U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-K
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 0R 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT FOR THE TRANSITION PERIOD FROM ________ TO ________
ALLSTATES WORLDCARGO, INC.
(Exact Name of Registrant as Specified In Its Charter)
New Jersey 22-3487471
(State or Other Jurisdiction of (I.R.S. Identification
Incorporation or Organization) Number)
4 Lakeside Drive South, Forked River, New Jersey 08731
(Address of Principal Executive Offices) (Zip Code)
(609) 693-5950
(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $.0001 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has 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 if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in part III
of this Form 10-K or any amendment to this Form 10-K [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act. Yes [ ] No [x]
The number of shares of Common Stock outstanding as of December 29, 2006
was 32,509,872 shares.
At December 29, 2006, the voting stock of the registrant had not been
publicly quoted.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Overview
Allstates WorldCargo, Inc. (the "Company" or "Allstates") is a
New Jersey Corporation formed in 1997 as Audiogenesis Systems, Inc.
("Audiogenesis"), pursuant to a corporate reorganization of Genesis
Safety Systems, Inc. ("Genesis"). 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 20 offices throughout the
United States, including the corporate headquarters, and employs 89
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. Allstates
currently has strategic alliance agreements with agents in the United
Kingdom, European, South American and Far East markets.
Allstates neither owns nor operates any aircraft or ships. By
not owning or operating its own equipment, Allstates believes it is
able to provide more flexible delivery schedules and shipment size.
In addition, by eliminating the substantial fixed expenses associated
with the ownership of such equipment, Allstates has been able to
affect certain cost savings.
Marketing and Licensing
Allstates markets its services through a network of 19 domestic
branch offices, its strategic alliances, and selected agents
throughout the world. Allstates is a party to several site licensing
agreements in which those licensees have contracted with the Company
to provide exclusive freight forwarding services, including sales and
operating functions, under the Allstates name. Of the 19 branch
locations, 13 are licensees operations, while 6 are company owned and
staffed operations.
Allstates utilizes a combination of professionally prepared
advertising materials, highly trained sales and operations/customer
services professionals, direct mail, assorted promotional items, and
audio/visual presentations.
Information Systems
A primary component of Allstates's business strategy is the continued
development of its information systems. Allstates has invested
substantial management and financial resources in an effort to provide
leading edge technology to customers and employees. Allstates
continues to upgrade its information systems. Highlights of the
current system are:
.. Centralized system located in Forked River, New Jersey, with
terminals in each office
.. Real-time customer service, operations, and accounting
information available to employees and customers
.. Customers can track shipments and collect POD information via the
Company's firewall-protected website
.. Tracks shipments from pickup order to delivery, confirms "on-
board" and "out for delivery" status
.. Produces the following daily, monthly, and yearly reports:
- Operations (inbound, outbound and on-hand reports)
- Sales (revenue, customer client list)
- Customer (POD and shipping history reports)
- Accounting (P&L reports)
.. Auto rates revenues and costs
.. Supports transactions via EDI (Electronic Data Interchange)
.. Customized reports to meet customer needs
.. Bar-code capable
.. Qualified customers can create airway bills via the Company
website, which are then uploaded into the operating system for
processing
.. Produces shipping labels and computerized airbills and airline
bills
During the first half of calendar year 2006, Allstates began the
rollout of a new freight tracking system that provides all the
features of the current system and adds new features such as:
.. Microsoft Windows(R)-based freight tracking system with the
infrastructure and functionality to process the most complex processes
and well as manage significant increases in shipment count
.. Automatic service performance tracking and reporting
.. Advanced features for multi-station management, operations, and
accounting
.. Automated event-driven tracking with detailed information about
shipments as they pass through the system
.. Extensive reporting capabilities
.. Full Internet functionality for customers including web-based
tracking, tracing, and shipment entry
.. Enhanced EDI capabilities
.. Automatic notifications to operations and sales personnel
regarding shipment status
.. Automatic document distribution to customers via fax and/or email
.. Electronic forms generation for transmission to customers,
carriers, stations, and agents
Allstates is rolling out the new system on a station-by-station basis.
Through the end of December 2006, nine of the Company's stations have
converted to the new tracking system. Management expects the full
conversion to be completed by June 30, 2007.
Licensing and Government Regulation
The Company's subsidiary, Allstates Logistics, is the holder of
Ocean Transportation Intermediary License No. 15364NF, and must be in
compliance with the regulations governing such certification. Also,
Allstates must be in compliance with the regulations of the Federal
Aviation Administration that apply to the business of Allstates.
Allstates believes that it has the resources, expertise and experience
to continue its compliance with all Federal agencies and regulations.
Allstates relies primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and
contractual provisions to protect its proprietary technology. For
example, Allstates licenses its software pursuant to signed license
agreements, which impose certain restrictions on the licensees'
ability to utilize the software. In addition, Allstates seeks to avoid
disclosure of its trade secrets, including requiring those persons
with access to Allstates's proprietary information to execute
confidentiality agreements with Allstates and restricting access to
Allstates's source code. Allstates seeks to protect its software,
documentation and other written materials under trade secret and
copyright laws, which afford only limited protection.
Despite Allstates's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of Allstates's
products or to obtain and use information that Allstates regards as
proprietary. Policing unauthorized use of Allstates's products is
difficult, and, while Allstates is unable to determine the extent to
which piracy of its software products exists, software piracy can be
expected to be a persistent problem. In addition, the laws of many
countries do not protect Allstates's proprietary rights to as great an
extent as do the laws of the United States. There can be no assurance
that Allstates's means of protecting its proprietary rights will be
adequate or that Allstates's competitors will not independently
develop similar technology.
To date, Allstates has not been notified that Allstates's
products infringe the proprietary rights of third parties, but there
can be no assurance that third parties will not claim infringement by
Allstates with respect to current or future products. Allstates
expects that software product developers will increasingly be subject
to infringement claims as the number of products and competitors in
Allstates's industry segment grows and the functionality of products
in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation,
cause product shipment delays or require Allstates to enter into
royalty or licensing agreements. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to Allstates or
at all, which could have a material adverse effect upon Allstates's
business, operating results and financial condition.
Competition
Allstates competes with other companies in the same business,
some of which are much larger and have substantially greater
resources. There are approximately 1,500 direct competitors of
various sizes throughout the country. The methods by which Allstates
chooses to compete include highly skilled and experienced upper and
middle management, a proprietary site-licensing program, cost control,
professional sales representation, highly trained operations and
customer service personnel, employee and customer premium awards
program, and a wide range of enhanced services. In addition, the
integration of Audiogenesis' experience and expertise with respect to
its applications for inventory control provides the Company with added
benefits for its customers. Allstates also owns its proprietary and
customized computer software and advanced hardware. Allstates's
website is functional, providing for cargo tracking, customer
communication, and entry of house airway bills to qualifying
customers.
Allstates's major competitors nationwide are Federal Express,
BAX, EGL Inc., and United Parcel Service. At each of Allstates's
locations, there are regional carriers who have strength in the local
marketplace. They, for the most part, all provide air, sea and ground
services. Service levels and pricing vary substantially based upon
geographic and customer volume criteria.
In order to remain competitive, Allstates negotiates with its
vendors to meet the appropriate service and pricing levels in its
markets. In addition to competitive pricing, Allstates strives to
provide its customers, with excellent service, highly trained inside
operations personnel, and state of the art computer services.
Customers
Allstates has a diverse customer base, with approximately 1,700
accounts. In fiscal 2006, no customer accounted for more than 10% of
revenues. Over the 45 years of its operations, Allstates has done
business with over 25,000 customers. Some of Allstates's major
customers over the years have been J.B. Williams, Raytheon, Giorgio
Perfume, Cosmair, Ashton Tate, Merisel Corporation, Budd Corporation,
Home Box Office (a division of Time-Warner), Sensormatic, AT&T, and
Polaris.
Employees
As of December 16, 2006, the Company employed a total of 85
individuals. Allstates Air Cargo, Inc. and subsidiaries accounted for
83 employees (of which 5 are part time), including 43 in operations
and customer service, 13 in sales, marketing and related activities, 3
in management information systems, and 24 in administration and
finance. The Audiogenesis Systems division has 2 full-time employees.
Allstates's success is highly dependent on its ability to attract and
retain qualified employees. The loss of any of the Company's senior
management or other key sales and marketing personnel could have a
material adverse effect on Allstates's business, operating results and
financial condition.
Pension Plan
Effective May 1994, the Company adopted a discretionary non-
standardized 401(k) profit sharing plan. The terms of the plan
provide for eligible employees ("participants") who have met certain
age and service requirements to participate by electing to contribute
up to the maximum percentage allowable not to exceed the limits of
Internal Revenue Code Section 401(k), 404 and 415 (the "Code"). For
2006, the maximum contribution allowed by the Code was the lesser of
100% of an employees' compensation, or $15,000. Participants who
attained age 50 prior to the close of the plan year are eligible to
make catch-up contributions of an additional $5,000, after the maximum
contribution has been made. The Company may make matching
contributions equal to a discretionary percentage, as determined by
the Company, up to 6% of a participants' salary. Company
contributions vest at the rate of 20% of the balance at each
employees' third, fourth, fifth, sixth, and seventh anniversary of
employment. The employees' contributions are 100% vested at the time
of deferral. The plan also allows employer discretionary
contributions allocated in accordance with participants' compensation.
The Company did not make any discretionary contributions to the plan
for the year ended September 30, 2006.
Audiogenesis Systems Division
Sales of Safety Equipment.
Allstates, trading as Audiogenesis Systems, operates a store
which distributes safety equipment under the service mark
SafeTvend(sm) at a major pharmaceutical corporation in the New York
area. Audiogenesis's safety store is located on the customer's
premises, and sells respirators, hard hats, safety glasses, protective
clothing, and other similar products which are used or worn by the
customer's employees to help protect them from industrial accidents
and injuries.
Competition
Audiogenesis's SafeTvend(sm) store is subject to competition not
only from companies which would offer similar services on-site at the
customer's premises, but also from direct distributors and
manufacturers of the products which would sell directly to such
company. Virtually all of the competitors have greater financial,
technological, marketing and sales resources than Audiogenesis. There
are numerous organizations of varying sizes that engage in the
business of customized audio-visual presentations, most of these being
advertising agencies and organizations of similar nature. There is
intense competition for such business from a variety of organizations
who have greater financial, technical, marketing and sales resources
than Audiogenesis.
ITEM 2. DESCRIPTION OF PROPERTY
Allstates occupies approximately 7,000 square feet of space in
Forked River, New Jersey for its principal administrative, sales and
marketing support and product development facility under a ten year
lease which is due to expire in fiscal 2009. The Company's branch
locations, which are located in the vicinity of major metropolitan
airports, occupy approximately 1,000 to 51,000 square feet. All such
branch locations are company leased properties or properties leased by
licensee owners. Company leased properties generally run for an
average term of three years and are scheduled to expire between fiscal
2008 and fiscal 2009. The total rent expense for company leased
facilities was approximately $636,000 during fiscal 2006. Allstates
believes that its existing facilities are adequate to support its
activities for the foreseeable future.
The Company's branch locations as of September 30, 2006 were:
Los Angeles, California Nashville, Tennessee
Kenilworth, New Jersey Miami, Florida
St. Louis, Missouri Houston, Texas
Jacksonville, Florida Indianapolis, Indiana
Pittsburgh, Pennsylvania Minneapolis, Minnesota
Philadelphia,
Pennsylvania Raleigh, North Carolina
Atlanta, Georgia San Francisco, California
Baltimore, Maryland San Diego, California
Boston, Massachusetts Wayne, New Jersey
Chicago, Illinois
ITEM 3. LEGAL PROCEEDINGS
Environmental matter
As previously reported, the Company has been involved in an
ongoing environmental proceeding pertaining to five underground
storage tanks and two above ground storage tanks that were removed
from a facility in which the Company leased office space at the time
prior to 1997. Also as previously reported, the Company performed
certain remedial work and monitoring as required by the New Jersey
Department of Environmental Protection (the "NJDEP"), and at the
NJDEP's request, the Company submitted proposal that no further action
was required. The NJDEP subsequently issued a No Further Action
("NFA") letter for the soil and groundwater. Pursuant to the NFA,
Allstates was to seal the monitoring wells at the site.
As previously reported, the work was unable to be completed due
to site improvements installed by the current property owner that
rendered the monitoring wells inaccessible. While the property owner
agreed to fund the additional costs necessary to access the wells for
abandonment, information provided by the owner indicates that the
monitoring wells were likely destroyed and that abandonment is not
feasible.
In order to resolve the matter administratively with DEP,
Allstates must proceed through NJDEP's Notice of Non-Compliance
process for lost or destroyed wells. This process requires that the
party demonstrate that it made an appropriate effort to find and
properly abandon the wells, but that abandonment is not possible.
Documentation was submitted by counsel to the NJDEP to demonstrate
that when the site improvements were installed, the contractors
excavated to a depth such that the wells would have been destroyed
beyond the ability to be properly abandoned. Although the NJDEP has
acknowledged that a high penalty is unlikely, it cannot estimate the
amount of penalty until the time of settlement. Allstates will proceed
to resolve the issue administratively pursuant to the Notice of Non-
Compliance process. A conservative estimate for the penalty, including
some premium assessed by the NJDEP, may be $3,000-$10,000. The law
provides for higher penalties, but the NJDEP has not typically
assessed significant penalties in this type of matter.
Allstates counsel has received written confirmation from the
property owner that it would assume the cost of the penalty,
conservatively estimated at $3,000 to $10,000, as well as the costs to
perform the remaining work concerning the well closure issue and the
legal fees to resolve the matter.
In March 1997, Allstates made claims against liability insurance
carriers for coverage. The Company's counsel submitted invoices to
the carriers in September 2003, and continues to respond to their
requests for information. The Company's counsel is in the process of
arranging to meet with the carriers to discuss settlement
Joseph M. Guido v. Allstates WorldCargo, Inc., Sam DiGiralomo, Barton
C. Theile, and Craig D. Stratton.
As previously reported, pursuant to the Settlement Agreement that
resolved the litigation that was commenced in October 2004 by the
Company's majority shareholder (the "Shareholder Litigation"), the By-
Laws of the Company were amended to provide that the Board of
Directors shall consist of seven members. The number of directors
prior to the amendment was four. Also pursuant to the Settlement
Agreement, Charles F. Starkey, Alan E. Meyer, and Joseph Buckelew were
appointed to fill the vacancies on the Board of Directors created by
the expansion of its size. The By-Laws were also amended, pursuant to
the Settlement Agreement, to provide for the manner in which vacancies
in the Board of Directors were to be filled. The Settlement Agreement
also required the parties to nominate and vote for, as Directors,
Messrs. Buckelew, Starkey, and Meyer (or their duly appointed
successors) at future meetings of the Company's shareholders at which
directors are to be chosen.
On August 2, 2006, the Company received a Written Consent in Lieu
of a Special Meeting of the Stockholders of Allstates WorldCargo, Inc.
(the "Written Consent"), signed by the Messrs. Guido, DiGiralomo,
Theile, and Stratton, all of whom constitute the holders of a majority
of the issued and outstanding shares of stock of the Company, and the
parties to the Settlement Agreement. The effect of the Written
Consent was to modify the Settlement Agreement by (1) relieving the
parties of the obligation to nominate and vote for Messrs. Buckelew,
Starkey, and Meyer (or their duly appointed successors) as Directors,
(2) removing Messrs. Buckelew, Starkey, and Meyer from the Board of
Directors, (3) amending Section 3.02 of the By- Laws to provide that
the Board of Directors shall consist of not less than one and not more
than ten directors, with the precise number of directors within that
range to be set by the Board each year before the annual meeting of
shareholders, and with the number of directors immediately following
the adoption of the amended Section 3.02 being four, and (4) amending
Sections 3.12(b) and 3.12(c) to provide that vacancies in the Board
shall be filled by an affirmative vote of the remaining Board.
The Written Consent also provided that the By-Laws, as amended,
have been adopted by the Shareholders, and may not be amended or
repealed by the Board of Directors.
Liberty Mutual Insurance Company v. Lightning Freight Inc., GTD
Logistics, Inc., and Gilberto Cordova.
As previously reported, The Company's subsidiary, GTD Logistics,
Inc. ("GTD") was a defendant in an action pending in Los Angeles
Superior Court, Docket No. 326868, brought by Liberty Mutual Insurance
Company ("Liberty"), regarding freight brokerage services that GTD
provided for a shipment that was allegedly stolen. The tractor
trailer hauling the shipment allegedly contained several million
dollars of hard disk drives. After the truck and trailer were
allegedly stolen, the owner of the contents of the trailer made a
claim against UPS Supply Chain Solutions, the shipper, who then made a
claim against its insurance company, Liberty. Liberty sought to
recover from GTD, and also from the carrier and truck driver, the
amount that allegedly expended to cover the loss suffered by its
insured, the owner of the contents of the trailer. The Complaint
requested damages of not less than $1,400,000.
Liberty alleged that when GTD agreed to provide brokerage
services for the shipment of the cargo, GTD also promised to select a
motor carrier with no less than $1 million in cargo insurance
coverage, and to select a carrier that would follow certain asset
protection rules. Liberty alleged breach of contract and negligence
against GTD for failure to comply with these alleged promises. GTD
and Lightning Freight, Inc., the carrier, filed Cross-Complaints
against each other and Gilberto Cordova, the truck driver. Gilberto
Cordova never appeared in the matter and the Court entered a default
against him.
The parties reached a settlement of the action, pursuant to which
GTD paid the sum of ten thousand dollars ($10,000) in full and
complete settlement of all claims. On March 6, 2006 the Court granted
the parties' Application for Determination of Good Faith Settlement
Pursuant to California Code of Civil Procedure, which would bar any
other joint tortfeasor or co-obligor from any further claims against
GTD arising out of the transaction. The entry of that March 6 Order
finalized the settlement of the action, and on March 8, 2006 GTD
submitted the settlement payment, thus completing its obligations
under the settlement.
Jeffrey H. Mims, Chapter 7 Trustee v. Allstates WorldCargo, Inc.
As previously reported, the Company was a defendant in an
Adversary Proceeding in the bankruptcy case of Mosaic Group US., Inc.,
pending in the United States Bankruptcy Court for the Northern
District of Texas, Bankruptcy Case No. 02-81440. The lawsuit sought to
recover an alleged preferential transfer under 11 U.S.C. Sec. 547 in
the sum of approximately $191,000, and a post-petition transfer under
11 U.S.C. Sec 549, in the sum of approximately $18,000.
In April 2006, the case was settled, with the Company agreeing to
pay the total sum of $45,000 in settlement of all claims. The
Bankruptcy Court approved that settlement by Order dated May 18, 2006.
The Company made the agreed-upon payment, and the case has been
concluded.
Masterbrush, LLC and B&G Plastics, Inc. v. Allstates Logistics, Inc.
and T.H. Weiss, Inc.
As previously reported, on or about December 5, 2005,
Masterbrush, LLC ("Masterbrush") and B&G Plastics, Inc. ("B&G")
commenced an action against the Company's wholly-owned subsidiary
Allstates Logistics, Inc. ("ALI") and T.H. Weiss, Inc. ("Weiss"),
alleging various causes of action arising out of the importation by
Masterbrush of a quantity of natural bristle paintbrushes produced in
China (the "Brushes").
The Complaint alleged that plaintiffs retained ALI to expedite
the importation of the Brushes into the United States, that ALI
wrongfully failed to advise plaintiffs that the Brushes were subject
to federal antidumping duties of 351.92 percent (the "Antidumping
Duty") in addition to the 4 percent normal duty, and that by reason of
ALI's (alleged) failure to so advise plaintiffs, plaintiffs were
required by U.S. Customs to pay the Antidumping Duty, in the amount of
$422,282. The plaintiffs seek to recover compensatory and
consequential damages.
The case settled in November 2006. Pursuant to the settlement,
the case was dismissed against the Company, without any admission of
liability on the Company's part. The Company was not, and will not
be, required to pay any money to the plaintiffs or any other party."
Autosplice, Inc. v. Allstates WorldCargo, Inc.
On or about November 30, 2006, a complaint was filed against the
Company in the Superior Court of California, County of San Diego,
Docket No. GIC876245. In that case, the plaintiff alleges breach of
contract and tortious behavior in connection with a shipment of
equipment handled by the Company. The plaintiff alleges that it was
damaged in the amount of $139,379, which it seeks to recover. The
plaintiff has reserved the right to seek punitive damages in the
amount of $400,000.
The action is only recently commenced, and has not progressed
past the service of the Summons and Complaint. The Company intends to
contest the matter, and has turned the matter over to its insurance
carrier, which has confirmed acceptance for defense and/or settlement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 2, 2006, the Company received a Written Consent in Lieu
of a Special Meeting of the Stockholders of Allstates WorldCargo,
Inc., resolving that the By-Laws of the Company were to be amended.
The action taken by the stockholders was described in detail in the
Form 8-K filed by the Company on August 4, 2006, which Form 8-K is
incorporated herein by reference.
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has not yet been publicly traded. The
Company anticipates that its common stock will be listed for quotation
on the NASD OTC Bulletin Board in the near future.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, selected consolidated financial data
for the Company for the five years ended September 30, 2006. The
selected consolidated financial data for the five years are derived
from the Company's audited consolidated financial statements. The
consolidated financial data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and
related Notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained herein.
YEAR ENDED SEPTEMBER 30,
(in thousands, except per share data)
2002 2003 2004 2005 2006
STATEMENT OF OPERATIONS DATA
Revenues $36,403 $46,293 $54,705 $68,842 $71,217
Income (loss) from operations 534 (326) 727 1,086 449
Net income (loss) 136 (582) 233 603 80
Basic net income (loss) per
common share $.00 ($.02) $.01 $.02 $.00
Diluted net income (loss) per
common share $.00 ($.02) $.01 $.02 $.00
Weighted average
Common shares outstanding
- basic 32,510 32,510 32,510 32,510 32,510
Weighted average
Common shares outstanding
- diluted 32,510 32,510 32,510 32,510 32,510
BALANCE SHEET DATA:
Working capital $1,534 $1,050 $1,081 $ 1,527 $1,369
Total assets 8,050 8,287 9,787 12,699 12,807
Liabilities - current 5,477 6,338 7,577 9,838 9,896
Liabilities - long term 2,453 2,412 2,440 2,487 2,457
Total stockholders' equity
(deficit) 120 (462) (229) 374 454
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The public may read and copy any materials we have filed with SEC
at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet site that contains reports, proxy
and information statements, and other information regarding issuers
that file electronically with the SEC. The address of the internet
site is http://www.sec.gov. The public can also contact Mr. Craig
Stratton at Allstates WorldCargo, Inc., 4 Lakeside Drive South, Forked
River, New Jersey, 08731, or through the internet web address
http://www.allstatesair.com.
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 total revenues:
Fiscal Year Ended September 30,
2006 2005 2004
--------------------------------
Revenues 100.0% 100.0% 100.0%
Cost of transportation 70.9 71.0 67.7
----- ----- -----
Gross profit 29.1 29.0 32.3
Operating expenses:
Personnel costs 9.7 9.8 11.9
License commissions and royalties 12.7 11.5 12.0
Other selling, general and
administrative expenses 6.1 6.1 7.1
----- ----- -----
Total operating expenses 28.5 27.4 31.0
Operating income 0.6 1.6 1.3
Interest expense, net (0.4) (0.4) (0.4)
Other income/(expense) 0.1 0.0 0.0
----- ----- -----
Net income before tax provision 0.3 1.2 0.9
Tax provision (0.2) (0.3) (0.5)
----- ----- -----
Net income 0.1% 0.9% 0.4%
REVENUES
Fiscal 2006 vs. fiscal 2005
The revenues of Allstates WorldCargo represent gross consolidated
sales less customer discounts. Sales increased for the fiscal year
ended September 30, 2006 by approximately $2.4 million, or 3.5%, to
71,217,000, over the previous fiscal year ended September 30, 2005,
reflecting an overall increase in volume of freight shipped.
Domestically-routed freight revenues increased by $1,337,000, or 2.4%,
to $56,179,000 over the previous fiscal year, and international
freight revenues increased by $1,038,000, or 7.4%, to $15,038,000 over
that earned in the prior fiscal year.
Domestic sales increased in fiscal 2006 compared to the prior
year despite the adverse affect of Allstates' termination of the
contractual relationship with our Chicago branch licensee during the
second quarter of the year. Although management determined that the
termination of the agreement was a necessary and prudent decision,
domestic revenue for that branch alone decreased from the previous
fiscal year by approximately $2,229,000. The growth in international
revenues primarily reflects an increase in air export business.
Fiscal 2005 vs. fiscal 2004
Sales for the fiscal year ended September 30, 2005 increased
$14.1 million, or 25.8%, to $68,842,000, over revenues earned during
the prior fiscal year ended September 30, 2004, reflecting a higher
volume of freight shipped. Revenues earned from domestic-routed
freight increased $10.5 million, or 23.8%, to $54,842,000, and
international freight revenues increased from the previous fiscal year
by $3.6 million, or 34.5%, to $14,000,000.
The increase in domestic sales, which accounted for 79.7% of
total revenues for fiscal 2005, primarily reflected incremental growth
in freight business at certain existing branches, including the full
year effect of sales generated from one branch location that was added
midway though the previous fiscal year. The growth in domestic
freight business was further augmented by the addition one new
customer during the fiscal year that accounted for 2.8% of sales
during the year. International sales showed positive growth in a
majority of our branch locations during fiscal 2005 as compared to
fiscal 2004.
NET REVENUES
Fiscal 2006 vs. fiscal 2005
Net revenues represents the revenues of the Company after
subtracting the cost of arranging transportation services to our
customers, which we refer to as cost of transportation. The cost of
transportation is composed primarily of amounts paid by the Company to
carriers and cartage agents for the transport of cargo. As a
percentage of revenues, the total cost of transportation was stable
for the fiscal year ended September 30, 2006 in comparison to the
fiscal year ended September 30, 2005, decreasing by 0.1%, to 70.9% of
sales. The cost of transportation percentage on international
shipments decreased by 1.4% primarily reflecting growth in higher
margin air export freight, while the cost percentage on domestic
shipments increased slightly by 0.2% of sales primarily due to the
continued growth in selected lower margin distribution business. In
absolute terms, cost of transportation increased by $1,636,000, or
3.3%, to $50,494,000 for the fiscal year ended September 30, 2006
compared to the prior fiscal year, reflecting the increase in sales.
Gross margins, which are stated as a percentage of net revenues to
gross sales, increased to 29.1% of sales for fiscal 2006. Net
revenues increased by $740,000, or 3.7%, to $20,723,000 in fiscal 2006
versus fiscal 2005.
Fiscal 2005 vs. fiscal 2004
As a percentage of revenues, cost of transportation increased by
3.2%, to 71.0%, for the fiscal year ended September 30, 2005 in
comparison to the fiscal year ended September 30, 2004. The higher
percentage of transportation costs to revenues primarily reflects
increases in fuel costs as they affect carrier rates, an increase in
deferred shipments versus priority, and the addition of and growth in
existing lower margin business that represents a significant portion
of the Company's revenue growth over the previous fiscal year. In
absolute terms, cost of transportation increased by $11.8 million, or
31.8%, to $48,859,000 for the fiscal year ended September 30, 2005
compared to the prior fiscal year, reflecting the increase in sales.
Gross margins, which are stated as a percentage of net revenues to
revenues, decreased to 29.0% of sales for fiscal 2005. Net revenues
increased by $2.3 million, or 13.3%, to $19,983,000 in fiscal 2005
versus fiscal 2004.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Fiscal 2006 vs. fiscal 2005
Selling, general and administrative expenses include personnel
costs, licensee commissions and other costs necessary to operate our
business. SG&A expenses increased as a percentage of revenues by
1.1%, to 28.5%, for the fiscal year ended September 30, 2006 when
compared to the prior fiscal year ended September 30, 2005. In
absolute terms, operating expenses increased by approximately
$1,376,000, or 7.3%, to $20,274,000. The increase in operating cost
expenditures can be primarily attributed to a combination of higher
licensee commission, personnel and facilities costs.
Allstates pays commissions to licensees and independent sales
agents as compensation for generating profits for the Company.
Licensee commissions and royalties pursuant to licensee agreements
increased by approximately $1,207,000 in fiscal 2006 over fiscal 2005.
The higher expense is primarily due to the change in status of our
Newark, NJ branch from a company-owned branch location to a licensee
operated station effective April 1, 2006. Licensee commissions
and royalties expensed to that station totaled approximately
$1,054,000 in fiscal 2006, based on the gross profits generated at
that location. On a comparative basis from fiscal 2005, the Company
eliminated approximately $830,000 of normal operating expenses at that
station, primarily in personnel and facilities related costs.
A net increase in gross profits at our other licensee locations
accounts for the balance of the increase in licensee commissions.
As a percentage of revenues, licensee commissions and royalties
increased by 1.2%, to 12.7% of sales, in fiscal 2006.
Personnel costs increased overall by approximately $157,000
during the fiscal year ended September 30, 2006, despite a savings in
personnel costs at our Newark station of approximately $551,000. The
increase primarily reflected higher salary and related expenses for
operations and corporate personnel. During the year, Allstates added
to headcount of operations personnel at other company stations, as
well as corporate personnel, necessary to sustain the growth in
business volume and support the Company's infrastructure. Corporate
salary expense was also higher due to the full year effect of new
employment agreements that were ratified during the third quarter of
fiscal 2005.
Rent expense increased approximately $85,000 over the previous
fiscal year, net of a comparative decrease in rent at the Newark
station of approximately $78,000. The increase was driven by new
warehouse leases at two of our company stations.
Expenses related to business travel and entertainment increased
by approximately $76,000 during the fiscal year ended September 30,
2006 in comparison to the same period of the prior year, primarily
reflecting the increased business volume.
Fees accrued on behalf of the Company's three Directors that were
appointed during the fourth quarter of fiscal 2005 amounted to $75,000
for the fiscal year. Those Directors were dismissed by majority vote
prior to the end of the 2006 fiscal year.
Bad debt expense increased for the fiscal year ended September
30, 2006 in comparison to the previous fiscal year by approximately
$108,000. This increase is due in part to a negotiated settlement
payment of $45,000 the Company made during the fiscal year for the
return of funds received from a customer who had filed for Chapter 11
bankruptcy status in 2005, as well as a $25,000 downward adjustment
made to the reserve account during the second quarter of fiscal 2005.
MIS fees increased by approximately $94,000 for the fiscal year
ended September 30, 2006 in comparison to the prior year period, which
is primarily a result of our using two computer systems during the
transition from our older system to the new system. Such costs
include fees for training, troubleshooting and system enhancement on
the new Air-Trak computer system, in addition to costs associated with
the maintenance of our current system.
Depreciation expense increased by approximately $73,000 in fiscal
2006 versus fiscal 2005 primarily due to Allstates purchase of the Air-
Trak related software and hardware.
Legal fees decreased by approximately $374,000 during the fiscal
year ended September 30, 2006 as compared to fiscal 2005. During
fiscal 2005, legal fees were driven to a higher level as a result of
Allstates defense and settlement effort related to an action commenced
by a majority shareholder against the Company.
Fiscal 2005 vs. fiscal 2004
As a percentage of revenues, SG&A expenses decreased by 3.6%, to
27.4%, for the fiscal year ended September 30, 2005 as compared to the
fiscal year ended September 30, 2004, reflecting the increase in
revenues in relation to fixed operating expenses. In absolute terms,
SG&A expenses increased by approximately $1,979,000, or 11.7%, to
$18,897,000 in fiscal 2005 in comparison to fiscal 2004, primarily
reflecting higher expense for licensee commissions and legal fees.
Licensee commissions and royalties pursuant to licensee
agreements increased by approximately $1,379,000 in fiscal 2005 over
fiscal 2004, primarily reflecting higher gross profits at our licensee
locations. As a percentage of revenues, licensee commissions and
royalties decreased by 0.5%, to 11.5% of sales, in fiscal 2005.
Legal fees increased during the fiscal year ended September 30,
2005 in comparison to the same period of the prior year by
approximately $564,000. The increased expense primarily reflects
Allstates defense and settlement effort related to an action commenced
by the majority shareholder against the Company during the fourth
quarter of fiscal 2004.
Personnel expenses increased for the fiscal year ended September
30, 2005 by approximately $202,000 over the fiscal year ended
September 30, 2004. This increase primarily reflects higher
operations personnel salaries necessary to sustain the growth in
business volume. In addition, corporate salary expense was higher,
primarily the result of new employment agreements that were ratified
during the third quarter of fiscal 2005, as well as the full year
effect of the addition of a Director of MIS during the third quarter
of fiscal 2004. Salesperson salaries decreased from the prior fiscal
year due to a reduction in sales headcount, but were offset by an
increase in sales commissions due to increased volume at company owned
stations.
Cargo insurance increased by approximately $94,000 in fiscal 2005
over the previous fiscal year as a reflection of the increased freight
volume. Accounting fees declined by approximately $91,000 in
comparison to the prior fiscal year, in which the Company had recorded
additional expense to catch up with under-accruals of previous year
audit fees. Telephone and communications expense decreased by
approximately $113,000 from the previous year, primarily reflecting
reduced rates for long distance and frame relay service.
OPERATING INCOME
Income from operations decreased by approximately ($637,000) for
the fiscal year ended September 30, 2006, to $449,000, versus the
fiscal year ended September 30, 2005, primarily reflecting the
increase in operating expenses. The operating margin decreased by
(1.0%) during fiscal year 2006, also reflecting the increase in
operating expenses as a percent of revenues.
Income from operations increased by approximately $359,000 for
the fiscal year ended September 30, 2005, to $1,086,000, versus the
fiscal year ended September 30, 2004, primarily reflecting the
increase in sales volume, offset by higher costs of transportation as
a percent of revenues. The operating margin increased by 0.3% during
fiscal year 2005.
NET INTEREST EXPENSE
Allstate's interest expense obligation consists primarily of the
note payable to the Estate of A.G. Hoffman, Jr. that the Company
assumed from Joseph M. Guido as provided in the terms of the August
24, 1999 reverse acquisition, as well as on borrowings against the
line of credit established with our bank. Interest on the note was
approximately $164,000 and $166,000 during fiscal 2006 and fiscal
2005, respectively.
Net interest expense increased by approximately $90,000 during
the fiscal year ended September 30, 2006, to $323,000 in comparison to
the prior year, reflecting the rise in interest rates during the year
applied to higher average outstanding borrowings. Net interest
expense during the fiscal year ended September 30, 2005 increased by
approximately $16,000 from the previous fiscal year, to $234,000,
reflecting a higher average borrowing rate applied to higher average
outstanding borrowings.
OTHER INCOME
Other income totaled approximately $94,000 in fiscal 2006,
primarily representing funds received during the year from the final
distribution settlement of the Q Logistics Chapter 11 filing that took
place in February 2001.
NET INCOME
Net income before taxes decreased by approximately ($656,000), to
$196,000 for the fiscal year ended September 30, 2006, compared to the
previous fiscal year then ended. The Company recorded a tax provision
of approximately $116,000 for fiscal 2006. Net income after taxes for
fiscal 2006 was approximately $80,000 versus net income of $603,000 in
the previous fiscal year.
Net income before taxes increased by approximately $331,000, to
$852,000 for the fiscal year ended September 30, 2005, compared to the
previous fiscal year then ended. The Company recorded a tax provision
of approximately $249,000 for fiscal 2005. Net income for fiscal 2005
was $603,000 versus net income of $233,000 in the previous fiscal
year.
Liquidity and Capital Resources
Net cash used for operating activities was approximately $355,000
for the fiscal year ended September 30, 2006 compared to net cash used
for operations of approximately $44,000 for the fiscal year ended
September 30, 2005. In fiscal 2006, cash was used primarily to
satisfy the Company's accounts payable obligations, resulting in a
decrease in accounts payable and accrued expenses of approximately
$687,000, as well as to finance the approximately $303,000 increase
in accounts receivable, offset by approximately $584,000 of income net
of non-cash charges. The increase in accounts receivable relates
primarily to the increase in revenue in fiscal 2006 over fiscal 2005.
The decrease in accounts payable primarily reflects an accelerated
cycle of payments.
Net cash used for operating activities was approximately $44,000
for the fiscal year ended September 30, 2005 compared to net cash
provided by operations of approximately $18,000 for the fiscal year
ended September 30, 2004. In fiscal 2005, cash was used to finance
the $2.8 million increase in accounts receivable, offset by the
related $1.7 million increase in accounts payable and accrued
expenses, and the $0.9 million of income net of non-cash charges of
the Company. The increase in accounts receivable relates primarily to
the increase in revenue. The increase in accounts payable is
primarily due to the increase in sales volume and our normal cycle of
payments.
At September 30, 2006, the Company had cash of $112,000 and net
working capital of $1,369,000, compared with cash of $180,000 and net
working capital of $1,527,000 respectively, at September 30, 2005. The
decrease in working capital at September 30, 2006 compared to
September 30, 2005 is primarily attributable to capital expenditures
made during the year, offset by the Company's net income as well as
the collection of loan proceeds.
The Company's investing activities are primarily comprised of
expenditures for capital equipment, for the most part representing
purchases of computer hardware and software. During the fourth
quarter of fiscal 2005, Allstates initiated the purchase and
implementation of a new computer system. During the fiscal year ended
September 30, 2006, the Company made approximately $356,000 in
purchases toward the new system, of which approximately $120,000 is
financed by a three year leasing arrangement. In addition, during
the third and fourth quarters of fiscal 2006, Allstates paid a sum of
approximately $147,000 to the Newark, NJ licensee as a start-up fee.
Allstates has capitalized this expenditure as a leasehold improvement
and will depreciate it over a fifteen year period. In total, capital
expenditures amounted to approximately $531,000 during the fiscal year
ended September 30, 2006. For the fiscal year ended September 30,
2005, capital expenditures totaled approximately $230,000. Proceeds
from the sale of fixed assets, primarily of company-owned automobiles,
amounted to approximately $49,000.
During March 2005, Allstates extended a $250,000 loan to a
licensee to finance their expansion effort. The loan is being paid
back with weekly payments over three years including interest, at the
same rate the Company pays on its line of credit with the bank. The
loan is secured by the personal guarantees of the licensee principals.
During fiscal 2006, Allstates collected $79,996 of principal on the
loan, and collected $41,573 during fiscal 2005.
The Company has a commercial line of credit with a bank, which
became effective on March 30, 2006, pursuant to which the Company
may borrow up to $3,000,000, based on a maximum of 70% of eligible
accounts receivable. Per the agreement, which expires February 28, 2007,
interest on outstanding borrowings accrues at the banks prime rate of
interest (8.25% at September 30, 2006). Allstates previously had a
$2,000,000 line of credit with a different bank, which was originally
scheduled to expire on January 31, 2007. However, that line of credit
was paid off and terminated concurrent with the opening of the line
of credit with the new bank. Outstanding borrowings on the
lines of credit at September 30, 2006 and 2005 were $2,300,000 and
$1,600,000, respectively.
The Company's current and anticipated use of cash is and will
continue to be to fund working capital and capital expenditures.
Allstates believes that cash flows from collections of accounts
receivable and the line of credit with its bank will be sufficient to
fund the Company's working capital and cash requirements for at least
the next 12 months. We will pursue increased borrowing availability
from lending institutions to meet our long-term cash requirements, and
believe that the Company has a sufficient borrowing base to accomplish
that.
The following table summarizes our significant contractual obligations
as of September 30, 2006
Contractual Obligations (dollars in thousands)
Payments Due by Fiscal Year
Total 2007 2008 2009 Thereafter
Long-term Debt (1) 2,337 25 25 25 2,262
Interest on long-term debt (1) 7,644 163 161 159 7,161
Line of Credit (2) 102 102
Capital Lease Obligations (3) 154 82 72
Operating Leases (4) 1,315 574 582 159
Total 11,552 946 840 343 9,423
(1) Long term debt represents a note payable from Joseph M. Guido to
the Estate of A.G. Hoffman Jr, assumed by the Company, in the
aggregate total of $2,511,730, with repayment over 101 years at annual
principal payments of $25,000 plus interest at 7% per year. Allstates
assumed this obligation as part of the consideration paid to Mr. Guido
in the August 24, 1999 reverse acquisition in which Allstates (then
known as Audiogenesis Sytems, Inc.) acquired from Mr. Guido 100
percent of the stock of Allstates Air Cargo, Inc ("AAC"). The debt
owed by Mr. Guido to the Hoffman estate arose from the buy/sell
agreement between Mr. Guido and his former partner in AAC, A.G.
Hoffman, and represents the amount that Mr. Guido was required to pay
the Hoffman estate upon Mr. Hoffman's death for Mr. Hoffman's share in
AAC.
(2) Assumes 8.25% interest on $3,000,000 borrowing against revolving
line of credit facility, expiring February 28, 2007.
(3) Capital lease obligation represents principal and interest on
purchase of Air-Trak computer system. Value of financed equipment is
approximately $211,000. Lease interest ranges from 11.37% to 12.96%.
(4) Operating leases primarily relates to the lease of space used for
our operations in Forked River, NJ, Pittsburgh, PA, Jacksonville, FL,
Miami, FL, and St. Louis, MO.
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; the
effect of litigation; future costs of transportation; future operating
expenses; future margins; any seasonality of the Company's business;
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
As of September 30, 2006 and 2005 and for the Years
Ended September 30, 2006, 2005 and 2004
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
As of September 30, 2006 and 2005 and for the Years
Ended September 30, 2006, 2005 and 2004
CONTENTS
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2 -3
Consolidated Statements of Net Income 4
Consolidated Statements of
Stockholders' Equity (Deficit) 5
Consolidated Statements of Cash Flows 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7- 17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Allstates WorldCargo, Inc. and Subsidiaries
Lacey, New Jersey
We have audited the accompanying consolidated balance sheets
of Allstates WorldCargo, Inc. and Subsidiaries (a
corporation), as of September 30, 2006 and 2005, and the
related consolidated statements of net income, stockholders'
equity (deficit), and cash flows for the three years ended
September 30, 2006, 2005 and 2004. These consolidated
financial statements (see Note 2) are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based
on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Allstates WorldCargo,
Inc. and Subsidiaries, as of September 30, 2006 and 2005,
and the results of their operations and cash flows for the
three years ended September 30, 2006, 2005 and 2004 in
conformity with accounting principles generally accepted in
the United States of America.
Toms River, New Jersey
December 13, 2006
1
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2006 and 2005
ASSETS 2006 2005
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents $ 111,630 $ 180,317
Accounts Receivable, net of allowance for doubtful accounts 10,707,363 10,681,589
Inventories 18,421 29,641
Prepaid Expenses and Other Assets 129,335 127,550
Prepaid Income Taxes 52,297 80,415
Loans Receivable - Licensee - Current Portion 86,190 80,385
Deferred Tax Asset - Current Portion 159,859 184,982
----------- -----------
Total Current Assets 11,265,095 11,364,879
PROPERTY AND EQUIPMENT, net of accumulated depreciation 892,274 599,042
----------- -----------
INTANGIBLE AND OTHER ASSETS
Deposits 46,511 33,227
Loans Receivable - Licensee 42,241 128,042
Other Receivables 25,346 38,504
Goodwill, including related acquisition costs,
net of accumulated amortization 535,108 535,108
----------- -----------
Total Intangible and Other Assets 649,206 734,881
----------- -----------
Total Assets $12,806,575 $12,698,802
=========== ===========
See Accompanying Notes and Report of Independent
Registered Public Accounting Firm
2
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2006 and 2005
LIABILITIES AND STOCKHOLDERS' EQUITY 2006 2005
----------- -----------
CURRENT LIABILITIES
Accounts Payable $ 5,810,199 $ 6,420,955
Accrued Expenses 1,690,800 1,767,391
Short-Term Borrowings Under Line of Credit 2,300,000 1,599,500
Current Portion of Obligations Under Capital Leases 69,624 24,888
Current Portion of Long-Term Debt 25,000 25,000
----------- -----------
Total Current Liabilities 9,895,623 9,837,734
LONG-TERM LIABILITIES
Deferred Tax Liability - Non-Current Portion 77,869 102,368
Obligations Under Capital Leases, less current portion 67,677 48,285
Long-Term Debt, less current portion 2,311,730 2,336,730
----------- -----------
Total Long-Term Liabilities 2,457,276 2,487,383
----------- -----------
Total Liabilities 12,352,899 12,325,117
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value, 50,000,000 shares
Authorized, 32,509,872 Shares Issued and Outstanding 3,251 3,251
Retained Earnings 450,425 370,434
----------- -----------
Total Stockholders' Equity 453,676 373,685
Total Liabilities and Stockholders' Equity $12,806,575 $12,698,802
=========== ===========
See Accompanying Notes and Report of Independent
Registered Public Accounting Firm
3
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
For the Years Ended September 30, 2006, 2005 and 2004
2006 2005 2004
---------- ---------- ----------
REVENUES $71,217,029 $68,841,843 $54,705,311
COST OF TRANSPORTATION 50,494,182 48,858,589 37,060,406
---------- ---------- ----------
NET REVENUES 20,722,847 19,983,254 17,644,905
OPERATING EXPENSES
Personnel Costs 6,896,263 6,739,203 6,536,983
Licensee Commissions and Royalties 9,125,963 7,918,505 6,539,285
Independent Sales Agent Commissions 108,766 201,498 247,398
Selling, General and Administrative Expenses 4,143,080 4,037,984 3,594,389
---------- ---------- ----------
Total Operating Expenses 20,274,072 18,897,190 16,918,055
---------- ---------- ----------
Income from Operations 448,775 1,086,064 726,850
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest Income 12,571 7,694 -
Interest Expense (336,060) (241,526) (217,367)
Gain (Loss) on Sale of Equipment (15,360) - 3,071
Loss on Foreign Exchange ( 7,672) - -
Other Income 93,606 - 9,093
---------- ---------- ----------
Total Other Income (Expense) (252,915) (233,832) (205,203)
---------- ---------- ----------
Income Before Provision for Income Tax Expense 195,860 852,232 521,647
Provision for Income Tax Expense 115,869 249,007 288,749
---------- ---------- ----------
Net Income Applicable to Common Shareholders' $ 79,991 $ 603,225 $ 232,898
========== ========== ==========
Weighted Average Common Shares - Basic 32,509,872 32,509,872 32,509,872
Net Income per Common Share - Basic $ 0.00 $ 0.02 $ 0.01
Weighted Average Common Shares - Diluted 32,509,872 32,509,872 32,509,872
Net Income per Common Share - Diluted $ 0.00 $ 0.02 $ 0.01
See Accompanying Notes and Report of Independent
Registered Public Accounting Firm
4
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30, 2006, 2005 and 2004
Common Stock
Retained Total
Number of Earnings Stockholders'
Shares Par Value (Deficit) Equity (Deficit)
--------- --------- ---------- ----------------
Balance at
September 30, 2003 32,509,872 $3,251 $(465,689) $( 462,438)
Consolidated net income
for the fiscal year
ended September 30, 2004 232,898 232,898
---------- --------- ---------- -------------
Balance at
September 30, 2004 32,509,872 $3,251 $(232,791) $( 229,540)
Consolidated net income
for the fiscal year
ended September 30, 2005 603,225 603,225
---------- --------- ---------- -------------
Balance at
September 30, 2005 32,509,872 $3,251 $ 370,434 $ 373,685
Consolidated net income
for the fiscal year
ended September 30, 2006 - - 79,991 79,991
---------- --------- ---------- -------------
Balance at
September 30, 2006 32,509,872 $3,251 $ 450,425 $ 453,676
========== ========= =========== =============
See Accompanying Notes and Report of Independent
Registered Public Accounting Firm
5
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2006, 2005 and 2004
2006 2005 2004
------------ ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income Applicable to Common Shareholders $ 79,991 $ 603,225 $ 232,898
Adjustments to reconcile net income
to net cash provided from
(used by) operating activities:
Depreciation and Amortization 211,847 138,968 167,202
Provision for Bad Debts 277,282 169,347 187,999
Loss (Gain) on Sale of Equipment 15,360 - (3,071)
(Increase) Decrease in:
Accounts Receivable (303,055) (2,777,545) (2,035,182)
Inventories 11,220 386 ( 1,383)
Prepaid Expenses and Other Assets 11,376 (24,121) (15,386)
Prepaid Income Taxes 28,117 (80,415) -
Deferred Tax Asset - Current Portion 25,123 166,018 139,000
Increase (Decrease) in:
Accounts Payable (610,756) 1,146,956 937,377
Accrued Expenses (76,591) 589,013 355,348
Deferred Tax Liability - Non-Current Portion (24,499) 24,368 53,000
------------ ------------- --------------
Net Cash Provided from (Used by)
Operating Activities (354,585) (43,800) 17,802
------------ ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (530,940) (230,137) (395,292)
Proceeds from Sale of Equipment 10,500 - 48,850
Loans to Licensee - (250,000) -
Payments from Licensee Loans 79,996 41,573 -
Deposits (13,285) 144 5,200
------------ ------------- --------------
Net Cash Used by Investing Activities (453,729) (438,420) (341,242)
------------ ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
New Borrowings:
Short-Term 1,411,860 1,400,000 200,000
Long-Term 120,067 73,174 -
Debt Reduction:
Short-Term (711,360) (900,000) (250,000)
Long-Term (80,940) (25,000) (28,836)
------------ ------------- --------------
Net Cash Provided from (Used by)
Financing Activities 739,627 548,174 (78,836)
------------ ------------- --------------
Net Increase (Decrease) in Cash
and Cash Equivalents (68,687) 65,954 (402,276)
Cash and Cash Equivalents, Beginning of Year 180,317 114,363 516,639
------------ ------------- --------------
Cash and Cash Equivalents, End of Year $ 111,630 $ 180,317 $ 114,363
============ ============= ==============
See Accompanying Notes and Report of Independent
Registered Public Accounting Firm
6
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2006 and 2005
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Nature of Operations
On August 24, 1999, Audiogenesis Systems, Inc.
(Audiogenesis) acquired 100 percent of the common stock of
Allstates Air Cargo, Inc. (Air Cargo) in a reverse
acquisition. As a result of the transaction, Air Cargo
became a wholly-owned subsidiary of Audiogenesis, and the
former sole shareholder of Air Cargo became a 56.91%
shareholder of Audiogenesis. On November 4, 1999,
Audiogenesis filed a Certificate of Amendment to its
Certificate of Incorporation, changing its name to Allstates
WorldCargo, Inc. (WorldCargo). Management has elected to
utilize the new name (Allstates WorldCargo, Inc. and
Subsidiaries) for purposes of these consolidated financial
statements. The entities that are included in these
consolidated financial statements are as follows:
Allstates WorldCargo, Inc. (formerly Audiogenesis
Systems, Inc.) - WorldCargo was incorporated in the
State of New Jersey on January 14, 1997 (under the name
Audiogenesis Systems, Inc.) pursuant to a corporate
reorganization of Genesis Safety Systems, Inc.
(Genesis). On January 14, 1997, the Company's
operations included sales and distribution of safety
equipment, development of audio-visual products,
including safety training programs and sales and
marketing presentations, development of a device to
treat tinnitus, and development of an echolocation
device to assist sighted persons in conditions of low
visibility and the blind. The Company ceased all efforts
concerning the the tinnitus device. The Company has
ceased all efforts concerning the echolocation device,
and has terminated its license for the intellectual
property underlying the device.
Biowaste Technologies Systems, Inc. - Biowaste
Technologies Systems, Inc. is a wholly owned subsidiary
of WorldCargo. Biowaste was formed on July 1, 1988 for
the purpose of engaging in the business of the
management of infectious waste. Biowaste is in the
developmental stage, and no revenues have been produced
to date. Presently, such subsidiary is inactive, and
the Company does not anticipate that it will become
active in the near future.
Allstates Air Cargo, Inc. - Allstates Air Cargo, Inc.
was incorporated in the state of New Jersey on October
3, 1962. The Company provides domestic and
international airfreight forwarding services.
Allstates maintains operating facilities throughout the
United States and has agents in Europe and South
America.
Allstates Allcargo (US), Inc. - Allstates Allcargo
(US), Inc. is a wholly owned subsidiary of Allstates
Air Cargo, Inc. Allstates Allcargo (US), Inc. owned
100% of Allstates Allcargo (UK), Ltd., a corporation
organized under the laws of England prior to the
dissolution of Allstates Allcargo (UK), Ltd. during the
year ended September 30, 2000. All appropriate foreign
currency translation adjustments have been made for
purposes of these financial statements. During the
fiscal year ended September 30, 2005, management
unanimously determined that the stock of Allstates
Allcargo (US), Inc. is worthless and no future business
activities will be conducted through this entity.
Consequently, Allstates Allcargo (US), Inc. was
statutorily merged into Allstates Air Cargo, Inc.
during the year ended September 30, 2006.
Allstates Logistics, Inc. - Allstates Logistics, Inc.
is also a wholly owned subsidiary of Allstates Air
Cargo, Inc. Allstates Logistics was incorporated in
the State of New Jersey in December 1997, and provides
ocean freight services to its customers.
7
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS (Continued)
GTD Logistics, Inc. - GTD Logistics, Inc. was
incorporated in the State of New Jersey on October 27,
1998. GTD Logistics is a wholly owned subsidiary of
Allstates Air Cargo, Inc. GTD Logistics is also in the
business of freight forwarding.
e-tail Logistics, Inc. - e-tail Logistics, Inc. was
incorporated in the State of New Jersey on February 11,
2000. e-tail Logistics is a majority owned subsidiary
of WorldCargo.
Reverse Acquisition
For purposes of these consolidated financial statements, the
purchase of Allstates Air Cargo, Inc. by Allstates
WorldCargo, Inc. is treated as a reverse acquisition under
the purchase method of accounting, as outlined in Accounting
Principles Board Opinion No. 16. For accounting purposes,
Allstates Air Cargo, Inc. is considered the acquirer in the
reverse acquisition.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
For purposes of the accompanying consolidated financial
statements, Allstates Air Cargo, Inc. is considered the
accounting "Parent" company and Allstates WorldCargo, Inc.
is considered a subsidiary. Therefore, these consolidated
financial statements include the combined assets and
liabilities of Allstates Air Cargo, Inc. and its
subsidiaries as of September 30, 2006 and 2005. The
consolidated statements of net income include the income and
expenses of Allstates Air Cargo, Inc. and its subsidiaries
for the years ended September 30, 2006, 2005 and 2004. All
material intercompany payables, receivables, revenues and
expenses have been eliminated for purposes of this
consolidation.
Basis of Accounting
The Company prepares its consolidated financial statements
on the accrual method of accounting, recognizing income when
earned and expenses when incurred.
Use of Estimates
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows,
the Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents.
Fair Value of Consolidated Financial Statements
Current Assets and Liabilities
The carrying values of cash, accounts receivable,
accounts payable, accrued expenses, taxes payable,
notes payable and other current liabilities
approximates fair value because of the relatively short
maturity of these instruments.
8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Fair Value of Consolidated Financial Statements (Continued)
Non-Current Assets and Liabilities
Loan Receivable - Licensee and Other Receivables
The fair value of the Loan Receivable - Licensee and
Other Receivables is estimated by discounting the
future cash flows using the current rates at which
similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
The estimated fair value of the Loan Receivable
approximates its book value.
Deposits
The fair value of deposits is the amount payable on
demand at the reporting date.
Long-Term Debt
Rates currently available to financial institutions for
debt with similar terms and remaining maturities are
used to estimate fair value of existing debt. The
estimated fair value of the long-term debt approximates
book value.
Inventory
For both financial reporting and income tax purposes,
inventory is stated on the cost basis. Cost is determined
using the first-in, first-out method.
Property and Equipment and Depreciation
Property and equipment are recorded at cost and depreciated
using the straight-line method for financial reporting
purposes. Depreciation expense for the years ended
September 30, 2006, 2005 and 2004 is $211,847, $138,968 and
167,202, respectively. Repair and maintenance expenditures
which do not extend the useful lives of the related assets
are expensed as incurred. Gains or losses on the disposal
of equipment are reflected in the statements of income.
Income Taxes
The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to
reverse.
Advertising
The Company expenses advertising costs as they are incurred.
Advertising expenses for the years ended September 30, 2006,
2005 and 2004 were $29,930, $32,993 and $41,217,
respectively.
9
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
Revenues and the associated freight transportation costs are
recognized at the time the freight departs the terminal of
origin for domestic shipments. International air revenues
and freight consolidation costs are recognized when
shipments are tendered to a carrier for transport to a
foreign destination. This method is permissible under
Emerging Issues Task Force Issue No. 91-9, "Revenue and
Expense Recognition for Freight Services in Progress".
Ocean freight consolidation revenues are recognized when the
shipment reaches its destination.
Trade Receivables
Accounts receivable are uncollateralized customer
obligations due under normal trade terms generally requiring
payment within 30 days from the invoice date. Follow-up
correspondence is made if unpaid accounts receivable go
beyond 30 days.
Payments of accounts receivable are allocated to the
specific invoices identified on the customers remittance
advice or, if unspecified, are applied to the earliest
unpaid invoices.
Trade accounts receivable are stated at the amount
management expects to collect from outstanding balances.
The carrying amounts of accounts receivable are reduced by a
valuation allowance that reflects management's best estimate
of the amounts that will not be collected. Management
individually reviews all accounts receivable balances that
exceed the due date by several days and based on an
assessment of current creditworthiness, estimates the
portion, if any, of the balance that will not be collected.
Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation
allowance based on its assessment of the current status of
individual accounts. Balances that are still outstanding
after management has used reasonable collection efforts are
written off through a charge to the valuation allowance and
a credit to trade accounts receivable. Changes in the
valuation allowance have not been material to the financial
statements. The valuation allowance for accounts receivable
at September 30, 2006 and 2005 was $314,731 and $263,202,
respectively.
Earnings per Share
The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS No. 128) which
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. EPS
is calculated by dividing net income by the weighted-average
number of outstanding shares of Common Stock for each year.
Bad Debts
The Company uses the allowance method to account for
uncollectible accounts receivable. The allowance for
doubtful accounts is based on prior years' experience and is
estimated by management. Bad debt recoveries are charged
against the allowance account as realized. Bad debt expense
for the years ended September 30, 2006, 2005 and 2004 was
$277,282, $169,347 and $187,999, respectively.
10
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are summarized by major
classifications as follows:
2006 2005
Leasehold Improvement $462,989 $368,112
Vehicles 13,374 56,525
Equipment and Software 1,429,333 1,126,053
Furniture and Fixtures 53,124 47,542
--------- ----------
1,958,820 1,598,232
Less: Accumulated Depreciation 1,066,546 999,190
--------- ----------
$892,274 $599,042
========= ==========
Computer equipment with a cost of $210,515 is held under a
capital leases.
NOTE 4 - LOANS AND OTHER RECEIVABLES
Loans Receivable - Licensee
In March 2005, the Company extended a $250,000 loan to a
licensee. The purpose of the loan was to expand the
operations of the licensee, with the intended impact of
increasing the revenue and profits of the Company. In the
past, Allstates has occasionally provided prepaid advances
against earned commissions of some of its licensees to help
with their short term needs. Such advances, which are
considerably smaller in amount, are deducted from their
weekly commission payment and are fully recouped within
three to six months. However, because of the larger dollar
amount involved and the payoff period of three years, the
Company required that the licensee's principals execute a
promissory note as well as their personal guarantees. The
terms of the Note include the payment of the $250,000 loan,
with payments due weekly, which commenced on March 21, 2005
and will continue for a three year period with successive
payments each Monday thereafter, together with interest at
the rate charged to Allstates for its bank line of credit.
In the event the interest rate paid by Allstates on its line
of credit is increased or decreased, the interest rate upon
the Note shall increase or decrease by an equal amount and
be effective on the first Monday following the date of
change. Such loan payments due from the licensee are
deducted from the amounts due from Allstates to the licensee
for earned commissions. Because that licensee consistently
generates sufficient commission monies each week to cover
the payments, as well as the personal guarantees of the
principals, the collectibility of the loan receivable at the
balance sheet date is assured. Therefore, management does
not deem an allowance against the loan receivable to be
necessary.
Other Receivables
On May 6, 2004, Allstates filed a complaint in Superior
Court against a third party freight brokerage company and
its principal owner for accounts receivable monies due them.
On May 27, 2004, a Stipulation of Settlement was executed
whereby the parties agreed on a settlement in which the
defendants, jointly and severally, agreed to pay Allstates
the full sum of $71,763 in sixty equal monthly installments
of $1,196 each. The payment schedule is interest-free,
provided checks are received in a timely manner. The
schedule called for the first payment to become due on July
15, 2004, with subsequent payments to be due on the
fifteenth day of the remaining months. All scheduled
payments have been received in a timely basis thus far.
11
NOTE 5 - AMORTIZATION OF GOODWILL AND ACQUISITION COSTS
Commencing with the fiscal year beginning October 1, 2001,
the Company implemented Statement of Financial Accounting
Standards Statement No. 142, "Accounting for Goodwill and
Intangible Assets", which no longer allows for the
amortization of goodwill. The new statement requires the
Company to conduct an annual goodwill impairment test and
write off any decrease in the fair value of the goodwill in
the period of such declined value. Pursuant to the Company's
impairment tests conducted for the years ended September 30,
2006, 2005 and 2004, no write-off of the carrying value is
deemed necessary.
Effective January 1, 2003, the Company ceased amortizing the
costs associated with the acquisition of Audiogenesis by
Allstates and will include such costs in its annual goodwill
impairment test as discussed above. There is no amortization
expense for the years ended September 30, 2006, 2005 and
2004.
NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES
2006 2005
Lease payable to VAResources, Inc.,
due in monthly installments of $2,662
including interest at 11.37%,
due June 2008, secured by computer equipment. $48,285 $73,173
Lease payable to US Express Leasing,
due in monthly installments of $1,742
including interest at 11.85%,
due September 2008,
secured by computer equipment. 39,986 -
Lease payable to GE Capital,
due in monthly installments of $2,180
including interest at 12.96%,
due in September 2008,
secured by computer equipment. 49,030 -
--------- ----------
137,301 73,173
Less: Current Portion 69,624 24,888
--------- ----------
$67,677 $48,285
========= ==========
Future minimum payments under capital leases as of September
30, 2006 are as follows:
2007 $82,454
2008 71,809
--------
Total Minimum Lease Payments 154,263
Less: Amount Representing Interest 16,962
--------
$137,301
========
12
NOTE 7 - LONG-TERM DEBT
The Company's notes payable balance at September 30, 2006
and 2005 consist of the following:
2006 2005
Notes payable from Joseph M. Guido to the Estate of A.G.
Hoffman, Jr., assumed by the Company, in the aggregate
total of $2,511,730, with repayment over 101 years at
annual principal payments of $25,000 plus interest at 7%
per year. All or any of the notes may be paid at any time
before maturity without any prepayment penalty. In the
event of a default under the notes by the Company, Joseph
M. Guido remains personally liable for the notes, and the
the 101 shares of Allstates Air Cargo, Inc. common stock
held as security under the notes (representing 48.1% of the
issued and outstanding common stock of Allstates Air
Cargo, Inc.) may be sold at public or private sale. $2,311,730 $2,336,730
Less: Current Portion 25,000 25,000
---------- ----------
$2,286,730 $2,311,730
Future maturities for long-term debt as of September 30,
2006 is as follows:
2007 $25,000
2008 25,000
2009 25,000
2010 25,000
2011 25,000
Thereafter 2,186,730
---------
$2,311,730
=========
NOTE 8 - LINE OF CREDIT
Allstates Air Cargo, Inc. has a $3,000,000 line of credit
agreement with PNC Bank, which expires February 28, 2007.
Interest on the outstanding borrowings accrue at the prime
rate of interest per annum, which approximated 8 1/4% at
September 30, 2006. The interest rate is predicated upon
the Company maintaining their primary depository account
with the bank. If the Company fails to comply with this
agreement, the interest rate would be increased by 1% over
the prime rate of interest. The loan is collateralized by
all assets of the Company. The balance outstanding on the
line of credit as of September 30, 2006 and 2005 was
$2,300,000 and $0, respectively.
13
NOTE 8 - LINE OF CREDIT (Continued)
Allstates Air Cargo, Inc. had a $2,000,000 line of credit
agreement with Sun National Bank, which was originally
scheduled to expire on January 31, 2007, however the line of
credit was paid off and terminated effective March 31, 2006
concurrent with the opening of the line of credit agreement
with PNC Bank mentioned above. Interest on the outstanding
borrowings accrued at the Wall Street Journal's (WSJ) prime
rate of interest per annum. The interest rate was
predicated upon the Company maintaining a compensating
account balance in a non-interest bearing account equal to
at least $230,000. Loan collateral includes the Company's
accounts receivable and the unlimited, unconditional
guarantees of Joseph M. Guido, Teresa Guido and Allstates
Allcargo (US), Inc. If, at any time, the Company failed
to maintain the compensating balance, the interest rate
would increase by 1% over the WSJ's prime rate at the time
of failure. The balances outstanding on the line of credit
as of September 30, 2006 and 2005 was $0 and $1,599,500,
respectively.
NOTE 9 - PROVISION FOR INCOME TAXES
A reconciliation of income tax at the statutory rate to the
Company's effective rate is as follows:
2006 2005 2004
-------- -------- -------
Expected Federal statutory rate 39.000% 0.000%* 0.000%*
Expected State statutory rates (average) 6.975% 6.975% 8.893%
-------- -------- -------
Total expected statutory rate 45.975% 6.975% 8.893%
State Franchise Tax and Miscellaneous
Book to Tax Adjustments 12.866% -0.096% 9.654%
Deferred income tax expense (benefit):
Federal -7.805% 17.664% 29.138%
State 8.124% 4.676% 7.668%
-------- -------- -------
Income Tax Expense (Benefit) - Effective Tax Rate 59.160% 29.219% 55.353%
* Due to the net operating loss carryforwards available for the years ended
September 30, 2005 and 2004, the expected Federal statutory rate is
deemed to be 0%.
The Company's provision for income taxes for 2006 and 2005
consist of the following:
2006 2005 2004
------- ------- -------
Current:
Federal $61,000 $17,850 $(6,318)
State 54,245 40,768 103,067
Deferred:
Federal (15,287) 150,541 152,000
State 15,911 39,848 40,000
------- ------- -------
$115,869 $249,007 $288,749
======= ======= =======
14
NOTE 9 - PROVISION FOR INCOME TAXES (Continued)
The Company's total deferred tax asset (liability) and
deferred tax asset (liability) valuation allowances at
September 30, 2006 and 2005 are as follows:
2006 2005
Deferred Tax Asset - Current:
Bad Debt Allowance $135,335 $113,177
Deferred Payable - 15,050
Net Operating Losses 24,524 56,755
-------- --------
$159,859 $184,982
======== ========
Deferred Tax Liabilities - Noncurrent:
Depreciable and Amortizable Assets $77,869 $102,368
======== ========
As of September 30, 2005, the Company wrote off its
investment in Allstates Allcargo (US), Inc. for income tax
purposes. The income tax benefit of this transaction was
approximately $136,000 and was reflected in the September
30, 2005 tax accrual.
NOTE 10 - NET OPERATING LOSS CARRYFORWARD
Allstates WorldCargo, Inc. (formerly known as Audiogenesis
System, Inc.) generated net operating losses prior to its
acquisition of Allstates Air Cargo, Inc. As a result of the
reverse acquisition, the ownership structure of Worldcargo
changed as of August 24, 1999; thereby limiting and reducing
the future utilization of the Worldcargo net operating loss
carryforwards. These pre-reverse acquisition net operating
loss carryforwards will be limited and reduced based upon
the Federal and New Jersey change in ownership net operating
loss carryforward rules. Any net operating loss
carryforwards to future tax years after limitation and
reduction will generally be available to offset future
taxable income of WorldCargo only, and will not be available
to offset any future income of Allstates Air Cargo, Inc. or
any other affiliated corporation. The income tax provisions
do not include any of these pre-reverse acquisition net
operating losses.
Pursuant to a ruling received by the Internal Revenue
Service, effective October 1, 1999, the operating losses
incurred by Allstates Allcargo (UK), LTD. may be offset
against taxable income of Allstates WorldCargo, Inc. in the
consolidated filing of its Federal income tax returns. For
tax purposes only, Allstates Allcargo US Inc. will treat the
foreign subsidiary Allstates Allcargo (UK), LTD. as a
disregarded entity and not as a subsidiary. Therefore, the
tax provisions included in these consolidated financial
statements utilize the operating loss for the fiscal year
2001 incurred by Allstates Allcargo (UK), Ltd. in
calculating the Federal tax liability. There were no gains
or losses in fiscal year 2002 since the foreign entity,
Allstates Allcargo (UK), LTD., was dissolved.
15
NOTE 11 - PENSION PLAN
Effective May 1994, the Company adopted a discretionary non-
standardized 401(k) profit sharing plan. The terms of the
plan provide for eligible employees who have met certain age
and service requirements to participate by electing to
contribute up to the lesser of 100% of an employees'
qualified compensation or $15,000, $14,000 and $13,000 for
the calendar years ended 2006, 2005 and 2004, respectively.
The Company may make matching contributions equal to a
discretionary percentage, as determined by the Company, up
to 6% of a participant's salary. Contributions to the plan
for the years ended September 30, 2006, 2005 and 2004
totaled $41,242, $50,426 and $43,493, respectively. The
plan also allows employer discretionary contributions
allocated in accordance with participants' compensation.
The Company did not make any discretionary contributions to
the plan for the years ended September 30, 2006, 2005 and
2004.
NOTE 12 - RELATED PARTY TRANSACTIONS
Allstates Air Cargo, Inc. leases office space located in
Forked River, New Jersey from a majority stockholder of the
Company. Rent expense under this lease totaled $81,600 for
all three of the years ended September 30, 2006, 2005 and
2004.
The Company has entered into royalty agreements for selected
licensee locations with an officer and director of the
Company, whereby the Company agrees to pay the officer a
royalty equal to 5% of the gross profit per the contract.
Royalty payments to this individual for the years ended
September 30, 2006, 2005 and 2004 totaled $585,731, $566,281
and $454,607, respectively.
The Company entered into Employment Agreements with four of
the Company's stockholders. The Employment Agreements are
effective through December 31, 2009. The following is a
summary of the terms of these agreements:
Annual Stock
Position Salary Bonus Options
Chairman Emeritus $370,000 3% of fiscal year Yes
increase in net profits
President/Chief Executive Yes
Officer $250,000 3% of fiscal year
increase in net profits
Executive Vice President/ Yes
Chief Operating Officer $250,000 3% of fiscal year
increase in net profits
Chief Financial Officer $185,000 Discretionary Yes
NOTE 13 - STOCK OPTION PLAN
On October 16, 2000, the Company filed a Form S-8
registration statement with the Securities and Exchange
Commission, registering 4,500,000 shares of common stock
with a $.0001 par value. The shares are registered on
behalf of the Company, and will be issued pursuant to the
Company's "2000 Stock Option and Stock Issuance Plan". As
of September 30, 2006, no stock options have been issued.
16
NOTE 14 - DESCRIPTION OF LEASING ARRANGEMENTS
The Company leases certain terminal facilities and its
corporate headquarters under operating leases that expire
over the next three years. These operating leases provide
the Company with the option to renew its lease at the fair
rental value at the end of the lease term. Management
expects that leases will be renewed or replaced by other
leases in the normal course of business.
Future minimum lease payments under all leases with initial
or remaining noncancellable lease terms in excess of one
year are as follows as of September 30, 2006:
2007 $575,967
2008 465,549
2009 78,703
----------
$1,120,219
Rent expense under operating leases for the years ended
September 30, 2006, 2005 and 2004 were $636,443, $551,749
and $554,321, respectively.
NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash was expended for interest in the amounts of $418,947,
$242,403 and $217,367 in 2006, 2005 and 2004, respectively.
Cash was expended for income taxes in the amounts of
$87,127, $138,429 and $52,355, respectively
NOTE 16 - LITIGATION
The following lawsuits exist between the Company, its
Subsidiaries and other third parties:
Masterbrush, LLC and B&G Plastics, Inc. v. Allstates
Logistics, Inc., and T.H. Weiss, Inc.
On or about December 5, 2005, Masterbrush, LLC
("Masterbrush") and B&G Plastics, Inc. ("B&G")
commenced an action against the Company's wholly-owned
subsidiary Allstates Logistics, Inc. ("ALI") and T.H.
Weiss, Inc. ("Weiss"), alleging various causes of
action arising out of the importation by Masterbrush of
a quantity of natural bristle paint brushes produced in
China (the "Brushes").
The Complaint alleges that plaintiffs retained ALI to
expedite the importation of the Brushes into the United
States, that ALI wrongfully failed to advise plaintiffs
that the Brushes were subject to federal antidumping
duties of 351.92 percent (the "Antidumping Duty") in
addition to the 4 percent normal duty, and that by
reason of ALI's (alleged) failure to so advise
plaintiffs, plaintiffs were required by U.S. Customs to
pay the Antidumping Duty, in the amount of $422,281.
The plaintiffs seek to recover compensatory and
consequential damages.
In November 2006, the case was settled and the
Complaint was dismissed without any admission of
liability or payment of any money by the Company.
17
NOTE 16 - LITIGATION (Continued)
Liberty Mutual Insurance Company v. Lightning Freight
Inc., GTD Logistics, Inc. and Gilberto Cordova
GTD Logistics ("GTD") is being represented in a matter
involving claims by Liberty Mutual Insurance Company
("Liberty") regarding freight brokerage services that
GTD provided for a shipment that was stolen. The
tractor trailer hauling the shipment allegedly
contained several million dollars of hard disk drives.
After the truck and trailer were stolen, the owner of
the contents of the trailer made a claim against UPS
Supply Chain Solutions, the shipper, who then made a
claim against its insurance company, the plaintiff in
this case. Liberty is seeking to recover from GTD and
also the carrier and truck driver the amount that it
expended to cover the loss suffered by its insured, the
owner of the contents of the trailer. The Complaint
requests damages of not less than $1,400,000.
Liberty alleges that when GTD agreed to provide
brokerage services for the shipment of the cargo, GTD
also promised to select a motor carrier with no less
than $1 million in cargo insurance coverage, and to
select a carrier that would follow certain asset
protection rules. Plaintiff alleges breach of contract
and negligence against GTD for failure to comply with
these alleged promises. GTD and Lightning Freight,
Inc., the carrier, filed Cross-Complaints against each
other and Gilberto Cordova, the truck driver. Gilberto
Cordova never appeared in the matter and the Court
entered a default against him.
The parties reached a settlement of the action,
pursuant to which GTD paid the sum of ten thousand
dollars ($10,000) in full and complete settlement of
all claims. On March 6, 2006, the Court granted the
parties' Application for Determination of Good Faith
Settlement Pursuant to California Code of Civil
Procedure, which would bar any other joint tortfeasor
or co-obligor from any further claims against GTD
arising out of the transaction. The entry of that
March 6, 2006 Order finalized the settlement of the
action, and on March 8, 2006 GTD submitted the
settlement payment, thus completing its obligations
under the settlement.
Autosplice, Inc. v. Allstates Worldcargo, Inc.
On or about November 30, 2006, a complaint was filed
about the Company. In the case, the plaintiff alleges
breach of contract and tortuous behavior in connection
with a shipment of equipment handled by the Company.
The plaintiff alleges that it was damaged in the amount
of $139,379, which it seeks to recover. The plaintiff
has reserved the right to seek punitive damages in the
amount of $400,000.
The action has only recently commenced and has not
progressed past the service of the Summons and
Complaint. The Company intents to contest the matter,
and has turned the matter over to its insurance
carrier, which has confirmed acceptance for defense
and/or settlement. The Company's internal counsel has
not yet formed an opinion of the likelihood of a
favorable or unfavorable outcome, or the amount or
range of potential loss.
18
NOTE 17 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following table presents summarized quarterly results
for the fiscal year ended September 30, 2006:
Q1 Q2 Q3 Q4
(dollars in thousands)
Revenues $19,492 $16,903 $16,970 $17,852
Net Revenues (after
transportation costs) 5,183 4,810 5,106 5,624
Net Income (Loss)
After Taxes 123 (66) (77) 100
Basic Net Income per
Common Share $0.00 ($0.00) ($0.00) $0.00
Diluted Net Income per
Common Share $0.00 ($0.00) ($0.00) $0.00
The following table presents summarized quarterly results
for the fiscal year ended September 30, 2005:
Q1 Q2 Q3 Q4
(dollars in thousands)
Revenues $16,453 $15,387 $18,663 $18,340
Net Revenues (after
transportation costs) 4,731 4,867 5,330 5,056
Net Income After Taxes 65 122 165 252
Basic Net Income per
Common Share $0.00 $0.00 $0.01 $0.01
Diluted Net Income per
Common Share $0.00 $0.00 $0.01 $0.01
The following table presents summarized quarterly results
for the fiscal year ended September 30, 2004:
Q1 Q2 Q3 Q4
(dollars in thousands)
Revenues $13,458 $12,096 $14,566 $14,586
Net Revenues (after
transportation costs) 4,431 3,970 4,679 4,564
Net Income (Loss)
After Taxes 155 (76) 165 (11)
Basic Net Income per
Common Share $0.00 $(0.00) $0.01 $(0.00)
Diluted Net Income per
Common Share $0.00 $(0.00) $0.01 $(0.00)
19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
Joseph M. Guido 72 Chairman Emeritus, Director
Sam DiGiralomo 63 President, CEO,
Director
Barton C. Theile 60 Executive Vice
President, COO, Director
Craig Stratton 55 CFO, Secretary,
Treasurer, Director
None of the above persons is related to any other of the above-named
persons by blood or marriage.
Based upon a review of filings with the Securities and Exchange
Commission and written representations that no other reports were
required, the Company believes that all of the Company's directors
and executive officers complied during fiscal 2006 with the reporting
requirements of Section 16(a) of the Securities Exchange Acts of
1934.
JOSEPH M. GUIDO, Chairman Emeritus, and a director of the Company,
is the founder of Allstates Air Cargo, Inc., having served as its
President and CEO from 1961 to August 1999. Mr. Guido became
Chairman of the Board of the Company upon the acquisition of
Allstates Air Cargo, Inc. on August 24, 1999. Prior to forming
Allstates Air Cargo, Inc., Mr. Guido served as a freight supervisor
with American Airlines, and as a sales and station manager for
Air Cargo Consolidators.
SAM DIGIRALOMO, became President, CEO and a director of the Company
upon the acquisition of Allstates Air Cargo, Inc. on August 24, 1999.
Prior to such acquisition, Mr. DiGiralomo had served as the President,
Treasurer, CEO and a director of Audiogenesis Systems, Inc. since it
was formed in January, 1997. From July 1981 through January 1997, Mr.
DiGiralomo had been the President of the predecessor of Audiogenesis
Systems, Inc., Genesis Safety Systems, Inc. Mr. DiGiralomo has more
than 20 years of management and marketing experience. He has
lectured at various trade associations and universities, and designed
and authored several employee training programs.
BARTON C. THEILE, became Executive Vice President, COO and a director
of the Company upon the acquisition of Allstates Air Cargo, Inc. on
August 24, 1999. Prior to such acquisition, Mr. Theile had served
Allstates Air Cargo, Inc., as a sales representative, operations
manager, Executive Vice President and COO over a period of 19 years.
In addition to his experience at Allstates, Mr. Theile was President
of Cargo Logistics Group, LLC. Mr. Theile has been involved in sales,
marketing operations and administration in the transportation industry
for over 25 years.
CRAIG STRATTON, became CFO, Secretary, Treasurer and a director of the
Company upon the acquisition of Allstates Air Cargo, Inc. on August
24, 1999. Prior to such acquisition, Mr. Stratton served as Chief
Financial Officer for Allstates Air Cargo, Inc. since November 1997.
Before joining Allstates, for three years, Mr. Stratton held the
position of Corporate Controller for Programmer's Paradise, Inc. a
cataloger and distributor of technical software. From 1990 through
1994, he was Controller for Baronet Corporation, an importer and
distributor of leather goods accessories. From 1981 through 1990, he
was employed by the finance department of Contel IPC, a specialty
telephone systems manufacturer and service provider, where he held
various positions of increasing responsibility in corporate
accounting, including an appointment to Assistant Controller in 1987.
In 1973, Mr. Stratton received his B.S. in accounting, and in 1980 he
earned his MBA. Mr. Stratton has been a CPA since 1986.
Audit Committee and Code of Ethics
The Company does not presently have an audit committee, nor a Code of
Ethics for its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, because the Company is not a listed
company, and therefore is not required to do so.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
EXECUTIVE COMPENSATION
Summary Compensation Table
Annual Compensation Long term compensation
----------------------- --------------------------
Name and Year Salary Bonus Other Awards All
Principal ($) ($) Annual Restrict- Options/ LTIP Other
Position Compen- ed Stock SARs(#) Pay- Compensa-
sation ($) ($) outs($) tion ($)
- ---------- ---- ------- ----- --------- --------- --------- ------ --------
Joseph 2006 370,000 44,153 86,700(1)
M. 2005 339,233 44,153 88,200(2)
Guido, 2004 329,811 81,600(3)
Chairman
Emeritus
Sam 2006 250,000 44,153 585,731(4)
DiGiralomo 2005 228,677 44,153 566,281(4)
President, 2004 216,000 526,957(5)
Barton 2006 250,000 44,153 7,631(6)
Theile, 2005 227,674 44,153 23,023(7)
COO, 2004 213,948 23,013(8)
Exec. VP
Craig 2006 185,000 7,200(9)
Stratton, 2005 169,262 7,500(9)
CFO, 2004 148,077 7,800(9)
Secretary,
Treasurer
(1) Rental income from leasing of Forked River corporate office
($79,500), and car allowance for use of personal vehicle ($7,200)
(2) Rental income from leasing of Forked River corporate office
($81,600), and car allowance for use of personal vehicle ($6,600)
(3) Rental income from leasing of Forked River corporate office
(4) Royalties paid in connection with site licensing agreements
(5) Royalties paid in connection with site licensing agreements
($454,607), and reimbursement of income taxes due IRS in connection
with insurance settlement ($72,350).
(6) Car allowance for use of personal auto ($7,200) and commission
paid for management services to GTD Logistics, Inc. ($431)
(7) Car allowance for use of personal auto ($7,500) and commission
paid for management services to GTD Logistics, Inc. ($15,523)
(8) Car allowance for use of personal auto ($7,800) and commission
paid for management services to GTD Logistics, Inc. ($15,213)
(9) Car allowance for use of personal auto
On June 6, 2005, the Company entered into individual employment
agreements with each of the Executives. The employment agreements are
effective as of April 5, 2005, and expire on December 31, 2009, but
may be extended if agreed to in writing by the parties. The
following is a summary of the terms of these agreements:
Annual
Name/Position Salary Bonus
Joseph M. Guido, $370,000 3% of
Chairman increase in net profits from
Emeritus fiscal year end 2003
to fiscal year end 2004
Sam DiGiralomo, $250,000 3% of
President/Chief increase in net profits from
Executive Officer fiscal year end 2003
to fiscal year end 2004
Barton C. Theile, $250,000 3% of
Executive VP/ increase in net profits from
Chief Operating Officer fiscal year end 2003
to fiscal year end 2004
Craig D. Stratton, $185,000 At the discretion of
Chief Financial Officer the Board of Directors
Under the terms of their respective employment agreements, each
individual has agreed to work full time. The agreements also provide
for health and life insurance benefits, participation in the Company's
401(k) plan, disability benefits, expense reimbursements,
indemnification from civil or criminal actions arising out of the
Executive's employment, financial and tax advice, tax "gross-up"
provisions, severance pay, and payments in the event of a change of
control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the beneficial ownership of the
Common Stock of the Company as of December 28, 2006 by each person who
was known by the Company to beneficially own more than 5% of the
common stock, by each director and executive officer who owns shares
of common stock and by all directors and executive officers as a
group:
No. of Shares
Title Name and Address and Percent
of of Beneficial Owner Nature of of
Class Beneficial Class(1)
Ownership
Common Joseph M. Guido 19,010,000(2) 58.47%
4 Lakeside Drive South
Forked River, NJ 08731
Common Sam DiGiralomo 3,850,000 11.84%
7 Doig Road, Suite 3
Wayne, NJ 07470
Common Barton C. Theile 500,000 1.54%
4 Lakeside Drive South
Forked River, NJ 08731
Common Craig D. Stratton 200,000 0.61%
4 Lakeside Drive South
Forked River, NJ 08731
All Officers and Directors as a Group 23,560,000 72.46%
__________________
(1) Based upon 32,509,872 shares outstanding as of December 28,
2006.
(2) Comprised of 18,250,000 shares owned by Joseph Guido and 760,000
shares owned by Teresa Guido, wife of Joseph Guido.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leased real estate in one location from Joseph M.
Guido during Fiscal 2006. Rent expense under this lease totaled
$79,500 for the year ended September 30, 2006. The Company believes
that this lease is commensurate with the terms which could be obtained
from an unaffiliated third party.
Prior to his becoming President, CEO and a director of the
Company, the Company entered into royalty agreements for its Los
Angeles and Chicago licensee locations with Sam DiGiralomo, whereby
the Company agreed to pay Mr. DiGiralomo a royalty equal to 5% of the
gross profit per the contract. Similar royalty agreements have since
been executed and are active which encompass its Minneapolis, San
Francisco, Indianapolis, Philadelphia, Boston, Atlanta, Raleigh,
Nashville and Newark licensee locations. Royalty payments to Mr.
DiGiralomo for the year ended September 30, 2006 totaled $585,731.
Pursuant to the Stock Purchase Agreement and Plan of
Reorganization between Audiogenesis Systems, Inc. and Allstates Air
Cargo, Inc., the Company assumed 101 Notes payable from Joseph M.
Guido to the Estate of A.G. Hoffman, Jr., aggregating $2,511,730 in
principal, with repayment over 101 years at annual principal payments
of $25,000 plus interest at 7% per year. All or any of the notes may
be paid at any time before maturity without any prepayment penalty. In
the event of a default under the notes by the Company, Joseph M. Guido
remains personally liable for the notes and the 101 shares of
Allstates Air Cargo, Inc. common stock held as security under the
notes (representing 48.1% of the issued and outstanding common stock
of Allstates Air Cargo, Inc.) may be sold at public or private sale.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our independent auditing firm during the fiscal years ended
September 30, 2006 and September 30, 2005 was Cowan, Gunteski and Co.,
who have audited our financial statements since fiscal 1999. All
audit and permissible non-audit services provided by Cowan, Gunteski
and Co. are pre-approved by the Allstates Board of Directors, as the
Company is not required to have an audit committee at the present
time. The fees of Cowan, Gunteski and Co. billed to the Company for
each of the last two fiscal years for audit services and other
services are shown below:
Audit fees. Cowan, Gunteski and Co. billed us an aggregate of $75,555
and $80,167 during fiscal 2006 and 2005 for professional services
rendered for the audit of the Company's financial statements and the
review of the interim financial statements included in the Company's
quarterly reports.
Audit-related fees. During the fiscal years ended September 30, 2006
and 2005, Cowan, Gunteski and Co. did not provide or bill for any
audit-related services that were not covered under audit fees.
Tax fees. The aggregate fees billed during fiscal 2006 and 2005 for
tax services rendered by Cowan, Gunteski and Co. were $31,040 and
$24,723, respectively.
All other fees. The aggregate fees billed during fiscal 2006 and 2005
for all other services rendered by Cowan, Gunteski and Co. were
$10,196 and $0, respectively, for professional services rendered for
the audit of the Allstates WorldCargo 401(k) Savings Plan.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to Item 601
of Regulation S-K.
Exhibit Description
No.
3.01* Articles of Incorporation of Audiogenesis Systems,
Inc. dated January 14, 1997 filed as an exhibit to
Registrant's Registration Statement on Form 10-SB,
filed October 23, 1998
3.02+ By-laws of Registrant
10.01* Echlocation Technology License Agreements, filed as
an exhibit to Registrant's Registration Statement on
Form 10-SB, filed October 23, 1998
10.02* Agreement with Allstates Air Cargo, Inc. dated
9/18/98, filed as an exhibit to Registrant's
Registration Statement on Form 10-SB, filed October
23, 1998
10.03* Promissory Note to Marshall E. Levine Ph.D. Profit
Sharing Plan, filed as an exhibit to Registrant's
Registration Statement on Form 10-SB, filed October
23, 1998
10.04* Genesis Safety Systems, Inc. Stock Option Plan, filed
as an exhibit to Amendment No. 1 to Registrant's
Registration Statement on Form 10-SB, filed March 11,
1999
10.05* Stock Purchase Agreement and Plan of Reorganization
dated June 30, 1999, filed as an exhibit to
Registrant's Form 8-K filed July 12, 1999 (The
Company's SEC file number reference is Commission
File No. 000-24991)
10.06+ Employment Agreement with Joseph M. Guido,
10.07+ Employment Agreement with Sam DiGiralomo
10.08+ Employment Agreement with Barton C. Theile
10.09+ Employment Agreement with Craig D. Stratton
10.10* Certificate of Amendment to the Certificate of
Incorporation of Registrant changing the name of the
corporation from Audiogenesis Systems, Inc. to
Allstates WorldCargo, Inc., filed as an exhibit to
Registrant's Form 8-K filed December 1, 1999 (The
Company's SEC file number reference is Commission
File No. 000-24991)
21.01* List of Subsidiaries of Registrant, filed as an
exhibit to Registrant's Registration Statement on
Form 10-SB, filed October 1, 1999
31.1+ Certification of Registrant's Chief Executive
Officer, Sam DiGiralomo, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2+ Certification of Registrant's Chief Financial
Officer, Craig D. Stratton, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1+ Certification of Registrant's Chief Executive
Officer, Sam DiGiralomo, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2+ Certification of Registrant's Chief Financial
Officer, Craig D. Stratton, pursuant to Section 906of
the Sarbanes-Oxley Act of 2002.
* Filed previously, incorporated herein by reference
+ Filed herewith
(b) Reports on Form 8-K:
Form 8-K filed July 6, 2006 Item 8.01, Other Events.
Form 8-K filed August 4, 2006, Item 5.03, Amendment to By-Laws, Item 8.01,
Other Events.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALLSTATES WORLDCARGO, INC.
BY: /s/ Sam DiGiralomo
President and CEO
DATED: December 29, 2006
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the date indicated.
Signature Title Date
By: /s/ Joseph M. Guido Chairman Emeritus and December 29, 2006
Director
By: /s/ Sam DiGiralomo President, CEO and December 29, 2006
Director
By: /s/ Barton C. Theile Executive Vice President, December 29, 2006
COO and Director
By: /s/ Craig D. Stratton Secretary, Treasurer, and December 29, 2006
Chief Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer)