10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2014 [Second Quarter]
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to _____________

Commission file number: 000–14273

INTEGRATED FREIGHT CORPORATION

(Exact name of registrant as specified in its charter)

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

42 Lake Avenue Extension - 208 Danbury, Connecticut	06811
(Address of principal executive offices)	(Zip code)

Issuer's telephone number: (203) 628-7142

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, $0.001 par value	(None)

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 ☑ NO ☐

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 ☐NO ☑

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	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ☑

The number of shares outstanding of each of the issuer's classes of common stock at June 8, 2015 was 595,254,541 shares.

INTEGRATED FREIGHT CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2014

Table of Contents

PART 1 – FINANCIAL INFORMATION	4
ITEM 1. Financial Statements	4
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	31
ITEM 4. Controls and Procedures	31
PART II - OTHER INFORMATION	32
ITEM 1. Legal Proceedings	32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33
ITEM 3. Defaults Upon Senior Securities.	32
ITEM 4. Mine Safety Disclosures.	34
ITEM 5. Other Information.	34
ITEM 6. Exhibits	34

2

SUMMARIES OF REFERENCED DOCUMENTS

This quarterly report on Form 10–Q may contain 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 quarterly 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 not complete and 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.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10–Q 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 as described in those sections.

This quarterly 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", 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.

The forward-looking statements are based upon our beliefs and assumptions using information available at the time the statements are made. We caution you not to place undue reliance on our forward-looking statements as (i) these statements are neither a prediction nor a guaranty of future events or circumstances and (ii) the assumptions, beliefs, expectations and projections about future events may differ materially from actual results. We undertake no obligation to publicly update any forward-looking statement to reflect developments occurring after the date of this quarterly report.

3

PART 1 – FINANCIAL INFORMATION

ITEM 1. Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and March 31, 2014		5
Consolidated Statements of Operations For the Three and Six Months Ended September 30, 2014 and 2013 (Unaudited)		6
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2014 and 2013 (Unaudited)		7
Notes to Consolidated Financial Statements (Unaudited)		8

4

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2014			March 31, 2014
	(Unaudited)			(Audited)
Assets
Current assets:
Cash	$	65,081		$	35,818
Accounts receivables, net of allowance for doubtful accounts of $50,000		2,775,516			2,426,976
Prepaid expenses and other assets		225,765			360,052
Total current assets		3,066,362			2,822,846
Property and equipment, net of accumulated depreciation		1,323,312			1,962,039
Intangible assets, net of accumulated amortization		-			-
Total assets	$	4,389,674		$	4,784,885
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft	$	132,465		$	266,042
Accounts payable		1,384,437			1,417,189
Accrued expenses and other liabilities		2,683,937			2,173,662
Other Liabilities		721,130			721,130
Line of credit		651,960			708,108
Notes payable - related parties		5,193,982			5,187,084
Current portion of notes payable		5,329,981			5,555,376
Total current liabilities		16,097,892			16,028,591
Derivative liability		11,632			8,874
Notes payable - related parties		-			-
Notes payable, net of current portion and debt discount		915,033			1,651,832
Liabilities of discontinued operations		-			-
Total long-term liabilities		926,665			1,660,706
Total liabilities		17,024,557			17,689,297
Stockholders' deficit:
Common stock, $0.001 par value, 2,000,000,000 shares authorized,
260,524,221 and 260,524,221 shares issued and outstanding  at September 30, 2014 and March 31, 2014 respectively		260,524			260,524
Additional paid-in capital		9,925,421			9,925,421
Accumulated deficit		(22,820,828	)		(23,090,357	)
Total stockholders' deficit		(12,634,883	)		(12,904,412	)
Total liabilities and stockholders' deficit	$	4,389,674		$	4,784,885

See notes to consolidated financial statements

5

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	(Unaudited)						(Unaudited)
	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Revenue	$	4,941,970		$	5,206,603		$	9,928,396		$	10,407,227
Operating Expenses
Rents and transportation		1,303,867			1,234,036			2,583,140			2,535,801
Wages, salaries and benefits		1,332,128			1,354,514			2,531,617			2,553,004
Fuel and fuel taxes		1,185,111			1,552,180			2,560,856			2,989,772
Insurance and claims		347,699			384,701			591,624			685,316
Operating taxes and licenses		79,697			79,946			159,581			137,929
Stock based compensation					99,500			-			99,500
General and administrative		341,749			339,654			623,515			699,836
Depreciation and amortization		147,581			260,876			295,163			468,457
Total Operating Expenses		4,737,832			5,305,407			9,345,496			10,169,615
Income (Loss) from operations		204,138			(98,804	)		582,900			237,612
Other Income (Expense)
Gain/(loss) on change of fair value of derivative liability		(4,218	)		18,636			(2,758	)		20,264
Interest		(258,845	)		(310,802	)		(562,613	)		(694,230	)
Other income (expense)		10,934			64,023			144,136			92,116
Gain on sale of assets		49,320			68,626			107,864			70,608
Total Other Income (Expense)		(202,809	)		(159,517	)		(313,371	)		(511,242	)
Net Income (loss) before income taxes		1,329			(258,321	)		269,529			(273,630	)
Income tax expense		-			-			-			-
Net income (loss)	$	1,329		$	(258,321	)	$	269,529		$	(273,630	)
Net income (loss) per share
Basic	$	-		$	-		$	-		$	-
Diluted	$	-		$	-		$	-		$	-
Weighted average shares outstanding
Basic		260,524,221			118,847,289			260,524,221			117,685,195
Diluted		282,318,077			118,847,289			282,308,833			117,685,195

See notes to consolidated financial statements.

6

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Unaudited)
	Six Months Ended
	September 30,
Cash flows from operating activities:	2014			2013
Net Income (loss)	$	269,529		$	(273,630	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		295,163			468,457
Stock based compensation		-			99,500
Derivative (gain) loss		2,758			(20,264	)
(Gain) on sale of assets		(107,864	)		(70,608	)
Increases/decreases in operating assets and liabilities
Accounts receivable		(348,540	)		240,734
Prepaid expenses and other assets		134,287			4,639
Accounts payable and accrued expense		343,945			(240,306	)
Net cash (used) in/provided by operating activities		589,278			208,522
Cash flows from investing activities:
Proceeds from sale of assets		451,429			172,333
Purchase of property and equipment		-			(179,163	)
Net cash used in investing activities		451,429			(6,830	)
Cash flows from financing activities:
Repayments of notes payable		(962,194	)		(273,205	)
Proceeds of notes payable – related party		25,000			-
Repayments of notes payable – related party		(18,102	)		(5,000	)
Net proceeds/(repayments) from line of credit		(56,148	)		84,362
Net cash (used) in/provided by financing activities		(1,011,444	)		(193,843	)
Net change in cash		29,263			7,849
Cash, beginning of period		35,818			81,429
Cash, end of period	$	65,081		$	89,278

See notes to consolidated financial statements

7

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

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 aniche motor freight carrier delivering dry, refrigerated and hazardous waste commodities throughout the United States and with corporate headquarters in Danbury, Connecticut.  We have two operating subsidiaries, one located in Hamburg, Arkansas and the other located in Scotts Bluff, Nebraska.  Through our two operating motor freight carriers, we provide truck load service throughout the forty-eight contiguous United States. As such, we provide long-haul, regional and local service to our customers.  The Company is subject to regulation by the Department of Transportation and numerous state regulatory authorities.

Principles of Consolidation

The accompanying consolidated balance sheet as of March 31, 2014 has been derived from audited financial statements.

The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company's latest Form 10-K.

The consolidated financial statements include the financial statements of the Company, and its wholly owned subsidiaries as of September 30, 2014 and March 31, 2014.  All material intercompany transactions have been eliminated.

We have the following wholly owned subsidiaries, during the periods indicated:

·  Morris Transportation, Inc., an Arkansas corporation

·  Smith Systems Transportation, Inc., a Nebraska corporation

In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2014 and March 31, 2014, and the results of operations and cash flows for the three and six months ended September 30, 2014 and 2013.

Subsequent Events

The Company has evaluated subsequent events through June 15, 2015 to assess the need for potential recognition or disclosure in this report.  Based upon this evaluation, management determined that all subsequent events that require recognition in the financial statements have been included.

Use of Estimates

The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

8

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

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 cash and cash equivalents of $65,081 and $35,818 at September 30, 2014 and March 31, 2014 respectively.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business from sales.  The Company uses the allowance method for recognizing bad debts. The Company specifically analyzes 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 an 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.  When an account is deemed uncollectible, it is written off against the allowance.  Accordingly, the Company has provided a $50,000 allowance for uncollectible accounts as of September 30 and March 31, 2014.

The Company uses factoring agents with recourse.  The accounts are maintained on the balance sheet until collected and an offsetting liability is recorded for monies received in advance of collections. 

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation, including any write-up in value measured at the time of acquisition of operating subsidiaries. Depreciation of property and equipment is calculated on the straight-line method over the following estimated useful lives:

	Years
Buildings / improvements		20 – 40
Furniture and fixtures		3 – 5
Shop and service equipment		2 – 5
Tractors and trailers		5 – 9
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.

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. Our business combinations did not result in any goodwill as of September 30 and March 31, 2014.

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.

9

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Impairment of Long-lived Assets

The Company evaluates the carrying value of its long-lived assets annually.  Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets' carrying amount.   If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed are reported at the lower of the carrying value or fair value, less costs to sell.  There has been no impairment as of September 30 and March 31, 2014.

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 months ended September 30, 2014 and 2013, advertising expense was $2,619 and $3,707, respectively.

Derivative Liability

The Company issued warrants to purchase the Company's common stock in connection with the issuance of common stock and convertible debt, which contain certain ratchet provisions that reduce the exercise price of the warrants or the conversion price in certain circumstances. Upon the Company's adoption of the Derivative and Hedging Topic of the FASB Accounting Standards Codification ("ASC 815") on January 1, 2009, the Company determined that the warrants and/or the conversion features with provisions that reduce the exercise price of the warrants did not qualify for a scope exception under ASC 815 as they were determined not to be indexed to the Company's stock as prescribed by ASC 815.

Derivatives are required to be recorded on the balance sheet at fair value (see Note 6). These derivatives, including embedded derivatives in the Company's structured borrowings, are separately valued and accounted for on the Company's balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates. In addition, additional disclosures is required about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

10

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Fair Value of Financial Instruments

The Company's financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities and notes payable are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments.

The carrying value of the Company's long-term debt approximates fair value based on borrowing rates currently available to the Company for loans with similar terms.

Our derivative financial instruments, consisting of embedded conversion features in our convertible debt, which are required to be measured at fair value on a recurring basis under FASB ASC 815-15-25 or FASB ASC 815 as of September 30 and March 31, 2014, are all measured at fair value, using a Black-Scholes valuation model which approximates a binomial lattice valuation methodology utilizing Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (see Note 6). Significant assumptions used in this model as of March 31, 2014 included a remaining expected life of 1 year, an expected dividend yield of zero, estimated volatility of 449%, and risk-free rates of return of approximately .72%. For the risk-free rates of return, we use the published yields on zero-coupon Treasury Securities with maturities consistent with the remaining term of the feature and volatility is based on a trucking company with characteristics comparable to our own.

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. At September 30 and March 31, 2014, the Company had $651,960 and $708,108 outstanding under its revolving credit agreement, and $11,438,996 and $12,394,292, including $5,193,982 and $5,187,084 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.

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 consolidated 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.

11

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

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 adopted the fair value recognition provisions of ASC 505, Equity and ASC 718, Compensation – Stock Compensation, using the modified prospective application method. 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 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, 2014 and March 31, 2014, the Company's bank deposits did not exceed insured limits

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. We estimate and accrue a liability for our share of ultimate settlements using all available information. We accrue 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 September 30 and March 31, 2014, management estimated $0 in claims accrual above insurance deductibles.

However, from time to time the various business units are subject to premium audits on workers compensation. When the results of these audits are available, the various business units record the additional premiums due when they are advised by the respective carriers. Such amounts are generally amortized over the following 12 months.

Going Concern

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  Our continuation is dependent upon attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have raised additional capital through the debt and equity offerings noted above. We do, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. We plan to sell additional equity securities, debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The issuance of additional equity securities, including convertible debt securities, by us could result in a significant dilution in the equity interests of our current stockholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. In such event, we will be forced to scale down or perhaps even cease our operations.

12

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

We have undertaken steps as part of a plan to improve operating results with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) increasing our revenues and gross profits; and (c) reducing expenses. Additionally, we are implementing a strategy to bring us to financial stability, which is as follows:

● A significant portion of our short term debt is in the hands of our subsidiary managers who, under the right circumstances, we believe may be willing to rework terms and to lengthen the maturity dates, as they have in the past, if that becomes necessary, lessening the short term debt on our balance sheet.

● A significant amount of short term debt on our balance sheet is convertible into common shares which may eliminate a meaningful amount of debt from our balance sheet.

● We expect to continue to grow through acquisitions involving stock payments in lieu of cash. We expect this larger business base will provide a larger "platform" in order to more easily offset the corporate overhead and costs of being public.

You have no assurance that we will successfully accomplish these steps and it is uncertain whether we will achieve a profitable level of operations and/or obtain additional financing. You have no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all.

Our consolidated financial statements do not give effect to any adjustments which would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our current and potential liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

Income (Loss) per Common Share

Basic net loss per share excludes the impact of common stock equivalents.  Diluted net income (loss) per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents.  As of September 30, 2014 there were 8,521,390 warrants outstanding, of which 620,883 were included in the calculation of net income (loss) per share-diluted because they were dilutive. In addition, the Company had convertible promissory notes that were also included because they were dilutive.

Effect of Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to March 31, 2014 through the date these financial statements were issued.

13

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Note 2. Property and Equipment

Property and equipment consist of the following at September 30, 2014:

	IFC		Morris			Smith			Total
Land, Buildings and Improvements	$	-	$	1,969		$	15,797		$	17,766
Tractors and Trailers		-		2,418,950			2,882,980			5,301,930
Vehicles		-		29,934			106,407			136,341
Furniture, Fixtures and Equipment		-		222,781			284,625			507,406
Less: accumulated depreciation		-		(1,514,725	)		(3,125,406	)		(4,640,131	)
Total	$	-	$	1,158,909		$	164,403		$	1,323,312

Depreciation expense totaled $295,163 and $468,457 for the six months ended September 30, 2014 and 2013.

Property and equipment consist of the following at March 31, 2014:

	IFC		Morris			Smith			Total
Land, Buildings and Improvements	$	-	$	1,969		$	15,797		$	17,766
Tractors and Trailers		-		3,274,557			2,887,513			6,162,070
Vehicles		-		29,934			106,407			136,341
Furniture, Fixtures and Equipment		-		221,828			284,625			506,453
Less: accumulated depreciation		-		(1,742,790	)		(3,117,801	)		(4,860,591	)
Total	$	-	$	1,785,498		$	176,541		$	1,962,039

Note 3. Intangible Assets

The Company purchased the stock of Morris and Smith in 2008, 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" and "customer lists."

The Company operating authorities are tied to their motor carrier numbers that are issued and monitored by the U.S. Department of Transportation (USDOT). The USDOT 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. Morris and Smith have the DOT's highest rating, "Satisfactory," which provides the Company with significant value. The customer lists adds value to the Company by providing an established cliental with established rates as well as predictable freight volume.

14

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

These intangible assets are as follows:

	September 30,			March 31,
	2014			2014
Employment and non-compete agreements	$	1,043,293		$	1,043,293
Company operating authority and customer lists		891,958			891,958
Total intangible assets		1,935,251			1,935,251
Less: accumulated amortization		(1,935,251	)		(1,935,251	)
Intangible assets, net	$	-		$	-

Amortization expense for the six months ended September 30, 2014 and 2013 was $0 and $0 respectively.

Note 4. Accrued Expenses

At September 30, 2014 and March 31, 2014, accrued expenses and liabilites consisted of the following:

	September 30, 2014		March 31, 2014
Accrued interest	$	2,216,924	$	1,851,592
Accrued officer compensation		240,000		80,000
Accrued payroll expenses		206,341		168,658
Accrued expenses - other		20,672		73,412
	$	2,683,937	$	2,173,662

Note 5. Other liabilities

At September 30, 2014 and March 31, 2014, other liabilities consist of three judgments totaling $721,130 arising from prior litigation.

Note 6. Line of Credit

Morris Revolving Credit

At September 30 and March 31, 2014, Morris has $ 651,960 and $708,108 outstanding under a revolving credit line agreement that allows it to borrow up to a total of $1,200,000. The line of credit is secured by accounts receivable, and guaranteed by a previous owner.  The applicable interest rate under this agreement is based on the Prime Rate, plus 3.5% with a floor of 4.00%.

15

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Note 7. Notes Payable

Notes Payable owed by Morris consisted of the following:

	September 30, 2014		March 31, 2014
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535 including interest, with interest rates ranging from 6.69% to 8.53%, secured by equipment		117,858		149,364
Notes payable to Wells Fargo Bank, payable in monthly installments  ranging from $569 to $5,687 including interest, with interest rates ranging from 7.00% to 7.25%, secured by equipment		450,957		574,547
Note payable to Mack Financial Services, payable in monthly installments of $8,359 including interest, with interest at 7.19% secured by equipment.		-		203,348
Note payable to Mack Financial Services, payable in monthly installments of $2,105 including interest, with interest at 7.19% secured by equipment.		50.051		59,096
Notes payable to Volvo Financial Services, payable in monthly installments ranging from $1,884 to $6,408 including interest, with interest rates ranging from 7.00% to 7.50%,  secured by equipment		551,528		859,337
Totals	$	1,170,394	$	1,845,692

Notes payable owed by Smith consisted of the following:

	September 30, 2014		March 31, 2014
Notes payable to bank,  payable in monthly installments of $60,000 including interest,  with interest at 9%, collateralized by substantially all of Smith assets	$	727,031	$	977,484
Notes payable to bank,  payable in monthly installments including interest, with interest at 6.5%, collateralized by substantially all of Smith assets		1,417,753		1,447,753
Note payable to Ally, payable in monthly installments of $599 including interest, with interest at6%, secured by a vehicle.		8,142		11,503
Notes payable to John Deere, payable monthly including interest, secured by equipment		2,054		5,135
Unsecured, non-interest bearing note payable to Colorado Holdings Valley Bank, payable in monthly installments of $5,000, through 2023.		701,570		701,570
Total	$	2,856,550	$	3,143,445

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

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

16

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Summary

	IFC		Morris		Smith		Total
Notes payable, current portion	$	2,218,071	$	496,540	$	2,615,370	$	5,329,981
Notes payable, net of current portion		-		673,854		241,179		915,033
Total as of September 30, 2014	$	2,218,071	$	1,170,394	$	2,856,549	$	6,245,014

 

Principal maturities of long term debt for the next five years are as follows	Year Ending
	September 30,	Total
	2015	$	5,329,981
	2016		612,980
	2017		224,069
	2018		77,984
	2019		-
	Thereafter		-
			6,245,014

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

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

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

The fair value of the derivative liability at September 30, 2014 and March 31, 2014 was $11,632 and $8,874, respectively and are reflected on the Consolidated Balance Sheets.

17

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Note 8. Related Party Notes Payable

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

	September 30, 2014		March 31, 2014
Various notes payable to related party with interest at 8%, currently payable on demand.	$	130,704	$	130,704
Collateralized Notes Payable currently payable on demand with interest at 9.9%, collateralized by equipment as defined.		645,276		645,276
Notes payable to related party, with interest of 8%, secured by all shares of Smith common stock, currently payable on demand		210,000		210,000
Notes payable to related party, with interest of 8%, secured by all shares of Morris common stock, currently payable on demand		195,000		195,000
Note payable to shareholder, with interest at 8.5%, due on demand.		148,461		171,563
Note payable to shareholder, with interest at 8.0%, due on demand.		40,176		40,176
Note payable to shareholder, with interest at 5.0%, due on demand.		78,750		48,750
Note payable to related party, with interest at 5.0%, principal and interest due on March 31, 2019.		3,745,615		3,745,615
Total	$	5,193,982	$	5,187,084

Note 9. Income Taxes

A reconciliation of U.S. statutory federal income tax rate to the effective rate follows:

	September 30, 2014			September 30,  2013
U.S. statutory federal rate, graduated		34.00	%		34.00	%
State income tax rate, net of Federal		3.6	%		3.6	%
Permanent book-tax differences		0	%		0	%
Net operating loss (NOL) for which no tax benefit was available.		-37.6	%		-37.6	%
Net tax rate		0.00	%		0.00	%

18

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

At September 30, 2014, deferred tax assets consisted of a net tax asset of approximately $7,520,000, due to operating loss carry forwards of approximately $20,000,000, which was fully allowed for, in the valuation allowance of $7,520,000.  The valuation allowance offsets the net deferred tax asset for which it was more likely than not that the deferred tax assets will not be realized.  The net operating loss carry forwards expire through the year 2034.

The valuation allowance is evaluated at the end of each fiscal year, considering positive and negative evidence about whether the deferred tax asset will be realized.  At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets was no longer impaired and the allowance was no longer required.

Note 10. Shareholders' Deficit

Common Stock

The Company did not issue any Common Stock during the six months ended September30, 2014

Warrants to Purchase Common Stock

The Company did not issue any Warrants to purchase Common Stock during the six months ended September 30, 2014.

A summary of the warrant balances outstanding for the six months ended September 30, 2014 is presented below:

	Stock Awards		Average		Remaining
	Outstanding		Exercise		Contractual
	& Exercisable		Price		Term
Balance, March 31, 2013		13,307,390	$	0.23	2 years
Granted		-		0.00
Exercised		-		0.0
Expired/Cancelled		360,000		0.0		N/A
Balance, March 31, 2014		12,947,390	$	0.23	2 years
Granted		-		0.0	-
Exercised		-		0.0	-
Expired/Cancelled		4,426,000		0		N/A
Balance, September 30, 2014		8,521,390	$	0.23	2 years

As of September 30, 2014 and March 31, 2014, the number of warrants that were currently vested and expected to become vested was 8,521,390 and 12,947,390, respectively.

Note 11. Commitments and Contingencies

Operating Leases

At September 30, 2014 the Company operated from the corporate office of the Chief Executive Officer in Danbury, Connecticut at no charge to the Company.  The value of this accommodation is deemed to be immaterial.

The Company leases approximately 15,000 square feet of office, and truck service space in Hamburg, Arkansas for the operations of Morris Transportation, Inc. by paying the mortgage payment on the property on a month to month basis.

The Company leases approximately 36,500 square feet of office, warehouse, and truck service space in Scotts Bluff, Nebraska from Colorado Holdings, a company controlled by Mr. Smith at a monthly rental of $4,000 per month.

The Company has multiple operating leases for trucks and trailers at various rates and are generally no longer than five years.

19

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Total facility and equipment lease expense for the six months ended September 30, 2014 was approximately $561,287.

The Company's commitments for minimum lease payments under these operating leases for the next five years as of September 30, 2014 are as follows:

Period ended September 30,
2015	$	931,344
2016		931,344
2017		924,498
2018		794,544
2019		646,313

Employment Agreements

From time to time since 2008, the Company has entered into several five year employment agreements with its executives. In 2013, we committed to pay executives a total of $275,000 per year, plus usual and customary benefits. The agreements also provide bonuses if the executives meet certain goals as set by the board of directors annually.

Consulting Agreements

On August 3, 2012 our Board of Directors voted to engage Fuselier Consulting of Danbury, CT, as its strategic business consultant.  Under terms of the agreement, Fuselier will consult with our management regarding the execution of our restructuring and Fuselier will be compensated with the issuance of our stock.  The Board directed the Company to issue to Fuselier ten million shares of stock at signing and an additional two and a half million shares per quarter through the term of the agreement.  This agreement was terminated in May 2014.

Purchase Commitments

The Company's purchase commitments for revenue equipment are continually negotiated and reviewed.  Upon execution of purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $1,000,000 to $3,000,000 and are expected to be financed over an average of 4 to 7 years.

Active litigation:

As a lender to the Company and its subsidiaries, Hillair Capital Investments, LP partially funded the Company's acquisition of Cross Creek and a portion of the Company's working capital requirements in 2011 via two notes totaling $339,660.   Hillair initially sought $1,200,000 in unspecified damages in New York State.  In 2014, the Company settled with Hillair for $400,000 payable $100,000 down and $300,000 pro rata over the subsequent three year period.   Under the court order the Company became in default of the agreement by its terms.   In the event of a default, Hillair's recovery is limited to $450,000.   The Company continues to discuss with Hillair an economic resolution of the matter and has reserved the full defaulted amount.

20

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

As a lender to the Company, Luberski, Inc. loaned the Company, via two Notes, $400,000 in 2011.   The Company defaulted on both loans and Luberski received a judgment against one of the Company's two subsidiaries.  In 2015, the Company and Luberski actively negotiated the settlement of the outstanding balance.   The Company has booked reserves equivalent to the debt outstanding plus interest and fees.

In 2012, Chapman and Associates sued the Company for fees related to their introduction of two acquired subsidiaries of the Company and received a judgment for the full amount of the suit.   The Company has reserved $900,000 relating to this debt and in 2015 participated in negotiations with Chapman to settle.

The Nutmeg Fortuna Fund litigation relates to the collection on a 2008 promissory note.  The Company has reserved $175,000 relating to this matter.   In 2015 we continued to participate in negotiations with Nutmeg to settle.

In April 2012, the Company entered into a forbearance agreement with Michael S. DeSimone, former owner of Cross Creek Trucking, Inc. As part of the agreement we issued a confession of judgment to Mr. DeSimone in the amount of $3,745,415 plus accrued interest.  We agreed to pay $5,000 per month commencing September 1, 2012 but are not currently in compliance with the agreement and are in negotiations to restructure the terms of the original agreement.

In January 2013 Robins Consulting, Inc. filed suit against us and our former CEO Paul Henley for $572,000 in broker fees related to the acquisition of Cross Creek Trucking.  We believe that Robins Consulting misrepresented the condition of Cross Creek in a material manner.  The Company is aggressively defending this case, has filed counterclaims, and has prepared a lawsuit against Robins for damages in excess of one million dollars.  The Company is in active negotiations to resolve this matter and has reserved $572,000 against this contingent liability.

Litigation in the normal course of business

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.

Claims and Assessments

The Company is involved in certain claims 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 will not have a material adverse effect on our financial condition, our results of operations or our liquidity.

Note 12. Related Party Transactions

We have been paying the mortgage payments for Morris Transportation, Inc. to an unrelated lender on behalf of an entity controlled by Mr. Morris as rent without a formal lease and intend to purchase the property at fair market value, as determined by appraisal, which may require us to refinance the mortgage.

The Company rents a facility owned by Colorado Holdings, a company controlled by Mr. Smith. The annual rental rate is $48,000.  As of September 30, 2014, there is an accrued balance of approximately $25,000 outstanding.

21

INTEGRATED FREIGHT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2014

(Unaudited)

Note 13. Subsequent Events

 On various dates since the fiscal year end, the Company has reached full and complete settlements with employees, creditors and/or note holders.  These settlements include:

·  Officer and employee payments of $827,000 settled for $36,500 cash plus common shares;

·   Former subsidiary owners payments of $467,000 settled for $17,000 cash plus convertible preferred shares;

·   Note holder payments of $357,000 settled for future cash payments of $135,000 plus convertible preferred shares.

In October, 2014, the Company issued 10,000,000 common shares for services.

In October, 2014, the Company issued 20,000,000 common shares to Fuselier Consulting in accordance with the terms of a consulting contract.  The stock was valued at $.0071 per share, its fair market value at the date of issuance

In November, 2014, the Company issued 13,500,000 common shares for services.  The stock was valued at $.0072 per share, its fair market value at the date of issuance

In November, 2014, the Company issued 8,728,265 common shares for accrued compensation to Officers of the Company.  The shares were valued using a volume weighted average price of $.017 per share

In December, 2015 the Company issued 8,023,529 common shares as part of a negotiated settlement on debt

In January, 2015, the Board approved an amendment to the Articles of Incorporation relative to its capital structure to create new classes of stock by authorizing Ninety Million (90,000,000) shares of Series A Preferred Stock with a par value of $.005, and Three Hundred Million (300,000,000) shares of Preferred Stock with preferences to be determined by the board at a later date.

In January, 2015, the Company issued 35,219,711 common shares in satisfaction of convertible debt

In January, 2015, the Company authorized 21,072,793 common shares as part of negotiated settlements on various debts.  These shares were issued in May 2015.

In February, 2015, the Company issued 36,310,721 common shares in satisfaction of convertible debt

In February, 2015, the Company issued 2,050,000 common shares as part of a negotiated settlement on debt

In March, 2015, the Company issued 40,223,804 common shares in satisfaction of convertible debt

In March 2015, the Company issued ten year warrants to purchase 20,000,000 common shares, with an exercise price of $.005, for services.

In April 2015, the Company issued 43,249,254 common shares in satisfaction of convertible debt.

In May 2015, the Company issued 35,945,000 common shares in satisfaction of convertible debt.

In May 2015, the Company issued 26,519,682 common shares for accrued compensation to Officers of the Company.

In May 2015, the Company issued 2,500,000 common shares for services.

In June 2015, the Company issued 31,387,561 common shares in satisfaction of convertible debt.

22

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following information in conjunction with our financial statements and related notes contained elsewhere in this report. You should consider the risks and difficulties frequently encountered by early-stage companies, particularly those engaged in new and rapidly evolving markets and technologies. Our limited operating history provides only a limited historical basis to assess the impact that critical accounting policies may have on our business and our financial performance.

Overview

The main factors that affect our results of operations are the number of tractors we operate, our revenue per tractor (which includes primarily our revenue per total mile and our number of miles per tractor), and our ability to control our costs.

Over the course of the last year, market prices for diesel fuel have been substantially more stable than 2011-2012.  As a result, fuel surcharges have tended to more adequately reflect the recapture of continued high fuel costs.  Management routinely compares market fuel price fluctuations relative to the Company base fuel price in an effort to insure that its fuel surcharge level is adequate and that it is properly applied to all freight invoices.

Our largest expenses, for example truck lease and financing costs, tend to be fixed. These expenses represent a significant use of cash flow. Our driver payroll fluctuates with the freight shipped; however, we do have fixed payroll expenses for office, management and shop personnel that do not vary in relation to freight revenues.  The Company has achieved substantial reductions in both general and administrative expenses as well as other areas of fixed overhead expense.  The operating companies have focused much attention on revenue quality, that is, improving the per mile yield.  The subsidiaries have been able to take selective rate increases and discontinue business that did not achieveminimum per mile yield standards.  For the full year the operating companies also improved fuel expense through improved buying and better miles per gallon.

Seasonality

Typically, revenue generally decreases as customers reduce shipments during the winter holiday season and as inclement weather impedes operations. At the same time, operating expenses generally increase, with fuel efficiency declining because of engine idling and weather, creating more equipment repairs. For the reasons stated, our fiscal fourth quarter results have historically has been lower than results in each of the other three quarters of the fiscal year excluding charges. Our equipment utilization typically improves substantially in the first and second fiscal quarters of each fiscal year because of the trucking industry's seasonal shortage of equipment.  It is during these periods that most U.S. manufacturing firms conduct the heaviest shipment volumes of the year.  Moreover, industry capacity is further stretched during these periods by agriculture-related seasonal demand for trucking services.

23

Operating Results

Results of Operations for the Three Months Ended September 30, 2014

The following table presents and compares the results of our operations for the three months ended September 30, 2014 and 2013.

	Three Months ended September 30,
	2014			2013			$ change			% change
Revenue	$	4,941,970		$	5,206,603		$	(264,633	)		-5.1	%
Operating Expenses
Rents and transportation		1,303,867			1,234,036			69,831			5.7	%
Wages, salaries and benefits		1,332,128			1,354,514			(22,386	)		-1.7	%
Fuel and fuel taxes		1,185,111			1,552,180			(367,069	)		-23.6	%
Insurance and claims		347,699			384,701			(37,002	)		-9.6	%
Operating taxes and licenses		79,697			79,946			(249	)		-0.3	%
Stock based compensation		-			99,500			(99,500	)		-100.0	%
General and administrative		341,749			339,654			2,095			0.6	%
Depreciation and amortization		147,581			260,876			(113,295	)		-43.4	%
Total Operating Expenses		4,737,832			5,305,407			(567,575	)		-10.7	%
Income(Loss) from operations		204,138			(98,804	)		302,942			-306.6	%
Other Income (Expense)
Derivative Gain (Loss)		(4,218	)		18,636			(22,854	)		-122.6	%
Interest expense		(258,845	)		(310,802	)		51,957			-16.7	%
Other income (expense)		10,934			64,023			(53,089	)		-82.9	%
Gain on sale of assets		49,320			68,626			(19,306	)		-28.1	%
Total Other Income (Expense)		(202,809	)		(159,517	)		(43,292	)		27.1	%
Net Income (Loss)	$	1,329		$	(258,321	)	$	259,650			-100.5	%

Revenues

For the three months ended September 30, 2014, we reported revenues of $4,941,970 as compared to revenues of $5,206,603 for the three months ended September 30, 2013, a decrease of $264,633 or 5.1%. This decrease is small due to the combination of an unusually difficult winter weather season and the continuing shortage of qualified truck drivers.

Operating Expenses

Our total operating expenses decreased 10.7% to $4,737.832 for the three months ended September 30, 2014, as compared to $5,305,407 for the three months ended September 30, 2013. These changes include:

Rents and Transportation. For the three months ended September 30, 2014, rents and transportation costs were $1,303,867 as compared to $1,234,036 for the three months ended September 30, 2013, an increase of $69,831 or 5.7%. The increase was primarily a result of the subsidiaries' improved equipment leasing terms.  Over time the subsidiaries have increased their reliance on full service truck leases because of a shortage of growth capital available for tractor purchases.

Wages, salaries and benefits.  For the three months ended September 30, 2014, wages, salaries and benefits costs were $1,332,128 as compared to $1,354,514 for the three months ended September 30, 2013, a decrease of $22,386 or 1.7%.

Fuel and fuel taxes.  For the three months ended September 30, 2014, the cost of fuel and fuel taxes were $1,185,111 as compared to $1,552,180 for the three months ended September 30, 2013, a decrease of $367,069 or 23.6%. The decrease in fuel expense is a result of slightly lower revenue miles and improved fuel mileage from the newer leased tractors in the fleet.

Insurance and claims.  For the three months ended September 30, 2014, insurance and claims costs were $347,699 as compared to $384,701 for the three months ended September 30, 2013, a decrease of $37,002 or 9.6%, which we believe is in line with the subsidiaries' accident and claims experience and  industry-wide insurance rate increases for the period.

24

Operating taxes and licenses.  For the three months ended September 30, 2014, operating taxes and licenses costs were $79,697 as compared to $79,946 for the three months ended September 30, 2013, a decrease of $249 or .3%.

General and administrative expenses. General and administrative expenses are the expenses of operating the business on a daily basis that are not related directly to cost of services and include managerial salaries, legal fees and rent and utilities. General and Administrative expenses were $341,749 for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013, when general and administrative expenses costs were $339,654, an increase of $2,095 or .6%. This comparative increase is a direct result of management's restructuring and turnaround plan initially implemented during 2013.  In this plan, corporate overhead was severely reduced or eliminated and no resources were expended for G&A other than those deemed by the board and management as mission critical.

Depreciation and amortization. For the three months ended September 30, 2014, depreciation and amortization costs were $147,581 as compared to $260,876 for the three months ended September 30, 2013, a decrease of $113,295 or 43.4%. This decrease is due to the subsidiary companies converting to full service tractor leases, and intangible assets being fully amortized.

Income (Loss) from Operations. We reported an income from operations of $204,138 for the three months ended September 30, 2014 as compared to a loss from operations of $98,804 for the three months ended September 30, 2013, an increase of $302,942.

Other Income (Expense)

We reported total other income (expense) of $(202,809) for the three months ended September 30, 2014 as compared to $(159,517) for the three months ended September 30, 2013, an increased loss of $43,292.   This increase is the cumulative effect of the changes in each of the following components of other income (expense);

We had a loss on derivatives of $4,218 for the three months ended September 30, 2014 as compared to a derivative gain of $18,636 for the three months ended September 30, 2013.

Interest expense for the three months ended September 30, 2014 was $258,845 compared to $310,802 for the three months ended September 30, 2013, a decrease of $51,957 or 16.7%.

Other income (expense) for the three months ended September 30, 2014 was $10,934 compared to $64,023 for the three months ended September 30, 2013, a decrease of $53,089 or 82.9%.

We had gain on sale of assets of $49,320 for the three months ended September 30, 2014 as compared to $68,626 for the three months ended September 30, 2013.

Net Income (Loss)

We reported a net income of $1,329 for the three months ended September 30, 2014 as compared to a net loss of $258,321 for the three months ended September 30, 2013, an increase of $259,650.

25

Results of Operations for the Six Months Ended September 30, 2014

The following table presents and compares the results of our operations for the six months ended September 30, 2014 and 2013.

	Six Months ended September 30,
	2014			2013			$ change			% change
Revenue	$	9,928,396		$	10,407,227		$	(478,831	)		-4.6	%
Operating Expenses
Rents and transportation		2,583,140			2,535,801			47,339			1.9	%
Wages, salaries and benefits		2,531,617			2,553,004			(21,387	)		-0.8	%
Fuel and fuel taxes		2,560,856			2,989,772			(428,916	)		-14.3	%
Insurance and claims		591,624			685,316			(93,692	)		-13.7	%
Operating taxes and licenses		159,581			137,929			21,652			15.7	%
Stock based compensation		-			99,500			(99,500	)		-100.0	%
General and administrative		623,515			699,836			(76,321	)		-10.9	%
Depreciation and amortization		295,163			468,457			(173,294	)		-37.0	%
Total Operating Expenses		9,345,496			10,169,615			(824,119	)		-8.1	%
Income(Loss) from operations		582,900			237,612			345,288			145.3	%
Other Income (Expense)
Derivative Gain (Loss)		(2,758	)		20,264			(23,022	)		-113.6	%
Interest expense		(562,613	)		(694,230	)		131,617			-19.0	%
Other income (expense)		144,136			92,116			52,020			56.5	%
Gain on sale of assets		107,864			70,608			37,256			52.8	%
Total Other Income (Expense)		(313,371	)		(511,242	)		197,871			-38.7	%
Net Income (Loss)	$	269,529		$	(273,630	)	$	543,159			-198.5	%

Revenues

For the six months ended September 30, 2014, we reported revenues of $9,928,396 as compared to revenues of $10,407,227 for the six months ended September 30, 2013, a decrease of $478,831 or 4.6%. This decrease is small due to the combination of an unusually difficult winter weather season and the continuing shortage of qualified truck drivers.

Operating Expenses

Our total operating expenses decreased 8.1% to $9,345,496 for the six months ended September 30, 2014, as compared to $10,169,615 for the six months ended September 30, 2013. These changes include:

Rents and Transportation. For the six months ended September 30, 2014, rents and transportation costs were $2,583,140 as compared to $2,535,801 for the six months ended September 30, 2013, an increase of $47,339 or 1.9%. The increase was primarily a result of the subsidiaries' improved equipment leasing terms.  Over time the subsidiaries have increased their reliance on full service truck leases because of a shortage of growth capital available for tractor purchases.

Wages, salaries and benefits.  For the six months ended September 30, 2014, wages, salaries and benefits costs were $2,531,617 as compared to $2,553,004 for the six months ended September 30, 2013, a decrease of $21,387 or .8%.

Fuel and fuel taxes.  For the six months ended September 30, 2014, the cost of fuel and fuel taxes were $2,560,856 as compared to $2,989,772 for the six months ended September 30, 2013, a decrease of $428,916 or 14.3%. The decrease in fuel expense is a result of slightly lower revenue miles and improved fuel mileage from the newer leased tractors in the fleet.

Insurance and claims.  For the six months ended September 30, 2014, insurance and claims costs were $591,624 as compared to $685,316 for the six months ended September 30, 2013, a decrease of $93,692 or 13.7%, which we believe is in line with the subsidiaries' accident and claims experience and  industry-wide insurance rate increases for the period.

26

Operating taxes and licenses.  For the six months ended September 30, 2014, operating taxes and licenses costs were $159,581 as compared to $137,929 for the six months ended September 30, 2013, an increase of $21,652 or 15.7%.

General and administrative expenses. General and administrative expenses are the expenses of operating the business on a daily basis that are not related directly to cost of services and include managerial salaries, legal fees and rent and utilities. General and Administrative expenses were $623,515 for the six months ended September 30, 2014 as compared to the six months ended September 30, 2013, when general and administrative expenses costs were $699,836, a decrease of $76,321 or 10.9%. This comparative decrease is a direct result of management's restructuring and turnaround plan initially implemented during 2013.  In this plan, corporate overhead was severely reduced or eliminated and no resources were expended for G&A other than those deemed by the board and management as mission critical.

Depreciation and amortization.  For the six months ended September 30, 2014, depreciation and amortization costs were $295,163 as compared to $468,457 for the six months ended September 30, 2013, a decrease of $173,294 or 37%. This decrease is due to the subsidiary companies converting to full service tractor leases, and intangible assets being fully amortized.

Income (Loss) from Operations. We reported an income from operations of $582,900 for the six months ended September 30, 2014 as compared to an income from operations of $237,612 for the six months ended September 30, 2013, an increase of $345,288.

Other Income (Expense)

We reported total other income (expense) of $(313,371) for the six months ended September 30, 2014 as compared to $(511,242) for the six months ended September 30, 2013, an decreased loss of $197,871.   This increase is the cumulative effect of the changes in each of the following components of other income (expense);

We had a loss on derivatives of $2,758 for the six months ended September 30, 2014 as compared to a derivative gain of $20,264 for the six months ended September 30, 2013.

Interest expense for the six months ended September 30, 2014 was $562,613 compared to $694,230 for the six months ended September 30, 2013, a decrease of $131,617 or 19%.

Other income (expense) for the six months ended September 30, 2014 was $144,136 compared to $92,116 for the six months ended September 30, 2013, an increase of $52,020 or 56.5%.

We had gain on sale of assets of $107,864 for the six months ended September 30, 2014 as compared to $70,608 for the six months ended September 30, 2013.

Net Income (Loss)

We reported a net income of $269,529 for the six months ended September 30, 2014 as compared to a net loss of $273,630 for the six months ended September 30, 2013, an increase of $543,159.

27

Results by Operational Subsidiary

Morris Transportation

For the six months ended September 30, 2014, Morris Transportation had revenues of $4,367,665 compared with revenues of $2,516,285 for the six months ended September 30, 2013, a decrease of $324,831 or 12.9%. This decrease is primarily due to generally weaker demand in the paper markets and intense competition in the driver recruiting and retention markets.  As a result, the company experienced several unmanned power units much of the year.

For the six months ended September 30, 2014, Morris Transportation had a net income of $122,459 compared with a net loss of $5,190 for the six months ended September 30, 2013, an increase of $90,241.

Morris Transportation total assets at September 30, 2014, were $1,925,919, as compared to total assets of $3,441,961 as of September 30, 2013, a decrease of $1,085,274. This decrease is primarily due to the company's ongoing conversion from owned to leased power units.

Smith Systems Transportation

For the six months ended September 30, 2014, Smith Systems Transportation had revenues of $5,560,731 compared with revenues of $2,684,340 for the six months ended September 30, 2013, an increase of $110,631. This increase is primarily due to increased petroleum charges, general improvement in the trucking demand in the Central and Mountain markets of the United States and, specifically, much stronger demand in the hazardous waste market.  Smith was able to service this significant increase in demand by expanding its capacity with both company and independent contractor drivers.

Smith Systems Transportation had a net income of $595,379 for the six months ended September 30, 2014 compared with a net income of $179,462 for the six months ended September 30, 2013, an increase of $215,057. This increase is primarily a result of strong demand in the hazardous waste markets to include the expanding hydraulic fracturing water recovery market.

Smith Systems total assets were $2,151,732 at September 30, 2014 as compared to total assets of $2,451,236 at September 30, 2013, a decrease of $113,373.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. The following table provides an overview of certain selected balance sheet comparisons related to continuing operations at September 30, 2014 and March 31, 2014.

	September 30, 2014			March 31, 2014			$ change			% change
Working Capital		(13,031,530	)		(13,205,745	)		174,215			-1.3	%
Cash		65,081			35,818			29,263			81.7	%
Accounts receivable, net		2,775,516			2,426,976			348,540			14.4	%
Prepaid expenses and other assets		225,765			360,052			(134,287	)		-37.3	%
Property and equipment, net		1,323,312			1,962,039			(638,727	)		-32.6	%
Bank overdraft		132,465			266,042			(133,577	)		-50.2	%
Accounts payable		1,384,437			1,417,189			(32,752	)		-2.3	%
Accrued expenses and other liabilities		2,683,937			2,173,662			510,275			23.5	%
Other liabilities		721,130			721,130			-			0.0	%
Line of credit		651,960			708,108			(56,148	)		-7.9	%
Notes payable		11,438,996			12,394,292			(955,296	)		-7.7	%
Derivative liability		11,632			8,874			2,758			31.1	%
Common stock		260,524			260,524			-			0.0	%
Additional paid-in capital		9,925,421			9,925,421			-			0.0	%

Cash Flows and Working Capital

Our cash flow from operations at the subsidiary level is sufficient to meet current subsidiary obligations. In fiscal year 2014 and 2013, we relied upon additional investment through sales of common stock and debentures in order to fund total operations. We anticipate raising significant amounts of capital to fund organic growth as well as acquisitions in the next fiscal year.

28

At September 30, 2014, we had $65,081 in cash and cash equivalents. We had receivables, net of allowances, of $2,775,516 and our current liabilities were $16,097,892.

Our sales cycle can be several weeks or longer, followed by a period of time in which to collect our receivables, with some costs incurred immediately, making our business working-capital intensive. We do not anticipate a profitability level that would resolve its cash flow issues in the foreseeable future and expects to rely upon acquisitions and capital contributed by investors to fund its operations.

We have significant capital expenditures, although leasing can reduce our equipment cost when justified by the level of sales.

Operating Activities

For the six months ended September 30, 2014, we had a net income of $269,529 as compared to a net loss of $273,630 for the six months ended September 30, 2013.  Net cash provided by operating activities for the six months ended September 30, 2014 totaled $589,278 as compared to $208,522 provided by operating activities for the six months ended September 30, 2013, an increase of $380,756.  Non-cash items included depreciation and amortization expense of $295,163 and a derivative loss of $2,758 for the six months ended September 30, 2014 as compared to depreciation and amortization expense of $468,457 and a derivative gain of $20,264 for the six months ended September 30, 2013.

Investing Activities

Net cash provided by investing activities for the six months ended September 30, 2014 was $451,429 from the sale of assets, as compared to net cash used in investing activities of $6,830 (for equipment) for the six months ended September 30, 2013.

Financing Activities

Net cash used in financing activities for the six months ended September 30, 2014, was $1,011,444 as compared to net cash used of $193,843 for the six months ended September 30, 2013.  For the six months ended September 30, 2014 and 2013, net cash was used to pay down various note balances.

Cash Requirements

The Company continues to maintain nominal balances in cash and cash equivalents. As discussed below, this amount and our current accounts receivable collections may be adequate to maintain our current level of operations for 30 to 60 days, after which we would need additional capital or face a significant curtailment of operations.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with United States Generally Accepted Accounting Principles ("GAAP") requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenue, and expenses in our consolidated financial statements and accompanying notes. Our management evaluates these estimates and assumptions on an ongoing basis, utilizing historical experience, consulting with experts, and using other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates and assumptions, and it is possible that materially different amounts would be reported using differing estimates or assumptions. We consider our critical accounting policies to be those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates. A summary of the significant accounting policies followed in preparation of the financial statements is contained in Note 1 to our consolidated financial statements.

29

Property and Equipment

Property and equipment are entered at acquisition cost and depreciated on a straight-line basis over their anticipated life. We estimate the salvage value of our equipment to be fifteen to twenty percent for tractors and trailers, if the equipment is kept in service for its entire useful life. This life expectancy is based upon our management's past experience of operations. The useful life of a typical tractor is seven fiscal years and a typical trailer is nine fiscal years. Our structures are forty fiscal years and leasehold improvements are the lesser of the economic life of the leasehold improvements or the remaining life of the lease.

Our ability to utilize net operating loss carry forwards may be limited

As of September 30, 2014, the Company had net operating loss carry forwards (NOLs) of approximately $20 million for federal income tax purposes that will begin to expire between the years of 2020 and 2034. These NOLs may be used to offset future taxable income, to the extent we generate any taxable income, and thereby reduce or eliminate our future federal income taxes otherwise payable. Section 382 of the Internal Revenue Code imposes limitations on a corporation's ability to utilize NOLs if it experiences an ownership change as defined in Section 382.  In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percent over a three-year period. In the event that an ownership change has occurred, or were to occur, utilization of our NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in the Internal Revenue Code. Any unused annual limitation may be carried over to later years.  We may be found to have experienced an ownership change under Section 382 as a result of events in the past or the issuance of shares of common stock upon a conversion of notes, or a combination thereof.  If so, the use of our NOLs, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of our NOLs before utilization.

Going Concern

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  Our continuation is dependent upon attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have raised additional capital through the debt and equity offerings noted above. We do, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. We plan to sell additional equity securities, debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The issuance of additional equity securities, including convertible debt securities, by us could result in a significant dilution in the equity interests of our current stockholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. In such event, we will be forced to scale down or perhaps even cease our operations.

We have undertaken steps as part of a plan to improve operating results with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) increasing our revenues and gross profits; and (c) reducing expenses. Additionally, we are implementing a strategy to bring us to financial stability, which is as follows:

● A significant portion of our short term debt is in the hands of our subsidiary managers who, under the right circumstances, we believe may be willing to rework terms and to lengthen the maturity dates, as they have in the past, if that becomes necessary, lessening the short term debt on our balance sheet.

● A significant amount of short term debt on our balance sheet is convertible into common shares and we are optimistic a meaningful amount of this debt will ultimately be reduced with capital formation, conversion to common or preferred shares, thus eliminating a meaningful amount of debt from our balance sheet.

● We expect to continue to grow through acquisitions involving stock payments in lieu of cash. We expect this larger business base will give us an ever larger "platform" in order to more easily offset the corporate overhead and costs of being public.

You have no assurance that we will successfully accomplish these steps and it is uncertain whether we will achieve a profitable level of operations and/or obtain additional financing. You have no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all.

Our consolidated financial statements do not give effect to any adjustments which would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

30

Recent Accounting Pronouncements

See Consolidated Financial Statements beginning on page 5.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

We have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:

· An obligation under a guaranty contract, although we do have obligations under certain sales arrangements including purchase obligations to vendors,

· A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets,

· Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument or,

· Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.

Effect of Changes in Prices

Changes in prices in the past few fiscal years have not been a significant factor in the trucking industry. Prices to the end customer do vary with fuel prices, which are affected by means of a fuel surcharge that is set by the U S. Department of Energy and is common to all companies in the industry. The surcharge may affect the industry and the economy as a whole but does not differentiate between companies.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable

ITEM 4. Controls and Procedures

307 – Disclosure controls and procedures: As of September 30, 2014, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, with the participation of our principal executive and principal financial officers. Disclosure controls and procedures are defined in Exchange Act Rule 15d–15(e) as "controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms [and] include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure." Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2014, such disclosure controls and procedures were not effective.

31

The two primary reasons for management's conclusions are:

·    Insufficient personnel to implement checks and balances; and

·    Decentralization of accounting functions in each subsidiary.

308(b) – Changes in internal control over financial reporting: Based upon an evaluation by our management of our internal control over financial reporting, with the participation of our principal executive and principal financial officers, there were no changes made in our internal control over financial reporting during the quarter ended September 30, 2014 that have materially affected or are reasonably likely to materially affect this control.

Limitations on the Effectiveness of Internal Control: Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about risks and the likelihood of future events, and there is no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances and the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

Our ability to aggressively defend and to prosecute the litigation described under this item depends significantly on our ability to fund legal fees and related costs of litigation.

Active litigation:

As a lender to the Company and its subsidiaries, Hillair Capital Investments, LP partially funded the Company's acquisition of Cross Creek and a portion of the Company's working capital requirements in 2011 via two notes totaling $339,660.   Hillair initially sought $1,200,000 in unspecified damages in New York State.  In 2014, the Company settled with Hillair for $400,000 payable $100,000 down and $300,000 paid pro rata over the following three year period.   Under the court order the Company became in default of the agreement by its terms.   In the event of a default, Hillair's recovery is limited to $450,000.   The Company continues to discuss with Hillair an economic resolution of the matter and has booked the full defaulted amount.

32

As a lender to the Company, Luberski, Inc. loaned the Company $400,000, via two Notes in 2011.   The Company defaulted on both loans and Luberski ultimately received a judgment against one of Company's two subsidiaries.  In 2015, the Company and Luberski were actively negotiating the settlement of the outstanding balance.   The Company has booked reserves equivalent to the debt outstanding plus interest and fees that may become due.

 In 2012, Chapman and Associates sued the Company for fees related to their introduction of two acquired subsidiaries of the Company and received a judgment for the full amount of the suit.   The Company has reserved $900,000 relating to this debt and in 2015 participated in negotiations with Chapman to settle.

The Nutmeg/Fortuna Fund litigation relates to the collection on a 2008 promissory note.  The Company has reserved $175,000 relating to this matter.   In 2015 we continued to participate in negotiations with Nutmeg to settle.

In April 2012, the Company entered into a forbearance agreement with Michael S. DeSimone, former owner of Cross Creek Trucking, Inc. As part of the agreement we issued a confession of judgment to Mr. DeSimone in the amount of $3,745,415 plus accrued interest.  We agreed to pay $5,000 per month commencing September 1, 2012 but are not currently in compliance with the agreement and are in negotiations to restructure the terms of the original agreement.

In January 2013 Robins Consulting, Inc. filed suit against us and our former CEO Paul Henley for $572,000 in broker fees related to the acquisition of Cross Creek Trucking, and in December 2014, received a judgment in the amount of $991,000.    The Company has filed counter claims, and a bill of review to overturn the judgment.  In addition, the Company has filed suit against Robins for its role in the acquisition of Cross Creek Trucking.  The amount of $572,500 is included in notes payable at September 30, 2014.

Litigation in the normal course of business

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.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no sales of equity securities during the six months ended September 30, 2014.  The following is a listing of all equity securities issued since that date through the date of this report;

In October, 2014, the Company issued 10,000,000 common shares for services.

In October, 2014, the Company issued 20,000,000 common shares to Fuselier Consulting in accordance with the terms of a consulting contract.  The stock was valued at $.0071 per share, its fair market value at the date of issuance

In November, 2014, the Company issued 13,500,000 common shares for services.  The stock was valued at $.0072 per share, its fair market value at the date of issuance

In November, 2014, the Company issued 8,728,265 common shares for accrued compensation to Officers of the Company.  The shares were valued using a volume weighted average price of $.017 per share

In December, 2015 the Company issued 8,023,529 common shares as part of a negotiated settlement on debt

33

In January, 2015, the Company issued 35,219,711 common shares in satisfaction of convertible debt

In January, 2015, the Company authorized 21,072,793 common shares as part of negotiated settlements on various debts.  These share were issued in May 2015.

In February, 2015, the Company issued 36,310,721 common shares in satisfaction of convertible debt

In February, 2015, the Company issued 2,050,000 common shares as part of a negotiated settlement on debt

In March, 2015, the Company issued 40,223,804 common shares in satisfaction of convertible debt

In March 2015, the Company issued ten year warrants to purchase 20,000,000 common shares, with an exercise price of $.005, for services.

In April 2015, the Company issued 43,249,254 common shares in satisfaction of convertible debt.

In May 2015, the Company issued 35,945,000 common shares in satisfaction of convertible debt.

In May 2015, the Company issued 26,519,682 common shares for accrued compensation to Officers of the Company.

In May 2015, the Company issued 2,500,000 common shares for services.

In June 2015, the Company issued 31,387,561 common shares in satisfaction of convertible debt.

These shares were issued in transactions deemed exempt from the registration requirements of the Securities Act, in reliance of either or both Regulation D or Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering.

ITEM 3. Defaults Upon Senior Securities.

Not applicable.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information.

We do not have any other material information to report under this Item.

ITEM 6. Exhibits

Exhibit Number
31.1	Rule 13a-14(a) Certification of Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Principal Financial Officer
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.DEF *	XBRL Taxonomy Extension Definition Link base Document
101.INS *	XBRL Instance Document
101SCH *	XBRL Taxonomy Extension Schema Document
101.CAL *	XBRL Taxonomy Extension Calculation Link base Document
101.LAB *	XBRL Taxonomy Extension Label Link base Document
101.PRE *	XBRL Taxonomy Extension Presentation Link base Document
101.DEF *	XBRL Taxonomy Extension Definition Link base Document

* To be filed by amendment

34

SIGNATURES

Pursuant to the requirements 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.

Integrated Freight Corporation
By	/s/ David N. Fuselier
	David N. Fuselier Principal Executive Officer and Principal Financial and Accounting Officer

     DATED: June 23, 2015

35

EX-31.1

Exhibit 31.1

INTEGRATED FREIGHT CORPORATION Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David N. Fuselier, Principal Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Integrated Freight Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that was materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 23, 2015

/s/ David N. Fuselier  

David N. Fuselier

Principal Executive Officer 

EX-31.2

Exhibit 31.2

INTEGRATED FREIGHT COPRORATION Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David N. Fuselier Principal Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Integrated Freight Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant's as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that was materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 23, 2015

/s/ David N. Fuselier 

David N. Fuselier 

Principal Financial Officer 

EX-32.1

Exhibit 32.1

INTEGRATED FREIGHT CORPORATIONCertification Pursuant to18 U.S.C. Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Integrated Freight Corporation (the Company) on Form 10-Q for the quarterly period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the Report), I David N. Fuselier, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
		/s/ David N. Fuselier
		David N. Fuselier
		Principal Executive Officer June 23, 2015

EX-32.2

Exhibit 32.2

INTEGRATED FREIGHT CORPORATIONCertification Pursuant to18 U.S.C. Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Integrated Freight Corporation (the Company) on Form 10-Q for the quarterly period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, David N. Fuselier, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
		/s/ David N. Fuselier
		David N. Fuselier
		Principal Financial Officer June 23, 2015