-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IB1ozdZ/6KjzdrLanp5Pp/fgzscfCiJDFj2N+6OQxJnm3ryYacnUPglzOkjgRXus KPOcwIS9iWIiJrQoaQUzmg== 0001260415-04-000029.txt : 20040813 0001260415-04-000029.hdr.sgml : 20040813 20040813081926 ACCESSION NUMBER: 0001260415-04-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATES WORLDCARGO INC CENTRAL INDEX KEY: 0001072293 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SERVICES, NEC [8900] IRS NUMBER: 223487471 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24991 FILM NUMBER: 04971854 BUSINESS ADDRESS: STREET 1: 4 LAKESIDE DRIVE SOUTH CITY: FORKED RIVER STATE: NJ ZIP: 08731 BUSINESS PHONE: 6096935950 MAIL ADDRESS: STREET 1: 4 LAKESIDE DRIVE SOUTH CITY: FORKED RIVER STATE: NJ ZIP: 08731 FORMER COMPANY: FORMER CONFORMED NAME: AUDIOGENESIS SYSTEMS INC DATE OF NAME CHANGE: 19981016 10-Q 1 awc063004-10q.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 JUNE 30, 2004 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 ---- ---- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No XX ---- ---- The Company had 32,509,872 shares of common stock, par value $.0001 per share, outstanding as of August 13, 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 JUNE 30, 2004 and 2003 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....................................13 PART II. OTHER INFORMATION.............................................14 ITEM 1 LEGAL PROCEEDINGS..........................................14 ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS..................14 ITEM 3 DEFAULTS ON SENIOR SECURITIES..............................14 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........14 ITEM 5 OTHER INFORMATION..........................................15 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...........................14 SIGNATURES........................................................15 2 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS June 30, September 30, 2004 2003 (Unaudited) * --------- --------- Current Assets Cash $ 105,621 $ 516,639 Accounts receivable, net of allowance for 7,254,168 6,226,209 bad debt of $248,000 and $229,000 Prepaid expenses and other current assets 156,003 155,191 Deferred income taxes 277,000 490,000 --------- --------- Total current assets 7,792,792 7,388,039 Property, plant and equipment 1,538,037 1,268,632 Less: Accumulated depreciation 974,675 943,070 --------- --------- Net property, plant and equipment 563,362 325,562 Goodwill, including acquisition cost, net 535,108 535,108 Other assets 92,782 38,571 --------- --------- Total assets $8,984,044 $8,287,280 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $4,363,313 $4,336,623 Accrued expenses 1,142,354 823,029 Short-term bank borrowings 1,249,500 1,149,500 Notes payable 25,000 28,836 --------- --------- Total current liabilities 6,780,167 6,337,988 Deferred tax liability - non current 61,000 25,000 Long term portion of notes payable 2,361,730 2,386,730 Stockholders' equity Common stock 3,251 3,251 Retained deficit (222,104) (465,689) --------- --------- Total stockholders' deficit (218,853) (462,438) --------- --------- Total liabilities and stockholders' deficit $8,984,044 $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 Nine Months Ended June 30, June 30, 2004 2003 2004 2003 ---------- ---------- ----------- ----------- Revenues (net of discounts) $14,565,851 $11,048,891 $40,119,401 $33,831,855 Cost of transportation 9,886,379 7,045,480 27,038,830 21,683,479 ---------- ---------- ----------- ----------- Gross profit 4,679,472 4,003,411 13,080,571 12,148,376 Selling, general and administrative expenses 4,287,461 3,941,956 12,377,372 12,514,525 ---------- ---------- ----------- ----------- Income (loss) from operations 392,011 61,455 703,199 ( 366,149) Other income (expense): Interest, net (54,636) ( 55,718) ( 162,321) ( 170,591) Gain/(loss) on sale of assets 2,000 50 ( 1,587) ( 6,873) Other income/(expense) 9,294 9,294 ( 372,477) ---------- ---------- ----------- ----------- Income (loss) before income tax provision 348,669 5,787 548,585 ( 916,090) Provision for income taxes 184,000 305,000 ( 398,813) Net income (loss) $ 164,669 $ 5,787 $ 243,585 $( 517,277) ========== ========== =========== =========== Weighted average common shares - basic 32,509,872 32,509,872 32,509,872 32,509,872 Net income per common share - basic $ .01 $ .00 $ .01 $ (.02) Weighted average common shares - diluted 32,509,872 32,509,872 32,509,872 32,509,872 Net income per common share - diluted $ .01 $ .00 $ .01 $ (.02) 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 profit for the nine months ended June 30, 2004 243,585 243,585 ___________ ______ ___________ _________ Balance at June 30, 2004 32,509,872 3,251 $(222,104) $(218,853) =========== ====== ========= =========
5 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine Months Ended June 30, 2004 2003 Cash flows from operating activities: Net income (loss) $ 243,585 $(517,277) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 122,478 139,957 Amortization -0- 1,166 Provision for doubtful accounts 116,113 141,166 (Gain)/loss on sale of assets 1,587 6,873 Deferred income taxes 249,000 (403,001) (Increase) decrease in assets: Accounts receivable (1,201,483) 37,437 Prepaid expenses and other assets ( 813) 835,553 Increase (decrease) in liabilities: Accounts payable and accrued expenses 346,015 (144,749) --------- --------- Net cash provided by (used for) operating activities (123,518) 97,125 Cash flows from investing activities: Purchase of equipment (382,014) ( 67,220) Proceeds from sale of property and equipment 20,150 21,388 Deposits 3,200 775 --------- --------- Net cash used for investing activities (358,664) ( 45,057) Cash flows from financing activities: Repayments under notes payable (28,836) (75,789) Repayments under short-term bank borrowings (100,000) (1,100,000) Borrowing under short-term Bank borrowings 200,000 1,000,000 --------- --------- Net cash (used for) provided by financing activities 71,164 ( 175,789) Net (decrease) in cash and cash (411,018) (123,721) Cash, beginning of year 516,639 173,277 --------- --------- Cash, end of period $105,621 $ 49,556 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6 ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2004 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 June 30, 2004 and September 30, 2003 and the results of operations for the three and nine months ended June 30, 2004 and 2003, respectively. 2. Net income per common share appearing in the statements of operations for the three and nine months ended June 30, 2004 and 2003, 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 waived the covenant default for the period covering February 28, 2003 to February 28, 2004. The bank has extended the maturity date of the loan through January 31, 2005 and a new covenant is in place. 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 the 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 licensee as a start-up fee. That amount has been paid in full. The Company has capitalized this expenditure as a leasehold improvement and is depreciating (straight-line) 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 94 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 Nine Months Ended June 30, June 30, 2004 2003 2004 2003 ---- ---- ---- ---- Revenues 100.0% 100.0% 100.0% 100.0% Cost of transportation 67.9 63.8 67.4 64.1 ---- ---- ---- ---- Gross profit 32.1 36.2 32.6 35.9 Selling, general and administrative expenses 29.4 35.6 30.8 37.0 ---- ---- ---- ---- Operating income 2.7 0.6 1.8 (1.1) Net income 1.1% 0.1% 0.6% (1.5)% 8 Revenues Revenues of the Company represents gross consolidated sales less customer discounts. Total revenues for the quarter ended June 30, 2004 increased by approximately $3.5 million, or 31.8%, to $14,566,000, from the quarter ended June 30, 2003, reflecting a higher volume of shipments and total weight of cargo shipped. The increase in volume reflects the overall growth of the Company, led by new business that Allstates acquired during fiscal 2004 from a significant customer that accounted for 11.3% of consolidated revenues during the quarter ended June 30, 2004. The growth in volume was driven as well by the addition of new licensee operations within the past year, the maturation of the two Florida company stations that opened during the third quarter of fiscal 2002, and the Allstates truck brokerage operation. Sales for the nine month period ended June 30, 2004 increased by approximately $6.3 million, or 18.6%, to $40,119,000 compared to the nine month period ended June 30, 2003, for the same reasons. 8 Domestic revenues increased by approximately $3,513,000 or 40.7%, to $12,150,000 during the three-month period ended June 30, 2004 in comparison to the same period in the previous year, and increased by approximately $6,921,000 or 27.3%, to $32,314,000 during the nine months ended June 30, 2004 compared to the same period in the prior year. International revenues of $2,415,000 for the three-month period ended June 30, 2004 approximated that of the same period of the previous year. International sales generated during the nine months ended June 30, 2004 decreased by approximately $634,000 or (7.5%), to $7,806,000, reflecting the effect of the chartered aircraft service that the Company provided in the previous fiscal year. International revenues of the comparative nine-month period ended June 30, 2003 included approximately $1.8 million of one-time billing to one customer for the arrangement of international chartered aircraft. 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. 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 4.1%, to 67.9%, for the three months ended June 30, 2004, and increased by 3.3%, to 67.4% for the nine months then ended, in comparison to the respective periods in the previous year. This higher cost of sales percentage during both periods can be attributed primarily to increased competition for freight business in the marketplace as well as the addition of certain lower margin business that the Company attained during the nine months ended June 30, 2004. In absolute terms, the cost of sales increased by approximately $2,841,000 or 40.3%, to $9,886,000 during the three months ended June 30, 2004, and increased approximately $5,355,000 or 24.7%, to $27,039,000 for the nine months then ended, versus each of the comparative periods in the prior year, reflecting the increased sales volume. Gross margins decreased to 32.1% during the quarter ended June 30, 2004 from 36.2% in the same quarter of the previous fiscal year. For the nine-month period ended June 30, 2004, gross margins decreased to 32.6% from 35.9% in the same period of the prior fiscal year. Gross profit increased by approximately $676,000 to $4,679,000 for the three months ended June 30, 2004, and increased by approximately $932,000 to $13,081,000 during the nine months then ended, versus the same respective periods of the prior year. Selling, General and Administrative Expenses As a percentage of sales, operating expenses decreased by 6.2% for the three months ended June 30, 2004 in comparison to the three months ended June 30, 2003, primarily reflecting a reduction in personnel and facilities expenses, as well as licensee commissions, in relation to total sales. For the nine month period ended June 30, 2004, operating expenses decreased as a percentage of sales by 6.2% in comparison to the nine months ended June 30, 2003, for the same reasons. In absolute terms, operating expenses increased by approximately $346,000 or 8.8%, to $4,287,000 during the three-month period ended June 30, 2004 as compared to the same period in the prior fiscal year, primarily due to higher licensee commission expense and higher personnel costs for the period. For the nine months ended June 30, 2004, operating expenses decreased by approximately $137,000 or 1.1%, to $12,377,000 compared to the same period of the previous fiscal year. This decrease primarily reflects a reduction in personnel costs, offset by increases in other administrative expenses. Allstates pays commissions to licensees as compensation for generating profits to the Company. Licensee commissions and royalties paid pursuant to licensee agreements increased by approximately $225,000 for the three-month period ended June 30, 2004 in comparison to the same period in the previous year, reflecting the addition of four licensee operations over the past year. Licensee commissions and royalties increased modestly by approximately $26,000 for the nine months ended June 30, 2004 in comparison to the same period of the previous fiscal year, reflecting the offsetting impact of the chartered airline service that the Company provided in the prior year nine month period through one of its licensees. 9 Personnel expenses increased by approximately $56,000 during the three months ended June 30, 2004 as compared to the same period of the prior year, primarily reflecting higher sales commission costs and executive bonus accrual due to the increase in sales and profits during the period. For the nine months ended June 30, 2004, personnel costs decreased by approximately $212,000 in comparison to the same period of the prior year, primarily reflecting a reduction in sales and operations personnel during the third quarter of fiscal 2003, as well as the effect of transferring two company stations to licensee owned operations during the past year. Travel and entertainment expense increased for the nine month comparative period by approximately $31,000, primarily reflecting the overall growth in sales as well as the specific demands of some of the Company's new business. Accounting fees increased by approximately $36,000 and $60,000 for the three and nine month comparative periods respectively, primarily based on an under accrual of fees as they related to the fiscal 2003 audit. Liability insurance costs increased by approximately $22,000 and $61,000 for the three and nine months ended June 30, 2004 respectively, as compared to the same periods of the previous year. Primarily, this relates to the Directors and Officers liability policy that the Company initiated in the fourth quarter of fiscal 2003, as well as higher cargo insurance expense due to the increased sales activity. MIS fees, which represent the expense of maintaining the computer system and programming modifications to improve its output and performance, decreased by approximately $37,000 during the nine month period ended June 30, 2004 versus the same period ended June 30, 2003, primarily reflecting enhancements to the Company's EDI capability and streamlining of customer order entry during the previous fiscal year. SG&A expenses presented for the three months ended June 30, 2004 and 2003 are inclusive of expenditures to related parties totaling $392,485 and $354,486, respectively. SG&A expenses presented for the nine months ended June 30, 2004 and 2003 are inclusive of expenditures to related parties totaling $1,141,830 and $1,069,285, respectively. Income/(Loss) From Operations Operating income increased during the three months ended June 30, 2004 by approximately $331,000, to $392,000, as compared to operating income of $61,000 in the same three month period in the previous year, for the reasons indicated above. In comparison to the respective period in fiscal 2003, the operating margin for the three-month period ended June 30, 2004 increased by 2.1%, to 2.7% of sales. Operating income increased during the nine months ended June 30, 2004 by approximately $1,069,000, to $703,000, as compared to an operating loss of ($366,000) in the same nine month period in the previous year, for the reasons indicated above. In comparison to the respective period in fiscal 2003, the operating margin for the nine-month period ended June 30, 2004 increased by 2.9%, to 1.8% of sales. Interest Expense Interest expense decreased slightly for the three and nine months ended June 30, 2004 by approximately $1,000 and $8,000, respectively as compared to the same periods in the previous year, reflecting lower interest rates on borrowed funds. 10 Net Income/(Loss) Income before income taxes increased to $349,000 during the quarter ended June 30, 2004 from $6,000 during the same period in the prior year. The Company recorded a tax provision of $184,000 for the quarter ended June 30, 2004 versus zero provision for quarter ended June 30, 2003. Net income after tax amounted to approximately $165,000 or 1.1% of revenues during the third quarter of fiscal 2004 versus net income of $6,000 or 0.1% of revenues in the third quarter of fiscal 2003. Income before income taxes increased to $549,000 during the nine months ended June 30, 2004 from a loss of ($916,000) during the same period in the prior year. The Company recorded a tax provision of $305,000 for the nine months ended June 30, 2004 as compared to a tax benefit of $399,000 for nine months ended June 30, 2003. Net income after tax amounted to approximately $244,000 or 0.6% of revenues during the first nine months of fiscal 2004 versus a net loss of ($517,000) or (1.5%) of revenues in the first nine months of fiscal 2003. Liquidity and Capital Resources Net cash used for operating activities was approximately $124,000 for the nine months ended June 30, 2004, compared to cash flow provided by operations of approximately $97,000 for the nine months ended June 30, 2003. For the nine months ended June 30, 2004, cash was used to finance an increase in accounts receivable, offset by the Company's profit during the period as well as an increase in accounts payable. For the nine months ended June 30, 2003, cash was primarily provided by the receipt of loan funds due from a third party, as well as a refund of federal tax payments, offset by a decrease in accounts payable and the net losses of the Company during the period. At June 30, 2004, the Company had cash of $106,000 and net working capital of $1,013,000, compared with cash of $50,000 and net working capital of $1,075,000 respectively, at June 30, 2003. The decrease in working capital at June 30, 2004 over June 30, 2003 is primarily attributable to the payment made in connection with a licensee agreement that Allstates entered in to in fiscal 2004, offset by the profits of the Company over the past twelve months. 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 June 30, 2004, the Company paid that amount in full. Allstates has capitalized this expenditure as a leasehold improvement and will depreciate it over the ten- year life of the contract The Company's investing activities were comprised of expenditures for capital equipment, primarily representing purchases of computer hardware and software. For the nine months ended June 30, 2004, capital equipment expenditures amounted to approximately $82,000, while capital expenditures amounted to approximately $67,000 for the nine months ended June 30, 2003. 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 January 31, 2005, interest on outstanding borrowings accrues at the Wall Street Journal's prime rate of interest (4.00% at June 30, 2004). 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 $1,250,000 as of June 30, 2004. 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. 12 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. 13 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 14 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: August 13, 2004 --------------------------------- ----------------- Sam DiGiralomo, President and CEO BY: /s/ Craig D. Stratton DATED: August 13, 2004 --------------------------------- ----------------- Craig D. Stratton, CFO, Secretary, Treasurer and Principal Financial Officer -15- EX-31 2 ex31-1.txt CERTIFICATION Exhibit 31.1 CERTIFICATION I, Sam DiGiralomo, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Allstates WorldCargo, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. August 13, 2004 /s/ Sam DiGiralomo - ------------------------------------- President and Chief Executive Officer EX-31 3 ex31-2.txt CERTIFICATION Exhibit 31.2 CERTIFICATION I, Craig D. Stratton, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Allstates WorldCargo, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. August 13, 2004 /s/ Craig D. Stratton - -------------------------------------- Craig D. Stratton Chief Financial Officer and Chief Accounting Officer EX-32 4 ex32-1.txt CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Allstates WorldCargo, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission (the "Report"), I, Sam DiGiralomo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the company as of the dates presented and the consolidated result of operations of the Company for the periods presented. August 13, 2004 /s/ Sam DiGiralomo - ------------------------ Sam DiGiralomo President and Chief Executive Officer This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-32 5 ex32-2.txt CERTIFICATION EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Allstates WorldCargo, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission (the "Report"), I, Craig D. Stratton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented. August 13, 2004 /s/ Craig D. Stratton - ------------------------ Craig D. Stratton Chief Financial Officer and Chief Accounting Officer This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -----END PRIVACY-ENHANCED MESSAGE-----