10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2011 [Second Quarter]
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to _____________

COMMISSION FILE NO.  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.

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

Issuer’s telephone number: (941) 907-8372

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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES oNO þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

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

The number of shares outstanding of each of the issuer’s classes of common stock at November 18, 2011 was 38,472,089 shares.

TABLE OF CONTENTS

		PAGE
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)		4
	Consolidated Balance Sheets		F-2
	Consolidated Statements Of Operations		F-3
	Consolidated Statements Of Cash Flows		F-4
	Notes To The Financial Statements		F-5
Item 2.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations		5
Item 3.	Quantitative And Qualitative Disclosures About Market Risk		13
Item 4.	Controls And Procedures		13
Part II - Other Information
Item 1.	Legal Proceedings		14
Item 1A	Risk Factors
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds		16
Item 3.	Defaults Upon Senior Securities		16
Item 4.	[Removed and Reserved]		16
Item 5.	Other Information		16
Item 6.	Exhibits		16

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.

WHERE YOU CAN FINDAGREEMENTS AND OTHER DOCUMENTS REFERRED TO IN THIS ANNUAL REPORT

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

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 I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The financial statements of Cross Creek Trucking, Inc., which we acquired effective as of April 14, 2010 are consolidated in our financial statements included herein at and for the six months ended September 30, 2011 and 2010.  We  encountered unexpected complications and delays in completing an audit Cross Creek Trucking, Inc.’s financial statements at and for the twelve months ended December 31, 2010 and 2009, including significantly the condition of  Cross Creek Trucking’s books and records.  Accordingly, we do not have audited financial statements of Cross Creek Trucking, Inc. as the starting point for Cross Creek Trucking, Inc.’s financial statements at and for the three and six months ended September 30, 2010.  Our consolidated financial statements included herein are subject to adjustment with respect to Cross Creek Trucking.’s financial statements.  See Part II, Item 1. “Legal Proceedings”.  Financial information regarding Cross Creek Trucking is included under the captions “Note 2 - Discontinued Operations”.

4

CONSOLIDATED FINANCIAL STATEMENTS OF

INTEGRATED FREIGHT CORPORATION

	Page
Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and  March 31, 2011		F-2
Consolidated Statements of Operations For the Three Months and  Six Months Ended September 30, 2011 and  2010 (Unaudited)		F-3
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2011 and  2010 (Unaudited)		F-4
Notes to Consolidated Financial Statements (Unaudited)		F-5

F-1

INTEGRATED FREIGHT CORPORATION

Consolidated Balance Sheets

	September 30, 2011			March 31, 2011
Assets	(Unaudited)
Current assets:
Cash	$	-		$	54,158
Accounts receivables, net of allowance for doubtful accounts of $50,000		4,620,823			2,564,352
Prepaid expenses and other assets		702,701			545,930
Total current assets		5,323,524			3,164,440
Property and equipment, net of accumulated depreciation		12,278,607			4,141,068
Intangible assets, net of accumulated amortization		1,425,093			268,785
Assets of discontinued operations		28,469			236,279
Total assets	$	19,055,693		$	7,810,572
Liabilities and Stockholders’ Deficit
Current liabilities:
Bank overdraft	$	453,941		$	214,303
Accounts payable		1,991,360			1,151,337
Accrued expenses and other liabilities		4,261,978			1,112,778
Line of credit		2,237,565			895,153
Notes payable - related parties		1,150,775			1,180,987
Current portion of notes payable		5,846,300			2,709,111
Total current liabilities		15,941,919			7,263,669
Derivative liability		124,352			513,471
Notes payable - related parties		4,007,633			120,000
Notes payable, net of current portion and debt discount		4,957,667			4,235,242
Liabilities of discontinued operations		1,893,269			1,765,313
Total long-term liabilities		10,982,921			6,634,026
Total liabilities		26,924,840			13,897,695
Stockholders’ deficit:
Common stock, $0.001 par value, 2,000,000,000 shares authorized,
38,472,089 and 31,574,883 shares issued and outstanding at June 30, 2011 and		38,471			31,575
March 31, 2011, respectively
Additional paid-in capital		8,490,614			6,013,911
Accumulated deficit		(16,754,409	)		(12,475,539	)
Total Integrated Freight Corporation stockholders’ deficit		(8,225,324	)		(6,430,053	)
Non controlling interest		356,177			342,930
Total stockholders’ deficit		(7,869,147	)		(6,087,123	)
Total liabilities and stockholders’ deficit	$	19,055,693		$	7,810,572

See notes to consolidated financial statements

F-2

INTEGRATED FREIGHT CORPORATION

Consolidated Statements of Operations

	(Unaudited)						(Unaudited)
	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Revenue	$	11,788,506		$	4,817,249		$	24,824,586		$	9,598,297
Operating Expenses
Rents and transportation		1,930,753			1,226,521			3,960,234			2,262,307
Wages, salaries and benefits		3,795,945			1,315,857			7,811,498			2,641,756
Fuel and fuel taxes		4,018,311			1,228,521			8,941,850			2,649,018
Depreciation and amortization		546,246			600,959			1,807,582			1,181,739
Insurance and claims		130,478			200,621			410,049			392,243
Operating taxes and licenses		264,501			52,562			682,904			93,466
General and administrative		1,158,311			468,902			3,078,177			944,110
Total Operating Expenses		11,844,545			5,093,943			26,692,294			10,164,639
Loss from continuing operations		(56,039	)		(276,694	)		(1,867,708	)		(566,342	)
(Loss)/Gain  from discontinued operations		-			130,938			(420,756	)		141,920
Other Income (Expense)
Gain/(loss) on change of fair value of derivative liability		207,936			-			181,119			(60,000	)
Interest		(1,196,127	)		(138,900	)		(2,129,945	)		(480,432	)
Interest - related parties		(136,815	)		(47,329	)		(19,848	)		(87,227	)
Other income (expense)		(220,614	)		20,851			(21,737	)		182,963
Total Other Income (Expense)		(1,345,620	)		(165,378	)		(1,990,411	)		(444,696	)
Net loss before noncontrolling interest		(1,401,659	)		(311,134	)		(4,278,875	)		(869,118	)
Noncontrolling interest share of subsidiary net income (loss)		3,804			9,339			13,247			15,030
Net loss	$	(1,397,855	)	$	(301,795	)	$	(4,265,628	)	$	(854,088	)
Net loss per share - basic and diluted
Loss from continuing operations	$	(0.03	)	$	(0.02	)	$	(0.11	)	$	(0.05	)
Loss from discontinued operations		(0.01	)		0.01			(0.01	)		0.01
Net loss per common share-basic and diluted	$	(0.04	)	$	(0.01	)	$	(0.12	)	$	(0.04	)
Weighted average common shares outstanding - basic and diluted		37,935,422			22,166,759			36,332,331			21,089,749

See notes to consolidated financial statements.

F-3

INTEGRATED FREIGHT CORPORATION

Consolidated Statements of Cash Flows

	Six Months Ended
	September 30,
	(Unaudited)
	2011			2010
Net loss	$	(4,278,875	)	$	(854,088	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,807,582			1,181,739
Debt discount amortization		49,597			169,012
Common stock issued in payment of derivative		208,000			-
Derivative liability		(389,119	)		60,000
Warrants issued for interest		101,280			-
Loss on asset dispositions		449,982			6,744
Noncontrolling interest in earnings of subsidiary		13,247			(15,030	)
Stock issued for stock based compensation		6,500			5,746
Warrants issued for services performed		79,600			-
Stock issued for interest		293,219			-
Stock issued for services		322,500			-
Loss from discountinued operations		420,756			-
Increases/decreases in operating assets and liabilities					-
Accounts receivable		38,623			(330,013	)
Prepaid expenses and other assets		(75,285	)		(26,842	)
Accounts payable		(41,128	)		57,677
Accrued and other liabilities		1,940,006			(41,093	)
Net cash (used) in/provided by operating activities		946,485			213,852
Trade-in of property and equipment		-			50,760
Purchase of discontinued operations-Triple C		-			(100,000	)
Net cash used in investing activities		-			(49,240	)
Repayments of notes payable		(2,734,882	)		(715,374	)
Proceeds of notes payable		796,916			559,000
Net proceeds/(repayments) from line of credit		665,185			(5,143	)
Bank overdraft		239,638			85,565
Proceeds from exercise of warrants/sale of stock		32,500			5,000
Net cash (used) in/provided by financing activities		(1,000,643	)		(70,952	)
Net change in cash		(54,158	)		93,660
		54,158			48,101
	$	-		$	141,761

See notes to consolidated financial statements.

F-4

INTEGRATED FREIGHT CORPORATION

Notes to Financial Statements

Note 1     Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

Integrated Freight Corporation (a Florida corporation) [formerly PlanGraphics, Inc. (a Colorado corporation)] and subsidiaries (the “Company”) is a short to medium-haul truckload carrier of general commodities headquartered in Sarasota, Florida. The Company provides dry van, hazardous materials, and temperature controlled truckload services.  The Company is subject to regulation by the Department of Transportation and various state regulatory authorities.

Pursuant to an agreement in connection with Integrated Freight Corporation’s (“Original IFC”) acquisition of control of the Company on May 1, 2009, the Company completed the sale of its historic operations to its former director and chief executive officer.  This transaction closed on December 27, 2009.  As part of the acquisition, the Company executed a 244.8598 for 1 reverse split in August, 2010, and all amounts have been presented on a post-split basis. Since the Company had, due to the sale of its historical operations, minimal assets and limited operations, the recapitalization has been accounted for as the sale of 404,961 shares of Original IFC common stock for the net liabilities of the Company. Therefore, the historical financial information prior to the date of the recapitalization is the financial information of IFC. Costs of the transaction have been charged to the period in which they are incurred. 

Following are the terms of the merger agreement:

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

Original IFC acquired 1,639,957 shares of the Company’s common stock, or 80.2 percent of the Company’s issued and outstanding common stock, as of May 1, 2009, for the purpose of merging the Company into Original IFC, with Original IFC being the surviving corporation. Uncertainty as to when Original IFC could obtain an effective registration statement on Form S-4 (which it filed and has now withdrawn) to complete the merger caused delays in Original IFC obtaining debt and equity funding and completing negotiations for additional acquisitions. On November 11, 2009, Original IFC and the Company agreed to restructure the transaction to provide for the Company’s acquisition of more than ninety percent of Original IFC’s issued and outstanding common stock and its merger into the Company. Colorado corporation law permits the merger of a subsidiary company owned ninety percent or more by a parent company into the parent company without stockholder approval. 

In furtherance of this change to the plan to combine Original IFC and the Company, 20,228,246 shares of Original IFC’s outstanding common stock were transferred by its stockholders to Jackson L. Morris, trustee for The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”). Original IFC also transferred the 1,639,957 shares of the Company’s common stock it owned to the Trust. The Company then exchanged 18,899,666 shares of its unissued common stock for the 20,228,246 shares of Original IFC held in the Trust. As a result of this transfer and exchange, the Trust held 20,539,623 of the Company’s shares. The number of shares of the Company’s common stock that it exchanged for the number of shares of Original IFC stock was not based on any financial or valuation considerations, but solely on the number of shares of the Company’s authorized but unissued shares in relation to the percentage of Original IFC’s outstanding common stock included in the exchange and the requirements of Colorado law that the Company own ninety percent or more of Original IFC in order to complete the merger without stockholder approval.

F-5

As part of the merger, the Company executed a 244.8598 for 1 reverse split effective August 17, 2010. All share amounts have been presented on a post-split basis.

Accordingly, the Company accounted for the acquisition and merger as a recapitalization because Original IFC stockholders gained control of a majority of the Company’s common stock upon completing these transactions.  Accordingly, Original IFC is deemed to be the acquirer for accounting purposes.  The consolidated financial statements have been retroactively restated to give effect to these transactions for all periods presented, except the statement of stockholders’ deficit with regard to common shares outstanding.

Certain items in the 2010 consolidated financial statements have been reclassified to conform to the presentation in the 2011 consolidated financial statements.  Such reclassifications did not have a material impact on the presentation of the overall consolidated financial statements.

Basis of Presentation

The unaudited consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for the interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These consolidated financial statements have not been audited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Company’s Annual Report for the year ended March 31, 2011, which is included in the Company’s Form 10-K for the year ended March 31, 2011. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, and its wholly owned subsidiaries, Morris Transportation, Inc. (“Morris”), Smith Systems Transportation, Inc. (“Smith”), Integrated Freight Services, Inc. (“IF Services”)  incorporated in February, 2011; Cross Creek Trucking, Inc. (Cross Creek), acquired April 1, 2011,  and Triple C Transport, Inc. (“Triple C”).- although Triple C is shown as a discontinued operation – See Notes 2, 10, 11 and 13. Smith holds a 60% ownership interest in SST Financial Group, LLC (“SSTFG”).  All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.  

Use of Estimates

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

F-6

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2011 and March 31, 2011.

Accounts Receivable Allowance

The Company makes estimates of the collectability of accounts receivable. 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 our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

Accordingly, the Company has a $50,000 allowance for uncollectible accounts and revenue adjustments as of September 30, 2011 and March 31, 2011.

Property and Equipment

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

	Years
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.

F-7

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, 2011 and March 31, 2011.

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.

Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. See Notes 2, 10, and 11 for the treatment of intangibles related to Triple C. No other impairment of intangibles has been identified since the date of acquisition.

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of September 30, 2011 and March 31, 2011.

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, 2011 and 2010, advertising expense was $-0- and $5,300, 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.

F-8

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.

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, 2011 and March 31, 2011, 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 September 30, 2011 and March 31, 2011 included a remaining expected life of 1 year, an expected dividend yield of zero, estimated volatility of 172%, and risk-free rates of return of approximately 1-2%. 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.

F-9

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. At September 30, 2011 and March 31, 2011, the Company had $2,237,565 and $895,953 outstanding under its revolving credit agreement, and $15,962,375 and $8,245,340, including $5, 920, 796 and $1, 300, 987 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.

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. Under ASC 505 and ASC 718, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, include cash and trade receivables.  For the six months ended September 30, 2011 and 2010, the Company’s top four customers, based on revenue, accounted for approximately 24%, and 27% of total revenue.  The Company’s top four customers, based on revenue, accounted for approximately 16% and 37 % of total trade accounts receivable at September 30, 2011 and March 31, 2011. 

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, 2011 and March 31, 2011, the Company's bank deposits did not exceed insured limits.

F-10

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, 2011 and March 31, 2011, 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. 

Earnings per Share

The Company calculates earnings per share in accordance with ASC, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

At September 30, 2011 and March 31, 2011, there was no variance between the basic and diluted loss per share.  The 4,699,390 and 12,463,890 warrants to purchase common shares outstanding at September 30, 2011 and March 31, 2011, were not included in the weighted-average number of shares computation for diluted earnings per common share, as the warrants are anti-dilutive. Also, the 6,698,292 and 6,514,111 shares potentially convertible into common stock underlying convertible notes payable were not included.

Recent Accounting Pronouncements

The Company has reviewed recent accounting pronouncements through September 2011 (Update 2011-05) and does not believe that any recently issued accounting pronouncements will have a material impact on its financial statements.

Note 2.    Discontinued Operations

As previously reported, on May 14, 2010, the Company had acquired 100% of the common stock of Triple C Transport, Inc. (“Triple C”).  As was our practice with previous acquisitions, the former owners continued to manage the day to day operations of Triple C and it was leasing approximately ninety-one power units and ninety-nine trailers from companies owned by the former owners for payments equal to the payment those companies make on its financing agreements for that equipment, which was approximately $300,000 a month.  Triple C headquarters was leased from another company owned by the former owners for approximately $5,250 per month.  The acquisition agreement provided that one of the former owners would serve on the Company’s Board of Directors and he would be employed as the general manager of Triple C for three years.

F-11

During the latter part of October, 2010, the former owners of Triple C notified the Company in writing that entities controlled by them and receiving lease payments from Triple C were having difficulty servicing the debt of the related entities.  Two of those entities White Farms Trucking, Inc. (“WFT”) and Craig Carrier Corporation, LLC (“CCC”) ultimately filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the district of Nebraska, which were filed on December 21, 2010 and have been assigned case numbers 10-43797 and 10-43798.

During November, 2010 both the former owners resigned as officers and directors of Triple C, but one of the former owners continued to serve on our (IFC) Board of Directors through April, 2011.  Triple C installed new management to operate the business on a day to day basis and in an effort to insure Triple C’s continued operations with minimum disruption from potential bankruptcy related issues, moved substantially all of the Triple C ongoing operations away from the facility it leased from one of the related entities.  The physical move occurred in Mid-January 2011.  In order to preserve liquidity, Triple C had temporarily suspended lease payments for the equipment leased by Triple C from WFT/CCC.  Under the terms of the May 14, 2010 “Stock Purchase Agreement” IFC executed a corporate guaranty for all lease and other payments arising from the leases between WFT/CCC and Triple C.

On May 2, 2011, we filed a complaint against Craig White and Vonnie White in the District Court for Douglas County, Nebraska and served notice on the defendants pursuant to the Stock Purchase Agreement under which we acquired Triple C Transport, Inc. from the defendants on or about May 14, 2010.  In the complaint, we ask the court to rescind the Stock Purchase Agreement, alleging multiple, material breaches of representations and warranties which individually and in the aggregate constitute fraud upon us.  We are also seeking damages in unspecified amounts.  We intend to pursue this litigation aggressively.  Because of actions taken by the defendants subsequent to closing of our acquisition, undisclosed liabilities of Triple C Transport, breaches of the defendants’ representations and warranties, and the bankruptcies of entities they control and which were Triple C Transport’s equipment lessors, we believe that rescission will not have a materially negative impact on our financial performance going forward; even though we will not enjoy the benefits of the acquisition which we expected at the time of the transaction but which do not seem now available in fiscal year 2012, in view of the fact that Triple C Transport has lost its licenses to operate based on actions by Mr. and Mrs. White and other entities they control both before and after the closing of the transaction.  

In September 2011, the Company estimated a loss in the amount of $1,893,269 to be realized upon completion of the rescission of this business unit, as well as an estimated operating loss of $420,756 to be incurred during the phase-out period.  For the period May 14, 2010 through March 31, 2011 the Company incurred actual operating losses associated with this discontinued unit of $1,529,033.  Current period legal fees incurred by the Company are being recorded within the Company’s financial statements and included in Accrued expenses and other liabilities at September 30, 2011.

Summarized operating resultes for discontinued operations is as follows:
	Six months Ending			May 14, 2010 through Sept. 30,		May 14, 2010 through March 31,
	Sept. 30, 2011			2010		2011
Revenue	$	322,664		$	3,848,744	$	13,674,634
Operating Expenses		743,420			3,697,026		14,968,828
Operating Income (Loss)		(420,756	)		151,718		(1,294,194	)
Other Income (Expense)		-			20,780		234,839
Income (Loss) from operations		(420,756	)		130,938		(1,529,033	)
Income tax benefit		-			-		-
Gain (loss) to be recognized from discontinued operations, net of tax	$	(420,756	)	$	130,938	$	(1,529,033	)

The gain (loss) from discontinued operations above do not include any income tax effect as the Company was not in a taxable position due to its continued losses and a full valuation allowance

F-12

Summary of assets and liabilities of discontinued operations is as follows:

	Sept. 30, 2011			Sept. 30, 2010		March 31, 2011			May 14, 2010
Accounts receivable	$	-		$	206,243	$	179,000		$	120,172
Other Assets		28,469			53,687		57,279			9,283
Intangible assets		-			-		-			466,424
Total assets from discontinued operations	$	28,469		$	259,930	$	236,279		$	595,879
Accrued liabilities and other current liabilities	$	1,893,269		$	126,644	$	1,765,313		$	145,879
		-			-		-			-
		1,893,269			126,644		1,765,313			145,879
		-			-		-			-
Total liabilities associated with discontinued operations	$	1,893,269		$	126,644	$	1,765,313		$	145,879
	$	(1,864,800	)	$	133,286	$	(1,529,034	)	$	450,000

Note 3.  Property and Equipment

Property and equipment consist of the following at September 30, 2011:

										Cross
	IFC			Morris			Smith			Creek			Total
Land, Buildings and Improvements	$	-		$	1,969		$	443,296		$	483,859		$	929,124
Tractors and Trailers		1,516,246			6,056,983			3,344,301			7,165,049			18,082,579
Vehicles		46,472			64,280			114,407			144,437			369,596
Furniture, Fixtures and Equipment		68,610			221,828			320,949			200,647			812,034
Less: accumulated depreciation		(822,829	)		(3,410,673	)		(3,338,232	)		(342,962	)		(7,914,696	)
Total	$	808,499		$	2,934,387		$	884,721		$	7,651,030		$	12,278,637

Depreciation expense totaled $1,039,876 for the six months ended September 30, 2011.

F-13

Property and equipment consist of the following at March 31, 2011:

	IFC			Morris			Smith			Consolidated
Buildings	$	-		$	1,969		$	809,266		$	811,235
Tractors and Trailers		-			5,498,173			5,144,477			10,642,650
Vehicles		46,472			64,280			114,406			225,158
Furniture, Fixtures and Equipment		68,610			221,828			298,566			589,004
Less: accumulated depreciation		(27,792	)		(3,529,092	)		(4,570,095	)		(8,126,979	)
Total	$	87,290		$	2,257,158		$	1,796,620		$	4,141,068

Depreciation expense totaled $1,405,181 for the year ended March 31, 2011.

Note 4.  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.”  In April, 2011 additional intangibles were recognized when the Company purchased the stock of Cross Creek.   

The Company operating authorities are tied to their motor carrier numbers that are issued and monitored by the U.S. Department of Transportation (FDOT).  The FDOT issues a rating to each company which has a direct impact on that company’s ability to attract and maintain a stable customer base as well as reduce the company’s insurance costs, one of the most significant expenditures for freight companies. Morris and Smith and Cross Creek 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. A detailed review of the Cross Creek intangibles is in process.

These intangible are as follows:

	September 30, 2011			March 31, 2011
Employment and non-compete agreements	$	1,043,293		$	1,043,293
Company operating authority and customer lists		891,958			891,958
Newly acquired (April 2011) identified intangibles		1,910,112			-
Total intangible assets		3,845,363			1,935,251
Less: accumulated amortization		(2,420,270	)		(1,666,466	)
Intangible assets, net	$	1,425,093		$	268,785

F-14

In addition, when the Company originally purchased Triple C (see Notes 2 and 11) $466,424 of identified intangible assets were recognized.  However, when the Company rescinded the Triple C purchase and reported Triple C as a “discontinued operation” previously identified intangible assets of Triple C were reported as impaired.

Amortization expense totaled $767,706 for the six months ended September 30, 2011, including $495,000 for the newly identified Cross Creek intangibles. Amortization expense for the year ended March 31, 2011 was $774,646, including $466,424 applicable to discontinued operations.

Note 5.   Line of Credit

Morris Revolving Credit

At September 30, 2011 and March 31, 2011, Morris has $844,062 and $895,153 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, guaranteed by a previous owner and is due August 27, 2012.  The applicable interest rate under this agreement is based on the Prime Rate, plus 3.5% with a floor of 4.00%.

Cross Creek Line of Credit

At September 30 2011, Cross Creek has $1,393,503 outstanding under a line of credit agreement that allows it to borrow up to a total of $1,800,000. The line of credit is secured by accounts receivable and is due March 28, 2013.  The applicable interest rate under this agreement is based on the Prime Rate, plus 2.0% with a floor of 6.0%.

F-15

Note 6.     Notes Payable
Notes Payable owed by Morris consisted of the following:
	September 30, 2011		March 31, 2011
Notes payable to Daimler Truck Financial, payable in monthly installments ranging from $569 to $5,687 including interest, through May 2013, with interest rates ranging from 5.34% to 8.07%, secured by equipment	$	835,600	$	1,191,577
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535 including interest, through April 2013, with interest rates ranging from 6.69% to 8.53%, secured by equipment		840,710		450,942
Note payable to Chrysler Credit, payable in monthly installments of $5,687 including interest, through November 2011, with interest at 6.9%, secured by equipment		-		50,298
Note payable to Wells Fargo Bank, payable in monthly installments  of $4,271 including interest, through October 2011, with interest at 6.59%, secured by equipment		75,441		92,606
Note payable to Mack Financial Services, payable in monthly installments of $8,359.96 including interest, through May 2016, with interest at 7.19% secured by equipment.		393,279
Note payable to Mack Financial Services, payable in monthly installments of $2,105.68 including interest, through May 2016, with interest at 7.19% secured by equipment.		99,642
Note payable to Volvo Financial Services, payable in monthly installments of $6,637.49 including interest, through October 2016, with interest at 7.50% secured by equipment		201,981
Note payable to a local dealer, payable in monthly installments of $499.83 though April 2013.		13,720
Totals	$	2,460,374	$	1,785,423

F-16

Notes payable owed by Smith consisted of the following:
	September 30, 2011		March 31, 2011
Notes payable to bank,  payable in monthly installments of $60,000 including interest,  through December 2012, with interest at 9%, collateralized by substantially all of Smith assets	$	1,549,671	$	1,803,578
Notes payable to bank,  payable in monthly instaments including interest, through June 2011, with interest at 6.5%, collateralized by substantially all of Smith assets		1,508,220		1,530,191
Note payable to Platte Valley National Bank, payable in monthly installments of $1,471 with interest, through  May 2011, with interest at 6.75%, collateralized by vehicle.		11,417		19,689
Note payable to Floyds, payable in monthly installments of $2,084, through November 2012, with interest at 8%, secured by a vehicle.		25,638		37,062
Note payable to Nissan Motors, payable in monthly installments of $505 including interest, through June 2011, with interest at 5.6%, secured by a vehicle.		-		1,225
Note payable to Ally, payable in monthly installments of $599 including interest, through December 2015, with interest at6%, secured by a vehicle.		27,256		30,113
Unsecured, non-interest bearing note payable to Colorado Holdings Valley Bank, payable in monthly installments of $5,000, through 2023.		677,000		686,999
Total	$	3,799,202	$	4,108,857

F-17

Notes payable owed by Cross Creek consisted of the following:
	September 30, 2011
Notes payable to All Points Capital, payable in monthly installments ranging from $1,495 to $9,912 including interest, through December 2012, with interest rates ranging from 5.84% to 8.45%, secured by equipment	$	184,303
Notes payable to Edison Financial, payable in monthly installments ranging from $2,058 to $11,411 including interest, through April 2014, with interest rates ranging from 8.09% to 11.50%, secured by equipment		339,288
Notes payable to FCC Equipment Financing, payable in monthly installments ranging from $654 to $17,078 including interest, through April 2014, with interest rates ranging from 6.43% to 8.69%, secured by equipment		*
Notes payable to GE Capital, payable in monthly installments ranging from $1,885 to $14,476 including interest, through May 2014, with interest rates ranging from 6.90% to 8.74%, secured by equipment		691,020
Note payable to Zion Credit Corporation, payable in monthly installments  of $16,789 including interest, through March 2012, with interest at 7.35%, secured by equipment		146,574
Note payable to Capital One Bank, payable in monthly installments  of $7,406 including interest, through September 2014, with interest at 5.65%, secured by equipment		255,887
Notes payable to Double Dee Finance, payable in monthly installments ranging from $1,615 to $7,760 including interest, through May 2013, with interest rates ranging from 10.00% to 12.00%, secured by equipment		238,250
Notes payable to Ford Motor Credit, payable in monthly installments ranging from $434 to $946 including interest, through July 2015, with interest rates ranging from 0.00% to 9.15%, secured by vehicles		94,217
Notes payable to Daimler Chrysler Financial, payable in monthly installments ranging from $2,264 to $15,529 including interest, through January 2014, with interest rates ranging from 5.26% to 8.12%, secured by equipment		1,528,781
Notes payable to Cascade Sierra Solutions, payable in monthly installments currently totaling $8,010 including interest, through January 2015, with interest rates ranging from 5.01% to 7.50%, secured by equipment		193,928
Total	$	3,672,248

F-18

Notes payable owed by IFC consisted of the following:

	$	September 30, 2011	March 31, 2011
Various notes payable with maturity dates ranging from 05/10/10 to 12/28/11.  Interest rates ranging from 4.0% to 18%.  Various warrants issued with an exercise price ranging  between $0.10 and $0.50 per share.  Various notes contain a conversion feature allowing the holder to convert the debt into shares of common stock at a strike price between $0.30 and $0.50 per share.	$	1,059,476.00		1,160,476
Note payable to Ford Credit, payable in monthly installments of $885 including interest, through Octber 2013, with interest at 16.84% , collateralized by a truck, used by an executive.		20,504.00		25,141
Note payable to Ally, payable in monthly installments of $715 including interest, through October 2016, with interest at 7.74%, collateralized by a truck, used by former executive.		36,365.17		38,821
Note payable to a former related party, with interest at 12.00%,  a default judgment has been awarded to the holder, the Company intends to comply with the judgment when funds are available.		45,115.00		45,115
Note payable to Robins Consulting, payable in quarterly installments of  $60,000, through March 2012 and a final payment of $222,640 on June 30, 2012, with interest at 7.50%, secured by 1,056,300 shares of Integrated Freight Corporation stock		382,000.00		-
Convertible promissory notes with an investment firm, simple interest of 8%, due in May 2012, convertible at the option of the holder at prices as defined.		156,500.00
Promissory nootes with an investment firm, simple interest of % per month, due in November 2011, secured by assets of The Company as defined.		400,000.00
Original Issue Discount Senior Debenture with an investment firm, due April 2012, secured by Equipment.		178,200.00
Less: unamortized discount on notes payable		72,486.00		(219,480	)
Totals	$	2,205,714.00	$	1,050,073

	IFC		Morris		Smith		Cross Creek		Total
Current portion of notes payable  & other	$	2,205,674	$	1,024,338	$	576,039	$	3,373,777	$	7,179,828
Notes payable, net of current portion		-		1,436,036		3,223,163		298,471		4,957,670
Total as of September 30, 2011	$	2,205,674	$	2,460,374	$	3,799,202	$	3,672,248	$	12,137,498
Current portion of notes payable	$	1,001,284	$	1,115,818	$	592,009	$	-	$	2,709,111
Notes payable, net of current portion		48,789		669,605		3,516,848		-		4,235,242
Total as of March 31, 2011	$	1,050,073	$	1,785,423	$	4,108,857	$	-	$	6,944,353

F-19

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

The Company maintains debt obligations in which the maturity dates have passed.  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.

During the three months ended September 30, 2011, the Company entered into  convertible notes (the “Agreements”) with an investor (the “Investor”) pursuant to which the Investor purchased an aggregate principal amount of $156,500 (the “Convertible notes”). The convertible notes bear interest at 15% and maturity dates of nine months from the date of issuance. The convertible notes are convertible at the option of the holder at any time into shares of common stock, at a conversion price equal to $0.30.

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

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

The fair value of the derivative liability at September 30, 2011 and March 31, 2011 was $124,352 and $513,471, respectively and are reflected on the Consolidated Balance Sheets.  During the six months ended September 30, 2011 the change in fair value of $389,119 was comprised of $208,000 of stock issued in payment of previously described “full ratchet” provisions and $181,119 change in fair value reflected on the Consolidated Statements of Operations. 

Note 7.   Notes Payable – Related Parties

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

F-20

	June 30, 2011		March 31, 2011
Various notes payable with maturity dates ranging from 05/10/10 to 12/28/11.  Interest rates ranging from 4.0% to 18%.  Various warrants issued with an exercise price ranging  between $0.10 and $0.50 per share.  Various notes contain a conversion feature allowing the holder to convert the debt into shares of common stock at a strike price between $0.30 and $0.50 per share.	$	371,621	$	562,944
Collateralized Notes Payable due October 2012, with interest of 9.9%, collateralized by equipment as defined.	$	382,526
Notes payable to related party, from acquisition described in note 11, to previous owners of Smith, with interest of 8%, secured by all shares of Smith common stock, principal and interest due May 15, 2011.		210,000		210,000
Amounts payable to related party, from acquisition described in note 11, to previous owners of Triple C, payment due November 10, 2010. The Company is currently in litigation and The Company has rescinded this aquisition to extend maturity.		150,000		150,000
Note payable to shareholder, with interest at 8.5%, due on demand.		212,261		328,138
Note payable to shareholder, with interest at 8.0%, due on demand.		40,000		40,000
Note payable to shareholder, with interest at 5.0%, due on June 1, 2011.		-		9,900
Note payable to related party, from acquisition described in note 11, to previous owners of Cross Creek, with interest at 5.0%, principal and interest due on March 31, 2019.		3,765,000		-
Note payable to related party, with interest at 10.0%, due on November 10, 2011.		27,000		-
	$	5,158,408	$	1,300,982

Note 8.    Income Taxes

At September 30, 2011, the Company estimated that it had approximately $32,000,000 of net operating loss carry forwards, which if unused will expire through 2031. Of the $ 32 million, approximately $20.8 million is subject to limitations under IRC Section 382 due to owner shifts during the period.

The Company and some of its operating entities have undergone tax status changes and is delinquent in filing certain of its income and payroll tax returns in certain jurisdictions, but the company believes it has sufficient loss carryforwards available for any income tax liability that may be due and has set aside sufficient reserves in accounts payable, accrued expenses and other liabilities for any payroll tax obligations.

F-21

Note 9.    Shareholders’ Deficit

Common Stock

2011

For the six months ended September 30, 2011, the Company issued 2,500,000 shares of common stock for the acquisition of Cross Creek Trucking Inc.  The stock was valued at $0.40 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 1,976,206 shares of common stock to various holders for services provided to the Company.  The stock was valued between $0.275 and $0.40 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 616,000 shares of common stock to various debt holders as an equity inducement.  The stock was valued at $0.32 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 650,000 shares of common stock to various holders as a result of a ratchet provision in their debt agreement, which enabled the holders to benefit from any deal done after their investment that had better terms.  The stock was valued at $0.32 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 325,000 shares of common stock as a result of an exercise of stock purchase warrants.  The stock was converted at $0.10 per share.

Warrants to Purchase Common Stock

2011

For the six months ended September 30, 2011, the Company issued 300,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 6 years, relating to a maturity extension of a convertible note.

For the six months ended September 30, 2011, the Company issued 1,500,000 common stock purchase warrants, at an exercise price ranging from $0.50 to $3.00, an expiration of 3 years, relating to acquisition of Cross Creek.

For the six months ended September 30, 2011, the Company issued 400,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 3 years, relating to a services rendered.

For the six months ended September 30, 2011, the Company issued 116,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 5 years, relating to the issuance of debt obligations.

For the three months ended September 30, 2011, The Company issued 304,500 common stock purchase warrants at an exercise price of $0.40, an expiration of 5 years relating to the issuance of debt obligations.

F-22

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

Risk-free interest rate		1.27- 2.19	%
Dividend yield		0.00	%
Volatility factor		172	%
Expected life	3-5 years

The relative fair value of the warrants issued for the six months ended September 30, 2011, calculated in accordance with ASC 470-20, Debt withConversion and Other Options; totaled $27,405..  The relative fair value of the warrants issued for the year ended March 31, 2011, totaled $. The relative fair value of the warrants issued with the debenture has been charged to additional paid-in capital with a corresponding discount on the note payable.  The discount is amortized over the life of the debt. As the discount is amortized, the reported outstanding principal balance of the notes will approach the remaining unpaid value.   

A summary of the grant activity for the six months ended September 30, 2011 is presented below:

					Weighted
			Weighted		Average
	Stock Awards		Average		Remaining
	Outstanding		Exercise		Contractual
	& Exercisable		Price		Term
Balance, March 31, 2011		12,403,890		0.35	3 years
Granted		2,620,500		0.62	3 years
Exercised		325,000		0.10		N/A
Expired/Cancelled		-		-		N/A
Balance, September 30, 2011		14,699,390	$	0.49	3 years

As of September 30, 2011 and March 31, 2011, the number of warrants that were currently vested and expected to become vested was 14, 699,390 and 12,403,890, respectively.

F-23

Note 10.    Commitments and Contingencies

Operating Leases

The Company leases office space in Sarasota, Florida under a one year operating lease with two additional one year extensions at the option of the Company.  Beginning August 1, 2010, the Company entered into a new lease for more space at $1,200 per month. The Company also entered into a 60-month lease, at $7,700 per month; relating to IT hardware infrastructure.

Employment Agreements

From time to time since 2008, the Company has entered into three year employment agreements with two executives of the Company.  The Company is committed to pay the executives a total of approximately $450,000 per year, with certain guaranteed bonuses and increases.  The agreements also call for bonuses if the executives meet certain goals which are to be set by the board of directors. A third executive left the Company in January, 2011 with certain portions of his employment agreement not yet funded.  That former executive has commenced legal action against the Company – see Litigation-Note 10.

Purchase Commitments

The Company’s purchase commitments for revenue equipment are always under negotiation and review. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $1MM to $3MM and are expected to be financed over an average of 4 to 7 years.

Litigation

The following table provides information about the litigation in which we are now engaged.  This litigation has arisen from our acquisition of Triple C Transport.

F-24

Plaintiff Name	Defendant Name	Case No.	Court	Basis of Claim and Amount
People's United Equipment Finance Corp.	Triple C Transport, Inc.	4:11-cv-00264	U.S. District Court Southern District of Texas	Triple C’s guaranty of its lessor’s equipment financing $3,603,716
Craig Carrier Corp., LLC and	Triple C Transport* and Integrated Freight Corporation	10-43798-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease$9,309,476
White Farms Trucking, Inc.	Triple C Transport* and Integrated Freight Corporation	10-43797-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease $9,309,476
Hilda L. Solis, Secretary of Labor	Triple C Transport*, et al.	A11-4049-TJM	U.S. Bankruptcy Court District of Nebraska	Claim for unpaid wages $39,201
Integrated Freight Corporation	Craig White and Vonnie White	11-248	District Court Douglas, Nebraska	Rescission of Stock Exchange Agreement and unspecified damages.
C&V LLC	Triple C Transport, Inc.	11-316	District Court Douglas, Nebraska	Real estate lease payments $178,972

________________

*Defense of Triple C Transport has been tendered to Craig White and Vonnie White.

F-25

All of the litigation identified above includes claims for interest and attorney’s fees.

Craig Carrier, White Farms Trucking and C&V are entities owned and controlled by Mr. and Mrs. White, from whom we acquired Triple C Transport.  The operations of Triple C Transport have been discontinued and it has no assets.  One or more judgments against Triple C Transport would be recorded as a liability on our consolidated balance sheet even though we would have no liability to pay any such judgment.  We have exposure to direct liability only in the above listed cases in which we are a named defendant.  If we are successful in our action for rescission of the Stock Exchange Agreement, of which we have no assurance, pursuant to which we acquired Triple C Transport from Mr. and Mrs. White, then we would not expect to record any liability for Triple C Transport’s litigation losses, to incur any direct liability with respect to our guaranty of Triple C Transport’s leases to the entities owned and controlled by Mr. and Mrs. White or to incur liability for alleged damages in unspecified amounts.  We intend to aggressively pursue our case for rescission of our acquisition of Triple C Transport and for damages against Mr. and Mrs. White, based on fraud, breach of material representations and warranties and gross and intentional mismanagement of Triple C Transport.

Other Litigation:

Weiss, as receiver for the Nutmeg/Fortuna Fund Integrated Freight Corporation 11-CV-03130 U.S. District Court Northern District of Illinois Collection $167,000

The suite by Nutmeg/Fortuna Fund is for collection on a promissory note that Original Integrated Freight issued in purchase of our preferred stock from the plaintiff in a transaction in which Original Integrated Freight acquired control of us.  We will endeavor to negotiate a settlement of this litigation or the purchase of the note from the plaintiff by another party who will restructure the note.

Litigation recently resolved:

On August 25, 2011 the Company entered into a confidential settlement with Steven E. Lusty for breach of his employment agreement and unspecified damages.  As part of the settlement the Company issued 50,000 common shares to Mr. Lusty and as of September 30, 2011 had paid a portion of the amounts outlined in the agreement.  All other amounts have been previously recorded on the financial statements of the Company.  Since September 30, 2011 the Company has been delinquent in a portion of the payments outlined in the agreement.

Our ability to aggressively defend and to prosecute the litigation described in the preceding table will depend significantly on our ability to fund legal fees and related costs of litigation.

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.

F-26

Claims and Assessments

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

Note 11. Related Party Transactions

The Company has not entered into any transactions with the Company’s directors and executive officers, outside of normal employment transactions, or with their relatives and entities they control, and in the day to day operations of our business.

Note 12.    Business Combinations

Triple C Transportation, Inc.

On May 14, 2010, the Company acquired 100% of the common stock of Triple C Transportation, Inc. (“Triple C”), a Nebraska-based refrigerated motor freight business, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was May 14, 2010 and the transaction was accounted for under the purchase method in accordance with ASC 805. Initially, Triple C’s results of operations were included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $466,424, with a weighted average amortization period of 3 years.

However, because of events during the past several months (as fully described in Note 2) the Company fully impaired the $466,424 of intangible assets, is attempting to rescind the Triple C purchase and reported Triple C as a “discontinued operation”.

Cross Creek Trucking Incorporated

On April 1, 2011, the Company acquired 100% of the common stock of Cross Creek Trucking, Inc. (Cross Creek), an Oregon-based motorized freight business, under the terms of a Stock exchange Agreement.  The accounting date of the acquisition was April 1, 2011 and the transaction was accounted for under the purchase method in accordance with ASC 805.  Cross Creek’s results of operations have been included in our consolidated financial statements since the date of acquisition.  Identified intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $1,910,112.  The weighted average amortization period is under study during the measurement period.

The aggregate purchase price was $6,515,000, including 2,500,000 shares of the Company’s common stock valued at $0.40 per share.  Transaction costs of $795,000 were expensed in accordance with ASC 805 and included on the Statement of Operations

F-27

Below is a summary of the total purchase price:

Common Stock (2,500,000 shares)	$	1,000,000
Note Payable		4,575,000
Warrants		440,000
Contingent Payment		500,000
	$	6,515,000

See Note 9 for description of warrants.

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

Accounts receivables	$	2,095,094
Prepaid expenses and other assets		60,631
Property and equipment		10,174,097
Other assets		31,416
Total Assets acquired	$	12,361,238
Accounts Payable	$	746,564
Accrued expenses and other liabilities		709,194
Line of Credit		916,005
Notes Payable		5,878,463
Total liabilities assumed	$	8,250,226
Net Assets acquired	$	4,111,012

F-28

Pro forma results

If the Company had purchased Cross Creek as of April 1, 2010, the results of operations for the six months ended September 30, 2010 would be as follow:

	IFC			Morris		Smith		Cross Creek		Total
Revenue					5,804,313		3,793,984		13,935,000		11,898,789
Operating Expenses
Rents and transportation					1,028,403		1,283,958		1,240,000		1,565,974
W ages. salaries & benefits		229,387			1,551,942		870,427		4,348,000		3,793,800
Fuel and fuel taxes					1,959,053		728,019				3,706,241
Other operatingexpenses		967,880			1,000,496		742,255		3,053,000		3,085,619
Total Operating Expenses		1,119,267			5,539,894		3,625,659		13,426,000		12,151,634
Other Expenses (Income)		137,805			58,641		41,435		145,000		72,078
Net loss before minority interest		(1,335,072	)		205,778		126,890		353,000		324,923
Minority interest share of subsidiary net income							20,721				20,721
Net income ( loss)		(1,335,072	)		205,778		147,611		353,000		319,232

The Company incurred transaction costs of $795,000 and losses from discontinued operations of $2,348 which are not reflected in the above amounts for the quarter ended September 30, 2010.

Triple C Transportation, Inc.

On May 14, 2010, the Company acquired 100% of the common stock of Triple C Transportation, Inc. (“Triple C”), a Nebraska-based refrigerated motor freight business, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was May 14, 2010 and the transaction was accounted for under the purchase method in accordance with ASC 805. Initially, Triple C’s results of operations were included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $466,424, with a weighted average amortization period of 3 years.

However, because of events during the past several months (as fully described in Note 2) the Company fully impaired the $466,424 intangible assets, rescinded the Triple C purchase and reported Triple C as a “discontinued operation”.

Note 13.  Business Segment Information

The Company follows the provisions of ASC 280, Segment Reporting, which established standards for the reporting of information about operating segments in annual and interim financial statements.  Operating segments are defined as components of an enterprise for which financial information is available that is evaluated regularly by the chief operating decision makers(s) in deciding how to allocate resources and in assessing performance.  In the past, the Company operated its subsidiaries (Morris Transportation and Smith Systems) as independent companies under separate management of their respective founders. Management of the Company makes decisions about allocating resources based on these operating segments. Since April, 1, 2011 the Company now operates all subsidiaries (including Morris Transportation and Smith Systems) under the same operating manager. The following tables depict the information expected by ASC 280:

F-29

	Revenue		Net Income (Loss)			Total Assets
Six Months Ended
September 30, 2011
IFC	$	-	$	(4,487,640	)	$	2,322,796
Morris		5,916,305		204,451			3,918,946
Smith		4,514,390		124,858			2,280,354
IF Services		485,333		59,404			67,451
Cross Creek		13,908,558		(166,701	)		10,466,146
	$	24,824,586	$	(4,265,628	)	$	19,055,693
September 30, 2010
IFC	$	-	$	(1,201,786	)	$	2,394,700
Morris		5,804,313		205,778			3,740,839
Smith		3,793,984		141,920			2,826,601
	$	9,598,297	$	(854,088	)	$	8,962,140

Note 14. Subsequent Events

In October 2011, the Company entered into a Securities Purchase Agreement in connection with the issuance of an 8% Convertible Note for $32,500.  The Note is due July 12, 2012 and has various prepayment, share conversion, share reservation, and penalty interest provisions.  The proceeds were used for general corporate purposes.

Management has evaluated events and transactions that occurred subsequent to September 30, 2011, through November 21, 2011, the date at which the consolidated financial statements were available to be issued.  Other than the disclosures shown, management did not identify any events or transactions that should be recognized or disclosed in the consolidated financial statements.

See Note 10 – Litigation – for Summary of recent legal activity.

In October 2011, The Company entered into a Securities Purchase Agreement in connection with the issuance of an 8% Note for $161,640. The Note is due May 1, 2012, and has various prepayment and penalty interest provisions. The proceeds were used for general corporate purposes. In connection with their agreement, The Company issued 453,030 common shares to the purchaser of the notes.

F-30

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

The following analysis of our consolidated financial condition and results of operations for the six months ended September 30, 2011 and 2010 should be read in conjunction with the consolidated financial statements, including footnotes, appearing elsewhere in this quarterly report.

Overview

The main factors that traditionally 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. We have also begun to use the brokerage of vehicles owned by other companies to fulfill excess demand from our customer base.

Six months ended September 30, 2011 Compared to the Six Months Ended September30, 2010

The following table presents and compares the results of our operations for the six months ending September 30, 2011 and 2010.  We began operations at Integrated Freight Services, Inc.  Our brokerage operation and purchased our Cross Creek Trucking, Inc.  Subsidiary April 1, 2011.  In reading this information, we encourage you to consider the differential in the periods being compared.

	Six Months Ended									%
	September 30,						Increase			Increase
	2011			2010			(Decrease)			(Decrease)
Revenue	$	24,824,586		$	9,598,297		$	15,226,289			158.6	%
Operating Expenses
Rents and transportation		3,960,234			2,262,307			1,697,927			75.1	%
Wages, salaries and benefits		7,811,498			2,641,756			5,169,742			195.7	%
Fuel and fuel taxes		8,941,850			2,649,018			6,292,832			237.6	%
Depreciation and amortization		1,807,582			1,181,739			625,843			53.0	%
Insurance and claims		410,049			392,243			17,806			4.5	%
Operating taxes and licenses		682,904			93,466			589,438			630.6	%
General and administrative		3,078,177			944,110			2,134,067			226.0	%
Total Operating Expenses		26,692,294			10,164,639			16,527,655			162.6	%
Loss  from continuing operations		(1,867,708	)		(566,342	)		(1,301,366	)		229.8	%
(Loss)/Gain from discontinued operations		(420,756	)		141,920			(562,676	)		-396.5	%
Other Income  (Expense)
Gain/(loss) on change of fair value of derivative liability		181,119			(60,000	)		241,119			-
Interest		(2,129,945	)		(480,432	)		(1,649,513	)		343.3	%
Interest - related parties		(19,848	)		(87,227	)		67,379			-77.2	%
Other income (expense)		(21,737	)		182,963			(204,700	)		-111.9	%
Total Other Income  (Expense)		(1,990,411	)		(444,696	)		(1,545,715	)		347.6	%
Net loss  before  noncontrolling interest		(4,278,875	)		(869,118	)		(3,409,757	)		392.3	%
Noncontrolling interest share  of subsidiary net income		13,247			15,030			(1,783	)		-11.9	%
Net loss	$	(4,265,628.00	)	$	(854,088.00	)	$	(3,411,540.00	)		399.4	%

5

Revenues

For the six months ended September 30, 2011, we reported revenues of $24,824,586 as compared to revenues of $9,598,297 for the six months ended September 30, 2010 an increase of $15,226,289 or approximately 158.6%.  The increase is due to three primary factors: the acquisition of Cross Creek Trucking, Inc. on April 1, 2011, the effect of the brokerage operation, and the increase in freight revenue in correlation to the US economy.

 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. Harvests also create additional demand for our refrigerated trucks.  For the reasons stated, our fiscal first and second quarter results have historically been higher than results in each of the other two quarters of the fiscal year excluding charges.  Our equipment utilization typically improves substantially fiscal third and fourth quarters of each fiscal year because of the trucking industry's seasonal shortage of equipment on traffic related to produce and because of general increases in shipping demand during those months.

Total Operating Expenses

Our total operating expenses increased approximately 162.6% to $26,692,294 for the six months ended September 30, 2011 as compared to $10,164,639 for the six months ended September 30, 2010. The principle reason for the percentage increase is the same reasons cited above for revenue, plus additional transaction costs in the Cross Creek Trucking, Inc. acquisition that were charged to general and administrative expenses. The main components of operating expense include:

Rents and Transportation.  For the six months ended September 30, 2011, rents and transportation costs were $3,960,234 as compared to $2,262,307 for the six months ended September 30, 2010, an increase of $1,697,927 or 75.1%.  The increase was due to the acquisition of Cross Creek Trucking, Inc.

Wages, salaries and benefits.  For the six months ended September 30, 2011, wages, salaries and benefits costs were $7,811,498 as compared to $2,641,756 for the six months ended September 30, 2010, an increase of $5,169,742 or 195.7%. The increase was due to the acquisition of Cross Creek Trucking, Inc.

Fuel and fuel taxes.  For the six months ended  September 30, 2011, fuel and fuel taxes costs were $8,941,850  as compared to $2,649,018 for the six months ended September 30, 2010, an increase of $6,292,832 or 237.6%.  A correlating fuel price instability is a contributing factor in these increases, along with the acquisition of Cross Creek Trucking, Inc.

Depreciation and amortization. For the six months ended September 30, 2011, depreciation and amortization costs were $1,807,582 as compared to $1,181,739 for the six months ended September 30, 2011, an increase of $625,843 or 53.0. The increase was due to the acquisition of Cross Creek Trucking, Inc.

Insurance and claims.  For the six months ended September 30, 2011, insurance claims costs were $410,049 as compared to $392,243 for the six months ended September 30, 2010, an increase of $17,806 or 4.5%.

Operating taxes and licenses.  For the six months ended  September 30, 2011, operating taxes and licenses costs were $682,904  as compared to $93,466 for the six months ended September 30, 2010, an increase of $589,438  or 630.6%. The increase was due to the acquisition of Cross Creek Trucking, Inc.

6

General and administrative expenses.   For the six months ended September 30, 2011, general and administrative expenses costs were $3,078,177 as compared to $944,110 for the six months ended September 30, 2010, an increase of $2,134,067 or 226.0%. The increase was due to the acquisition of Cross Creek Trucking, Inc. and included $795,000 of transactions costs related to the acquisition.

Our larger expenses, for example truck lease and financing costs, are fixed.  Our driver payroll tends to fluctuate with the freight shipped;  however, we do have fixed payroll expenses for the office, management and the shop that do not increase in correlation to the increase on freight income.  For us to achieve success, in addition to the cost cutting measures we are initiating in areas  such as insurance, we will need to pass through more of our fuel costs increases to our customers either in the form of surcharges or rate increases for this to occur.

Loss from Continuing Operations

We reported a loss from continuing operations of $1,867,708 for the six months ended September 30, 2011 as compared to a loss from operations of $566,342 for the six months ended September 30, 2010, an increase of $1,301,366  or 229.8%.  The increase was due to the acquisition of Cross Creek Trucking, Inc. and included $795,000 of transactions costs related to the acquisition and the fuel cost situation described above.

Discontinued Operations - Triple C Transport

As more fully discussed in Note 2 to our consolidated financial statements, we shut down Triple C Transport’s operations due to the loss of the tractor and trailer fleet it was leasing from the former owners.  As was our practice with previous acquisitions, the former owners continued to manage the day to day operations of Triple C Transport and it was leasing approximately ninety-one power units and ninety-nine trailers from companies owned by the former owners for payments equal to the payment those companies were making on their financing agreements for that equipment, which was approximately $ 300,000 a month. During the latter part of October, 2010, the former owners of Triple C Transport notified us in writing that entities controlled by them and receiving lease payments from Triple C Transport were having difficulty servicing the debt of the related entities.  Two of those entities White Farms Trucking, Inc. (“WFT”) and Craig Carrier Corporation, LLC (“CCC”) ultimately filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Nebraska, on December 21, 2010 which have been assigned case numbers 10-43797 and 10-43798.

On May 2, 2011, we filed a complaint against Craig White and Vonnie White in the District Court for Douglas County, Nebraska and served notice on the defendants pursuant to the Stock Purchase Agreement under which we acquired Triple C Transport from the defendants on or about May 14, 2011.  In the complaint, we ask the court to rescind the Stock Purchase Agreement, alleging multiple, material breaches of representations and warranties which individually and in the aggregate constitute fraud upon us.  We are also seeking damages in unspecified amounts.  We intend to pursue this litigation aggressively.  Because of actions taken by the defendants subsequent to closing of our acquisition, undisclosed liabilities of Triple C Transport, breaches of the defendants’ representations and warranties, and the bankruptcies of entities they control and which were Triple C Transport’s equipment lessors, we believe that rescission will not have a materially negative impact on our financial performance going forward; even though we will not enjoy the benefits of the acquisition which we expected at the time of the transaction but which do not seem now available in fiscal year 2012 in view of the fact that Triple C Transport has lost its licenses to operate based on actions by Mr. and Mrs. White and other entities they control both before and after the closing of the transaction.

We incurred cumulative losses of $1,949,789, including $420,756 for the six months ending September 30, 2011, associated with this transaction and have reserved $1,893,269 to cover any liabilities incurred in relation to it. The ultimate disposition of these liabilities and losses hinge with the results of the litigation, which we cannot estimate an outcome of at this time.

7

Other Income (Expenses)

We reported total other expense of $1,990,411  for the six months ended September 30, 2011 as compared to total other expenses of  $444,696 for the six months ended September 30, 2010, an increase  of  $1,545,715 or 347.6%.  While interest expense continues to increase due to a greater debt level, other income decreased during the period.  Other income and expense reflects interests costs (net of interest income), including derivatives, as discussed below.

Interest expense for the six months ended September 30, 2011 was $2,129,945 compared to $480,432 for the six months ended September 30, 2010, an increase of 1,649,513. This was due to greater debt levels, default interest on past due notes, acquisition indebtedness for Cross Creek Trucking, Inc., increases from the acquisition of Cross Creek Trucking, Inc.  and expenses incurred to renegotiate and extend existing debt.

We had interest gains related derivative expense of $181,119 on the sale of convertible notes for the six months ended September 30, 2011 compared to interest loss of $60,000 for the six months ended September 30, 2010.

Segments

Morris Transportation

For the six months ended September 30, 2011, Morris Transportation had revenues of $5,916,305 compared with revenues of $5,804,313 for the six months ended September 30, 2010, an increase of $111,992 or 1.9%.  This increase is primarily due to a general improvement in the trucking industry.

For the six months ended September 30, 2011, Morris Transportation had net income of $204,451 compared with net income of $205,778 for the six months ended September 30, 2010.  The decrease in net income is due to the increase in fuel costs, net of surcharge.

Total assets at September 30, 2011, were $3,918,946, as compared to total assets of $3,740,839 at of September 30, 2010.  This decrease is primarily due to an increase in accounts receivable.

Smith Systems Transportation

For the six months ended September 30, 2011, Smith Systems Transportation had revenues of $4,514,390 compared with revenues of $3,793,984 for the six months ended September 30, 2010.  This increase is primarily due to a general improvement in the trucking industry, particularly in the part of the country (Nebraska, Wyoming, and surrounding states) where Smith Systems Transportation operates and increased fuel surcharge passed on to customers.

For the six months ended September 30, 2011, Smith Systems Transportation had a net loss of $124,858 compared with a net income of $141,920 for the six months ended September 30, 2010, a decrease of $266,778.  This increase is primarily due to losses of the sales of fixed assets and increasing fuel prices.

Total assets at September 30, 2011, totaled $2,280,354, as compared to total assets of $2,826,601 at September 30, 2010, a decrease of $546,247, due to equipment disposals.

8

Cross Creek Trucking, Inc.

We acquired Cross Creek Trucking, Inc. on April 1, 2011, so the results of operations for the quarter ending September 30, 2010, are not included in our results of operations.

For the fiscal six months ended September 30, 2011, Cross Creek Transportation had revenues of $13,908,558 compared with revenues of $13,934,763 for the six months ended September 30, 2010, a decrease of $26,205 or 0.2%.  This small decrease is due to lower miles billed offset by increase fuel surcharge.

For the six months ended September 30, 2011, Cross Creek Transportation had a net loss of $166,701 compared with net income of $772,854 for the six months ended September 30, 2010.  The decrease in net income is due to the increase in fuel costs that have been passed on the our customers.

Integrated Freight Services

We began our brokerage operations for Integrated Freight Services on April 1, 2011 from unfulfilled business opportunities we had in the remainder of the Company. There are no prior period results to compare to.

For the fiscal six months September 30, 2011, Integrated Freight Services had revenues of $485,333. For the six months ended September 30, 2011, Integrated Freight Services had net income of $59,404. Total assets at September 30, 2011, totaled $67,541.

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. In addition to the cash flows discussed below, the Company issued approximately $5,000,000 of debt and $1,440,000 of stock and warrants to acquire Cross Creek Trucking, Inc.

Cash Flows and Working Capital

Our cash flow from operations is insufficient to meet current obligations. In fiscal quarter September 30, 2011, we relied upon additional investment through debt in order to fund our operations. We anticipate the need to raise significant amounts of capital in order to fund our operations in the next fiscal quarter.

As a result of losses we have incurred to date, we have financed our operations primarily through equity and debentures. At September 30, 2011, we had receivables, net of allowances, of $4,620,823 and our current liabilities were $10,941,919.

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 and brokerage operations can reduce our equipment cost when justified by the level of sales.

9

Operating Activities

Net cash flows from operating activities was $946,485 for the six months ended September 30,2011 as compared to net cash provided by operating activities of $298,852 for the six months ended September 30, 2010. For the six months ended September 30, 2011, the Company had a net loss of $4,278,875, along with non-cash items such as depreciation and amortization expense of $1,807,582, share-based compensation and interest expense of $1,461,081, minority interest in earnings of a subsidiary of $13,247, changes in discontinued assets and liabilities of $335,765 and changes in operating assets and liabilities of $1,607,679. During the six months ended September 30, 2010 the Company experienced a net loss of $854,088, along with non-cash items such as depreciation and amortization expense of $1,408,211, offset by changes in assets and liabilities of $340,271.

Investing Activities

We did not expend or generate any cash from investing activities for the six months quarter ended September 30, 2011 as compared to $134,240 of net cash used in investing activities for the six months ended September 30, 2010. During the six months ended September 30, 2010, we used cash of $100,000 for the purchase of Triple C Transport. We also purchased equipment for $34,240. We were able to acquire Cross Creek Trucking, Inc. entirely through Notes, stocks, and warrants.

Financing Activities

Net cash used by financing activities for the six months ended September 30, 2011, was $1,000,643, as compared to net cash used of $70,952 for the six months ended September 30, 2010. For the six months ended September 30, 2011, net cash provided by financing activities related to proceeds received from notes payable of $1,701,739 which were funds received from various lenders, proceeds from the exercise of warrants of $32,500, offset by repayments on notes payable of $2,734,882 which were to pay down the balances on various notes related to the trucks and trailers and other debts. In the prior period there were proceeds from notes payable of $644,422 and repayment of notes payable of $715,374.

Outlook

Notwithstanding our operating losses in the comparative quarters covered by this report on Form 10-Q, the Company has experienced positive cash flows and improvements in our working capital positions at the subsidiary level during the six months ended September 30, 2011 compared to the same quarter in 2010. As the Company begins to consolidate the duplicated functions among our subsidiaries, which the Company has begun in the areas of insurance and fuel purchasing, the Company expects to achieve further savings which will be reflected in improved cash flows and working capital positions, and profitable operations of which there is no assurance. The expenses associated with maintaining our reporting under the Securities Exchange Act, transaction costs and amortization, and interest costs and other costs associated with the raising of capital at the parent level have significantly contributed to our consolidated negative cash flow and working capital positions. The Company does not expect a positive change in these factors until the Company completes additional acquisitions, if any, which will enable the Company to spread the parent’s expenses, associated with being a publicly traded and reporting company and costs of future acquisition over a larger revenue and cash flow base.

The Company believes that we are in a continuingly uncertain truckload freight market as the operating environment grew slightly positive during the six months ended September 30, 2011. The Company expects the trend to continue in future quarters.

Even though management is uncertain about the overall economic recovery, the transportation industry is generally cash lean with over-leveraged balance sheets. The Company intends to invest more heavily as demand for truckload services improves, including additional acquisitions. The Company believes we are well-positioned to grow our business as the recovery continues to develop.

10

The Company believes that our level of profitability, fleet renewal strategy, and use of independent contractors will enable us to eventually internally finance attractive levels of fleet growth when demand conditions are right. Based on our growing network, a history of low cost operations and anticipated access to capital resources, albeit often at high rates, we believe we have the competitive position and ability to perpetuate our model based on leading growth and profitability.

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. 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. The Company considers 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.

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 percent or less 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.

Cash Requirements

At November 18, 2011, we had a nominal balance 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 60 to 90 days, after which we would need additional capital or face a significant curtailment of operations.

Recent Accounting Pronouncements

See Consolidated Financial Statements beginning on page F-1.

11

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, although the ability to recover surcharges varies depending on the customer relationships. The surcharge may affect the industry and the economy as a whole but does not differentiate between companies.

12

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, 2011, 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/Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2011, such disclosure controls and procedures were not effective.

The two primary reasons for management’s conclusions are:

Insufficient personnel to implement checks and balances; and

Decentralization of accounting functions in each subsidiary.

We began centralizing our accounting functions at the parent company level in April 2010 and we anticipate substantial completion by March 31, 2012.

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, 2011 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.

13

PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Triple C Transport and related litigation

Plaintiff Name	Defendant Name	Case No.	Court	Basis of Claim and Amount
People's United Equipment Finance Corp.	Triple C Transport, Inc.	4:11-cv-00264	U.S. District Court Southern District of Texas	Triple C’s guaranty of its lessor’s equipment financing Default Judgment $816,578 plus pre-judgment and post-judgment interest.
Craig Carrier Corp., LLC and	Triple C Transport* and Integrated Freight Corporation	10-43798-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease $9,309,476
White Farms Trucking, Inc.	Triple C Transport* and Integrated Freight Corporation	10-43797-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease $9,309,476
Hilda L. Solis, Secretary of Labor	Triple C Transport*, et al.	A11-4049-TJM	U.S. Bankruptcy Court District of Nebraska	Claim for unpaid wages $39,201
Integrated Freight Corporation	Craig White and Vonnie White	11-248	District Court Douglas, Nebraska	Rescission of Stock Exchange Agreement and unspecified damages.
C&V LLC	Triple C Transport, Inc.	11-316	District Court Douglas, Nebraska	Real estate lease payments $178,972

_________

*Defense of Triple C Transport has been tendered to Craig White and Vonnie White.

Craig Carrier, White Farms Trucking and C&V are entities owned and controlled by Mr. and Mrs. White, from whom we acquired Triple C Transport.  The operations of Triple C Transport have been discontinued and it has no assets.  One or more judgments against Triple C Transport would be booked as a liability on our consolidated balance sheet even though we would have no liability to pay any such judgment.  We have exposure to direct liability only in the above listed cases in which we are a named defendant.  If we are successful in our action for rescission of the Stock Exchange Agreement, of which we have no assurance, pursuant to which we acquired Triple C Transport from Mr. and Mrs. White, then we would not expect to book any liability for Triple C Transport’s litigation losses, to incur any direct liability with respect to our guaranty of Triple C Transport’s leases to the entities owned and controlled by Mr. and Mrs. White or to incur liability for alleged damages in unspecified amounts.  We intend to aggressively pursue our case for rescission of our acquisition of Triple C Transport and for damages against Mr. and Mrs. White, based on fraud, breach of material representations and warranties and gross and intentional mismanagement of Triple C Transport.

14

Other Litigation:

Weiss, as receiver for the Nutmeg/Fortuna Fund Integrated Freight Corporation 11-CV-03130 U.S. District Court Northern District of Illinois Collection $167,000

The suite by Nutmeg/Fortuna Fund is for collection on a promissory note that Original Integrated Freight issued in purchase of our preferred stock from the plaintiff in a transaction in which Original Integrated Freight acquired control of us.  We will endeavor to negotiate a settlement of this litigation or the purchase of the note from the plaintiff by another party who will restructure the note.

Litigation recently resolved:

On August 25, 2011, we entered into a confidential settlement with Steven E. Lusty, our former chief operating officer, of Case No. 2011-002523-NC in the Circuit Court in Sarasota, Florida..  As part of the settlement, we issued 50,000 common shares to Mr. Lusty and as of September 30, 2011 had paid a portion of the amounts outlined in the agreement.  All other amounts have been previously recorded on our financial statements.  Since September 30, 2011, we have been delinquent in making payments to Mr. Lusty.

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.

General

Our ability to aggressively defend and to prosecute the litigation, other than insured claims, will depend significantly on our ability to fund legal fees and related costs of litigation.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As of August 19, 2011, we  approved the  issue of 769,231 common shares to Paul A. Henley, our chief executive officer, in payment of $100,000 of accrued compensation owed to him.  As of the date of this report, these shares have not been issued, but are expected to be issued soon.

As of August 19, 2011, we issued  but  650,000 shares to Edward and Valerie Michaels as partial consideration for our proposed acquisition of American Transportation & Logistics, LLC. We have not closed on the transaction and are holding the shares until such time as we obtain the necessary financing to complete the transaction.

On September 26, 100, we issued 500,000 shares to Hillair Capital Investments LP in connection with the sale of $178,200  principal amount of Original Issue Discount Senior Debentures.

On November 1, 2011, , we issued 453,030 shares to Hillair Capital Investments LP in connection with the sale of $161,460  principal amount of Original Issue Discount Senior Debentures.

We have relied on the exemption from registration provided in Section 4(2) of the Securities Act of 1933 in that none of the sales involved a public offering.  Each sale was individually negotiated directly with the stockholder.  None of the sales involved the payment of commissions or fees to brokers.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  [Removed and Reserved]

ITEM 5.   OTHER INFORMATION

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

ITEM 6.   EXHIBITS

The following exhibits are attached to this report:

Exhibit Number	Description
31.1	Rule 15d-14 (a)  Certification by Principal Executive and Principal Operating Officer
31.2	Rule 15d-14 (a)  Certification by Principal Financial and Principal Accounting Officer
32	Section 1350 Certification of Principal Executive and Principal Operating Officer and Principal Financial Principal Accounting  Officer

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

16

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Integrated Freight Corporation
Date: November 21, 2011
	By:	/s/  Paul A. Henley
		Paul A. Henley, Chief Executive Officer
		(Principal Executive and Principal Operating Officer)
	By:	/s/  Paul A. Henley
		Paul A. Henley
		(Principal Financial and Principal Accounting Officer)

17

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Paul A. Henley, certify that:

1.   I have reviewed this Form 10-Q for the quarter ended September 30, 2011, 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 small business issuer as of, and for, the periods presented in this report;

4.   The small business issuer's other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and 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 small business issuer, 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 small business issuer'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 small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.   The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer'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 small business issuer's internal control over financial reporting.

Date:  November 21, 2011	By:	/s/  Paul A. Henley
		Paul A. Henley, Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Paul A. Henley, certify that:

1.   I have reviewed this Form 10-Q for the quarter ended September 30, 2011, 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 small business issuer as of, and for, the periods presented in this report;

4.   The small business issuer's other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and 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 small business issuer, 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 small business issuer'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 small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.   The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer'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 small business issuer's internal control over financial reporting.

Date:  November 21, 2011	By:	/s/  Paul A. Henley
		Paul A. Henley, Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 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 quarter ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned principal executive officer and the principal financial officer of the Company, hereby certify pursuant to 18 U.S.C. Section 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.

Date: November 21, 2011
	By:	/s/  Paul A. Henley
		Paul A. Henley, Chief Executive Officer
		(Principal Executive and Principal Operating Officer)
	By:	/s/  Paul A. Henley
		Paul A. Henley, Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

XML

Intangible Assets

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

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.”  In April, 2011 additional intangibles were recognized when the Company purchased the stock of Cross Creek.  

The Company operating authorities are tied to their motor carrier numbers that are issued and monitored by the U.S. Department of Transportation (FDOT).  The FDOT issues a rating to each company which has a direct impact on that company’s ability to attract and maintain a stable customer base as well as reduce the company’s insurance costs, one of the most significant expenditures for freight companies. Morris and Smith and Cross Creek 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. A detailed review of the Cross Creek intangibles is in process.

These intangible are as follows:

In addition, when the Company originally purchased Triple C (see Notes 2 and 11) $466,424 of identified intangible assets were recognized. However, when the Company rescinded the Triple C purchase and reported Triple C as a “discontinued operation” previously identified intangible assets of Triple C were reported as impaired.

Amortization expense totaled $767,706 for the six months ended September 30, 2011, including $495,000 for the newly identified Cross Creek intangibles.Amortization expense for the year ended March 31, 2011 was $774,646, including $466,424 applicable to discontinued operations.

XML

Property and equipment

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Property and equipment

Property and equipment consist of the following at September 30, 2011:
											Cross
		IFC			Morris			Smith			Creek			Total
Land, Buildings and Improvements	$	—		$	1,969		$	443,296		$	483,859		$	929,124
Tractors and Trailers		1,516,246			6,056,983			3,344,301			7,165,049			18,082,579
Vehicles		46,472			64,280			114,407			144,437			369,596
Furniture, Fixtures and Equipment		68,610			221,828			320,949			200,647			812,034
Less: accumulated depreciation		(822,829	)		(3,410,673	)		(3,338,232	)		(342,962	)		(7,914,696	)
Total	$	808,499		$	2,934,387		$	884,721		$	7,651,030		$	12,278,637

 Depreciation expense totaled $1,039,876 for the six months ended September 30, 2011.

Property and equipment consist of the following at March 31, 2011:

	IFC			Morris			Smith			Consolidated
Buildings	$	—		$	1,969		$	809,266		$	811,235
Tractors and Trailers		—			5,498,173			5,144,477			10,642,650
Vehicles		46,472			64,280			114,406			225,158
Furniture, Fixtures and Equipment		68,610			221,828			298,566			589,004
Less: accumulated depreciation		(27,792	)		(3,529,092	)		(4,570,095	)		(8,126,979	)
Total	$	87,290		$	2,257,158		$	1,796,620		$	4,141,068

Depreciation expense totaled $1,405,181 for the year ended March 31, 2011.

XML

Balance Sheets (Unaudited) (USD $)	Sep. 30, 2011	Mar. 31, 2011
Assets
Cash	$ 0	$ 54,158
Accounts receivables, net of allowance for doubtful accounts of $50,000	4,620,823	2,564,352
Prepaid expenses and other assets	702,701	545,930
Total current assets	5,323,524	3,164,440
Property and equipment, net of accumulated depreciation	12,278,607	4,141,068
Intangible assets, net of accumulated amortization	1,425,093	268,785
Assets of discontinued operations	28,469	236,279
Total assets	19,055,693	7,810,572
Liabilities and Stockholders’ Deficit
Bank overdraft	453,941	214,303
Accounts payable	1,991,360	1,151,337
Accrued expenses and other liabilities	4,261,978	1,112,778
Line of credit	2,237,565	895,153
Notes payable - related parties	1,150,775	1,180,987
Current portion of notes payable	5,846,300	2,709,111
Total current liabilities	15,941,919	7,263,669
Derivative liability	124,352	513,471
Notes payable - related parties	4,007,633	120,000
Notes payable, net of current portion and debt discount	4,957,667	4,235,242
Liabilities of discontinued operations	1,893,269	1,765,313
Total long-term liabilities	10,982,921	6,634,026
Total liabilities	26,924,840	13,897,695
Stockholders’ deficit:
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 38,472,089 and 31,574,883 shares issued and outstanding at September 30, 2011 and March 31, 2011, respectively	38,471	31,575
Additional paid-in capital	8,490,614	6,013,911
Accumulated deficit	(16,754,409)	(12,475,539)
Total Integrated Freight Corporation stockholders’ deficit	(8,225,324)	(6,430,053)
Non controlling interest	356,177	342,930
Total stockholders’ deficit	(7,869,147)	(6,087,123)
Total liabilities and stockholders’ deficit	$ 19,055,693	$ 7,810,572

XML

Nature of Operations and Significant Accounting Policies

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Nature of Operations and Significant Accounting Policies

Nature of Business

Integrated Freight Corporation (a Florida corporation) [formerly PlanGraphics, Inc. (a Colorado corporation)] and subsidiaries (the “Company”) is a short to medium-haul truckload carrier of general commodities headquartered in Sarasota, Florida. The Company provides dry van, hazardous materials, and temperature controlled truckload services.  The Company is subject to regulation by the Department of Transportation and various state regulatory authorities.

Pursuant to an agreement in connection with Integrated Freight Corporation’s (“Original IFC”) acquisition of control of the Company on May 1, 2009, the Company completed the sale of its historic operations to its former director and chief executive officer.  This transaction closed on December 27, 2009.  As part of the acquisition, the Company executed a 244.8598 for 1 reverse split in August, 2010, and all amounts have been presented on a post-split basis. Since the Company had, due to the sale of its historical operations, minimal assets and limited operations, the recapitalization has been accounted for as the sale of 404,961 shares of Original IFC common stock for the net liabilities of the Company. Therefore, the historical financial information prior to the date of the recapitalization is the financial information of IFC. Costs of the transaction have been charged to the period in which they are incurred. 

Following are the terms of the merger agreement:

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

Original IFC acquired 1,639,957 shares of the Company’s common stock, or 80.2 percent of the Company’s issued and outstanding common stock, as of May 1, 2009, for the purpose of merging the Company into Original IFC, with Original IFC being the surviving corporation. Uncertainty as to when Original IFC could obtain an effective registration statement on Form S-4 (which it filed and has now withdrawn) to complete the merger caused delays in Original IFC obtaining debt and equity funding and completing negotiations for additional acquisitions. On November 11, 2009, Original IFC and the Company agreed to restructure the transaction to provide for the Company’s acquisition of more than ninety percent of Original IFC’s issued and outstanding common stock and its merger into the Company. Colorado corporation law permits the merger of a subsidiary company owned ninety percent or more by a parent company into the parent company without stockholder approval. 

In furtherance of this change to the plan to combine Original IFC and the Company, 20,228,246 shares of Original IFC’s outstanding common stock were transferred by its stockholders to Jackson L. Morris, trustee for The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”). Original IFC also transferred the 1,639,957 shares of the Company’s common stock it owned to the Trust. The Company then exchanged 18,899,666 shares of its unissued common stock for the 20,228,246 shares of Original IFC held in the Trust. As a result of this transfer and exchange, the Trust held 20,539,623 of the Company’s shares. The number of shares of the Company’s common stock that it exchanged for the number of shares of Original IFC stock was not based on any financial or valuation considerations, but solely on the number of shares of the Company’s authorized but unissued shares in relation to the percentage of Original IFC’s outstanding common stock included in the exchange and the requirements of Colorado law that the Company own ninety percent or more of Original IFC in order to complete the merger without stockholder approval.

As part of the merger, the Company executed a 244.8598 for 1 reverse split effective August 17, 2010. All share amounts have been presented on a post-split basis.

Accordingly, the Company accounted for the acquisition and merger as a recapitalization because Original IFC stockholders gained control of a majority of the Company’s common stock upon completing these transactions.  Accordingly, Original IFC is deemed to be the acquirer for accounting purposes.  The consolidated financial statements have been retroactively restated to give effect to these transactions for all periods presented, except the statement of stockholders’ deficit with regard to common shares outstanding.

Certain items in the 2010 consolidated financial statements have been reclassified to conform to the presentation in the 2011 consolidated financial statements.  Such reclassifications did not have a material impact on the presentation of the overall consolidated financial statements.

Basis of Presentation

The unaudited consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for the interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These consolidated financial statements have not been audited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Company’s Annual Report for the year ended March 31, 2011, which is included in the Company’s Form 10-K for the year ended March 31, 2011. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, and its wholly owned subsidiaries, Morris Transportation, Inc. (“Morris”), Smith Systems Transportation, Inc. (“Smith”), Integrated Freight Services, Inc. (“IF Services”) incorporated in February, 2011; Cross Creek Trucking, Inc. (Cross Creek), acquired April 1, 2011, and Triple C Transport, Inc. (“Triple C”).- although Triple C is shown as a discontinued operation – See Notes 2, 10, 11 and 13. Smith holds a 60% ownership interest in SST Financial Group, LLC (“SSTFG”).  All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.  

Use of Estimates

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

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2011 and March 31, 2011.

Accounts Receivable Allowance

The Company makes estimates of the collectability of accounts receivable. 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 our allowance for doubtfulaccounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs.

Accordingly, the Company has a $50,000 allowance for uncollectible accounts and revenue adjustments as of September 30, 2011 and March 31, 2011.

Property and Equipment

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

	Years
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, 2011 and March 31, 2011.

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.

Furthermore, ASC 350 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. See Notes 2, 10, and 11 for the treatment of intangibles related to Triple C. No other impairment of intangibles has been identified since the date of acquisition.

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of September 30, 2011 and March 31, 2011.

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, 2011 and 2010, advertising expense was $-0- and $5,300, 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.

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, 2011 and March 31, 2011, 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 September 30, 2011 and March 31, 2011 included a remaining expected life of 1 year, an expected dividend yield of zero, estimated volatility of 172%, and risk-free rates of return of approximately 1-2%. 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, 2011 and March 31, 2011, the Company had $2,237,565 and $895,953 outstanding under its revolving credit agreement, and $15,962,375 and $8,245,340, including $5, 920, 796 and $1, 300, 987 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.

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. Under ASC 505 and ASC 718, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, include cash and trade receivables.  For the six months ended September 30, 2011 and 2010, the Company’s top four customers, based on revenue, accounted for approximately 24%, and 27% of total revenue.  The Company’s top four customers, based on revenue, accounted for approximately 16% and 37 % of total trade accounts receivable at September 30, 2011 and March 31, 2011. 

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, 2011 and March 31, 2011, 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, 2011 and March 31, 2011, 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. 

Earnings per Share

The Company calculates earnings per share in accordance with ASC, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

At September 30, 2011 and March 31, 2011, there was no variance between the basic and diluted loss per share. The 4,699,390 and 12,463,890 warrants to purchase common shares outstanding at September 30, 2011 and March 31, 2011, were not included in the weighted-average number of shares computation for diluted earnings per common share, as the warrants are anti-dilutive. Also, the 6,698,292 and 6,514,111 shares potentially convertible into common stock underlying convertible notes payable were not included.

Recent Accounting Pronouncements

The Company has reviewed recent accounting pronouncements through September 2011 (Update 2011-05) and does not believe that any recently issued accounting pronouncements will have a material impact on its financial statements.

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Discontinued Operations

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Discontinued Operations

As previously reported, on May 14, 2010, the Company had acquired 100% of the common stock of Triple C Transport, Inc. (“Triple C”).  As was our practice with previous acquisitions, the former owners continued to manage the day to day operations of Triple C and it was leasing approximately ninety-one power units and ninety-nine trailers from companies owned by the former owners for payments equal to the payment those companies make on its financing agreements for that equipment, which was approximately $300,000 a month.  Triple C headquarters was leased from another company owned by the former owners for approximately $5,250 per month.  The acquisition agreement provided that one of the former owners would serve on the Company’s Board of Directors and he would be employed as the general manager of Triple C for three years.

During the latter part of October, 2010, the former owners of Triple C notified the Company in writing that entities controlled by them and receiving lease payments from Triple C were having difficulty servicing the debt of the related entities.  Two of those entities White Farms Trucking, Inc. (“WFT”) and Craig Carrier Corporation, LLC (“CCC”) ultimately filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the district of Nebraska, which were filed on December 21, 2010 and have been assigned case numbers 10-43797 and 10-43798.

During November, 2010 both the former owners resigned as officers and directors of Triple C, but one of the former owners continued to serve on our (IFC) Board of Directors through April, 2011.  Triple C installed new management to operate the business on a day to day basis and in an effort to insure Triple C’s continued operations with minimum disruption from potential bankruptcy related issues, moved substantially all of the Triple C ongoing operations away from the facility it leased from one of the related entities.  The physical move occurred in Mid-January 2011.  In order to preserve liquidity, Triple C had temporarily suspended lease payments for the equipment leased by Triple C from WFT/CCC.  Under the terms of the May 14, 2010 “Stock Purchase Agreement” IFC executed a corporate guaranty for all lease and other payments arising from the leases between WFT/CCC and Triple C.

On May 2, 2011, we filed a complaint against Craig White and Vonnie White in the District Court for Douglas County, Nebraska and served notice on the defendants pursuant to the Stock Purchase Agreement under which we acquired Triple C Transport, Inc. from the defendants on or about May 14, 2010.  In the complaint, we ask the court to rescind the Stock Purchase Agreement, alleging multiple, material breaches of representations and warranties which individually and in the aggregate constitute fraud upon us.  We are also seeking damages in unspecified amounts.  We intend to pursue this litigation aggressively.  Because of actions taken by the defendants subsequent to closing of our acquisition, undisclosed liabilities of Triple C Transport, breaches of the defendants’ representations and warranties, and the bankruptcies of entities they control and which were Triple C Transport’s equipment lessors, we believe that rescission will not have a materially negative impact on our financial performance going forward; even though we will not enjoy the benefits of the acquisition which we expected at the time of the transaction but which do not seem now available in fiscal year 2012, in view of the fact that Triple C Transport has lost its licenses to operate based on actions by Mr. and Mrs. White and other entities they control both before and after the closing of the transaction.  

In September 2011, the Company estimated a loss in the amount of $1,893,269 to be realized upon completion of the rescission of this business unit, as well as an estimated operating loss of $420,756 to be incurred during the phase-out period. For the period May 14, 2010 through March 31, 2011 the Company incurred actual operating losses associated with this discontinued unit of $1,529,033. Current period legal fees incurred by the Company are being recorded within the Company’s financial statements and included in Accrued expenses and other liabilities at September 30, 2011.

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Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2011	Mar. 31, 2011
Assets
Allowance for doubtful accounts	$ 50,000	$ 50,000
Stockholders equity:
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized shares	2,000,000,000	2,000,000,000
Common stock, issued shares	38,472,089	31,574,883
Common stock, outstanding shares	38,472,089	31,574,883

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Business Combinations

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Business Combinations

Triple C Transportation, Inc.

On May 14, 2010, the Company acquired 100% of the common stock of Triple C Transportation, Inc. (“Triple C”), a Nebraska-based refrigerated motor freight business, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was May 14, 2010 and the transaction was accounted for under the purchase method in accordance with ASC 805. Initially, Triple C’s results of operations were included in our consolidated financial statements since the date of acquisition. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $466,424, with a weighted average amortization period of 3 years.

However, because of events during the past several months (as fully described in Note 2) the Company fully impaired the $466,424 of intangible assets, is attempting to rescind the Triple C purchase and reported Triple C as a “discontinued operation”.

Cross Creek Trucking Incorporated

On April 1, 2011, the Company acquired 100% of the common stock of Cross Creek Trucking, Inc. (Cross Creek), an Oregon-based motorized freight business, under the terms of a Stock exchange Agreement. The accounting date of the acquisition was April 1, 2011 and the transaction was accounted for under the purchase method in accordance with ASC 805. Cross Creek’s results of operations have been included in our consolidated financial statements since the date of acquisition. Identified intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $1,910,112. The weighted average amortization period is under study during the measurement period.

The aggregate purchase price was $6,515,000, including 2,500,000 shares of the Company’s common stock valued at $0.40 per share. Transaction costs of $795,000 were expensed in accordance with ASC 805 and included on the Statement of Operations.

Below is a summary of the total purchase price:

Common Stock (2,500,000 shares)	$          1,000,000
Notes Payable	4,575,000
Warrants	440,000
Contingent Payment	500,000
	6,515,000

See Note 9 for description of warrants.

The following table represents the initial purchase price allocation to the estimated fair value of the assets

Acquired and liabilities assumed:

Accounts receivables	$        2,095,094
Prepaid expenses and other assets	60,631
Property and equipment	10,174,097
Other assets	31,416
Total Assets acquired	$      12,361,238
Accounts Payable	$          746,564
Accrued expenses and other liabilities	709,194
Line of Credit	916,005
Notes Payable	5,878,463
Total liabilities assumed	$        8,250,226
Net Assets acquired	$        4,111,012

Pro forma results

If the Company had purchased Cross Creek as of April 1, 2010, the results of operations for the six months ended September 30, 2010 would be as follow:

	IFC			Morris		Smith		Cross Creek		Total
Revenue					5,804,313		3,793,984		13,935,000		11,898,789
Operating Expenses
Rents and transportation					1,028,403		1,283,958		1,240,000		1,565,974
W ages. salaries & benefits		229,387			1,551,942		870,427		4,348,000		3,793,800
Fuel and fuel taxes					1,959,053		728,019				3,706,241
Other operating expenses		967,880			1,000,496		742,255		3,053,000		3,085,619
Total Operating Expenses		1,119,267			5,539,894		3,625,659		13,426,000		12,151,634
Other Expenses (Income)		137,805			58,641		41,435		145,000		72,078
Net loss before minority interest		(1,335,072	)		205,778		126,890		353,000		324,923
Minority interest share of subsidiary net income							20,721				20,721
Net income ( loss)		(1,335,072	)		205,778		147,611		353,000		319,232

The Company incurred transaction costs of $795,000 and losses from discontinued operations of $2,348 which are not reflected in the above amounts for the quarter ended September 30, 2010.

Triple C Transportation, Inc.

On May 14, 2010, the Company acquired 100% of the common stock of Triple C Transportation, Inc. (“Triple C”), a Nebraska-based refrigerated motor freight business, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was May 14, 2010 and the transaction was accounted for under the purchase method in accordance with ASC 805. Initially, Triple C’s results of operations were included in our consolidated financial statements since the date of acquisition. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $466,424, with a weighted average amortization period of 3 years.

However, because of events during the past several months (as fully described in Note 2) the Company fully impaired the $466,424 intangible assets, rescinded the Triple C purchase and reported Triple C as a “discontinued operation”.

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Document and Entity Information	6 Months Ended
	Sep. 30, 2011	Nov. 21, 2011
Document And Entity Information
Entity Registrant Name	INTEGRATED FREIGHT Corp
Entity Central Index Key	0000783284
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		38,472,089
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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Business Segment Information

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Business Segment Information

The Company follows the provisions of ASC 280, Segment Reporting, which established standards for the reporting of information about operating segments in annual and interim financial statements.  Operating segments are defined as components of an enterprise for which financial information is available that is evaluated regularly by the chief operating decision makers(s) in deciding how to allocate resources and in assessing performance.  In the past, the Company operated its subsidiaries (Morris Transportation and Smith Systems) as independent companies under separate management of their respective founders. Management of the Company makes decisions about allocating resources based on these operating segments. Since April, 1, 2011 the Company now operates all subsidiaries (including Morris Transportation and Smith Systems) under the same operating manager. The following tables depict the information expected by ASC 280:

	Revenue		Net Income (Loss)			Total Assets
Six Months Ended
September 30, 2011
IFC	$	—	$	(4,487,640	)	$	2,322,796
Morris		5,916,305		204,451			3,918,946
Smith		4,514,390		124,858			2,280,354
IF Services		485,333		59,404			67,451
Cross Creek		13,908,558		(166,701	)		10,466,146
	$	24,824,586	$	(4,265,628	)	$	19,055,693
September 30, 2010
IFC	$	—	$	(1,201,786	)	$	2,394,700
Morris		5,804,313		205,778			3,740,839
Smith		3,793,984		141,920			2,826,601
	$	9,598,297	$	(854,088	)	$	8,962,140

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Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Statements Of Operations
Revenue	$ 11,788,506	$ 4,817,249	$ 24,824,586	$ 9,598,297
Operating Expenses
Rents and transportation	1,930,753	1,226,521	3,960,234	2,262,307
Wages, salaries and benefits	3,795,945	1,315,857	7,811,498	2,641,756
Fuel and fuel taxes	4,018,311	1,228,521	8,941,850	2,649,018
Depreciation and amortization	546,246	600,959	1,807,582	1,181,739
Insurance and claims	130,478	200,621	410,049	392,243
Operating taxes and licenses	264,501	52,562	682,904	93,466
General and administrative	1,158,311	468,902	3,078,177	944,110
Total Operating Expenses	11,844,545	5,093,943	26,692,294	10,164,639
Loss from continuing operations	(56,039)	(276,694)	(1,867,708)	(566,342)
(Loss)/Gain  from discontinued operations	0	130,938	(420,756)	141,920
Other Income (Expense)
Gain/(loss) on change of fair value of derivative liability	207,936	0	181,119	(60,000)
Interest	(1,196,127)	(138,900)	(2,129,945)	(480,432)
Interest - related parties	(136,815)	(47,329)	(19,848)	(87,227)
Other income (expense)	(220,614)	20,851	(21,737)	182,963
Total Other Income (Expense)	(1,345,620)	(165,378)	(1,990,411)	(444,696)
Net loss before noncontrolling interest	(1,401,659)	(311,134)	(4,278,875)	(869,118)
Noncontrolling interest share of subsidiary net income (loss)	3,804	9,339	13,247	15,030
Net loss	$ (1,397,855)	$ (301,795)	$ (4,265,628)	$ (854,088)
Net loss per share - basic and diluted
Loss from continuing operations	$ (0.03)	$ (0.02)	$ (0.11)	$ (0.05)
Income (loss) from discontinued operations	$ (0.01)	$ 0.01	$ (0.01)	$ 0.01
Net loss per common share-basic and diluted	$ (0.04)	$ (0.01)	$ (0.12)	$ (0.04)
Weighted average common shares outstanding - basic and diluted	37,935,422	22,166,759	36,332,331	21,089,749

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Notes Payable – Related Parties

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Notes Payable – Related Parties

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

	September 30, 2011		March 31, 2011
Various notes payable with maturity dates ranging from 05/10/10 to 12/28/11.  Interest rates ranging from 4.0% to 18%.  Various warrants issued with an exercise price ranging  between $0.10 and $0.50 per share.  Various notes contain a conversion feature allowing the holder to convert the debt into shares of common stock at a strike price between $0.30 and $0.50 per share	$	371,621	$	562,944
Collateralized Notes Payable due October 2012, with
interest of 9.9%, collateralized by equipment as defined		382,526		—
Notes payable to related party, from acquisition described in note 11, to previous owners of Smith, with interest of 8%, secured by all shares of Smith common stock, principal and interest due May 15, 2011		210,000		210,000
Amounts payable to related party, from acquisition described in note 11, to previous owners of Triple C, payment due November 10, 2010. The Company is currently in litigation and The Company has rescinded this aquisition to extend maturity		150,000		150,000
Note payable to shareholder, with interest at 8.5%, due on demand		212,261		328,138
Note payable to shareholder, with interest at 8.0%, due on demand		40,000		40,000
Note payable to shareholder, with interest at 5.0%, due on June 1, 2011		—		9,900
Note payable to related party, from acquisition described in note 11, to previous owners of Cross Creek, with interest at 5.0%, principal and interest due on March 31, 2019		3,765,000		—
Note payable to related party, with interest at 10.0%, due on November 10, 2011		27,000		—
	$	5,158,408	$	1,300,982

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Notes Payable

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Notes Payable

Notes Payable owed by Morris consisted of the following:
	September 30, 2011		March 31, 2011
Notes payable to Daimler Truck Financial, payable in monthly installments ranging from $569 to $5,687 including interest, through May 2013, with interest rates ranging from 5.34% to 8.07%, secured by equipment	$	835,600	$	1,191,577
Notes payable to GE Financial, payable in monthly installments ranging from $2,999 to $7,535 including interest, through April 2013, with interest rates ranging from 6.69% to 8.53%, secured by equipment		840,710		450,942
Note payable to Chrysler Credit, payable in monthly installments of $5,687 including interest, through November 2011, with interest at 6.9%, secured by equipment		—		50,298
Note payable to Wells Fargo Bank, payable in monthly installments  of $4,271 including interest, through October 2011, with interest at 6.59%, secured by equipment		75,441		92,606
Note payable to Mack Financial Services, payable in monthly
installments of $8,359.96 including interest, through May 2016,
with interest at 7.19% secured by equipment		393,279		—
Note payable to Mack Financial Services, payable in monthly
installments of $2,105.68 including interest, through May 2016,
with interest at 7.19% secured by equipment		99,642		—
Note payable to Volvo Financial Services, payable in monthly
installments of $6,637.49 including interest, through October
2016, with interest at 7.50% secured by equipment		201,981		—
Note payable to a local dealer, payable in monthly installments
of $499.83 though April 2013		13,720		—
Totals	$	2,460,374	$	1,785,423

Notes payable owed by Smith consisted of the following:
	September 30, 2011		March 31, 2011
Notes payable to bank,  payable in monthly installments of $60,000 including interest,  through December 2012, with interest at 9%, collateralized by substantially all of Smith assets	$	1,549,671	$	1,803,578
Notes payable to bank,  payable in monthly instaments including interest, through June 2011, with interest at 6.5%, collateralized by substantially all of Smith assets		1,508,220		1,530,191
Note payable to Platte Valley National Bank, payable in monthly installments of $1,471 with interest, through  May 2011, with interest at 6.75%, collateralized by vehicle		11,417		19,689
Note payable to Floyds, payable in monthly installments of $2,084, through November 2012, with interest at 8%, secured by a vehicle		25,638		37,062
Note payable to Nissan Motors, payable in monthly installments of $505 including interest, through June 2011, with interest at 5.6%, secured by a vehicle		—		1,225
Note payable to Ally, payable in monthly installments of $599 including interest, through December 2015, with interest at 6%, secured by a vehicle		27,256		30,113
Unsecured, non-interest bearing note payable to Colorado Holdings Valley Bank, payable in monthly installments of $5,000, through 2023		677,000		686,999
Total	$	3,799,202	$	4,108,857

Notes payable owed by Cross Creek consisted of the following:
	September 30, 2011
Notes payable to All Points Capital, payable in monthly installments ranging from $1,495 to $9,912 including interest, through December 2012, with interest rates ranging from 5.84% to 8.45%, secured by equipment	$	184,303
Notes payable to Edison Financial, payable in monthly installments ranging from $2,058 to $11,411 including interest, through April 2014, with interest rates ranging from 8.09% to 11.50%, secured by equipment		339,288
Notes payable to FCC Equipment Financing, payable in monthly installments ranging from $654 to $17,078 including interest, through April 2014, with interest rates ranging from 6.43% to 8.69%, secured by equipment		—
Notes payable to GE Capital, payable in monthly installments ranging from $1,885 to $14,476 including interest, through May 2014, with interest rates ranging from 6.90% to 8.74%, secured by equipment		691,020
Note payable to Zion Credit Corporation, payable in monthly installments  of $16,789 including interest, through March 2012, with interest at 7.35%, secured by equipment		146,574
Note payable to Capital One Bank, payable in monthly installments  of $7,406 including interest, through September 2014, with interest at 5.65%, secured by equipment		255,887
Notes payable to Double Dee Finance, payable in monthly installments ranging from $1,615 to $7,760 including interest, through May 2013, with interest rates ranging from 10.00% to 12.00%, secured by equipment		238,250
Notes payable to Ford Motor Credit, payable in monthly installments ranging from $434 to $946 including interest, through July 2015, with interest rates ranging from 0.00% to 9.15%, secured by vehicles		94,217
Notes payable to Daimler Chrysler Financial, payable in monthly installments ranging from $2,264 to $15,529 including interest, through January 2014, with interest rates ranging from 5.26% to 8.12%, secured by equipment		1,528,781
Notes payable to Cascade Sierra Solutions, payable in monthly installments currently totaling $8,010 including interest, through January 2015, with interest rates ranging from 5.01% to 7.50%, secured by equipment		193,928
Total	$	3,672,248

Notes payable owed by IFC consisted of the following:

	September 30, 2011			March 31, 2011
Various notes payable with maturity dates ranging from 05/10/10 to 12/28/11.  Interest rates ranging from 4.0% to 18%.  Various warrants issued with an exercise price ranging  between $0.10 and $0.50 per share.  Various notes contain a conversion feature allowing the holder to convert the debt into shares of common stock at a strike price between $0.30 and $0.50 per share	$	1,059,476		$	1,160,476
Note payable to Ford Credit, payable in monthly installments of $885 including interest, through Octber 2013, with interest at 16.84% , collateralized by a truck, used by an executive		20,504			25,141
Note payable to Ally, payable in monthly installments of $715 including interest, through October 2016, with interest at 7.74%, collateralized by a truck, used by former executive		36,365			38,821
Note payable to a former related party, with interest at 12.00%,  a default judgment has been awarded to the holder, the Company intends to comply with the judgment when funds are available		45,115			45,115
Note payable to Robins Consulting, payable in quarterly installments of  $60,000, through March 2012 and a final payment of $222,640 on June 30, 2012, with interest at 7.50%, secured by 1,056,300 shares of Integrated Freight Corporation stock		382,000			—
Convertible promissory notes with an investment firm, simple interest
of 8%, due in May 2012, convertible at the option of the holder at
prices as defined		156,500
Promissory notes with an investment firm, simple interest of % per
month, due in November 2011, secured by assets of The Company as		400,000
defined
Original Issue Discount Senior Debenture with an investment firm, due
April 2012, secured by Equipment		178,200
Less: unamortized discount on notes payable		(72,486	)		(219,480	)
Totals	$	2,205,674		$	1,050,073

	IFC		Morris		Smith		Cross Creek		Total
Current portion of notes payable  & other	$	2,205,674	$	1,024,338	$	576,039	$	3,373,777	$	7,179,828
Notes payable, net of current portion		—		1,436,036		3,223,163		298,471		4,957,670
Total as of September 30, 2011	$	2,205,674	$	2,460,374	$	3,799,202	$	3,672,248	$	12,137,498
Current portion of notes payable	$	1,001,284	$	1,115,818	$	592,009	$	—	$	2,709,111
Notes payable, net of current portion		48,789		669,605		3,516,848		—		4,235,242
Total as of March 31, 2011	$	1,050,073	$	1,785,423	$	4,108,857	$	—	$	6,944,353

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

The Company maintains debt obligations in which the maturity dates have passed. 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.

During the three months ended September 30, 2011, the Company entered into convertible notes (the “Agreements”) with an investor (the “Investor”) pursuant to which the Investor purchased an aggregate principal amount of $156,500 (the “Convertible notes”). The convertible notes bear interest at 15% and maturity dates of nine months from the date of issuance. The convertible notes are convertible at the option of the holder at any time into shares of common stock, at a conversion price equal to $0.30.

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

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

The fair value of the derivative liability at September 30, 2011 and March 31, 2011 was $124,352 and $513,471, respectively and are reflected on the Consolidated Balance Sheets.  During the six months ended September 30, 2011 the change in fair value of $389,119 was comprised of $208,000 of stock issued in payment of previously described “full ratchet” provisions and $181,119 change in fair value reflected on the Consolidated Statements of Operations. 

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Subsequent Events

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Subsequent Events

In October 2011, the Company entered into a Securities Purchase Agreement in connection with the issuance of an 8% Convertible Note for $32,500.  The Note is due July 12, 2012 and has various prepayment, share conversion, share reservation, and penalty interest provisions.  The proceeds were used for general corporate purposes.

Management has evaluated events and transactions that occurred subsequent to September 30, 2011, through November 21, 2011, the date at which the consolidated financial statements were available to be issued.  Other than the disclosures shown, management did not identify any events or transactions that should be recognized or disclosed in the consolidated financial statements.

See Note 10 – Litigation – for Summary of recent legal activity.

In October 2011, The Company entered into a Securities Purchase Agreement in connection with the issuance of an 8% Note for $161,640. The Note is due May 1, 2012, and has various prepayment and penalty interest provisions. The proceeds were used for general corporate purposes. In connection with their agreement, The Company issued 453,030 common shares to the purchaser of the notes.

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Commitments and Contingencies

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Commitments and Contingencies

Operating Leases

The Company leases office space in Sarasota, Florida under a one year operating lease with two additional one year extensions at the option of the Company. Beginning August 1, 2010, the Company entered into a new lease for more space at $1,200 per month. The Company also entered into a 60-month lease, at $7,700 per month; relating to IT hardware infrastructure.

Employment Agreements

From time to time since 2008, the Company has entered into three year employment agreements with two executives of the Company. The Company is committed to pay the executives a total of approximately $450,000 per year, with certain guaranteed bonuses and increases. The agreements also call for bonuses if the executives meet certain goals which are to be set by the board of directors. A third executive left the Company in January, 2011 with certain portions of his employment agreement not yet funded. That former executive has commenced legal action against the Company – see Litigation-Note 10.

Purchase Commitments

The Company’s purchase commitments for revenue equipment are always under negotiation and review. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $1MM to $3MM and are expected to be financed over an average of 4 to 7 years.

Litigation

The following table provides information about the litigation in which we are now engaged.  This litigation has arisen from our acquisition of Triple C Transport.

Plaintiff Name	Defendant Name	Case No.	Court	Basis of Claim and Amount
People's United Equipment Finance Corp.	Triple C Transport, Inc.	4:11-cv-00264	U.S. District Court Southern District of Texas	Triple C’s guaranty of its lessor’s equipment financing $3,603,716
Craig Carrier Corp., LLC and	Triple C Transport* and Integrated Freight Corporation	10-43798-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease$9,309,476
White Farms Trucking, Inc.	Triple C Transport* and Integrated Freight Corporation	10-43797-TJM	U.S. Bankruptcy Court District of Nebraska	Unpaid and future rents under Master Lease and our guarantee of Master lease $9,309,476
Hilda L. Solis, Secretary of Labor	Triple C Transport*, et al.	A11-4049-TJM	U.S. Bankruptcy Court District of Nebraska	Claim for unpaid wages $39,201
Integrated Freight Corporation	Craig White and Vonnie White	11-248	District Court Douglas, Nebraska	Rescission of Stock Exchange Agreement and unspecified damages.
C&V LLC	Triple C Transport, Inc.	11-316	District Court Douglas, Nebraska	Real estate lease payments $178,972

*Defense of Triple C Transport has been tendered to Craig White and Vonnie White.

All of the litigation identified above includes claims for interest and attorney’s fees.

Craig Carrier, White Farms Trucking and C&V are entities owned and controlled by Mr. and Mrs. White, from whom we acquired Triple C Transport.  The operations of Triple C Transport have been discontinued and it has no assets.  One or more judgments against Triple C Transport would be recorded as a liability on our consolidated balance sheet even though we would have no liability to pay any such judgment.  We have exposure to direct liability only in the above listed cases in which we are a named defendant.  If we are successful in our action for rescission of the Stock Exchange Agreement, of which we have no assurance, pursuant to which we acquired Triple C Transport from Mr. and Mrs. White, then we would not expect to record any liability for Triple C Transport’s litigation losses, to incur any direct liability with respect to our guaranty of Triple C Transport’s leases to the entities owned and controlled by Mr. and Mrs. White or to incur liability for alleged damages in unspecified amounts.  We intend to aggressively pursue our case for rescission of our acquisition of Triple C Transport and for damages against Mr. and Mrs. White, based on fraud, breach of material representations and warranties and gross and intentional mismanagement of Triple C Transport.

Other Litigation:

Weiss, as receiver for the Nutmeg/Fortuna Fund Integrated Freight Corporation 11-CV-03130 U.S. District Court Northern District of Illinois Collection $167,000

The suite by Nutmeg/Fortuna Fund is for collection on a promissory note that Original Integrated Freight issued in purchase of our preferred stock from the plaintiff in a transaction in which Original Integrated Freight acquired control of us.  We will endeavor to negotiate a settlement of this litigation or the purchase of the note from the plaintiff by another party who will restructure the note.

Litigation recently resolved:

On August 25, 2011 the Company entered into a confidential settlement with Steven E. Lusty for breach of his employment agreement and unspecified damages. As part of the settlement the Company issued 50,000 common shares to Mr. Lusty and as of September 30, 2011 had paid a portion of the amounts outlined in the agreement. All other amounts have been previously recorded on the financial statements of the Company. Since September 30, 2011 the Company has been delinquent in a portion of the payments outlined in the agreement.

Our ability to aggressively defend and to prosecute the litigation described in the preceding table will depend significantly on our ability to fund legal fees and related costs of litigation.

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

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Income Taxes

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Income Taxes

At September 30, 2011, the Company estimated that it had approximately $32,000,000 of net operating loss carry forwards, which if unused will expire through 2031. Of the $ 32 million, approximately $20.8 million is subject to limitations under IRC Section 382 due to owner shifts during the period.

The Company and some of its operating entities have undergone tax status changes and is delinquent in filing certain of its income and payroll tax returns in certain jurisdictions, but the company believes it has sufficient loss carryforwards available for any income tax liability that may be due and has set aside sufficient reserves in accounts payable, accrued expenses and other liabilities for any payroll tax obligations.

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Shareholders’ Deficit

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Shareholders’ Deficit

Common Stock

2011

For the six months ended September 30, 2011, the Company issued 2,500,000 shares of common stock for the acquisition of Cross Creek Trucking Inc. The stock was valued at $0.40 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 1,976,206 shares of common stock to various holders for services provided to the Company. The stock was valued between $0.275 and $0.40 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 616,000 shares of common stock to various debt holders as an equity inducement. The stock was valued at $0.32 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 650,000 shares of common stock to various holders as a result of a ratchet provision in their debt agreement, which enabled the holders to benefit from any deal done after their investment that had better terms. The stock was valued at $0.32 per share, its fair market value at the date of issuance.

For the six months ended September 30, 2011, the Company issued 325,000 shares of common stock as a result of an exercise of stock purchase warrants. The stock was converted at $0.10 per share.

Warrants to Purchase Common Stock

2011

For the six months ended September 30, 2011, the Company issued 300,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 6 years, relating to a maturity extension of a convertible note.

For the six months ended September 30, 2011, the Company issued 1,500,000 common stock purchase warrants, at an exercise price ranging from $0.50 to $3.00, an expiration of 3 years, relating to acquisition of Cross Creek.

For the six months ended September 30, 2011, the Company issued 400,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 3 years, relating to a services rendered.

For the six months ended September 30, 2011, the Company issued 116,000 common stock purchase warrants, at an exercise price of $0.40, an expiration of 5 years, relating to the issuance of debt obligations.

For the three months ended September 30, 2011, The Company issued 304,500 common stock purchase warrants at an exercise price of $0.40, an expiration of 5 years relating to the issuance of debt obligations.

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

Risk-free interest rate	1.27- 2.19%
Dividend yield	0.00	%
Volatility factor	172	%
Expected life	3-5 years

The relative fair value of the warrants issued for the six months ended September 30, 2011, calculated in accordance with ASC 470-20, Debt with Conversion and Other Options; totaled $27,405..  The relative fair value of the warrants issued for the year ended March 31, 2011, totaled $. The relative fair value of the warrants issued with the debenture has been charged to additional paid-in capital with a corresponding discount on the note payable.  The discount is amortized over the life of the debt. As the discount is amortized, the reported outstanding principal balance of the notes will approach the remaining unpaid value.   

AA summary of the grant activity for the six months ended September 30, 2011 is presented below:

	Stock Awards Outstanding & Excercisable	Weighted Average Exercise price	Weighted Average Remaining Contractual Term
Balance, March 31, 2011	12,403,890	0.35	3 Years
Granted	2,620,500	0.62	3 years
Exercised	325,000	0.10	N/A
Expired/Cancelled	-	-	N/A
Balance, September 30, 2011	14,699,390	$                   0.49	3 Years

As of September 30, 2011 and March 31, 2011, the number of warrants that were currently vested and expected to become vested was 14, 699,390 and 12,403,890, respectively.

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Related Party Transactions

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Related Party Transactions

The Company has not entered into any transactions with the Company’s directors and executive officers, outside of normal employment transactions, or with their relatives and entities they control, and in the day to day operations of our business.

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Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net loss	$ (4,278,875)	$ (854,088)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,807,582	1,181,739
Debt discount amortization	45,597	169,012
Derivative liability	(389,119)	60,000
Common stock issued in payment of derivative	208,000	0
Warrants issued for interest	101,280	0
Loss on asset dispositions	449,982	6,744
Noncontrolling interest in earnings of subsidiary	13,247	(15,030)
Stock issued for stock based compensation	6,500	5,746
Warrants issued for services performed	79,600	0
Stock issued for interest	293,219	0
Stock issued for services	322,500	0
Loss from discountinued operations	420,756	0
Increases/decreases in operating assets and liabilities
Accounts receivable	38,623	(330,013)
Prepaid expenses and other assets	(75,285)	(26,842)
Accounts payable	(41,128)	57,677
Accrued and other liabilities	1,940,006	(41,093)
Net cash (used) in/provided by operating activities	946,485	213,852
Cash flows from investing activities:
Purchase of property and equipment	0	50,760
Purchase of discontinued operations-Triple C	0	(100,000)
Net cash used in investing activities	0	(49,240)
Cash flows from financing activities:
Repayments of notes payable	(2,734,882)	(715,374)
Proceeds of notes payable	796,916	559,000
Net proceeds/(repayments) from line of credit	665,185	(5,143)
Bank overdraft	239,638	85,565
Proceeds from exercise of warrants	32,500	5,000
Net cash (used) in/provided by financing activities	(1,000,643)	(70,952)
Net change in cash	(54,158)	93,660
Cash, beginning of period	54,158	48,101
Cash, end of period	$ 0	$ 141,761

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Line of Credit

6 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Line of Credit

Morris Revolving Credit

At September 30, 2011 and March 31, 2011, Morris has $844,062 and $895,153 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, guaranteed by a previous owner and is due August 27, 2012. The applicable interest rate under this agreement is based on the Prime Rate, plus 3.5% with a floor of 4.00%.

Cross Creek Line of Credit

At September 30 2011, Cross Creek has $1,393,503 outstanding under a line of credit agreement that allows it to borrow up to a total of $1,800,000. The line of credit is secured by accounts receivable and is due March 28, 2013.  The applicable interest rate under this agreement is based on the Prime Rate, plus 2.0% with a floor of 6.0%.