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 SECURITIES EXCHANGE
    ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM______ TO ______

                         Commission File Number 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 [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] 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 May 8, 2006, the number of
outstanding shares of the issuer's common stock was 83,495,960.

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
 ______________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                -----------------



                                                                                             Page
                                                                                             ----
<S>      <C>                                                                                 <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited):                                                      3

         Consolidated Balance Sheet, March 31, 2006                                             3

         Consolidated Statements of Operations, Three and Nine Months Ended
            March 31, 2006 and 2005                                                             4

         Consolidated Statements of Cash Flows, Nine Months Ended
            March 31, 2006 and 2005                                                             5

         Notes to Consolidated Financial Statements                                             6

Item 2.  Management's Discussion and Analysis or Plan of Operation                             21

Item 3.  Controls and Procedures                                                               31

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                                     31

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                           31

Item 3.  Defaults Upon Senior Securities                                                       32

Item 4.  Submission of Matters to a Vote of Security Holders                                   32

Item 5.  Other Information                                                                     32

Item 6.  Exhibits                                                                              32
</TABLE>



















                                      2

<PAGE>
                         PART I. FINANCIAL INFORMATION
                         -----------------------------

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
                        POWER2SHIP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 March 31, 2006
                                   (UNAUDITED)
<S>                                                                                           <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                            $       354,302
   Accounts receivable, net of allowance of $34,848                                           3,671,288
   Prepaid expenses                                                                             115,041
                                                                                        ----------------
        Total current assets                                                                  4,140,631

Property and equipment                                                                          629,283
     Less: accumulated depreciation                                                            (217,898)
                                                                                        ----------------
        Net property and equipment                                                              411,385

Software development costs, net of accumulated amortization
     of $139,816                                                                                966,393
Deferred financing costs                                                                        142,286
Intangible asset, net of accumulated amortization of $197,825                                   265,341
Restricted cash for interest on debentures                                                        2,308
Other assets                                                                                    532,693
                                                                                        ----------------
Total assets                                                                            $     6,461,037
                                                                                        ================
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Notes payable - short term                                                           $       913,000
   Convertible notes payable less discount of $375,063                                        3,346,937
   Convertible note payable to related party                                                    115,000
   Lines of credit                                                                            1,879,995
   Accounts payable                                                                           1,295,709
   Accrued expenses                                                                             884,093
   Accrued salaries                                                                             276,484
                                                                                        ----------------
       Total current liabilities                                                              8,711,218

Long term debt:
   Long term notes payable                                                                       16,500
                                                                                        ----------------
       Total liabilities                                                                      8,727,718

Stockholders' deficit :
Preferred stock, $.01 par value, 1,000,000 shares authorized:
   Series B convertible preferred stock, $.01 par value, 200,000
      shares authorized; 158,200  shares issued and outstanding                                   1,582
   Series C convertible preferred stock, $.01 par value, 20,000
      shares authorized; 832 shares issued and outstanding                                            8
   Series Y convertible preferred stock, $.01 par value, 87,000
      shares authorized; 87,000  shares issued and outstanding                                      870
   Common stock, $.001 par value, 250,000,000 shares
      authorized; 81,293,960 issued and outstanding                                              81,294
   Deferred compensation                                                                       (396,458)
   Additional paid-in capital                                                                20,740,165
   Accumulated deficit                                                                      (22,694,142)
                                                                                        ----------------
       Total stockholders' deficit                                                           (2,266,681)
                                                                                        ----------------
Total liabilities and stockholders' deficit                                             $     6,461,037
                                                                                        ================
</TABLE>
                             See accompanying notes
                                        3
<PAGE>
<TABLE>
<CAPTION>
                        POWER2SHIP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                         Three months ended March 31,             Nine months ended March 31,
                                                    --------------------------------------  -------------------------------------
                                                         2006                   2005               2006                   2005
                                                    -----------------   ------------------  ------------------  -----------------
<S>                                                 <C>                 <C>                 <C>                 <C>
Revenue:
Freight transportation                              $      6,801,040    $       1,473,526   $      23,002,082   $      2,941,169
Access services                                                  702                    -                 702                180
Implementation services                                       15,668                    -              21,336                  -
                                                    -----------------   ------------------  ------------------  -----------------
       Total revenue                                       6,817,410            1,473,526          23,024,120          2,941,349

Operating expenses:
   Freight transportation                                  6,019,275            1,207,628          20,451,742          2,517,682
   Selling, general and administrative:
        Salaries, benefits and consulting fees             1,134,735            1,855,170           3,134,764          2,989,219
        Other selling, general and administrative            654,875              471,362           1,803,065          1,300,437
                                                    -----------------   ------------------  ------------------  -----------------

       Total operating expenses                            7,808,885            3,534,160          25,389,571          6,807,338
                                                    -----------------   ------------------  ------------------  -----------------

       Loss from operations                                 (991,475)          (2,060,634)         (2,365,451)        (3,865,989)
                                                    -----------------   ------------------  ------------------  -----------------
Other income (expense):
   Gain on asset disposal                                          -                    -               1,415                  -
   Interest expense, net                                    (444,113)            (513,296)         (1,276,919)          (932,964)
   Other income                                                    -                  443               2,906              1,014
                                                    -----------------   ------------------  ------------------  -----------------

       Total other expense                                  (444,113)            (512,853)         (1,272,598)          (931,950)
                                                    -----------------   ------------------  ------------------  -----------------

Net loss                                            $     (1,435,588)   $      (2,573,487)  $      (3,638,049)  $     (4,797,939)
                                                    =================   ==================  ==================  =================

Loss per share-basic and diluted                    $          (0.02)   $           (0.05)  $           (0.05)  $          (0.11)
                                                    =================   ==================  ==================  =================
Weighted average shares outstanding
      - basic and diluted                                 78,680,488           47,469,723          74,417,045         41,910,942
                                                    =================   ==================  ==================  =================
</TABLE>











                             See accompanying notes
                                       4
<PAGE>
<TABLE>
<CAPTION>
                        POWER2SHIP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                           Nine Months Ended March 31,
                                                                       ----------------------------------
                                                                            2006               2005
                                                                       ---------------    ---------------
<S>                                                                    <C>                <C>
Cash flows from operating activities:
   Net loss                                                            $   (3,638,049)    $   (4,797,939)
   Adjustments to reconcile net loss to
      net cash used in operating activities:
        Depreciation                                                           81,319             38,533
        Amortization of software development costs                             40,569             40,569
        Amortization of intangible asset                                      101,692             75,336
        Amortization of deferred compensation                                 366,162            148,530
        Amortization of deferred financing costs                              344,241            303,491
        Amortization of discount on notes payable                             395,495             68,211
        Impairment of intangible assets                                        12,500                  -
        Increase in allowance for doubtful accounts                             3,990                  -
        Issuance of stock options and warrants
          for services and conversion                                         144,229            525,183
        Issuance of stock for services, interest and
          litigation settlement                                               198,565          1,066,509
        Changes in operating assets and liabilities:
            Increase in receivables                                        (2,553,850)          (542,480)
            Decrease (increase) in prepaid expenses                           (15,446)            37,030
            Increase in other assets                                         (132,246)          (193,913)
            Increase in accounts payable and accrued expenses                 656,125            586,514
                                                                       ---------------    ---------------
               Net cash used in operating activities                       (3,994,705)        (2,644,426)
                                                                       ---------------    ---------------
Cash flows from investing activities:
   Purchases of property and equipment                                        (98,775)          (316,435)
   Capitalized costs of software development                                 (281,806)          (268,502)
                                                                       ---------------    ---------------
               Net cash used in investing activities                         (380,581)          (584,937)
                                                                       ---------------    ---------------
Cash flows from financing activities:
   Proceeds from convertible promissory notes net of costs of $0
     and $100,000, respectively                                               320,000            900,000
   Proceeds from promissory notes                                             500,000            642,500
   Proceeds from notes receivable                                              50,000                  -
   Repayments of promissory notes                                              (1,500)          (195,000)
   Proceeds from line of credit net of costs of $0 and
     $40,305, respectively                                                  1,763,335            105,426
   Proceeds from sale of common stock and warrants net of
     costs of $0 and $430,767 respectively                                  1,260,000          1,831,850
                                                                       ---------------    ---------------
               Net cash provided by financing activities                    3,891,835          3,284,776
                                                                       ---------------    ---------------
               Net increase (decrease) in cash and cash equivalents          (483,451)            55,413

Cash and cash equivalents, beginning of period                                837,753            832,130
                                                                       ---------------    ---------------
Cash and cash equivalents, end of period                               $      354,302     $      887,543
                                                                       ===============    ===============
</TABLE>
                             See accompanying notes
                                       5
<PAGE>
                        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
MobileMarket(TM), 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 MobileMarket(TM) 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 MobileMarket(TM)
Website. The Company's management believes that this matching and tracking
capability and providing other logistics information through the P2S
MobileMarket(TM) 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 shippers' 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 MobileMarket(TM). 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
                                       6
<PAGE>
independent transportation agents in Port Newark, New Jersey, Charlotte, North
Carolina, Charleston, South Carolina and Detroit, Michigan 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 March 31,
2006 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
nine month periods ended March 31, 2006 are not necessarily indicative of the
results to be expected for the fiscal year ended June 30, 2006.

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.

                                       7
<PAGE>
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 revenue is recognized in the month that access to the
         P2S MobileMarket(TM) 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.

         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 106,624,585 and 59,845,278 as of March 31, 2006 and 2005,
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 Company previously accounted for stock-based compensation issued to its
employees using the intrinsic value method. Accordingly, compensation cost for
stock options issued was measured as the excess, if any, of the fair value of
our common stock at the date of grant over the exercise price of the options.
The pro forma net loss and per share amounts as if the fair value method had
been applied to employee stock options granted are presented below for the three
                                       8
<PAGE>
and nine months ended March 31, 2006 and 2005 in accordance with the Company's
adoption of SFAS 123(R) effective March 31, 2006.
<TABLE>
<CAPTION>
                                          Three Months Ended March 31,              Nine Months Ended March 31,
                                          ----------------------------              ---------------------------
                                            2006              2005                 2006                    2005
                                            ----              ----                 ----                    ----
<S>                                     <C>                 <C>                 <C>                   <C>
Loss available to common
shareholders, as reported               $ (1,435,588)       $(2,573,487)        $(3,638,049)          $(4,797,939)

Add: Stock compensation expense to
employees                                          -                  -                   -                     -

Deduct: Total stock compensation
expense to employees with expense
determined under fair value based
method for all awards, net of
related tax effects
                                                   -           (107,454)            (25,908)             (148,967)
                                      ---------------     --------------      --------------       ---------------

Pro forma loss available to common
shareholders                            $ (1,435,588)       $(2,680,941)        $(3,663,957)          $(4,946,906)
                                      ==============      =============       =============        ==============

Loss per share:
Basic and diluted - as reported               ($0.02)            ($0.05)             ($0.05)               ($0.11)

Basic and diluted - pro forma                 ($0.02)            ($0.06)             ($0.05)               ($0.12)
</TABLE>
Research and Development
------------------------
Research and development costs are expensed as incurred. No research and
development expenses were incurred for the quarters ended March 31, 2006 and
2005.

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. The Company amortizes its capitalized computer software and website
development costs over five years. This amortization period was based on
management's assessment that its computer software and website were designed and
written to enable them to be customized relatively easily for numerous customer
applications. SOP 98-1 and EITF #00-2 define three stages of development:

       - 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
                                       9
<PAGE>
         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
         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.

In March and December 2003, the Company completed its preliminary or planning
stage and moved into the application and infrastructure development stage with
respect to certain components of its software and website and, upon completing
all substantial testing and deciding that they were ready for their intended
uses, began amortizing over five years $90,665 and $179,799, respectively, in
capitalized costs related to the development of these components. Since then,
the Company has continued capitalizing internal and external development costs
related to various other components of its computer software and website but has
not begun amortizing these additional capitalized costs as it has not yet
completed the development and testing of these components.

At March 31, 2006 and 2005, the net book value of capitalized software
development costs was $966,393 and $645,397, respectively. Amortization expense
of capitalized software development costs for the nine months ended March 31,
2006 and 2005 was $40,569 and $40,569, respectively. Management anticipates that
sometime during fiscal year 2007 it will commence amortizing over five years a
substantial portion of the Company's capitalized software development costs upon
completing development of the components of its software and website, performing
all substantial testing of the components and deciding that the components are
ready for their intended uses.

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
                                       10
<PAGE>
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 March 31, 2006, the
Company's cash balances exceeded the insured limits by approximately $112,000.
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 March 31, 2006. 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 for the nine months ended March 31, 2006 and 2005 were $9,497 and
$153,320, respectively.

NOTE 3 - CONCENTRATIONS

During the quarter ended March 31, 2006, one customer accounted for
approximately 54.5% of the Company's revenue and that same customer accounted
for 49.1% of accounts receivable as of March 31, 2006. No other customer
accounted for more than 10% of revenue or 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., $12,500 of expenses incurred
in the transaction with LTS to provide transportation services for some of its
customers 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.

In March 2006, the Company entered into a settlement agreement and mutual
release with the parties that sold it the GFC assets in which the Company agreed
to issue the seller 300,000 shares of its common stock valued at $38,700 and to
pay the seller a total of $36,000 over two years in full settlement of the
$191,667 outstanding balance of the purchase price. Based on this settlement,
management assessed the intangible assets purchased from GFC and determined that
their net realizable value should be reduced by $113,667 to $220,933. Also in
March 2006, management assessed the intangible assets of CXT and determined that
its net realizable value should be reduced by $43,949 to $45,925.

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
                                       11
<PAGE>
stock that was 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 nine months ended March 31,
2006 and 2005 of $101,692 and $75,336, respectively. At March 31, 2006, future
amortization expense for these intangible assets is expected to be as follows:

                           2006             $   45,228
                           2007                 66,330
                           2008                 56,921
                           2009                 56,921
                           2010                 39,941
                                            ----------
                                            $  265,341
                                            ==========

NOTE 6 - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

In March 2006, the Company borrowed $100,000 from one accredited investor and
issued the investor a short-term 8% unsecured promissory note with a due date of
April 30, 2006. In April 2006, the investor exchanged the note for a $100,000
principal amount Series D 8% convertible debenture.

In December 2005, the Company borrowed $400,000 from one accredited investor and
issued the investor a $400,000 unsecured debenture having a maturity date of May
15, 2006 at which date a $40,000 transaction fee is 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-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 short-term promissory
note originally issued to one investor in January 2005. 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, the 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
                                       12
<PAGE>
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 January 2006, one holder converted $25,000 principal amount of
the debentures, and $432 of accrued interest, into 254,316 shares of common
stock. In April and May 2006, three holders exchanged $250,000 principal amount
of the Series C debentures for $250,000 principal amount of the Series D
debentures (see Note 9 - "Subsequent Events").

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. In March
2006, the Company entered into a settlement agreement and mutual release with
the parties that sold it the GFC assets in which the Company agreed to issue the
seller 300,000 shares of its common stock valued at $42,000 and to pay the
seller a total of $36,000 over two years in full settlement of the $191,667
outstanding balance of the purchase price. In March 2006, the Company recorded
an impairment of intangible assets of $113,667 based on this settlement. As of
March 31, 2006, the Company had recorded $18,000 of this obligation as current
notes payable and $16,500 as long term notes payable.

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 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
                                       13
<PAGE>
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. In January 2006, the
investor converted $50,000 of the debenture into 707,214 shares of common stock.

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
                                       14
<PAGE>
consecutive payments of $5,000 on the first of each month from August 2003
through May 2005 for a total of $140,000. All 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.

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 which remains the outstanding
balance as of March 31, 2006. 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

Common Stock
------------
During the nine months ended March 31, 2006, the Company issued an aggregate of
15,159,935 shares of its common stock consisting of:

-        4,525,000 shares issued upon the sales of 18.1 units for $25,000 per
         unit to 18 investors for an aggregate of $452,500 between December 2005
         and February 2006;

-        5,583,333 shares issued upon the sale of approximately 27.9 units for
         $30,000 per unit to 21 investors for an aggregate of $837,500,
         including the forgiveness of a $30,000 unsecured short term promissory
         note, during the quarter ended September 30, 2005

-        2,797,000 shares valued at $507,060 issued to six consultants for
         providing various management consulting services

-        707,214 shares issued upon conversion of $50,000 principal amount
         Series B 5% secured convertible debenture to the sole holder of these
         debenture;

-        254,316 shares issued upon the conversion of $25,000 Series C 10%
         unsecured convertible debentures and accrued interest thereon to one
         investor

-        374,112 shares issued upon the conversion of $100,000 of the Company's
         14.25% secured convertible debentures to one investor
                                       15
<PAGE>
-        200,000 shares issued upon the conversion of an aggregate of 10,000
         shares of the Company's Series B convertible preferred stock to six
         shareholders

-        418,960 shares valued at $55,005 issued to two law firms for providing
         legal services; and

-        300,000 shares valued at $42,000 issued as part of the price paid for a
         settlement agreement with the entity that sold the Company certain
         assets of GFC, Inc.

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.

The Company adopted SFAS 123(R), "Accounting for Stock-Based Compensation",
effective March 31, 2006. Accordingly, the Company now measures the cost of
employee services received in exchange for stock options based on the grant-date
fair value of the options. This cost is recognized over the vesting period, if
any, specified in the stock option agreement. Prior to adopting SFAS 123(R), the
Company had chosen to account for stock-based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25 in which
the cost of employee stock options was measured as the excess, if any, of the
estimated fair value of the Company's stock on the grant date over the exercise
price of the stock options.

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:

       Weighted average:                           2006            2005
       -----------------                           ----            ----
       Dividend yield                              None            None
       Expected 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.














                                       16
<PAGE>
Stock options
-------------

A summary of the stock option activity is as follows:
<TABLE>
<CAPTION>
                                                               Weighted
                                                                Average
                                                                Exercise      Number       Exercise Price
                                                                 Price      of Options       Per Option
                                                                 -----      ----------       ----------
<S>                                                              <C>         <C>            <C>     <C>
       Outstanding options at June 30, 2005                      $0.37       17,707,517     $0.25 - $1.01
       Granted                                                   $0.15           54,000         $0.15
       Expired                                                   $0.44       (2,684,331)    $0.38 - $0.56
       Cancelled                                                  --              --              --
                                                                             ----------
       Outstanding options at March 31, 2006                     $0.36       15,077,186     $0.25 - $1.01
                                                                             ==========
       Exercisable options at March 31, 2006                     $0.36       15,077,186     $0.25 - $1.01
                                                                             ==========
</TABLE>
The following table summarizes information concerning stock options outstanding
and exercisable at March 31, 2006:
<TABLE>
<CAPTION>
                                                                    Weighted       Weighted
                                                                     Average        Average
                                             Number of Options     Remaining       Exercise
         Range of Exercise Price                Outstanding      Life in Years       Price
         -----------------------                -----------      -------------       -----
<S>          <C>                                 <C>                 <C>            <C>
             $ 0.15 - 0.40                       14,652,186          1.44           $0.34
             $ 0.50 - 0.52                          125,000          0.89           $0.50
                 $ 1.01                             300,000          1.54           $1.01
                                                 ----------
                                                 15,077,186
                                                 ==========
</TABLE>
Warrants
--------

A summary of the warrant activity is as follows:
<TABLE>
<CAPTION>
                                                                  Weighted
                                                                   Average
                                                                  Exercise     Number of    Exercise Price
                                                                   Price       Warrants       Per Warrant
                                                                   -----       --------       -----------
<S>                                                                 <C>        <C>           <C>     <C>
Outstanding warrants at June 30, 2005                               $0.28      30,483,206    $0.15 - $2.00
Granted                                                             $0.13      19,802,292    $0.07 - $0.15
Cancelled                                                           $0.50      (1,250,000)        $0.50
Expired                                                             $0.68      (1,140,583)   $0.38 - $1.51
                                                                              -----------
Outstanding warrants at March 31, 2006                              $0.21      47,894,915    $0.07 - $2.00
                                                                              ===========
Exercisable warrants at March 31, 2006                              $0.20      47,094,915    $0.07 - $2.00
                                                                              ===========
</TABLE>
                                       17
<PAGE>
The following table summarizes information concerning warrants outstanding at
March 31, 2006:
<TABLE>
<CAPTION>
                                                                       Weighted         Weighted
                                                                       Average          Average
                                                                      Remaining         Exercise
             Range of Exercise Price       Number of Warrants       Life in Years        Price
             -----------------------       ------------------       -------------        -----
<S>               <C>      <C>                 <C>                       <C>            <C>
                  $ 0.07 - $0.15               40,684,627                2.30           $  0.14
                  $ 0.20 - $0.74                5,487,934                1.78           $  0.42
                  $ 0.75 - $2.00                1,722,354                0.93           $  1.02
                                               ----------
                                               47,894,915
                                               ==========
</TABLE>
The following table summarizes information concerning warrants exercisable at
March 31, 2006:
<TABLE>
<CAPTION>
                                                                     Weighted
                                                                     Average
                                                                     Exercise
             Range of Exercise Price       Number of Warrants         Price
             -----------------------       ------------------         -----
<S>               <C>      <C>                  <C>                   <C>
                  $ 0.07 - $0.15               40,684,627             $0.14
                  $ 0.20 - $0.74                4,687,934             $0.41
                  $ 0.75 - $2.00                1,722,354             $1.02
                                               ----------
                                               47,094,915
                                               ==========
</TABLE>
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 $269,208
consisting of $100,000 in cash, 370,370 shares of the Company's common stock
valued at $100,000 in satisfaction of the seller's obligation to the business
broker involved in the transaction and the assumption of liabilities in the
amount of $69,208. See Note 5 "Intangible Assets" for further details related to
the allocation of the purchase price and subsequent re-valuation. 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 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;
                                       18
<PAGE>
         - 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. In March 2006, the
Company entered into a settlement agreement and mutual release with the parties
that sold it the GFC assets in which the Company agreed to issue the seller
300,000 shares of its common stock valued at $38,700 and to pay the seller a
total of $36,000 over two years in full settlement of the $191,667 outstanding
balance of the purchase price. See Note 5 "Intangible Assets" for further
details related to the allocation of the purchase price and subsequent
re-valuation.
                                       19
<PAGE>
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. The settlement agreement and mutual release between the Company and
the parties that sold it the GFC assets resulted in the termination of this
consulting agreement.

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 SFAS 141,
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 Nine Months Ended March 31,
------------------------------------------------------------------------------
2005
<TABLE>
<CAPTION>
                                                                 Commodity                  Pro Forma
                                                 Power2Ship        Express        GFC      Adjustments     Pro Forma
                                                 ----------        -------        ---      -----------     ---------
<S>                                             <C>             <C>          <C>              <C>         <C>
Revenue:
Freight transportation                          $  2,941,169    $11,865,993  $ 4,117,692      $       -   $18,924,854
Access services                                          180              -            -              -           180
                                                ----------------------------------------------------------------------
                                                                          -            -              -             -
       Total revenue                               2,941,349     11,865,993    4,117,692              -    18,925,034

Operating expenses:
   Freight transportation                          2,517,682      7,353,481    3,441,909              -    13,313,072
   Selling, general and administrative:                    -
        Salaries, benefits and
          consulting fees                          2,989,219      1,668,503      201,705              -     4,859,427
        Other selling, general and
          administrative                           1,300,437      2,631,660      403,501         61,803     4,397,401
                                               -----------------------------------------------------------------------

       Total operating expenses                    6,807,338     11,653,644    4,047,115         61,803    22,569,900
                                               -----------------------------------------------------------------------

       Loss from operations                       (3,865,989)       212,349       70,577        (61,803)   (3,644,866)
                                               -----------------------------------------------------------------------
Other income (expense):
   Interest income                                        28              -            -              -            28
   Interest expense                                 (932,992)      (182,550)     (73,805)             -    (1,189,347)
   Other income                                        1,014              -            -              -         1,014
                                               -----------------------------------------------------------------------
       Total other expense                          (931,950)      (182,550)     (73,805)             -    (1,188,305)
                                               -----------------------------------------------------------------------
Loss available to common shareholders           $ (4,797,939)   $    29,799  $    (3,228)     $ (61,803)  $(4,833,171)
                                               =======================================================================
</TABLE>
                                       20
<PAGE>
NOTE 9 - SUBSEQUENT EVENTS

In April and May 2006, the Company issued $940,000 of its Series D 8% unsecured
convertible debentures to seven accredited investors, all of whom were existing
significant shareholders of our company, in consideration for $690,000 and the
exchange of $250,000 principal amount of the Company's Series C 10% unsecured
convertible debentures. The maturity date of the debentures is the earlier to
occur of June 30, 2008 or the date the Company receives proceeds from a private
or public offering of its securities resulting in gross proceeds of at least
$5,000,000. The conversion price per share of these debentures will be 80% of
the price per common share offered by the Company in any subsequent offering,
but in no event less than $0.02 per share or greater than $0.10 per share. This
discounted conversion price results in the recognition of a beneficial
conversion provision having a value of $235,000. However, after giving affect to
the fair value of the warrants granted in conjunction with these debentures, the
beneficial conversion provision was limited to the remaining face value of the
debentures or $220,161 that was recorded as discounts on notes payable to be
amortized as interest expense over the term of the debentures. The debenture
holders received three-year warrants to purchase an aggregate of 9,400,000
shares of common stock for $0.05 per share. The fair value of these warrants was
estimated using the Black-Scholes option-pricing model to be $613,640 and was
recorded as discounts on notes payable to be amortized as interest expense over
the term of the debentures. The key assumptions used in this estimate were the
market price of our common stock on the grant date of each warrant, no dividend
yield, an expected volatility factor of 192.56%, an approximate risk-free
interest rate of 7.25% and a three year expected life. In addition, the Company
modified the exercise prices of warrants previously granted to the seven
debenture holders to purchase an aggregate of 14,650,000 shares of common stock
at prices ranging from $0.10 to $1.00 per share, to an exercise price of $0.05
per share. The increase in value associated with the modified warrants was
$106,199 that was determined in accordance with FAS 123R and recorded as
discounts on notes payable to be amortized as interest expense over the term of
the debentures.

In April 2006, the Company repaid the $400,000 unsecured debenture issued to one
accredited investor in December 2005 and paid the $40,000 transaction fee
related to the debenture.

In April 2006, one shareholder converted 2,600 shares of Series B preferred
stock into 52,000 shares of common stock.

In April and May 2006, the Company issued 2,150,000 shares of common stock
valued at $154,980 to two consultants to provide various management consulting
services that was recorded as deferred compensation to be amortized over the one
year terms of the consulting agreements.

In April 2006, the Company granted three-year warrants to purchase 2,700,000
shares of common stock to three consultants, of which 1,200,000 are exercisable
at $0.05 per share, 1,000,000 are exercisable at $0.08 per share and 500,000 are
exercisable at $0.10 per share. The fair value of these warrants was estimated
using the Black-Scholes option-pricing model to be $175,030 and recorded as
deferred compensation to be amortized as consulting expense over the respective
terms of the consulting agreements.

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
                                       21
<PAGE>
financial statements and the notes to those statements included elsewhere in
this report.

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 MobileMarket(TM) 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.

OVERVIEW

         In March 2005 we acquired certain assets and liabilities of Commodity
Express Transportation, Inc., a South Carolina company, and GFC, Inc., a South
Carolina company. The consolidated financial statements and accompanying notes
thereto included elsewhere in this report reflect the assets, liabilities and
results of operations of these two acquisitions from their respective dates of
acquisition. These two transactions have substantially increased both our
revenues and operating expenses.
                                       22
<PAGE>
         For the fiscal year ended June 30, 2005 and the nine months ended March
31, 2006, virtually all our revenue was generated by providing freight
transportation services. Freight transportation services represented
approximately 85% of our total revenues for the fiscal year ended June 30, 2004.
Revenue from freight transportation services includes the total dollar value of
services purchased from us by our customers. We provide freight transportation
for our shipper customers using our own transportation equipment (asset based),
on transportation equipment of owner-operators which are affiliated with our
subsidiary CXT as well as numerous unaffiliated independent carriers located
throughout the United States (non-asset based). We are a principal in the
transaction to transport the freight. By accepting our customer's order, we
accept certain responsibilities for transportation of the load from its origin
to its destination. In instances when we arrange for transportation of the load
by an unaffiliated independent carrier, the carrier's contract is with our
company, not our shipper customer, and we are responsible for prompt payment of
carrier charges. We are also generally responsible to our shipper customer for
any claims for damage to freight while in transit. The price we charge for these
freight transportation services depends largely upon the prices charged by our
competitors as well as upon several factors, including the distance the freight
is being transported, the type of transportation equipment required to move the
freight, the distance that equipment is from the origin of the freight and
whether or not that equipment is available in our fleet, the value of the
freight and the availability of loads near the locations where the freight is to
be delivered.

         To a lesser extent, we have historically generated revenues from access
services and implementation services. Access services revenue represents revenue
generated from the unlimited use of the information available through the P2S
MobileMarket(TM) for a fixed monthly fee. Implementation services include
design, programming and testing of custom developed interfaces that permit the
P2S MobileMarket(TM) to communicate and share data with a customer's existing
computer software. The revenue generated from access services and implementation
services has declined from 15% of total revenue during the fiscal year ended
June 30, 2004 to less than 1% of our total revenue during the fiscal year ended
June 30, 2005. For the nine months ended March 31, 2006 we reported less than 1%
of our revenue from access services and implementation services. While we market
these services to our existing and potential customer base, we cannot predict if
we will report significant revenue from either access services or implementation
services in any future periods.

         Approximately 40% and 66%, respectively, of our freight transportation
revenue for the fiscal year ended June 30, 2005 and the nine months ended March
31, 2006 was generated from one customer. Because our agreement with that
customer can be terminated upon a 30 days notice to us, our dependence on
revenues from this customer puts us at risk until such time, if ever, that we
can diversify our revenue base. In order to lessen the risks to us from this
dependence on a single customer, we are marketing our services to potential
shipper customer and companies involved in freight security to the maximum
extent permitted by our limited sales and marketing budget.

         Our revenue growth during fiscal 2005 and into fiscal 2006 is
substantially related to revenue from acquisitions of the assets of two freight
transportation companies which now comprise the operations of our CXT and
Power2Ship Intermodal subsidiaries. CXT is a freight transportation services
provider serving customers located in the southeastern United States. Its
freight transportation services are provided by independent truck
owner-operators under contract with CXT or by independent drivers that utilize
tractors and trailers provided by CXT, as well as by other trucking companies,
including Power2Ship, arranged by CXT's freight transportation brokerage.
Power2Ship Intermodal is a freight transportation services company serving
customers with containers coming in to or out of the ports of Newark, New Jersey
                                       23
<PAGE>
and Charleston, South Carolina, as well as to and from the railroad terminal in
Charlotte, North Carolina.

         In addition to providing revenue for our company, one of the prime
drivers to these acquisitions was the ability to integrate our P2S
MobileMarket(TM) into the operations of these subsidiaries. We originally
developed the P2S MobileMarket(TM) with the goal of obtaining fee based
subscribers to the Internet-based software. We designed our P2S MobileMarket(TM)
to help smaller motor carriers compete more effectively with large carriers,
while also providing valuable logistics services to both small and large
shippers. This information, accessed through a password-protected portion of our
website, helps improve the efficiency of the supply chain by enabling carriers
to minimize excess transportation capacity, permitting the execution of freight
transactions online and letting all participants easily track the movement of
loads and/or trucking assets online. We use the P2S MobileMarket(TM) in
connection with logistics services for our freight transportation customers.

         During fiscal 2003 and fiscal 2004, we also generated access services
revenue and implementation services revenue under an agreement with The Great
Atlantic and Pacific Tea Company wherein we provided that company with unlimited
use of the P2S MobileMarket(TM) for a fixed monthly fee, as well as a virtual
private network (VPN) fee which provided our customer with data encryption and
other extra security measures for their data together with software development
in the form of the design, programming and testing of a custom developed
interface to our P2S MobileMarket(TM). This agreement was terminated in January
2005. In fiscal year 2006 we completed a pilot program with one of International
Paper's core carriers that we believe demonstrated the ability of the P2S
MobileMarket(TM) to permit carriers to become e-commerce compliant.

         A key component of our business model is developing a significant
number of third-party fee-based subscribers to our MobileMarket(TM). This part
of our business model is dependent upon building our customer base of shippers
and carriers who regularly utilize our P2S MobileMarket(TM) 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. As of
March 31, 2006 and 2005, approximately 4,240 and 2,095 carriers, respectively,
had registered as members on our website and approximately 1,647 and 496 of
these carriers, respectively, had transported freight for our shipper customers.
We presently provide free access to the MobileMarket(TM) to these shipper and
carrier customers. We have been able to increase the number of shipper customers
from whom we generated revenue from approximately 27 at March 31, 2005 to
approximately 65 at March 31, 2006. 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.

         We are presently able to identify available capacity among our carrier
customers to move only a very small percentage of our shipper's loads. Given the
tens of thousand of transportation routes in the U.S., in order to have the P2S
MobileMarket(TM) be successful as a standalone revenue base, 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. During the nine months ended March 31, 2006 and 2005, we spent $9,497
and $153,320, respectively, in advertising and marketing our services to
potential carriers and shippers utilizing trade publications, transportation
industry websites and direct mail and an additional $12,645 and $37,127,
respectively, participating in industry conventions and trade shows. As a result
of our limited financial resources, we have curtailed most of our advertising
and marketing expenses during fiscal year 2006 and intend to continue doing so
until such time as we have sufficient capital for such expenditures. Our ability
                                       24
<PAGE>
to begin charging for access to the P2S MobileMarket(TM) is limited until such
time as we have developed a sufficient base of carrier customers. We believe,
however, that the use of our P2S MobileMarket(TM) in providing freight
transportation services to our customers also helps us market the product to
other transportation service companies.

         We also want to leverage our P2S MobileMarket(TM) software to expand
our revenue base to include other applications. We believe that our secure,
wireless, Internet-based system which uses global positioning satellite
technology 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 hardware 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 and electronic seals applied at the time the container is loaded. In
addition, the system could have other security capabilities such as geo-fencing
which alerts a truck's owner or authorities if a vehicle deviates from its
designated route. In August 2005 we announced 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 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. There can be no assurances, however, that we
will ever enter into any agreement 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 or profits from such agreements.

         During the remainder of 2006, our greatest challenge is to raise
sufficient additional capital to fund our ongoing operations, pay our
obligations as they become due and continue to implement our business model. As
of March 31, 2006, we had approximately $3,547,000 of secured debt and
$1,098,500 of unsecured debt which becomes due by December 31, 2006. Although we
have deferred certain employees' compensation, reduced certain non-essential
personnel and eliminated certain administrative costs and have developed plans
for further such cost reductions, if we are unable to secure additional capital
as needed then we may be unable to satisfy our secured and unsecured debt as it
becomes due which could adversely affect our ability to continue our operations
as presently conducted, as well as severely limiting our ability to diversify
our revenue sources. If we are unable to satisfy the secured debt when it
becomes due or arrange waivers and extensions with the holders of this debt,
then the holders could foreclose on our assets and we would be forced to cease
our operations.

RESULTS OF OPERATIONS

Nine Months Ended March 31, 2006 compared to the Nine Months Ended March 31,
2005

Revenue

         Total revenue generated during the nine months ended March 31, 2006
increased by $20,082,771 or 683% as compared with total revenue generated during
the nine months ended March 31, 2005. This increase in revenue is attributable
to both the revenue generated by our CXT and Power2Ship Intermodal subsidiaries
for a full nine-month period in fiscal 2006 as compared to a 13-day period in
fiscal 2005 following our acquisitions of those businesses on March 19, 2005, as
well as to organic growth of our company's revenue base. The increase in revenue
for the nine months ended March 31, 2006 included increases of:

-        $17,162,085 to $17,782,978 in revenue generated by CXT during the nine
         months ended March 31, 2006 versus $620,893 during the period from when
                                       25
<PAGE>
         we acquired the business on March 19, 2005 through the end of that
         quarter. While this increase in revenue is primarily attributable to
         the timing of the acquisition during fiscal 2005, internal growth of
         50% by CXT also accounted for approximately $5,900,000 of the revenue
         increase during the nine months ended March 31, 2006 compared with the
         nine months ended March 31, 2005;

-        $2,579,024 to $2,735,675 in revenue generated by Power2Ship Intermodal,
         Inc. during the nine months ended March 31, 2006 versus $156,652 during
         the period from when we acquired the business on March 19, 2005 through
         the end of that quarter. This increase is attributable to acquisition
         timing as was the case for CXT but was reduced by a decrease in revenue
         of approximately $1,380,000, or approximately 34%, for the nine months
         ended March 31, 2006 revenue compared with the nine months ended March
         31, 2005 as a result of losing one of its three independent agents in
         October 2005;

-        $319,805, or approximately 14.8%, to $2,483,429 in revenue from our
         other operations for the nine months ended March 31, 2006 versus
         $2,163,624 in the comparable nine months during the prior year as a
         result of growth of revenue from existing customers and additional
         revenue from several new shipper customers; and

-        $21,858 to $22,038 in revenue from access services and implementation
         services during the nine months ended March 31, 2006 versus $180 in the
         comparable nine month during the prior year.

         Management expects revenue during the fourth quarter of fiscal 2006 to
be more in line with revenue generated during the first and second quarters of
this fiscal year. Based upon preliminary indications, we anticipate that our
revenue will continue to increase during fiscal 2007, although at a slower rate
of growth than we achieved from fiscal 2005 to fiscal 2006.

Operating Expenses

         Total operating expenses incurred during the nine months ended March
31, 2006 increased by $18,582,233 or approximately 273% compared to the nine
months ended March 31, 2005. The increase during the nine months ended March 31,
2006 primarily 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 $17,934,061 or 712% in the
              nine months ended March 31, 2006 as compared with the nine months
              ended March 31, 2005. This percentage increase in freight
              transportation expense was higher than the percentage increase in
              revenue reflecting a decrease in the gross margin on freight
              transportation services from 14.4% to 11.1%. This decrease in
              gross margin during the nine months ended March 31, 2006 primarily
              was attributed to the re-allocation of certain expenses incurred
              by CXT from selling, general and administrative expenses to
              freight transportation expenses during the nine months ended March
              31, 2006. Management expects the gross margin to remain relatively
              constant at approximately 11% in the fourth quarter of fiscal 2006
              and in fiscal 2007.

         -    Selling, general and administrative expenses increased by $635,673
              or approximately 14.8% during the nine months ended March 31, 2006
              compared to the nine months ended March 31, 2005. The increase
                                       26
<PAGE>
              during the nine months ended March 31, 2006 primarily was
              attributed to the following:

              -   Salaries, benefits and consulting fees increased by $145,544
                  or approximately 4.9% during the nine months ended March 31,
                  2006 comprised of:

                  -   Salaries and benefits which increased by $861,309 or
                      approximately 61.7% to $2,257,725 in the nine months ended
                      March 31, 2006 from $1,396,416 during the nine months
                      ended March 31, 2005. This increase was attributed
                      primarily to the $843,230 increase in salaries and
                      benefits paid to employees of CXT and Power2Ship
                      Intermodal, Inc. during the nine months ended March 31,
                      2006 compared to the period from when we acquired the
                      businesses on March 19, 2005 through the end of that
                      quarter.

                  -   The increase in salaries and benefits significantly was
                      offset by consulting fees which decreased by $715,764 or
                      approximately 44.9% in the nine months ended March 31,
                      2006 to $877,039 from $1,592,803 during the nine months
                      ended March 31, 2005. This decrease during the nine months
                      ended March 31, 2006 was a result of a reduction in the
                      number of consultants engaged by the Company as well as to
                      an increase in the average length of the consulting
                      agreements over which the consulting expenses are realized
                      compared to consulting agreements entered into during the
                      nine months ended March 31, 2005.

              Management expects salaries and consulting expenses during the
              fourth quarter of fiscal 2006 to be comparable to those incurred
              during the third quarter of this fiscal year and to remain
              relatively constant during fiscal 2007.

              -   Other selling, general and administrative expenses increased
                  by $502,628 or approximately 38.7% during the nine months
                  ended March 31, 2006 as compared to the nine months ended
                  March 31, 2005. This increase consisted of a $621,537 increase
                  by CXT and a $62,615 increase by Power2Ship Intermodal, Inc.
                  that partially was offset by a decrease of $181,524 or
                  approximately 15.0% by the Company's other operations. The
                  decrease by the other operations primarily was attributed to:

                  -   Decreased advertising and marketing expenses which
                      declined by $143,823 or approximately 93.8% to $9,497
                      during the nine months ended March 31, 2006 from $153,320
                      during the nine months ended March 31, 2005 as a result of
                      management's decision to stop using an outside public
                      relations firm and to temporarily curtail advertising
                      products and services to shippers and carriers in trade
                      publications, transportation industry websites and other
                      media.

                  -   Decreased travel expenses which declined by $38,356 or
                      approximately 33.3% to $76,772 during the nine months
                      ended March 31, 2006 from $115,128 during the nine months
                      ended March 31, 2005 primarily as a result of a reduction
                      in travel to conventions and trade shows;
                                       27
<PAGE>
                  -   Decreased convention and trade show expenses which
                      declined by $24,482 or approximately 65.9% to $12,645
                      during the nine months ended March 31, 2006 from $37,127
                      during the nine months ended March 31, 2005 as a result of
                      attending fewer conventions and trade shows; and

                  -   Decreased Web hosting expenses which declined by $24,326
                      or approximately 21.1% to $91,035 during the nine months
                      ended March 31, 2006 from $115,361 during the nine months
                      ended March 31, 2005 as a result of our hosting the system
                      in-house for a couple of months in early 2006 while we
                      made the switch to a new, lower cost Web hosting company

                  This decrease by the other operations partially was offset by
                  an increase of $54,047 in bank service charges to $55,957
                  during the nine months ended March 31, 2006 from $1,910 during
                  the nine months ended March 31, 2005 primarily as a result of
                  the increase in transaction fees we incur to electronically
                  pay our carriers. These bank service charges are expected to
                  be reduced substantially as we recently began paying these
                  carriers directly without incurring transaction fees.

              Management expects other selling, general and administrative
              expenses during the fourth quarter of fiscal 2006 to be comparable
              to those incurred during the third quarter of this fiscal year and
              to remain relatively constant during fiscal 2007.

Other Income (Expenses)

         Total other expenses increased by $340,648 or approximately 36.6%
during the nine months ended March 31, 2006 as compared with the nine months
ended March 31, 2005. This increase primarily resulted from an increase in
interest expense, net of interest income, of $343,955 or approximately 36.9%.
The higher interest expense primarily was associated with:

         -    CXT and Power2Ship Intermodal, Inc. which had interest expense,
              net of interest income, of $162,439 and $50,608, respectively,
              compared with no interest expense incurred during the period from
              when we acquired the businesses on March 19, 2005 through the end
              of that quarter, and

         -    Approximately $155,000 of deferred financing costs that were
              recorded as interest expense upon termination of the standby
              equity distribution and related agreements in July 2005.

         Management expects other expenses, primarily interest expense, during
the fourth fiscal quarter of 2006 to be comparable to other expenses incurred
during the first three quarters of this fiscal year. Interest expense during the
first half of fiscal 2007 should be comparable to the interest expense incurred
during the second half of fiscal 2006. Interest expense during the second half
of fiscal 2007 depends on how we handle our outstanding debt. If this debt is
retired or converted to equity, then interest expense would be expected to
decline substantially. However, if outstanding debt is re-structured or replaced
with other debt, then interest expense would be expected to increase as a result
of costs incurred in such lending arrangements that may include higher interest
rates, penalties and other transaction fees.

LIQUIDITY AND CAPITAL RESOURCES

         We have experienced losses and negative cash flows from operations
since our inception. As of March 31, 2006, we had an accumulated deficit of
                                       28
<PAGE>
$22,694,142, a stockholders' deficit of $2,266,681, 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 March 31, 2006, we had a working capital deficit of $4,570,587 as
compared with a working capital deficit of $38,477 at June 30, 2005. This
$4,532,110 increase in our working capital deficit during these nine months was
attributed to a $2,031,856 increase in current assets which was more than offset
by a $6,563,966 increase in current liabilities. The increase in current assets
consisted of increases in accounts receivable of $2,549,861 and in prepaid
insurance of $15,446 offset by a decrease in cash of $483,451 and short term
notes receivable of $50,000. The increase in current liabilities consisted of
increases in short term notes payable of $683,000, in the current portion of
convertible notes payable of $3,461,937, in the outstanding balances on our
lines of credit of $1,763,335, in accounts payable and accrued expenses of
$527,438, and in accrued salaries of $128,256.

         During the nine months ended March 31, 2006, our cash balance decreased
by $483,451. This decrease was the result of $3,994,705 used in operating
activities and $380,581 used in investing activities that partially was offset
by $3,891,835 provided by financing activities. This compared with an increase
in our cash balance of $55,413 during the nine months ended March 31, 2005 as a
result of $2,644,426 used in operating activities and $584,937 used in investing
activities that partially were offset by $3,284,776 provided by financing
activities.

         During the nine months ended March 31, 2006, we used $3,994,705 in
operating activities which was made up of our net loss of $3,638,049 and an
increase in cash used for operating assets and liabilities of $2,045,418 that
partially was offset by non-cash expenses including depreciation, amortization
and an increase in the allowance for doubtful accounts of $1,345,968 and
issuances of our common stock, options and warrants as payment for services,
interest and compensation of $342,794. This compared with $2,644,426 used in
operating activities during the nine months ended March 31, 2005 which consisted
of our net loss of $4,797,939 and an increase in cash used for operating assets
and liabilities of $112,849 that partially was offset by non-cash expenses
including depreciation and amortization of $674,670 and issuances of our common
stock, options and warrants as payment for services, interest and compensation
of $1,591,692.

         The $380,581 used in investing activities during the nine months ended
March 31, 2006 consisted of $281,806 for costs of software development and
$98,775 for purchases of property and equipment. This compared with $584,937
used in investing activities during the nine months ended March 31, 2005 which
consisted of $268,502 for costs of software development and $316,435 for
purchases of property and equipment.

         During the nine months ended March 31, 2006, we generated net cash from
financing activities of $3,891,835 which consisted of net proceeds of $820,000
from the issuance of units consisting of unsecured convertible debentures and
warrants, a short term loan of $50,000 repaid by an unrelated party, $1,763,333
                                       29
<PAGE>
from revolving lines of credit and $1,260,000 from the issuance of units
consisting of common stock and warrants less $1,500 repaid on a promissory note.
This compared with net cash provided by financing activities of $3,284,776
during the nine months ended March 31, 2005 which consisted of net proceeds of
$900,000 from the issuance of convertible promissory notes, $642,500 from the
issuance of short term unsecured promissory notes, $105,426 from our revolving
line of credit and $1,831,850 from the issuance of units consisting of common
stock and warrants less $195,000 from the repayment of promissory notes.

         We have two revolving lines of credit secured by our accounts
receivable. We have a $1,000,000 credit facility with Mercantile Capital, L.P.
secured with the accounts receivable of our company, excluding our subsidiaries
CXT and Power2Ship Intermodal, and a $2,000,000 credit facility with BB&T
Corporation secured with the accounts receivable of CXT. The Mercantile Capital
facility, which had a balance on March 31, 2006 of $191,490, is effective until
May 31, 2006 and the BB&T facility, which had a balance on March 31, 2006 of
$1,688,506, is in effect until February 2007. We do not plan to renew the
Mercantile Capital facility on May 31, 2006 as we have made arrangements to
utilize the BB&T facility.

         Between May 2006 and September 2006, an aggregate of $3,982,000 of our
debentures and notes become due, including the $1,950,000 principal amount
Series B 5% secured convertible debentures due between June 2006 and September
2006, and the $1,597,000 principal amount 14.25% secured convertible debentures
due on December 31, 2006. We are in the preliminary stages of negotiating to
restructure the Series B 5% secured convertible debentures and a portion of the
14.25% secured convertible debentures. We intend to seek to restructure our
other financial obligations.

         We estimate that the $354,302 in cash on hand at March 31, 2006 and our
receipt since April 1, 2006 of $690,000 in net proceeds from sales of our Series
D 8% unsecured convertible debentures, less $440,000 used to repay an unsecured
debenture to an unrelated party and our projected cash used in operations and
additional borrowings from our revolving credit facilities should fund our
operating activities for approximately thirty 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
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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.

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 March 31, 2006, 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 April and May 2006, we sold an aggregate of 18.8 units of our
securities to seven accredited investors, all of whom were existing significant
shareholders of our company, in a private placement exempt from registration
under the Securities Act in reliance on Section 4(2) of that act. Each unit
consisted of a $50,000 Series D 8% unsecured convertible debenture, currently
convertible into 625,000 shares of our common stock, and a warrant to purchase
500,000 shares of our common stock for a total issuance of warrants to purchase
9,400,000 shares of our common stock. Each warrant is exercisable for three
years from the date it was granted for an exercise price of $0.05 per share. We
paid no sales commissions and received proceeds of $690,000 and the exchange of
$250,000 principal amount of our Series C 10% unsecured debentures from these
sales. No general solicitation or advertising was used in connection with this
offering, and the certificates evidencing the securities 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 represented that they were acquiring the securities for investment
purposes only, and not with a view towards distribution or resale except in
compliance with applicable securities laws.

         During May 2006, we issued 1,000,000 shares of common stock to a
consultant to provide various management consulting services valued at $80,000
pursuant to a consulting agreement. The issuance was exempt from registration
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under the Securities Act in reliance on Section 4(2) thereof. The recipient was
an accredited investor. 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 its 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

     31.2     Certification of Chief Executive Officer and Principal Financial
              and Accounting Officer pursuant to 18 U.S.C. Section 1350

     32.1     Certification of Chief Executive Officer and Chief Financial
              Officer Pursuant to 18 U.S.C. Section 1350.




























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                                   SIGNATURES

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


Date:  May 22, 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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