10-Q 1 awc1qt04-10q.txt ALLSTATES WORLDCARGO, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE --- ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______. Commission file number 000-24991 ____________________ ALLSTATES WORLDCARGO, INC. ------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) New Jersey 22-3487471 -------------- ------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 4 Lakeside Drive South, Forked River, New Jersey, 08731 ---------------------------------------------------------- (Address of principal executive offices) 609-693-5950 -------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days) Yes XX No ---- ---- The Company had 32,509,872 shares of common stock, par value $.0001 per share, outstanding as of February 12, 2004. 1 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES INDEX PAGE PART 1. FINANCIAL INFORMATION ---- ITEM 1. FINANCIAL STATEMENTS Financial Statements with Supplemental Information For the Period Ending December 31, 2003 and 2002 Financial Statements: Condensed Consolidated Balance Sheet 3 Condensed Consolidated Statement of Operations 4 Condensed Consolidated Statements of Stockholders' Equity (Deficit) 5 Condensed Consolidated Statement of Cash Flows 6 Notes to the Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS....................... 8 ITEM 3. CONTROLS AND PROCEDURES....................................12 PART II. OTHER INFORMATION.............................................13 ITEM 1 LEGAL PROCEEDINGS..........................................13 ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS..................13 ITEM 3 DEFAULTS ON SENIOR SECURITIES..............................13 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........13 ITEM 5 OTHER INFORMATION..........................................13 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...........................14 SIGNATURES........................................................14 2 PART 1 - FINANCIAL INFORMATION ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS December September 31, 30, 2003 2003 (Unaudited) * Current Assets Cash and cash cash equivalents $342,854 $ 516,639 Accounts Receivable 6,288,227 6,226,209 Prepaid taxes and other current assets 152,218 155,191 Deferred income taxes 353,000 490,000 ---------- --------- Total current assets 7,136,299 7,388,039 Property, plant and equipment 1,285,035 1,268,632 Less: Accumulated depreciation 980,641 943,070 ---------- --------- Net property, plant and equipment 304,394 325,562 Goodwill, including acquisition cost, net 535,108 535,108 Other assets 110,371 38,571 ---------- --------- Total assets $8,086,172 $8,287,380 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $3,757,994 $4,336,623 Accrued expenses 1,042,947 823,029 Short-term bank borrowings 1,149,500 1,149,500 Notes payable 26,937 28,836 ---------- --------- Total current liabilities 5,977,378 6,337,988 Deferred tax liability - non-current 30,000 25,000 Long term portion of notes payable 2,386,730 2,386,730 Stockholders' equity Common stock 3,251 3,251 Retained earnings ( 311,187) (465,689) ---------- --------- Total stockholders' equity ( 307,936) (462,438) Total liabilities and stockholders' equity $8,086,172 $8,287,280 ========== ========== * Condensed from audited financial statements. The accompanying notes are an integral part of these consolidated financial statements. 3 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Ended December 31, 2003 2002 Revenues (net of discounts) $13,457,620 $13,089,484 Cost of transportation 9,026,301 8,548,925 ---------- ----------- Gross profit 4,431,319 4,540,559 Selling, general and administrative expenses 4,046,888 4,597,220 ---------- ----------- Income from operations 384,431 ( 56,661) Other income (expense): Interest, net (54,402) (58,343) Other income 4,973 2,173 ---------- ----------- Income before income tax provision 335,002 (112,831) Provision for income taxes 180,500 ( 43,012) Net income $154,502) $( 69,819) ========== =========== Weighted average common shares - basic 32,509,872 32,509,872 Net income per common share - basic $ .00 $ .00 Weighted average common shares - diluted 32,509,872 32,509,872 Net income per common share - diluted $ .00 $ .00 The accompanying notes are an integral part of these consolidated financial statements. 4 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) Common Stock Retained Total Number Earnings Stockholders' of Par (Deficit) Equity Shares Value (Deficit) ___________ ______ _________ _________ Balance at 32,509,872 $ 3,251 $(465,689) $(462,438) September 30, 2003 Consolidated net income for the three months ended December 31, 2003 154,502 154,502 ___________ ______ _________ _________ Balance at December 31, 2003 32,509,872 3,251 $(311,187) $(307,936) =========== ====== ========= =========
5 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended December 31, 2003 2002 Cash flows from operating activities: Net income $154,502 $(69,819) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 37,571 46,256 Amortization 0 1,166 Provision for doubtful accounts 39,176 50,301 (Gain)/loss on sale of assets (5,300) (2,123) Deferred income taxes 142,000 (32,200) (Increase) decrease in assets: Accounts receivable (101,194) 326,403 Prepaid expenses and other assets 2,972 (310,373) Increase (decrease) in liabilities: Accounts payable and accrued expenses (358,710) 145,000 --------- --------- Net cash (used for) provided by operating activities (88,983) 154,611 Cash flows from investing activities: Purchase of equipment (16,403) ( 24,241) Proceeds from sale of property and equipment 5,300 16,338 Deposits (71,800) ( 1,040) --------- --------- Net cash used for investing activities (82,903) ( 8,943) Cash flows from financing activities: Repayments under notes payable ( 1,899) (23,096) Repayments under short-term bank borrowings (1,000,000) Borrowing under short-term Bank borrowings 800,000 --------- --------- Net cash used for financing activities ( 1,899) ( 223,096) Net (decrease) in cash and cash equivalents (173,785) ( 77,428) Cash and cash equivalents, beginning of year 516,639 173,277 --------- --------- Cash and cash equivalents, end of period $ 342,854 $ 95,849 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 1. The accompanying unaudited condensed consolidated financial statements have been prepared by Allstates WorldCargo, Inc. (the "Company") in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial statements and accordingly do not include all information and footnotes required under generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with the accounting principles and practices disclosed in, and should be read in conjunction with, the annual financial statements of the Company included in the Company's Fiscal year 2003 Form 10-K filing dated December 29, 2003 (File No. 000-24991). In the opinion of management, these interim financial statements contain all adjustments necessary for a fair presentation of the Company's financial position at December 31, 2003 and September 30, 2003 and the results of operations for the three months ended December 31, 2003 and 2002, respectively. 2. Net income per common share appearing in the statements of operations for the three months ended December 31, 2003 and 2002, respectively have been prepared in accordance with Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"). SFAS No. 128 establishes standards for computing and presenting earnings per share ("EPS") and requires the presentation of both basic and diluted EPS. As a result primary and fully diluted EPS have been replaced by basic and diluted EPS. Such amounts have been computed based on the profit or (loss) for the respective periods divided by the weighted average number of common shares outstanding during the related periods. 3. The line of credit with the Sun National Bank contains a covenant pertaining to maintenance of a Debt Service Coverage Ratio. At December 31, 2003, the Company was in breach of the Debt Service Coverage Ratio. Under the terms of the agreement, the bank may call the loan if the Company is in violation of any restrictive covenant. Per the banks requirement, Allstates underwent an independent accounts receivable audit. Based on the results of the audit, the bank has agreed to waive the covenant default for the period covering February 28, 2003 to February 28, 2004 when the covenant will once again go into effect. 4. During the fiscal quarter ended December 31, 2003, Allstates entered into a ten-year licensee agreement with another party. This agreement would result in the creation of a new station in Nashville, Tennessee, the conversion of the Company-owned Raleigh, North Carolina station to a licensee operation, and the rights to Atlanta, Georgia licensee operation. Operations related to this agreement started January 31, 2004. As part of the agreement, Allstates WorldCargo agreed to pay a sum of $300,000 to the licensees as a start-up fee. As of December 31, 2003, the Company paid one deposit installment of $75,000. The Company intends to amortize the $300,000 payment over the ten-year life of the contract. 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Overview Allstates WorldCargo, Inc. (the "Company" or Allstates") is a New Jersey Corporation formed on January 14, 1997 as Audiogenesis Systems, Inc. (Audiogenesis"), pursuant to a corporate reorganization of Genesis Safety Systems, Inc. On August 24, 1999, Audiogenesis acquired 100 percent of the common stock of Allstates Air Cargo, Inc. in a reverse acquisition, and on November 30, 1999, changed its name to Allstates WorldCargo, Inc. Allstates is principally engaged in the business of providing global freight forwarding and other transportation and logistics services for its customers. Allstates is headquartered in Forked River, New Jersey. The freight forwarding business of Allstates opened its first terminal in Newark, New Jersey in 1961. Allstates provides domestic and international freight forwarding services to over 1,700 customers utilizing ground transportation, commercial air carriers, and ocean vessels. Allstates supplements its freight forwarding services to include truck brokerage, warehousing and distribution, and other logistics services. Allstates operates 22 offices throughout the United States, and employs 99 people. Allstates has agreements with domestic and international strategic partners and a network of agents throughout the world, and continues to pursue opportunities to forge additional strategic alliances in order to increase its global market share. The Company is a party to several site licensing agreements in which those licensees have contracted with Allstates to provide exclusive freight forwarding services, including sales and operating functions, under the Allstates name. Of the 22 domestic locations, 14 are licensee operations, while 8 are company owned and staffed operations. Results of Operations The following table sets forth for the periods indicated certain financial information derived from the Company's consolidated statement of operations expressed as a percentage of net sales: Three Months Ended December 31, 2003 2002 ---- ---- Revenues 100.0% 100.0% Cost of transportation 67.1 65.3 ---- ---- Gross profit 32.9 34.7 Selling, general and administrative expenses 30.1 35.1 ---- ---- Operating income 2.9 (0.4) ==== ==== Net income 1.1% (0.5%) Revenues Revenues of the Company represents gross consolidated sales less customer discounts. Total revenues for the quarter ended December 31, 2003 increased by $368,000, or 2.8%, to $13,458,000, from the quarter ended December 31, 2002, reflecting a higher volume of shipments and total weight of cargo shipped. Included in total revenues of the comparative three month period ended December 31, 2002 was approximately $1,787,000 of one-time billing to one customer for the arrangement of international chartered aircraft. 8 The Company was asked to make these special arrangements by its customer as an emergency response to the backlog of ocean freight deliveries that resulted from the lock out of West Coast ports. After discounting the effect of this isolated billing during the prior year fiscal quarter, the company's real revenue growth from quarter to quarter was approximately $2,155,000 or 19.1%. The increase in this shipping volume can be primarily attributed to the maturation of the two Florida stations that opened during the third quarter of fiscal 2002, the addition of a new licensee location during the second quarter of fiscal 2003, and the revenues generated by the Allstates truck brokerage operation which began providing truckload service to selected customers during the second quarter of fiscal 2003. Domestic revenues increased by approximately $1.3 million or 14.1%, to $10,126,000 during the three-month period ended December 31, 2003 in comparison to the same period in the previous year, for the reasons mentioned above. International revenues decreased in total by approximately $884,000 or (21.0%), to $3,331,000, reflecting the effect of the chartered aircraft service that the Company provided in the previous fiscal year, offset by import sales generated by one customer that accounted for approximately 8.9% of total revenues for the three months ended December 31, 2003. Gross Profit Gross profit represents the difference between net revenues and the cost of sales. The cost of sales is composed primarily of amounts paid by the Company to carriers and cartage agents for the transport of cargo. Cost of sales as a percentage of revenues increased by 1.8%, to 67.1%, for the three months ended December 31, 2003, in comparison to the same period in the previous year. This higher cost of sales percentage can be attributed to a combination of factors. The growth of the Company's truck brokerage business since the second quarter of fiscal 2003 has impacted the overall cost percentage, as it operates at lower margins than freight forwarding operations. The addition of certain lower margin customer accounts during the quarter ended December 31, 2003, including one customer that accounted for 8.9% of revenues for that period, also led to the increase in the cost of sales percentage, but is offset in comparison by the low margin effect of the chartered airline service the Company provided in the previous fiscal year quarter. The reduction in revenues from a previously significant account also contributed to the increase in the cost percentage. In absolute terms, the cost of sales increased by approximately $477,000 or 5.6%, to $9,026,000 during the three months ended December 31, 2003 versus the comparative period in the prior year, reflecting the increased sales volume. Gross margins decreased to 32.9% during the quarter ended December 31, 2003 from 34.7% in the same quarter of the previous fiscal year. Gross profit increased by approximately $109,000 to $4,431,000 for the three months ended December 31, 2003 versus the same three months of the prior year. Selling, General and Administrative Expenses As a percentage of sales, operating expenses decreased by 5.0% for the three months ended December 31, 2003 in comparison to the three months ended December 31, 2002, reflecting a reduction in fixed operating expenses and licensee commissions in relation to sales. In absolute terms, operating expenses decreased by approximately $550,000 or 12.0% during the three-month period ended December 31, 2003 as compared to the same period in the prior fiscal year. The comparative decrease in SG&A expenses is primarily due to lower licensee commission expense as well as a reduction in personnel costs for the period. Allstates pays commissions to licensees as compensation for generating profits to the Company. Licensee commissions and royalties paid pursuant to licensee agreements decreased by approximately $313,000 for the three-month period ended December 31, 2003 in comparison to the same period in the previous year, as gross profits generated by licensee operations decreased, primarily reflecting the impact of the chartered airline service that the Company provided in the prior year quarter through one of its licensees. 9 Personnel expenses decreased by approximately $182,000 during the three months ended December 31, 2003 as compared to the same period of the prior year, primarily reflecting a reduction in sales and operations personnel during the third quarter of fiscal 2003 to offset losses that the Company sustained during the first six months of that fiscal year. On a net basis, the Company's headcount decreased by 10, to 99 employees at December 31, 2003, compared to December 31, 2002. Facilities expenses decreased by approximately $23,000 during the quarter ended December 31, 2003 in comparison to the quarter ended December 31, 2002, primarily driven by lower telephone and data line expense. Allstate's stations are connected on a real-time basis via data lines to a centralized computer system located at the Company's corporate office. During the first quarter of fiscal 2003, in order to realize a smoother transmission of data during high volume periods, the Company converted from T1 data line service to a frame relay. This process required that both services run concurrently for a limited period until the conversion was completed in full. The charges for concurrent services totaled approximately $30,000, and the conversion was completed prior to the end of the first quarter of fiscal 2003. MIS fees, which represent the expense of maintaining the computer system and programming modifications to improve its output and performance, decreased by approximately $44,000 during the quarter ended December 31, 2003 versus the same period ended December 31, 2002, primarily reflecting enhancements to the Company's EDI capability and streamlining of customer order entry during the previous fiscal year quarter. Legal fees decreased by approximately $41,000, partially reflecting increased responsibilities of the Company's in-house General Counsel. SG&A expenses presented for the three months ended December 31, 2003 and 2002 are inclusive of expenditures to related parties totaling $394,395 and $385,478, respectively. Income/(Loss) From Operations Operating income increased during the three months ended December 31, 2003 by approximately $441,000, to $384,000, as compared to an operating loss of $57,000 in the same three month period in the previous year, for the reasons indicated above. In comparison to the respective period in fiscal 2002, the operating margin for the three month period ended December 31, 2003 increased by 3.3%, to 2.9% of sales. Interest Expense and Income Net interest expense decreased slightly for the three months ended December 31, 2003 by approximately $4,000 as compared to the same period in the previous year, reflecting lower interest rates on borrowed funds. Net Income/(Loss) Income before income taxes increased to $335,000 during the quarter ended December 31, 2003 from a loss of ($113,000) during the same period in the prior year. The Company recorded a tax provision of $181,000 for the quarter ended December 31, 2003 as compared to a tax benefit of $43,000 for quarter ended December 31, 2002. Net income after tax amounted to approximately $155,000 or 1.1% of revenues during the first quarter of Fiscal 2004 versus a net loss of ($70,000) or (0.5%) of revenues in the first quarter of Fiscal 2003. Liquidity and Capital Resources Net cash used for operating activities was approximately $89,000 for the three months ended December 31, 2003, compared to cash flow provided by operations of approximately $155,000 for the three months ended December 31, 2002. For the three months ended December 31, 2003, cash was used to finance an increase in accounts receivable and a decrease in accounts payable, offset by the Company's profit during the quarter. During the three months ended 10 December 31, 2002, cash was primarily provided by a net decrease in accounts receivable as collections outpaced sales, as well as an increase in accounts payable, offset by an increase in other current assets. In December 2002, Allstates made a temporary transfer of $300,000 to a bonding company as security for a legal judgement in the Company's favor. Those funds were returned in January 2003 in favor of a letter of credit issued through the Company's bank. At December 31, 2003, the Company had cash of $343,000 and net working capital of $1,159,000, compared with cash of $96,000 and net working capital of $1,477,000 respectively, at December 31, 2002. The decrease in working capital at December 31, 2003 over December 31, 2002 is primarily attributable to the Company's net loss during the final three quarters of fiscal 2003, which includes the partial write-off of a third party loan, offset by the net profit during the first quarter of fiscal 2004 The Company's investing activities were comprised of expenditures for capital equipment, primarily representing purchases of computer hardware and software. For the three months ended December 31, 2003, capital expenditures amounted to approximately $16,000, while capital expenditures amounted to approximately $24,000 for the three months ended December 31, 2002. During the first quarter of fiscal 2004, Allstates entered into a licensee agreement with another party that would result in that party owning the rights to three licensee operations commencing January 31, 2004. As part of the agreement, Allstates WorldCargo agreed to pay in installments a sum of $300,000 to the licensees as a start- up fee. As of December 31, 2003, the Company paid a deposit of $75,000. The Company has a commercial line of credit with a bank, pursuant to which the Company may borrow up to $2,000,000, based on a maximum of 70% of eligible accounts receivable. Per the agreement, which expires February 28, 2004, interest on outstanding borrowings accrues at the Wall Street Journal's prime rate of interest (4.00% at December 31, 2003). The interest rate is predicated on the Company maintaining a compensating account balance in a non-interest bearing account equal to at least $230,000. If such average compensating balances are not maintained, the interest rate will increase by 1% over the rate currently accruing. Outstanding borrowings on the line of credit totaled $1,150,000 as of December 31, 2003. The line of credit with the bank contains a covenant pertaining to maintenance of a Debt Service Coverage Ratio. At December 31, 2003, the Company was in breach of the Debt Service Coverage Ratio. Per the banks requirement, Allstates underwent an independent accounts receivable audit. Based on the results of the audit, the bank has agreed to waive the covenant default for the period covering February 28, 2003 to February 28, 2004 when the covenant will once again go into effect. In September, 2000, Allstates extended an operating loan to an unrelated freight and warehouse services company, Q Logistics Solutions, Inc. ("QLS"), as part of an agreement that the Company entered into to provide customer invoicing and vendor disbursement services. The loan was secured by a $750,000 promissory note signed by the borrower, and for which a Form UCC-1 financing statement was filed. In February 2001, QLS filed for Chapter 11 protection under the U.S. bankruptcy laws. Pursuant to the bankruptcy proceedings, another company, unrelated to Allstates WorldCargo, Inc., purchased the assets of QLS in May 2001. Allstates had outstanding loan advances of approximately $702,000 to QLS prior to the purchase. As a contingency of that purchase, Allstates entered in to an agreement with the other company whereby Allstates assigned the Form UCC-1 filing to them in exchange for their promissory note, secured by a personal guarantee made by an officer of that company, to pay the full loan amount of approximately $702,000, plus 9% interest over six months, beginning in April 2001. The other company subsequently defaulted on the loan after having made no payments to Allstates. The Company filed suit against the other company and the guarantor for breach of contract, and subsequently the parties signed a Stipulation of Settlement whereby Allstates received a judgement against the other company for the full amount plus interest and attorney's fees. An $80,000 payment in lieu of the personal guarantee was placed in escrow pending legal review of documentation supplied to the Company. In January, 2003, the parties came to an agreement whereby the other company would pay Allstates a total of $330,000 in full settlement. Payments were scheduled to be made over four equal monthly installments at $82,500 per month, including the release of the escrow funds. All payments were received by the Company as per the schedule. Allstates recorded a charge of $372,000 during the second quarter of fiscal 2003, representing the difference between the receivable and the settlement amount. 11 Forward Looking Statements The Company is making this statement in order to satisfy the "safe harbor" provisions contained in the Private Securities Litigation Reform Act of 1995. The statements contained in all parts of this document (including the portion, if any, appended to the Form 10-K) including, but not limited to, those relating to the availability of cargo space; the Company's plans for, effects, results and expansion of international operations and agreements for international cargo; future international revenue and international market growth; the future expansion and results of the Company's terminal network; plans for local delivery services and truck brokerage; future improvements in the Company's information systems and logistic systems and services; technological advancements; future marketing results; construction of the new facilities; the effect of litigation; future costs of transportation; future operating expenses; future margins; any seasonality of the Company's business; future dividend plans; future acquisitions and the effects, benefits, results, terms or other aspects of any acquisition; Ocean Transportation Intermediary License; ability to continue growth and implement growth and business strategy; the ability of expected sources of liquidity to support working capital and capital expenditure requirements; future expectations; and any other statements regarding future growth, future cash needs, future terminals, future operations, business plans, future financial results, financial targets and goals; and any other statements which are not historical facts are forward-looking statements. When used in this document, the words "anticipate," "estimate," "expect," "may," "plans," "project" and similar expressions are intended to be among the statements that identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to the Company's dependence on its ability to attract and retain skilled managers and other personnel; the intense competition within the freight industry; the uncertainty of the Company's ability to manage and continue its growth and implement its business strategy; the Company's dependence on the availability of cargo space to serve its customers; the effects of regulation; results of litigation; the Company's vulnerability to general economic conditions; the control by the Company's principal shareholder; risks of international operations; risks relating to acquisitions; the Company's future financial and operating results, cash needs and demand for its services; and the Company's ability to maintain and comply with permits and licenses, as well as other factors detailed in this document and the Company's other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The Company undertakes no responsibility to update for changes related to these or any other factors that may occur subsequent to this filing. ITEM 3 CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. The Company's principal executive officer and principal financial officer, based on their evaluation of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of this Quarterly Report on Form 10Q, concluded that the Company's disclosure controls and procedures are adequate and effective for the purposes set forth in the definition in the Exchange Act rules. (b) Changes in Internal Controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the date of the evaluation. 12 PART II OTHER INFORMATION ------------------ ITEM 1 LEGAL PROCEEDINGS There has been no material change in our legal proceedings since the filing of our Form 10-K for the period ended September 30, 2003. ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS NONE ITEM 3 DEFAULTS ON SENIOR SECURITIES NONE ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5 OTHER INFORMATION NONE ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K None 13 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLSTATES WORLDCARGO, INC. BY: /s/ SAM DIGIRALOMO DATED: February 13, 2004 --------------------------------- ----------------- Sam DiGiralomo, President and CEO BY: /s/ Craig D. Stratton DATED: February 13, 2004 --------------------------------- ----------------- Craig D. Stratton, CFO, Secretary, Treasurer and Principal Financial Officer -14-