**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D. C. 20549





**FORM
      10-QSB**


**(Mark
      One)**


x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                ACT OF 1934**FOR
                THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005**ORo
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                ACT OF 1934******FOR
                THE TRANSITION PERIOD FROM****______****TO****_____**





Commission
      File Number 0-25753


**___________________**





**POWER2SHIP,
      INC.**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            
            **87-04496677**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)





**903
      Clint Moore Road, Boca Raton, Florida 33487-2802**


(Address
      of principal executive offices)





**(561)
      998-7557**


(Issuer’s
      telephone number)





not
      applicable


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


**___________________**


Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days.
      Yes x
      No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o
      No x





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: As of February 13, 2006, the number of
      outstanding shares of the issuer’s common stock was 80,070,654.





Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No x









-
            1
            -


TABLE
                  OF CONTENTSPagePART
                  I. FINANCIAL INFORMATIONItem
                  1. Financial Statements (Unaudited):Consolidated
                  Balance Sheet, December 31, 2005
              3Consolidated
                  Statements of Operations, Three and Six Months EndedDecember
                  31, 2005 and 2004
              4Consolidated
                  Statements of Cash Flows, Six Months EndedDecember
                  31, 2005 and 2004
              5Notes
                  to Consolidated Financial Statements for the Six Months EndedDecember
                  31, 2005
              6Item
                  2. Management's Discussion and Analysis or Plan of
                  Operation
              
              17Item
                  3. Controls and Procedures
              
              23PART
                  II. OTHER INFORMATIONItem
                  1. Legal Proceedings
              
              23Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              
              23Item
                  3. Defaults Upon Senior Securities
              
              24Item
                  4. Submission of Matters to a Vote of Security Holders
              
              24Item
                  5. Other Information
              
              24Item
                  6. Exhibits
              
              24
  -
            2
            -


**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS (UNAUDITED)**





**POWER2SHIP,
                INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET****December
                31, 2005****(UNAUDITED)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            1,196,847Accounts
                receivable, net of allowance of $30,920
            
            
            1,426,659Prepaid
                expenses
            
            
            92,034Total
                current assets
            
            
            2,715,540Property
                and equipment
            
            
            607,811Less:
                accumulated depreciation
            
            
            (190,303
            )Net
                property and equipment
            
            
            417,508Software
                development costs, net of accumulated amortizationof
                $126,293
            
            
            884,744Deferred
                financing costs
            
            
            185,098Intangible
                assets, net of accumulated amortization of $183,513
            
            
            459,773Restricted
                cash for interest on debentures
            
            
            2,308Other
                assets
            
            
            547,016Total
                assets
            
            $
            5,211,987**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Notes
                payable - short term
            
            $
            920,000Current
                portion of convertible notes payable less discount of
                $588,963
            
            
            3,183,037Line
                of credit
            
            
            288,828Accounts
                payable
            
            
            1,548,209Accrued
                expenses
            
            
            568,533Accrued
                salaries
            
            
            231,633Total
                current liabilities
            
            
            6,740,240Long
                term debt:Long
                term notes payable
            
            
            91,667Convertible
                note payable to related party
            
            
            115,000Total
                liabilities
            
            
            6,946,907Stockholders'
                deficit :Preferred
                stock, $.01 par value, 1,000,000 shares authorized:Series
                B convertible preferred stock, $.01 par value, 200,000shares
                authorized; 158,200 shares issued and outstanding
            
            
            1,582Series
                C convertible preferred stock, $.01 par value, 20,000shares
                authorized; 832 shares issued and outstanding
            
            
            8Series
                Y convertible preferred stock, $.01 par value, 87,000shares
                authorized; 87,000 shares issued and outstanding
            
            
            870Common
                stock, $.001 par value, 250,000,000 sharesauthorized;
                75,088,471 issued and outstanding
            
            
            75,088Deferred
                compensation
            
            
            (539,671
            )Additional
                paid-in capital
            
            
            19,985,757Accumulated
                deficit
            
            
            (21,258,554
            )Total
                stockholders' deficit
            
            
            (1,734,920
            )Total
                liabilities and stockholders' deficit
            
            $
            5,211,987*See
                accompanying notes*


-
            3
            -





**POWER2SHIP,
                INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(UNAUDITED)**Three
                months ended December 31,
            
            Six
                months ended December 31,2005
            
            2004
            
            2005
            
            2004Revenue:Freight
                transportation
            
            $
            8,001,444
            
            $
            736,917
            
            $
            16,201,042
            
            $
            1,467,643Access
                services
            
            
            -
            
            
            180
            
            
            -
            
            
            180Implementation
                services
            
            
            -
            
            
            -
            
            
            5,668
            
            
            -Total
                revenue
            
            
            8,001,444
            
            
            737,097
            
            
            16,206,710
            
            
            1,467,823Operating
                expenses:Freight
                transportation
            
            
            7,112,211
            
            
            658,282
            
            
            14,432,467
            
            
            1,310,054Selling,
                general and administrative:Salaries,
                benefits and consulting fees
            
            
            999,201
            
            
            519,235
            
            
            2,000,029
            
            
            1,134,049Other
                selling, general and administrative
            
            
            573,557
            
            
            408,611
            
            
            1,148,190
            
            
            829,075Total
                operating expenses
            
            
            8,684,969
            
            
            1,586,128
            
            
            17,580,686
            
            
            3,273,178Loss
                from operations
            
            
            (683,525
            )
            
            (849,031
            )
            
            (1,373,976
            )
            
            (1,805,355
            )Other
                income (expense):Gain
                on asset disposal
            
            
            -
            
            
            -
            
            
            1,415
            
            
            -Interest
                expense, net
            
            
            (361,225
            )
            
            (222,545
            )
            
            (832,806
            )
            
            (419,668
            )Other
                income
            
            
            -
            
            
            571
            
            
            2,906
            
            
            571Total
                other expense
            
            
            (361,225
            )
            
            (221,974
            )
            
            (828,485
            )
            
            (419,097
            )Net
                loss
            
            $
            (1,044,750
            )
            $
            (1,071,005
            )
            
            (2,202,461
            )
            $
            (2,224,452
            )Loss
                per share-basic and diluted
            
            $
            (0.01
            )
            $
            (0.03
            )
            $
            (0.03
            )
            $
            (0.06
            )Weighted
                average shares outstanding-
                basic and diluted
            
            
            74,666,383
            
            
            39,776,956
            
            
            71,996,823
            
            
            39,129,646*See
                accompanying notes*





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          4
          -


**POWER2SHIP,
                    INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****(UNAUDITED)**Six
                    Months Ended December 31,2005
                
                2004Cash
                    flows from operating activities:Net
                    loss
                
                $
                (2,202,461
                )
                $
                (2,224,452
                )Adjustments
                    to reconcile net loss tonet
                    cash used in operating activities:Depreciation
                
                
                53,724
                
                
                24,686Amortization
                    of software development costs
                
                
                27,046
                
                
                27,046Amortization
                    of intangible asset
                
                
                64,876
                
                
                47,085Amortization
                    of deferred compensation
                
                
                189,149
                
                
                13,875Amortization
                    of deferred financing costs
                
                
                301,429
                
                
                193,284Amortization
                    of discount on notes payable
                
                
                181,595
                
                
                45,474Increase
                    in allowance for doubtful accounts
                
                
                62
                
                
                -Issuance
                    of stock options and warrantsfor
                    services and conversion
                
                
                54,851
                
                
                61,286Issuance
                    of stock for services, interest and litigation settlement
                
                
                106,060
                
                
                129,299Changes
                    in operating assets and liabilities:Increase
                    in receivables
                
                
                (305,294
                )
                
                (117,338
                )Decrease
                      in prepaid expenses
                
                
                7,561
                
                
                43,400Decrease
                    (increase) in other assets
                
                
                (178,018
                )
                
                92,725Increase
                    (decrease) in accounts payable and accrued expenses
                
                
                547,783
                
                
                (11,529
                )Net
                    cash used in operating activities
                
                
                (1,151,637
                )
                
                (1,675,159
                )Cash
                    flows from investing activities:Disbursement
                    of cash for note receivable
                
                
                -
                
                
                (100,000
                )Purchases
                    of property and equipment
                
                
                (77,303
                )
                
                (9,812
                )Capitalized
                    costs of software development
                
                
                (186,634
                )
                
                (179,284
                )Net
                    cash used in investing activities
                
                
                (263,937
                )
                
                (289,096
                )Cash
                    flows from financing activities:Proceeds
                    from convertible promissory notes net of costs of $0and
                    $100,000, respectively
                
                
                320,000
                
                
                900,000Proceeds
                    from promissory notes
                
                
                400,000
                
                
                110,000Proceeds
                    from notes receiveable
                
                
                50,000
                
                
                -Repayments
                    of promissory notes
                
                
                -
                
                
                (30,000
                )Proceeds
                    from line of credit net of costs of $0 and $24,305,
                    respectively
                
                
                172,168
                
                
                166,654Proceeds
                    from sale of common stock and warrants net of costs of $0and
                    $0 respectively
                
                
                832,500
                
                
                -Net
                    cash provided by financing activities
                
                
                1,774,668
                
                
                1,146,654Net
                    increase (decrease) in cash and cash equivalents
                
                
                359,094
                
                
                (817,601
                )Cash
                    and cash equivalents, beginning of period
                
                
                837,753
                
                
                832,130Cash
                    and cash equivalents, end of period
                
                $
                1,196,847
                
                $
                14,529*See
                    accompanying notes*
  -
            5
            -


**POWER2SHIP,
      INC. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**(UNAUDITED)**





**NOTE
      1 - DESCRIPTION OF BUSINESS**





**Organization**


Power2Ship,
      Inc. (the "Company"), formerly Jaguar Investments, Inc., was incorporated in
      Nevada on October 28, 1987. On March 11, 2003, the Company merged with Freight
      Rate, Inc. which became a wholly owned subsidiary. The Company is an
      information technology company that has developed the P2S MobileMarketTM, an
      Internet-based, patent-pending software application that captures, processes
      and
      displays transportation information, forecasts the availability of
      transportation assets, and matches that future capacity with freight that needs
      to be transported throughout the United States. In addition, the freight and
      transportation assets can be tracked while in transit if their location is
      provided to the P2S MobileMarketTM either by i) electronic transmissions
      communicated by wireless devices which may be installed in the transportation
      assets or ii) by manual input through the P2S MobileMarketTM Website. The
      Company’s management believes that this matching and tracking capability and
      providing other logistics information through the P2S MobileMarketTM enables our
      member shippers and carriers to make better informed transportation decisions
      and improves the efficiency of their supply chain.





Since
      March 2003, the Company’s primary source of revenue has been providing
      transportation services for s hippers’
      inbound and outbound freight both as a freight broker and, since March 2005,
      by
      utilizing its own transportation equipment. In
      order
      to be a principal in these types of transportation transactions, the Company
      applied for, and obtained, licenses from the United States Department of
      Transportation, Federal Motor Carrier Safety Administration, both as a broker
      arranging for transportation of freight by motor vehicle and as a carrier when
      operating its own transportation assets. Also in fiscal year 2003, the Company
      began providing some of its large shipper customers with software development
      and customization services to interface their existing software with the P2S
      MobileMarketTM. Currently, Power2Ship offers a wide range of other logistics
      services that reduce or eliminate supply chain inefficiencies to its current
      and
      prospective shipper customers.





On
      February 25, 2005, the Company formed P2S Holdings, Inc., a Florida corporation,
      as a wholly owned subsidiary. Then, on March 21, 2005, Commodity Express
      Transportation, Inc. (“CXT”), a wholly owned subsidiary of P2S Holdings formed
      as a Delaware corporation on March 21, 2002, acquired certain assets and
      liabilities representing the business of Commodity Express Transportation,
      Inc., a **** South
      Carolina based company engaged in the business of motor carriage specializing
      in full
      truckload transportation services primarily using dry vans. CXT operates
      a fleet of approximately 85 tractors, including 45 that it owns and 40 from
      owner-operators with whom it has independent contractor’s lease agreements, and
      285 trailers. Also, CXT rents a 137,000 square foot distribution facility in
      South Carolina to provide warehousing services for its largest customer and
      provides freight transportation brokerage services through its wholly owned
      subsidiary, Commodity Express Brokerage, Inc., a Florida corporation formed
      on
      March 3, 2005. See Note 13 - “Acquisitions” for further details related to this
      transaction.





Also,
      on
      March 21, 2005, Power2Ship Intermodal, Inc. (“P2SI”), a wholly owned subsidiary
      of CXT formed as a Delaware corporation on March 21, 2002, acquired certain
      assets and liabilities representing the business of GFC, Inc. P2SI is a
      non-asset based drayage company that arranges for the transportation of freight
      containers arriving at various ports and rail terminals. It
      has
      contracts with independent transportation agents in
      Port
      Newark, New Jersey and Charlotte, North Carolina who have
      relationships with various shipper customers. P2SI matches these shippers’
requirements with the transportation assets of approximately 20 owner-operators
      with whom it has independent contractor’s lease agreements.





The
      accompanying unaudited financial statements for the period ended December 31,
      2005 have been prepared in accordance with generally accepted accounting
      principles for interim financial information and with instructions to Form
      10-QSB. Accordingly, they do not include all of the information and footnotes
      required by generally accepted accounting principles as would be included in
      audited financial statements. In the opinion of management, all adjustments
      (consisting of normal recurring accruals) considered necessary for a fair
      presentation have been included.
      The results of operations for the three and six month periods ended December
      31,
      2005 are not necessarily indicative of the results to be expected for the fiscal
      year ended June 30, 2006.  -
            6
            -


**NOTE
      2 - SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS**





**Principles
      of Consolidation**


The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All material intercompany transactions have been
      eliminated.





**Reclassifications**


Certain
      prior period balances have been reclassified to conform to the current period's
      presentation. These reclassifications had no impact on previously reported
      results of operations or stockholders’ deficit.





**Cash
      and Cash Equivalents**


The
      Company considers all unrestricted deposits and highly liquid investments,
      readily convertible to known amounts, with an original maturity of three months
      or less, to be cash equivalents.





**Property
      and Equipment**


Property
      and equipment is stated at cost. Depreciation on property and equipment is
      calculated using the straight-line method over the estimated useful lives of
      the
      assets. Expenditures for major renewals and betterments that extend the useful
      lives of the assets are capitalized. Expenditures for maintenance and repairs
      of
      the assets are charged to expense as incurred.





**Income
      Taxes**


Under
      the
      asset and liability method of FASB Statement 109, deferred tax assets and
      liabilities are recognized for the future tax consequences attributable to
      differences between the financial statement carrying amounts of existing assets
      and liabilities, and their respective tax bases and operating loss and tax
      credit carryforwards. Deferred tax assets and liabilities are measured using
      enacted tax rates expected to apply to taxable income in the years in which
      those temporary differences are expected to be recovered or settled. Deferred
      tax assets are reduced by a valuation allowance, when in the Company's opinion
      it is likely that some portion or the entire deferred tax asset will not be
      realized.





**Revenue
      Recognition**




The
      Company follows the guidance of the Securities and Exchange Commission’s Staff
      Accounting Bulletin 104 for revenue recognition. In general, the Company records
      revenue when persuasive evidence of an arrangement exists, services have been
      rendered or product delivery has occurred, the sales price to the customer
      is
      fixed or determinable, and collectability is reasonably assured. The following
      policies reflect specific criteria for the reported revenue streams of the
      Company:




Freight
      transportation revenue consists of the total dollar value of services purchased
      from us by our customers. The
      Company recognizes freight transportation revenue when shipments of goods reach
      their destinations and the receiver of the goods acknowledges their receipt
      by
      signing a bill of lading. At
      that
      time, our obligations to the customer are completed and collection of
      receivables is reasonably assured. Emerging Issues Task Force Issue No. 99-19,
      “Reporting Revenue Gross as a Principal versus Net as an Agent”, establishes the
      criteria for recognizing revenues on a gross or net basis. When we provide
      these
      freight transportation services, we are the primary obligor, we are a principal
      to the transaction not an agent, we have the risk of loss for collection, we
      have discretion to select the supplier when we do not supply the services and
      we
      have latitude in pricing decisions.





Access
      services r evenue
      is
      recognized in the month that access to the P2S MobileMarketTM is provided to
      customers. When the Company provides equipment to customers, in conjunction
      with
      providing access services to them, on any basis in which ownership is retained
      by the Company, then the Company accounts for equipment provided to the customer
      as part of the access services agreement and revenue is recognized ratably
      over
      the term of the agreement.


-
          7
          -


Implementation
      services revenue, generated pursuant
      to software development contracts with customers, is recognized on the
      percentage of completion basis for each deliverable provided for in the
      contract. Revenue from implementation services is expected to be insignificant
      as a percentage of total revenue in the foreseeable future.





**Loss
      Per Common Share**


Basic
      loss per common share is based upon the weighted average number of common shares
      outstanding during the year. Diluted earnings (loss) per common share include
      the effects of potential dilution that would occur if securities (such as
      warrants) or other contracts (such as options) to issue common stock were
      exercised or converted into common stock. Such instruments that are convertible
      into common stock are excluded from the computation in periods in which they
      have an anti-dilutive effect. Potential common shares included in the
      computation are not presented in the consolidated financial statements, as
      their
      effect would be anti-dilutive. The Company had outstanding options, warrants
      and
      shares issuable upon conversion of outstanding convertible debt and preferred
      stock totaling 99,775,003 and 39,744,202 as of December 31, 2005 and 2004,
      respectively, which it did not use in computing its diluted loss per share
      because the Company had net losses for the periods presented in its financial
      statements and the inclusion of these securities would have been anti-dilutive.





The
      following table presents pro forma net loss and per share amounts as if the
      fair
      value method had been applied to employee stock options and warrants granted:





Six
                Months Ended December 31,2005
            
            2004Loss
                available to common shareholders, as reported
            
            $
            (2,202,461
            )
            $
            (2,224,452
            )Add:
                Stock compensation expense to employeesincluded
                in reported net loss, net of related tax effects
            
            
            -
            
            
            -Deduct:
                Total stock compensation expense to employeesexpense
                determined under fair value basedmethod
                for all awards, net of related tax effects
            
            
            (25,908
            )
            
            (41,513
            )_________
            
            
            _________Pro
                forma loss available to common shareholders
            
            
            (2,228,369
            )
            
            (2,265,965
            )========
            
            
            ========Loss
                per share:Basic
                and diluted - as reported
            
            $
            (0.03
            )
            $
            (0.06
            )=====
            
            
            =====Basic
                and diluted - pro forma
            
            $
            (0.03
            )
            $
            (0.06
            )====
            
            
            ====





**Research
      and Development**


Research
      and development costs are expensed as incurred. No research and development
      expenses were incurred for the quarters ended December 31, 2005 and
      2004.





**Computer
      Software and Web Site Development Costs**


The
      Company has adopted the provisions of AICPA Statement of Position (“SOP”) 98-1,
      Accounting for the Costs of Software Developed or Obtained for Internal Use,
      and
      Emerging Issues Task Force (“EITF”) Consensus #00-2, Accounting for Web Site
      Development Costs. The type of costs incurred by the Company in developing
      its
      internal use software and Web site include, but are not limited to, payroll
      and
      payroll-related costs (e.g. fringe benefits) for employees who devote time
      to
      the internal use computer software or Web site project, consulting fees, the
      price of computer software purchased from third parties and travel expenses
      incurred by employees or consultants in their duties directly associated with
      developing the software. These costs are either expensed or capitalized
      depending on the type of cost and the stage of development of the software
      and
      Web site. SOP 98-1 and EITF #00-2 define three stages of
      development:


-
          8
          -





-
            the
                preliminary or planning stage includes all activities related to
                conceptualizing, evaluating and selecting the alternatives for
                implementing the project including, but not limited to, developing
                a
                project plan, determining desired functionalities and content, identifying
                required hardware and software tools and selecting external vendors
                and
                consultants. All internal and external costs during the preliminary
                project stage are expensed as incurred.




-
            the
                application and infrastructure development stage begins immediately
                upon
                conclusion of the preliminary or planning stage and includes, but
                is not
                limited to, all activities related to designing the software configuration
                and software interfaces, acquiring or customizing the software necessary
                to build the application, coding, hardware installation and testing,
                including parallel processing. Generally, any internal and external
                costs
                incurred during the application and infrastructure development stage
                are
                capitalized and amortized on a straight-line basis over the estimated
                economic life of the software of three to five years. General and
                administrative costs and overhead costs are not capitalized. Amortization
                for each module or component of software begins after all substantial
                testing is completed and it is deemed to be ready for its intended
                use.
                The only exception to beginning amortization at that time would be
                if the
                functionality of that module or component is entirely dependent on
                the
                completion of other modules or component in which case the amortization
                would begin when both the module and the other modules upon which
                it is
                functionally dependent are ready for their intended
                use.






-
            the
                post-implementation/operation stage includes, but is not limited
                to,
                activities related to training, user administration, application
                maintenance, system backups, routine security reviews, the costs
                of which
                are expensed as incurred. Also, upgrades and enhancements that result
                in
                additional functionality may occur during this stage, the costs of
                which
                are amortized on a straight-line basis over the estimated economic
                life of
                the upgrade or enhancement of three to five
                years.




At
      December 31, 2005 and 2004, the net book value of capitalized software was
      $884,744 and $569,702, respectively. Amortization expense for the six months
      ended December 31, 2005 and 2004 was $27,046 and $27,046,
      respectively.





The
      Company makes ongoing evaluations of the recoverability of its capitalized
      internal use software and Web site by comparing the amount capitalized for
      each
      module or component of software to their estimated net realizable values. If
      such evaluations indicate that the unamortized costs exceed the net realizable
      values, the Company writes off the amount by which the unamortized costs exceed
      the net realizable values.





**Concentrations
      of Credit Risk**


Financial
      assets that potentially subject the Company to significant concentrations of
      credit risk consist primarily of cash and cash equivalents and accounts
      receivable. The Company's investment policy is to invest in low risk, highly
      liquid investments. The Company does not believe it is exposed to any
      significant credit risk in its cash investments.





The
      Company maintains its cash balances at financial institutions that are insured
      by the Federal Deposit Insurance Corporation or the Securities Investor
      Protection Corporation up to $100,000 per institution. At December 31, 2005,
      the
      Company's cash balances exceeded the insured limits by approximately $1 million.
      The Company has not experienced any losses in such accounts and believes it
      is
      not exposed to any significant credit risk on cash on deposit.





The
      Company performs on-going credit evaluations of its customer base including
      those that represent its accounts receivable at December 31, 2005. The Company
      maintains reserves for potential credit losses and such losses historically
      have
      been within management's expectations.





**Advertising
      and marketing**


Advertising
      and marketing is expensed as incurred. Advertising and marketing expenses,
      including convention and trade show expenses, for the six months ended December
      31, 2005 and 2004 were $50,033 and $134,743, respectively.


-
          9
          -


**Recent
      accounting pronouncements**


In
      December 2004, the FASB issued SFAS 123R "Share-Based Payment". This Statement
      requires that the cost resulting from all share-based transactions be recorded
      in the financial statements.  The Statement establishes fair value as the
      measurement objective in accounting for share-based payment arrangements and
      requires all entities to apply a fair-value-based measurement in accounting
      for
      share-based payment transactions with employees. The Statement also establishes
      fair value as the measurement objective for transactions in which an entity
      acquires goods or services from non-employees in share-based payment
      transactions.  The Statement replaces SFAS 123 "Accounting for Stock-Based
      Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock Issued
      to
      Employees".  The provisions of 123R will be effective for the Company
      beginning with the first period after December 15, 2005.  The Company is
      currently evaluating the impact this new Standard will have on its financial
      position, results of operations or cash flows.





**NOTE
      3 - CONCENTRATIONS**





During
      the quarter ended December 31, 2005, one customer accounted for 53% of the
      Company’s revenue. No other customer accounted for more than 10% of revenue and
      no customers accounted for more than 10% of accounts receivable.





**NOTE
      4 - NOTE RECEIVABLE**





In
      May
      2005, the Company loaned $50,000 to an unrelated third party that issued the
      Company a short-term promissory note with a term of sixty days and an interest
      rate of 10%. The note was repaid with interest in October 2005.





**NOTE
      5 - INTANGIBLE ASSETS**





In
      March
      2005, the Company allocated $77,374 of the purchase price for certain assets
      of
      Commodity Express Transportation, Inc. and $334,600 of the purchase price for
      certain assets of GFC, Inc. to intangible assets attributable to the customer
      lists of these businesses. These intangible assets are being amortized over
      their estimated useful lives of 5 years. The Company recorded amortization
      expense for the six months ended December 31, 2005 and 2004 of $21,385 and
      $0,
      respectively. At December 31 ,
      2005,
      future amortization expense for these intangible assets is expected to be as
      follows:





2006
            
            $53,4222007
            
            82,3952008
            
            82,3952009
            
            82,3952010
            
            80,243$380,850**=======**




In
      July
      and August, 2004, the Company entered into Intellectual Property Assignment
      Agreements with three of its executives pursuant to which each of them assigned
      to the Company all of their right, title and interest in and to all the
      intellectual property which they had contributed to the Company in the past
      in
      consideration for an aggregate of 600,000 shares of the Company’s common stock
      that is to be issued in January 2005. The Company believes that there are no
      other parties with any claims to any right, title and interest in and to any
      of
      the Company’s intellectual property. The
      shares issued in this transaction were valued at their fair market value of
      $226,000 and recorded as an intangible asset which is being amortized over
      its
      estimated useful life of 24 months from the effective dates of the Intellectual
      Property Assignment Agreements. The Company recorded amortization expense for
      the six months ended December 31, 2005 and 2004 of $56,502 and $47,085,
      respectively.





**NOTE
      6 - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE**





In
      December 2005, the Company issued a $400,000 unsecured debenture to one
      accredited investor. The maturity date of the debenture is May 15, 2006 on
      which
      date the principal and a $40,000 transaction fee are due and payable. The lender
      received a five-year warrant to purchase 1,000,000 shares of common stock for
      $.07 per share that expires on December 30, 2010. The fair value of this warrant
      was estimated on its grant date using the Black-


-
          10
          -


Scholes
      option-pricing model when the market price was $.07 per share and assuming
      no
      dividend yield, an expected volatility factor of 193%, an approximate risk-free
      interest rate of 7.25% and a five year expected life. The warrant was valued
      at
      $68,200 which was recorded as a discount on notes payable and is being amortized
      as interest expense over the term of the debenture.





In
      October and November 2005, the Company issued $420,000 of its Series C 10%
      unsecured, convertible debentures to eight accredited investors in consideration
      for $320,000 and the forgiveness of a $100,000 unsecured promissory note. The
      maturity dates of the debentures are the
      earlier to occur of the one-year anniversary of the debentures or the date
      the
      Company receives at least $5,000,000 in aggregate proceeds from subsequent
      financings. In addition, t he
      lenders received three-year warrants to purchase an aggregate of 5,600,000
      shares of common stock for $0.15 per share. The fair value of these warrants
      was
      estimated on their grant dates using the Black-Scholes option-pricing model
      when
      the market prices ranged from $.13 to $.15 per share and assuming no dividend
      yield, an expected volatility factor of 193%, an approximate risk-free interest
      rate of 7.25% and a three year expected life. Since these warrants were valued
      at $700,133, which exceeded the principal amount of the debentures, the discount
      on notes payable was limited to $420,000 and is being amortized as interest
      expense over the term of the debentures. The
      conversion price per share is the greater of i) $0.15 or ii) 50% of the average
      closing price of the common stock for the ten trading days immediately preceding
      the conversion date. However, in the event the Company sells unregistered shares
      of its common stock, excluding shares underlying employee options or shares
      issued in connection with a merger or acquisition, for less than $0.15 per
      share, then the conversion price for any outstanding debentures automatically
      changes to the greater of i) 50% of the average closing price of the Common
      Stock on the Over-the-Counter Bulletin Board or such other quotation system
      as
      the Common Stock may be principally quoted for the ten (10) trading days
      immediately preceding the date that Holder provides written notice to Company
      of
      their intent to exercise the conversion provision or ii) the lowest price per
      share paid by any investor for the Company’s unregistered shares of common stock
      at any time between the date of issue of the Debenture and the conversion date.
      Since the Company sold shares of its common stock for $.10 per share in December
      2005, a beneficial conversion feature was realized which, in this case, is
      not
      recorded since the discount on notes payable associated with the warrants
      already equaled the principal amount of the debentures.





In
      March
      2005, pursuant to its asset purchase agreement with GFC, Inc., the Company
      agreed to pay GFC a total of $200,000 in twenty-four equal payments of $8,333
      per month without interest commencing on April 21, 2005 and continuing for
      the
      next twenty-three consecutive months subject to partial or full acceleration
      based on the gross freight revenue of Power2Ship Intermodal generated during
      the
      one month period commencing on March 21, 2006. As of December 31, 2005, the
      Company has recorded $100,000 of this obligation as current, and $91,667 as
      long
      term notes payable.





In
      January 2005, the Company issued a 10% unsecured, three-month, promissory note
      for $100,000 to one accredited investor. The Company obtained a waiver from
      the
      investor as to the repayment of $100,000 of principal and accrued interest
      on
      its maturity date, as amended, and their consent to extend the maturity date
      of
      the note until December 31, 2005. In November 2005, the investor forgave the
      note in exchange for $100,000 of a 10% unsecured convertible debenture and
      a
      three-year warrant to purchase 1,333,333 shares of common stock for $0.15 per
      share.


The
      maturity date of the debenture is the
      earlier to occur of the one-year anniversary of the debenture or the date the
      Company receives at least $5,000,000 in aggregate proceeds from subsequent
      financings. The conversion price per share is the greater of $0.15 or 50% of
      the
      average closing price of the common stock for the ten trading days immediately
      preceding the conversion date.





In
      January 2005, the Company issued a 5% unsecured three-month promissory note
      for
      $30,000 to one accredited investor. The Company obtained a waiver from the
      investor as to the repayment of $30,000 of principal and accrued interest in
      April 2005. In August 2005, the investor forgave the repayment of the promissory
      note and accrued interest in consideration for the purchase of one unit
      consisting of 200,000 shares of common stock and a warrant to purchase 200,000
      shares for $0.15 per share that expires on July 31, 2008.





In
      June
      and September 2004, the Company issued a total of $2,000,000 of its Series
      B 5%
      secured convertible debentures to one accredited investor. The maturity dates
      of
      these debentures are their respective two-year anniversaries. Interest accrues
      at the rate of 5% per annum during the term of the debentures unless converted
      or redeemed prior to their maturity dates. The Company paid $225,000 in
      commissions and expenses related to these debentures that were accounted for
      as
      deferred financing costs and are being amortized as interest expense over the


-
          11
          -


term
      of
      the debentures. Any portion of the outstanding balance of the debentures may
      be
      converted by the holder at any time into common stock at a conversion price
      per
      share equal to the lesser of $0.456 or 100% of the average of the three lowest
      closing bid prices of the common stock for the thirty trading days immediately
      preceding the conversion date. The Company may redeem the debentures at any
      time
      by providing three days notice and paying a premium of up to 20% of the amount
      being redeemed in a combination of cash and common stock. The Company has
      provided the debenture holder with a security interest in its tangible and
      intangible assets, subject to automatic subordination to most traditional
      asset-based loans, to secure the prompt payment of principal. The
      Company may be in default under certain covenants contained in the debenture
      and
      agreements related thereto. If the Company receives notice of noncompliance
      and
      potential default, the Company would have an obligation to rectify or otherwise
      receive a waiver from the investor under the terms of those agreements. While
      the Company has not received any such notice to date, it is possible that notice
      could be provided in the future, which would likely cause the Company to be
      in
      default under its agreement and obligations to the investor. Any default would
      permit the investor, in its sole discretion, to accelerate full repayment of
      the
      $2,000,000 in principal and accrued interest thereon, claim an indeterminate
      amount of penalties and perhaps result in acceleration of other obligations
      owed
      to other parties. We cannot assure you that we would be in a position to arrange
      alternative financing to satisfy these obligations in the event of a
      default.




Also
      in
      June 2004, the Company issued an aggregate of 816,260 shares of its common
      stock
      valued at $310,179 to the same investor that purchased the Series B unsecured
      convertible debentures and a placement agent upon entering into a Standby Equity
      Distribution Agreement and related agreements with the investor. The value
      of
      these shares was accounted for as deferred financing costs that are being
      amortized as interest expense over a two-year term. In July 2005, the Standby
      Equity Distribution Agreement and related agreements were terminated and the
      unamortized deferred financing costs of $155,090 were amortized as interest
      expense.





In
      March
      and April, 2004, the Company issued $1,747,000 of its 14.25% secured convertible
      debentures to 35 accredited investors and paid commissions and expenses of
      $227,110 accounted for as deferred financing costs that are being amortized
      as
      interest expense over the terms of the debentures. In addition, the Company
      issued 873,500 warrants
      valued at $108,160 and 131,025
      common shares valued at $55,031 to the lenders accounted for as interest
      expense. The debentures mature on December 31, 2006, and earn interest of 14.25%
      per annum payable semi-annually in arrears on June 30 and December 31. The
      debentures may be converted by the holders at any time into common stock at
      a
      conversion price per share of $0.2673. EITF
      98-5
      requires that a beneficial conversion feature be recognized when
      the conversion price is less than the market price at the time the debentures are
      issued. The Company recognized a beneficial conversion provision of
      $194,111 that was recorded as a discount on notes payable and is being amortized
      as interest expense over the remaining terms of the debentures. The Company
      may
      redeem the debentures with fifteen days notice at any time, by paying a premium
      of up to 15% of their original purchase price in a combination of cash and
      common stock. The Company has provided the debenture holders with a security
      interest in its tangible and intangible assets, subject to automatic
      subordination to most traditional asset-based loans, to secure the prompt
      payment of principal. In addition, the Company is subject to a security
      agreement requiring it to deposit six months of interest on the debentures
      in a
      separate account with Newbridge Securities Corporation to be paid to investors
      in the event of a default. During the quarter ended September 30, 2005, one
      investor converted $100,000 of their debentures into common stock decreasing
      the
      outstanding balance to $1,597,000. The
      Company may be in default under certain covenants contained in its agreements
      with the debenture holders. If the Company receives notice of noncompliance
      and
      potential default, the Company would have an obligation to rectify or otherwise
      receive a waiver from the debenture holders under the terms of those agreements.
      While the Company has not received any such notice to date, it is possible
      that
      notice could be provided in the future, which would likely cause the Company
      to
      be in default under its agreement and obligations to the debenture holders.
      Any
      default would accelerate the Company’s obligations to the debenture holders in
      the remaining principal amount of $1,597,000 together with all accrued and
      unpaid interest thereon and perhaps other obligations owed to other parties.
      We
      cannot assure you that we would be in a position to arrange alternative
      financing to satisfy these obligations in the event of a default.





In
      July
      2003, the Company issued a promissory note in the amount of $170,000 to a
      software vendor for licenses to use certain logistics software. The note
      required the Company to pay $30,000 upon issuing the note followed by 22
      consecutive payments of $5,000 on the first of each month from August 2003
      through May 2005 for a total of $140,000. A ll
      the
      aforementioned payments were made when due and the $30,000 remaining balance
      of
      the note was waived resulting in a write-off of $30,000 against prepaid interest and a gain of $18,111 during
      fiscal year 2005.


-
          12
          -


In
      March
      2003, the Company issued a convertible promissory note in the amount of $175,000
      to an unaffiliated Company shareholder. The interest rate of the note is 8%
      per
      annum and it has a maturity date of June 30, 2006. The holder of the note has
      the right to convert the outstanding principal balance of the note into the
      Company’s common stock at any time prior to its maturity date at a conversion
      price equal to the lesser of 1) $1.51 per share or 2) 50% of the average of
      the
      closing bid prices of the common stock for the five trading days immediately
      preceding the date of conversion but no less than $0.25 per share. Given this
      type of conversion provision, EITF 98-5 specifies that a beneficial conversion
      feature be recognized based upon the five days preceding the commitment date.
      This resulted in a beneficial conversion of $175,000 which was treated as a
      discount on notes payable which is being amortized as interest expense over
      the
      term of the debt.





In
      March
      2003, the Company issued a convertible promissory note in the amount of $135,000
      to its Chief Executive Officer upon the forgiveness of $147,520 of accrued
      salary. During fiscal year 2004, the Company repaid $20,000 of this note
      decreasing its outstanding balance to $115,000. The interest rate of the note
      is
      8% per annum and it has a maturity date of June 30, 2006. The holder of the
      note
      has the right to convert the outstanding principal balance of the note into
      the
      Company’s common stock at any time prior to its maturity date at a conversion
      price equal to the lesser of 1) $1.51 per share or 2) 50% of the average of
      the
      closing bid prices of the common stock for the five trading days immediately
      preceding the date of conversion but no less than $0.75 per share.





**NOTE
      7 - STOCKHOLDERS' DEFICIT**





**Preferred
      Stock**





During
      the quarter ended December 31, 2005, two shareholders converted 3,000 shares
      of
      Series B preferred stock into 60,000 shares of common stock.





**Common
      Stock**


During
      the quarter ended December 31, 2005, the Company issued an aggregate of 577,000
      shares of its common stock. This total issuance consisted of 250,000 shares
      sold
      to one investor pursuant to the Company’s unit offering for which it received
      $25,000 of net proceeds, 267,000 shares issued to three consultants valued
      at
      $32,360 pursuant to consulting agreements and 60,000 shares issued to two
      shareholders upon conversion of their Series B preferred stock. For the six
      months ended December 31, 2005, the Company recorded $585,225 in deferred
      compensation for the shares issued as compensation pursuant to agreements and
      amortized $189,149 as consulting expenses.





**Options
      and Warrants**


The
      Company’s board of directors has the authority to determine when and to whom it
      grants options and warrants to purchase shares of the Company’s common stock. In
      addition, the board determines the number of options and warrants to be granted
      and all other terms and conditions related to these securities such as the
      recipients’ vesting schedules, expiration dates, exercise prices and
      restrictions.





Statement
      of Financial Accounting Standards No. 123, "Accounting for Stock-Based
      Compensation" ("SFAS 123"), encourages, but does not require, companies to
      record compensation cost for stock-based employee compensation plans at fair
      value. The Company has chosen to account for stock-based compensation using
      the
      intrinsic value method prescribed in Accounting Principles Board Opinion No.
      25,
      "Accounting for Stock Issued to Employees", and related Interpretations.
      Accordingly, compensation cost for stock options and warrants is measured as
      the
      excess, if any, of the estimated fair value of the Company's stock at the date
      of the grant over the amount an employee must pay to acquire the stock. The
      Company has adopted the "disclosure only" alternative described in SFAS 123
      and
      SFAS 148, which require pro forma disclosures of net income and earnings per
      share as if the fair value method of accounting had been applied.







For
      purposes of the pro forma calculations, the fair value of each option was
      estimated on the date of the grant using the Black-Scholes option-pricing model
      with the following assumptions used:




-
          13
          -









Weighted
                average:
            2006
            2005Dividend
                yield
            None
            NoneExpected
                volatility factor
            172
                %
            94
                %Approximate
                risk free interest rates
            6.88%
            4.75%Expected
                lives, in years
            3
            3











The
      determination of fair values for all stock options and warrants is based on
      the
      assumptions described in the preceding paragraph, and because additional option
      grants are expected to be made each year, the above pro forma disclosures are
      not representative of pro forma effects on reported net income or loss for
      future years.







**Stock
      options**





A
      summary
      of the stock option activity is as follows:





WeightedAverageExercise
            
            Number
            
            Exercise
                PricePrice
            
            of
                Options
            
            Per
                OptionOutstanding
                options at June 30, 2005
            
            $
            0.37
            
            
            17,707,517
            
            $
            0.25
                - $1.01Granted
            
            $
            0.15
            
            
            54,000
            
            $
            0.15Expired
            
            $
            0.51
            
            
            (1,246,923
            )
            $
            0.38
                - $0.50Cancelled
            
            
            --
            
            
            --
            
            
            --Outstanding
                options at December 31, 2005
            
            $
            0.36
            
            
            16,514,594
            
            $
            0.15
                - $1.01Exercisable
                options at December 31, 2005
            
            $
            0.36
            
            
            16,377,094
            
            $
            0.15
                - $1.01









The
      following table summarizes information concerning stock options outstanding
      at
      December 31, 2005.





Weighted
            
            WeightedNumber
              of
            
            Average
            
            AverageOptions
            
            Remaining
            
            ExerciseRange
                of Exercise Price
            
            Outstanding
            
            Life
                in Years
            
            Price$0.15
            
            
            54,000
            
            
            1.98
            
            $
            0.15$
                0.25 - $0.40
            
            
            15,935,594
            
            
            1.53
            
            $
            0.34$
                0.50 - $0.52
            
            
            225,000
            
            
            0.72
            
            $
            0.55$.1.01
            
            
            300,000
            
            
            1.79
            
            $
            1.0116,514,594









The
      following table summarizes information concerning stock options exercisable
      at
      December 31, 2005.


WeightedAverageNumber
              of
            
            ExerciseRange
                of Exercise Price
            
            Options
            
            Price$
                0.15
            
            
            54,000
            
            $
            0.15$
                0.25 - $0.40
            
            
            15,798,094
            
            $
            0.34$
                0.50 - $0.52
            
            
            225,000
            
            $
            0.50$
                1.01
            
            
            300,000
            
            $
            1.0116,377,094





**Warrants**





A
      summary
      of the warrant activity is as follows:


WeightedAverageExercise
            
            Number
                of
            
            Exercise
                PricePrice
            
            Warrants
            
            Per
                WarrantOutstanding
                warrants at June 30, 2005
            
            $
            0.28
            
            
            30,483,206
            
            $
            0.15
                - $2.00Granted
            
            $
            0.14
            
            
            14,383,333
            
            $
            0.07
                - $0.15Cancelled
            
            $
            0.50
            
            
            (1,250,000
            )
            $
            0.50Expired
            
            $
            0.75
            
            
            (145,658
            )
            $
            0.75Outstanding
                warrants at December 31, 2005
            
            $
            0.23
            
            
            43,470,881
            
            $
            0.07
                - $2.00Exercisable
                warrants at December 31, 2005
            
            $
            0.22
            
            
            42,450,881
            
            $
            0.07
                - $2.00





The
      following table summarizes information concerning warrants outstanding at
      December 31, 2005:





Weighted
            
            WeightedAverage
            
            AverageNumber
                of
            
            Remaining
            
            ExerciseRange
                of Exercise Price
            
            Warrants
            
            Life
                in Years
            
            Price$
                0.07 - $0.15
            
            
            35,265,668
            
            
            2.46
            
            $
            0.15$
                0.20 - $0.74
            
            
            5,908,314
            
            
            1.89
            
            $
            0.42$
                0.75 - $2.00
            
            
            2,296,899
            
            
            0.90
            
            $
            0.9943,470,881





The
      following table summarizes information concerning warrants exercisable at
      December 31, 2005:





WeightedAverageNumber
                of
            
            ExerciseRange
                of Exercise Price
            
            Warrants
            
            Price$
                0.07 - 0.15
            
            
            35,265,668
            
            $
            0.15$
                0.20 - $0.74
            
            
            4,888,314
            
            $
            0.40$
                0.75 - $2.00
            
            
            2,296,899
            
            $
            0.9942,450,881





**NOTE
      8 - ACQUISITIONS**





In
      March
      2005 we purchased
      certain assets, including customer lists, back-shop equipment, office equipment,
      telecommunications equipment, certain contracts, five vehicle/trucks, and
      assumed certain liabilities of Commodity Express Transportation, Inc., a South
      Carolina company, for a purchase price of $100,000 in cash and the assumption
      of
      liabilities in the amount of $193,655. See Note 4 “Intangible Assets” for
      further details related to the allocation of the purchase price. In addition,
      we
      replaced certain deposits and a letter of credit previously made or issued
      on
      the seller's behalf with third parties in the aggregate amount of approximately
      $145,000 related to the operation of the seller's business and agreed to replace
      additional letters of credit totaling approximately $20,000 on


-
          14
          -


or
      before
      June 10, 2005. We also assumed certain leases related to the operation of the
      seller's business, including tractor leases, owner/operator leases and a
      warehouse lease. At the
      closing of this transaction, we entered into a(n):





-  equipment
      lease agreement whereby we agreed to lease from the seller certain trailers
      for
      terms ranging from twelve to sixty months;





-  commercial
      lease pursuant to which we agreed to rent from the seller the commercial
      property used as the corporate offices for Commodity Express Transportation
      for
      a term of five years for $4,200 per month with a one-year renewal option for
      $5,040 per month;





-  agreement
      with TPS Logistics, Inc., a company in the transportation brokerage business
      in
      which the president of Commodity Express Transportation is an officer, to be
      the
      exclusive carrier for TPS’ largest customer in consideration for one percent of
      the gross receipts from such customer for a term that will terminate on the
      earlier of March 20, 2010 or when the agreement between TPS and its largest
      customer is no longer effective;





-  consulting
      agreement with Stokes Logistics Consulting, LLC, a company in which the
      president of Commodity Express Transportation is a principal, having a term
      of
      five years which may be extended for two successive one year terms upon consent
      of both parties, pursuant to which we will pay a monthly consulting fee based
      upon gross revenue of Commodity Express Transportation, with the minimum and
      maximum payable in any one year of $100,000 and $200,000,
      respectively;





-  employment
      agreement with W.A. Stokes, president of Commodity Express Transportation,
      having a term of one year which may be extended for two additional one year
      terms, pursuant to which we agreed to pay an annual base salary of $150,000
      and
      a quarterly bonus based on the gross revenue that Mr. Stokes is responsible
      for
      generating from additional facilities operated by its current largest customer
      outside of South Carolina;





-  escrow
      agreement pursuant to which we have deposited all the shares of Commodity
      Express Transportation into an escrow account until March 21, 2007 during which
      period we retain voting rights over these securities except in the event of
      a
      default under the escrow agreement, which would occur if the net worth of
      Commodity Express Transportation drops below certain levels or if we are
      delinquent in our payments under the equipment or commercial lease agreements,
      consulting agreement or agreement with TPS Logistics, Inc. described above,
      the
      seller would have the right to assume control of Commodity Express
      Transportation until such default has been cured; and





-  fee
      assumption agreement pursuant to which we agreed to assume the seller’s
      liability to pay the business broker involved with this transaction $100,000
      which we paid at the closing with the issuance of 370,370 shares of our common
      stock.





In
      March
      2005, we **** purchased certain
      assets, including trucking and brokerage authority permits, contracts with
      shipping customers, contracts with agents, lease contracts with owner-operators
      and escrow deposits from owner-operators and agents from GFC, Inc., a South
      Carolina company, for a purchase price of $300,000, of which $100,000 was paid
      by canceling the $100,000 secured promissory note made by the seller to the
      Company, and $200,000
      will be paid in twenty-four equal monthly payments of $8,333 subject to partial
      or full acceleration based on the gross freight revenue of Power2Ship Intermodal
      generated during the one month period commencing on March 21, 2006 and
      the
      assumption of those obligations corresponding to owner-operator and agent escrow
      deposits. In addition, the Company issued the seller a three-year warrant to
      purchase 200,000 shares of the Company’s common stock for $.30 per share, which
      vests 50% on the closing date and 50% on the one year anniversary of the closing
      date which was valued at $34,600 using the
      fair
      value estimated on the date of the grant using the Black-Scholes option-pricing
      model .





Also,
      in
      conjunction with this transaction, we entered into a five year consulting
      agreement with automatic one-year extensions unless terminated prior thereto,
      with Michael Allora, the former president of GFC. The agreement provides for
      Mr.
      Allora to earn a commission based on the annual increases, if any, in the gross
      revenue of the acquired business with such commission to be paid in five equal
      annual installments as well as a three-year stock option at the end of each
      yearly period during which the annual gross revenue of the acquired business
      has
      increased from the prior year and is in excess of $10,000,000.


-
          15
          -


The
      following Pro Forma Combined Financial Statement of Power2Ship, Inc., Commodity
      Express Transportation, Inc. and GFC, Inc. gives effect to the acquisitions
      of
      certain assets of Commodity Express Transportation, Inc. and GFC, Inc. under
      the
      purchase method of accounting prescribed by Accounting Principles Board Opinion
      No. 16, Business Combinations, as if they had occurred on July 1, 2004. This
      pro
      forma statement is presented for illustrative purposes only. The pro forma
      adjustments are based upon available information and assumptions that management
      believes are reasonable.





Pro
      Forma Combined Statement of Operations for the Six Months Ended December 31,
      2004




**Commodity**
              
              
              
              **Pro
                  Forma****Power2Ship**
              
              **Express**
              
              **GFC**
              
              **Adjustments**
              
              **Pro
                  Forma**Revenue:Freight
                  transportation
              
              $
              1,467,643
              
              $
              7,789,673
              
              $
              3,013,396
              
              $
              -
              
              $
              12,270,712Implementation
                  services
              
              
              180
              
              
              -
              
              
              -
              
              
              -
              
              
              180-
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -Total
                  revenue
              
              
              1,467,823
              
              
              7,789,673
              
              
              3,013,396
              
              
              -
              
              
              12,270,892Operating
                  expenses:Freight
                  transportation
              
              
              1,310,054
              
              
              6,864,111
              
              
              2,484,357
              
              
              -
              
              
              10,658,522Selling,
                  general and administrative:Salaries,
                  benefits and consulting fees
              
              
              1,134,049
              
              
              543,372
              
              
              180,956
              
              
              -
              
              
              1,858,377Other
                  selling, general and administrative
              
              
              829,075
              
              
              318,961
              
              
              309,711
              
              
              -
              
              
              1,457,747Total
                  operating expenses
              
              
              3,273,178
              
              
              7,726,444
              
              
              2,975,024
              
              
              -
              
              
              13,974,646Loss
                  from operations
              
              
              (1,805,355
              )
              
              63,229
              
              
              38,372
              
              
              -
              
              
              (1,703,754
              )Other
                  income (expense):Forgiveness
                  of debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  expense, net
              
              
              (419,668
              )
              
              (115,021
              )
              
              (57,034
              )
              
              -
              
              
              (591,723
              )Other
                  income
              
              
              571
              
              
              -
              
              
              -
              
              
              -
              
              
              571Total
                  other expense
              
              
              (419,097
              )
              
              (115,021
              )
              
              (57,034
              )
              
              -
              
              
              (591,152
              )Net
                  loss
              
              $
              (2,224,452
              )
              $
              (51,792
              )
              $
              (18,662
              )
              $
              -
              
              $
              (2,294,906
              )




**NOTE
      9 - SUBSEQUENT EVENTS**





Subsequent
      to December 31, 2005, the Company:





**-**
            sold
                17.1 units consisting of 4,275,000 shares of common stock and three-year
                warrants to purchase a total of 4,275,000 shares of common stock
                exercisable at $0.10 per shareand
                received net proceeds of $427,500 from 18 investors;





**-**
            issued
                512,640 shares of common stock and three-year warrants to purchase
                1,012,640 shares of common stock exercisable at $0.15 per share to
                three
                consultants to provide various management consulting services;
                and





**-**
            issued
                169,544 shares of common stock to one holder of $25,000 principal
                amount
                of the Company’s Series C convertible
                debentures.




-
          16
          -


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





The
      following discussion and analysis of financial condition and results of our
      operations should be read in conjunction with the consolidated financial
      statements and the notes to those statements included elsewhere in this report.
      For accounting purposes, our merger with Freight Rate, Inc. was treated as
      a
      recapitalization of Freight Rate, Inc. and accounted for as a reverse
      acquisition. Therefore, the financial statements and accompanying notes thereto
      included elsewhere in this report reflect the assets, liabilities and operations
      of Freight Rate, Inc. as if it had been the reporting entity since inception.
      In
      February 2004 we changed our fiscal year from May 31 to June 30 in order to
      align our quarterly reporting obligations with calendar quarters.





**Forward-looking
      Information**






This
      quarterly report on Form 10-QSB, including the discussion and analysis of our
      financial condition and results of operations and our disclosures about market
      risk, contain certain “forward-looking statements.” These statements represent
      our expectations, beliefs, intentions, or strategies concerning future events
      and by their nature involve risks and uncertainties. Forward-looking statements
      include, among others, statements about our future performance, the continuation
      of historical trends, the sufficiency of our sources of capital for future
      needs, the expected impact of recently issued accounting pronouncements, and
      the
      outcome or effects of litigation. Risks that could cause actual results to
      differ materially from our current expectations include changes in market demand
      and pricing for our services, the impact of competition, changes in
      relationships with our customers, our ability to obtain sufficient carrier
      capacity at competitive rates to transport freight, our ability to retain
      shippers willing to have us move their freight, the risks associated with
      litigation and insurance coverage, the impacts of war on the economy, and
      changing economic conditions. Therefore, actual results may differ materially
      from our expectations based on these and other risks and uncertainties.







**Critical
      Accounting Policies**





Financial
      Reporting Release No. 60, which was released by the SEC, requires all companies
      to include a discussion of critical accounting policies or methods used in
      the
      preparation of financial statements. Note 2 to our consolidated financial
      statements includes a summary of the significant accounting policies and methods
      used in the preparation of our consolidated financial statements. The following
      is a brief discussion of the more significant accounting policies and methods
      used by us:





-  General .
      The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, disclosure of contingent
      assets and liabilities and the reported amounts of revenues and expenses. Actual
      results could differ from those estimates.





-  Revenue
      Recognition. The
      Company recognizes freight transportation revenue when shipments reach their
      destinations and the receiver acknowledges the receipt of goods by signing
      a
      bill of lading. Revenue from access fees is recognized in the month that access
      to our P2S MobileMarketTM is provided to customers. Revenue generated from
      implementation services, pursuant to software development contracts with
      customers defining the scope of work, is recognized on the percentage of
      completion basis for each deliverable provided for in the contract. Revenue
      from
      implementation services are non-recurring and are expected to significantly
      decrease in total and as a percent of total revenue in future
      periods.





-  Stock
      Based Compensation .
      The
      Company uses SFAS No. 123, "Accounting for Stock-Based Compensation," which
      permits entities to recognize as expense over the vesting period the fair value
      of all stock-based awards on the date of grant. Alternatively, SFAS No. 123
      also
      allows entities to continue to apply the provision of APB Opinion No. 25 and
      provide pro forma net income and pro forma earnings per share disclosures for
      employee stock option grants as if the fair-value-based method defined in SFAS
      No. 123 has been applied. The Company has elected to continue to apply the
      provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
      of SFAS No. 123 and SFAS No. 148.








-
          17
          -


**OVERVIEW**





We
      operate as an application service provider that delivers supply chain, tracking
      and logistics information to the freight industry. We provide logistics
      information and services to shippers that need to have truckloads of goods
      transported to or from their facilities. In certain instances, we provide
      consulting services to enable our shipper customers to integrate their systems
      with our logistics information system. We also provide logistics information
      and
      services to trucking companies (carriers) that operate fleets of trucks which
      enable these companies to manage the utilization of their transportation assets
      and personnel. Our mission is to provide our shipper and carrier members with
      easily accessible and useful information that allows them to be more profitable
      by improving the utilization of transportation assets and optimizing the
      efficiency of the supply chain.





We
      began
      providing our freight transportation and implementation services in October
      2002
      and we began providing logistics information access services in March 2003.
      A
      key component of our business model is building our customer base so that we
      have a sufficient number of shippers and carriers utilizing our Web-based P2S
      MobileMarketTM system so
      that
      when a shipper customer wants to move a load of freight we can offer one or
      more
      carriers with available trucks and trailers that meet their criteria. We
      have
      been able to increase the number of shipper customers from whom we generated
      revenue from eight at December 31, 2004 to
      27 at
      December 31, 2005 .
      We have
      entered into agreements to provide transportation services with some of our
      shipper customers including International Paper, Nestle Waters, Tyco
      International, Ltd., Tofutti Brands, Luckey Logistics, Gold Coast Freightways,
      Associated Grocers, Caruso Foods, Compass Roadmaster, Paper Pak and Valmont
      Industries. Further, in July 2005, we disclosed the start of a pilot program
      with International Paper to enable one of their core carriers to become
      e-commerce compliant by installing the P2S MobileMarket system in their trucks.
      We can provide no assurance, however, as to the amount of revenue, if any,
      we
      will generate from such customers, since these agreements do not commit them
      to
      using us for any specific volume of transportation services.





We
      are
      presently able to identify available capacity among our carrier customers to
      move only a very small percentage of these loads. Given the tens of thousand
      of
      transportation routes in the U.S., in order to have the P2S MobileMarketTM be
      successful we must substantially increase the number of our carrier customers
      in
      order to capture a greater percentage of our shipper customer’s inbound and
      outbound transportation business. We spent $50,033 in the six months ended
      December 31, 2005 compared to $134,743 in the six months ended December 31,
      2004
      in advertising and marketing our services to potential carriers and shippers
      utilizing trade publications, transportation industry websites and direct mail
      as well as company participation in industry trade shows and trade
      organizations .
      We
      intend to curtail most of our marketing expenditures for the remainder of fiscal
      year 2006 unless we raise sufficient capital to increase our marketing efforts
      for which no assurances can be given.





As
      of
      December 31, 2005, approximately 2,095 carriers had registered on our website
      to
      become members. Of
      the
      2,095 carriers that are currently registered to participate in our
      MobileMarketTM, approximately 1,907 have entered into carrier agreements with us. We
      have
      used approximately 496 of these carriers to transport freight for our shipper
      customers.





Our
      business model also includes the pursuit of mergers, acquisitions and joint
      ventures of strategic, trucking companies and other transportation-related
      providers. During the quarter ended March 31, 2005, we consummated the
      acquisitions of Commodity
      Express Transportation ,
      Inc.
      and GFC, Inc. as described in Note 8 to the financial statements in this Form
      10-QSB. These transactions resulted in our gaining additional trucking capacity
      for our existing shipper customers without incurring any additional marketing
      expense and obtaining new shipper customers. In addition, the acquisition of
      Commodity Express Transportation, Inc., which had the federal operating
      authorities required to operate as a trucking company, enables us to recruit
      truck owner-operators to increase our trucking capacity. Our ability to pursue
      additional transactions is subject to the availability of sufficient capital
      as
      may be necessary. While we have identified potential targets for additional
      mergers, acquisitions or joint ventures, we have not signed any definitive
      agreements with any parties as of the date of this report and we cannot assure
      you we will be successful in consummating any transactions with any of these
      targets.




In
      August
      2005 we issued a press release announcing our collaboration with L-3
      Communications on an end-to-end solution for secure and efficient container
      transportation worldwide. We are also in discussions with other several
      technology and defense companies that, in response to the Homeland Security
      Act
      and Operation Safe Commerce, are in the process of developing solutions that
      address global transportation security issues. We believe


-
          18
          -


that
      our
      secure, wireless, Internet-based system which uses a combination of global
      positioning satellite technologies can become a key component in the security
      solutions being developed by other companies to counteract the threat of
      terrorism. Our system is capable of capturing and processing data transmitted
      wirelessly from other technologies that could be part of any comprehensive
      security system. Examples of these technologies may include radio-frequency
      identification (RFID) tags fastened to containers and/or trailers, smart tags
      affixed to the goods inside shipping containers, electronic seals applied at
      the
      time the container is loaded and geo fencing to alert a truck’s owner or
      authorities if a vehicle deviates from its designated route. There can be no
      assurances, however, that we will ever enter into any agreements with L-3
      Communications or any of the other companies we are in discussions with or,
      if
      we do, that we will ever generate any significant revenues from such
      agreements.





Also,
      we
      have begun marketing the P2S MobileMarketTM outside of the United States. In
      November 2004, we retained
      International Logistics Solutions to represent the company outside of North
      America. In April, 2005, our President, Michael Darden, traveled to Brazil
      to
      attend meetings with several major Brazilian companies to educate them about
      the P2S
      MobileMarketTM and explore their interest in becoming customers if it was
      introduced in Brazil.





In
      September 2005, we announced that we had signed a referral partner agreement
      to
      form a strategic alliance with ShipLogix in which both companies will
      cross-market each other’s systems to their respective customer bases as well as
      engage in joint sales and marketing activities.





**RESULTS
      OF OPERATIONS**





**Six
      Months Ended December 31, 2005 compared to the Six Months Ended December 31,
      2004**





**Revenue**





Total
      revenue generated during the six months ended December 31, 2005 increased by
      $14,738,887 as compared with total revenue generated during the six months
      ended
      December 31, 2004. The increase during the six months ended December 31, 2005
      was attributed to higher freight transportation revenue generated
      from:





-
            Commodity
                Express Transportation, Inc., our subsidiary which began operationsupon
                consummating an asset purchase in March 2005, that had revenue of
                $12,373,377 versus no revenue during the same six months of 2004
                which was
                prior to the asset purchase;





-
            Power2Ship
                Intermodal, Inc., our subsidiary which began operations upon consummating
                an asset purchase in March 2005, that had revenue of $1,976,866 versus
                no
                revenue during the same six months of 2004 which was prior to the
                asset
                purchase; and





-
            Power2Ship
                which had an increase of $388,644 or approximately 26.5% to $1,850,467
                versus $1,467,823 in the same six months of 2004 as a result of growth
                of
                revenue from existing customers such as Tire Kingdom and Carroll
                Tireand additional revenue from several new shipper customers.





Revenue
      from access services and implementation services during the six months ended
      December 31, 2005 was $5,668 versus $180 during the same six months of 2004.
      Access services provide unlimited use of the information available through
      the
      Power2Ship MobileMarketTM for a fixed monthly fee. Implementation services
      generally involve software development related to the design, programming and
      testing of a custom developed interface to the Power2Ship MobileMarketTM.





During
      the six months ended December 31, 2005, one customer accounted for 53% of the
      Company’s revenue.  Our
      agreement with this customer may be cancelled upon thirty days notice Because
      of
      the significant nature of the revenue from this customer to our results of
      operations, however, the loss of this customer, prior to our obtaining a
      comparable amount of revenue from additional customers, could have a material
      adverse effect on our business operations and prospects.


-
            19
            -


Operating Expenses




Total
      operating expenses incurred during the six months ended December 31, 2005
      increased by $14,307,508 or approximately 437% compared to the six months ended
      December 31, 2004. The
      increase during the six months ended December 31, 2005 was attributed to the
      following:





-  Freight
      transportation expenses, consisting of direct costs associated with transporting
      freight either with our own trucks or through non-affiliated trucking companies
      we hired to move loads for our shipper customers, increased by $13,122,413
      in
      the six months ended December 31, 2005 as compared with the same six months
      during 2004. This percentage increase in freight transportation expense was
      approximately the same as the percentage increase in revenue indicating that
      the
      gross margin on freight transportation services was approximately the same
      in
      both periods.





-  Selling,
      general and administrative expenses increased by $1,185,095 or approximately
      60.4% during the six months ended December 31, 2005 compared to the six months
      ended December 31, 2004. The increase during the six months ended December
      31,
      2005 was attributed to the following:





-
            Salaries,
                benefits and consulting fees increased by $865,980 or approximately
                76.4%
                during the six months ended December 31, 2005 which consisted of
                increases
                to:





-  Salaries
      and benefits by $630,324 or approximately 74.4% to $1,477,319 in the six months
      ended December 31, 2005 from $846,995 during the same six months of 2004. This
      increase can be attributed primarily to the $586,538 in salaries and benefits
      paid to employees of our subsidiaries Commodity Express Transportation, Inc.
      and
      Power2Ship Intermodal, Inc. during the six months ended December 31, 2005
      compared to the same six months of 2004 which was prior to our asset purchases
      that began the operations of Commodity Express Transportation and Power2Ship
      Intermodal.





-  Consulting
      fees by $235,656 or approximately 82% in the six months ended December 31,
      2005
      to $522,710 from $287,054 during the same six months of 2004. This increase
      was
      attributed to higher consulting fees, primarily in the forms of common stock
      and
      warrants, paid to a greater number of consultants to provide the Company with
      additional management consulting services than in the same six months of 2004.




-
            Other
                selling, general and administrative expenses increased by $319,115
                or
                approximately 38.5% during the six months ended December 31, 2005
                as
                compared to the six months ended December 31, 2004. The most significant
                contributors to this increase were:





-
            Expenses
                of $439,755 incurred by our subsidiary Commodity Express Transportation
                during the six months ended December 31, 2005 as compared with no
                expenses
                during the same period of 2004 which was prior to it commencing
                operations.





-
            Expenses
                of $56,944 incurred by our subsidiary Power2Ship Intermodal during
                the six
                months ended December 31, 2005 ascompared
                with no expenses during the same period of 2004 which was prior to
                it
                commencing operations.





These
      increases were partially offset by a decrease of $177,584 or approximately
      21.4%
      in other selling, general and administrative expenses incurred by our Boca
      Raton, Florida operation. The most significant contributors to this decrease
      were:





-
            Advertising
                and marketing expenses, including convention and trade show expenses,
                which decreased by $84,710 or approximately 62.9% to $50,033 during
                the
                six months ended December 31, 2005 from $134,743 during the same
                six
                months of 2004. This decrease was a result of management’s decision to
                stop using an outside public relations firm, to temporarily curtail
                advertising our products and services to shippers and carriers in
                trade
                publications, transportation industry websites and other media, and
                to
                reduce our attendance at regional and national trade
                shows.




-
          20
          -




-
            Legal
                fees and expenses which decreased by $92,617 or approximately 71.0%
                to
                $37,841 during the six months ended December 31, 2005 from $130,458
                during
                the same six months of 2004. This decrease resulted from our requiring
                less legal services to prepare and review agreements and other documents
                incurred in the ordinary course of business including our required
                public
                filings, customer contracts and securities offerings and to represent
                us
                in various legal proceedings. In addition, we incurred significant
                legal
                expenses during the six months ended December 31, 2004 related to
                the
                preparation of our registration statement on Form SB-2 and amendments
                thereto.





These
      decreases were partially offset by increases in:





-
            Bank
                services charges of $28,990 to $29,408 during the six months ended
                December 31, 2005 from $418 during the same six months of 2004 primarily
                as a result of the increase in transaction fees paid to the vendor
                that
                electronically pays our carriers.





**Other
      Income (Expenses)**





Total
      other expenses increased by $409,388 or approximately 97.7% during the six
      months ended December 31, 2005 as compared with the same six months of 2004.
      This increase primarily resulted from an increase in interest expense of
      $413,138 or approximately 98.4%. The higher interest expense primarily was
      associated with interest incurred by:





-
            Amortization
                of deferred financing costs and discounts on notes payable which
                increased
                by $244,266 to $483,024 during the six months ended December 31,
                2005 from
                $238,758 during the same six months of 2004
                and





-
            Commodity
                Express Transportation, Inc. and Power2Ship Intermodal, Inc. which
                had
                interest expenses of $132,399 and $37,451, respectively, compared
                with no
                interest expenses during the same period of 2004 as this was prior
                to
                their commencing operations.




**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      have
      experienced losses and negative cash flows from operations since our inception.
      As of December 31, 2005, we had an accumulated deficit of $21,258,554, a
      stockholders' deficit of $1,734,920, and our independent auditors’ report on our
      financial statements for fiscal year 2005 contained an explanatory paragraph
      regarding our ability to continue as a going concern. Our ability to continue
      as
      a going concern is dependent upon our ability to obtain the necessary financing
      to meet our obligations and repay our liabilities when they become due and
      to
      increase our revenues and generate profitable operations in the future. We
      plan
      to continue to provide for our capital requirements through the sale of equity
      or debt securities; however, we have no firm commitments from any third party
      to
      provide this financing and we cannot assure you we will be successful in raising
      working capital as needed. There are no assurances that we will have sufficient
      funds to execute our business plan, pay our obligations as they become due
      or
      generate positive operating results. If we are unable to raise additional
      capital, we may be required to reduce or eliminate certain of our operations.





At
      December 31, 2005, we had a working capital deficit of $4,024,700 as compared
      with a working capital deficit of $38,477 at June 30, 2005. This $3,986,223
      decrease in working capital during these six months was attributed to a $606,765
      increase in current assets which was more than offset by a $4,592,988 increase
      in current liabilities. The $606,765 increase in current assets consisted of
      increases in cash of $359,094 and in accounts receivable of $305,232 offset
      by a
      decrease in short term notes receivable of $50,000 and a decrease in prepaid
      insurance of $7,561. The $4,592,988 increase in current liabilities consisted
      of
      increases in short term notes payable of $690,000, in accounts payable and
      accrued expenses of $464,378, in accrued salaries of $83,405, in the current
      portion of convertible notes payable of $3,183,037, and in the outstanding
      balance of our line of credit by $172,168.





During
      the six months ended December 31, 2005, our cash balance increased by $359,094.
      This increase was the result of $1,774,668 provided by financing activities
      that
      partially was offset by $1,151,637 used in


-
          21
          -


operating
      activities and $263,937 used in investing activities. This compared with a
      decrease in our cash balance of $817,601 during the six months ended December
      31, 2004 as a result of $1,675,159 used in operating activities and $289,096
      used in investing activities that partially were offset by $1,146,654 provided
      by financing activities.





During
      the six months ended December 31, 2005, we used $1,151,637 in operating
      activities which was made up of our net loss of $2,202,461 that partially was
      offset by depreciation and amortization of $817,819, issuances of our common
      stock, options and warrants as payment for services, interest and compensation
      of $160,911, changes in operating assets and liabilities of $72,032 and a $62
      increase in allowance for doubtful accounts. This compared with $1,675,159
      used
      in operating activities during the six months ended December 31, 2004 which
      consisted of our net loss of $2,224,452 that partially was offset by
      depreciation and amortization of $351,450, issuances of our common stock,
      options and warrants as payment for services, interest and compensation of
      $190,585 and changes in operating assets and liabilities of $7,258.





The
      $263,937 used in investing activities during the six months ended December
      31,
      2005 consisted of $186,634 for costs of software development and $77,303 for
      purchases of property and equipment. This
      compared with $289,096 used in investing activities during the six months ended
      December 31, 2004 which consisted of $100,000 disbursed to GFC, Inc. prior
      to
      our acquisition of certain of its assets, $179,284 for costs of software
      development and $9,812 for purchases of property and equipment.





During
      the six months ended December 31, 2005, we generated net cash from financing
      activities of $1,774,668 which consisted of net proceeds of $720,000 from the
      issuance of units consisting of unsecured convertible debentures and warrants,
      $50,000 from repayment of a short term loan to an unrelated party, $172,168
      from
      our revolving line of credit and $832,500 from the issuance of units consisting
      of common stock and warrants. This compared with net cash provided by financing
      activities of $1,146,654 during the six months ended December 31, 2004 which
      consisted of net proceeds of $900,000 from the issuance of convertible
      promissory notes, $110,000 from the issuance of short term unsecured promissory
      notes and $166,654 from our revolving line of credit less $30,000 from the
      repayment of promissory notes.





We
      estimate that the $1,196,847 we had on hand at December 31, 2005 and our receipt
      since January 1, 2006 of $427,500 in net proceeds pursuant to our unit offering
      that closed on February 13, 2006, a projected decrease in cash used in
      operations as a result of our increasing transportation and MobileMarketTM
revenue and additional borrowings from our revolving credit facilities should
      be
      sufficient to fund our operating activities for approximately sixty
      days from the date of filing this report. Thereafter, we will need additional
      working capital to fund our operations or may be forced to curtail some or
      all
      of our operations.





Our
      future capital requirements depend primarily on the rate at which we can
      decrease our use of cash to fund operations. Cash used for operations will
      be
      affected by numerous known and unknown risks and uncertainties including, but
      not limited to, our ability to successfully market our products and services,
      the degree to which competitive products and services are introduced to the
      market, and our ability to attract key personnel as we grow. As long as our
      cash
      flow from operations remains insufficient to completely fund operations, we
      will
      continue depleting our financial resources and seeking additional capital
      through equity and/or debt financing. If we raise additional capital through
      the
      issuance of debt, this will result in increased interest expense. If we raise
      additional funds through the issuance of equity or convertible debt securities,
      the percentage ownership of Power2Ship held by existing stockholders will be
      reduced and those stockholders may experience significant dilution. In addition,
      new securities may contain certain rights, preferences or privileges that are
      senior to those of our common stock. There can be no assurance that acceptable
      financing to fund our ongoing operations and for future acquisitions or for
      the
      integration and expansion of existing operations can be obtained on suitable
      terms, if at all. Our ability to continue our existing operations and to
      continue to implement our growth and acquisition strategy could suffer if we
      are
      unable to raise the additional funds on acceptable terms which will have the
      effect of adversely affecting our ongoing operations and limiting our ability
      to
      increase our revenues or possibly attain profitable operations in the future.
      We
      are constantly evaluating our cash needs and current burn rate, and we have
      a
      strategy whereby certain non-essential personnel and administrative costs will
      be reduced or eliminated so that we may continue to meet operating obligations
      until such time as we can raise additional working capital. If we are unable,
      however, to secure the necessary additional working capital as needed, we may
      be
      forced to curtail some or all of our operations.





In
      July
      2005 we terminated our Standby Equity Distribution Agreement and several other
      related agreements
      with Cornell Capital Partners.


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**ITEM
      3. CONTROLS AND PROCEDURES**





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the
      end
      of the period covered by the Report, being December 31, 2005, we have carried
      out an evaluation of the effectiveness of the design and operation of our
      company's disclosure controls and procedures. This evaluation was carried out
      under the supervision and with the participation of our company's management,
      including our company's Chief Executive Officer. Based upon that evaluation,
      our
      company's Chief Executive Officer concluded that our company's disclosure
      controls and procedures are effective and that there are no occurrences during
      the period covered by this quarterly report that have materially affected,
      or
      are reasonably likely to materially affect, our internal controls over financial
      reporting.





Disclosure
      controls and procedures and other procedures that are designed to ensure that
      information required to be disclosed in our reports filed or submitted under
      the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
      within the time period specified in the Securities and Exchange Commission's
      rules and forms. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed in our reports filed under the Securities Exchange Act of 1934 is
      accumulated and communicated to management including our Chief Executive as
      appropriate, to allow timely decisions regarding required
      disclosure.





**PART
      II. OTHER INFORMATION**





**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





None.





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





During
      October and November 2005 we issued
      250,000 shares of common stock to two consultants to provide various management
      consulting services valued
      at
      $31,000 as compensation pursuant to their respective consulting agreements. The
      issuances were exempt from registration under the Securities Act in reliance
      on
      Section 4(2) thereof. The recipients were accredited investors. No general
      solicitation or advertising was used in connection with the transaction, and
      the
      certificates evidencing the shares that were issued contained a legend
      restricting their transferability absent registration under the Securities
      Act
      or the availability of an applicable exemption therefrom.







Between
      October and November 2005, we sold approximately 17 units of our securities
      to
      seven investors in a private placement exempt from registration under the
      Securities Act in reliance on Rule 506 of Regulation D of that act. Each unit
      consisted of a $25,000 Series C convertible debenture, currently convertible
      into 250,000 shares of common stock, and a warrant to purchase 333,333 shares
      of
      common stock for a total issuance of warrants to purchase 5,599,994 shares
      of
      common stock. We paid no sales commissions in this offering. We received net
      proceeds of $320,000 after payment of costs related to the offering from six
      of
      the investors and one investor exchanged their $100,000 unsecured promissory
      note for four units. No general solicitation or advertising was used in
      connection with this offering, and the certificates evidencing the shares that
      were issued contained a legend restricting their transferability absent
      registration under the Securities Act or the availability of an applicable
      exemption therefrom. The purchasers had access to business and financial
      information concerning our company. Each purchaser represented that they were
      acquiring the shares for investment purposes only, and not with a view towards
      distribution or resale except in compliance with applicable securities
      laws.







In
      December 2005 we sold a $400,000 principal amount unsecured debenture with
      a
      five-year warrant attached providing the holder with the right to purchase
      1,000,000 shares of our common stock for $.07 per share, to one investor in
      a
      private transaction exempt from registration under the Securities Act in
      reliance on an exemption provided by Section 4(2) of that act. We paid no sales
      commissions in this offering. We received net proceeds of $400,000 from this
      sale. No general solicitation or advertising was used in connection with this
      offering. The purchaser had access to business and financial information
      concerning our company. The purchaser represented that it
      was
      acquiring the securities for investment purposes only, and not with a view
      towards distribution or resale except in compliance with applicable securities
      laws.


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          23
          -


Between
      December 2005 and February 2006, we sold approximately 18 units of our
      securities to 18 accredited investors in a private placement exempt from
      registration under the Securities Act of 1933 in reliance on Rule 506 of
      Regulation D of that act. Each unit consisted of 250,000 shares of our common
      stock and a warrant to purchase 250,000 shares of our common stock for an
      aggregate purchase of 4,525,000 shares of our common stock and warrants to
      purchase 4,525,000 shares of common stock. We paid no sales commissions in
      this
      offering. We received net proceeds of $452,500 from these sales. No general
      solicitation or advertising was used in connection with this offering, and
      the
      certificates evidencing the shares that were issued contained a legend
      restricting their transferability absent registration under the Securities
      Act
      or the availability of an applicable exemption therefrom. The purchasers had
      access to business and financial information concerning our company. Each
      purchaser represented that they were acquiring the shares for investment
      purposes only, and not with a view towards distribution or resale except in
      compliance with applicable securities laws.





In
      February 2006, we issued 262,640 shares of our common stock valued at $39,396
      to
      a law firm as payment for legal services. The issuance was exempt from
      registration under the Securities Act in reliance on Section 4(2) thereof.
      The
      recipient was an accredited investor represented that it was acquiring the
      shares for investment purposes only, and not with a view towards distribution
      or
      resale except in compliance with applicable securities laws. No general
      solicitation or advertising was used in connection with the transaction, and
      the
      certificate evidencing the shares that were issued contained a legend
      restricting their transferability absent registration under the Securities
      Act
      or the availability of an applicable exemption therefrom.




**ITEM
      3.**  **DEFAULTS
      UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5.****OTHER
      INFORMATION**





None.





**ITEM
      6.****EXHIBITS**





(a)  Exhibits




31.1  Rule
        13a-14(a)/15d-14(a) Certification of
        Chief Executive Officer
 
 31.2  Rule
        13a-14(a)/15d-14(a) Certification of
        Principal Financial and Accounting Officer
  32.1
        Certification
        of Chief Executive Officer
        and Chief Financial Officer Pursuant to 18 U.S.C. Section
        1350
 -
              24
              -





**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.








Date:
                February 21, 2006
              POWER2SHIP,
                INC.
              
              By:/s/
                Richard Hersh
              Richard
                Hersh
              Chief
                Executive Officer, principal executive
              officer and principal financial and accounting
                officer















































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