coverage network, a wider range of services, greater capital resources or have other competitive advantages;

• some of our competitors periodically reduce their prices to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase prices or maintain revenue growth;

• many customers reduce the number of carriers they use by selecting “core carriers,” as approved transportation service providers, and in some instances we may not be selected;

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• many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress prices or result in the loss of some business to competitors;

• the trend towards consolidation in the ground transportation industry may create other large carriers with greater financial resources and other competitive advantages relating to their size;

• advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments; and

• competition from non-asset-based logistics and freight brokerage companies may adversely affect our customer relationships and pricing policies.

If our employees were to unionize, our operating costs would increase and our ability to compete would be impaired.

None of our employees are currently represented under a collective bargaining agreement. From time to time there may be efforts to organize our employees. There is no assurance that our employees will not unionize in the future, particularly if legislation is passed that facilitates unionization such as the Employee Free Choice Act (“EFCA”). The unionization of our employees could have a material adverse effect on our business, financial condition and results of operations because:

• some shippers have indicated that they intend to limit their use of unionized trucking companies because of the threat of strikes and other work stoppages;

• restrictive work rules could hamper our efforts to improve and sustain operating efficiency;

• restrictive work rules could impair our service reputation and limit our ability to provide next-day services;

• a strike or work stoppage would negatively impact our profitability and could damage customer and employee relationships; and

• an election and bargaining process could divert management’s time and attention from our overall objectives and impose significant expenses.

Insurance and claims expenses could significantly reduce our profitability.

We are exposed to claims related to cargo loss and damage, property damage, personal injury, workers’ compensation, long-term disability and group health. We have insurance coverage with third-party insurance carriers, but retain or self-insure a portion of the risk associated with these claims. If the number or severity of claims increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessment, our operating results would be adversely affected. Insurance companies may require us to obtain letters of credit to collateralize our self-insured retention. If these requirements increase, our borrowing capacity could be adversely affected. Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. We expect our growth strategy to require a periodic reassessment or our insurance strategy, including self-insurance of a greater portion of our claims exposure resulting from workers’ compensation, auto liability, general liability, cargo and property damage claims, as well as employees’ health insurance under pending federal legislation, which we are unable to predict. We may also become responsible for our legal expenses relating to such claims. With growth, we will be required to periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts. We maintain insurance above the amounts for which we self-insure with licensed insurance carriers. Although we believe the aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed our aggregate coverage limits. Insurance carriers have raised premiums for many businesses, including trucking companies. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention when our policies are renewed. If these expenses increase, or if we experience a claim in excess of our coverage limits, or we experience a claim for which coverage is not provided, results of our operations and financial condition could be materially and adversely affected.

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Our customers and suppliers’ business may be impacted by the current downturn in the worldwide economy and disruption of financial markets.

Our business is dependent on a number of general economic and business factors that may have a materially adverse effect on our results of operations, many of which are beyond our control.  These factors include excess capacity in the trucking industry, strikes or other work stoppages, and significant increases or fluctuations in interest rates, fuel taxes, and license and registration fees.  We are affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries where we have a significant concentration of customers. Economic conditions may adversely affect our customers and their ability to pay for our services. Current economic conditions have adversely affected and may continue to adversely affect our customers’ business levels, the amount of transportation services they need and their ability to pay for our services. Customers encountering adverse economic conditions may be unable to obtain additional financing, or financing under acceptable terms, because of the disruptions to the capital and credit markets. These customers represent a greater potential for bad debt losses, which may require us to increase our reserve for bad debt. Economic conditions resulting in bankruptcies of one or more of our large customers could have a significant impact on our financial position, results of operations or liquidity in a particular year or quarter. Our supplier’s business levels have also been and may continue to be adversely affected by current economic conditions or financial constraints, which could lead to disruptions in the supply and availability of equipment, parts and services critical to our operations. A significant interruption in our normal supply chain could disrupt our operations, increase our costs and negatively impact our ability to serve our customers.

We may be adversely impacted by fluctuations in the price and availability of diesel fuel.

We require large amounts of diesel fuel to operate our tractors and to power the temperature-control units on our trailers. Fuel is one of our largest operating expenses. Fuel prices tend to fluctuate, and prices and availability of all petroleum products are subject to political, economic and market factors that are beyond our control. We do not hedge against the risk of diesel fuel price increases. We depend primarily on fuel surcharges, auxiliary power units for our tractors, volume purchasing arrangements with truck stop chains and bulk purchases of fuel at our terminals to control and recover our fuel expenses. We have no assurance that we will be able to collect fuel surcharges or enter into volume purchase agreements in the future. An increase in diesel fuel prices or diesel fuel taxes, or any change in federal or state regulations that results in such an increase, could have a material adverse effect on our operating results, unless the increase is offset by increases in freight rates or fuel surcharges charged to our customers. Historically, we have been able to offset significant increases in diesel fuel prices through fuel surcharges to our customers, and we were able to minimize the negative impact on our profitability in 2008 that resulted from the rapid and significant increase to the cost of diesel fuel. Depending on the base rate and fuel surcharge levels agreed upon by individual shippers, a rapid and significant decline in the cost of diesel fuel could also have a material adverse effect on our operating results. We continuously monitor the components of our pricing, including base freight rates and fuel surcharges, and address individual account profitability issues with our customers when necessary. While we have historically been able to adjust our pricing to offset changes to the cost of diesel fuel, through changes to base rates and/or fuel surcharges, we cannot be certain that we will be able to do so in the future. The absence of meaningful fuel price protection through these measures, fluctuations in fuel prices, or a shortage of diesel fuel, could materially and adversely affect our results of operations.

Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.

We are subject to various federal, state and local environmental laws and regulations dealing with the handling and transportation of hazardous materials ("hazmat") and waste ("hazwaste") (which is a material portion of our existing business). We operate in industrial areas, where truck terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. If a spill or other accident involving fuel, oil or hazardous substances occurs, or if we are found to be in violation of applicable laws or regulations, it could have a material adverse effect on our business and operating results. One of our subsidiaries specializes in transport of hazardous materials and waste. If we should fail to comply with applicable environmental laws and regulations, we could be subject to substantial fines or penalties, to civil and criminal liability and to loss of our licenses to transport the hazardous materials and waste. Under certain environmental laws, we could also be held responsible for any costs relating to contamination at our past facilities and at third-party waste disposal sites. Any of these consequences from violation of such laws and regulations could be expected to have a material adverse effect on our business and prospects, financial and otherwise.

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Increased prices, reduced productivity, and restricted availability of new revenue equipment could cause our financial condition, results of operations and cash flows to suffer.

Prices for new tractors have increased over the past few years, primarily as a result of higher commodity prices, better pricing power among equipment manufacturers, and government regulations applicable to newly manufactured tractors and diesel engines.  We expect to continue to pay increased prices for revenue equipment and incur additional expenses and related financing costs for the foreseeable future.  Our business could be harmed if we are unable to continue to obtain an adequate supply of new tractors and trailers or if we have to pay increased prices for new revenue equipment. The EPA adopted revised emissions control regulations, which require progressive reductions in exhaust emissions from diesel engines through 2010, for engines manufactured in October 2002, and thereafter. Some manufacturers have significantly increased new equipment prices, in part to meet new engine design requirements imposed by the EPA, increasing the cost of our new tractors. The revised regulations decrease the amount of emissions that can be released by tractor engines and affect tractors produced after the effective date of the regulations. Compliance with these regulations has, lowered fuel mileage and increased our operating expenses and maintenance costs. These adverse effects combined with the uncertainty as to the reliability of the vehicles equipped with the newly designed diesel engines and the residual values that will be realized from the disposition of older vehicles are expected increase our costs or otherwise adversely affect our business or operations. There is no assurance that continued increases in pricing or costs will not have an adverse effect on our business and operations.

Seasonality and the impact of weather can adversely affect our profitability.

Our tractor productivity generally decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments. At the same time, operating expenses generally increase, with harsh weather creating higher accident frequency, increased claims and more equipment repairs. We can also suffer short-term impacts from weather-related events such as hurricanes, blizzards, ice-storms, and floods that could harm our results or make our results more volatile.

Increases in driver compensation or difficulty in attracting drivers could affect our profitability and ability to grow.

We periodically experience difficulties in attracting and retaining qualified drivers, including independent contract drivers. With increased competition for drivers, we could experience greater difficulty in attracting sufficient numbers of qualified drivers. In addition, due in part to current economic conditions, including the cost of fuel and insurance, the available pool of independent contractor drivers is smaller than it has been historically. Accordingly, we may and periodically do face difficulty in attracting and retaining drivers for all of our current tractors and for those we may add. We may face difficulty in increasing the number of our independent contractor drivers. In addition, our industry suffers from high turnover rates of drivers. Our turnover rate requires us to recruit a substantial number of drivers. Moreover, our turnover rate could increase. If we are unable to continue to attract drivers and contract with independent contractors, we could be required to continue adjusting our driver compensation package beyond the norm or let equipment sit idle. An increase in our expenses or in the number of power units without drivers could materially and adversely affect our growth and profitability. Our operations may be affected in other ways by a shortage of qualified drivers in the future, such as temporary under-utilize our fleet and difficulty in meeting shipper demands. When we encounter difficulty in attracting or retaining qualified drivers, our ability to service our customers and increase our revenue could be adversely affected. A shortage of qualified drivers in the future could cause us to temporarily under-utilize our fleet, face difficulty in meeting shipper demands and increase our compensation levels for drivers.

We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future regulations could have a materially adverse effect on our business.

The USDOT and various state and local agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, safety and insurance requirements. Our company drivers and independent contractors also must comply with the safety and fitness regulations promulgated by the USDOT, including those relating to drug and alcohol testing and hours-of-service.  We also may become subject to new or more restrictive regulations relating to fuel emissions, drivers’ hours-of-service, ergonomics, or other matters affecting safety or operating methods. Other agencies, such as the Environmental Protection Agency and the Department of Homeland Security also regulate our equipment, operations, and drivers.  Future laws and regulations may be more stringent and require changes in our operating practices, influence the demand for transportation services, or require us to incur significant additional costs. Higher costs incurred by us or by our suppliers who pass the costs onto us through higher prices could adversely affect our results of operations.

In the aftermath of the September 11, 2001 terrorist attacks, federal, state, and municipal authorities have implemented and continue to implement various security measures, including checkpoints and travel restrictions on large trucks. As a result, it is possible we may fail to meet the needs of our customers or may incur increased expenses to do so. These security measures could negatively impact our operating results.

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Some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors, such as ours, may idle, in order to reduce exhaust emissions.  The State of California has recently enacted legislation which requires tractors weighing more than 10,000 pounds to use alternative sources, such as auxiliary power units, when powering their cabs at idle for more than five minutes.  The State of California has also enacted legislation requiring compliance with exhaust emissions standards for refrigeration units on trailers.  Compliance is being phased in by the state, beginning with 2001 and earlier models.  Given our investment in auxiliary power units for our tractors and the average age of our trailer fleet, we do not expect these regulations will have a significant impact on our operations or financial results.

From time to time, various federal, state, or local taxes are increased, including taxes on fuels.  We cannot predict whether, or in what form, any such increase applicable to us will be enacted, but such an increase could adversely affect our profitability.

Higher interest rates on borrowed funds would adversely impact our results of operations.

We rely on borrowings to finance our revenue equipment and receivables. We are subject to interest rate risk to the extent our borrowings. Even though we attempt to manage our interest rate risk by managing the amount of debt we carry, our debt levels are not entirely within our control in the short term. An increase in the rates of interest we incur on borrowings and financing we cannot decrease in the short term without adversely impacting our level of service to our customers and expansion of our business will adversely affect our results of operations.

Our financial results may be adversely impacted by potential future changes in accounting practices.

Future changes in accounting standards or practices, and related legal and regulatory interpretations of those changes, may adversely impact public companies in general, the transportation industry or our operations specifically. New accounting standards or requirements, such as a conversion from U.S. generally accepted accounting principles to International Financial Reporting Standards, could change the way we record revenues, expenses, assets and liabilities or could be costly to implement. These types of regulations could have a negative impact on our financial position, liquidity, results of operations or access to capital.

"Penny stock” rules may make buying and selling our common stock difficult.

Trading in our common stock is subject to the "penny stock" rules of the Securities and Exchange Commission. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Our securities are subject to the penny stock rules, and investors may find it more difficult to sell their securities.

We will incur significant expense in complying with Section 404 of the Sarbanes-Oxley Act of 2002 on a timely basis.

The SEC, as directed by Section 404 of the Sarbanes-Oxley Act, adopted rules generally requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual report on Form 10-K that contains an assessment by management of the effectiveness of the company's internal controls over financial reporting. Under current rules, commencing with our annual report for the fiscal year ending September 30, 2011, our independent registered accounting firm must attest to and report on management's assessment of the effectiveness of our internal controls over financial reporting.

We have not developed a basic Section 404 implementation plan. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. How companies should be implementing these new requirements including internal control reforms to comply with Section 404's requirements and how independent auditors will apply these requirements and test companies' internal controls, continues to change. We do not have a precedent available with which to measure compliance adequacy. Accordingly, there can be no positive assurance that we will receive a positive attestation from our independent auditors. 

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We expect that we may need to hire and/or engage additional personnel and incur incremental costs in order to complete the work as required by Section 404. We have initially concluded that our internal controls are not effective; in the event that in the future we conclude that our internal controls are effective, our independent accountants may disagree with our assessment and may issue a report that is qualified. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

Item 1B. Unresolved Staff Comments.

We are not an accelerated filer or a large accelerated filer, as defined in Rule 12b-2 of the Exchange Act (§240.12b-2 of this chapter), or a well-known seasoned issuer as defined in Rule 405 of the Securities Act (§230.405 of this chapter); and, we are not subject to this item.

Item 2. Properties.

Our corporate headquarters office is located in Sarasota, Florida. We do not have a lease or written rental agreement and are not being charged rent. We believe this facility will not be adequate for our needs in the immediate future. Based upon our future acquisitions, we will determine the best facility to use as a corporate and operations headquarters.

The headquarters of our operating subsidiaries are located in Hamburg, Arkansas and Scotts Bluff, Nebraska. The following table presents information regarding these facilities.

Location	Acres	Under Roof*	Office*	Warehouse*	Service*	Trucks Accommodated
Hamburg facility (Morris)	10	15,000	3,000	none	12,000	170 trucks
Scotts Bluff facility (Smith)	10	36,500	3,000	30,000	3,500	400 trucks

 *Number indicates square feet.

We also have terminals in Pine Bluff, Arkansas, Arcadia, California, Kimble, Nebraska and Ponca City, Oklahoma. We rent drop yards on a short term basis as the seasonal and operational needs of our customers require. These drop yards are routinely located in Eldorado, Arkansas, Sacramento, California, Chicago, Illinois, Iowa City, Iowa, Denton and Houston, Texas and Dell, Utah. Drop yards are a specific number of truck parking places we rent on an as-needed basis in terminal facilities of other trucking companies.

We believe all of these facilities are adequate for our operations for the foreseeable future. We expect to acquire additional facilities for operations when we make future acquisitions, of which there is no assurance.

Item 3. Legal Proceedings.

We expect to be engaged in litigation from time to time in the normal course of our business as a motor freight carrier. Claims for worker’s compensation, auto accident, general liability and cargo and property damage are routine occurrences in the motor transportation industry. We have programs and policies which are designed to minimize the events that result in such claims. We maintain insurance against workers’ compensation, auto liability, general liability, cargo and property damage claims. We are responsible for deductible amounts up to $3,000 per accident. We periodically evaluate and adjust our insurance and claims reserves to reflect our experience.  Our workers’ compensation claims are entirely covered by our insurance.  Insurance carriers have raised premiums for many businesses, including truck transportation companies. As a result, our insurance and claims expense could increase, or we could raise our deductible when our policies are renewed. We believe that our policy of self-insuring up to set limits, together with our safety and loss prevention programs, are effective means of managing insurable costs.

The following table presents information regarding our claims experience during calendar year 2009.

Category of Claim	Total Claims*		Our Portion
Auto Accident	$	0	$	0
General Liability	$	27,250	$	0
Cargo Damage	$	0	$	0
Property Damage	$	11,000	$	3,000

*Includes estimated amounts of pending claims, which are expected to settle in 2010.

We require our contract drivers to carry their own occupational accidental insurance, which is similar to workers’ compensation insurance.

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The following table presents our accident experience during the past twenty-four months.

Type	Fatal	Injury	Tow	Total
Crashes	0	4	4	8

Item 4. Submission of Matters to a Vote of Security Holders.

We did not submit any matters to our stockholders for action or approval during the last quarter of our fiscal year.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market information. Our common stock trades on OTC Bulletin Board under the symbol, PGRA. The following quotations reflect inter–dealer prices without retail markup, markdown, or commission, and may not necessarily represent actual transactions. The quarterly ranges of high and low sales prices per share for the past two fiscal years have been as follows:

Quarters Ended	Sales Price
	High	Low
December 31, 2007	.0220	.0050
March 31, 2008	.0090	.0015
June 30, 2008	.0080	.0002
September 30, 2008	.0002	.0002
December 31, 2008	.0220	.0050
March 31, 2009	.0025	.0015
June 30, 2009	.0049	.0012
September 30, 2009	.0020	.0005

As of December 31, 2009, the last reported sales price of our common stock was $0.00219.

Holders. Based on information supplied by certain record holders of our common stock, we estimate that as of December 31, 2009, there were approximately 2,960 beneficial owners of our common stock, of which approximately 2,010 are registered shareholders.

Dividends. We have never declared or paid any dividends on our common stock. Because we currently intend to retain any future earnings to finance operations and growth, we do not anticipate paying any cash dividends in the foreseeable future.

Securities authorized for issuance under equity compensation plans. Our employment agreement with Steven E. Lusty requires us to issue 25,000 shares (after our planned reverse stock split on 1:244.8598) for each month we are not able to pay his compensation in cash beginning August 2009. At the date of this annual report, he has not received any shares issued by Integrated Freight and we are obligated to issue 125,000 shares to him after approval of the reverse stock split.

Performance graph. We are not required to include this information in our annual report.

Recent sales of unregistered securities. All sales of equity securities during our 2009 fiscal year have been reported on Form 8-K and Form 10-Q.

Item 6. Selected Financial Data.

We are not required to provide the information under this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and notes to those statements included elsewhere in this report.

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During the twelve-month period covered by management’s discussion under this item, the results of operations for the period ended and financial condition at September 30, 2009, our business was exclusively providing life–cycle systems integration and implementation of information technology solutions within the public and commercial sectors with a focus and specialty is on spatial information management technologies, including web–enabled GIS and applications. We sold this business on December 27, 2009. Beginning December 3, 2009, when we acquired the stock of Integrated Freight, we added motor freight transportation to our business and at the date of this annual report are exclusively engaged in that business. Our future financial performance will be unrelated to our financial performance through September 30, 2009, discussed below.

Financial Condition

Liquidity

During fiscal year 2009, we are reporting a net loss to common stockholders of $511,960, about nine percent higher than the net loss recorded for the prior year. We continued to experience very constrained cash flows. The limited cash flows have, from time to time, adversely affected our ability to timely meet vendor payment obligations. We have an accumulated deficit of $24,468,511 at September 30, 2009, a net working capital deficit of $3,203,345 at September 30, 2009, net losses for the years ended September 30, 2009 and 2008, and net losses back to 1998. Substantially all of our operations, and the losses associated therewith, have been conducted in PGI-MD.

Cash Flow

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During fiscal years 1998 through 2009, we experienced significant losses with corresponding reductions in working capital and net worth, excluding the impact of certain onetime gains. Our revenues and backlog have also decreased substantially during the past two years. We have struggled to maintain a minimal cash flow necessary to meet our barebones operating and capital requirements and have been be forced to restrict operating expenditures to match available resources. These factors, among others, raised substantial doubt about our ability to continue as a going concern.

We continued to experience significant liquidity issues that caused us to finance the needed resources with funds from now discontinued operations and accretion of amounts owed to creditors. As a result, from time to time we delayed payment of subcontractor invoices. At September 30, 2009, we had a net working capital deficit of $3,203,345 compared with a net working capital deficit of $3,469,474 at September 30, 2008.

Cash provided by operations. In the twelve months ended September 30, 2009, operations used net cash of $18,856, as compared to $167,872 provided by operations during the period ended September 30, 2008. This $186,728 change from the prior year was primarily a result of:

A decrease of $43,321 in cash used to fund our current year net loss of $511,960 versus $468,639 for the prior year plus a net change of $87,009 for changes in operating assets and liabilities of continuing operations which decreased the cash used, plus a decrease of $186,728 in cash provided by discontinued operations. The latter decrease was primarily a result of gains from extinguishments of debt.

Cash used by investing activities. In the period ended September 30, 2009, investing activities used cash of $23,425 versus $71,423 used in investing activities during the period ended September 30, 2008. The primary reason for the change was decreased purchases of software for future use in the current period. All activity was from discontinued operations.

Cash provided by and used in financing activities. During the period ended September 30, 2009, financing activities provided $41,877 as compared to net cash used of $174,677 in financing activities in the period ended September 30, 2008. The change was mainly a result of proceeds received from the issue of a convertible debenture in continuing operations and a related party note payable in discontinued operations versus the pay-down of debt in discontinued operations in the prior year period.

Accounts receivable balances at September 30, 2009 and 2008, have been reclassified in the current presentation to “current assets of discontinued operations” on our balance sheets.

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We depended on revenues and accounts receivable collections from discontinued operations to fund our costs of administration at the parent company level through the completion of the merger with Integrated Freight on December 27, 2009. Therefore the elevated levels of aged accounts receivable we experience periodically, coupled with the need to finance activities with cash from discontinued operations, places cash flow constraints on us requiring it to very closely manage its expenses and payables. From time to time we have also borrowed funds from officers and employees to meet working capital needs.

Accounts Receivable

At September 30, the components of contract receivables were as follows:

	2009		2008
Billed	$	204,256	$	544,720
Unbilled		38,834		238,470
		243,090		783,190
Less allowance for doubtful accounts		14,151		49,718
Accounts receivable, net	$	228,939	$	733,472

Unbilled receivables represent work-in-process that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. Unbilled work-in-process includes revenue earned as of the last day of the reporting period which will be billed in subsequent days. The amount of unbilled revenues will vary in any given period based upon contract activity.

Receivables include retainages receivable representing amounts billed to customers that are withheld for a certain period of time according to contractual terms, generally until project acceptance by the customer. At September 30, 2009 and 2008, retainage amounted to $4,055 and $168,434, respectively. Management considers all retainage amounts to be collectible.

Billed receivables include $37,597 for the net amount of factored invoices due from Rockland. This amount is comprised of the amount of outstanding uncollected invoices on hand at Rockland ($83,716) less the net amount of funds employed by Rockland in servicing them ($67,684) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement we have granted Rockland and a lien and security interest in all of PGI-MD’s cash, accounts, goods and intangibles.

PGI-MD has historically received greater than ten percent of its annual revenues from one or more customers creating some amount of concentration in both revenues and receivables.

At September 30, 2009, customers exceeding ten percent of accounts receivable were the Italian Ministry of Finance ("IMOF"), twenty-seven percent and China Clients fourteen percent. At the same date, customers exceeding ten percent of revenue for the year were IMOF, twenty-seven percent, San Francisco Department of Technology and Information Systems (“SFDTIS”), eleven percent, and Dawson County, Georgia, thirteen percent.

At September 30, 2008, customers exceeding ten percent of accounts receivable were the Italian Ministry of Finance ("IMOF"), twenty-four percent, New York City Department of Environmental Engineering (“NYDEP”), nineteen percent. At the same date, customers exceeding ten percent of revenue for the year were NYDEP, twenty-six percent, San Francisco Department of Technology and Information Systems (“SFDTIS”), sixteen percent, and the IMOF, twelve percent.

Deferred revenue amounts of $130,269 and $312,303 at September 30, 2009 and 2008, respectively, represented amounts billed in excess of amounts earned.

Contractual Obligations and Commercial Commitments

As a result of our sale of PGI-MD on December 27, 2009, we no longer are subject to any contractual obligations and commitments of that company. We have assumed the contractual obligations and commercial commitments of Integrated Freight as a result of our merger on December 23, 2009. Contractual obligations and commercial commitments consist primarily of leases and financing agreements, in each case for terms of up to forty-eight  months for power units and trailers.

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Off-Balance Sheet Arrangements

We do not have any (1) guaranties, (2) retained or contingent interest in transferred assets, (3) obligations under derivative instruments classified as equity or (4) obligations arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.

Capital Resources

We believe our capital resources are insufficient to fund our business plan.  We will require additional debt and equity funding to complete the acquisition of additional companies and to provide additional working capital for our existing operations and operations we may acquire.  To date our capital needs have been met by the private sale of our common stock to individual investors and convertible and non-convertible loans to individual investors.  We believe we will need to continue to develop sources of private funding until such time as the scale of our operations, our sales and our profits are sufficient to attract the interest of institutional investors, if we are ever able so to do. 

Results of Operations

Business operations during the twelve months ended September 30, 2009 were conducted exclusively in PGI-MD. We conducted administrative operations as related to maintenance of our public reporting obligations. We discontinued these historical operations on December 27, 2009 with the sale of PGI-MD.

Results of continuing operations:

Revenues

With the reclassification of PGI-MD to discontinued operations we recorded our financial results to continuing operations and to discontinued operations. As a result, because our continuing operations do not generate revenue we have no revenues for continuing operations.

Costs and Expenses from Continuing Operations

Total costs and expenses for the twelve months ended September 30, 2009, amounted to $186,027, a $10,844 reduction from the $196,871 for the same period ended September 30, 2008. This 6% decrease is primarily due to reductions in salaries and benefits.

Salaries and benefits decreased by $9,457, or 13% as a result of management’s decision to change to a reduced workweek of thirty-two hours pending receipt of new contracts. General and administrative expenses decreased by $1,387, or one percent, primarily as a result of decreased accounting fees.

Operating loss from continuing operations

We reported an operating loss from continuing operations of $186,027 for the 12 months ended September 30, 2009, as compared to an operating loss of $196,871 in the prior year. This decrease of $10,844, or 6%, was a result of the items described above.

Interest expense decreased to $38,776 in the current period compared with $60,163 during the prior year; the decrease of $21,387, or 36%, occurred because the redemption of outstanding preferred stock terminated further accrual of related interest.

Loss from continuing operations amounted to $233,019 in the current year period compared to $257,034 in the prior year. The 13% decrease resulted from the items noted above.

Results of discontinued operations

Revenue from our discontinued information technology operations amounted to $1,854,617 for the year ended September 30, 2009, a decrease of $1,759,399, or 49%, from prior year revenues of $3,614,016. The decrease resulted from contraction of the economy which manifested itself in reduced tax collections by our primary local government customers who reduced their spending accordingly.

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Discontinued operations incurred an operating loss of $498,952 in the current period versus an operating loss of $192,102 in the prior year period. The $306,840 increase resulted primarily from the decrease in revenues noted above; the decrease of $1,452,548 in total costs and expenses was insufficient to offset the drop in revenue. While direct contract costs decreased $1,153,560, or 55%, salaries and employee benefits decreased only $205,854,  or 20%.

Other income and expenses from discontinued operations amounted to income of $258,472 in the current year versus an income of $63,252 in the prior year. The primary cause was income recorded from the write off of liabilities.

Interest expenses also fell $34,284 from the prior year total of $82,745, primarily as a result of reduced levels of borrowing for operations.

Loss from discontinued operations amounted to $288,941 in the current year period compared to $211,605 in the prior year. The 37% increase resulted from the items noted above.

Our net loss.

Our net loss for the year ended September 30, 2009, is $511,960 versus $468,639 in the prior year. The $43,321 increase resulted from the items noted above.

Market Risk

Market risk is the potential change in a financial instrument’s value caused by fluctuations in interest or currency exchange rates, or in equity and commodity prices. Our activities expose us to certain risks that management evaluates carefully to minimize earnings volatility. During the fiscal year ended September 30, 2009, we were not a party to any derivative arrangement. We did not engage in trading, hedging, market–making or other speculative activities in the derivatives markets.

Our international sales were denominated in U.S. dollars with the exception of the payments made to Xmarc Limited whose clients pay in British Pounds Sterling, Euros and US Dollars. Receipts in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on the date of the transaction. Management views the exchange rate fluctuations occurring in the normal course of business as low risk and they are not expected to have a material effect on the financial results of the Company.

Foreign Currency Exchange Rate Risk. We conducted business in a number of foreign countries and, therefore, face exposure to slight but sometimes adverse movements in foreign currency exchange rates. International revenue of $640,330 was about 35% of our total revenue in 2009, of which about $571,690, or thirty-one percent of our total revenue, was denominated in a currency other than U.S dollars. Accordingly, a ten percent change in exchange rates could increase or decrease our revenue by $57,169. Since we do not use derivative instruments to manage foreign currency exchange rate risks, the consolidated results of operations in U.S. dollars may be subject to some amount of fluctuation as foreign exchange rates change. In addition, our foreign currency exchange rate exposures may change over time as business practices evolve and could have a material impact on our future financial results.

Our primary foreign currency exposure was related to non–U.S. dollar denominated sales, cost of sales and operating expenses related to our international operations. This means we are subject to changes in the consolidated results of operations expressed in U.S. dollars. Other international business, consisting primarily of consulting and systems integration services provided to international customers in Asia, is predominantly denominated in U.S. dollars, which reduced our exposure to fluctuations in foreign currency exchange rates. There have been period–to–period fluctuations in the relative portions of international revenue that are denominated in foreign currencies. The net amount of foreign currency gains and (losses) was a loss of $56,043 for fiscal year 2009 and a gain of $8,675 for fiscal year 2008.

Critical Accounting Policies

General. Discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On a regular basis, we evaluate estimates, including those related to bad debts, intangible assets, restructuring, and litigation. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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We believe the following critical accounting policies, which applied to our discontinued operations, required significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition. Our revenue recognition policy was significant because our revenues were a key component of our results of operations. We recognize revenue in accordance with SEC Staff Accounting Bulletin 104 “Revenue Recognition” (“SAB 104”). SAB 104 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements and updates Staff Accounting Bulletin Topic 13 to be consistent with Accounting Standards Codification (“ASC”) 605, Revenue Arrangements with Multiple Deliverables. We recognize revenues when (1) persuasive evidence of an arrangement exists, (2) the services have been provided to the client, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Our operations require us to make significant assumptions concerning cost estimates for labor and expense on contracts in process. Due to the uncertainties inherent in the estimating process for costs to complete contracts in process under the percentage of completion method, it is possible that completion costs for some contracts may need to be revised in future periods. Should changes in conditions or estimates cause management to determine a need for revisions to these balances in transactions or periods, revenue recognized for any reporting period could be adversely affected.

Allowance for Doubtful. Accounts. We make estimates of the collectability of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in our client payment terms and collection trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of the assets acquired. The Company accounts for goodwill in accordance with FASB ASC 350, “Intangibles and Other”. ASC 350 requires the use of a non–amortization approach to account for purchased goodwill and certain intangible assets. Under the non–amortization approach, goodwill and certain intangible assets are not amortized into results of operations, but instead are reviewed for impairment at least annually and written down and charged to results of operations in the periods in which the recorded value is determined to be greater than the fair value. The Company did not record any impairment of assets on its records for fiscal year 2009.

Impairment of Assets. We review long–lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, we estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, we recognize an impairment loss. Otherwise, an impairment loss is not recognized. Measurement of an impairment loss for long–lived assets and identifiable intangibles that we expect to hold and use are based on the fair value of the asset. We have reviewed these assets recorded at September 30, 2009 and found no impairment.

Purchased and Internally Developed Software Costs for Future Project Use. Purchased software is recorded at the purchase price. Software products that are internally developed are capitalized when a product’s technological feasibility has been established. Amortization begins when a product is available for general release to customers. The costs for both purchased and developed software are then amortized over a future period. The amortization is computed on a straight–line basis over the estimated economic life of the product, which is generally three years, or on a basis using the ratio of current revenue to the total of current and anticipated future revenue, whichever is greater. All other research and development expenditures are charged to research and development expense in the period incurred. Management routinely assesses the utility of its capitalized software for future usability in customer projects. No write-downs were recorded in fiscal year 2009.

Deferred Tax Valuation Allowance –– Fiscal Year 2009

We reported net loss of $511,960 for the twelve months ended September 30, 2009. Coupled with losses in prior years, we have generated a federal tax net operating loss, or NOL, carryforward that totals approximately $20.8 million as of September 30, 2009, compared to $19.9 million at September 30, 2008. We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carryforwards in excess of the deferred tax liability. The valuation allowance has been recorded as our management has not been able to determine that it is more likely than not that the deferred tax assets will be realized. As a result, no provision or benefit for federal income taxes has been recorded for the period ended September 30, 2009. The utilization of the loss carry forwards is limited under Internal Revenue Service Code Section 382 due to the changes in ownership noted as subsequent events.

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Effect of Recent Accounting Pronouncements

The pronouncements that may affect us in the ensuing fiscal year are:

In June 2009, the FASB issued SFAS 168 (now: FASB ASC 105-10), Generally Accepted Accounting Principles the FASB Accounting Standards Codification. SFAS 168 represented the last numbered standard to be issued by FASB under the old (pre-Codification) numbering system, and amends the GAAP hierarchy established under SFAS 162. On July 1, 2009, the FASB launched FASB’s new Codification entitled “The FASB Accounting Standards Codification”, or FASB ASC. The Codification supersedes all existing non-SEC accounting and reporting standards. FASB ASC 105-10 is effective in the first interim and annual periods ending after September 15, 2009. This pronouncement had no effect on our consolidated financial statements upon adoption other than current references to GAAP, which, where appropriate, have been replaced with references to the applicable codification paragraphs.

In March 2008, the FASB issued FASB ASC 815, Derivatives and Hedging, which requires additional disclosures about the objectives of derivative instruments and hedging activities, the method of accounting for such instruments and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. FASB ASC 815 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early adoption encouraged. Management believes that, for the foreseeable future, this guidance will not have a material impact on the financial statements.

In December 2007, the FASB issued FASB ASC 805, Business Combinations. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. FASB ASC 805 was effective for our company beginning December 15, 2008 and will apply prospectively to business combinations completed on or after that date. Management believes that, for the foreseeable future, this guidance will have no material impact on our financial statements.

In December 2007, the FASB issued FASB ASC 810-65, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No 51, which changes the accounting and reporting for minority interests. Under this pronouncement, minority interest is recharacterized as noncontrolling interests and is to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. FASB ASC 810-65 was effective for our company December 15, 2008 and applies prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. Management believes that, for the foreseeable future, this guidance will not have a material impact on our financial statements.

The FASB issued FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. In February 2008, the FASB issued FASB Staff Position, FASB ASC 820-15-5, which delayed the effective date of FASB ASC 820 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Excluded from the scope of FASB ASC 820 are certain leasing transactions accounted for under FASB ASC 840, Leases. The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of FASB ASC 820. Management believes that, for the foreseeable future, this guidance will have no material impact on our financial statements.

In April 2008, FASB ASC 350-50 was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. FASB ASC 350-50 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption was prohibited. Management is currently evaluating the effects, if any, that this guidance may have on our financial reporting.

In May 2009, the FASB issued FASB ASC 855, Subsequent Events. FASB ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC 855 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether the date represents the date the financial statements were issued or were available to be issued. FASB ASC 855 is effective in the first interim period ending after June 15, 2009. We expect FASB ASC 855 will have an impact on disclosures in our consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms and value of any subsequent events occurring after adoption.

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In June 2009, the FASB issued “Amendments to FASB Interpretation No. 46(R)”, FASB ASC 810-Consolidation, that will change how we determine when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under this guidance, determining whether a company is required to consolidate an entity will be based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The changes are FASB ASC 810-10, effective for financial statements after January 1, 2010. We are currently evaluating the requirements of this guidance and the impact of adoption on our consolidated financial statements

We have reviewed all significant newly issued accounting pronouncements and concluded that, other than those disclosed herein, no material impact is anticipated on the financial statements as a result of announced accounting changes.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are not required to provide information under this item.

Item 8. Financial Statements and Supplementary Data.

The financial statements required by this item, including an index to the financial statements, begin on page F–1 of this annual report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

We have not had any change in or disagreement with our accountants

Item 9A. Controls and Procedures.

We are subject to the requirements of Item 9A(T), at the date of this report.

Item 9A(T).

Evaluation of Disclosure Controls and Procedures

We are not maintaining "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. We will be required to design and evaluate our disclosure controls and procedures, recognizing that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily are required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures will be based partially upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Disclosure controls and procedures are intended:

• to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and

• to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our chief executive officer and senior vice president – finance, who is also our principal accounting officer, to allow timely decisions regarding required disclosure.

Our former chief executive officer and former senior vice president – finance, who were also our principal accounting officer were responsible for evaluating the effectiveness of the our disclosure controls and procedures and conclude, based on their evaluation, that such disclosure controls and procedures were effective as at September 30, 2009, to ensure that information required to be disclosed in reports filed or submitted under United States securities legislation was recorded, processed, summarized and reported within the same period specified in those rules and regulations.  These controls and procedures applied to the business conducted by our prior management and do not apply to our business at the present time. We do not have disclosure controls and procedures in place at the present time.

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Management’s Report on Internal Controls Over Financial Reporting

Our chief executive officer and the principal accounting officer are responsible for designing and maintaining internal controls over financial reporting, or causing them to be designed under their supervision, to provide reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal controls over financial reporting should include policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail will accurately and fairly reflect the transactions and dispositions of our assets,

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with the authorization of management, and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Using the framework provided by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), on our behalf our former chief executive officer and former principal accounting officers conducted an evaluation of the effectiveness of the internal controls over financial reporting as of September 30, 2009 and concluded that there were deficiencies and material weaknesses in internal controls over financial reporting, which included follows:

• The Company did not have an audit committee, and

• Due to the limited number of staff resources, the Company believes there are instances where a lack of segregation of duties existed which would be required to provide effective controls;

• Due to the limited number of staff resources, the Company may not have the necessary in-house knowledge to address complex accounting and tax issues that may arise; and

• The limited staff in accounting and finance may not allow for an adequate review process of adjusting journal entries and financial results.

As a result of these findings, our internal controls over financial reporting at September 30, 2009 were deemed not effective.

PCAOB Auditing Standard No. 5 defines:

• A material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

• A significant deficiency as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.

The findings noted above and their related risks are not uncommon in a small company of our size of because of limitations in size and number of staff. We believe our management has taken initial steps to mitigate these risks by identifying certain conditions that require correction and involving the Board of Directors in reviews and consultations where necessary. However, these weaknesses in internal controls over financial reporting could result in a more than remote likelihood that a material misstatement may not be prevented or detected. We believe that our management must take additional steps to further mitigate these risks by consulting outside advisors on a more regular and timely basis.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Our independent auditors will be required to attest to, and report on, management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX) in their audit of our annual report for the year ending September 30, 2011.

Changes in Internal Control Over Financial Reporting

During the fourth fiscal quarter, we did not make any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

28

Item 9B. Other Information.

We believe we have filed reports on Form 8-K during the fourth fiscal year providing all information required to be reported on Form 8-K which occurred during that period.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table and biographical information following the table provide information about our directors and executive officers elected effective at 5:30 o’clock p.m. Central Standard Time on November 9, 2009. These persons held the same offices with Integrated Freight at the date of their election as our directors and officers and through the date of the merger of Integrated Freight into us on December 23, 2009.

NAME	AGE	POSITION
John E. Bagalay	75	Director
Paul A. Henley	50	Director, Chief Executive Officer, Chief Financial and Accounting Officer
Henry P. Hoffman	58	Director
Steven E. Lusty	48	Chief Operating Officer
Jackson L. Morris	65	Corporation Secretary
T. Mark Morris	43	Director and Chief Operating Officer of Subsidiary
Monte W. Smith	55	Director and Chief Operating Officer of Subsidiary

Biographical Information About Our Directors And Executive Officers

John E. Bagalay is one of our independent directors.

• 2005 to present – Mr. Bagalay is executive-in-residence at EuroUS Ventures LLC, a venture capital firm located in Newton, Massachusetts that invests exclusively in European based technology companies that wish to establish a U.S. market. That firm’s investment is committed to facilitate that expansion into the U.S. market.

• 2003 to 2005 – He was Director of Special Projects in the Life Sciences at the Boston University Technology Commercialization Institute

• 1989 to 2003 – Mr. Bagalay was Senior Advisor to the Chancellor of Boston University from January 1998 to November 2003.

• 1989 to 1998 – He Managing Director of BU Ventures, a university venture capital company.

Mr. Bagalay is an independent director of the following publicly traded, registered companies: Wave Systems Corp. and Cytogen Corp. He serves on various committees of the boards of directors of these corporations. Mr. Bagalay earned a B.A. degree in philosophy, history and economics (1954) from Baylor University, a J.D. degree (1964) from the University of Texas at Austin and a Ph.D. degree (1957) from Yale University.

Paul A. Henley is the chairman of our board, chief executive officer, chief financial and accounting officer. he devotes all of his working time to our business.

• May 2008 to present – Mr. Henley is the founder of Integrated Freight Corporation and has served as its chairman of the board and chief executive officer since its inception. He now also serves as its chief financial and accounting officer.

• June 2002 to June 2006 - He was President of Henley Capital Group, a consulting company that worked with private companies and early stage public companies in the area of business development. He assisted companies in the following areas; writing of business plans, the preparing of budgets, corporate communications (public relations/investor relations), corporate presentations at various types of events, assisting in the development of board of directors, hiring of market makers, attorneys and auditors, merger and acquisition consulting and the planning and implementation of capital programs.

• October 2006 to May 2007 - Mr. Henley was engaged in a joint venture with Friedland Capital doing business under the name of Friedland-Henley Advisers which was engaged in developing a venture capital fund for early stage companies. Mr. Henley terminated his relationship before the fund began to raise capital.

• June 2006 to 2007 - He was a consultant to Friedland Capital of Denver, Colorado in the areas of product development and investment seminars.

29

• June 2006 - 2008 - Mr. Henley was engaged on a part time basis in planning a business to acquire trucking companies, efforts to obtain funding and efforts to identify potential acquisition targets. This activity culminated in his founding of High Point Transport, Inc. in 2006, which filed a registration statement on Form 10 in August 2007. High Point Transport acquired Cannon Freight Systems, Inc., located in Harrison Township, Michigan, in November 2007 that continued to be operated on a daily basis by its founder and president. Due to operating losses and breach of financial covenants by Cannon Freight, unforeseen and unexpected by High Point Transport at the time of acquisition, Cannon Freight was forced to cease operations in or about February 2008. This circumstance prevented High Point Transport from satisfying its covenants with Cannon Freight’s founder and selling stockholder, who as a consequence became the controlling stockholder of High Point Transport. Management of Integrated Freight believes, under the new controlling stockholder, High Point Transport also terminated its business activities in or about February 2008.

• May 2008 to present – He is the founder of Integrated Freight Corporation and has served as its chairman of the board and chief executive officer since its inception. He now also serves as its chief financial and accounting officer.

Mr. Henley earned a B.A. degree in business management and marketing (1981) from Florida State University.

Henry P. (“Hank”) Hoffman is one of our independent directors.

• February 2000 to May 2006 - Mr. Hoffman was founder, President & CEO, and chairman of the board of SiriCOMM, Inc. an applications service provider and wireless networking business serving the U.S. truckload industry. The company installed its VSAT-based network technology in the major truck stop chain facilities throughout the U.S. to support its applications and those of third party partners.

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• June 2006 to May 2007 – He served as chairman of the board of SiriCOMM. Upon his departure in May 2007, the company subsequently changed its business model to a pure Internet service provider. The company filed for bankruptcy in 2008.

• June 2007 to present – Mr. Hoffman is President & CEO and a director of SeaBridge Freight, Inc., a tug and barge transportation company that provides short sea service between Port Manatee, FL and Brownsville, TX.

Mr. Hoffman earned his BS degree (1973) from the United States Military Academy and a MBA degree (1985) from the University of Wisconsin.

Steven E. Lusty is our chief operating officer.  He devotes essentially all of his working time to our business.

•

2006 to present – Mr. Lusty owns and operates Valleytown Ventures, LLC which specializes in providing interim executive officer/turnaround consulting services in the transportation/logistics industry.  He performs implementation and integration of financial, information technology, operations enhancements, cost models, pricing standards, route utilization, driver relations, policy and procedures, regulatory and compliance, and safety.  In his consulting capacity, he provided services to High Point Transport, Inc. in 2007, subsequently in 2008 serving as the interim chief executive officer of its operating subsidiary, Cannon Freight Systems, Inc. for purposes of orderly liquidated assets, collected debts, and settled collections.  See Mr. Henley’s biographical information for more information about High Point Transport, Inc. Mr. Lusty has provided operations analysis for a restructuring firm and has analyzed numerous trucking firms’ financials and operations for acquisitions by investment firms and holding companies.

2009 to present – He has been employed by Integrated Freight.

• 1998 to 2007 – Mr. Lusty founded and operated Chromos, Inc. This company originally provided transportation brokerage, later establishing a trucking operation and making three acquisitions.  The company operated in varied freight sectors.   Chromos established six field agents in the Southeast for brokerage. In 2006, signed an agreement with XRG, Inc., a publicly traded holding company operating in the interstate trucking sector. Under the agreement, XRG was to provide back office, accounting and disbursement as an agent of Chromos.  Chromos paid XRG amounts needed for disbursement in payment of Chromos’ payables, but XRG failed to disburse those funds in payment of Chromos’ obligations, including long term debt.  Without remaining funds to pay these obligations, Chromos was forced to file for liquidation in bankruptcy. Mr. Lusty was also forced to file for bankruptcy as a result of loans he had guaranteed for Chromos.

30

Mr. Lusty earned a BA degree in civil engineering (1985) from Mississippi State University.

Jackson L. Morris fills the statutory position of corporation secretary as a courtesy and incidental to his services as our independent corporate and securities counsel. He has served in these capacities with Integrated Freight since inception. Mr. Morris has been engaged in the private practice of law since 1982, maintaining his own practice in the Tampa Bay area since 1993. Mr. Morris focuses his practice in corporate, securities and business transaction law. Mr. Morris earned a B.A. degree in economics from Emory University in 1966, a J.D. degree from Emory University Law School in 1969 and an LL.M. from Georgetown Law School in 1974.

T. Mark Morris is one of our directors and is the chief operating officer of one of Integrated Freight’s subsidiaries, Morris Transportation, Inc., which he founded in 1998 and has been its chief executive officer from inception to the present. Mr. Morris earned a BA degree in business administration (1988) from Ouachita Baptist University in Arkadelphia, Arizona.

Monte W. Smith is one of our directors and is the chief operating officer of one of Integrated Freight’s subsidiaries, Smith Systems Transportation, Inc., which he founded in 1992 and has been its chief executive officer from inception to the present. Mr. Smith attended the University of Nebraska at Kearney, studying finance.

Audit Committee/Audit Committee Financial Expert

Our audit committee is composed of John E. Bagalay and Henry P. Hoffman, our two independent directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5 filed with the SEC, and other information known to the Company, during and with respect to the fiscal year ended September 30, 2009, we believe that, with the exception of Integrated Freight, all directors, officers and beneficial owners of more than ten percent of our registered shares timely filed all reports required by Section 16(a) of the Exchange Act.

Code of Ethics

Our former Board of Directors approved a Code of Ethics for senior financial officers on October 7, 2002. We filed it with our September 30, 2002 report on Form 10–KSB as Exhibit 99.3.  The current board of directors has not reviewed or considered continuation of the Code of Ethics and there is no assurance it will do so.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to us in all capacities by our principal executive officer, our former chief operating officer, and the other most highly compensated employee of PGI-MD who were employed at September 30, 2009 (collectively, the “Named Executive Officers”).

Name and principal position	Year	Salary	Total
John C Antenucci President & Chief Executive Officer	2009	$157,000	$157,000
Michael Kevany, Senior Vice President, PGI-MD	2009	$103,000	$103,000

(1) These amounts in the salary column reflect the basic compensation earned during fiscal year 2009 by the named executive officers.

31

The following table sets forth certain information with respect to outstanding equity awards at September 30, 2009, for our Named Executive Officers.  

Name	Outstanding Equity Awards at Fiscal Year End September 30, 2009 Option awards
	Number of securities underlying unexercised options exercisable (1)	Number of securities underlying unexercised options unexercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options	Option exercise price ($)	Option expiration date
	972,144	-	-	0.0150	Apr 30, 2010
John C. Antenucci	972,144	-	-	0.0120	Apr 30, 2011
	1,750,000	-	-	0.0140	May 16, 2012

(1) As was customary for our stock option grants, all of Mr. Antenucci’s stock options were immediately fully vested at the date of grant and expire five years from the date of grant.

2009 Option Exercises and Stock Vested

During fiscal year 2009 there no options exercised to acquire shares of our common stock; accordingly the total intrinsic value of options exercised during fiscal year 2009 is nil.

Employment and Change in Control Agreements

Employment Agreements

Messrs. Antenucci and Beisser, our management prior to a change in our management to that of Integrated Freight, have voluntarily terminated their employment agreements. See “Terms of Sale of PGI-MD, under Item 1, above.

Director Compensation

Through the period September 30, 2009, we did not provide any cash compensation to our sole director, Mr. Antenucci. Directors who are not our employees will receive 25,000 shares of our common stock (on a post reverse stock split basis) for each month during which either a board meeting(s) is held or an action by written consent is required.

Compensation of Our Current Management

The following table presents information about compensation of Integrated Freight’s chief executive officer and each of our highest paid executive officers who have compensation exceeding $100,000 per year. We paid only cash compensation to these persons, except for 125,000 shares of Integrated Freight’s common stock issued to Mr. Lusty in lieu of six months of cash compensation reflected in the following table.

Name and principal position	Year (1)		Salary
Paul A. Henley, Chief Executive Officer (2)		2008	$	57,500
		2009	$	195,000
Steven E. Lusty, Executive Vice President		2009	$	150,000
T. Mark Morris, Chief Executive Officer of Morris Transportation (3)		2007	$	78,000
		2008	$	105,000
		2009	$	110,000
Monte W. Smith, Chief Executive Officer of Smith Systems Transportation (3)		2007	$	110,000
		2008	$	110,000
		2009	$	110,000

(1) Fiscal year ended March 31.

(2) The completion of the merger of Integrated Freight into us entitles Mr. Henley to receive a bonus of $50,000 during the fiscal year ended March 31, 2010.

(3) Includes annual salary, prior to the respective date of our acquisitions, but excludes distributed and undistributed S-corporation earnings.

32

Neither our chief executive officer nor our other highest paid executives received any form of compensation other than cash salary during the periods indicated. The salaries of Mr. Morris and of Mr. Smith were paid by their employing companies.

Compensation Committee

Integrated Freight did not established a compensation committee prior to its merger into us. These functions are provided by its full board of directors. As a privately owned company with Mr. Henley as the sole director, a compensation committee was neither possible nor necessary as he has approved his own compensation. The compensation of executive officers other than Mr. Henley was approved by the full board of directors, except the compensation of the chief operating officers of our operating subsidiaries has been negotiated in the acquisition from the respective director/officers/controlling stockholders of those companies by Mr. Henley as the sole director at the time of such negotiations. We plan to have a compensation committee when we elect additional independent persons to our board of directors.

Employment Agreements

We have succeeded to the employment agreements Integrated Freight entered into with its executive officers identified in the following table. These persons are our executive officers, beginning November 10, 2009.

Name	Began	Ends (1)	Annual Cash Salary		Annual Increase	Bonus		Other
Paul A. Henley	May 30, 2008	May 29, 2011	$	195,000	10%		(2)(3)
Steven E. Lusty	January 1, 2009	December 31, 2011	$	150,000			(2)	(4)
T. Mark Morris	September 1, 2008	August 31, 2011	$	110,000		$	25,000(2)(5)(6)
Monte W. Smith	September 1, 2008	August 31, 2011	$	110,000			(2)(6)

(1)   Subject to subsequent automatic annual renewals.

(2)   Eligible for discretionary bonuses, upon board review and approval.

(3)   Achievement of a public market for our shares – bonus of $50,000. Closing acquisitions – bonus equal  to one-tenth of one percent (.001) of the revenue from operations generated by acquired company.

(4)   150,000 shares of our common stock as a signing bonus, plus 25,000 shares of our common stock per month for every month in which salary is not paid beginning August 1, 2009.  Mr. Lusty’s agreement provides for a base salary increase of ten percent per year.

(5)   A contractual-bonus of $25,000 which is in arrears.

(6)  Mr. Morris receives a bonus equal to ten percent of EBITA and Mr. & Ms. Smith receives an aggregate bonus equal to ten percent of EBITA.

Each employment agreement provides for payment of benefits provided to other employees, an automobile allowance, and an opportunity to earn a performance bonus and bonuses for initiating successful acquisitions equal to fifteen percent of one-year’s acquired revenues.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table identifies the beneficiaries of The Integrated Freight Stock Exchange Trust who are also our directors and officers and other persons who, based on their stock ownership of Integrated Freight at September 30, 2009, will own five percent or more of our common stock after the reverse stock split and related transactions are completed and sets forth the number and percentage of shares they beneficially own. Following the reverse stock split to be approved at the special stockholders meeting, the Trust will distribute these shares out of the Trust and into the names of these beneficial owners. The address of our directors and officers is our address. These persons own the shares before the reverse beneficially only, and after the reverse legally unless otherwise identified.

33

	Number of Shares		Percent
Name	Before Reverse Split (1)	After Reverse Split (2)	After all shares are issued (3)
John E. Bagalay	4,400,787	50,000		*
Paul A. Henley	572,102,258	6,500,000		30	%
Henry P. Hoffman	4,400,787	50,000		*
Steven E. Lusty	88,015,732	1,125,000		4.615	%
Jackson L. Morris	44,007,866	500,000		2.308	%
T. Mark Morris	264,047,196	3,000,000		13.846	%
Monte W. Smith (4)	81,854,631	930,000		4.292	%
All directors and officers as a   group (7 persons)	1,058,829,256	12,030,000		55.523	%
MTH Ventures, Inc.	101,218,092	1,150,000		5.308	%
24636 Harbour View Drive, Ponte Vedra, FL 32082
Edgar Renteria	132,023,598	1,500,000		6.923	%
Unit 105, 3550 Wembley Way, Palm Harbor, FL 34685
Tangiers Investors LP	176,317,515	2,003,250		9.246	%
Suite 400, 1446 Front Street, San Diego, CA 92101

*Less than one percent.

(1)  PlanGraphics shares held in the Trust. 

(2)   PlanGraphics shares to be distributed from the Trust following the reverse stock split and the issue of additional shares under the plan of merger, total is equal to the number of shares owned directly in Integrated Freight Corporation before placement in the Trust.

(3)   Percentage of total issued and outstanding after reverse stock split and the issue of additional shares to the Trust, such that one of our shares will be distributed by the Trust for each share of Integrated Freight Corporation placed in the Trust, plus an additional 1,337,822 shares not placed the Trust.

(4)   Includes 36,306,489 shares and 412,500 shares, respectively, legally owned by Mary Catherine Smith, Mr. Smith’s spouse.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

During the 2009 fiscal year, we did not enter into any transactions with our directors, executive officers and persons who own more than five percent of our common stock, or with their relatives and entities they control, except we contracted to sell PGI-MD to Mr. Antenucci as of May 1, 2009. This sale was completed on December 27, 2009. This transaction is described under “Terms of Our Sale of PGI-MD”, under Item 1, above.

Integrated Freight Corporation did not entered into any transactions with our directors and executive officers, persons who owned more than five percent of its common stock outside of normal employment transactions, or with their relatives and entities they control; except the following:

• We issued 6.5 million shares of our common stock to Mr. Henley for his founding of our incorporation, organizational and start up expenses in the amount of approximately $1,786. Mr. Henley is our founder and was our sole director at the date the issue of stock was approved.

• We issued 500,000 shares to Jackson Morris for his services in performed in our organization and start up.

From time to time we sold additional securities to outside investors who at the time of certain sales may have owned more than five percent of our common stock. These sales were on the same terms we were offering to others and were negotiated on an arms’-length basis.

We do not anticipate entering into any future transactions with our directors, officers and affiliates apart from normal employment transactions.

Jackson L. Morris and T. Mark Morris are not related.

34

Item 14. Principal Accounting Fees and Services.

Aggregate fees billed by our principal independent registered public accounting firms for audits of the financial statements for the fiscal years indicated:

		2009		2008
Audit Fees	$	60,000	$	58,500
Audit–Related Fees(1)		–		–
Tax Fees		–		–
All Other Fees		–		–
Total	$	60,000	$	58,500

Percentage of hours on audit engagement performed by non–FTEs: The audit work performed by non–full time employees was less than 50% of total time.

Audit pre–approval policies and procedures: In accordance with the Amended and Restated Audit Committee Charter of March 21, 2003 as provided with our Proxy Statement dated April 1, 2003, the Board of Directors, acting as the Audit Committee, reviewed with the independent auditors, Sherb & Co. LLP, and financial management of the Company the scope of the proposed audit and timing of quarterly reviews for the current year and as well as non–audit services requested and the audit procedures to be utilized. The Board of Directors, acting as the Audit Committee, also approves in advance all audit and any non–audit services for which the independent auditors may be retained.

35

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)  Financial Statements

INDEX TO FINANCIAL STATEMENTS

	Page
Index to Consolidated Financial Statements of PlanGraphics, Inc.	F-1
Index to Financial Statements of Integrated Freight Corporation (Predecessor Company)	F-31
Index to Financial Statements of Morris Transportation, Inc. (Predecessor Company)	F-82
Index to Consolidated Financial Statements of Smith Systems Transportation, Inc. (Predecessor Company)	F-95
Index to Pro Forma Unaudited Financial Information of PlanGraphics, Inc.	F-110

36

PLANGRAPHICS, INC.
Financial Statements
September 30, 2009 and 2008
TABLEOFCONTENTS
	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
FINANCIALSTATEMENTS
CONSOLIDATED BALANCE SHEETS	F-3
CONSOLIDATED STATEMENTS OF OPERATIONS	F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT	F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

PlanGraphics, Inc.

We have audited the accompanying consolidated balance sheets of PlanGraphics, Inc. and Subsidiaries as of September 30, 2009 and 2008 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PlanGraphics, Inc. and Subsidiaries, as of September 30, 2009 and 2008 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has a negative working capital position and a stockholders’ deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sherb & Co., LLP
Certified Public Accountants

Boca Raton, Florida

January 12, 2010

F-2

PLANGRAPHICS,INC.
CONSOLIDATED BALANCE SHEETS
			September 30,
	ASSETS		2009		2008
CURRENT ASSETS
Cash and cash equivalents
Cash		$	-	$	202
			-		202
Note receivable from related party			20,469		-
Current assets of discontinued operations			249,508		754,079
	Total current assets		269,977		754,281
PROPERTY AND EQUIPMENT
Equipment and furniture			2,000		2,000
Less accumulated depreciation and amortization			(2,000)		(2,000)
Long-term assets of discontinued operations			15,377		23,169
			15,377		23,169
OTHER ASSETS
Other assets of discontinued operations			92,156		195,759
			92,156		195,759
	TOTAL ASSETS	$	377,510	$	973,209
	LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Mandatory redeemable Series A preferred stock, $0.001 par
value, nil and 500 shares issued and outstanding at September
30, 2009 and 2008, respectively		$	-	$	500,000
Notes payable - current maturities			57,668		7,668
Accounts payable			181,560		142,778
Accrued payroll costs			32,202		13,256
Accrued expenses			118,502		244,052
Current liabilities of discontinued operations			3,087,511		3,316,001
	Total current liabilities		3,477,443		4,223,755
	TOTAL LIABILITIES		3,477,443		4,223,755
STOCKHOLDERS' DEFICIT
Common stock, no par value, 2,000,000,000 shares authorized,
500,718,173 and 99,158,706 shares issued and outstanding
at September 30, 2009 and 2008, respectively			21,368,578		20,706,005
Accumulated deficit			(24,468,511)		(23,956,551)
	TOTAL STOCKHOLDER'S DEFICIT		(3,099,933)		(3,250,546)
	TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	377,510	$	973,209

The accompanying notes are an integral part of these consolidated financial statements.

F-3

PLANGRAPHICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
			Years ended September 30,
			2009		2008
Revenues		$	-	$	-
Costs and expenses
Salaries and employee benefits			64,876		74,333
General and administrative expenses			121,151		122,538
	Total costs and expenses		186,027		196,871
	Operating loss		(186,027)		(196,871)
Other income (expense):
Other income			1,784		-
Interest expense			(38,776)		(60,163)
			(36,992)		(60,163)
	Loss from continuing operations		(223,019)		(257,034)
Discontinued operations
Operating loss from discontinued operations			(498,952)		(192,113)
	Other income		258,472		63,253
	Interest expense		(48,461)		(82,745)
	Loss from discontinued operations		(288,941)		(211,605)
Net loss		$	(511,960)	$	(468,639)
Basic and diluted loss per common share
Loss from continuing operations		$	(0.00)	$	(0.00)
Loss from discontinued operations			(0.00)		(0.00)
	Net loss per common share	$	(0.00)	$	(0.00)
Weighted average shares of common stock
outstanding - basic and diluted			237,779,234		99,158,706

The accompanying notes are an integral part of these consolidated financial statements.

F-4

PLANGRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years ended September 30, 2009 and 2008
	Common Stock				Accumulated		Stockholders'
	Shares		Amount		Deficit		Equity (Deficit)
Balance, September 30, 2007	97,214,418	$	20,697,839	$	(23,487,912)	$	(2,790,073)
Issue of common stock upon option exercise	1,944,288		8,166		-		8,166
Net loss	-		-		(468,639)		(468,639)
Balance at September 30, 2008	99,158,706		20,706,005		(23,956,551)		(3,250,546)
Issue of common stock upon conversion of
preferred stock	401,559,467		662,573		-		662,573
Net loss	-		-		(511,960)		(511,960)
Balance at September 30, 2009	500,718,173	$	21,368,578	$	(24,468,511)	$	(3,099,933)
The accompanying notes are an integral part of these consolidated financial statements.

F-5

PLANGRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
			Years ended September 30,
			2009		2008
Cash provided by (used in) operating activities:
Loss from continuing operations		$	(223,019)	$	(257,034)
Loss from discontinued operations			(288,941)		(211,605)
Net loss			(511,960)		(468,639)
Adjustments to reconcile net loss to net cash
provided by (used in) continuing operating activities:
Changes in operating assets and liabilities
Prepaid expenses and other			(4,121)		2,620
Accounts payable			38,782		30,556
Accrued expenses			106,604		42,854
Net cash provided by continuing operating activities			(81,754)		(181,004)
Adjustments to reconcile net loss to net cash
provided by (used in) discontinued operating activities:
Depreciation and amortization			114,852		175,130
Allowance for doubtful accounts			(32,586)		49,718
Net change in discontinued operating assets and liabilities			269,573		335,633
Net cash provided by discontinued operations			62,898		348,876
	Net cash used by operating activities		(18,856)		167,872
Cash flows used in investing activities:
Used in continuing operations investing activities
Note receivable due from related party			(20,469)		-
Used in discontinued operations investing activities
Purchases of equipment			(2,150)		(3,602)
Software developed for future use			(806)		(67,831)
Cash used in discontinued operations investing activities			(2,956)		(71,433)
	Net cash used in investing activities		(23,425)		(71,433)
Cash flows provided by (used in) discontinued operations financing activities:
Payments on debt			(8,123)		(174,677)
Proceeds from debt			50,000		-
Proceeds from notes payable to related party			13,750		-
Payments of note payable to related party			(13,750)		-
	Net cash provided by (used in) discontinued operations financing activities		41,877		(174,677)
Net decrease in cash			(404)		(78,238)
Cash and cash equivalents at beginning of year			404		78,642
	Cash - continuing operations		-		202
	Cash - discontinued operations		-		202
Cash and cash equivalents at end of year		$	-	$	404

The accompanying notes are an integral part of these consolidated financial statements.

F-6

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009 and 2008

NOTE A – COMPANY BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. The Company

These consolidated financial statements include the accounts of PlanGraphics, Inc. (a Colorado Corporation) and those of its wholly owned subsidiary held for sale, PlanGraphics, Inc. (a Maryland Corporation), and the latter’s wholly owned subsidiaries, RTD2M and Xmarc Ltd (collectively the "Company"). All significant inter-company accounts and transactions have been eliminated in consolidation. (See also Note N, Subsequent Events, regarding the sale of subsidiary.)

The Company has historically been a full life-cycle systems integration and implementation firm providing a broad range of services in the design and implementation of information technology in the public and commercial sectors. The Company has extensive experience with spatial information systems and e-services.

Reclassifications resulting from discontinued operations. During the third quarter, the Company determined to sell its operating subsidiary, PlanGraphics of Maryland (including its two subsidiaries) and the sale was subsequently completed on December 27, 2009. Accordingly, the assets and liabilities related to the subsidiary are considered to be held for sale in this report and have been reclassified in this report as “discontinued operations” in the consolidated balance sheets in accordance with Statement of Financial Accounting Standards Codification (“ASC”) No. 360, “Property, Plant and Equipment” and ASC 205, Presentation of Financial Statements. Both current and historical operating results of the subsidiary have been reclassified as “discontinued operations.” Depreciation and amortization on long-lived assets of the subsidiary were also reclassified to discontinued operations. Certain amounts in the Company’s consolidated financial statements for prior periods have also been reclassified to conform to the current period presentation.

The Company’s historical customers are located in the United States and foreign markets requiring locational or “spatial” information. Approximately 65% of its revenue comes from customers in federal, state and local governments and utilities; 34% from international; and the remaining 1% from commercial enterprises within the United States. International revenues were derived from various countries and as a percent of total revenue the countries are: Italy 26%, China 2%, England 4%, and the remaining 2% from Holland, Australia and Portugal.

2. Cash and Cash Equivalents; Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

3. Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting periods. Significant changes in the estimates or assumptions, or in actual outcomes related to them, could possibly have a material impact on the financial statements.

F-7

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company’s activities in discontinued operations require it to make significant assumptions concerning cost estimates for labor and expenses on contracts in process. Due to the uncertainties inherent in the estimation process of costs to complete for contracts in process, it is possible that completion costs for some contracts may have to be revised in future periods.

4. Allowance for Doubtful Accounts

We make estimates of the collectability of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in our client payment terms and collection trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

5. Property, Equipment and Depreciation and Amortization

Property and equipment are recorded at cost less accumulated depreciation or amortization. Depreciation is computed primarily using the straight-line method over the estimated useful lives ranging from 5 to 31 years. Depreciation and amortization expense on property and equipment was $114,852 and $175,130 for the years ended September 30, 2009 and 2008, respectively. Maintenance and repairs are charged to expense as incurred and expenditures for major improvements are capitalized. When assets are retired or otherwise disposed of, the property accounts are relieved of costs and accumulated depreciation, and any resulting gain or loss is credited or charged as an expense to operations.

6. Revenue and Cost Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin 104 “Revenue Recognition” (“SAB 104”). SAB 104 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements and updates Staff Accounting Bulletin Topic 13 to be consistent with Accounting Standards Codification (“ASC”) 605, Revenue Arrangements with Multiple Deliverables. We recognize revenues when (1) persuasive evidence of an arrangement exists, (2) the services have been provided to the client, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

Revenues from fixed fee projects are recognized on the percentage of completion method using total costs incurred to date to determine the percent complete. Revenues for projects are recognized as services are provided for time and material projects. Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which they become known.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as subcontracted labor, supplies, tools, repairs and depreciation costs. General and administrative costs are charged to expense as incurred. Deferred revenue represents retainage and prepayments in connection with these contracts, as well as amounts billed in excess of amounts earned under percentage of completion accounting.

F-8

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

7.  Income Taxes

The Company files United States federal and state income tax returns for its domestic operations, and files separate foreign tax returns for its United Kingdom subsidiary. The Company accounts for income taxes under FASB ASC 740, Income Taxes. Deferred income taxes result from temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years.

8. Net Loss Per Share

Basic income (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Exercise of outstanding stock options is not assumed if the result would be antidilutive, such as when a net loss is reported for the period or the option exercise price is greater than the average market price for the period presented.

The following is a reconciliation of the weighted average number of shares used in the Basic Earnings Per Share ("EPS") and Diluted EPS computations:

	Year ended September 30,
	2009	2008
Basic EPS share quantity	237,779,234	99,158,706
Effect of dilutive options and warrants	-	-
Diluted EPS share quantity	237,779,234	99,158,706

*For the net-loss periods ended September 30, 2009 and 2008, we excluded any effect of the 4,694,288 and 5,966,432 outstanding options and warrants, respectively, as their effect would be anti-dilutive.

9. Research and Development costs

Research and development costs are expensed as incurred. The amounts for fiscal years 2009 and 2008 were insignificant.

10. Concentrations of Credit Risk

The Company's financial instruments that are exposed to concentrations of credit risk consist of cash and cash equivalent balances in excess of the insurance provided by governmental insurance authorities. The Company's cash and cash equivalents are placed with reputable financial institutions and are primarily in demand deposit accounts. The Company did not have balances in excess of FDIC insured limits as of September 30, 2009, or at September 30, 2008. Because of large but infrequent payments that may be received from major customers, account balances may exceed FDIC insured limits for very short periods.

F-9

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations of credit risk with respect to accounts receivable are associated with a few customers dispersed across geographic areas. The Company reviews a customer's credit history before extending credit and establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other information. Generally, the Company does not require collateral from its customers, as a significant number of the customers are governmental entities.

11. Fair Value of Financial Instruments

Fair Value Measurements. On October 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This ASC applies under other accounting pronouncements that require or permit fair value measurements, the Financial Accounting Standards Board having previously concluded in accounting pronouncements that fair value is a relevant measurement attribute. Accordingly, this ASC does not require any new fair value measurements. However, for some entities, the application of this ASC will change current practices.

The following table sets forth the liabilities the Company has elected to record at fair value under ASC 820 as of September 30, 2009:

Fair Value Measurements at September 30, 2009
Using Significant Unobservable Inputs
Description	(Level 3)
Accounts payable – discontinued operations:
Balance before fair value adjustment		$2,658,590
Charge to accounts payable		( 91,516)
Balance after fair value charge		$2,567,074

The Company has antiquated legacy accounts payable balances in discontinued operations that are at least four years old and some as old as ten years that it believes will never require a financial payment for a variety of reasons. Accordingly, under ASC 820, (and in this case for our United Kingdom subsidiary, the UK’s Financial Reporting Standard 12, “Provisions, Contingent Liabilities and Contingent Assets” (“FRS 12”), since this is where the balances are located) the Company has analyzed the accounts and recorded a charge against those legacy balances as permitted under FSR 12 in the United Kingdom reducing the balances to the amount expected to be paid out. The income recorded during the year ended September 30, 2009 was $91,516 and is recorded in other income from discontinued operations on the Company's Consolidated Statement of Operations.

Fair Value of Financial Instruments. The carrying amounts of cash equivalents, short-term investments, accounts receivable and accounts payable and accrued expenses approximate fair value due to the short maturities of these items. The carrying value of long-term investments, long-term debt and lease obligations approximates fair value.

F-10

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

12. Segment Information

The Company follows the provisions of FASB ASC 280, Segment Reporting, which establishes standards for the reporting of information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. In the opinion of management, the Company operates in one business segment, business information services, and all revenue from its services and license fees and royalties are made in this segment. Management of the Company makes decisions about allocating resources based on this one operating segment.

The Company has three geographic regions for its operations, the United States, Europe and Asia. Revenues are attributed to geographic areas based on the location of the customer. The following graph depicts the geographic information expected by FASB ASC 280:

Geographic Information
				Long-lived		Accounts
		Revenues		Assets		Receivable
2009
North America	$	1,214,287	$	95,005	$	115,601
Europe		608,438		4,011		38,137
Asia		31,892		-		75,201
Total	$	1,854,617	$	99,016	$	228,939
2008
North America	$	2,799,856	$	207,591	$	504,866
Europe		595,804		3,321		257,629
Asia		218,356		-		-
Total	$	3,614,016	$	210,912	$	762,495

F-11

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

13. Recognition of Expenses in Outsourced Work

Pursuant to management’s assessment of the services that have been performed by subcontractors on contracts and other assignments, we recognize expenses as the services are provided. Such management assessments include, but are not limited to: (1) an evaluation by the project manager of the work that has been completed during the period, (2) measurement of progress prepared internally or provided by the third-party service provider, (3) analyses of data that justify the progress, and (4) management’s judgment. Several of our contracts extend across multiple reporting periods.

14. Stock-Based Compensation Expense

The Company applies FASB ASC 718, Compensation – Stock Compensation, which establishes the financial accounting and reporting standards for stock-based compensation plans. The Company uses the modified prospective method requiring companies to record compensation expense for (1) the unvested portion of previously issued awards that remain outstanding at the initial date of adoption, which we did not have, and (2) for any awards issued, modified or settled after the effective date of the statement which we also did not have. The Company recognizes stock compensation expenses over the requisite service period of the award, normally the vesting term of the options which are generally immediately fully vested and exercisable. As required by FASB ASC 718, the Company has recognized the cost resulting from all stock-based payment transactions including shares issued under its now expired stock option plans in the financial statements. See Note I, Item 2, below, for further discussion.

15. Foreign Currency Translation

Assets and liabilities of the Company's foreign subsidiary are translated at the rate of exchange in effect at the end of the accounting period. Net sales and expenses denominated in foreign currencies are translated at the actual rate of exchange incurred for each transaction during the period. The total of all foreign currency transactions and translation adjustments were considered not to be material as of the end of the reporting period.

We conduct business in a number of foreign countries and, therefore, face exposure to slight but sometimes adverse movements in foreign currency exchange rates. International revenue of $640,330 was about 35% of our total revenue in 2009, of which about $571,690, or 31% of our total revenue, was denominated in a currency other than U.S dollars. Accordingly, a 10% change in exchange rates could increase or decrease our revenue by $57,169. Since we do not use derivative instruments to manage foreign currency exchange rate risks, the consolidated results of operations in U.S. dollars may be subject to some amount of fluctuation as foreign exchange rates change. In addition, our foreign currency exchange rate exposures may change over time as business practices evolve and could have a material impact on our future financial results.

F-12

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Our primary foreign currency exposure is related to non–U.S. dollar denominated sales, cost of sales and operating expenses related to our international operations. This means we are subject to changes in the consolidated results of operations expressed in U.S. dollars. Other international business, consisting primarily of consulting and systems integration services provided to international customers in Asia, is predominantly denominated in U.S. dollars, which reduces our exposure to fluctuations in foreign currency exchange rates. There have been and there may continue to be period–to–period fluctuations in the relative portions of international revenue that are denominated in foreign currencies. The net amount of foreign currency gains and (losses) was a loss of $56,043 for fiscal year 2009 and a gain of $8,675 for fiscal year 2008. In view of the foregoing, we believe our exposure to market risk is limited.

16. Recent Accounting Pronouncements

In December 2007, the FASB issued FASB ASC 805, Business Combinations. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. FASB ASC 805 was effective for our company beginning December 15, 2008 and will apply prospectively to business combinations completed on or after that date. Management believes that, for the foreseeable future, this guidance will have no material impact on our financial statements.

In December 2007, the FASB issued FASB ASC 810-65, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No 51, which changes the accounting and reporting for minority interests. Under this pronouncement, minority interest is recharacterized as noncontrolling interests and is to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. FASB ASC 810-65 was effective for our company December 15, 2008 and applies prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. Management believes that, for the foreseeable future, this guidance will not have a material impact on our financial statements.

In March 2008, the FASB issued FASB ASC 815, Derivatives and Hedging, which requires additional disclosures about the objectives of derivative instruments and hedging activities, the method of accounting for such instruments and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. FASB ASC 815 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early adoption encouraged. Management believes that, for the foreseeable future, this guidance will not have a material impact on the financial statements.

F-13

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In April 2008, FASB ASC 350-50 was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. FASB ASC 350-50 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption was prohibited. Management is currently evaluating the effects, if any, that this guidance may have on our financial reporting.

In May 2009, the FASB issued FASB ASC 855, Subsequent Events. FASB ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC 855 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether the date represents the date the financial statements were issued or were available to be issued. FASB ASC 855 is effective in the first interim period ending after June 15, 2009. We expect FASB ASC 855 will have an impact on disclosures in our consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms and value of any subsequent events occurring after adoption.

In June 2009, the FASB issued SFAS 168 (now: FASB ASC 105-10), Generally Accepted Accounting Principles the FASB Accounting Standards Codification. SFAS 168 represented the last numbered standard to be issued by FASB under the old (pre-Codification) numbering system, and amends the GAAP hierarchy established under SFAS 162. On July 1, 2009, the FASB launched FASB’s new Codification entitled “The FASB Accounting Standards Codification”, or FASB ASC. The Codification supersedes all existing non-SEC accounting and reporting standards. FASB ASC 105-10 is effective in the first interim and annual periods ending after September 15, 2009. This pronouncement had no effect on our consolidated financial statements upon adoption other than current references to GAAP, which, where appropriate, have been replaced with references to the applicable codification paragraphs.

The FASB issued FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. In February 2008, the FASB issued FASB Staff Position, FASB ASC 820-15-5, which delayed the effective date of FASB ASC 820 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Excluded from the scope of FASB ASC 820 are certain leasing transactions accounted for under FASB ASC 840, Leases. The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of FASB ASC 820. Management believes that, for the foreseeable future, this guidance will have no material impact on our financial statements.

In June 2009, the FASB issued “Amendments to FASB Interpretation No. 46(R)”, FASB ASC 810-Consolidation, that will change how we determine when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under this guidance, determining whether a company is required to consolidate an entity will be based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The changes are FASB ASC 810-10, effective for financial statements after January 1, 2010. We are currently evaluating the requirements of this guidance and the impact of adoption on our consolidated financial statements.

F-14

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

17. Reclassifications

Certain reclassifications have been made to the fiscal 2008 financial statements to conform to the fiscal 2009 financial statements’ presentation. Related to this is the reclassification of financial balances and results for the sole operating subsidiary to present its financial results as discontinued operations as required by FASB ASC 205 because it is considered held for sale at September 30, 2009, as a result of its sale subsequent to the end of the reporting year. (See Note L, Results of Discontinued Operations) The reclassifications have no effect on the financial position or net loss available to common shareholders as previously reported.

18. Purchased and Internally Developed Software Costs for Future Project Use

The Company follows FASB ASC 350, Intangibles – Goodwill and Other. Purchased software is recorded at the purchase price. Software products that are internally developed are capitalized when a product’s technological feasibility has been established. Amortization begins when a product is available for general release to customers. The amortization is computed on a straight-line basis over the estimated economic life of the product, which is generally three years, or on a basis using the ratio of current revenue to the total of current and anticipated future revenue, whichever is greater. Amortization expense amounted to $104,910 and $165,019 for fiscal years 2009 and 2008, respectively. All other research and development expenditures are charged to research and development expense in the period incurred. Management routinely assesses the utility of its capitalized software for future usability in customer projects. No impairments were recorded in 2009.

NOTE B – LIQUIDITY CONSIDERATIONS

The Company has an accumulated deficit of $24,468,511 at September 30, 2009, and the Company’s working capital deficit decreased to $3,203,345 at September 30, 2009 and it has recurring net losses in fiscal years 2009 back to 1998. Additionally the Company reported a net loss of $511,960 for fiscal year 2009 versus a net loss of $468,639 for fiscal year 2008 and a significant decrease in revenue of $1,759,399, or 49%, during fiscal year 2009 as a result of slowed tax revenue receipts in state and local government customers. The resulting constrained cash flows adversely affect the Company’s ability to meet payroll, subcontractor and other payment obligations on a timely basis. On occasion, payroll disbursements to employees were delayed resulting in payments made subsequent to normal due dates. Delayed payments to subcontractors have caused work stoppages and, at times, adversely affected the Company’s ability to service certain of its major projects and to generate revenue.

F-15

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE B – LIQUIDITY CONSIDERATIONS (Continued)

Board’s Plan for PlanGraphics, Inc. PlanGraphics experienced declining revenues in the past several years. The costs for audits, legal advice, other items related to the Company’s SEC reporting and maintaining its status as a public company are significant and have had an adverse effect on our ability to successfully operate our historical core business. Based on this combination of declining revenues and increasing costs, in 2003, the Company’s Board of Directors began examining strategic alternatives for PlanGraphics and retained a number of specialist investment banking firms to assist with this process. Through these efforts, and in parallel with efforts to maintain and build on our traditional lines of business, the Board has concluded that in order to provide shareholders with some opportunity for achieving value on their investment, PlanGraphics needed to aggressively pursue the option of deriving value from one or more of the assets of the corporation. One such option that the Company has pursued in recent years is the spin-off of PGI-MD and the sale of PlanGraphics, the public entity, to a private company interested in becoming a publicly traded corporation.

As disclosed in Note N, Subsequent Events, the Company has completed the reverse merger of Integrated Freight Corporation into the Company effective December 23, 2009, and then sold its historical operating subsidiary, PGI-MD, to John Antenucci effective December 27, 2009 (See Note N, Subsequent Events). The board believes these actions create a larger entity that will be profitable and capable of bearing the costs of being a publicly traded company.

The Company’s new management has been in discussions with potential investors and investment bankers regarding funding to support the new operation’s growth plans. Viability of the Company will initially be dependent upon obtaining external funding. There can be no assurance that these efforts will be successful.

NOTE C - ACCOUNTS RECEIVABLE – DISCONTINUED OPERATIONS

At September 30, the components of contract receivables were as follows:

	2009		2008
Billed	$	204,256	$	544,720
Unbilled		38,834		238,470
		243,090		783,190
Less allowance for doubtful accounts		14,151		49,718
Accounts receivable, net	$	228,939	$	733,472

Unbilled receivables represent work-in-process that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. Unbilled work-in-process includes revenue earned as of the last day of the reporting period which will be billed in subsequent days. The amount of unbilled revenues will vary in any given period based upon contract activity.

Receivables include retainages receivable representing amounts billed to customers that are withheld for a certain period of time according to contractual terms, generally until project acceptance by the customer. At September 30, 2009 and 2008, retainage amounted to $4,055 and $168,434, respectively. Management considers all retainage amounts to be collectible.

F-16

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DISCONTINUED)

September 30, 2009 and 2008

NOTE C - ACCOUNTS RECEIVABLE – DISCONTINUED OPERATIONS (Continued)

Billed receivables include $37,597 for the net amount of factored invoices due from Rockland. This amount is comprised of the amount of outstanding uncollected invoices on hand at Rockland ($83,716) less the net amount of funds employed by Rockland in servicing them ($67,684) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement we have granted Rockland a lien and security interest in all of our cash, accounts, goods and intangibles.

The Company has historically received greater than 10% of its annual revenues from one or more customers creating some amount of concentration in both revenues and receivables.

At September 30, 2009, customers exceeding 10% of accounts receivable were the Italian Ministry of Finance ("IMOF"), 27% and China Clients 14%. At the same date, customers exceeding 10% of revenue for the year were IMOF, 27%, San Francisco Department of Technology and Information Systems (“SFDTIS”), 11%, and Dawson County, GA, 13%.

At September 30, 2008, customers exceeding 10% of accounts receivable were the Italian Ministry of Finance ("IMOF"), 24%, New York City Department of Environmental Engineering (“NYDEP”), 19%. At the same date, customers exceeding 10% of revenue for the year were NYDEP, 26%, San Francisco Department of Technology and Information Systems (“SFDTIS”), 16%, and the IMOF, 12%.

Deferred revenue amounts of $182,034 and $312,303 at September 30, 2009 and 2008, respectively, represent amounts billed in excess of amounts earned.

NOTE D – ACCOUNTS PAYABLE

Accounts payable at September 30 consist of:

	2009		2008
Trade payables	$	1,419,292	$	1,333,529
Payable to subcontractors		1,229,729		1,347,369
Other payables		99,613		105,936
Total accounts payable	$	2,786,634	$	2,786,834

NOTE E – ACCRUED EXPENSES

Accrued expenses at September 30 are as follows:

	2009		2008
Accrued expenses due to vendors and subcontractors	$	72,198	$	41,210
Accrued interest		136,178		263,479
Accrued professional fees		-		67,003
Other accrued expenses		7,599		8,945
Total accrued expenses	$	215,975	$	380,637

F-17

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE F - NOTES PAYABLE

Notes payable at September 30, 2009 were as follows:	2009		2008
Continuing operations:
An uncollateralized promissory note with a vendor in the original amount of $11,500, interest rate of 12%. The note, requiring monthly payments of $1,916 matured on September 15, 2006 and is currently in default.	$	7,668	$	7,668
A convertible promissory note with an unrelated party in exchange for a business loan in the amount of $30,000 bearing interest at 6% per annum. The note matured on February 28, 2009. As a result the note became convertible into common stock of the Company. Liquidation of the note will occur in connection with the merger of Integrated Freight into PGRA.		30,000		-
A convertible promissory note in exchange for a business loan in the amount of $20,000 borrowed from an unrelated entity. The note, which bears interest at 8% per annum and matures on January 15, 2010, is guaranteed by Integrated Freight   Corporation.		20,000		-
Discontinued operations:
An uncollateralized promissory note with a vendor in the original amount of $91,509, interest rate of 5%. An initial payment of $25,000 was due January 31, 2007 followed by 12 monthly payments of $5,694.		-		11,317
An uncollaterlized promissory note with a vendor in the original amount of $185,000, interest rate of 9.5%. The   note matured June 21, 2001 when final payment of  $23,665 was due and is currently in default. As a result   the interest rate increased to 13.5%.		21,165		23,665
Total notes payable		78,833		42,650
Less: Current maturities		78,833		42,650
Notes payable – long-term	$	-	$	-

F-18

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE G – TAXES ON INCOME

The provision for income taxes consisted of the following:

	2009		2008
Current	$	-	$	-
Deferred		-		-
Total	$	-	$	-

A reconciliation of the effective tax rates and the statutory U.S. federal income tax rates is as follows:

	2009		2008
U.S. federal statutory rates		(34.0%)		(34.0%)
State income tax, net of federal tax benefit		(3.3)		(3.3)
Permanent differences		-		-
Foreign income taxes, net of federal tax benefit		-		-
(Increase) decrease in deferred tax asset valuation allowance		37.3		37.3
Effective tax rate		-%		-%

Temporary differences that give rise to a significant portion of the deferred tax asset are as follows:

	2009		2008
Deferred tax assets:
Net operating loss carryforwards	$	7,758,000	$	7,719,000
Provision for losses on accounts receivable		5,000		8,000
Accrued payroll costs and vacation		11,000		32,000
Total gross deferred tax asset		7,774,000		7,759,000
Deferred tax liabilities:
Deferred income of foreign corporation		(577,000)		(441,000)
		7,197,000		7,318,000
Valuation allowance		(7,197,000)		(7,318,000)
Net deferred tax asset	$	-	$	-

A valuation allowance equal to the net deferred tax asset has been recorded as management of the Company has not been able to determine that it is more likely than not that the net deferred tax assets will be realized.

During the year ended September 30, 2009, the valuation allowance decreased by $121,000.

During the year ended September 30, 2009, the Company’s estimated tax asset relating to its net-operating loss carryforward from prior years was revised by $297,000 to reflect a change in the estimated tax rates in effect when the asset would be utilized.

F-19

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE G – TAXES ON INCOME (CONTINUED)

At September 30, 2009, the Company had estimated net operating loss carryforwards of approximately $20.8 million with expirations through 2029. On May 29, 2009, Integrated Freight Corporation acquired approximately 80% of our outstanding shares resulting in an ownership change. Accordingly, the utilization of the loss carry forwards is limited under Internal Revenue Service Code Section 382 regulations due to the change of ownership.

NOTE H - COMMITMENTS AND CONTINGENCIES

1. Obligations Under Operating Lease – Related Party

The Company leases an office facility from Capitol View Development, LLC, a partnership, which includes a related party, under a triple net commercial lease. An officer/shareholder owns approximately ten percent of Capitol View Development, LLC. The annual lease amount is $102,500 excluding taxes, insurance and maintenance costs.

2. Operating Lease Commitments

The Company leases certain office facilities and certain furniture and equipment under various operating leases. The remaining lease terms range from one to five years.

Minimum annual operating lease commitments at September 30, 2009 are as follows:

Year ending September 30,
2010	$	120,627
2011		105,242
2012		102,500
2013		102,500
2014		102,500
Thereafter		273,333
	$	806,702

Rental expense for the years ended September 30, 2009 and 2008 totaled $133,892 and $163,198, respectively.

3. Licensing Agreement

The Company entered into a licensing agreement under which it obtained exclusive North American rights to Xmarc, Ltd., intellectual property and spatial integration software owned by a Swiss based investment company, HPI Holding SA and a Cayman Island company, Glendower Opportunity Partners II, collectively the Xmarc Sellers (“XS”), for use in the public sector and utility markets. Under the agreement the Company supports former Xmarc clients, work in progress and outstanding proposals and pay XS, a royalty stream for a period of 21 months ending September 30, 2003 as it receives revenue for the product licensing and maintenance.

F-20

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Under the agreement the Company also had the right to acquire in perpetuity the exclusive rights to Xmarc intellectual property and technology and all subsequent product enhancements for the North American public sector and utility markets. Effective April 1, 2003 the Company exercised its right to acquire the intellectual property. As a result, the Company paid XS the amount of $50,000 annually on March 31 in the years 2004 through 2008 (see Note F) and royalty payments for amounts due for each of these years in which the royalties earned exceeds $50,000. During fiscal year 2008 the Company had recorded approximately $736,235 in revenues earned under the revenue license agreement and $24,172 in royalties.

4. Employment Agreements

On April 30, 2002, the Company entered into new employment agreements with its officers. One of them was effective January 1, 2002 for one year and the third was effective on May 1, 2002 for three years. The employment agreements set forth annual compensation to the employees of between $66,000 and $157,000 each. Under the employment agreements, each employee is entitled to between 18 months and three years of severance pay upon termination of their employment for reasons other than constructive termination. On the anniversary date of his employment agreement, the chief executive officer is entitled to receive options to acquire common stock equal to 1% of the outstanding shares of the Company's common stock. The Company extended the employment agreements of its two officers through December 31, 2008. During fiscal year 2007 the Company granted stock options to acquire a total of 2,750,000 shares of common stock to the two officers as inducement to extend their employment agreements to December 31, 2008. Pursuant to the employment agreement for the chief executive officer, stock options to acquire 972,144 and 972,144 of common stock were granted during fiscal year 2007 and 2008. Recently both agreements were extended from time to time through December 31, 2009; pursuant to the reverse merger agreement with Integrated Freight both officers resigned all their positions with PGRA effective November 9, 2009 (See also Note N, Subsequent Events).

5. KSTC Agreement

On June 16, 2003, the Company’s subsidiary, PlanGraphics, Inc. (“PGI-MD”), entered into a two-year agreement with Kentucky State Technology Corporation (“KSTC”) to develop classification algorithms to delineate and classify wetlands in commercial satellite images, field verify the imagery interpretation and to establish a marketing program for these value added wetlands imagery product to potential governmental and business clients. KSTC provides $200,000 under the agreement on a cost share matching basis for cash and in-kind services provided. The Company has established a wholly owned subsidiary, RDT2M, as required by the agreement, and has selected Murray State University to work with RDT2M. Murray State University will receive 51% and RDT2M will receive 49% of the funding. The agreement provides for payment to the Company of certain development expenses of approximately $200,000. The agreement also requires the Company’s repayment of up to $400,000, including the grant amount, through a royalty stream based on free cash flow if a commercial and sustainable market is developed for the products. Should no viable market be established, repayment of the grant amount is waived. On June 7, 2004, KTSC renewed the agreement, which can again be renewed, and increased the repayment provision up to $800,000.

F-21

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)

6. Xmarc Ltd.

During the first quarter of calendar year 2004 the Company determined, in conjunction with the termination of the Xmarc Services Limited agreement, that it was more efficient and economical to simply acquire Xmarc Ltd, the already existing distributor for Xmarc in Europe. Accordingly, on April 30, 2004, the Company completed a purchase transaction with an effective date of March 31, 2004, in which it acquired Xmarc Ltd in a non-cash transaction. The results of XL’s operations have been included in the consolidated financial statements since that date. Headquartered in Great Britain, XL has been a distributor of Xmarc products throughout Europe. The Company believes the acquisition, which has resulted in revenue of $766,686 during fiscal year 2009, enhances the strategic development and prospects for growth of its operating subsidiary.

NOTE I – EQUITY TRANSACTIONS

1. Preferred Stock

As of September 30, 2009, the Company had authorized 20,000,000 shares of preferred stock, 500 of which were issued and outstanding at September 30, 2008. The shares of preferred stock may be issued from time to time in one or more series. The Company’s board of directors is expressly authorized, without further approval by shareholders, to provide for the issue of all or any of the shares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be adopted by the board of directors and as may be permitted by law.

On August 21, 2006, the Company entered into a Series A Preferred Stock Purchase Agreement with Nutmeg Group, LLC pursuant to which it sold and Nutmeg Group, LLC bought, for an aggregate purchase price of $500,000, a total of 500 shares (the "Shares") of the Company's Series A 12% Redeemable Preferred Stock (the "Series A Preferred Stock") and a warrant to purchase shares of the Company's common stock equal to 80 percent of the fully diluted outstanding shares with an aggregate exercise price of $10.00 (the "Warrant,"). The Series A Preferred Stock is non-voting and was not convertible into shares of the company's common stock.

The holder of Series A Preferred Stock could have required the Company to redeem the Series A Preferred Stock in whole or in part at any time after February 17, 2007. In addition, at any time after August 17, 2007, the Company had the right to redeem the Series A Preferred Stock in whole or in part. The investor did not exercise the Warrant prior to its expiration date.

On May 29, 2009, in lieu of a cash payment of $662,573, the Company issued 401,559,467 shares of the Company's common stock (the number of shares that the Company was required to issue in accordance with an agreed upon formula) to Integrated Freight Systems Inc. (“IFSI”), a Florida corporation and holder in due course of the Preferred Stock, to satisfy our obligations for redemption of our Series A Redeemable Preferred Stock and accrued unpaid dividends pursuant to the related Redemption Request from the Nutmeg Group. The issuance resulted in a change in control of the Company, with IFSI owning 80.2% of the shares of common stock issued and outstanding after giving effect to the issuance. The shares of Common Stock were issued in reliance on the exemption from registration provided in Section 4(2) of the Securities Act. No commissions or fees were paid in connection with the redemption. The certificates representing the shares were issued with a restrictive legend.

F-22

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE I – EQUITY TRANSACTIONS (CONTINUED)

2. Common Stock

On January 14, 2009, PlanGraphics, Inc., entered into a business loan in the amount of $30,000 with the holder of all of the outstanding Series A Preferred Stock of PlanGraphics, Nutmeg/Fortuna Fund LLLP (the "Holder"), in the form of a convertible debenture ("the Debenture"). The Debenture provides for an interest rate of 6% per annum with a maturity date of February 28, 2009. Proceeds of the Debenture were applied to certain critical working capital needs. The Debenture is, in the event of default, convertible into common stock of the Company if the default is not timely cured. The Debenture is convertible in whole or in part at a conversion price on the date of conversion at the lesser of $0.002 per share or fifty percent (50%) of the average closing price for the common stock on the five trading days immediately prior to the conversion date. Conversion of the Debenture into common stock of the registrant is limited and the Holder or its affiliates, according to the terms of the Debenture agreement, may not be the beneficial owner of more than 4.99% of the total number of shares of the Company's common stock outstanding immediately after giving effect to the issuance of shares permitted upon conversion by the Holder. Upon not less than 61 days notice to the Company, the Holder may increase or decrease this limitation. As of March 1, 2009, the Company has been in default with regard to the terms of the Debenture, and the Holder has the right to require the Company to convert the amounts owing under the Debenture to common stock. The Debenture will be liquidated concurrent with the reverse merger transaction discussed in Note N, Subsequent Events, below.

Convertible Promissory Note. On July 16, 2009, the Company entered into a business loan in the amount of $20,000 with an unrelated entity, Tangiers Investors LP (the "Holder"), in the form of a convertible promissory note ("the Note"). The Note provides for an interest rate of 8% per annum with a maturity date of January 15, 2010. Default rate of interest is 15% if the note is not cured within 20 days of maturing. The Holder of the note has the right to convert the principal amount into common stock of the Company at 65% of the three lowest volume weighted average prices of the Company's common stock during the 10 day trading period preceding the conversion notice. Any shares that may be issued pursuant to the promissory note are issuable only if an effective registration statement is available to cover the shares or if an exemption from registration is available under Rule 144 of the 1933 Act. Proceeds of the Note were applied to certain working capital needs.

3.Stock-Based Compensation

As noted above, the Company follows provisions of FASB ASC 718 in accounting for share-based payments to employees, including grants of employee stock options, and recognizes related expenses in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards.

The Company’s option valuation model (the Black-Scholes model) requires the input of highly subjective assumptions including the expected life of the option. Because the Company’s employee stock options have characteristics significantly different from those of traded options (which it does not have), and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not, in management’s opinion, necessarily provide a reliable single measure of the fair value of the Company’s employee stock options.

The Company did not grant options to acquire shares of common stock during the fiscal year ended September 30, 2009.

F-23

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE I – EQUITY TRANSACTIONS (CONTINUED)

A summary of the status of the Company's stock option plans, changes and outstanding options and warrants as of September 30, 2009 and 2008 and changes during the years ended on those dates is presented below:

	Options		Warrants
		Weighted		Weighted
	Number of	Average	Number of	Average
	Shares	Exercise Price	Shares	Exercise Price
Outstanding
at 9/30/2007	8,447,790	$           0.021	-	$           -
Granted	972,144	0.005	-	-
Expired	(1,509,214)	0.018	-	-
Exercised	(1,944,288)	0.004	-	-
Outstanding
at 9/30/2008	5,966,432	$           0.021	-	$           -
Granted	-	-	-	-
Exercised	-	-	-	-
Expired	(1,272,144)	0.040	-	-
Outstanding
at 9/30/2009	4,694,288	$           0.014	-	$           -
Exercisable
at 9/30/2008	5,966,432	$           0.021	-	$           -
Exercisable
at 9/30/2009	4,694,288	$           0.014	-	$           -

There were no options exercised during the period ending September 30, 2009; accordingly, the total intrinsic value of options exercised during fiscal year 2009 is nil.

F-24

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

The range of exercise prices, shares, weighted-average remaining contractual life and weighted-average exercise price for all options and warrants outstanding at September 30, 2009 is presented below:

Stock Options
Range of		Weighted-average
Exercise		Remaining Years
Prices	Shares	Contractual Life
$0.012-$0.0400	4,694,288	1.64
	4,694,288

F-25

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE I – EQUITY TRANSACTIONS (CONTINUED)

No options were granted in the current fiscal year. The fair value of the options granted in the period ending September 30, 2008, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2009	2008
Dividend yield	N/A	0.00%
Expected Volatility	N/A	311.00%
Risk free interest rate	N/A	3.10%
Expected lives	N/A	5 years

No options were granted in the current fiscal year. The weighted-average grant date fair value for options granted during 2008 was approximately $0.

For the twelve months ended September 30, 2009 and 2008, net loss and the loss per share reflect the actual deduction for stock-based compensation expense which was $0 and $0, respectively. The expense for stock-based compensation is a non-cash expense item when it occurs.

Because we did not have any unvested options or warrants as of September 30, 2009, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Equity Compensation Plan.

NOTE J – EMPLOYEE BENEFIT PLANS

The Company has a Section 401(k) deferred compensation plan covering substantially all employees. The plan allows participating employees to defer up to 20% of their annual salary with a tiered matching contribution by PlanGraphics up to 1.75%. Additional contributions may be made at PlanGraphics’ discretion based upon PlanGraphics’ performance. During April 2003 the matching contributions were suspended pending improved profitability of the Company; accordingly, no discretionary matching expenses were charged to operations for the plan during the years ended September 30, 2009 and 2008.

NOTE K – LITIGATION

Subcontractor Claim. On December 22, 2008, a subcontractor, Sanborn Map Company, Inc. ("Sanborn"), asserted in a summons filed in the District Court for Douglas County, Colorado, that it was entitled to recover an outstanding amount of $896,475 plus certain unpaid retainage of $18,501 earned for work as a subcontractor to the Company’s operating subsidiary, PlanGraphics of Maryland. All amounts had been previously recorded in the Company's financial records. The case was moved to the U.S. District Court for the District of Colorado (case # 09-cv-0332-RPM) and subsequently to the District Court of the City and County of Denver. On December 10, 2009, the parties presented to the District Court and the Court entered an Order for a Stipulation of Payment or Entry of Judgment. The parties agreed that PGI MD is to begin making a timely series of payments on November 30, 2009, through July 31, 2014, in liquidation of an agreed amount. PGI-MD agreed to the Court’s authority to enforce payment of the agreed amount less any prior payments, should PGI-MD default on the payment terms.

F-26

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE K – LITIGATION (Continued)

The Company is engaged in various other litigation matters from time to time in the ordinary course of business. In the opinion of management, the outcome of any such litigation will not materially affect the financial position or results of operations of the Company.

NOTE L – RESULTS OF DISCONTINUED OPERATIONS

The discontinued operations of PGI-MD, our operating subsidiary, will continue to fund our limited continuing operations until completion of the sale of PGI-MD and the pending reverse merger of Integrated Freight into PGRA are completed. Therefore we are providing the financial position and the operating results for PGI-MD in the disclosures below.

Statement of Financial Position - Discontinued Operations
		September 30,
		2009		2008
Cash and cash equivalents	$	-	$	202
Accounts receivable, less allowances for doubtful
accounts of $14,151 and $49,718		228,939		733,472
Prepaid expenses and other		20,569		20,405
Equipment and furniture net of accumulated depreciation
of $355,890 and $345,948		15,377		23,169
Software development costs, net of accumulated
amortization of $927,896 and $822,986		83,640		187,743
Other assets		8,516		8,016
Notes - payable current maturities		(21,165)		(34,982)
Accounts payable		(2,567,074)		(2,644,056)
Accrued payroll costs		(271,530)		(188,075)
Accrued expenses		(97,473)		(136,585)
Deferred revenue and prebillings		(130,269)		(312,303)
Net liabilities of discontinued operations	$	(2,730,470)	$	(2,342,994)

F-27

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE M – SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS

	2009		2008
Years ended September 30,
Cash paid for interest	$	50,900	$	113,789
Cash paid for income taxes		-		4,393

Non-cash transactions affecting cash flow computations during the years ended were:

September 30, 2008:

In continuing operations;

• Exercise of stock options $8,166.

September 30, 2009:

In continuing operations:

• Payment of amounts due in liquidation of redeemable preferred stock and accrued dividends which totaled $662,573.

• Cancellation of $1,314 of accounts payables in continuing operations.

In discontinued operations:

• Cancellation off of $159,470 of receivables.

• Fair value adjustment of $91,516 to certain liabilities.

• Cancellation of $372,865 of accounts payables.

• Cancellation of $5,694 of debt.

• Cancellation of $208,438 liabilities.

NOTE N – SUBSEQUENT EVENTS

Resignations. Effective November 9, 2009, Mssrs. Antenucci and Beisser, pursuant to the terms of the agreement with Integrated Freight Corporation, resigned from their positions as director and chief executive officer (Antenucci) and senior vice president – finance, treasurer and secretary (Beisser). As of the date of the filing of this report the Company owes Mr. Beisser $24,126 for unpaid wages, accrued vacation and reimbursable expenses.

Subcontractor Claim. On November 9, 2009, a subcontractor of PGI-MD, Charter Global, Inc., ("CGI"), asserted in a summons filed in the Franklin Circuit Court in the Commonwealth of Kentucky, that it was entitled to recover an outstanding amount of $55,800 plus interest for work as a subcontractor to the Company’s operating subsidiary, PlanGraphics of Maryland. All amounts had been previously recorded in the Company's financial records. The Company is aggressively defending its interests and has challenged the fees sought and is complying with an order of the court by entering into mediation with CGI.

Change in Control. As disclosed in Note I, above, on May 29, 2009, the Company issued 401,559,467 shares of its common stock to an unrelated entity, Integrated Freight, in payment of $500,000 of the Company’s outstanding preferred stock and accrued and unpaid dividends of approximately $162,573. Integrated Freight had previously acquired the preferred stock and unpaid dividends from the Nutmeg Fund LLC.

F-28

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE N – SUBSEQUENT EVENTS (Continued)

The stock issuance resulted in a change in control of the Company, with Integrated Freight owning 80.2% of the shares of common stock issued and outstanding after giving effect to the issue. In connection with such change in control, Mr. Paul A. Henley, a control person of Integrated Freight before and after the merger, is deemed to be a "control person" and beneficial owner with sole voting power.

Subsequently, on November 9, 2009, pursuant to certain agreements between Integrated Freight, Nutmeg and the Company, Antenucci and Beisser resigned their positions with PGRA and Integrated Freight appointed directors of its choosing to the open board of directors positions. On January 7, 2010, the Company committed to paying the amount of $24,126 owed at November 9, 2009 to Mr. Beisser for unpaid wages, accrued vacation and reimbursable expenses in monthly increments of approximately one-third of the total with each increment to be paid no later than the end of January, February and March of 2010.

Actions Preliminary to Merger of Integrated Freight into PlanGraphics, Inc. (Colorado corporation). Integrated Freight originally acquired the 401,559,467 shares of our common stock, or 80.2 percent of our issued and outstanding common stock, for the purpose of merging PGRA into IFC, with IFC being the surviving corporation. Uncertainty as to when IFC could obtain an effective registration statement on Form S-4 to complete the merger caused delays in IFC obtaining external debt and equity funding and also impeded negotiations for additional acquisitions. On October 30, 2009, PGRA’s former board of directors comprised of John C. Antenucci agreed with IFC to restructure the transaction to provide for PGRA’s acquisition of more than ninety percent of IFC’s issued and outstanding common stock and its merger into PGRA. Colorado corporate law permits the merger of a subsidiary company owned ninety percent or more by a parent company into the parent company without stockholder approval.

In furtherance of this change to the plan to combine IFC and PGRA, as approved by the board of directors of each corporation on November 11, 2009, common stock amounting to 20,228,246 shares of IFC’s outstanding common stock were transferred by its stockholders to Jackson L. Morris, trustee for The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”). IFC also transferred the 401,559,467 shares of PGRA’s common stock that it owned to the Trust. PGRA then exchanged 1,406,284,229 shares of its unissued common stock for the 20,228,246 shares of IFC, after which PGRA effectively owns 94.787 percent of IFC outstanding shares which are held in the Trust. As a result of this transfer and exchange, the Trust now holds 1,807,842,696 of our shares. Consequently the requirements of Colorado law that PGRA own ninety percent or more of IFC in order to complete the merger without stockholder approval were been met.

Acquisition of IFC. On December 22, 2009, PGRA filed articles of merger in the State of Florida; and, on December 23, 2009, in the State of Colorado. Pursuant to these articles of merger, Integrated Freight Corporation (“IFC”) merged into PGRA with PGRA being the surviving corporation.

F-29

PLANGRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2009 and 2008

NOTE N – SUBSEQUENT EVENTS (Continued)

Sale of PGI-MD. On December 27, 2009, the Company completed the sale of its historical operating subsidiary, PGI-MD, to Mr. Antenucci, a former director and chief executive officer of the Company, pursuant to an agreement executed as of May 1, 2009, in connection with IFC’s acquisition of control of PGRA. As a result:

• PGRA will transfer all of its assets to PGI-MD, excluding the stock it owns in PGI-MD and PGI-MD will assume all of PGRA’s debts and obligations at May 1, 2009, excluding $28,000 in auditing fees.

• PGRA will sell the stock of PGI-MD to Mr. Antenucci. Mr. Antenucci will pay for the stock of PGI-MD by (1) relieving PGRA from its obligation to make severance payments and forego any claim associated with the obligations pursuant to Mr. Antenucci’s Executive Employment Agreement, and (2) voluntarily terminating his Executive Employment Agreement.

Pending Shareholder Vote. On December 28, 2009, the Company filed with the SEC a Preliminary Information Statement on Schedule 14C for a special stockholders meeting at which three proposals will be approved by the Trust, as a majority stockholder. These proposals are a reverse stock split in a ratio of one new share for each 244.8598 shares outstanding, a change of the Company’s state of incorporation to Florida from Colorado and a change in the Company’s name to Integrated Freight Corporation.

The Company has evaluated events and transactions that occurred subsequent to September 30, 2009 through January 12, 2010, the date the financial statements were issued, for potential recognition or disclosure in the accompanying financial statements. Other than the disclosures shown, we did not identify any other events or transactions that would need to be recognized or disclosed in the accompanying consolidated financial statements.

F-30

CONSOLIDATED FINANCIAL STATEMENTS OF

INTEGRATED FREIGHT CORPORATION

	Page
Report of Independent Registered Public Accounting Firm	F-32
Consolidated Balance Sheet at  March 31, 2009	F-33
Consolidated Statement of Operations from May 13, 2008 (inception) through March 31, 2009	F-34
Consolidated Statement of Changes in Stockholders’ Deficit from May 13, 2008 (inception) through	F-35
March 31, 2009
Consolidated Statement of Cash Flows from May 13, 2008 (inception) through March 31, 2009	F-36
Notes to Consolidated Financial Statements	F-37

F-31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Integrated Freight Corporation

Sarasota, Florida

We have audited the accompanying consolidated balance sheet of Integrated Freight Corporation as of March 31, 2009, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows from May 13, 2008 (inception) through March 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Integrated Freight Corporation as of March 31, 2009, and the results of their operations and their cash flows from May 13, 2008 (inception) through March 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

/s/ Cordovano and Honeck LLP

Cordovano and Honeck LLP

Englewood, Colorado

July 24, 2009

F-32

INTEGRATED FREIGHT CORPORATION

Consolidated Balance Sheet

March 31, 2009

	Assets
Current assets:
	Cash	$	158,442
	Accounts receivable, net of allowance for doubtful accounts of $50,000		2,061,297
	Deferred finance costs, net of amortization of $79,130		135,220
	Prepaid expenses		187,475
Total current assets			2,542,434
Property and equipment, net of accumulated depreciation of $6,748,293  (Note 3)			7,193,426
Intangible assets, net of accumulated amortization of $298,521 (Note 4)			1,236,730
Other assets			123,331
Total assets		$	11,095,921
	Liabilities and Stockholders’ Deficit
Current liabilities:
	Bank overdraft	$	497,541
	Accounts payable		337,819
	Accrued and other liabilities		639,933
	Line of credit (Note 5)		630,192
	Notes payable - related parties (Note 7)		1,075,000
	Current portion of notes payable (Note 6)		3,942,592
Total current liabilities			7,123,077
Notes payable, net of current portion (Note 6)			4,184,293
Total liabilities			11,307,370
Minority interest			303,393
Stockholders’ deficit:
	Common stock, $0.001 par value, 50,000,000 shares authorized, 17,798,250 shares
	Issued and outstanding (Note 9)		17,798
	Additional paid-in capital		1,041,276
	Retained deficit		(1,573,916)
Total stockholders’ deficit			(514,842)
Total liabilities and stockholders’ deficit		$	11,095,921
See notes to consolidated financial statements

F-33

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Operations for the period from May 13, 2008

(inception) through March 31, 2009

Revenue		$	10,460,113
Operating Expenses
	Rents and transportation		2,060,175
	Wages, salaries & benefits		3,294,275
	Fuel and fuel taxes		3,430,465
	Depreciation and amortization		1,129,034
	Insurance and claims		529,592
	Operating taxes and licenses		143,479
	General and administrative		919,602
Total Operating Expenses			11,506,622
Other Expenses
	Interest		457,930
	Interest - related parties		50,838
	Other Income		(102,327)
Total Other Expenses			406,441
Net loss before minority interest		$	(1,452,950)
Minority interest share of subsidiary net income		$	(18,615)
Net loss		$	(1,471,565)
Net loss per share - basic and diluted		$	(0.12)
Weighted average common shares outstanding - basic and diluted			12,667,988
See notes to consolidated financial statements

F-34

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Stockholders’ Deficit for the period from May 13, 2008

(inception) through March 31, 2009

		Common Stock				Additional
		Shares		Par Value		Paid-in Capital		Retained Deficit		Total
Balance at May 13, 2008 (inception)		—	$	—	$	—	$	—	$	—
Common stock issued to officers in exchange
	for organizational services (Note 9)	7,000,000		7,000		—		—		7,000
Common stock issued in exchange
	for services (Note 9)	2,450,000		2,450		242,550		—		245,000
Common stock issued to acquire Smith Systems
	Transportation, Inc. (Note 11)	825,000		825		81,675				82,500
Common stock issued to acquire Morris
	Transportation, Inc. (Note 11)	3,000,000		3,000		297,000				300,000
Sale of common stock (Note 9)		1,580,000		1,580		143,920		—		145,500
Shareholder distributions		—		—		—		(187,351)		(187,351)
Shareholder contributions		—		—		—		85,000		85,000
Common stock and warrants issued as deferred
	finance costs on notes payable (Note 9)	2,150,000		2,150		212,850		—		215,000
Finder's fee paid in common stock (Note 9)		400,000		400		(400)		—		—
Common stock issued to extend loan (Note 9)		393,250		393		38,932		—		39,325
Fair value of warrants issued with short-term
note payable (Note 9)		—		—		24,749		—		24,749
Net loss		—		—		—		(1,471,565)		(1,471,565)
Balance at March 31, 2009		17,798,250	$	17,798	$	1,041,276	$	(1,573,916)	$	(514,842)
See notes to consolidated financial statements

F-35

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Cash Flows for the period from May 13, 2008

(inception) through March 31, 2009

	Net loss				$	(1,471,565)
	Adjustments to reconcile net loss to net cash provided by operating activities:
			Depreciation and amortization			1,129,034
			Debt discount amortization			21,538
			Deferred finance cost amortization			79,130
			Loss on asset dispositions			73,480
			Minority interest in earnings of subsidiary			18,615
			Stock Issued for stock based compensation			252,000
			Stock issued for interest			39,325
			Increases/decreases in operating assets and liabilities:
				Accounts receivable		1,052,400
				Prepaid expenses		68,070
				Other assets		(83,331)
				Bank overdraft		28,757
				Accounts payable		(17,306)
				Accrued and other liabilities		226,550
	Net cash provided by operating activities					1,416,697
Cash flows from investing activities:
	Purchase of property and equipment					(80,818)
	Proceeds from asset dispositions					65,940
	Cash proceeds from acquisitions of subsidiaries					154,707
	Net cash provided by investing activities					139,829
Cash flows from financing activities:
	Repayments of notes payable, and					(1,381,726)
	Proceeds of long term debt					164,026
	Payment on line of credit					(223,536)
	Proceeds from sale of common stock					145,500
	Distributions paid to common shareholders					(187,348)
	Contributions received from stockholders					85,000
	Net cash  used in financing activities					(1,398,084)
	Net change in cash					158,442
Cash, beginning of period						-
Cash, end of period					$	158,442
Supplemental disclosure of cash flow information:
	Cash paid during the period for:
		Income taxes			$	-
		Interest			$	314,329
Schedule of noncash investing and financing transactions:
Common stock issued for acquisition of subsidiaries
	Common stock issued in purchase				$	382,500
	Notes payable issued in purchase					850,000
	Less: assets received in purchase, net of cash					(13,027,033)
	Plus: liabilities assumed during purchase					11,664,462
	Minority interest					284,778
		Net cash received at purchase			$	154,707
Common stock issued for stock based compensation					$	252,000
Common Stock and warrants issued for deferred finance costs, extension of
loans and with notes payable					$	279,074
See notes to consolidated financial statements

F-36

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

Integrated Freight Corporation (a Florida corporation) and subsidiaries (the “Company”) is a short to medium-haul truckload carrier of general commodities headquartered in Sarasota, Florida. The Company also has service centers located throughout the United States.  The Company provides dry van, hazardous materials, and temperature controlled truckload carriers and intends to open brokerage services.  The Company is subject to regulation by the Department of Transportation and various state regulatory authorities.

Principles of Consolidation

The consolidated financial statements include the financial statements of Integrated Freight Corporation (“IFC”), and its wholly owned subsidiaries, Morris Transportation, Inc. (“Morris”) and Smith Systems Transportation, Inc. (“Smith”).  Smith holds a 60% ownership interest in SST Financial Group, LLC (“SSTFG”).  All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.

Use of Estimates

The financial statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America.  The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes.  Management evaluates these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods we consider reasonable in the particular circumstances.  Nevertheless, the Company’s actual results may differ significantly from our estimates.

Management believes that certain accounting policies and estimates are of more significance in our financial statement preparation process than others.  Management believes the most critical accounting policies and estimates include the economic useful lives and salvage values of our assets, provisions for uncollectible accounts receivable, and estimates of exposures under our insurance and claims plans.  To the extent that actual, final outcomes are different than our estimates, or additional facts and circumstances cause the Company to revise the estimates, the earnings during that accounting period will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2009.

Accounts Receivable Allowance

The Company makes estimates of the collectability of the accounts receivable. The Company specifically analyzes accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in the client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

Accordingly, the Company made a $50,000 allowances for uncollectible accounts and revenue adjustments as of March 31, 2009.

F-37

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

(continued)

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated on the straight-line method over the following estimated useful lives:

	Years
Land improvements	7- 10
Buildings / improvements	20 - 30
Furniture and fixtures	3 – 5
Shop and service equipment	2 – 5
Revenue equipment	3 -  5
Leasehold improvements	1 – 5

The Company expenses repairs and maintenance as incurred.  The Company periodically reviews the reasonableness of its estimates regarding useful lives and salvage values for revenue equipment and other long-lived assets based upon, among other things, the Company's experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice.  Salvage values are typically 15% to 20% for tractors and trailing equipment and consider any agreements with tractor suppliers for residual or trade-in values for certain new equipment.  The Company capitalizes tires placed in service on new revenue equipment as a part of the equipment cost.  Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service.  Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition.

Deferred Finance Charge

Costs incurred to obtain financing are recorded as a deferred finance charge and is amortized over the initial term of the loan agreement on the interest method.

Intangible Assets

The Company accounts for business combinations in accordance with SFAS No. 141, Business Combinations, which requires that the purchase method of accounting be used for all business combinations. SFAS 141 requires intangible assets acquired in a business combination to be recognized and reported separately from goodwill.

Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. The Company assigns all the assets and liabilities of the acquired business, including goodwill, to reporting units in accordance with SFAS No. 142, Goodwill and Other Intangible Assets.  Our business combinations did not result in any goodwill as of March 31, 2009.

The Company evaluates intangible assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

F-38

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

(continued)

Furthermore, SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. No impairment of intangibles has been identified since the date of acquisition.

Impairment of Long-lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of March 31, 2009.

Revenue Recognition

The Company recognizes revenues on the date the shipments are delivered to the customer.  Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.  Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as the Company acts as a principal with substantial risks as primary obligor.

Advertising Costs

The Company charges advertising costs to expense as incurred.  During the period ended March 31, 2009, advertising expense was approximately $4,217.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. 

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

F-39

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

(continued)

Stock-based Compensation

The Company has adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards, Share-Based Payment, or SFAS No. 123(R), using the modified prospective application method. Under SFAS No. 123R, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, include cash and trade receivables.  For the period ended March 31, 2009, the Company’s top four customers, based on revenue, accounted for approximately 35%, of the total revenue.  The Company’s top four customers, based on revenue, accounted for approximately 35% of the total trade accounts receivable at March 31, 2009. 

Financial instruments with significant credit risk include cash. The Company deposits its cash with high quality financial institutions in amounts less than the federal insurance limit of $250,000 in order to limit credit risk. As of March 31, 2009, the Company's bank deposits did not exceed insured limits.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payableapproximate fair value because of their short maturities. At March 31, 2009, the Company had $630,192 outstanding under its revolving credit agreement, and approximately $ 9,201,885, including $1,075,000 with related parties, outstanding under promissory notes with various lenders.  The carrying amount of the revolving credit agreement approximates fair value as the rate of interest on the revolving credit facility approximate current market rates of interest for similar instruments with comparable maturities, and the interest rate is variable.  The fair value of notes payable to various lenders is based on current rates at which the Company could borrow funds with similar remaining maturities.

Claims Accruals

Losses resulting from personal liability, physical damage, workers' compensation, and cargo loss and damage are covered by insurance subject to deductible, per occurrence. Losses resulting from uninsured claims are recognized when such losses are known and can be estimated. The Company estimates and accrues a liability for the share of ultimate settlements using all available information. The Company accrues for claims reported, as well as for claims incurred but not reported, based upon our past experience. Expenses depend on actual loss experience and changes in estimates of settlement amounts for open claims which have not been fully resolved. These accruals are based on our evaluation of the nature and severity of the claim and estimates of future claims development based on historical trends. Insurance and claims expense will vary based on the frequency and severity of claims and the premium expense.  At March 31, 2009, management estimated $-0- in claims accrual.

F-40

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

(continued)

Earnings per Share

The Company calculates earnings per share in accordance with SFAS No. 128, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.  The $600,000 note payable to the previous owner of Morris Transportation is convertible at the election of the holder into common stock at $1 per share.

At March 31, 2009, there was no variance between the basic and diluted loss per share.  The 675,000 warrants to purchase common shares outstanding at March 31, 2009 are not included in the weighted-average number of shares computation for diluted earnings per common share, as the warrants are anti-dilutive.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”).  SFAS No. 162 identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in accordance with accounting principles generally accepted in the United States.  This statement will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”  The Company does not expect the adoption of SFAS No. 162 to have a material impact on the Company’s financial condition, results of operations, and disclosures.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB 51 (“SFAS No. 160”).  This statement amends ARB 51 and revises accounting and reporting requirements for noncontrolling interests (formerly minority interests) in a subsidiary and for the deconsolidation of a subsidiary.  Upon the adoption of SFAS No. 160 on April 1, 2009, any noncontrolling interests will be classified as equity, and income attributed to the noncontrolling interest will be included in the Company’s income.  The provisions of this standard are applied retrospectively upon adoption.  

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, (“SFAS No. 141(R)”).  SFAS No. 141(R) clarifies and amends the accounting guidance for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree.  The provisions of SFAS No. 141(R) are effective for the Company for any business combinations occurring on or after January 1, 2009.

F-41

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies

(continued)

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, which amends SFAS No. 140, to require additional disclosures about transfers of financial assets.  The FSP also amended FASB Interpretation No. 46(R), to provide additional disclosures about entities’ involvement with variable interest entities.  The FSP’s scope is limited to disclosure only and is not expected to have an impact on the Company's consolidated financial position or results of operations. The Company does not expect the adoption of SFAS No. 162 to have a material impact on the Company’s financial condition, results of operations, and disclosures.

Note 2.              Related Party Transactions

From inception to date, we have not entered into any transactions with our directors and executive officers, outside of normal employment transactions, or with their relatives and entities they control; except for the following:

·   The Company issued 6,500,000 shares of our common stock to Mr. Henley for his services related to founding our corporation as well as organizational and start-up expenses in the amount of approximately $1,786. Mr. Henley is our founder and was our sole director at the date the issue of stock was approved. We also issued 500,000 shares to Mr. J. Morris for his services performed in our organization and start up. The stock issuances have been recorded based upon the estimated fair value of the services rendered.

·   The Company issued 150,000 shares of its common stock to Mr. Lusty, Chief Operating Officer as part of an employment contract.

·   As described in Note 11, the Company acquired the stock of Morris and Smith and issued notes payable to the previous owners of those companies totaling $850,000.  Unpaid interest of $39,682 was accrued on those notes through March 31, 2009.

Note 3.              Property and Equipment

Property and equipment consist of the following at March 31, 2009:

	IFC	Smith	Morris	Consolidated
Property Plant and Equipment	$ 46,472	$6,444,400	$ 7,450,847	$13,941,719
Less: accumulated depreciation	(3,485)	3,359,627	(3,385,181)	(6,748,293)
Total	$ 42,987	$3,084,773	$ 4,065,666	$7,193,426

Depreciation expense totaled $830,513 for the period ended March 31, 2009.

Note 4.              Intangible Assets

The Company purchased the stock of Smith and Morris, see Note 11, which resulted in the recognition of intangibles assets.  These intangible assets include the “employment and non-compete agreements” which are critical to Company because of the management team’s business intelligence and customer relationship value which is required to execute the Company’s business plan.  The intangibles also include their “company operating authority” which is tied to their motor carrier number that is issued and monitored by the U.S. Department of Transportation (FDOT).  The FDOT issues a rating to each company which has a direct impact on that company’s ability to attract and maintain a stable customer base as well as reduce the Company’s insurance costs, one of the most significant expenditure for freight companies.  Both Morris and Smith have the FDOT’s highest rating, “Satisfactory,” which provides the Company with significant value.  As of March 31, 2009, these intangible are as follows:

F-42

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 4.              Intangible Assets (continued)

Employment and non-compete agreements		$	1,043,293
Company operating authority			491,958
	Total intangible assets		1,535,251
Less: accumulated amortization			(298,521)
Intangible assets, net		$	1,236,730

Amortization expense totaled $298,521 for the seven months ended March 31, 2009.

The intangible assets acquired in the business combination are expected to amortize over the next three years as follows:

March 31,
2010..........................................................................................		511,750
2011..........................................................................................		511,750
2012..........................................................................................		213,230
	$	1,236,730

Note 5.              Line of Credit

Morris Revolving Credit

At March 31, 2009, Morris has $630,192 outstanding under a revolving credit line agreement that allows them to borrow up to a total of $1,500,000. The line of credit is secured by accounts receivable, guaranteed by a previous owner and is due on demand.  The applicable interest rate under this agreement is based on the LIBOR plus 3.5%. The line has financial covenants that require Morris to maintain a tangible net worth of not less than $700,000 and a fixed charge coverage ratio of at least 1 to 1.  Morris is currently in default of these covenants but believe they can negotiate a successful resolution with the lender.

F-43

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable

Notes payable owed by Smith consisted of the following as of March 31, 2009:

Notes payable to bank, due December 2012, payable in monthly installments of $65,000, interest of 9% collateralized by substantially all of Smith assets	$	2,357,890
Notes payable to bank, due April 2010, with monthly interest payments of 9%, collateralized by substantially all of Smith assets		1,766,721
Note payable to Platte Valley National Bank, due December 2010, payable in monthly installments of $1,423, with interest at 9.5% collateralized vehicle.		27,047
Notes payable to Daimler Chrysler, due 2010, Payable in monthly installments of $10,745, interest ranging from 8-9%, collateralized by  6 units.		112,309
Note payable to Floyds, due 2010, payable in monthly installments of $2,664 with interest at 8.5% unsecured.		9,564
Note payable to General Motors due November 2009, payable in monthly installments of $778, with interest at 8% secured by a vehicle.		4,744
Note payable to Nissan Motors due June 2011, payable in monthly installments of $505, with interest at 37% secured by a vehicle.		15,278
Unsecured, non-interest bearing note payable to Colorado Holdings, due 2010, payable in monthly installments of $1,250.		32,690
Total	$	4,326,243

The carrying amount of Smith assets pledged as collateral for the installment notes payable totaled $3,067,624 at March 31, 2009.

Notes payable owed by Morris consisted of the following as of March 31, 2009:

Notes payable to Chrysler Financial payable in monthly installments ranging from $569 to $5,687 including interest through May 2013 with interest rate ranging from 5.34% to 8.07% secured by equipment		$2,041,641
Notes payable to Banks payable in monthly installments ranging from $1,805 to $5,829 including interest through June 2010 with interest rate ranging from 5.9% to 7.25% secured by equipment		130,083
Notes payable to GE Financial payable in monthly installments ranging from $2,999 to $7,535 including interest through April 2013 with interest rate ranging from 6.69% to 8.53% secured by equipment		1,209,669
6.9% note payable to a GMAC Financial in  installments of $667 including interest, through August 2013 secured by a vehicle		143,845
8.59% note payable to a Wells Fargo Bank payable in monthly installments of $4,271 including interest, through October 2011 secured by equipment		129,143
Totals	$	3,654,381

F-44

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable (continued)

Notes payable owed by IFC consisted of the following as of March 31, 2009:

Note payable to Tangiers payable in May to 2009, with interest rate of 9.9%, collateralized by assets of IFS with unamortized discount of $3,211.	$	44,789
Notes payable to Tangiers payable in January 2010, with interest rate of 9.9%, collateralized by assets of IFS and personally guaranteed by three stockholders and managers of the Company.		60,000
Note payable to Ford Credit, principal and 16.8% interest payment of $885 due monthly, collateralized by truck used by Stockholder.		41,472
	$	146,261

Future maturities of notes payable for the five years subsequent to March 31, 2009, are as follows:

March 31,
2010..........................................................................................		3,942,592
2011..........................................................................................		1,764,806
2012..........................................................................................		1,503,798
2013..........................................................................................		852,860
2013..........................................................................................		62,829
	$	8,126,885

Note 7.              Notes Payable – Related Parties

Notes payable owed by the Company to related parties at March 31, 2009 is as follows:

Note payable to related party, from acquisition described in note 11, to previous owner of Morris, with interest of 8%, secured by all shares of Morris common stock, principal and interest due by October 31, 2009.	$	600,000
Notes payable to related party, from acquisition described in note 11, to previous owners of Smith, with interest of 8%, secured by all shares of Smith common stock, principal and interest due October 31, 2009.		250,000
8.5% note payable to previous owner, due on demand.		225,000
	$	1,075,000

Note 8.              Income Taxes

The Company accounts for income taxes under SFAS 109, which requires use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

F-45

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 8.              Income Taxes (continued)

Deferred tax assets and liabilities at the end of each period are determined using the currently effective tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. The reconciliation of enacted rates the year ended March 31, 2009 is as follows:

	2009
Federal	34%
State	0%
Net operating loss carry forward	--
Increase in valuation allowance	(34%)
	-

At March 31, 2009, the Company had a net operating loss carry forward of approximately $2,800,000 which can be offset against future taxable income. However $2,200,000 of that may be subject to limitations imposed by the Internal Revenue Service. This carry-forward is subject to review by the Internal Revenue Service and, if allowed, may be offset against taxable income through 2029.  A portion of the net operating loss carryovers begin expiring in 2019.

Deferred tax assets are as follows:

	2009
Deferred tax asset due to net operating loss	$	1,147,579
Valuation allowance		(1,147,579)
Net Asset Less Liability		-

The deferred tax asset relates principally to the net operating loss carry-forward. A valuation allowance was established at March 31 2009 to eliminate the deferred tax benefit that existed at that time since it is uncertain if the tax benefit will be realized. The deferred tax asset (and the related valuation allowance) increased by $1,147,579 for the period May 18, 2008 (inception) to March 31, 2009.

Note 9.              Shareholders’ Deficit

Common Stock

On May 13, 2008, the Company issued 7,000,000 shares of its common stock to its officers, directors, and other individuals at par value in exchange for work and services attendant to the organization of the Company.  The Company recorded $7,000 of expense on these shares

In May and July 2008, in total, the Company issued 2,300,000 shares of common stock for various consulting services and recognized an expense of $230,000.

On July 14, 2008, the Company sold 100,000 shares of common stock for $10,000.

On August 28, 2008, the Company issued 825,000 shares of its common stock to the stockholders of Smith Systems Transportation, Inc. as part of a business combination (see Note 11).

F-46

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 9.              Shareholders’ Deficit

On September 12, 2008, the Company issued 3,000,000 shares of its common stock to the stockholders of Morris Transportation, Inc. as part of a business combination (see Note 11).

In November 2008 and January 2009, the Company issued 2,150,000 shares in consideration of receiving debt financing as described in Note 6.  The Company recorded $312,500 of deferred financing costs as a result of issuing these shares.  These deferred financing costs are amortized over the term of the debt.

In February 2009, the Company issued 105,000 shares of common stock for $0.10 per share.

On February 26, 2009 The Company issued 393,250 shares of common stock to the holder of a note payable by the Company in order to extend the maturity date of the note payable for 90 days.  The $39,325 value of the stock was recorded as interest expense.

On March 10, 2009, the Company issued 150,000 shares of its common stock to the Chief Operating Officer upon execution of an employment agreement.  The stock’s fair market value of $15,000 was recognized as compensation expense.

In March 2009, the Company issued 1,375,000 shares of common stock for $137,500, less $12,500 in fees.  The Company also issued 400,000 shares of common stock and warrants to purchase another 350,000 shares as a finders’ fee to the companies that introduced the buyers to IFC.  In May 2009, the Company agreed that there was an error in the amount of shares and warrants issued to the two entities that found the purchaser and issued another 137,500 common shares and warrants to purchase 68,572 common shares.

Warrants to Purchase Common Stock

On November 26, 2008 the Company’s Board of Directors issued 325,000 common stock warrants as payment for an incentive to extend a senior subordinated secured debenture totaling $48,000. The warrants vested immediately, carry an exercise price of $0.10 and expire on November 26, 2011.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.157 per share, or $51,025 in aggregate, in accordance with SFAS 123R.  Stock-based compensation expense recognized is based on awards ultimately expected to vest and has been reduced for estimated forfeitures.  SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

On March 7, 2009 the Company issued 350,000 common stock warrants as payment for a finder’s fee. The warrants vested immediately, carry an exercise price of $.01 and expire on March 6, 2014.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $31,500 in aggregate, in accordance with SFAS 123R.  Stock-based compensation expense recognized is based on awards ultimately expected to vest and has been reduced for estimated forfeitures.  SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

F-47

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

The fair value for the warrants was estimated at the date of valuation using the Black-Scholes option-pricing model with the following assumptions: 

Risk-free interest rate	1.38- 2.57%
Dividend yield	0.00%
Volatility factor	59.552%
Expected life	3.84 years

The relative fair value of the warrants, calculated in accordance with Accounting Principles Board (“APB”) Opinion 14, “Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants”; totaled $24,749, or $.076 per share.  The relative fair value of the warrants issued with the debenture has been charged to additional paid-in capital with a corresponding discount on the note payable.  The discount is amortized over the life of the debt. As the discount is amortized, the reported outstanding principal balance of the notes will approach the remaining unpaid value ($18,546 at March 31, 2009).    

A summary of the grant activity for the years ended March 31, 2009, is presented below:

			Weighted
		Weighted	Average
	Stock Awards	Average	Remaining	Aggregate
	Outstanding	Exercise	Contractual	Intrinsic
	& Exercisable	Price	Term	Value
Balance, May 13, 2008	-	N/A	N/A	N/A
Granted	675,000	$    0.10	3.84 years	-
Exercised		N/A	N/A	N/A
Expired/Cancelled	-	N/A	N/A	N/A
Balance, March 31, 2009	675,000	$    0.10	3.84 years	$         -

As of March 31, 2009, the number of warrants that were currently vested and expected to become vested was 675,000.

Note 10.                         Commitments and Contingencies

Operating Leases

The Company leases office space in Sarasota, Florida under a one year operating lease with two additional one year extension at the option of the Company.  The Company pays $695 per month, which increases to $770 per month in October 2009 if the Company elects to exercise its option for additional years under the lease.

F-48

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 10.                         Commitments and Contingencies (continued)

Employment Agreements

The Company entered into three year employment agreements with four executives of the Company.  The Company is committed to pay the executives a total of $590,000 per year, with certain guaranteed bonuses and increases.  The agreements also call for bonuses if the executives meet certain goals which are to be set by the board of directors. The minimum commitments under these are agreements are as follows:

Year ended March 31,
2010	$	606,250
2011		627,375
2012		316,825
	$	1,550,450

Purchase Commitments

The Company’s purchase commitments for revenue equipment are currently under negotiation. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $300,000 and will be paid throughout 2010.

Claims and Assessments

We are involved in certain claims and pending litigation arising from the normal conduct of business.  Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our financial condition, our results of operations or our liquidity.

Contingency

In IFC’s note payable to Tangiers there is a requirement to develop a public market defined by having a ticker symbol on a trading market, by December 31, 2009.  If this does not occur Tangiers is entitled to a break-up fee of $100,000.

Note 11.                         Business Combinations

Smith Systems Transportation, Inc.

On August 28, 2008, the Company acquired 100% of the common stock of Smith Systems Transportation, Inc. (“Smith”), a Nebraska-based hazardous waste carrier, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was September 1, 2008 and the transaction was accounted for under the purchase method in accordance with SFAS 141. Smith’s results of operations have been included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $783,570, with a weighted average amortization period of 3 years.

F-49

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 11.                         Business Combinations (continued)

The aggregate purchase price was $332,500, including 825,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (825,000 shares)	$	82,500
Note payable		250,000
	$	332,500

The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

Cash	$	96,454
Accounts Receivable, Trade		1,913,282
Accounts Receivable, Officers		96,305
Prepayments		255,545
Other Current Assets		39,687
Net Property and Equipment		3,546,996
Employment contract and non-compete		525,000
Company operating authority		258,570
Total assets acquired		6,731,839
Bank overdraft		468,784
Accounts payable		136,048
Accrued liabilities and other current liabilities		321,943
Notes payable		5,187,786
Total liabilities assumed		6,114,561
Net assets acquired before minority interest		617,278
less Minority Interest		(284,778)
Net assets acquired	$	332,500

Contingent Consideration

 As part of the Stock Exchange Agreement with Morris, if Smith does not maintains certain levels of profitability the note payable to Smith can be reduced by up to the full amount, $250,000, of the note.  The results of the payment contingency may affect the final valuation of the Morris acquisition, to be measured at the October 31, 2009 maturity date of the note.

Morris Transportation, Inc.

On September 12, 2008, the Company acquired 100% of the common stock of Morris Transportation, Inc. (“Morris”), an Arkansas-based dry van truckload carrier, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was September 1, 2008 and the transaction was accounted for under the purchase method in accordance with SFAS 141. Morris’ results of operations have been included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $751,681, with a weighted average amortization period of 3 years.

F-50

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 11.                         Business Combinations (continued)

The aggregate purchase price was $900,000, including 3,000,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (3,000,000 shares)	$	300,000
Note payable		600,000
	$	900,000

The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

Cash	$	58,252
Accounts Receivable, Trade		1,104,423
Net Property and Equipment		4,535,545
Intangible assets:
Employment and non-compete agreement		518,293
Company operating authority		233,388
Total assets acquired		6,449,901
Accounts payable		219,073
Accrued liabilities and other current liabilities		92,560
Notes payable		5,238,268
Total liabilities assumed		5,549,901
Net Assets Acquired	$	900,000

Contingent Consideration

As part of the Stock Exchange Agreement with Morris, if Morris does not maintains certain levels of profitability the amount of the note payable to Morris can be reduced up to $250,000.  The results of the payment contingency may affect the final valuation of the Morris acquisition, to be measured at the October 31, 2009 maturity date of the note.

Pro forma results

If the Company had purchased Morris and Smith at the date of inception (May 13, 2008) the results of operations would be as follow:

F-51

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 11.                         Business Combinations (continued)

		IFC		Smith		Morris		Total
Revenue			$	7,182,311	$	10,346,177	$	17,528,488
Operating Expenses
Rents and transportation		-		2,079,321		1,613,394		3,692,715
Wages, salaries & benefits		427,102		1,987,549		2,605,396		5,020,047
Fuel and fuel taxes		-		1,610,937		4,410,511		6,021,448
Other operating expenses		190,810		1,739,832		1,487,652		3,418,294
Total Operating Expenses		617,912		7,417,639		10,116,953		18,152,504
Other Expenses		183,283		179,788		312,193		675,264
Net loss before minority interest		(801,195)		(415,116)		(82,969)		(1,299,280)
Minority interest share of
subsidiary net income		-		(34,003)		-		(34,003)
Net loss	$	(801,195)	$	(449,119)	$	(82,969)	$	(1,333,283)

Note 12.                         Business Segment Information

The Company follows the provisions of FASB 131, Disclosures about Segments of an Enterprise and Related Information , which established standards for the reporting of information about operating segments in annual and interim financial statements.  Operating segments are defined as components of an enterprise for which financial information is available that is evaluated regularly by the chief operating decision makers(s) in deciding how to allocate resources and in assessing performance.  The Company operates both of its subsidiaries (Morris Transportation and Smith Systems) as independent companies under separate management of their respective founders. Management of the Company makes decisions about allocating resources based on these operating segments. The following table depicts the information expected by FASB 131.

	Revenue	Net Income(loss)	Total Assets
IFC (Parent)	$                     -	$            (1,215,824)	$      2,868,874
Morris	6,299,649	12,403	5,159,423
Smith	4,160,464	(268,144)	3,067,624
	$   10,460,113	$            (1,471,565)	$   11,095,921

F-52

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 13.                         Subsequent Events

On May 1, 2009 the Company purchased 500 shares of PlanGraphics, Inc. (PlanGraphics) 12% redeemable preferred stock, $0.001 par value, in exchange for 1,307,822 shares of the Company’s common stock and a $167,000 promissory note due in one year from the date of closing.  As part of this transaction the Company also issued to PlanGraphics 177,170 shares of common stock and two year warrants to purchase another 177,170 shares of common stock with an exercise price of $0.50 per share.   On June 2, 2009, these preferred shares were converted into 401,599,467 shares of common stock, which gave the Company voting control over approximately 80% of PlanGraphics’ outstanding shares. PlanGraphics is a public OTCBB company with a ticker symbol of PGRA.

Also on May 1, 2009, PlanGraphics transferred all operating assets and liabilities (except for $28,000 of audit fees) to a subsidiary created in the state of Maryland also called PlanGraphics, Inc. (PGI Maryland).  PlanGraphics sold to their previous management 100% of the shares of PGI Maryland in exchange for a released from all obligations under their employment agreements.  Management also received from IFC 134,579 shares of IFC common stock and warrants to purchase another 134,579 shares of IFC common stock at $0.50 per share, with a term of two years.

In addition to the above, in several transactions pursuant to various debt and equity financings from April 1, 2009 to date of this report, the Company has issued 892,142 shares of its common stock and five year warrants to purchase another 260,000 shares of common stock with an exercise price of $0.01 per share.

The securities discussed above were offered and sold in reliance upon exemptions from the registration requirements of Section 5 of the Act, pursuant to Section 4(2) of the Act and Rule 506 promulgated there under. Such securities were sold or conveyed exclusively to accredited investors as defined by Rule 501(a) under the Act.

F-53

CONSOLIDATED FINANCIAL STATEMENTS OF

INTEGRATED FREIGHT CORPORATION

	Page
Consolidated Balance Sheet as of September 30, 2009 (unaudited) and March 31, 2009	F-55
Consolidated Statement of Operations For the Six Months Ended September 30, 2009 and the Period from May 13, 2008 (inception) to September 30, 2008 (unaudited)	F-56
Consolidated Statement of Changes in Stockholders’ Deficit For the Six Months Ended September 30, 2009 (unaudited) and the Period from May 13, 2008 (inception) to March 31, 2009	F-57
Consolidated Statement of Cash Flows For the Six Months Ended September 30, 2009 (unaudited)  and the Period from May 13, 2008 (inception) to September 30, 2008 (unaudited)	F-59
Notes to Consolidated Financial Statements	F-61

F-54

INTEGRATED FREIGHT CORPORATION

Consolidated Balance Sheets

			September 30, 2009		March 31, 2009
	Assets		(Unaudited)
Current assets:
	Cash	$	29,610	$	158,442
	Accounts receivable, net of allowance for doubtful accounts of $50,000		2,689,454		2,061,297
	Deferred finance costs, net of amortization of $173,881 and $79,130		40,469		135,220
	Prepaid expenses & other assets		180,447		187,475
Total current assets			2,939,980		2,542,434
Property and equipment, net of accumulated depreciation (Note 3)			6,396,001		7,193,426
Intangible assets, net of accumulated amortization (Note 4)			1,106,135		1,236,730
Other assets			842,176		123,331
Total assets		$	11,284,292	$	11,095,921
	Liabilities and Stockholders’ Deficit
Current liabilities:
	Bank overdraft	$	177,277	$	497,541
	Accounts payable		574,661		337,819
	Accrued and other liabilities		786,372		639,933
	Line of credit (Note 5)		812,097		630,192
	Notes payable - related parties (Note 7)		850,000		1,075,000
	Current portion of notes payable, net of unamortized discount
	of $141,213 and $24,749 respectively  (Note 6)		3,920,948		3,942,592
Total current liabilities			7,121,355		7,123,077
Notes payable, net of current portion (Note 6)			4,706,613		4,184,293
Total liabilities			11,827,968		11,307,370
Stockholders’ deficit:
	Common stock, $0.001 par value, 50,000,000 shares authorized,
	21,366,068 and 17,798,250 shares issued and outstanding		21,366		17,798
	Additional paid-in capital		2,288,391		1,041,276
	Retained deficit		(3,140,606)		(1,573,916)
Total stockholders’ deficit			(830,849)		(514,842)
	Minority interest		287,173		303,393
Total liabilities and stockholders’ deficit		$	11,284,292	$	11,095,921
See notes to consolidated financial statements

F-55

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Operations

			Six Months		May 13, 2008
			Ended		(inception) to
			September 30,		September 30,
			2009		2008
			(Unaudited)		(Unaudited)
Revenue		$	8,832,631	$	1,855,789
Operating Expenses
	Rents and transportation		2,617,766		360,998
	Wages, salaries & benefits		2,949,320		340,332
	Fuel and fuel taxes		1,911,444		611,020
	Depreciation and amortization		952,475		185,563
	Insurance and claims		324,261		74,820
	Operating taxes and licenses		64,390		7,815
	General and administrative		1,121,140		334,902
Total Operating Expenses			9,940,796		1,915,450
Other Expenses
	Interest		586,456		101,166
	Interest - related parties		34,093		8,589
	Other Income		(108,498)		(14,066)
Total Other Expenses			512,051		95,689
Net loss before minority interest			(1,620,216)		(155,350)
Minority interest share of subsidiary net income			16,220		(6,071)
Net loss		$	(1,603,996)	$	(161,421)
Net loss per share - basic and diluted		$	(0.08)	$	(0.01)
Weighted average common shares outstanding
- basic and diluted			21,366,068		13,225,000
See notes to consolidated financial statements

F-56

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Stockholders’ Deficit

May 13, 2008 (inception) through March 31, 2009 and for the

Six Months Ended September 30, 2009

		Common Stock				Additional
				Par		Paid-in		Retained
		Shares		Amount		Capital		Deficit		Total
Balance at May 13, 2008 (Inception)		—	$	—	$	—	$	—	$	—
Common stock issued to officers in exchange
	for organizational services (Note 9)	7,000,000		7,000		—		—		7,000
Common stock issued in exchange
	for services (Note 9)	2,450,000		2,450		242,550		—		245,000
Common stock issued to acquire Smith Systems
	Transportation, Inc. (Note 11)	825,000		825		81,675		—		82,500
Common stock issued to acquire Morris
	Transportation, Inc. (Note 11)	3,000,000		3,000		297,000		—		300,000
Sale of common stock (Note 9)		1,580,000		1,580		143,920		—		145,500
Shareholder distributions		—		—		—		(187,351)		(187,351)
Shareholder contributions		—		—		—		85,000		85,000
Common stock and warrants issued as deferred
	finance costs on notes payable (Note 9)	2,150,000		2,150		212,850		—		215,000
Finder's fee paid in common stock (Note 9)		400,000		400		(400)		—		—
Common stock issued to extend loan (Note 9)		393,250		393		38,932		—		39,325
Fair value of warrants issued with short-term
note payable (Note 9)		—		—		24,749		—		24,749
Net loss		—		—		—		(1,471,565)		(1,471,565)
Balance at March 31, 2009		17,798,250	$	17,798	$	1,041,276	$	(1,573,916)	$	(514,842)
See notes to consolidated financial statements

F-57

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Stockholders’ Deficit

May 13, 2008 (inception) through March 31, 2009 and for the

Six Months Ended September 30, 2009 – (Continued)

		Common Stock				Additional
				Par		Paid-in		Retained
		Shares		Value		Capital		Deficit		Total
Balance at March 31, 2009		17,798,250	$	17,798	$	1,041,276	$	(1,573,916)	$	(514,842)
Common stock issued to officers in exchange
	for organizational services (Note 9) (Unaudited)	—		—		—		—		—
Common stock issued in exchange
	for services (Note 9) (Unaudited)	75,000		75		7,425		—		7,500
Common stock issued to acquire Smith Systems
	Transportation, Inc. (Note 11) (Unaudited)	—		—		—		—		—
Common stock issued to acquire Morris
	Transportation, Inc. (Note 11) (Unaudited)	—		—		—		—		—
Sale of common stock (Note 9) (Unaudited)		570,000		570		101,430		—		102,000
Shareholder distributions (Unaudited)		—		—		—		37,306		37,306
Shareholder contributions (Unaudited)		—		—		—		—		—
Common stock and warrants issued as deferred
	finance costs on notes payable (Note 9) (Unaudited)	—		—		—		—		—
Finder's fee paid in common stock (Note 9) (Unaudited)		639,996		640		63,360		—		64,000
Common stock issued to extend loan (Note 9) (Unaudited)		25,000		25		2,475		—		2,500
Fair value of warrants issued with notes
	payable (Note 9) (Unaudited)	—		—		—		—		—
Common stock issued to directors and
	executives for compensation (Note 9) (Unaudited)	950,000		950		94,050		—		95,000
Common stock issue to purchase
	personal property (Note 9) (Unaudited)	1,307,822		1,308		837,162		—		838,470
Fair value of warrants issued with short-term
	note payable (Note 9) (Unaudited)	—		—		141,213		—		141,213
Net loss (Unaudited)		—		—		—		(1,603,996)		(1,603,996)
Balance at September 30, 2009 (Unaudited)		21,366,068	$	21,366	$	2,288,391	$	(3,140,606)	$	(830,849)
See notes to consolidated financial statements

F-58

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Cash Flows

					Six Months		May 13, 2008
					Ended		(inception) to
					September 30, 2009		September 30, 2008
Cash flows from operating activities:					(Unaudited)		(Unaudited)
	Net loss			$	(1,603,996)	$	(161,421)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization			952,475		185,563
		Debt discount amortization			23,536		-
		Deferred finance cost amortization			94,751		-
		Loss on asset dispositions			-		73,480
		Minority interest in earnings of subsidiary			16,220		309,464
		Stock issued for stock based compensation			187,854		-
		Stock issued for interest			39,325		-
		Increase/decrease in operating assets and liabilities
			Accounts receivable		(628,157)		(3,176,690)
			Prepaid expenses		7,028		(187,929)
			Other assets		(718,845)		(668,750)
			Bank overdraft		320,264		554,464
			Accounts payable		236,842		249,426
			Accrued and other liabilities		146,439		266,000
	Net cash used in operating activities				(926,264)		(2,556,393)
Cash flows from investing activities:
	Purchase of property and equipment				(24,455)		(7,899,046)
	Net cash used in investing activities				(24,455)		(7,899,046)
Cash flows from financing activities:
	Repayments of notes payable, and				(21,644)		-
	Proceeds of long term debt				522,320		10,013,129
	Payment on line of credit				181,905		878,728
	Proceeds from sale of common stock				102,000		-
	Distributions paid to common shareholders				37,306		-
	Net cash  provided by financing activities				821,887		10,891,857
	Net change in cash				(128,832)		436,418
Cash, beginning of period					158,442		-
Cash, end of period				$	29,610	$	436,418
See notes to consolidated financial statements

F-59

INTEGRATED FREIGHT CORPORATION

Consolidated Statement of Cash Flows – (Continued)

				Six Months		May 13, 2008
				Ended		(inception) to
				September 30, 2009		September 30, 2008
Supplemental disclosure of cash flow information:				(Unaudited)		(Unaudited)
	Cash paid during the period for:
		Income taxes	$	-	$	-
		Interest	$	1,028,556	$	547,398
Schedule of noncash investing and financing transactions:
Common stock issued for acquisition of subsidiaries
	Common stock issued in purchase		$	-	$	382,500
	Notes payable issued in purchase			-		850,000
	Less: assets received in purchase, net of cash			-		(13,027,033)
	Plus: liabilities assumed during purchase			-		11,664,462
	Minority interest			-		284,778
		Net cash received at purchase			$	154,707
Common stock issued for stock based compensation			$	950,000	$	252,000
Common Stock and warrants issued for deferred finance costs, extension
of loans and with notes payable			$	-	$	279,074
See notes to consolidated financial statements

F-60

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.                 Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

Integrated Freight Corporation (a Florida corporation) and subsidiaries (the “Company”) is a short to medium-haul truckload carrier of general commodities headquartered in Sarasota, Florida. The Company also has service centers located throughout the West Central United States.  The Company provides dry van, hazardous materials, and temperature controlled truckload services.  The Company is subject to regulation by the Department of Transportation and various state regulatory authorities.

Principles of Consolidation

The consolidated financial statements include the financial statements of Integrated Freight Corporation (“IFC”), and its wholly owned subsidiaries, Morris Transportation, Inc. (“Morris”) and Smith Systems Transportation, Inc. (“Smith”).  Smith holds a 60% ownership interest in SST Financial Group, LLC (“SSTFG”).  All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.

Use of Estimates

The financial statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes.  Management evaluates these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods we consider reasonable in the particular circumstances.  Nevertheless, the Company’s actual results may differ significantly from its estimates.

Management believes that certain accounting policies and estimates are of more significance in the financial statement preparation process than others.  Management believes the most critical accounting policies and estimates include the economic useful lives and salvage values of the assets, provisions for uncollectible accounts receivable, and estimates of exposures under the insurance and claims plans.  To the extent that actual, final outcomes are different than the estimates, or additional facts and circumstances cause the Company to revise the estimates, the earnings during that accounting period will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable Allowance

The Company makes estimates of the collectability of the accounts receivable. The Company specifically analyzes accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in the client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs. Accordingly, the Company made a $50,000 allowances for uncollectible accounts and revenue adjustments as of September 30, 2009 (unaudited) and March 31, 2009.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated on the straight-line method over the following estimated useful lives:

	Years
Land improvements	7- 10
Buildings / improvements	20 - 30
Furniture and fixtures	3 – 5
Shop and service equipment	2 – 5
Revenue equipment	3 -  5
Leasehold improvements	1 – 5

The Company expenses repairs and maintenance as incurred.  The Company periodically reviews the reasonableness of its estimates regarding useful lives and salvage values for revenue equipment and other long-lived assets based upon, among other things, the Company's experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice.  Salvage values are typically 15% to 20% for tractors and trailer equipment and consider any agreements with tractor suppliers for residual or trade-in values for certain new equipment.  The Company capitalizes tires placed in service on new revenue equipment as a part of the equipment cost.  Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service.  Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition.

Deferred Finance Charge

Costs incurred to obtain financing are recorded as a deferred finance charge and are amortized over the initial term of the loan agreement on the interest method.

Intangible Assets

The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, which requires that the purchase method of accounting be used for all business combinations. ASC 805 requires intangible assets acquired in a business combination to be recognized and reported separately from goodwill.

Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. The Company assigns all the assets and liabilities of the acquired business, including goodwill, to reporting units in accordance with ASC 350, Intangible – Goodwill and Other.  The business combinations did not result in any goodwill as of December 31, 2009 (unaudited) and March31, 2009.

The Company evaluates intangible assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies (continued)

Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. No impairment of intangibles has been identified since the date of acquisition.

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of September 30, 2009 and March 31, 2009.

Revenue Recognition

The Company recognizes revenues on the date the shipments are delivered to the customer.  Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.  Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as the Company acts as a principal with substantial risks as primary obligor.

Advertising Costs

The Company charges advertising costs to expense as incurred.  During the six month period ended September30, 2009, and from the period of May 13, 2008 (inception) to September 30, 2008, advertising expense was approximately $265 and $2,453 (unaudited).

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. 

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies (continued)

Stock-based Compensation

The Company has adopted the fair value recognition provisions of ASC 505, Equity and ASC 718, Compensation – Stock Compensation, using the modified prospective application method. Under ASC 505 and ASC 718, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, include cash and trade receivables.  For the period ended September 30, 2009 and 2008, the Company’s top four customers, based on revenue, accounted for approximately 48% and 37% of the total revenue.  The Company’s top four customers, based on revenue, accounted for approximately 34% and 35% of the total trade accounts receivable at September 30, 2009 and March 31, 2009. 

Financial instruments with significant credit risk include cash. The Company deposits its cash with high quality financial institutions in amounts less than the federal insurance limit of $250,000 in order to limit credit risk. As of September 30, 2009 and March 31, 2009, the Company's bank deposits did not exceed insured limits.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payableapproximate fair value because of their short maturities. At September 30, 2009 and March 31, 2009, the Company had $812,097 (unaudited) and $630,192 outstanding under its revolving credit agreement, and approximately $9,477,561 (unaudited) and $9,201,885, including $850,000 (unaudited) and $1,075,000 with related parties, outstanding under promissory notes with various lenders.  The carrying amount of the revolving credit agreement approximates fair value, as the rate of interest on the revolving credit facility approximate current market rates of interest for similar instruments with comparable maturities, and the interest rate is variable.  The fair value of notes payable to various lenders is based on current rates at which the Company could borrow funds with similar remaining maturities.

Claims Accruals

Losses resulting from personal liability, physical damage, workers' compensation, and cargo loss and damage are covered by insurance subject to deductible, per occurrence. Losses resulting from uninsured claims are recognized when such losses are known and can be estimated. The Company estimates and accrues a liability for the Company’s share of ultimate settlements using all available information. The Company accrues for claims reported, as well as for claims incurred but not reported, based upon the Company’s past experience. Expenses depend on actual loss experience and changes in estimates of settlement amounts for open claims which have not been fully resolved. These accruals are based on the evaluation of the nature and severity of the claim and estimates of future claims development based on historical trends. Insurance and claims expense will vary based on the frequency and severity of claims and the premium expense.  At September 30, 2009 and March 31, 2009, management estimated $-0- in claims accrual.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies (continued)

Earnings per Share

The Company calculates earnings per share in accordance with ASC 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.  The $600,000 note payable to the previous owner of Morris Transportation is convertible at the election of the holder into common stock at $1 per share.

At September 30, 2009 and March 31, 2009, there was no variance between the basic and diluted loss per share.  The 2,464,225 (unaudited) and 675,000 warrants to purchase common shares outstanding at September 30, 2009 and March 31, 2009 are not included in the weighted-average number of shares computation for diluted earnings per common share, as the warrants are anti-dilutive.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) approved FASB Accounting Standards Codification (“Codification”) as the single source of authoritative accounting guidance used in the preparation of financial statements in conformity with GAAP for all non-governmental entities.  Codification, which changed the referencing and organization of accounting guidance without modification of existing GAAP, is effective for interim and annual periods ending after September 15, 2009. Since it did not modify existing GAAP, Codification did not have any impact on the Company’s financial condition or result of operations.  On the effective date of Codification, substantially all existing non-SEC accounting and reporting standards are superseded and, therefore, are no longer referenced by title in the accompanying interim condensed consolidated financial statements.

In June 2009, the FASB issued SFAS 168 (now: FASB ASC 105-10), Generally Accepted Accounting Principles the FASB Accounting Standards Codification. SFAS 168 represented the last numbered standard to be issued by FASB under the old (pre-Codification) numbering system, and amends the GAAP hierarchy established under SFAS 162. On July 1, 2009, the FASB launched FASB’s new Codification entitled The FASB Accounting Standards Codification, or FASB ASC. The Codification supersedes all existing non-SEC accounting and reporting standards. FASB ASC 105-10 is effective in the first interim and annual periods ending after September 15, 2009. This pronouncement had no effect on the consolidated financial statements upon adoption other than current references to GAAP, which, where appropriate, have been replaced with references to the applicable codification paragraphs.

In June 2009, the FASB issued Amendments to FASB Interpretation No. 46(R), FASB ASC 810-Consolidation, that will change how the Company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under this guidance, determining whether a company is required to consolidate an entity will be based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The changes are FASB ASC 810-10, effective for financial statements after January 1, 2010. The Company is currently evaluating the requirements of this guidance and the impact of adoption on the Company’s consolidated financial statements.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 1.              Nature of Operations and Summary of Significant Accounting Policies (continued)

In May 2009, the FASB issued FASB ASC 855, Subsequent Events. FASB ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC 855 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date; that is, whether the date represents the date the financial statements were issued or were available to be issued. FASB ASC 855 is effective in the first interim period ending after June 15, 2009. The Company expects FASB ASC 855 will have an impact on disclosures in the Company’s consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms and value of any subsequent events occurring after adoption.

Note 2.              Related Party Transactions

From inception to date, the Company has not entered into any transactions with the directors and executive officers, outside of normal employment transactions, or with their relatives and entities they control; except for the following:

·   The Company issued 6,500,000 shares of the Company’s common stock to the Company’s founder for services related to preincorporation, organization and start-up.

·   The Company also issued 500,000 shares to an officer and corporate counsel for services related to incorporation, organization and start-up. The stock issuances have been recorded based upon the estimated fair value of the services rendered.

·   The Company issued 1,000,000 shares of its common stock to an officer as part of an employment contract.

·   The Company issued 3,825,000 shares to two directors as compensation

Note 3.              Property and Equipment

Property and equipment consist of the following at September 30, 2009 (unaudited):

	IFC
	(Parent)	Smith	Morris	Consolidated
Property Plant and Equipment	$ 46,472	$6,444,400	$ 7,451,767	$13,942,639
Less: accumulated depreciation	( 8,133)	(3,735,723)	(3,802,782)	(7,546,638)
Total	$ 38,339	$2,708,677	$ 3,648,985	$6,396,001

Depreciation expense totaled $698,823 for the period ended September 30, 2009 (unaudited).

Property and equipment consist of the following at March 31, 2009:

	IFC
	(Parent)	Smith	Morris	Consolidated
Property Plant and Equipment	$ 46,472	$6,444,400	$ 7,450,847	$13,941,719
Less: accumulated depreciation	(3,485)	(3,359,627)	(3,385,181)	(6,748,293)
Total	$ 42,987	$3,084,773	$ 4,065,666	$7,193,426

Depreciation expense totaled $830,513 for the period ended March 31, 2009.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 4.              Intangible Assets

The Company purchased the stock of Morris and Smith, see Note 11, which resulted in the recognition of intangible assets.  These intangible assets include the “employment and non-compete agreements” which are critical to the Company because of the management team’s business intelligence and customer relationship value which is required to execute the Company’s business plan.  The intangibles also include their “company operating authority” which is tied to their motor carrier number that is issued and monitored by the U.S. Department of Transportation (“FDOT”).  The FDOT issues a rating to each company which has a direct impact on that company’s ability to attract and maintain a stable customer base as well as reduce the Company’s insurance costs, one of the most significant expenditures for freight companies.  Both Morris and Smith have the FDOT’s highest rating, “Satisfactory,” which provides the Company with significant value.  These intangible are as follows:

			September 30, 2009		March 31, 2009
			(Unaudited)
Employment and non-compete agreements		$	1,043,293	$	1,043,293
Company operating authority			491,958		491,958
	Total intangible assets		1,535,251		1,535,251
Less: accumulated amortization			(429,116)		(298,521)
Intangible assets, net		$	1,106,135	$	1,236,730

Amortization expense totaled $130,595 (unaudited) and $298,521 for the six months ended September 30, 2009 and for the period from May 13, 2008 (date of inception) to March 31, 2009.

Note 5.              Line of Credit

Morris Revolving Credit

At September 30, 2009 and March31, 2009, Morris has $812,097 (unaudited) and $630,192 outstanding under a revolving credit line agreement that allows them to borrow up to a total of $1,500,000. The line of credit is secured by accounts receivable, guaranteed by a previous owner and is due on demand.  The applicable interest rate under this agreement is based on the LIBOR plus 3.5%. The line has financial covenants that require Morris to maintain a tangible net worth of not less than $700,000 and a fixed charge coverage ratio of at least 1 to 1.  Morris is currently in default of these covenants but believe they can negotiate a successful resolution with the lender.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable

Notes payable owed by Morris consisted of the following:

	September 30, 2009		March 31, 2009
	(Unaudited)
Notes payable to Chrysler Financial, payable in monthly installments ranging from $569 to $5,687, including interest, through May 2013, with interest rate ranging from 5.34% to 8.07%, secured by equipment	$	1,854,494	$	2,041,641
Notes payable to Banks, payable in monthly installments ranging from $1,805 to $5,829, including interest through June 2010, with interest rate ranging from 5.9% to 7.25%, secured by equipment		65,159		130,083
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535, including interest, through April 2013, with interest rate ranging from 6.69% to 8.53%, secured by equipment		997,815		1,209,669
6.9% note payable to GMAC Financial, in  installments of $667, including interest, through August 2013, secured by a vehicle		26,261		143,845
8.59% note payable to Wells Fargo Bank, payable in monthly installments of $4,271, including interest, through October 2011, secured by equipment		121,102		129,143
Note payable to shareholder is non-interest bearing, and is payable on demand		390,000		-
Totals	$	3,454,831	$	3,654,381

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable (continued)

Notes payable owed by Smith consisted of the following:

	September 30, 2009		March 31, 2009
	(Unaudited)
Notes payable to bank, due December 2012, payable in monthly installments of $65,000, interest of 9% collateralized by substantially all of Smith assets	$	2,339,129	$	2,357,890
Notes payable to bank, due April 2010, with monthly interest payments of 6.5%, collateralized by substantially all of Smith assets		1,591,821		1,766,721
Note payable to Platte Valley National Bank, due December 2010, payable in monthly installments of $1,423, with interest at 9.5% collateralized by a vehicle.		18,514		27,047
Notes payable to Daimler Chrysler, due 2010, payable in monthly installments of $10,745, interest ranging from 8-9%, collateralized by  6 units.		51,570		112,309
Note payable to Floyds, due 2010, payable in monthly installments of $2,664 with interest at 5.6% unsecured.		14,381		9,564
Note payable to General Motors, due November 2009, payable in monthly installments of $778, with interest at 8%, secured by a vehicle.		-		4,744
Note payable to Nissan Motors, due June 2011, payable in monthly installments of $505, with interest at 5.6%, secured by a vehicle.		12,044		15,278
Unsecured, non-interest bearing note payable to Colorado Holdings, due 2010, payable in monthly installments of $1,250.		674,058		32,690
Total	$	4,701,517	$	4,326,243

The carrying amount of Smith assets pledged as collateral for the installment notes payable totaled $3,338,077 (unaudited) and $3,067,624 at September 30, 2009 and March 31, 2009.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable (continued)

Notes payable owed by IFC (Parent) consisted of the following:

	September 30, 2009		March 31, 2009
	(Unaudited)
Note payable to lender, with interest rate of 9.9%, collateralized by assets of PlanGraphics with unamortized discount of $3,211.	$	44,789	$	44,789
Notes payable to lender, with interest rate of 9.9%, collateralized by assets of PlanGraphics and personally guaranteed by three stockholders and managers of the Company.		60,000		60,000
Note payable to Ford Credit, principal and 16.8% interest payment of $885 due monthly, collateralized by truck used by Stockholder.		39,666		41,472
Various notes payable with various due dates.  Interest rate of 9.9%. Warrants convertible between .40 and .50 per share. 100% warrant coverage.		112,186		-
Various notes payable with various due dates.  Interest rate of 9.9%. Warrants convertible  between .40 and .50 per share. 100% warrant coverage.		140,250		-
Notes payable to lender.  Interest rate of 9.9%. Warrants convertible at .40 per share. 100% warrant coverage.		25,000		-
Note payable to lender.  Interest rate of 8.0%.  The principal amount and all accrued and unpaid interest shall be due on May 15, 2010.		167,000
Discount on note payable
		(117,678)
Totals	$	471,213	$	146,261

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 6.              Notes Payable (continued)

Summary of notes payable:

			IFC
	Smith	Morris	(Parent)	Total
Current portion of notes payable
(Unaudited)	2,269,195	1,220,206	431,547	3,920,948
Notes payable, net of current portion
(Unaudited)	2,432,322	2,234,625	39,666	4,706,613
Total as of September 30, 2009
(Unaudited)	4,701,517	3,454,831	471,213	8,627,561
Current portion of notes payable
(Unaudited)	2,624,914	1,205,111	112,567	3,942,592
Notes payable, net of current portion
(Unaudited)	1,701,329	2,449,270	33,694	4,184,293
Total as of March 31, 2009
(Unaudited)	4,326,243	3,654,381	146,261	8,126,885

Note 7.              Notes Payable – Related Parties

Notes payable owed by the Company to related parties are as follows:

	September 30, 2009		March 31, 2009
	(Unaudited)
Note payable to related party, from acquisition described in note 11, to previous owner of Morris, with interest of 8%, secured by all shares of Morris common stock, principal and interest due October 31, 2009.	$	600,000	$	600,000
Notes payable to related party, from acquisition described in note 11, to previous owners of Smith, with interest of 8%, secured by all shares of Smith common stock, principal and interest due October 31, 2009.		250,000		250,000
8.5% note payable to previous owner, due on demand.		-		225,000
	$	850,000	$	1,075,000

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 8.              Shareholders’ Deficit

Common Stock

In May 2008, the Company issued 7,000,000 shares of its common stock to two persons who were its founders, a director and officer, and an officer and general counsel, at par value in exchange for work and services attendant to the organization of the Company.  The Company recorded $7,000 of expense on these shares.

In May and July 2008, in total, the Company issued 2,300,000 shares of common stock for various consulting services and recognized an expense of $230,000. The Company also sold 100,000 shares of common stock for $10,000.

In August 2008, the Company issued 825,000 shares of its common stock to the stockholders of Smith Systems Transportation, Inc. as part of a business combination (see Note 11).

In September 2008, the Company issued 3,000,000 shares of its common stock to the stockholders of Morris Transportation, Inc. as part of a business combination (see Note 11).

In November 2008 and January 2009, the Company issued 2,150,000 shares in consideration of receiving debt financing as described in Note 6.  The Company recorded $312,500 of deferred financing costs as a result of issuing these shares.  These deferred financing costs are amortized over the term of the debt.

In February 2009, the Company issued 105,000 shares of common stock for $0.10 per share. The Company issued 393,250 shares of common stock to the holder of a note payable by the Company in order to extend the maturity date of the note payable for 90 days.  The $39,325 value of the stock was recorded as interest expense.

In March 2009, the Company issued 1,375,000 shares of common stock for $137,500, less $12,500 in fees.  The Company also issued 400,000 shares of common stock as a finders’ fee to the companies that introduced the buyers to IFC.  The Company issued 150,000 shares of its common stock to the Chief Operating Officer upon execution of an employment agreement.  The stock’s fair market value of $15,000 was recognized as compensation expense.

In April 2009, the Company sold 150,000 shares of common stock for $15,000.  The Company issued 25,000 shares of common stock for consideration of releasing the Company from a merger clause in Tangiers agreement.  The stock’s fair market value of $2,500 was recognized as professional fees.

In May 2009, the Company issued 1,307,822 shares of common stock to purchase preferred shares of PlanGraphics.  The Company also issued 297,142 shares as a finder’s fee. The stock’s fair market value of $29,712 was recognized as professional fees.

In June 2009, the Company sold 420,000 shares to common stock for $87,000. The Company issued 850,000 share of common stock to an officer.  The stock’s fair market value of $85,000 was recognized as compensation expense.  The Company issued 342,854 shares of common stock as finder’s fees. The stock’s fair market value of $24,285 was recognized as professional fees.

In July 2009, the Company issued 75,000 shares of common stock for services to be rendered.  The stock’s fair market value of $7,500 was recognized as professional fees.

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INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 8.              Shareholders’ Deficit  (continued)

In September 2009, the Company issued 100,000 shares of common stock to two directors. The stock’s fair market value of $10,000 was recognized as compensation expense.

Warrants to Purchase Common Stock

The following is a summary of Warrants to Purchase Common Stock

In November 2008, the Company issued 325,000 common stock warrants as payment for an incentive to extend a senior subordinated secured debenture totaling $48,000. The warrants vested immediately, carry an exercise price of $0.10 and expire in 18 months.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.157 per share, or $51,025 in aggregate, in accordance with ASC 505 and ASC 718.  Stock-based compensation expense recognized is based on awards ultimately expected to vest and has been reduced for estimated forfeitures.  ASC 505 and ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

In January 2009, the Company issued 980,000 common stock warrants as incentive to purchase the Company’s debentures. The warrants vested immediately, carry an exercise price of $.01 and expire in five years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $88,200 in aggregate, in accordance with ASC 505 and ASC 718.

In March 2009, the Company issued 350,000 common stock warrants as payment for a finder’s fee. The warrants vested immediately, carry an exercise price of $.01 and expire in five years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $31,500 in aggregate, in accordance with ASC 505 and ASC 718.  Stock-based compensation expense recognized is based on awards ultimately expected to vest and has been reduced for estimated forfeitures.  ASC 505 and ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 In May 2009, the Company issued 560,000 common stock warrants as payment for a finder’s fee.  The warrants vested immediately, carry an exercise price of $.01 and expire in five years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $50,400 in aggregate, in accordance with ASC 505 and ASC 718. The Company also issued 32,500 common stock warrants as incentive to purchase the Company’s debentures. The warrants vested immediately, carry an exercise price of $.50 and expire in three years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $2,925 in aggregate, in accordance with ASC 505 and ASC 718.

In June 2009, the Company issued 86,500 common stock warrants as incentive to purchase the Company’s debentures. The warrants vested immediately, carry an exercise price of $.50 and expire in three years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $7,785 in aggregate, in accordance with ASC 505 and ASC 718.

In July 2009, the Company issued 84,750 common stock warrants as incentive to purchase the Company’s debentures. The warrants vested immediately, carry an exercise price of $.50 and expire in three years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $7,628 in aggregate, in accordance with ASC 505 and ASC 718.

F-73

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 8.              Shareholders’ Deficit (continued)

In September 2009, the Company issued 45,475 common stock warrants as incentive to purchase the Company’s debentures. The warrants vested immediately, carry an exercise price between $.40 and $.50, and expire in three years.  The Company’s common stock had no quoted market price on the date of issuance.  The Company valued the warrants at $.09 per share, or $4,093 in aggregate, in accordance with ASC 505 and ASC 718.

The fair value for the warrants was estimated at the date of valuation using the Black-Scholes option-pricing model with the following assumptions: 

Risk-free interest rate	1.38- 2.57%
Dividend yield	0.00%
Volatility factor	59.552%
Expected life	3.19 to 3.84 years

The relative fair value of the warrants, calculated in accordance with ASC 470-20, Debt with Conversion and Other Options; totaled $141,213 (unaudited) and $24,749, respectively.  The relative fair value of the warrants issued with the debenture has been charged to additional paid-in capital with a corresponding discount on the note payable.  The discount is amortized over the life of the debt. As the discount is amortized, the reported outstanding principal balance of the notes will approach the remaining unpaid value.   

A summary of the grant activity for the period  ended September 30, 2009, is presented below:

			Weighted
		Weighted	Average
	Stock Awards	Average	Remaining	Aggregate
	Outstanding	Exercise	Contractual	Intrinsic
	& Exercisable	Price	Term	Value
Balance, March 31, 2009	675,000	0.10	3.84 years	-
Granted	1,789,225	$      0.34	3.15 years	-
Exercised	-	N/A	N/A	N/A
Expired/Cancelled	-	N/A	N/A	N/A
Balance, September 30, 2009 (Unaudited)	2,464,225	$      0.29	3.15 years	$             -

As of September 30, 2009 and March 31, 2009, the number of warrants that were currently vested and expected to become vested was 2,464,225(unaudited) and 675,000.

F-74

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 9.              Commitments and Contingencies

Operating Leases

The Company leases office space in Sarasota, Florida under a one-year operating lease with two additional one-year extensions at the option of the Company.  The Company pays $695 per month, which increases to $770 per month in October 2009, if the Company elects to exercise its option for additional years under the lease.

Employment Agreements

The Company entered into three-year employment agreements with four executives of the Company.  The Company is committed to pay the executives a total of $590,000 per year, with certain guaranteed bonuses and increases.  The agreements also call for bonuses if the executives meet certain goals which are to be set by the board of directors.

Purchase Commitments

The Company’s purchase commitments for revenue equipment are currently under negotiation. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $300,000 and will be paid throughout 2010.

Contingency

In IFC’s note payable to Tangiers there is a requirement to develop a public market defined by having a ticker symbol on a trading market, by December 31, 2009.  If this does not occur Tangiers is entitled to a break-up fee of $100,000.

Note 10.                         Business Combinations

Smith Systems Transportation, Inc.

On August 28, 2008, the Company acquired 100% of the common stock of Smith Systems Transportation, Inc. (“Smith”), a Nebraska-based hazardous waste carrier, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was September 1, 2008, and the transaction was accounted for under the purchase method in accordance with ASC 805. Smith’s results of operations have been included in the consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $783,570, with a weighted average amortization period of 3 years.

F-75

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 10.                         Business Combinations (continued)

The aggregate purchase price was $332,500, including 825,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (825,000 shares)	$	82,500
Note payable		250,000
	$	332,500

The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

Cash	$	96,454
Accounts Receivable, Trade		1,913,282
Accounts Receivable, Officers		96,305
Prepayments		255,545
Other Current Assets		39,687
Net Property and Equipment		3,546,996
Employment contract and non-compete		525,000
Company operating authority		258,570
Total assets acquired		6,731,839
Bank overdraft		468,784
Accounts payable		136,048
Accrued liabilities and other current liabilities		321,943
Notes payable		5,187,786
Total liabilities assumed		6,114,561
Net assets acquired before minority interest		617,278
less Minority Interest		(284,778)
Net assets acquired	$	332,500

Contingent Consideration

As part of the Stock Exchange Agreement with Smith, if Smith does not maintain certain levels of profitability the note payable to Smith can be reduced by up to the full amount, $250,000, of the note.  The results of the payment contingency may affect the final valuation of the Morris acquisition, to be measured at the October 31, 2009, maturity date of the note.

F-76

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 10.                         Business Combinations (continued)

Morris Transportation, Inc.

On August 28, 2008, the Company acquired 100% of the common stock of Morris Transportation, Inc. (“Morris”), an Arkansas-based dry van truckload carrier, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was September 1, 2008, and the transaction was accounted for under the purchase method in accordance with ASC 805. Morris’ results of operations have been included in the consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $751,681, with a weighted average amortization period of 3 years.

The aggregate purchase price was $900,000, including 3,000,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (3,000,000 shares)	$	300,000
Note payable		600,000
	$	900,000

The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

Cash	$	58,252
Accounts Receivable, Trade		1,104,423
Net Property and Equipment		4,535,545
Intangible assets:
Employment and non-compete agreement		518,293
Company operating authority		233,388
Total assets acquired		6,449,901
Accounts payable		219,073
Accrued liabilities and other current liabilities		92,560
Notes payable		5,238,268
Total liabilities assumed		5,549,901
Net Assets Acquired	$	900,000

Note 10.                         Business Combinations (continued)

Contingent Consideration

As part of the Stock Exchange Agreement with Morris, if Morris does not maintain certain levels of profitability the amount of the note payable to Morris can be reduced by up to $250,000.  The results of the payment contingency may affect the final valuation of the Morris acquisition, to be measured at the October 31, 2009, maturity date of the note.

F-77

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 10.                         Business Combinations (continued)

Pro forma results

If the Company had purchased Morris and Smith at the date of inception (May 13, 2008) the results of operations would be as follow:

	IFC
	(Parent)	Smith	Morris	Total
Revenue	$               -	$    7,182,311	$     10,346,177	$     17,528,488
Operating Expenses
Rents and transportation	-	2,079,321	1,613,394	3,692,715
Wages, salaries & benefits	427,102	1,987,549	2,605,396	5,020,047
Fuel and fuel taxes	-	1,610,937	4,410,511	6,021,448
Depreciation and amortization	3,485	361,256	770,742	1,135,483
Insurance and claims	-	521,512	197,699	719,211
Operating taxes and licenses	-	118,511	78,799	197,310
General and administrative	187,325	738,553	440,411	1,366,289
Other operating expenses	190,810	1,739,832	1,487,652	3,418,294
Total Operating Expenses	617,912	7,417,639	10,116,953	18,152,504
Other Expenses	183,283	179,788	312,193	675,264
Net loss before minority interest	(801,195)	(415,116)	(82,969)	(1,299,280)
Minority interest share of subsidiary net income	-	(34,003)	-	(34,003)
Net loss	$   (801,195)	$     (449,119)	$         (82,969)	$    (1,333,283)

Note 11.                         Business Segment Information

The Company follows the provisions of FASB ASC 280, Segment Reporting, which established standards for the reporting of information about operating segments in annual and interim financial statements.  Operating segments are defined as components of an enterprise for which financial information is available that is evaluated regularly by the chief operating decision makers(s) in deciding how to allocate resources and in assessing performance.  The Company operates both of its subsidiaries (Morris Transportation and Smith Systems) as independent companies under separate management of their respective founders. Management of the Company makes decisions about allocating resources based on these operating segments. The following tables depict the information expected by FASB ASC 280:

F-78

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 11.                         Business Segment Information (continued)

	Revenue	Net Income(loss)	Total Assets
2009
IFC (Parent)	$                     -	$            (1,534,368)	$       3,185,385
Morris	5,407,832	95,755	3,127,742
Smith	3,424,799	(165,383)	4,971,165
	$      8,832,631	$            (1,603,996)	$     11,284,292
2008
IFC (Parent)	$                     -	$                (330,574)	$       3,425,566
Morris	1,061,143	150,307	6,015,960
Smith	794,646	18,846	4,349,789
	$      1,855,789	$                (161,421)	$     13,791,315

F-79

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 12.                         Subsequent Events

Effective December 24, 2009, the Company merged into PlanGraphics, Inc. (PGRA).

Prior to the merger, PGRA acquired approximately 94% of the issued and outstanding common shares of the Company in exchange for 1,807,842,696 shares of PGRA’s common stock. At the closing of the merger, the former shareholders of the Company owned approximately 94% of the outstanding common stock of the PGRA. For accounting purposes, this merger has been treated as a reverse acquisition and recapitalization of the Company, with PGRA the legal surviving entity.

Pursuant to an agreement in connection with the Company’s acquisition of control of PGRA on May 1, 2009, PGRA completed the sale of its historic operations to its former director and chief executive officer.  This transaction closed on December 27, 2009.  Since PGRA had, due to the sale of its historical operations, minimal assets and limited operations, the recapitalization has been accounted for as the sale of shares of the Company’s common stock for the net liabilities of PGRA. Therefore, the historical financial information prior to the date of the recapitalization is the financial information of the Company. Costs of the transaction have been charged to the period in which they are incurred.

Following are the terms of the merger agreement:

On December 24, 2009, PGRA filed articles of merger in the State of Florida; and, on December 23, 2009, PGRA filed articles of merger in the State of Colorado. Pursuant to these articles of merger, the Company merged into PGRA and PGRA is the legal surviving corporation.

F-80

INTEGRATED FREIGHT CORPORATION

Notes to Consolidated Financial Statements

Note 12.                         Subsequent Events (continued)

The Company acquired 401,559,467 shares of PGRA’s common stock, or 80.2 percent of PGRA’s issued and outstanding common stock, as of May 1, 2009, for the purpose of merging PGRA into the Company, with the Company being the surviving corporation. Uncertainty as to when the Company could obtain an effective registration statement on Form S-4 (which it filed and has now withdrawn) to complete the merger caused delays in the Company obtaining debt and equity funding and completing negotiations for additional acquisitions. On November 11, 2009, the Company and PGRA agreed to restructure the transaction to provide for PGRA’s acquisition of more than ninety percent of the Company’s issued and outstanding common stock and its merger into PGRA. Colorado corporation law permits the merger of a subsidiary company owned ninety percent or more by a parent company into the parent company without stockholder approval.

In furtherance of this change to the plan to combine the Company and PGRA, 20,228,246 shares of the Company’s outstanding common stock were transferred by its stockholders to Jackson L. Morris, trustee for The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”). The company also transferred the 401,559,467 shares of PGRA’s common stock it owned to the Trust. PGRA then exchanged 1,406,284,229 shares of its unissued common stock for the 20,228,246 shares of the Company held in the Trust. As a result of this transfer and exchange, the Trust now holds 1,807,842,696 of PGRA’s shares. The number of shares of PGRA’s common stock that it exchanged for the number of shares of the Company stock was not based on any financial or valuation considerations, but solely on the number of shares of PGRA’s authorized but unissued shares in relation to the percentage of the Company’s outstanding common stock included in the exchange and the requirements of Colorado law that PGRA own ninety percent or more of the Company in order to complete the merger without stockholder approval.

The Company avoided a contingent liability in the event it failed to develop a public market for its common stock no later than December 31, 2009.

The Company renegotiated its liabilities that were part of the transactions in which the Company acquired its two subsidiaries in August and September 2008.  These notes were renegotiated in the first half of 2010.  The Company is no longer in default on these liabilities. The terms to the agreement as follows:

(1)   The interest rate on the note is eight percent per annum.  The Company has paid $100,000 of the original principal amount of $600,000 has been reduced to $500,000 by the cash payment of $100,000 in January 2010.  Payments of the balance of the note are as follows:  $25,000 on February 18, 2010; $125,000 on April 20, 2010 and $350,000 on May 1, 2010.  Security for the note in stock of Morris was terminated.

(2)   The notes and accrued interest are convertible at the election of Mr. Morris into our common stock at $1 per share.  In the event the market price of our common stock is less than $1 per share one year after conversion, then Mr. Morris will be entitled to receive additional shares such that the aggregate market price of all shares received will equal the dollar amount converted into common stock.

(3)  The interest rate on the note is eight percent per annum.  The Company issued the note in lieu of cash payments we incurred at closing. This note represents an aggregate of a $150,000 cash payment and a $250,000 cash payment, both due by amendment on October 31, 2009, and is due on May 1, 2010.

(4)  The two notes have been consolidated with payments to be made as follows: $41,000-June 1, 2010; $100,000-September 1, 2010; $150,000-December 1, 2010; $250,000-February 1, 20111; and $400,000-May 1, 2011. 

(5)  Two notes of $125,000, one payable to Mr. Smith and the other payable to Ms. Smith, due by amendment on May 15, 2011.  The notes are secured by a pledge of the Smith Systems Transportation stock.

(6)   For the purpose of eliminating personal guaranties. At the present time, there is no deadline by which personal guaranties must be eliminate, as long as we are pursuing commercially reasonable mesa of doing so.

F-81

FINANCIAL STATEMENTS OF MORRIS TRANSPORTATION, INC.

(Predecessor Company)

		Page
Report of Independent Registered Public Accounting Firm at and for the years ended March 31, 2008 and 2007		F-83
Report of Independent Registered Public Accounting firm at and for the period ended August 31, 2008		F-84
Balance Sheets at August 31, 2008, March 31, 2008 and 2007		F-85
Statements of Operations for the five months ended August 31, 2008
	and years ended March 31, 2008 and 2007	F-86
Statement of Changes in Stockholder’s Equity
	for the period from April 1, 2006 through August 31, 2008	F-87
Statements of Cash Flows for the five months ended
	August 31, 2008 and years ended March 31, 2008 and 2007	F-88
Notes to Consolidated Financial Statements		F-89

F-82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder

Morris Transportation, Inc.

Hamburg, Arkansas

We have audited the accompanying balance sheets of Morris Transportation, Inc. as of March 31, 2008 and 2007, and the related statements of operations, changes in stockholders’ equity and cash flows for the years ended March 31, 2008 and 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Morris Transportation, Inc. as of March 31, 2008 and 2007, and the results of its operations and its cash flows for the years ended March 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

/s/ Cordovano and Honeck LLP

Cordovano and Honeck LLP

Englewood, Colorado

May 9, 2009

F-83

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder Morris

Transportation, Inc.

Hamburg, Arkansas

We have audited the accompanying balance sheet of Morris Transportation, Inc. as of August 31, 2008, and the related statements of operations, changes in stockholders’ equity and cash flows for the period from April 1, 2008 through August 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Morris Transportation, Inc. as of August 31, 2008, and the results of its operations and its cash flows for the period from April 1, 2008 through August 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/ Cordovano and Honeck LLP

Cordovano and Honeck LLP

Englewood, Colorado

September 9, 2009

F-84

Morris Transportation Inc.
Balance Sheets at March 31, 2008 and 2007 and August 31, 2008
				March 31,			August 31,
				2008		2007	2008
Assets
Current assets:
	Cash		$	78,436	$	69,792	$58,252
	Trade receivables, net of allowance for
		doubtful accounts of $-0-, -0-, and $-0-, respectively		918,840		1,270,432	$1,104,423
	Other current assets			37,661		36,982
		Total current assets		1,034,937		1,377,206	$1,162,675
Property and equipment, net of accumulated
	depreciation of $2,552,307, $1,749,700, and 2,918,388 respectively (Note 3)			5,005,351		5,263,056	$4,648,414
		Total assets	$	6,040,288	$	6,640,262	$5,811,089
Liabilities and Stockholder’s Equity
Current liabilities:
	Accounts payable		$	77,855	$	113,716	$219,073
	Note payable - related party (Note 4)			225,000		0	$225,000
	Current portion of notes payable (Note 5)			1,203,995		1,318,108	$1,282,896
	Line of credit (Note 5)			744,200		680,138	$853,728
	Other current liabilities			60,697		128,761	$92,560
		Total current liabilities		2,311,747		2,240,723	$2,673,257
Long term debt:
	Note payable, less current portion (Note 5			3,293,094		3,558,033	$2,876,644
		Total liabilities		5,604,841		5,798,756	$2,876,644
Commitments and contingencies (Note 7				—		—
Stockholder’s equity (Note 6):
	Common stock, $1.00 par value; 1,000 shares authorized,
		200 shares issued and outstanding at March 31, 2008 and March 31, 2007		200		200	$200
	Retained earnings			435,247		841,306	$260,988
		Total stockholder’s equity		435,247		841,506	$261,188
		Total liabilities and stockholder’s equity	$	6,040,288	$	6,640,262	$5,811,089

F-85

Morris Transportation Inc.
Statements of Operations for the years ended
March 31, 2008 and 2007
And the five month period ended August 31, 2008
				Years Ended March 31,				Five Months Ended
				2008		2007		August 31, 2008
Operating revenues, including fuel surcharges and rental			$	12,363,823	$	11,918,175	$	5,628,352
Operating expenses:
	Rents and purchased transportation			3,626,272		3,801,066		1,003,769
	Salaries, wages and employee benefit			3,122,724		2,781,105		1,429,191
	Fuel and fuel taxes			3,576,765		3,581,861		2,446,291
	Depreciation and amortization			899,267		818,235		366,071
	Insurance and claims			392,418		292,474		55,385
	Operating taxes and licenses			115,153		68,563		39,310
	General and administrative expenses			222,095		159,392		261,007
		Total operating expenses		11,954,694		11,502,696		5,601,024
		Operating income		409,129		415,479		27,328
Other income/(expense):
	Interest expense			(378,135)		(261,154)		(159,983)
	Loss on disposition of equipment			(71,387)		(119,125)
		Total other income/(expense)		(449,522)		(380,279)		(159,983)
		Loss before income taxes		(40,393)		35,200		(132,655)
Provision for income taxes				—		—
		Net loss	$	(40,393)	$	35,200	$	(132,655)
Pro forma adjustments (Note 1):
	Officer/shareholder distributions			140,666		234,707		57,649
	Income taxes			(46,000)		(89,000)		(20,177)
		Pro forma net loss	$	54,273	$	180,907	$	(95,183)

F-86

Morris Transportation Inc.
Statement of Changes in Stockholder’s Equity
for the period from April 1, 2006 through August 31, 2008
	Common Stock				Retained
	Shares		Par Value		Earnings		Total
Balance at April 1, 2006	200	$	200	$	1,040,813	$	1,041,013
Owner distributions	—		—		(234,707)		(234,707)
Net income	—		—		35,200		35,200
Balance at March 31, 2007	200		200		841,306		841,506
Owner distributions	—		—		(365,666)		(365,666)
Net income	—		—		(40,393)		(40,393)
Balance at March 31, 2008	200	$	200	$	435,247	$	435,247
Owner distributions					(57,649)		(57,649)
Net income					(132,655)		(132,655)
Balance at August 31, 2008	200		200		244,943		244,943

F-87

Morris Transportation Inc.
Statements of Cash Flows for the years ended
March 31, 2008 and 2007
and for the five month period ended August 31, 2008
										Years Ended March 31,				Five Months Ended
										2008		2007		August 31, 2008
Cash flows from operating activities:
	Net loss								$	(40,393)	$	35,200	$	(132,655)
	Adjustments to reconcile net income to net cash
		used by operating activities:
			Depreciation and amortization							899,267		818,235		366,071
			Loss on asset dispositions							71,387		119,125		0
			Changes in operating assets and liabilities:
				(Increase)/decrease in accounts receivable						351,592		(38,386)		(185,583)
				(Increase)/decrease in other current assets						(679)		(10,799)		37,661
				Increase/(decrease) in accounts payable						(35,861)		59,110		173,081
				Increase/(decrease) in other current liabilities						(68,064)		17,383		109,528
						Net cash provided by (used in)
								operating activities		1,177,249		999,868		368,103
Cash flows from investing activities:
	Acquisitions of property and equipment									(712,949)		(1,734,452)		(9,144)
					Net cash provided by (used in)
							investing activities			(712,949)		(1,734,452)		(9,144)
Cash flows from financing activities:
	Proceeds from notes payable									225,000		948,233		1,367
	Repayment of notes payable									(314,990)		—		(322,861)
	Distributions paid to common shareholders									(365,666)		(234,707)		(57,649)
					Net cash provided by (used in)
							financing activities			(455,656)		713,526		(379,143)
					Net change in cash					8,644		(21,058)		(20,184)
Cash, beginning of year										69,792		90,850		78,436
Cash, end of year									$	78,436	$	69,792	$	58,252
Supplemental disclosure of cash flow information:
	Cash paid during the year for:
		Income taxes							$	—	$	—	$	—
		Interest							$	378,135	$	261,154	$	159,983

F-88

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007and August 31, 2008

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

Morris Transportation, Inc. (an Arkansas corporation) and subsidiaries (the “Company”) is a closely held S corporation operating as a short to medium-haul truckload carrier of dry van materials headquartered in Hamburg, Arkansas.. The Company also has service centers located throughout the United States. The Company is subject to regulation by the Department of Transportation, OSHEA and various state regulatory authorities.

Note 2.Uses of Estimates

The financial statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes. The Company evaluates these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods the Company considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from estimates.

The Company believes that certain accounting policies and estimates are of more significance in its financial statement preparation process than others. The Company believes the most critical accounting policies and estimates include the economic useful lives and salvage values of  assets, provisions for uncollectible accounts receivable, and estimates of exposures under the Company's insurance and claims plans. To the extent that actual, final outcomes are different than the Company's estimates, or additional facts and circumstances cause us to revise the Company's estimates, its earnings during that accounting period will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2008 and the period ended August 31, 2008.

Accounts Receivable Allowance

The Company trade accounts receivable includes accounts receivable from brokers and the various clients for whom the Company offer its for-hire transportation services. The Company has experienced minimal losses from the Company's inability to collect bad debts and accordingly, the Company has not made any allowances for uncollectible accounts and revenue adjustments as of March 31, 2008 and the period ended August 31 2008.

Impairment of Long-lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of March 31, 2008 and the period ended August 31, 2008.

F-89

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007and August 31, 2008

Revenue Recognition

The Company recognizes revenues on the date the shipments are delivered to the customer.  Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.  Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as the Company acts as a principal with substantial risks as primary obligor.

Advertising Costs

The Company charges advertising costs to expense as incurred. During the years ended March 31, 2008 and 2007, and period ended August 31, 2008 advertising expense was approximately $5,000 and $5,000, $2000 respectively.

Income Taxes

Income Taxes and Related Pro Forma Adjustments

The Company elects to be taxed as an S corporation. As such, there is no provision for income taxes in the accompanying financial statements. As an S corporation, the Company makes distributions to the Company's shareholders annually and charge those distributions to retained earnings.

The accompanying statements of income include pro forma adjustments to reflect as salaries distributions to shareholders and to reflect an estimated provision for income taxes. The effective income tax rate used on the pro forma adjustments is that estimated had the Company been a C corporation.

Stock-based Compensation

The Company has not issued any further stock since inception, but would apply the fair value recognition provisions of Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards, Share-Based Payment, or SFAS No. 123(R), using the modified prospective application method. Under SFAS No. 123R, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, include cash and trade receivables. For the years ended March 31, 2008 and 2007, and the period ended August 31, 2008 the Company's top four customers, based on revenue, accounted for approximately 40% and 36% and 38%, of total revenue, respectively. The Company's top four customers, based on revenue, accounted for approximately 30% and 26% and 29% of the Company's total trade accounts receivable at March 31, 2008 and 2007, and the period ended August 31, 2008 respectively.

Financial instruments with significant credit risk include cash. The Company deposits its cash with high quality financial institutions in amounts less than the federal insurance limit of $250,000 in order to limit credit risk. As of March 31, 2008, and the period ended August 31, 2008 the Company’s bank deposits did not exceeded insured limits.

F-90

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007and August 31, 2008

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. At March 31, 2008, and the period ended August 31, 2008 the Company has $5,097,699 and $ 5,004,227 respectively outstanding under promissory notes with various lenders. The fair value of notes payable to various lenders is based on current rates at which the Company could borrow funds with similar remaining maturities.

Claims Accruals

Losses resulting from personal liability, physical damage, workers’ compensation, and cargo loss and damage are covered by insurance subject to deductible, per occurrence. Losses resulting from uninsured claims are recognized when such losses are known and can be estimated. The Company estimates and accrues a liability for the Company's share of ultimate settlements using all available information. The Company accrues for claims reported, as well as for claims incurred but not reported, based upon past experience. Expenses depend on actual loss experience and changes in estimates of settlement amounts for open claims which have not been fully resolved. These accruals are based on evaluation of the nature and severity of the claim and estimates of future claims development based on historical trends. Insurance and claims expense will vary based on the frequency and severity of claims and the premium expense. At March 31, 2008, and the period ended August 31, 2008 management estimated $-0- in claims accrual.

Earnings per Share

The Company calculates earnings per share in accordance with SFAS No. 128, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. The Company has no warrants or stock option plan that would be dilutive. At March 31, 2008, and the period ended August 31, 2008 there was no effect between the basic and diluted loss per share.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in accordance with accounting principles generally accepted in the United States. This statement will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”  The Company does not expect the adoption of SFAS No. 162 to have a material impact on the Company’s financial condition, results of operations, and disclosures.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). This standard revises the presentation of and requires additional disclosures to an entity’s derivative instruments, including how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect its financial position, financial performance and cash flows. The provisions of SFAS No. 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of adopting of SFAS No. 161 on its consolidated financial statements.

F-91

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007and August 31, 2008

In December 2007, the FASB issued SFAS No. 160, No controlling Interests in Consolidated Financial Statements – an Amendment of ARB 51 (“SFAS No. 160”). This statement amends ARB 51 and revises accounting and reporting requirements for no controlling interests (formerly minority interests) in a subsidiary and for the deconsolidation of a subsidiary. Upon the adoption of SFAS No. 160 on April 1, 2009, any no controlling interests will be classified as equity, and income attributed to the no controlling interest will be included in the Company’s income. The provisions of this standard are applied retrospectively upon adoption.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, (“SFAS No. 141(R)”). SFAS No. 141(R) clarifies and amends the accounting guidance for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any no controlling interest in the acquire. The provisions of SFAS No. 141(R) are effective for the Company for any business combinations occurring on or after January 1, 2009.

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, which amends SFAS No. 140, to require additional disclosures about transfers of financial assets. The FSP also amended FASB Interpretation No. 46(R), to provide additional disclosures about entities’ involvement with variable interest entities. The FSP’s scope is limited to disclosure only and is not expected to have an impact on the Company’s consolidated financial position or results of operations.

Note 3. Property and Equipment

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated on the straight-line method over the following estimated useful lives:

	Years
Land improvements	7- 10
Buildings / improvements	20 – 30
Furniture and fixtures	3 – 5
Shop and service equipment	2 – 5
Revenue equipment	3-5
Leasehold improvements	1 – 5

The Company expenses repairs and maintenance as incurred. The Company periodically reviews the reasonableness of its estimates regarding useful lives and salvage values for revenue equipment and other long-lived assets based upon, among other things, the Company’s experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Salvage values are typically 3% to 6% for tractors and trailing equipment and consider any agreements with tractor suppliers for residual or trade-in values for certain new equipment. The Company capitalizes tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service. Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition.

F-92

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007, and August 31, 2008

Property and equipment consist of the following at March 31, 2008 and 2007, and August 31, 2008:

	March 31,
	2008			2007
Cost	$	7,557,658	$	7,012,756
Accumulated Depreciation		(2,552,307)		(1,749,700)
Net Carrying Value	$	5,005,351	$	5,263,056

Depreciation Expense for the years ended March 31, 2008 and 2007, and the period ended August 31, 2009 was $899,267 and $818,235, and $366,071 respectively.

Note 4. Note Payable - Related Parties

Notes payable owed by the Company to related parties at March 31, 2008 and the period ended August 31, 2008 is as follows:

8.5% note payable to shareholder, due on demand	$	225,000	$	225,000
	$	225,000	$	225,000

Note 5. Notes Payable

Line of credit with interest rate of 8.5%, $800,000 limit, secured by company receivables maturing August 2008	$744,200	$853,728
Various notes payable to Chrysler Financial payable in monthly installments ranging from $569 to $5,687 including interest through May 2013 with interest rate ranging from 5.34% to 8.07% secured by equipment	$2,376,667	$2,388,994
Various notes payable to First Continental Bank payable in monthly installments ranging from $1,805 to $5,829 including interest through June 2010 with interest rate ranging from 5.9% to 7.25% secured by equipment	$179,028	$147,502
Various notes payable to GE Financial payable in monthly installments ranging from $2,999 to $7,535 including interest through April 2013 with interest rate ranging from 6.69% to 8.53% secured by equipment	$1,726,436	$1,401,891
6.9% note payable to a GMAC Financial in installments of $667 including interest, through August 2013 secured by a vehicle	$15,112	$12,266
8.59% note payable to a Wells Fargo Bank payable in monthly installments of $4,271 including interest, through October 2011 secured by equipment	$199,846	$199,846
The carrying amount of assets pledged as collateral for the installment notes payable totaled $4,371,885 at December 31, 2008		$5,004,227

F-93

Morris Transportation Inc.

Notes to Financial Statements

March 31, 2008 and 2007, and August 31, 2008

Note 6. Shareholder’s Equity

Common Stock

The Company has not issued any of its common stock or granted any options or warrants since inception.

Note 7. Commitments and Contingencies

Operating Leases

The Company has no office space under non-cancellable lease agreements. The Company only has informal month to month leases.

The Company leases vehicles and trailers under various non-cancelable operating leases expiring through November 2009. Vehicle and trailer lease expense for the period ended December 31, 2008 totaled $209,975

Purchase Commitments

The Company’s purchase commitments for revenue equipment are currently under negotiation. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $300,000 and will be paid throughout 2010.

Claims and Assessments

The Company is involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, the Company believes the resolution of these claims and pending litigation will not have a material adverse effect on the Company's financial condition, results of operations or liquidity.

Contingent Consideration

The Company has no contingent liabilities at this time.

Note 8.Subsequent Events

On August 28, 2008, all of the Company’s stock was acquired by Integrated Freight Systems, Inc. (“IFG”), a Florida-based company under the terms of a Stock Exchange Agreement, resulting in a change in control. The accounting date of the acquisition was September 1, 2008 and the transaction was accounted for under the purchase method in accordance with SFAS 141.

F-94

FINANCIAL STATEMENTS OF SMITH SYSTEMS TRANSPORTATION, INC.

(Predecessor Company)

		Page
Report of Independent Registered Public Accounting Firm at and for the years ended March 31, 2008 and 2007		F-96
Report of Independent Registered Public Accounting Firm at and for the period ended August 31, 2008		F-97
Consolidated Balance Sheets at August 31, 2008, March 31, 2008 and 2007		F-98
Consolidated Statements of Operations for the five months ended August 31, 2008
	and years ended March 31, 2008 and 2007	F-99
Consolidated Statement of Changes in Stockholder's Equity/(Deficit)
	for the period from April 1, 2006 through August 31, 2008	F-100
Consolidated Statements of Cash Flows for the five months ended
	August 31, 2008 and years ended March 31, 2008 and 2007	F-101
Notes to Consolidated Financial Statements		F-102

F-95

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Smith Systems Transportation, Inc.

Scottsbluff, Nebraska

We have audited the accompanying consolidated balance sheets of Smith Systems Transportation, Inc. as of March 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years ended March 31, 2008 and 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smith Systems Transportation, Inc. as of March 31, 2008 and 2007, and the results of their operations and cash flows for the years ended March 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

/s/ Cordovano and Honeck LLP

Cordovano and Honeck LLP

Englewood, Colorado

May 9, 2009

F-96

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Smith Systems Transportation, Inc.

Scottsbluff, Nebraska

We have audited the accompanying consolidated balance sheet of Smith Systems Transportation, Inc. as of August 31, 2008, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the period from April 1, 2008 through August 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smith Systems Transportation, Inc. as of August 31, 2008, and the results of their operations and cash flows for the period from April 1, 2008 through August 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/  Cordovano and Honeck LLP

Cordovano and Honeck LLP

Englewood, Colorado

September 9, 2009

F-97

Smith Systems Transportation Inc.
Consolidated Balance Sheets at March 31, 2008 and 2007, and August 31, 2008
						March 31,
						2008		2007	August 31, 2008
Assets
Current assets:
	Cash				$	356	$	46,926	96,454
	Trade receivables, net of allowance for
			doubtful accounts of $-0- and $-0-, respectively			1,775,854		2,713,436	2,009,274
	Other receivables					109,189		155,438
	Prepaid expenses					405,380		532,976	255,545
	Other current assets					40,947		81,665	—
				Total current assets		2,331,726		3,530,441	2,361,273
Property and equipment, net of accumulated
		depreciation of $3,041,567, $3,173,875, and 3,261,177 respectively (Note 3)				2,157,471		2,867,722	1,917,881
Other assets						—		64	40,000
				Total assets	$	4,489,197	$	6,398,227	4,319,154
Liabilities and Stockholders' Equity/(Deficit)
Current liabilities:
	Bank overdraft				$	264,529		101,968	468,784
	Accounts payable					212,633		226,684	136,051
	Current portion of notes payable (Note 4)					1,162,935		3,249,946	3,404,261
	Current portion of capital lease obligations (Note 5)					34,612		32,223
	Accrued liabilities					304,916		351,405	321,943
				Total current liabilities		1,979,625		3,962,226	4,331,039
Long term debt:
	Earned escrow					106,051		277,219	—
	Note payable, less current portion (Note 4)					3,934,616		2,237,254	1,783,525
	Capital lease obligations, less current portion (Note 5)					—		34,611
		Total liabilities				6,020,292		6,511,310	6,114,564
Commitments and contingencies (Note 8)						—		—
Minority interest (Note 9)						303,392		265,566	284,778
Stockholders' equity/(deficit) (Note 7):
	Common stock, $10.00 par value; 1,000 shares authorized,
		100 and 100 shares issued and outstanding, respectively				1,000		1,000	1,000
	Additional paid-in capital					30,036		30,036	30,036
	Retained earnings					(1,865,523)		(409,685)	(2,111,224)
				Total stockholders' equity/(deficit)		(1,834,487)		(378,649)	(2,080,188)
				Total liabilities and stockholders' equity/(deficit)	$	4,489,197		6,398,227	4,319,154

F-98

Smith Systems Transportation Inc.
Consolidated Statements of Operations for the years ended
March 31, 2008 and 2007, and August 31, 2008
				Years Ended March 31,
				2008		2007		August 31, 2008
Operating revenues, including fuel surcharges and rentals			$	12,557,762	$	15,232,314	$	4,203,117
Operating expenses:
	Rents and purchased transportation			7,316,521		9,436,439		1,266,949
	Salaries, wages and employee benefits			2,509,202		2,547,178		971,195
	Fuel and fuel taxes			1,924,647		1,658,548		1,157,531
	Depreciation and amortization			543,010		572,799		219,610
	Insurance and claims			779,176		849,979		208,357
	Operating taxes and licenses			146,602		144,990		35,565
	General and administrative expenses			932,779		586,546		360,297
		Total operating expenses		14,151,937		15,796,479		4,219,504
		Operating income		(1,594,175)		(564,165)		(16,387)
Other income/(expense):
	Interest income			594		4,123		—
	Interest expense			(279,162)		-359,338		(297,014)
	Gain on disposition of equipment			56,121		60,729		—
	Other income			415,994		769,447		83,088
		Total other income/(expense)		193,547		474,961		(213,926)
		Loss before minority interest		(1,400,628)		(89,204)		(230,313)
Minority interest				(55,210)		(128,655)		(15,388)
		Net loss	$	(1,455,838)	$	(217,859)	$	(245,701)
F-99

Smith Systems Transportation Inc.
Consolidated Statement of Changes in Stockholder's Equity/(Deficit)
for the period from April 1, 2006 through August 31, 2008
					Additional
	Common Stock				Paid-in		Retained
	Shares		Par Value		Capital		Earnings		Total
Balance at April 1, 2006	100	$	1,000	$	30,036	$	(141,826)	$	(110,790.00)
Owner distributions	—		—		—		(50,000)		(50,000.00)
Net income	—		—		—		(217,859)		(217,859.00)
Balance at March 31, 2007	100		1,000		30,036		(409,685)		(378,649.00)
Net income	—		—		—		(1,455,838)		(1,455,838.00)
Balance at March 31, 2008	100	$	1,000	$	30,036	$	(1,865,523)	$	(1,834,487.00)
Net Income	---		---		---		(245,701)		(245,701.00)
Balance at August 31, 2008	100		1,000		30,036		(2,111,224)		(2,080,188.00)

F-100

Smith Systems Transportation Inc.
Consolidated Statements of Cash Flows for the years ended
March 31, 2008 and 2007, and August 31, 2008
											Years Ended March 31,			August 31, 2008
											2008		2007
Cash flows from operating activities:
	Net loss									$	(1,455,838)	$	(217,859)	(245,701)
	Adjustments to reconcile net income to net cash
			used by operating activities:
					Depreciation and amortization						543,010		572,799	219,610
					Gain on asset dispositions						(56,121)		(60,729)	—
					Minority interest in earnings of subsidiary						55,210		128,655	15,388
					Changes in operating assets and liabilities:
						(Increase)/decrease in accounts receivable					937,582		(92,386)	(124,231)
						(Increase)/decrease in prepaid expenses					127,596		3,562	135,823
						(Increase)/decrease in other current assets					40,718		(364)	947
						Increase/(decrease) in bank overdraft					162,561		(95,830)	204,255
						Increase/(decrease) in accounts payable					(14,051)		5,560	(76,582)
						Increase/(decrease) in other current liabilities					59,562		27,480	2,223,741
						Increase/(decrease) in earned escrow					(277,219)		277,113	(106,051)
								Net cash provided by (used in) operating activities			123,010		548,001	2,247,199
Cash flows from investing activities:
	Acquisitions of property and equipment										(113,945)		—	—
	Proceeds from asset dispositions										337,307		72,738	—
	Collection of Accounts Receivable, Officer										46,249		18,316	—
	Other										64		—	—
							Net cash provided by (used in) investing activities				269,675		91,054	—
Cash flows from financing activities:
	Proceeds from notes payable										4,392,975		2,604,198
	Repayment of notes payable										(4,814,846)		(3,078,401)	(2,151,091)
	Distributions paid to common shareholders										—		(50,000)	—
	Distributions paid to minority interest										(17,384)		(68,326)	—
							Net cash provided by (used in)
									financing activities		(439,255)		(592,529)	(2,151,091)
							Net change in cash				(46,570)		46,526	96,108
Cash, beginning of year											46,926		400	346
Cash, end of year										$	356	$	46,926	96,454
Supplemental disclosure of cash flow information:
		Cash paid during the year for:
				Income taxes						$	—	$	—
				Interest						$	694,564	$	968,129	297,014

F-101

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007and  August 31, 2008

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

Smith Systems Transportation (a Nebraska corporation) and subsidiaries (the “Company”) is a closely held corporation operating as a short to medium-haul truckload carrier of hazardous waste headquartered in Scottsbluff, Nebraska. The Company also has service centers located throughout the United States.  The Company is subject to regulation by the Department of Transportation, OSHEA and various state regulatory authorities.

Principles of Consolidation

The consolidated financial statements include the financial statements of Smith Systems Transportation, Inc. (“Smith”). Smith holds a 60% ownership interest in SST Financial Group, LLC (“SSTFG”). All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.

Use of Estimates

The financial statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America.  The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes.  The Company evaluates these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods the Company considers reasonable in the particular circumstances.  Nevertheless, the Company's actual results may differ significantly from the Company's estimates.

The Company believes that certain accounting policies and estimates are of more significance in the Company's financial statement preparation process than others.  The Company believes the most critical accounting policies and estimates include the economic useful lives and salvage values of the Company's assets, provisions for uncollectible accounts receivable, and estimates of exposures under the Company's insurance and claims plans.  To the extent that actual, final outcomes are different than the Company's estimates, or additional facts and circumstances cause the Company to revise the estimates, the earnings during that accounting period will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2008, and the period ended August 31, 2008.

Accounts Receivable Allowance

The Company's trade accounts receivable includes accounts receivable from brokers and the various clients for whom the Company offers its for-hire transportation services. The Company has experienced minimal losses from its inability to collect bad debts and accordingly, the Company has not made any allowances for uncollectible accounts and revenue adjustments as of March 31, 2008 and the period ended August 31, 2008.

F-102

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007 and August 31, 2008

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated on the straight-line method over the following estimated useful lives:

	Years
Land improvements	7- 10
Buildings / improvements	20 - 30
Furniture and fixtures	3 – 5
Shop and service equipment	2 – 5
Revenue equipment	3-5
Leasehold improvements	1 – 5

The Company expenses repairs and maintenance as incurred. The Company periodically reviews the reasonableness of its estimates regarding useful lives and salvage values for revenue equipment and other long-lived assets based upon, among other things, the Company's experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Salvage values are typically 3% to 6% for tractors and trailing equipment and consider any agreements with tractor suppliers for residual or trade-in values for certain new equipment.  The Company capitalizes tires placed in service on new revenue equipment as a part of the equipment cost.  Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service.  Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition.

Impairment of Long-lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of March 31, 2008 and the period ended August 31, 2008.

Revenue Recognition

The Company recognizes revenues on the date the shipments are delivered to the customer.  Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.  Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as the Company acts as a principal with substantial risks as primary obligor.

Advertising Costs

The Company charges advertising costs to expense as incurred. During the years ended March 31, 2008 and 2007, and the period ended August 31, 2008 advertising expense was approximately $5,000 and $5,000, and $2,000respectively.

F-103

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007and August 31, 2008

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. 

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

Stock-based Compensation

The Company has not issued any further stock since inception, but would apply the fair value recognition provisions of Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards, Share-Based Payment, or SFAS No. 123(R), using the modified prospective application method. Under SFAS No. 123R, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, include cash and trade receivables.  For the years ended March 31, 2008 and 2007, and the period ended August 31, 2008 the Company's top four customers, based on revenue, accounted for approximately 40% and 26% and 32%, of total revenue, respectively.

Financial instruments with significant credit risk include cash. The Company deposits its cash with high quality financial institutions in amounts less than the federal insurance limit of $250,000 in order to limit credit risk. As of March 31, 2008, and the period ended August 31, 2008 the Company's bank deposits did not exceeded insured limits.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. At March 31, 2008, and the period ended August 31, 2008 the Company had $5,097,551 and $5,370,166 outstanding under promissory notes with various lenders. The fair value of notes payable to various lenders is based on current rates at which the Company could borrow funds with similar remaining maturities.

F-104

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007 and August 31, 2008

Claims Accruals

Losses resulting from personal liability, physical damage, workers' compensation, and cargo loss and damage are covered by insurance subject to deductible, per occurrence. Losses resulting from uninsured claims are recognized when such losses are known and can be estimated. The Company estimates and accrues a liability for its share of ultimate settlements using all available information. The Company accrues for claims reported, as well as for claims incurred but not reported, based upon its past experience. Expenses depend on actual loss experience and changes in estimates of settlement amounts for open claims which have not been fully resolved. These accruals are based on the Company's evaluation of the nature and severity of the claim and estimates of future claims development based on historical trends. Insurance and claims expense will vary based on the frequency and severity of claims and the premium expense. At March 31, 2008, and the period ended August 31, 2008 management estimated $-0- in claims accrual.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”).  SFAS No. 162 identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in accordance with accounting principles generally accepted in the United States.  This statement will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”  The Company does not expect the adoption of SFAS No. 162 to have a material impact on the Company’s financial condition, results of operations, and disclosures.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”).  This standard revises the presentation of and requires additional disclosures to an entity’s derivative instruments, including how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect its financial position, financial performance and cash flows.  The provisions of SFAS No. 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  The Company is currently evaluating the impact of adopting of SFAS No. 161 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB 51 (“SFAS No. 160”).  This statement amends ARB 51 and revises accounting and reporting requirements for noncontrolling interests (formerly minority interests) in a subsidiary and for the deconsolidation of a subsidiary.  Upon the adoption of SFAS No. 160 on April 1, 2009, any noncontrolling interests will be classified as equity, and income attributed to the noncontrolling interest will be included in the Company’s income.  The provisions of this standard are applied retrospectively upon adoption.  

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, (“SFAS No. 141(R)”).  SFAS No. 141(R) clarifies and amends the accounting guidance for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree.  The provisions of SFAS No. 141(R) are effective for the Company for any business combinations occurring on or after January 1, 2009.

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, which amends SFAS No. 140, to require additional disclosures about transfers of financial assets.  The FSP also amended FASB Interpretation No. 46(R), to provide additional disclosures about entities’ involvement with variable interest entities.  The FSP’s scope is limited to disclosure only and is not expected to have an impact on the Company's consolidated financial position or results of operations.

F-105

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007and August 31, 2008

Note 2. Related Party Transactions

From time to time, the company’s 60% owned subsidiary Smith Systems Financial Group advances operating capital to the parent to accommodate operating cash deficiencies. As of March 31, 2008, and the period ended August 31, 2008 SST Financial had advanced $1,034,857 and $1,274,518. These advances are repaid when availability of funds from the parent company are received. There are no terms on these advances and are eliminated in the presentation of consolidated statements.

Note 3. Property and Equipment

Property and equipment consist of the following at March 31, 2008 and the period ended August 31, 2008:

	SST		SST Financial		Consolidated
	March  31	August 31	March31	August 31	March 31	August 31
Property Plant and Equipment	5,189,058	5,189,058	9,980	9,980	5,199,038	5,199,038
Less: accumulated depreciation)	(3,033,084)	(3,252,694)	(8,483)	8,483	(3,041,567)	(3,261,177)
Total	2,155,974	1,936,364	1,497	1,497	2,157,471	1,937,861

Depreciation expense totaled $543,010 and $ 572,799, and $219,610 respectively, for the years ended March 31, 2008 and 2007 and the period ended August 31, 2008.

Note 4. Notes Payable

Notes payable owed by Smith consisted of the following as of March 31, 2008 and the period ended August 31, 2008 respectively:

Notes payable to bank, due Dec 2012, payable in monthly installments of $65,000.00 @ 9% collateralized by substantially all of the Company's assets	... $2,692,667	... $2,939,447
Various notes payable to the bank for revolving credit, due May 2009, with monthly interest payments with interest at 9% collateralized by substantially all of the Company's assets	$1,874,490	$2,357,890
Note payable to Platte Valley National Bank, due Dec 2010, payable in monthly installments of $1422.57, with interest at 9.5% collateralized by one unit #525	$   41,393	$–
Various notes payable to Daimler Chrysler, due 2010, payable in monthly installments of $10,745.41, ranging from 8-9%, collateralized by 6 units	$222,010	$127,587
One parts note payable to Floyds, due 2010, payable in monthly installments of $2663.81, with interest at 8.5% unsecured	$136,340	$9,564
One note payable to General Motors Acceptance Corp, due November 2009, payable in monthly installments of $778.12, with interest at 8%, secured by a vehicle	$14,081	$4,744
One note payable to Nissan Motor Corp., due June 2011, payable in monthly installments of $505.35, with interest at 36.9%, secured by a vehicle.	$  20,380	$15,278
One Note payable to Colorado Holdings Company, payable in 2 monthly payments of $1250.00 each, this Note has not interest rate and is unsecured	$65,190	$32,690
One note payable to Arvada Land & Development, due September 2008, payable in monthly installments of $2500.00	$31,000	$–
Totals	$5,097,551	$5,487,200

F-106

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007and August 31 2008

The carrying amount of assets pledged as collateral for the installment notes payable totaled $4,463,485 and $5,444,946  at March 31, 2008 and August 31, 2008 respectively.

Note 5. Capital Lease Obligations

The Company leases operating equipment under a capital lease which expires in March, 2009. Information concerning the capital lease is as shown in the tables below.

	March 31
	2008		2007		August 31, 2008
Cost	$	223,617	$	223,617	$	223,617
Accumulated Depreciation		(89,446)		(67,085)		(98,763)
Net Book Value	$	134,171	$	156,532	$	124,854

The above are included in Property, Plant, and Equipment on the Balance Sheet at March 31, 2008 and 2007 and the period ended August 31, 2008 respectively.

Minimum future lease payments under this lease are as follows:

	March 31
	2008		2007
2008	$	–	$	35,964
2009		35,964		35,964
		35,964		71,928
Less Amount Representing Interest		(1,352)		(5,094)
Capital Lease Obligation	$	34,612	$	66,834

The above debt amounts are included in the Balance Sheet in the respective short-term and long-term capital lease obligations at March 31, 2008 and 2009, respectively.

Note 6 - Income Taxes

The Company accounts for income taxes under SFAS 109, which requires use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

F-107

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007and August 31,  2008

Deferred tax assets and liabilities at the end of each period are determined using the currently effective tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. The reconciliation of enacted rates the years ended March 31, 2008 and March 31, 2007, and the period ended August 31, 2008 is as follows:

	March 31,
	2008	2007	August 31,2008
Federal	34%	34%	34%
State	0%	0%	0%
Net operating loss carryforward	-	-
Increase in valuation allowance	(34%)	(34%)	(34%)
	-	-

At March 31, 2008,  and August 31, 2008 the Company had a net operating loss carry forward of approximately $2,495,205.00 and $2,740,906 respectively that may be offset against future taxable income subject to limitations imposed by the Internal Revenue Service. This carryforward is subject to review by the Internal Revenue Service and, if allowed, may be offset against taxable income through 2028. A portion of the net operating loss carryovers begin expiring in 2019.

Deferred tax assets are as follows:

	2008	2007	August 31, 2008
Deferred tax asset due to net operating loss	$ 448,082	331,936	$531,620
Valuation allowance	(448,082)	(331,936)	(531,620)
Net Asset less liability	-0 -	-0 -	-0-

The deferred tax asset relates principally to the net operating loss carryforward. A valuation allowance was established at March 31, 2008 and March 31, 2007 to eliminate the deferred tax benefit that existed at that time since it is uncertain if the tax benefit will be realized. The deferred tax asset (and the related valuation allowance) increased by $373,000 and $270,000 for the years ended March 31, 2008 and March 31, 2007, respectively.

Effective October 1, 2007 the Company must adopt the provisions of Financial Interpretation 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” Management does not believe the adoption will have a material impact on future results of operations.

Note 7. Shareholder’s Equity

Common Stock

The Company has not issued any of its common stock or granted any options or warrants since inception.

F-108

Smith Systems Transportation Inc.

Notes to Consolidated Financial Statements

March 31, 2008 and 2007 and August 31, 2008

Note 8. Commitments and Contingencies

Operating Leases

The Company has no office space under non-cancellable lease agreements. The Company only has informal month to month leases.

The Company leases vehicles and trailers under various non-cancelable operating leases expiring through November 2009. Vehicle and trailer lease expense for the period ended March 31, 2008, and the period ended August 31, 2008 respectively totaled $209,975 and $141,186.

Purchase Commitments

The Company’s purchase commitments for revenue equipment are currently under negotiation. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $300,000 and will be paid throughout 2010.

Claims and Assessments

The Company is involved in certain claims and pending litigation arising from the normal conduct of business.  Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, the Company believes the resolution of these claims and pending litigation will not have a material adverse effect on the Company's financial condition, results of operations or liquidity.

Note 9. Business Combinations

Smith Financial Group, LLC is a factoring company which is 60% owned by Smith Systems Transportation Corp. Smith Financial Group LLC is reported on a consolidated basis, the minority interest of 40% is reported in the mezzanine section of the balance sheet.

Contingent Consideration

The Company has no contingent liabilities at this time.

Note 10. Subsequent Events

On August 28, 2008, all of the Company’s stock was acquired by Integrated Freight Systems, Inc. (“IFG”), a Florida-based company under the terms of a Stock Exchange Agreement, resulting in a change in control.  The accounting date of the acquisition was September 1, 2008 and the transaction was accounted for under the purchase method in accordance with SFAS 141.

F-109

PRO FORMA FINANCIAL INFORMATION
	Page
Introductory Statement	F-111
Pro Forma Balance Sheet at September 30, 2009	F-112
Pro Forma Balance Sheet at March 31, 2009	F-113
Pro Forma Statement of Operations for the six months ended September 30, 2009	F-114
Pro Forma Statement of Operations for the year ended March 31, 2009	F-115
Notes to Pro Forma Financial Information	F-116

F-110

INTEGRATED FREIGHT CORPORATION.

Pro Forma Financial Information.

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

Introductory Statement

The following unaudited pro forma condensed balance sheets give effect to Integrated Freight Corporation’s (“IFS”) acquisitions of PlanGraphics, Inc., as of March 31, 2009 and September 30, 2009. The acquisition of eighty percent of PlanGraphics, Inc.'s common stock was completed as of May 1, 2009.  Integrated Freight Corporation has a fiscal year end of March 31, 2009 and PlanGraphics has a fiscal year end of September 30, 2009.  In computing the September 30, 2009 results for PlanGraphics, the net loss of $228,682 from the March 31, 2009 10-Q was subtracted from the $498,952 operating loss from discontinued operations on the September 30, 2009 10-K.  The net loss from discontinued operations for the pro forma period is $270,270.  This amount is included with additional items in the other income/expense total.

The pro forma condensed statements of operations are presented as if the transaction was consummated at the beginning of the period presented.

The pro forma condensed statements of operations should be read in conjunction with the accompanying notes and the separate audited and unaudited financial statements and notes thereto of each of the companies included in the pro forma as of the balance sheet date and their respective year- and period-end dates.

These pro forma statements are presented for illustrative purposes only.  The pro forma adjustments are based upon preliminary information available at the time of this document and on assumptions that management believes are reasonable.  The final adjustments may vary materially from the pro forma adjustments presented herein.  The unaudited pro forma condensed financial statements do not purport to represent what the result of operations or financial position of the Company would actually have been if the acquisition had in fact occurred on the beginning of the period presented, nor do they purport to project results of operations or financial position of the Company for any future period or as of any date.  The unaudited pro forma condensed financial statements should be read in conjunction with the Company’s historical financial statements included in its Annual Report on Form 10-K.

F-111

Integrated Freight Corporation
Pro Forma Balance Sheet
September 30, 2009
			IFC			Pro Forma	Consolidated
		ASSETS	(Parent)	PlanGraphics	Note	Adjustments	Total
Current Assets
	Cash		$           29,610	$                   -		$                   -	$          29,610
	Trade receivables, net		2,689,454	-		-	2,689,454
	Prepaid, etc		220,916	269,977		(269,977)	220,916
Total Current Assets			2,939,980	269,977		(269,977)	2,939,980
Property and equipment, net			6,396,001	-		-	6,396,001
Intangible assets & other assets			1,948,311	107,533		(107,533)	1,948,311
		TOTAL ASSETS	$   11,284,292	$       377,510		$      (377,510)	$  11,284,292
		LIABILITIES
Current Liabilities
	Accounts payable, accrued and
	other liabilities		$      1,538,310	$    3,477,443	1	$  (3,477,443)	$     1,538,310
	Line of credit & current debts		5,583,045	-		-	5,583,045
Total Current Liabilities			7,121,355	3,477,443		(3,477,443)	7,121,355
Long term Liabilities, net of current			4,706,613	-		-	4,706,613
Total Liabilities			11,827,968	3,477,443		(3,477,443)	11,827,968
Minority Interest in Subsidiary			287,173	-		-	287,173
Stockholder deficit
	Common stock & paid in capital		2,309,757	21,368,578		(21,368,578)	2,309,757
	Retained deficit		(3,140,606)	(24,468,511)		24,468,511	(3,140,606)
Total stockholder deficit			(830,849)	(3,099,933)		3,099,933	(830,849)
Total liabilities & stockholder deficit			11,284,292	377,510		(377,510)	11,284,292
See notes to pro forma financial information

F-112

Integrated Freight Corporation
Pro Forma Balance Sheet
March 31, 2009
		IFC					Pro Forma	Consolidated
	ASSETS	(Parent)	Morris	Smith	PlanGraphics	Note	Adjustments	Total
Cash		$         158,442	$       58,252	$       96,454	$          40,173		$        (40,173)	$        313,148
Trade receivables, net		2,061,297	1,104,423	2,009,274	534,921		(534,921)	5,174,994
Prepaid		322,695	-	255,545	10,782		(10,782)	578,240
		2,542,434	1,162,675	2,361,273	585,876		(585,876)	6,066,382
		7,193,426	4,648,414	1,917,881	17,855		(17,855)	13,759,721
		1,360,061	-	40,000	140,628		(140,628)	1,400,061
	TOTAL ASSETS	$   11,095,921	$ 5,811,089	$ 4,319,154	$       744,359		$      (744,359)	$  21,226,164
	LIABILITIES
Accounts payable, accrued and
other liabilities		$      1,475,293	$     311,633	$    926,778	$    4,091,290	1	$  (4,091,290)	$     2,713,704
Line of credit & current debts		5,647,784	2,361,624	3,404,261	75,083		(75,083)	11,413,669
		7,123,077	2,673,257	4,331,039	4,166,373		(4,166,373)	14,127,373
		4,184,293	2,876,644	1,783,525	-		-	8,844,462
		11,307,370	5,549,901	6,114,564	4,166,373		(4,166,373)	22,971,835
Common stock & paid in capital		1,059,074	200	31,036	20,706,005		(20,706,005)	1,090,310
Retained deficit		(1,573,916)	260,988	(2,111,224)	(24,128,019)		24,128,019	(3,424,152)
		303,393	-	284,778	-		-	588,171
		(211,449)	261,188	(1,795,410)	(3,422,014)	-	3,422,014	(1,745,671)
		11,095,921	5,811,089	4,319,154	744,359	-	(744,359)	21,226,164
See notes to pro forma financial information

F-113

Integrated Freight Corporation
Pro Forma Statements of Operations
For the Six Months Ended September 30, 2009
		IFC			Pro Forma	Consolidated
		(Parent)	PlanGraphics	Note	Adjustments	Total
Revenue		$     8,832,631	$                       -		$                  -	$      8,832,631
Operating expenses
	Operating expenses	3,006,417	-		-	3,006,417
	Wages, salaries & benefits	2,949,320	64,876		(64,876)	2,949,320
	Fuel and fuel taxes	1,911,444	-		-	1,911,444
	General, administrative and other	2,073,615	121,151	1	(121,151)	2,073,615
Total operating expenses		9,940,796	186,027		(186,027)	9,940,796
Other (income) expenses		512,051	97,251		(97,251)	512,051
Net loss before minority interest		$    (1,620,216)	$          (283,278)		$      283,278	$    (1,620,216)
Minority interest share of subsidiary net income		16,220	-		-	16,220
Net Income		$    (1,603,996)	$          (283,278)		$      283,278	$    (1,603,996)
See notes to pro forma financial information

F-114
 

Integrated Freight Corporation
Pro Forma Statements of Operations
For the Year Ended March 31, 2009
		IFC					Pro Forma	Consolidated
		(Parent)	Morris	Smith	PlanGraphics	Note	Adjustments	Total
Revenue		$   10,460,113	$   5,628,352	$   4,203,117	$        2,753,625		$ (2,753,625)	$    20,291,582
Operating expenses
	Operating expenses	2,060,175	1,003,769	1,266,949	1,400,240		(1,400,240)	4,330,893
	Wages, salaries & benefits	3,294,275	1,429,191	971,195	1,031,111		(1,031,111)	5,694,661
	Fuel and fuel taxes	3,430,465	2,446,291	1,157,531	-		-	7,034,287
	General, administrative and other	2,721,707	721,773	823,829	779,941	1	(751,941)	4,295,309
Total operating expenses		11,506,622	5,601,024	4,219,504	3,211,292		(3,183,292)	21,355,150
Other (income) expenses		406,441	159,983	213,926	(26,200)		26,200	780,350
Net loss before minority interest		$    (1,452,950)	$     (132,655)	$     (230,313)	$          (431,467)		$      403,467	$    (1,843,918)
Minority interest share of subsidiary net income		(18,615)	-	(15,388)	-		-	(34,003)
Net Income		$    (1,471,565)	$     (132,655)	$     (245,701)	$          (431,467)		$      403,467	$    (1,877,921)
See notes to pro forma financial information

F-115

INTEGRATED FREIGHT CORPORATION

Pro Forma Financial Information.

Business Combinations

Integrated Freight Corporation, Inc. purchases PlanGraphics, Inc. stock

On May 1, 2009 the Integrated Freight Corporation (IFC) purchased 500 shares of PlanGraphics, Inc. (PlanGraphics) 12% redeemable preferred stock, no par value, in exchange for 1,307,822 shares of the IFC’s common stock and a $167,000 promissory note due in one year from the date of closing. As part of this transaction IFC also issued to PlanGraphics 177,170 shares of common stock and two year warrants to purchase another 177,170 shares of common stock with an exercise price of $0.50 per share. On June 2, 2009, these preferred shares were converted into 401,599,467 shares of common stock, which gave the Company voting control over approximately 80% of PlanGraphics’ outstanding shares.

Also on May 1, 2009, PlanGraphics transferred all operating assets and liabilities (except for $28,000 of audit fees) to a subsidiary created in the state of Maryland also called PlanGraphics, Inc. (PGI Maryland). PlanGraphics sold to their previous management 100% of the shares of PGI Maryland in exchange for a release from all obligations under their employment agreements. Management also received from IFC 134,579 shares of IFC common stock and warrants to purchase another 134,579 shares of IFC common stock at $0.50 per share, with a term of two years.

Assumptions in the Pro Forma

The public company, PlanGraphics, completes a reverse stock split of 244.8598 shares converted to one share as described in Proposal No. 1 of this prospectus, leaving a total of 2,044,918 under the new consolidated entity.

We have assumed that IFC and PlanGraphics have merged as specified by Proposal No. 3 of this prospectus.

Note 1

Since all of PlanGraphics’ operations were transferred to PGI Maryland, which was subsequently sold to the previous management team, all assets, liabilities, equity, revenue and expenses of PlanGraphics have been adjusted out via pro forma adjustment. However, $28,000 of audit fee expense and liability were added back since they were retained as specified by contract.

F-116

 (b) Exhibits

Exhibit Number	Description of Exhibit
2.1	Stock Purchase Agreement dated as of May 1, 2009 among PlanGraphics, Inc., John C. Antenucci and others.
3.1	Amended and Restated Articles of Incorporation (filed with our Definitive Proxy Statement dated May 3, 1991 and incorporated herein by reference).
3.2	Articles of Amendment to the Articles of Incorporation dated May 02, 2002 changing the name to PlanGraphics, Inc. (filed with our Annual Report on Form 10–KSB on December 30, 2002 and incorporated herein by reference).
3.3	Amended and Restated Bylaws of PlanGraphics, Inc. adopted by the Board of Directors on October 7, 2002 (filed with our Annual Report on Form 10–KSB on December 30, 2002 and incorporated herein by reference).
3.4	Amendment to Articles of Incorporation filed August 18, 2006 (filed on Form 8–K, dated August 16, 2006, and incorporated herein by reference).
3.5	Articles of Merger filed December 23, 2009.
4.1	Specimen Stock Certificate of PlanGraphics, Inc. (filed with our Annual Report on Form 10–KSB on December 30, 2002 and incorporated herein by reference).
5.1	Consolidated, Amended and Restated Promissory Note dated April 19, 2010 payable to Mr. Morris.
5.2	Sample of the Third Amended Promissory Note dated April 19, 2010 payable to MR. & Mr. Smith.
14.1	Code of Ethics for Senior Financial Officers implemented by Board Decision on October 7, 2002 (filed with our Annual Report on Form 10–KSB on December 30, 2002, and incorporated herein by reference).
21	List of Subsidiaries.
31.1	Sarbanes–Oxley Certification for the principal executive officer, dated January 13, 2010.
31.2	Sarbanes–Oxley Certification for the principal financial officer, dated January 13, 2010.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 which is dated January 13, 2010.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 which is dated January 13, 2010.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PlanGraphics, Inc.

By: /s/ Paul A. Henley

Principal Executive Officer and

Principal Accounting and Financial Officer

Date: June 21, 2010

Signature and Name: Capacity in which signed: Date:

/s/ John E. Bagalay	Director	June 21, 2010
John E. Bagalay
/s/ Paul A. Henley	Director, Principal Executive Officer	June 21, 2010
Paul A. Henley	Principal Accounting and Financial Officer
/s/ Henry P. Hoffman	Director	June 21, 2010
Henry P. Hoffman
/s/ T. Mark Morris	Director	June 21, 2010
T. Mark Morris
/s/ Monte W. Smith	Director	June 21, 2010
Monte W. Smith
Craig White	Director (beginning May 5, 2010)

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