February 14, 2006
Zip+4 Code: 20549-0305
Via Fax & U.S. Mail
Allstates Worldcargo, Inc.
Craig D. Stratton, Chief Financial Officer
4 Lakeside Drive South
Forked River, New Jersey 08731
Re: Allstates Worldcargo, Inc.
Form 10-K for the Year Ended September 30, 2005
File 000-24991
Dear Mr. Stratton:
Based upon an examination restricted solely to
considerations
of the Financial Statements, Management`s Discussion and Analysis,
and Selected Financial Data, the staff has the following comments
on
the above-referenced documents. Where indicated, we think you
should
revise your filing in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with supplemental information so we may better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K For the Fiscal Year Ended September 30, 2005
General
1. In Item 1 of your Form 10-K you state that 14 of your 21 branch
locations are licensee operations and that you are party to
certain
site licensing agreements in which these licensees have contracted
with you to provide freight forwarding services under the Allstate
name. Please describe to us the significant contractual terms of
these arrangements. Explain how you account for, record and
classify
the various payments made to or received from these licensees.
Support your apparent conclusion that you should record revenues
earned at those locations at gross rather than at net. Quantify
the
number of site licensing agreements with related parties. We may
have further comments upon review of your response.
2. Your financial statements do not include selected quarterly
financial data. Please revise your financial statements to comply
with Item 302 (a) of Regulation S-K.
3. The Audiogenesis Systems Division distributes safety equipment
under the service mark Safetrend. Please tell us how this apparent
segment meets the aggregation criteria set forth in paragraph 17
of
SFAS 131 or revise your financial statements as appropriate.
Item 7- Management Discussion and Analysis
4. Please revise your financial statements to include a
contractual
obligations table as required by Item 303(a)(5) of Regulation S-K.
When presenting contractual obligations, please ensure that all
obligations are shown in the table, including your Revolving
Credit
Facility and scheduled (or estimated) interest payments on your
indebtedness. See FR-72 for guidance.
Liquidity and Capital Resources
5. Please revise your discussion and analysis of cash flows to
also
include underlying causes of changes in operating assets and
liabilities. For example, you should discuss the reasons for the
increase in accounts receivable and its effect on liquidity.
Refer
to the instructions to Item 303(a) of Regulation S-K and FR-72 for
guidance.
Item 8- Financial Statements
Report of Independent Registered Public Accounting Firm, page F-1
6. Please revise your financial statements to provide a signed
accountant`s report. See Rule 302 of Regulation S-T for guidance
regarding required signatures within electronic submissions.
Consolidated Statements of Net Income, page F-4
7. Financial statements should be furnished that meet the
requirements of Regulation S-X. This would generally include
statements of income, cash flows and changes in stockholders`
equity
for each of the most recent three fiscal years. MD&A disclosures
should be provided for each of these periods as well. Please
revise
or advise.
8. It appears that you generate sales from both product and
service.
The staff believes that these revenues as well as the associated
costs from the sales of products, services and other products
should
be separately disclosed on the face of the consolidated statements
of
net income. Therefore, please revise your financial statements
accordingly or provide us with substantive support for your
approach.
For guidance refer to Article 5-03(b)(1) and (2).
9. In order to increase the transparency of your financial
statements, please revise your consolidated statements of net
income
to include personnel costs as well as commissions paid to
licensees
and independent sales agents as separate line items.
10. Further, in order to appropriately reflect the nature of costs
on
your consolidated statement of net income, the caption "cost of
sales" should be revised to "cost of transportation." Please note
that your result of operations disclosures make use of the term
"cost
of transportation" instead of "costs of sales." Consider whether
the
use of the caption "gross profit" is appropriate.
Note 2- Summary of Significant Accounting Policies
Fair Value of Consolidated Financial Statements, page F-9
11. Please expand your disclosures to also address the fair values
of
your non-current financial instruments. We refer to such assets
as
your deposits and non-current receivables and to the portion of
your
debt classified as long-term. Please note that if it is not
practicable to estimate the fair value of any financial instrument
appropriate disclosures are required under paragraph 14 of SFAS
107.
12. As a related matter, please expand your footnotes to describe
the
nature and significant contractual terms of the loans receivable
and
the other receivables. Explain the business reasons for the loan
made to a licensee and tell us whether the loan represents an
unusual
event or transaction or whether such loans are routine in your
business. Describe how you have evaluated the recoverability of
these loans receivable at the balance sheet date.
Revenue Recognition, page F-9
13. The Audiogenesis Systems Division is involved in the sale
safety
equipment. However, there are no disclosures as to how you
account
for these arrangements within your footnotes. Please revise your
revenue recognition footnote to disclose your revenue recognition
process for these transactions.
Note 6- Long Term Debt
14. Please tell us the business reasons why you assumed debt
associated with the notes payable from Joseph Guido to the estate
of
A.G. Hoffman. Additionally, tell us how the proceeds from the
debt
were used.
Note 15- Litigation, page F-17
15. Please revise your disclosures to provide estimate of the
amount
or range of loss or possible loss on the Mutual Insurance Company
v.
Lightning Freight Inc., GTD Logistics, Inc. and Gilberto Cordova
litigation or state that such an estimate cannot be made. See
paragraph 10 of SFAS 5 for guidance.
As appropriate, respond to these comments within 10 business
days or tell us when you will provide us with a response. You may
wish to provide us with marked copies of the amendment to expedite
our review. Please furnish a cover letter that keys your
responses
to our comments and provides any requested supplemental
information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
Pursuant to Rule 101(a)(3) of Regulation S-T, your response
should be also be submitted in electronic form, under the label
"corresp" with a copy to the staff.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Juan Migone at (202) 551-3312 or Margery
Reich
at (202) 551-3347 if you have questions regarding comments on the
financial statements and related matters. Please contact the
undersigned at (202) 551-3211 with any other questions.
Sincerely,
David R. Humphrey
Branch Chief-Accountant