Integrated Freight (PGRA) 10-Q 2011 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

COMMISSION FILE 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: (888) 623-4378

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

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

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

PlanGraphics, Inc.

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X] NO [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [     ] NO [ X ]

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

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

The number of shares outstanding of each of the issuer’s classes of common stock at August 13, 2010 was 1,991,248,938, shares of no par common stock.

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6
	Notes to the Financial Statements	7
ITEM 2. ITEM 3. ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 4T.	CONTROLS AND PROCEDURES	36
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	37
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	38
ITEM 5.	OTHER INFORMATION	38
ITEM 6.	EXHIBITS	38

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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 qualified in their entirely by the full text of the agreements and documents, which you may obtain from the Public Reference Section of or online from the Commission. See “Where You Can Find Additional Information About Us And Exhibits” for instructions as to how to access and obtain this information. Whenever we make reference in this annual report to any of our agreements and other documents, t he references are not necessarily complete and you should refer to the exhibits attached to the registration statement of which this annual report is a part for copies of the actual contract, agreement or other document.

FORWARD-LOOKING STATEMENTS

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

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.

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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

The financial statements of Triple C Transport, Inc., which we acquired effective as of May 5, 2010 are consolidated in our financial statements included herein at and for the first quarter ended June 30, 2010.  We have encountered unexpected complications and delays in completing an audit of Triple C Transport’s financial statements at and for the twelve months ended March 31, 2010 and 2009, in particular as related to the condition of its and its predecessor’s financial records.  Accordingly, we do not have audited financial statements of Triple C Transport as the starting point for Triple C Transport’s financial statements at and for the first quarter ended June 30, 2010.  Our consolidated financial statements included herein are subject to adjustment with respect to Triple C Transport&# 8217;s financial statements for the concurrent period which may and are expected to result from completion of Triple C Transport’s audit.

PLANGRAPHICS, INC.

Consolidated Balance Sheets

	June 30, 2010			March 31, 2010
Assets	(Unaudited)
Current assets:
Cash	$	125,727		$	48,101
Accounts receivables, net of allowance for doubtful accounts of $50,000		2,622,020			2,306,738
Prepaid expenses and other assets		456,241			336,127
Total current assets		3,203,988			2,690,966
Property and equipment, net of accumulated depreciation		5,342,240			5,679,610
Intangible assets, net of accumulated amortization		1,206,065			913,868
Total assets	$	9,752,293		$	9,284,444
Liabilities and Stockholders’ Deficit
Current liabilities:
Bank overdraft	$	209,547		$	166,966
Accounts payable		554,082			447,752
Accrued and other liabilities		1,097,604			885,613
Contingent liabilities		216,424			-
Line of credit		905,943			755,044
Notes payable - related parties		1,760,000			1,441,740
Current portion of notes payable		3,052,420			4,066,928
Total current liabilities		7,796,020			7,764,043
Notes payable - related parties		-			210,000
Notes payable, net of current portion		5,476,513			4,496,292
Total long-term liabilities		5,476,513			4,706,292
Total liabilities		13,272,533			12,470,335
Stockholders’ deficit:
Common stock, no par value, 2,000,000,000 shares authorized,
1,942,945,514 and 1,942,445,514 shares issued and outstanding		1,193,879			1,192,879
Accumulated deficit		(5,043,997	)		(4,714,339	)
Total PlanGraphic Inc. stockholders’ deficit		(3,850,118	)		(3,521,460	)
Non controlling interest		329,878			335,569
Total stockholders’ deficit		(3,520,240	)		(3,185,891	)
Total liabilities and stockholders’ deficit	$	9,752,293		$	9,284,444

See notes to consolidated financial statements

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PLANGRAPHICS, INC.

Consolidated Statement of Operations

(Unaudited)

	Three Months Ended June 30,
	2010			2009
Revenue	$	6,706,247		$	4,145,057
Operating Expenses
Rents and transportation		1,752,971			1,264,155
Wages, salaries and benefits		1,630,269			1,287,194
Fuel and fuel taxes		2,290,031			910,294
Depreciation and amortization		518,274			510,683
Insurance and claims		262,361			152,887
Operating taxes and licenses		46,011			22,637
General and administrative		518,228			430,305
Total Operating Expenses		7,018,145			4,578,155
Other Expenses
Interest		154,219			214,978
Interest - related parties		39,898			17,189
Other Income		(170,666	)		(123,871	)
Total Other Expenses		23,451			108,296
Net loss before noncontrolling interest		(335,349	)		(541,394	)
Noncontrolling interest share of subsidiary net income		5,691			(2,035	)
Net loss	$	(329,658	)	$	(543,429	)
Net loss per share - basic and diluted	$	(0.00	)	$	(0.03	)
Weighted average common shares outstanding - basic and diluted		1,942,456,625			19,933,246

See notes to consolidated financial statements

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PLANGRAPHICS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

	Three Months Ended June 30,
Cash flows from operating activities:	2010			2009
Net loss	$	(329,658	)	$	(543,429	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		518,273			510,683
Deferred finance cost amortization		-			57,306
Minority interest in earnings of subsidiary		(5,691	)		2,035
Stock issued for stock based compensation		1,000			-
Increases/decreases in operating assets and liabilities
Accounts receivable		(315,282	)		(93,802	)
Prepaid expenses and other assets		(120,114	)		(9,794	)
Accounts payable		148,911			(457,373	)
Accrued and other liabilities		211,991			82,188
Net cash (used) in/provided by operating activities		109,430			(452,186	)
Cash flows from investing activities:
Purchase of property and equipment		(6,674	)		4,006
Purchase of subsidiary		(100,000	)		-
Net cash (used) in/provided by investing activities		(106,674	)		4,006
Cash flows from financing activities:
Repayments of notes payable		(464,029	)		(455,235	)
Proceeds of long term debt		388,000			562,048
Net proceeds from line of credit		150,899			249,476
Proceeds from sale of common stock		-			15,000
Net cash (used) in/provided by financing activities		74,870			371,289
Net change in cash		77,626			(76,891	)
Cash, beginning of period		48,101			158,442
Cash, end of period	$	125,727		$	81,551

See notes to consolidated financial statements

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1     Nature of Operations and Summary of Significant Accounting Policies

Nature of Business

PlanGraphics, Inc (a Colorado corporation) [formerly, Integrated Freight Corporation (a Florida corporation)] and subsidiaries (the “Company”) is a short to medium-haul truckload carrier of general commodities headquartered in Sarasota, Florida. The Company 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 (“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.  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 99,157,730 shares of 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, PGI filed articles of merger in the State of Florida; and, on December 23, 2009, PGI filed articles of merger in the State of Colorado. Pursuant to these articles of merger, IFC merged into the Company and the Company is the legal surviving corporation.

IFC acquired 401,559,467 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 IFC, with IFC being the surviving corporation. Uncertainty as to when 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 IFC obtaining debt and equity funding and completing negotiations for additional acquisitions. On November 11, 2009, IFC and the Company agreed to restructure the transaction to provide for the Company’s acquisition of more than ninety percent of 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 IFC and the Company, 20,228,246 shares of IFC’s outstanding common stock were transferred by its stockholders to Jackson L. Morris, trustee for The Integrated Freight Stock Exchange Trust, a Florida business trust (“Trust”). IFC also transferred the 401,559,467 shares of the Company’s common stock it owned to the Trust. The Company then exchanged 1,406,284,229 shares of its unissued common stock for the 20,228,246 shares of IFC held in the Trust. As a result of this transfer and exchange, the Trust now holds 1,807,843,696 of the Company’s shares. The number of shares of the Company’s common stock that it exchanged for the number of shares of 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 the percentage of IFC’s outstanding common stock included in the exchange and the requirements of Colorado law that PGI own ninety percent or more of IFC in order to complete the merger without stockholder approval.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Accordingly, the Company accounted for the acquisition and merger as a recapitalization because IFC gained control of a majority of PGI’s common stock upon completing these transactions.  Accordingly, 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.

Principles of Consolidation

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

Use of Estimates

The financial statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes.  Management evaluates these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods we consider reasonable in the particular circumstances.  Nevertheless, the Company’s actual results may differ significantly from 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 and salvage values of our assets, provisions for uncollectible accounts receivable, and estimates of exposures under our insurance and claims plans.  To the extent that actual, final outcomes are different than our estimates, or additional facts and circumstances cause 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 June 30, 2010 and March 31, 2010.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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 made a $50,000 allowance for uncollectible accounts and revenue adjustments as of June 30, 2010 and March 31, 2010.

Property and Equipment

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

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

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

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 June 30, 2010 and March 31, 2010.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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. No impairment of intangibles has been identified since the date of acquisition.

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of June 30, 2010 and March31, 2010.

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 three month period ended June 30, 2010 and 2009, advertising expense was approximately $15,225 and $1,084.

Income Taxes

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

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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

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

Stock-based Compensation

The Company has adopted the fair value recognition provisions of ASC 505, Equity and ASC 718, Compensation – Stock Compensation, using the modified prospective application method. 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 three months ended June 30, 2010 and 2009, the Company’s top four customers, based on revenue, accounted for approximately 48% and 35%, of total revenue.  The Company’s top four customers, based on revenue, accounted for approximately 27% and 34% of total trade accounts receivable at June 30, 2010 and March 31, 2010. 

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 June 30, 2010 and March 31, 2010, the Company's bank deposits did not exceed insured limits.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable and accounts payableapproximate fair value because of their short maturities. At June 30, 2010 and March 31, 2010, the Company had $905,943 and $775,044 outstanding under its revolving credit agreement, and $10,288,933 and $9,971,289, including $1,760,000 and $946,240 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.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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 June 30, 2010 and March 31, 2010, management estimated $-0- in claims accrual above insurance deductibles.

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 June 30, 2010 and March 31, 2010, there was no variance between the basic and diluted loss per share.  The 8,993,100 and 8,053,717 warrants to purchase common shares outstanding at June 30, 2010 and March 31, 2010, are not included in the weighted-average number of shares computation for diluted earnings per common share, as the warrants are anti-dilutive.

Basis of Presentation

The unaudited consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position at June 30, 2010, and the consolidated results of its operations for the three months ended June 30, 2010 and 2009, and the consolidated cash flows for the three ended June 30, 2010 and 2009. The results of operations for the three months ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncements

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification (“the Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our third-quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

In May 2009, the FASB issued (ASC Topic 855), “Subsequent Events” (ASC Topic 855). This guidance is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. It is effective for interim and annual reporting periods ending after June 15, 2009.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2009, the FASB issued ASC Topic 810-10, “Amendments to FASB Interpretation No. 46(R)”. This updated guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. It is effective for annual reporting periods beginning after November 15, 2009. The adoption of ASC Topic 810-10 did not have a material impact on the results of operations and financial condition.

In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements.” This ASU establishes the accounting and reporting guidance for arrangements including multiple revenue-generating activities. This ASU provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments in this ASU also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of t he relative selling-price method affects the timing or amount of revenue recognition. The amendments in this ASU are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June 15, 2010. Early application is permitted. The Company is currently evaluating this new ASU.

In October 2009, the FASB issued ASU No. 2010-14, “Certain Revenue Arrangements That Include Software Elements.” This ASU changes the accounting model for revenue arrangements that include both tangible products and software elements that are “essential to the functionality,” and scopes these products out of current software revenue guidance. The new guidance will include factors to help companies determine what software elements are considered “essential to the functionality.” The amendments will now subject software-enabled products to other revenue guidance and disclosure requirements, such as guidance surrounding revenue arrangements with multiple-deliverables. The amendments in this ASU are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June 15, 2010. Early application is permitted. The Compan y is currently evaluating this new ASU.

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PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements” an amendment to ASC Topic 820, “Fair Value Measurements and Disclosures.”  This amendment requires an entity to: (i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (ii) present separate information for Level 3 activity pertaining to gross purchases, sales, issuances, and settlements.  ASU No. 2010-06 is effective for the Company for interim and annual reporting beginning after December 15, 2009, with one new disclosure effective after December 15, 2010. The adoption of ASU No. 2010-06 did not have a material impact on the results of operations and financial condition.

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

Note 2.         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.

Note 3.     Property and Equipment

Property and equipment consist of the following at June 30, 2010:

	IFC			Morris			Smith			Triple C		Consolidated
Buildings	$	-		$	1,969		$	443,266		$	-	$	445,235
Tractors and Trailers		-			6,722,977			5,601,348			-		12,324,325
Vehicles		46,472			64,280			119,060			-		229,812
Furniture, Fixtures and  Equipment		-			212,342			292,287			-		504,629
Less: accumulated depreciation		(15,103	)		(4,083,287	)		(4,063,371	)		-		(8,161,761	)
Total	$	31,369		$	2,918,281		$	2,392,590		$	-	$	5,342,240

Depreciation expense totaled $344,045 for the three months ended June 30, 2010.

- 14 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Property and equipment consist of the following at March 31, 2010:

	IFC			Morris			Smith			Consolidated
Buildings	$	-		$	1,969		$	443,266		$	445,235
Tractors and Trailers		-			6,722,977			5,585,187			12,308,164
Vehicles		46,472			64,280			119,060			229,812
Furniture, Fixtures and Equipment		-			221,828			292,287			514,115
Less: accumulated depreciation		(12,780	)		(3,885,692	)		(3,919,244	)		(7,817,716	)
Total	$	33,692		$	3,125,362		$	2,520,556		$	5,679,610

Depreciation expense totaled $1,511,372 for the year ended March 31, 2010.

Note 4.  Intangible Assets

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

	June 30, 2010			March 31, 2010
Employment and non-compete agreements	$	1,144,293		$	1,043,293
Company operating authority and customer lists		1,257,382			891,958
Total intangible assets		2,401,675			1,935,251
Less: accumulated amortization		(1,195,610	)		(1,021,383	)
Intangible assets, net	$	1,206,065		$	913,868

Amortization expense totaled $174,228 and $722,862 for the three months ended June 30, 2010 and for the year ended March 31, 2010.

- 15 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Future amortization of intangible assets is as follows:

March 31,
2011	$	600,398
2012		424,269
2013		155,484
2014		25,914
	$	1,206,065

Note 5.       Line of Credit

Morris Revolving Credit

At June 30, 2010 and March 31, 2010, Morris has $905,943 and $755,044 outstanding under a revolving credit line agreement that allows them to borrow up to a total of $1,500,000. The line of credit is secured by accounts receivable, guaranteed by a previous owner and is due on demand.  The applicable interest rate under this agreement is based on the LIBOR plus 3.5%. The line has financial covenants that require Morris to maintain a tangible net worth of not less than $700,000 and a fixed charge coverage ratio of at least 1 to 1.  Morris is currently in default of these covenants but believe they can negotiate a successful resolution with the lender.

- 16 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 6.     Notes Payable

Notes payable owed by Morris consisted of the following:

	June 30, 2010		March 31, 2010
Notes payable to Daimler Truck Financial payable in monthly installments ranging from $569 to $5,687 including interest through May 2013 with interest rate ranging from 5.34% to 8.07% secured by equipment	$	1,715,335	$	1,810,261
Notes payable to Banks payable in monthly installments ranging from $1,805 to $5,829 including interest through June 2010 with interest rate ranging from 5.9% to 7.25% secured by equipment		-		42,585
Notes payable to GE Financial payable in monthly installments ranging from $2,999 to $7,535 including interest through April 2013 with interest rate ranging from 6.69% to 8.53% secured by equipment		698,339		809,984
6.9% note payable to a GMAC Financial in  installments of $667 including interest, through August 2013 secured by a vehicle		8,404		112,689
8.59% note payable to a Wells Fargo Bank payable in monthly installments of $4,271 including interest, through October 2011 secured by equipment		116,612		125,991
Totals	$	2,538,690	$	2,901,510

- 17 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Notes payable owed by Smith consisted of the following:

	June 30, 2010		March 31, 2010
Notes payable to bank, due December 2012, payable in monthly installments of $65,000, interest of 9%, collateralized by substantially all of Smith assets	$	2,099,371	$	2,186,889
Notes payable to bank, due 2010, with monthly interest payments of 6.5%, collateralized by substantially all of Smith assets		1,574,803		1,574,803
Note payable to Platte Valley National Bank, due December 2010, payable in monthly installments of $1,423, with interest at 9.5% collateralized by vehicle.		7,778		11,874
Notes payable to Daimler Chrysler, due 2010, Payable in monthly installments of $10,745, interest ranging from 8-9%, collateralized by  6 tractors.		3,787		13,978
Note payable to Floyds, due 2010, payable in monthly installments of $2,664 with interest at 5.6% unsecured.		4,686		6,229
Note payable to Nissan Motors due June 2011, payable in monthly installments of $505, with interest at 5.6% secured by a vehicle.		6,700		8,322
Unsecured, non-interest bearing note payable to Colorado Holdings, due 2010, payable in monthly installments of $1,250.		669,069		669,069
Total	$	4,366,194	$	4,471,164

- 18 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Notes payable owed by IFC consisted of the following:

	June 30, 2010		March 31, 2010
Various notes payable with various maturity dates.  Interest rates ranging from 8.0% to 14%.  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 $0.40 per share.	$	1,544,264		1,151,764
Note payable to Ford Credit, principal and 16.8% interest payment of $885 due monthly, collateralized by truck, used by stockholder.		31,855		38,781
Note payable to a former related party, with interest at 12.00%,  a default judgment has been award to the holder, the Company intends to comply with the judgment when funds are available.		47,930		51,740
Totals	$	1,624,049	$	1,242,285

Summary of notes payable:

	IFC		Morris		Smith		Triple C		Total
Current portion of notes payable	$	1,207,478	$	1,203,620	$	641,322	$	-	$	3,052,420
Notes payable, net of current portion		416,571		1,335,070		3,724,872		-		5,476,513
Total as of June 30, 2010	$	1,624,049	$	2,538,690	$	4,366,194	$	-	$	8,528,933
Current portion of notes payable	$	1,135,504	$	766,343	$	2,216,820	$	-	$	4,118,667
Notes payable, net of current portion		106,781		2,135,167		2,254,344		-		4,496,292
Total as of March 31, 2010	$	1,242,285	$	2,901,510	$	4,471,164	$	-	$	8,614,959

- 19 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 7.     Notes Payable – Related Parties

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

	June 30, 2010		March 31, 2010
Note payable to related party, from acquisition described in note 11, to previous owner of Morris, with interest of 8%,  to be paid in full by May 15, 2011.	$	970,000	$	1,000,000
Notes payable to related party, from acquisition described in note 11, to previous owners of Smith, with interest of 8%, secured by all shares of Smith common stock, principal and interest due May 15, 2011.		210,000		210,000
Notes payable to related party, from acquisition described in note 11, to previous owners of Triple C, payment due November 10, 2010.		150,000		-
Note payable to shareholder, with interest at 8.5%, due on demand.		390,000		390,000
Note payable to shareholder, with interest at 8.0%, due on demand.		40,000		-
	$	1,760,000	$	1,600,000

Note 8.    Income Taxes

 At June 30, 2010, the Company estimated that it had approximately $23 million of net operating loss carry forwards, which if unused will expire through 2030.  Of the $23 million, approximately $20.8 million is subject to limitations under IRC Section 382 due to owner shifts during the period.

Note 9.    Shareholders’ Deficit

Common Stock

On June 28, 2010, the Company issued 500,000 share of common stock as compensation under contract.  The stock was valued at $0.002 per share, its fair market value at the date of issuance.

- 20 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Warrants to Purchase Common Stock

For the three months ended June 30, 2010, the Company issued 318,500 common stock warrants to various holders, at an exercise price ranging from $0.40 to $0.50, with a termination period from 3 to 5 years, relating to the issuance of debt obligations.

For the three months ended June 30, 2010, the Company issued 620,883 common stock warrants, with an exercise price of $0.30, an expiration date of 5 years, relating to services provided to the Company.

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	0.28- 0.46%
Dividend yield	0.00%
Volatility factor	172%
Expected life	5 years

The relative fair value of the warrants issued for the three months ended June 30, 2010, calculated in accordance with ASC 470-20, Debt with Conversion and Other Options; totaled $787.  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 three months ended June 30, 2010 is presented below:

	Stock Awards Outstanding & Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance, March 31, 2010		8,053,717	$	0.15	1.16 years
Granted		939,383		0.54	5 years
Exercised				N/A		N/A
Expired/Cancelled		-		-		N/A
Balance, June 30, 2010		8,993,100	$	0.35	3.08 years

- 21 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

As of June 30, 2010 and March 31, 2010, the number of warrants that were currently vested and expected to become vested was 8,993,100 and 8,053,717, respectively.

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 will enter into a new lease for more space at $1,200 per month.

Employment Agreements

The Company entered into three year employment agreements with five executives of the Company.  The Company is committed to pay the executives a total of $710,000 per year, with certain guaranteed bonuses and increases.  The agreements also call for bonuses if the executives meet certain goals which are to be set by the board of directors.

Purchase Commitments

The Company’s purchase commitments for revenue equipment are currently under negotiation. Upon execution of the purchase commitments, the Company anticipates that purchase commitments under contract will have a net purchase price of approximately $1,000,000 and will be paid throughout 2011.

Claims and Assessments

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

Note 11.    Business Combinations

Smith Systems Transportation, Inc.

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

- 22 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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

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

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

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

Contingent Consideration

As part of the Stock Exchange Agreement with Monte and Mary Smith, if Smith Systems Transportation, Inc. does not maintain certain levels of profitability the notes payable to Monte and Mary Smith can be reduced by up to the full amount, $250,000, of the note.  The results of the payment contingency may affect the final valuation of the Smith acquisition, to be measured at the May 1, 2010 maturity date of the note.

- 23 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Morris Transportation, Inc.

On August 28, 2008, the Company acquired 100% of the common stock of Morris Transportation, Inc. (“Morris”), an Arkansas-based dry van truckload carrier, under the terms of a Stock Exchange Agreement.  The accounting date of the acquisition was September 1, 2008 and the transaction was accounted for under the purchase method in accordance with ASC 805. Morris’ results of operations have been included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $1,151,681, with a weighted average amortization period of 3 years.

The aggregate purchase price was $1,300,000, including 3,000,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (3,000,000 shares)	$	300,000
Note payable		1,000,000
	$	1,300,000

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

Cash	$	58,252
Accounts Receivable, Trade		1,104,423
Net Property and Equipment		4,535,545
Intangible assets:
Employment and non-compete agreement		518,293
Company operating authority and customer list		633,388
Total assets acquired		6,849,901
Accounts payable		219,073
Accrued liabilities and other current liabilities		92,560
Notes payable		5,238,268
Total liabilities assumed		5,549,901
Net Assets Acquired	$	1,300,000

Contingent Consideration

As part of the Stock Exchange Agreement with Mark Morris, if Morris Transportation Inc. maintains certain levels of profitability the amount of the note payable to Mark Morris can be increased up to $250,000.  Pursuant to the terms set forth in the Stock Exchange Agreement and an installment obligation of $150,000, a promissory note of $400,000, with interest at 8.0%, and a maturity date of May 1, 2010, was executed on January 19, 2010.

- 24 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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. Triple C’s results of operations have been included in our consolidated financial statements since the date of acquisition.  Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles which totaled $466,424, with a weighted average amortization period of 3 years.

The aggregate purchase price was $450,000, including 2,000,000 shares of the Company’s common stock valued at $0.10 per share. Below is a summary of the total purchase price:

Common stock (2,000,000 shares)	$	200,000
Notes payable		250,000
	$	450,000

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

Accounts Receivable, Trade	$	120,172
Other Assets		9,283
Intangible assets:
Employment and non-compete agreement		101,000
Company operating authority/Customer list		365,424
Total assets acquired		595,879
Accrued liabilities and other current liabilities		145,879
Total liabilities assumed		145,879
Net Assets Acquired	$	450,000

Contingent Liability

The Company did not have enough authorized shares of common stock to issue at the time of the purchase. The shares of common stock will be issued upon completion of the reverse stock split.  The resulting transaction created a contingent liability of $216,424.

- 25 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Pro forma results

If the Company had purchased Triple C as of April 1, 2010, the results of operations for the three months ended June 30, 2010 would be as follow:

	IFC			Morris			Smith			Triple C			Total
Revenue	$	-		$	2,982,581		$	1,798,467		$	3,563,075		$	8,344,123
Operating Expenses
Rents and transportation		-			447,813			638,027			1,318,305			2,404,145
Wages, salaries & benefits		108,987			797,813			419,099			539,103			1,865,002
Fuel and fuel taxes		-			1,091,907			366,644			1,541,576			3,000,127
Other operating expenses		450,004			401,168			374,835			258,783			1,484,790
Total Operating Expenses		558,991			2,738,701			1,798,605			3,657,767			8,754,064
Other Expenses (Income)		78,129			(10,983	)		5,357			(110,280	)		(37,777	)
Net loss before minority interest		(637,120	)		254,863			(5,495	)		15,588			(372,164	)
Minority interest share of subsidiary net income		-			-			5,691			-			5,691
Net loss	$	(637,120	)	$	254,863		$	196		$	15,588		$	(366,473	)

- 26 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

If the Company had purchased Triple C as of April 1, 2009, the results of operations for the three months ended June 30, 2009 would be as follow:

	IFC			Morris			Smith			Triple C			Total
Revenue	$	-		$	2,632,686		$	1,512,371		$	3,361,986		$	7,507,043
Operating Expenses
Rents and transportation		-			684,103			580,052			998,200			2,262,355
Wages, salaries & benefits		112,253			740,811			434,130			839,153			2,126,347
Fuel and fuel taxes		-			657,078			253,216			1,248,410			2,158,704
Other operating expenses		265,471			432,769			384,939			482,935			1,566,114
Total Operating Expenses		377,724			2,514,761			1,652,337			3,568,698			8,113,520
Other Expenses (Income)		57,306			(6,362	)		57,352			34,260			142,556
Net loss before minority interest		(435,030	)		124,287			(197,318	)		(240,972	)		(749,033	)
Minority interest share of subsidiary net income		-			-			(2,035	)		-			(2,035	)
Net loss	$	(435,030	)	$	124,287		$	(199,353	)	$	(240,972	)	$	(751,068	)

Note 12.  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.  The Company operates both of its subsidiaries (Morris Transportation and Smith Systems) as independent companies under separate management of their respective founders. Management of the Company makes decisions about allocating resources based on these operating segments. The following tables depict the information expected by ASC 280:

- 27 -

PLANGRAPHICS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

	Revenue		Net Income (Loss)			Total Assets
June 30, 2010
IFC	$	-	$	(587,066	)	$	2,379,685
Morris		2,982,581		254,863			4,375,402
Smith		1,798,467		197			2,866,433
Triple C		1,925,199		2,348			130,773
	$	6,706,247	$	(329,658	)	$	9,752,293
June 30, 2009
IFC	$	-	$	(435,030	)	$	2,428,983
Morris		2,632,686		124,287			5,173,000
Smith		1,512,371		(199,353	)		2,990,453
	$	4,145,057	$	(510,096	)	$	10,592,436

Note 13. Subsequent Events

On August 19, 2010, at a special stockholder’s meeting the Company approved a reverse stock split, a relocation of its State of Incorporation to Florida and a change of its name to Integrated Freight Corporation. The Company's name change and State of Incorporation have been approved and are effective as of August 18, 2010.  The reverse stock split has been approved but is not effective as of the date of this filing.

The reverse stock split is in a ratio of one share for each 244.8598 shares outstanding. The effective date will be ten days after submission of notice to the Financial Industry Regulatory Authority, which is expected within five business days. Fractional shares will be paid for at a price of $0.0035, unless the stockholder also has at least one other whole share, in which event the fractional share will be rounded up.

The company is changing its State of Incorporation to Florida from Colorado, by 'domestication' and 'conversion.' In the process of domestication in Florida, the company's name will be changed to "Integrated Freight Corporation."

Management has evaluated events and transactions that occurred subsequent to June 30, 2010 through August 23, 2010, the date the financial statements were issued.  Other than the disclosures shown, management did not identify any events or transactions that should be recognized or disclosed in the financial statements.

- 28 -

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

The following analysis of our consolidated financial condition and results of operations for the three months ended June 30, 2010 and 2009 should be read in conjunction with the consolidated financial statements, including footnotes, appearing elsewhere in this quarterly report.

Overview

The main factors that affect our results of operation 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. The results of our brokerage activities were relatively insignificant for the fiscal year 2010 and, therefore, a detailed discussion of the financial results of these operations will not be separately presented.

 Fuel surcharges tended to be a volatile source of revenue; therefore, measured freight revenue is calculated with the removal of such surcharges, providing a more consistent basis for comparing results of operations from period to period.   

- 29 -

Three months ended June 30, 2010 Compared to the Three Months Ended June 30, 2009

The following table presents and compares the results of our operations for the three months ending June 30, 2010 and 2009.  We purchased our third subsidiary May 14, 2010.  In reading this information, we encourage you to consider the differential in the periods being compared.

	Three Months Ended		Three Months Ended
	June 30, 2010		June 30, 2009			$ change	% change
Revenue	$	6,706,247	$	4,145,057	$	2,561,190	61.79%
Operating Expenses
Rents and transportation		1,752,971		1,264,155		488,816	38.67%
Wages, salaries and benefits		1,630,269		1,287,194		343,075	26.65%
Fuel and fuel taxes		2,290,031		910,294		1,379,737	151.57%
Depreciation and amortization		518,274		510,683		7,591	1.49%
Insurance and claims		262,361		152,887		109,474	71.60%
Operating taxes and licenses		46,011		22,637		23,374	103.26%
General and administrative		518,228		430,305		87,923	20.43%
Total Operating Expenses		7,018,145		4,578,155		2,439,990	53.30%
Other Expenses
Interest		154,219		214,978		(60,759)	(28.26%)
Interest - related parties		39,898		17,189		22,709	132.11%
Other Income		(170,666)		(123,871)		(46,795)	37.78%
Total Other Expenses		23,451		108,296		(84,845)	(78.35%)
Net loss before noncontrolling interest		(335,349)		(541,394)		206,045	(38.06%)
Noncontrolling interest share of subsidiary net income		5,691		(2,035)		(7,726)	(379.66%)
Net loss	$	(329,658)	$	(543,429)		$213,771	(39.34%)

Revenues

For the three months ended June 30, 2010, we reported revenues of $6,706,247 as compared to revenues of $4,145,057 for the three months ended June 30, 2009 an increase $2,561,190 or approximately 61.79%.  The increase is due to two primary factors: the acquisition of Triple C Transportation in May, 2010 and the increase in freight revenue in correlation to the US economy.

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Total Operating Expenses

Our total operating expenses increased approximately 53.30% to $7,018,145 for the three months ended June 30, 2010 as compared to $4,578,155 for the three months ended June 30, 2009.  These changes include:

Rents and Transportation For the three months ended  June 30, 2010, rents and transportation costs were $1,752,971 as compared to $1,264,155 for the three months ended June 30, 2009, an increase of $488,816 or 38.67%.  The increase was due to the acquisition of Triple C Transportation.

Wages, salaries and benefits For the three months ended June 30, 2010, wages, salaries and benefits costs were $1,630,269 as compared to $1,287,194 for the three months ended June 30, 2009, an increase of $343,075 or 26.65%.  The increase was due to the acquisition of Triple C Transportation.

Fuel and fuel taxes For the three months ended  June 30, 2010, fuel and fuel taxes  costs were $2,290,031 as compared to $910,294 for the three months ended June 30, 2009, an increase of $1,379,737 or 151.57%.  A correlating fuel price instability is a contributing factor in these increases.

Depreciation and amortization For the three months ended  June 30, 2010, depreciation and amortization costs were $518,274 as compared to $510,683 for the three months ended June 30, 2009, an increase of $7,591 or 1.49%.

Insurance claims For the three months ended June 30, 2010, insurance claims costs were $262,361 as compared to $152,887 for the three months ended June 30, 2009, an increase of $109,474 or 71.60%.

Operating taxes and licenses For the three months ended  June 30, 2010, operating taxes and licenses costs were $46,011 as compared to $22,637 for the three months ended June 30, 2009, an increase of $23,374 or 103.26%.

General and administrative expenses For the three months ended June 30, 2010, general and administrative expenses costs were $518,228 as compared to $430,305 for the three months ended June 30, 2009, an increase of $87,923 or 20.43%.

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Our large expenses, for example truck lease and financing costs, are fixed.  Our driver payroll fluctuates 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.  With our reduction in operating expenses during fiscal 2010 and the increase in the current freight sector, we believe the results of these events will be reflected positively in fiscal 2011.

Loss from Operations

The Company reported a loss from operations of $311,898 for the three months ended June 30, 2010 as compared to a loss from operations of $433,098 for the three months ended June 30, 2009, a decrease of $121,200 or 27.98%.

Other Income (Expenses)

The Company reported total other income of $170,666 for the three months ended June 30, 2010 as compared to total other income of $123,871 for the three months ended June 30, 2009, an increase of $46,795 or 37.78%.

Net Loss

The Company reported a net loss of $329,658 for the three months ended June 30, 2010 as compared to a net loss of $543,429 for the three months ended June 30, 2009, a decrease of $213,771 or 9.34%.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. The following table provides an overview of certain selected balance sheet comparisons between June 30, 2010 and March 31, 2010:

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	June 30,			March 31,				$		%
	2010			2010				change		change
Working Capital	$	(4,592,032)		$	(5,073,077)		$	481,045		9.48%
Cash		125,727			48,101			77,626		161.38%
Accounts receivables, net		2,622,020			2,306,738			315,282		13.67%
Prepaid expenses and other assets		456,241			336,127			120,114		35.73%
Property and equipment, net		5,342,240			5,679,610			(337,370	)	(5.94%)
Intangible assets, net		1,206,065			913,868			292,197		31.97%
Total Assets		9,752,293			9,284,444			467,849		5.04%
Bank overdraft		209,547			166,966			42,58		25.50%
Accounts payable		554,082			447,752			106,330		23.75%
Accrued and other liabilities		1,097,604			885,613			211,991		23.94%
Contingent liabilities		216,424			-			216,424		100.00%
Line of credit		905,943			755,044			150,899		19.99%
Notes payable		10,288,933			10,214,960			73,973		0.72%
Total Liabilities		13,272,533			12,470,335			802,198		6.43%
Common stock		1,193,879			1,192,879			1,000		0.08%
Accumulated deficit		(5,043,997	)		(4,714,339	)		329,658		6.99%
Non controlling interest		329,878			335,569			(5,691	)	(1.70%)
Total Liabilities and Stockholders’ Deficit	$	9,752,293		$	9,284,444			467,849		5.04%

Net cash provided by operating activities was $109,430 for the three months ended June 30, 2010 as compared to net cash used in operating activities of $452,186 for the three months ended June 30, 2009, an increase of $561,616. For the three months ended June 30, 2010, the Company had a net loss of $329,658, along with non-cash items such as depreciation and amortization expense of $518,273, share-based compensation expense of $1,000, minority interest in earnings of a subsidiary of $5,691, offset by changes in assets and liabilities of $74,494. During the three months ended June 30, 2009 the Company experienced a net loss of $543,429, along with non-cash items such as depreciation and amortization expense and deferred finance costs of $534,656, minority interest in earnings of a subsidiary of $2,035, offset by changes in assets and l iabilities of $478,781.

Net cash used in investing activities for the three months ended June 30, 2010 was $106,674 as compared to net cash provided by investing activities of $4,006 for the three months ended June 30, 2009. During the three months ended June 30, 2010, the Company used cash of $100,000 for the purchase of Triple C Transportation.

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Net cash provided by financing activities for the three months ended June 30, 2010 was $74,870 as compared to net cash provided of $371,289 for the three months ended June 30, 2009.  For the three months ended June 30, 2010, net cash provided by financing activities related to proceeds received from notes payable of $388,000 which were funds received from various lenders, as well as an advance of $150,899 on the line of credit, offset by repayments on notes payable of $464,029 which were to pay down the balances on various notes related to the trucks and trailers.

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 quarter ended June 30, 2010 compared to the same quarter in 2009.  As the Company begins to consolidate the duplicated functions among our subsidiaries, which the Company has begun in the areas of insurance, 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 at the parent level have significantly contributed to our consolidated negative cash flow and wo rking capital positions.  In particular, the legal and accounting expenses associated with acquisitions and first-time audits of acquisition candidates have resulted in greater cash outflows and expenses in these categories than we expect to experience when our acquisition program matures in the future.  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 recovering truckload freight market as the operating environment grew increasingly positive during the first quarter of 2011.  This improvement marks the second consecutive quarter with increased year over year average miles per tractor. Market share growth continued in the fourth quarter of 2010.  The Company expects the upward trend to continue in future quarters.

Even though management is optimistic about the 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. The Company believes we are well-positioned to grow our business as the recovery continues to develop.

The Company believes that our level of profitability, fleet renewal strategy, and use of independent contractors will enable us to 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 substantial capital resources, we believe we have the competitive position and ability to perpetuate our model based on leading growth and profitability.

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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 importan t 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.

Subsequent Events  (Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events throug h the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

Determination Of The Useful Life Of Intangible Assets   (Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued fo r fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s 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 negligible if the equipment is kept in service for its entire useful life. This life expectancy is based upon management’s past experience of operations. The useful life of a typical tractor is 9 years and a typical trailer is 15 years. Are structures are 40 years and leasehold improvements are the lesser of the economic life of the leasehold improvements or the remaining life of the lease.

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Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4T.  CONTROLS AND PROCEDURES

307 – Disclosure controls and procedures:  As of June 30, 2010, 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 June 30, 2010, 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 intend to begin centralizing our accounting functions within the parent company during the four month period beginning March 1, 2010.

308T(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 June 30, 2010 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 a ny, 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 ti mely basis.

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PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We expect to be engaged in litigation from time to time in the normal course of our business as a motor freight carrier.  Claims for worker’s compensation, auto accident, general liability and cargo and property damage are routine occurrences in the motor transportation industry. We have programs and policies which are designed to minimize the events that result in such claims. We maintain insurance against workers’ compensation, auto liability, general liability, cargo and property damage claims. We are responsible for deductible amounts up to $3,000 per accident. We periodically evaluate and adjust our insurance and claims reserves to reflect our experience.  Our workers’ compensation claims are entirely covered by our insurance.  Insurance carriers have raised premiums for many businesses, includi ng 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.

PlanGraphics, Inc., a Maryland corporation, referred to as PGI-MD in our prior filings has brought suit against us for collection on a note given in reimbursement of expenses it advanced to us between May 5 and December 31, 2009 and in payment for services rendered with respect to the design and construction of our Integrated Freight web site.  The suit was filed in the Franklin County Kentucky Circuit Court, case no. 10-CI-01009. The note has an approximate balance of $49,000, plus accrued interest, costs and attorney’s fees.  We are not defending against the suit and expect PGI-MD to obtain a default judgment.  We cannot predict when we will have funds to pay this judgment, if it is entered.

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

The following table sets forth information about our unregistered sales of common stock during the three months ended June 30, 2010 that were not reported on Form 8-K:

Class of Purchaser	Aggregate Number of Shares
Debenture/note holder (1)	16,998,708 shares
Debenture/note holder (2)	31,314,712 shares
Financial Consultant (3)	500,000 shares

_________________

1)  A non-affiliated, accredited investor.  Issued in conversion of debentures and promissory notes.

(2)  A non-affiliated, accredited investor, including his defined benefit plan and 401K plan.   Issued in exchange for and satisfaction of $5,000 of an $18,000 debenture issued January 10, 2009, plus accrued and unpaid interest.

(3)  A non-affiliated, accredited person, including his designee for a portion of the shares.  Issued in partial payment of fees for financial consulting services to be rendered.

The stock issuances to the debenture/note holders identified above were made to two creditors of Integrated Freight (one creditor including the individual and his defined benefit and his 401K plans), to whose obligations we succeeded as a result of its merger into us as of December 24, 2009.  The stock issuance to the financial consultant was made in a partial payment of financial consulting services to be rendered.  We did not pay and to our knowledge no one acting on our behalf paid any commissions or other compensation with respect to the sales identified in the foregoing table.

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The following table sets forth information about our commitments during the three months ended June 30, 2010 to make unregistered sales of common stock, subject to completion of our planned reverse stock split as described in our definitive Schedule 14C filed with the U.S. Securities and Exchange Commission and mailed to our stockholders as described therein.

Class of Purchaser	Aggregate Number of Shares
Lender (1)	266,666 shares
Counsel to lender (2)	8,000 shares

_________________

(1)  A non-affiliated, accredited investor.  Issued as additional consideration for a $100,000 loan.

(2)  Non-affiliated, accredited investors.   Issued to two attorneys in partial payment for legal services rendered in preparation of loan documents on behalf of the lender on the preceding line..

  We negotiated with and borrowed the funds from the holders of the convertible debentures/notes and the lender directly from the purchasers.  .  We used the cash proceeds from the borrowings for working capital in payment of then current obligations.  We negotiated the financial consulting services agreement directly with the consultant and the payment of legal fees directly with the attorneys.  We derived no cash proceeds under the consulting agreement.  Each of the investors acknowledged the investment nature of the transaction and a legend was placed on the note and debenture certificates, prohibiting public resale of the obligations, except in compliance with the requirements of Rule 144 which have been satisfied with respect to the stock issued in conversion and exchange.& #160; We believe each of the investors has both (a) such relationship with us and (b) such knowledge and experience in business and financial transactions that he is able to understand and evaluate the risks and merits of investment in our common stock.  We relied upon the exemption from the registration requirement of the Securities Act of 1933, as amended (the “Act”) provided in Section 4(2) of the Act and the rules and regulations thereunder, on grounds that borrowing and the conversion and the exchange did not involve a public offering within the meaning of the Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

ITEM 5.   OTHER INFORMATION

Not applicable.

ITEM 6.   EXHIBITS

The following exhibits are attached to this report:

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

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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:	August 23, 2010
By:	/s/  Paul A. Henley
	Paul A. Henley, Chief Executive Officer and Chief Financial Officer
	(Principal Executive and Principal Operating Officer)
	(Principal Financial and Principal Accounting Officer)

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