SECURITIES AND EXCHANGE COMMISSION
                    Washington, DC 20549


                          FORM 10-Q

 (Mark One)

XX  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005

    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______.


    Commission file number        000-24991
                             ____________________


                         ALLSTATES WORLDCARGO, INC.
     -------------------------------------------------------------------
     (Exact name of small business issuer as specified in its charter)


          New Jersey                            22-3487471
        --------------                 -------------------------------
  (State or other jurisdiction        (IRS Employer Identification No.)
     of incorporation)


           4 Lakeside Drive South, Forked River, New Jersey, 08731
          ----------------------------------------------------------
                 (Address of principal executive offices)


                             609-693-5950
            --------------------------------------------------
            (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days)

Yes  XX      No
    ----         ----

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes          No   XX
    ----         ----

The Company had 32,509,872 shares of common stock, par value
$.0001 per share, outstanding as of February 14, 2006.

                               -1-
<PAGE>



         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

                            INDEX

PART 1.           FINANCIAL INFORMATION

      ITEM 1.    FINANCIAL STATEMENTS

        Financial Statements with Supplemental Information
        For the Period Ending December 31, 2005 and 2004

      Financial Statements:

         Condensed Consolidated Balance Sheet                   3

         Condensed Consolidated Statement of Operations         4

         Condensed Consolidated Statements of Stockholders'
           Equity                                               5

         Condensed Consolidated Statement of Cash Flows         6

      Notes to the Financial Statements                         7


      ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS        8

      ITEM 3.       CONTROLS AND PROCEDURES                    12

PART II.            OTHER INFORMATION                          12

       ITEM 1.  LEGAL PROCEEDINGS                              12

       ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS      20

       ITEM 3   DEFAULTS ON SENIOR SECURITIES                  20

       ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF
                SECURITY HOLDERS                               20

       ITEM 5   OTHER INFORMATION                              20

       ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K               20

                SIGNATURES                                     21




                               -2-
<PAGE>

         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED BALANCE SHEET

                           ASSETS

                              December 31,     September
                                                  30,
                                  2005           2005
                               (Unaudited)         *
                              ----------     ----------
  Current Assets
    Cash                     $   854,317      $ 180,317
    Accounts receivable
                              10,062,949     10,681,589
    Prepaid expenses and
    other current assets         215,061        317,991

    Deferred tax asset -
    current                      184,982        184,982
                              ----------     ----------
  Total current assets        11,317,309     11,364,879

  Property, plant and
  equipment                    1,858,017      1,598,231
  Less:  Accumulated
  depreciation                 1,034,885        999,189
                              ----------     ----------
  Net property, plant and
  equipment                      823,132        599,042

  Goodwill, including
  acquisition cost, net          535,108        535,108
  Other assets
                                 175,447        199,773
                              ----------     ----------
  Total assets               $12,850,996    $12,698,802
                              ==========     ==========

           LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities
    Accounts payable         $7,244,793      $6,420,955
    Accrued expenses          1,061,220       1,767,391
    Short-term bank
    borrowings                1,399,500       1,599,500
    Notes/leases payable -
    current portion              88,649          49,888
                              ----------     ----------
  Total current liabilities   9,794,162       9,837,734

  Deferred tax liability -
  non current                   102,368         102,368
  Long term portion of
  notes/leases payable        2,457,397       2,385,015

    Stockholders' equity
    Common stock                  3,251           3,251
    Retained earnings           493,818         370,434
                              ----------     ----------
  Total stockholders'
  equity                        497,069         373,685

  Total liabilities and
  stockholders' equity       $12,850,996    $12,698,802
                              ==========     ==========

 *  Condensed from audited financial statements.

     The accompanying notes are an integral part of these
consolidated financial statements.





                             -3-
<PAGE>

         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                         (Unaudited)

                              Three Months Ended December
                                          31,
                                  2005           2004
                              ----------     ----------
  Revenues                   $19,491,819    $16,452,754
  Cost of transportation      14,308,707     11,721,572
                              ----------     ----------
  Gross profit                 5,183,112      4,731,182

  Selling, general and
  administrative expenses      4,978,493      4,575,609
                              ----------     ----------
  Income from operations         204,619        155,573

  Other income (expense):
     Interest, net               (70,042)       (56,022)
     Other income                 98,223
                              ----------     ----------
  Income before income tax
  provision                      232,800         99,551

  Provision for income taxes     109,416         35,000

  Net income                   $ 123,384       $ 64,551
                              ==========     ==========
  Weighted average common
  shares - basic              32,509,872     32,509,872
  Net income per common
  share - basic               $      .00     $      .00

  Weighted average common
  shares - diluted            32,509,872     32,509,872
  Net income per common
  share - diluted             $      .00     $      .00

The accompanying notes are an integral part of these
consolidated financial statements.






                             -4-
<PAGE>
         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         (Unaudited)

                           Common Stock
                                                           Total
                        Number      Par     Retained    Stockholder's
                          of       Value    Earnings       Equity
                        Shares
 Balance at
 September 30, 2005  32,509,872  $ 3,251   $ 370,434      $373,685

 Consolidated net
 profit for the
 three months ended                          123,384       123,384
 December 31, 2005   ----------   -------   --------      ---------

 Balance at December
 December 31, 2005   32,509,872  $ 3,251   $ 493,818      $497,069







                              -5-
<PAGE>

         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                         (Unaudited)

                                       Three Months Ended
                                          December 31,
                                         2005       2004
  Cash flows from operating
  activities:
  Net income                          $123,384     $ 64,551
  Adjustments to reconcile net
  income to net cash provided
    by operating activities:
      Depreciation                      35,695      32,655
      Provision for doubtful
       accounts                         75,149      47,643
      (Increase) decrease in assets:
          Accounts receivable          543,492    (794,361)
          Prepaid expenses and other
           assets                      107,669     (47,406)
       Increase (decrease) in
        liabilities:
          Accounts payable and
           accrued expenses            117,667     704,964
                                      --------    --------
  Net cash provided by
  operating activities               1,003,056       8,046

  Cash flows from investing
  activities:
     Purchase of equipment            (259,786)     (5,907)
     Collection of principal on loan
      to licensee                       19,586
                                      --------    --------
  Net cash used for investing
  activities                          (240,200)    ( 5,907)

  Cash flows from financing
  activities:
    Borrowings under capital leases    120,067
     Repayments under capital leases    (8,923)
    Repayments under short term bank
     borrowing                        (200,000)         0
                                      --------    --------
  Net cash used for financing
  activities                           (88,856)         0

  Net decrease in cash and cash
  equivalents                          674,000       2,139
  Cash and cash equivalents,
  beginning of year                    180,317     114,363
                                      --------    --------
  Cash and cash equivalents,
    end of period                     $854,317    $116,502
                                      ========    ========





         The accompanying notes are an integral part of
these consolidated financial statements.




                              -6-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      December 31, 2005

1.   The accompanying unaudited condensed consolidated
  financial statements have been prepared by Allstates
  WorldCargo, Inc. (the "Company") in accordance with the
  rules and regulations of the Securities and Exchange
  Commission (the "SEC") for interim financial statements and
  accordingly do not include all information and footnotes
  required under generally accepted accounting principles for
  complete financial statements.  The financial statements
  have been prepared in conformity with the accounting
  principles and practices disclosed in, and should be read in
  conjunction with, the annual financial statements of the
  Company included in the Company's Fiscal year 2004 Form 10-K
  filing dated December 29, 2005 (File No. 000-24991).  In the
  opinion of management, these interim financial statements
  contain all adjustments necessary for a fair presentation of
  the Company's financial position at December 31, 2005 and
  September 30, 2005 and the results of operations for the
  three months ended December 31, 2005 and 2004, respectively.

2.   Net income per common share appearing in the statements
  of operations for the three months ended December 31, 2005
  and 2004, respectively have been prepared in accordance with
  Statement of Financial Accounting Standards No. 128 ("SFAS
  No. 128").  SFAS No. 128 establishes standards for computing
  and presenting earnings per share ("EPS") and requires the
  presentation of both basic and diluted EPS.  As a result
  primary and fully diluted EPS have been replaced by basic
  and diluted EPS.  Such amounts have been computed based on
  the profit or (loss) for the respective periods divided by
  the weighted average number of common shares outstanding
  during the related periods.







                              -7-
<PAGE>

ITEM 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations.

General Overview

     Allstates WorldCargo, Inc. (the "Company" or
Allstates") is a New Jersey Corporation formed on January
14, 1997 as Audiogenesis Systems, Inc. (Audiogenesis"),
pursuant to a corporate reorganization of Genesis Safety
Systems, Inc.  On August 24, 1999, Audiogenesis acquired 100
percent of the common stock of Allstates Air Cargo, Inc. in
a reverse acquisition, and on November 30, 1999, changed its
name to Allstates WorldCargo, Inc.  Allstates is principally
engaged in the business of providing global freight
forwarding and other transportation and logistics services
for its customers.  Allstates is headquartered in Forked
River, New Jersey.

     The freight forwarding business of Allstates opened its
first terminal in Newark, New Jersey in 1961.  Allstates
provides domestic and international freight forwarding
services to over 1,700 customers utilizing ground
transportation, commercial air carriers, and ocean vessels.
Allstates supplements its freight forwarding services to
include truck brokerage, warehousing and distribution, and
other logistics services.  Allstates operates 21 offices
throughout the United States, including the corporate
headquarters and employs 104 people.

     Allstates has agreements with domestic and
international strategic partners and a network of agents
throughout the world, and continues to pursue opportunities
to forge additional strategic alliances in order to increase
its global market share.  The Company is a party to several
site licensing agreements in which those licensees have
contracted with Allstates to provide exclusive freight
forwarding services, including sales and operating
functions, under the Allstates name.  Of the 21 domestic
locations, 14 are licensee operations, while 7 are company
owned and staffed operations.



Results of Operations

     The   following  table  sets  forth  for  the   periods
indicated  certain financial information  derived  from  the
Company's consolidated statement of operations expressed  as
a percentage of net sales:

                             Three months ended December 31,
                                   2005           2004
                                 --------       ---------
Revenues                            100.0%        100.0%
Cost  of transportation              73.4          71.2
                                 --------       ---------
Gross    profit                      26.6          28.8

Operating expenses:
  Personnel    costs                  9.3          10.1
  License commissions and royalties  10.4          11.3
  Other selling, general
     and administrative expenses      5.9           6.5
                                 --------       ---------
Total operating expenses             25.6          27.9

Operating income                      1.0           0.9
Net interest expense                 (0.3)         (0.3)
Other income                          0.5            -
Net income before tax provision       1.2           0.6

Tax provision                         0.6           0.2
                                 --------       ---------
Net income                           0.6%           0.4%


                              -8-
<PAGE>
Revenues

     Revenues  of  the Company represents gross consolidated
sales  less  customer  discounts.  Total  revenues  for  the
quarter  ended December 31, 2005 increased by $3.0  million,
or  18.5%,  to $19,492,000, over the quarter ended  December
31,  2004, reflecting a higher volume of shipments and total
weight  of  cargo shipped.  Domestic revenues  increased  by
approximately  $2.0 million or 15.0%, to $15,771,000  during
the three-month period ended December 31, 2005 in comparison
to the same period in the previous year.   The net growth in
domestic  revenues  can be traced to  two  customers  that
accounted  for  approximately $2.3  million  in  incremental
sales  in  comparison  to the previous year  fiscal  period.
International  revenues  increased  by  approximately   $1.0
million or 35.8%, to $3,721,000, reflecting volume increases
at certain existing stations.


Gross Profit

     Gross  profit  represents the  difference  between  net
revenues  and  the  cost of sales.  The  cost  of  sales  is
composed  primarily  of  amounts  paid  by  the  Company  to
carriers  and  cartage agents for the  transport  of  cargo.
Cost of sales as a percentage of revenues increased by 2.2%,
to  73.4%, for the three months ended December 31, 2005,  in
comparison  to the same period in the previous  year.   This
higher  cost  of  sales percentage can be  attributed  to  a
combination of factors, including the effect of increases in
fuel  costs  as  they affect carrier rates, an  increase  in
deferred shipments versus priority, and the continued growth
of  significant lower margin business that the Company first
attained during fiscal 2004.  In absolute terms, the cost of
sales  increased by approximately $2.6 million or 22.1%,  to
$14,309,000 during the three months ended December 31,  2005
versus  the comparative period in the prior year, reflecting
the  increased  sales  volume.  Gross margins  decreased  to
26.6%  during the quarter ended December 31, 2005 from 28.8%
in  the  same  quarter of the previous fiscal  year.   Gross
profit increased by approximately $452,000 to $5,183,000 for
the  three  months ended December 31, 2005 versus  the  same
three months of the prior year.


Selling, General and Administrative Expenses

     As  a percentage of sales, operating expenses decreased
by  2.3%  for  the three months ended December 31,  2005  in
comparison  to  the  three months ended December  31,  2004,
reflecting  the  growth rate in sales in relation  to  fixed
operating  expenses.  In absolute terms, operating  expenses
increased by approximately $403,000 or 8.8% during the three-
month period ended December 31, 2005 as compared to the same
period  in the prior fiscal year.  The comparative  increase
in  SG&A expenses primarily reflect a combination of  higher
personnel  costs and higher license commission  and  royalty
expense.

     Personnel expenses increased for the fiscal year  ended
September 30, 2005 by approximately $152,000 over the fiscal
year ended September 30, 2004, driven in part by an increase
in   headcount   of  operations  and  corporate   personnel,
necessary   to  sustain  the  growth  in  business   volume.
Corporate salary expense was also higher as a result of  new
employment  agreements that were ratified during  the  third
quarter  of  fiscal 2005.  In addition, the executive  bonus
accrual increased by $53,000 over  the amount accrued in the
comparative period of fiscal 2005.

     Allstates pays commissions to licensees as compensation
for generating profits to the Company.  Licensee commissions
and royalties paid pursuant to licensee agreements increased
by  approximately $170,000 for the three-month period  ended
December  31, 2005 in comparison to the same period  in  the
previous  year,  reflected by higher gross profits  at  some
existing licensee operations.





                              -9-
<PAGE>
     Expenses  related to business travel and  entertainment
increased by approximately $43,000 during the quarter  ended
December  31, 2005 in comparison to the same period  of  the
prior  year,  reflecting the overall  increase  in  business
volume.  The initial fees paid to the Company's three  newly
appointed Directors amounted to approximately $37,000, which
included compensation for the fourth quarter of fiscal 2005.
Legal  fees,  which had increased significantly  during  the
prior  year  fiscal quarter ended December  31,  2004  as  a
result of Allstates defense and settlement effort related to
an  action  commenced by a majority shareholder against  the
Company,  decreased during the three months  ended  December
31,  2005  in  comparison  to that period  by  approximately
$74,000.

     SG&A  expenses  presented for the  three  months  ended
December 31, 2005 and 2004 are inclusive of expenditures  to
related    parties   totaling   $505,395    and    $483,906,
respectively.

Income From Operations

     Operating  income  increased during  the  three  months
ended  December  31,  2005  by  approximately  $49,000,   to
$205,000,  compared to the same three month  period  in  the
previous   year,  for  the  reasons  indicated  above.    In
comparison to the respective period ended December 31, 2004,
the  operating  margin  for  the three  month  period  ended
December 31, 2005 increased by 0.1%, to 1.0% of sales.

Net Interest Expense

     Net interest expense increased by approximately $14,000
for the three months ended December 31, 2005 as compared to
the same period in the previous year, reflecting higher
interest rates on higher average outstanding borrowings.

Other income

     Other income represents funds received during the
period from the final distribution settlement of the Q
Logistics Chapter 11 filing from February 2001.

Net Income

     Income before income taxes increased to $233,000 during
the quarter ended December 31, 2005,  versus $100,000 during
the  same period in the prior year.  The Company recorded  a
tax  provision  of approximately $109,000  for  the  quarter
ended  December 31, 2005 as compared to a tax  provision  of
$35,000  for  quarter ended December 31, 2004.   Net  income
after  tax  amounted to approximately $123,000  or  0.6%  of
revenues during the first quarter of Fiscal 2006 versus  net
income  of approximately $65,000 or 0.4% of revenues in  the
first quarter of Fiscal 2005.


Liquidity and Capital Resources

     Net   cash   provided  by  operating   activities   was
approximately $1,003,000 for the three months ended December
31,  2005,  compared  to  cash  provided  by  operations  of
approximately $8,000 for the three months ended December 31,
2004.   For  the three months ended December 31, 2005,  cash
was  primarily provided by a decrease in accounts receivable
as  well  as the net income of the company.  For  the  three
months ended December 31, 2004, cash was provided by the net
income of the company, offset by the net effect of increases
in accounts receivable and accounts payable that reflect the
growth in sales volume during the period as compared to  the
same period of the previous year.





                            -10-
<PAGE>
     At  December 31, 2005, the Company had cash of $854,000
and net working capital of $1,523,000, compared with cash of
$117,000 and net working capital of $1,176,000 respectively,
at  December  31,  2004.  The change in working  capital  at
December  31,  2005  over December  31,  2004  is  primarily
attributable  to  the  Company's  net  income   during   the
preceding twelve months, offset by a combination of the long
term  portion of a loan made to a licensee during the second
quarter of fiscal 2005, as well as expenditures made  toward
the purchase of a new computer system.

     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.   Allstates
collected  $19,586  of  principal on  the  loan  during  the
quarter ended December 31, 2005.

     The  Company's  investing activities during  the  three
months  ended December 31, 2005 were primarily comprised  of
expenditures  for capital equipment, primarily  representing
purchases of computer hardware for the new computer  system.
For  the  three  months  ended December  31,  2005,  capital
expenditures  amounted  to  approximately $260,000, of which
approximately  $120,000 is  financed by a three year leasing
arrangement, while capital  expenditures amounted to
approximately  $6,000  for the three months ended
December 31, 2004.

     The  Company  has a commercial line of  credit  with  a
bank,  pursuant  to  which  the Company  may  borrow  up  to
$2,000,000,  based on a maximum of 70% of eligible  accounts
receivable.   Per the agreement, which expires  January  31,
2007, interest on outstanding borrowings accrues at the Wall
Street  Journal's prime rate of interest (7.25% at  December
31,  2005).  The interest rate is predicated on the  Company
maintaining a compensating account balance in a non-interest
bearing account equal to at least $230,000.  If such average
compensating balances are not maintained, the interest  rate
will  increase  by  1%  over  the rate  currently  accruing.
Outstanding  borrowings  on  the  line  of  credit   totaled
$1,400,000  and  $1,100,000 at December 31, 2005  and  2004,
respectively.


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



                            -11-
<PAGE>

customers; the effects of regulation; results of litigation;
the Company's vulnerability to general economic
conditions;   the   control  by  the   Company's   principal
shareholder;   risks  of  international  operations;   risks
relating to acquisitions; the Company's future financial and
operating  results, cash needs and demand for its  services;
and  the  Company's  ability to  maintain  and  comply  with
permits  and licenses, as well as other factors detailed  in
this  document  and  the Company's other  filings  with  the
Securities  and Exchange Commission. Should one or  more  of
these   risks  or  uncertainties  materialize,   or   should
underlying assumptions prove incorrect, actual outcomes  may
vary materially from those indicated. The Company undertakes
no  responsibility to update for changes related to these or
any other factors that may occur subsequent to this filing.



ITEM 3         CONTROLS AND PROCEDURES

(a)   Evaluation of Disclosure Controls and Procedures.  The
Company's   principal   executive  officer   and   principal
financial  officer,  based  on  their  evaluation   of   the
Company's disclosure controls and procedures (as defined  in
Exchange Act Rules 13a-14 and 15d-14) as of a date within 90
days  prior to the filing of this Quarterly Report  on  Form
10Q,  concluded that the Company's disclosure  controls  and
procedures  are adequate and effective for the purposes  set
forth in the definition in the Exchange Act rules.

(b)  Changes in Internal Controls. There were no significant
changes  in  the  Company's internal controls  or  in  other
factors   that  could  significantly  affect  the  Company's
internal controls subsequent to the date of the evaluation.



 PART II

 OTHER INFORMATION


 ITEM 1         LEGAL PROCEEDINGS


Joseph   M.   Guido  v.  Allstates  WorldCargo,  Inc.,   Sam
DiGiralomo, Barton C. Theile, and Craig D. Stratton.

On   October  14,  2004,  Joseph  M.  Guido,  the   majority
shareholder  of  the Company, who is also  employed  by  the
Company  as  its Chairman, commenced an action  against  the
Company  and  three  of  the Company's  directors,  entitled
"Joseph   M.  Guido  v.  Allstates  WorldCargo,  Inc.,   Sam
DiGiralomo, Barton C. Theile, and Craig D. Stratton," in the
Superior  Court  of  New  Jersey, Chancery  Division,  Ocean
County (the "First Action").  Messrs. DiGiralomo, Theile and
Stratton  are also employed by the Company as its  President
and  Chief  Executive Officer, Executive Vice President  and
Chief   Operating  Officer,  and  Chief  Financial  Officer,
respectively.

Mr.  Guido alleged that on August 16, 2004, he delivered  to
the  Company's Secretary (1) an executed Written Consent  in
Lieu  of  a Special Meeting of the Stockholders of Allstates
WorldCargo,   Inc.  dated  August  16,  2004   (the   "Guido
Consent"),  (2) Amended and Restated Bylaws of  the  Company
adopted  pursuant  to the Guido Consent,  and  (3)  a  draft
Information  Statement  pursuant to  Section  14(c)  of  the
Securities Exchange Act of 1934 (the "1934 Act").  Mr. Guido
alleged  that, pursuant to the Guido Consent, he had amended
the  Company's  bylaws to (among other  things)  expand  its
Board  of  Directors  from four to seven  members,  and  had
appointed three persons (alleged to be independent) to  fill
the  newly  created seats.  He alleged that the Company  was
required  by  law to comply with his demand  to  notify  its
shareholders of his action.  He also alleged that the  three
individual defendants, both as directors and officers,  owed
the Company and its shareholders certain fiduciary duties to
direct  that  appropriate steps be taken by the  Company  to
allegedly  comply  with applicable law in  response  to  the
Guido  Consent.   Mr.  Guido  demanded  relief  enjoining  a
scheduled   special  Board  of  Directors  meeting   pending
Company's  performance  of acts allegedly  required  by  New
Jersey  law  and by the 1934 Act.  Mr. Guido also  sought  a
permanent injunction requiring the Company and its Secretary
to  prepare and distribute to the Company's shareholders all
notices  allegedly  required by state  and  federal  law  in
connection with the Guido Consent. Finally, he sought  entry
of  an  order requiring the Company to file and  serve  upon
him,   within   seven  days  after  entry  of  a   permanent
injunction,  a written report setting forth the  manner  and
form in which the Company complied with the injunctions.


                            -12-
<PAGE>

The  Company  (and the three individual defendants)  opposed
the  application for relief upon the grounds that subsequent
to his execution of the Guido Consent, Mr. Guido advised one
of  the  individual defendants that he had  decided  not  to
proceed with his amendment of the Bylaws or his expansion of
the  Board  of Directors.  The Defendants also alleged  that
Mr.  Guido's  actions were not in the best interest  of  the
Company,  and  motivated by self-interest, that  because  of
such  concerns,  the Company needed time  to  determine  its
obligations  under  the law, and that  the  purpose  of  the
Special Board Meeting (among others) was to consider  issues
pertaining to the request by Mr. Guido to file the  Schedule
14C presented to the Secretary of the Corporation.

On  October  28,  2004, Mr. Guido, by his counsel,  filed  a
Notice  of Voluntary Dismissal Without Prejudice, dismissing
the  First Action.  The parties agreed, subject to the terms
of  definitive  settlement agreements, to settle  the  issue
raised in the First Action upon the following terms: (1) the
Company's Board of Directors would not be expanded except by
unanimous   consent,  (2)  Mr.  Guido  and  the   individual
defendants  would enter into a voting agreement pursuant  to
which each would agree to vote his respective shares in  the
Company for the others as directors of the Company, (3)  the
Company would enter into new employment agreements with  the
individual  defendants  (the existing employment  agreements
being  due to expire on December 31, 2004), (4) the  parties
would  exchange general releases and (5) the Company  would,
to  the  extent  lawfully required by Mr.  Guido's  existing
employment  agreement, reimburse him for the attorneys  fees
he   incurred  in  connection  with  the  action.   It   was
anticipated that the complete terms of a settlement would be
agreed  upon, and that formal settlement documents would  be
prepared  and  executed.   Such  formal  documentation   was
prepared  and delivered to Mr. Guido's counsel  on  December
27, 2004.

Mr.    Guido    refused   to   execute   formal   settlement
documentation, and commenced a second action,  in  the  same
court  and  entitled  in the same style,  seeking  the  same
relief  (the  "Second  Action").  The  Defendants  answered,
denying the allegations, and asserting counterclaims against
Mr. Guido and his wife, Teresa Guido.

On  April  5, 2005, the parties agreed to a full  and  final
settlement  of  the Second Action, the terms of  which  were
placed  on the record in court, and the parties acknowledged
to  the  court,  under oath, their obligation  to  be  bound
thereby.  The material terms of that agreement (referred  to
as the "Settlement Agreement") were:


                            -13-
<PAGE>

(1)  the Company's Board of Directors would be expanded from
four to seven members, and the Court would appoint the three
new  directors, (2) vacancies thereafter would be filled  by
vote  of the remaining Board members, and in the event of  a
tie or deadlock in filling any vacancy, the vacancy would be
filled  by an arbitrator chosen by the Board, (3) Mr.  Guido
and  the  individual defendants would enter  into  a  voting
agreement  pursuant to which each would agree  to  vote  his
respective shares of the Company for the others as directors
of  the  Company,  (4)  the Company  would  enter  into  new
employment  agreements  with Mr. Guido  and  the  individual
defendants, (5) the parties would exchange general  releases
and  (6)  the Company would, to the extent lawfully required
by  Mr. Guido's previous employment agreement, reimburse him
for  the  attorneys fees he incurred in connection with  the
action.

On  May 27, 2005, a final judgment was ordered, granted  and
entered by the court in accordance with the settlement terms
agreed to by the parties on April 5, 2005.  Finally, on June
6,  2005, Court declared the new employment agreements,  the
voting  agreement,  and  the mutual general  release  to  be
effective as of April 5, 2005, notwithstanding any  lack  of
signatures.   Pursuant  to the mutual general  release,  the
Company  and  each  of  Mr. Guido,  his  wife,  and  Messrs.
DiGiralomo,  Theile and Stratton each released  and  forever
discharged  each  and all of the others  from  any  and  all
causes of actions, known and unknown, then existing.

Pursuant  to the terms of the settlement, on June  6,  2005,
the  Company  and  Messrs.  Guido,  DiGiralomo,  Theile  and
Stratton  (collectively, for purposes of this  section,  the
"Voters")  entered into a Voting Agreement whereby  each  of
the  Voters agreed to vote all of the capital stock  of  the
Company that each Voter is entitled to vote, for each  other
as  directors of the Company. Further, pursuant to the terms
of  the Voting Agreement, any action taken to expand  or  in
any way modify the composition of the Board of Directors  of
the  Company from its present constitution shall require the
unanimous  consent of all of the Voters.   Additionally,  in
the event that shareholder action is taken to alter or amend
the  Certificate of Incorporation or Bylaws of the  Company,
the Voters agree to vote all of their shares unanimously  in
the  same  manner.   If the Voters are  unable  to  reach  a
unanimous  decision,  then  the  proposed  change  shall  be
rejected.   The  Voting Agreement terminates  when  each  of
Messrs.  Guido,  DiGiralomo, Theile and Stratton  no  longer
own,  control  or hold any shares of capital  stock  of  the
Company.

For  so long as the Voting Agreement remains in effect,  the
Voters also agreed, with a certain agreed-to exception,  not
to  transfer  any  of  the shares of capital  stock  of  the
Company they hold without the prior written consent  of  all
of   the  Voters,  unless  the  other  party  to  any   such
transaction agrees in writing to join and be bound by all of
the  terms of the Voting Agreement.  To that end, the Voters
agreed  to the placement of an additional restrictive legend
on  all  of  their  shares (including subsequently  acquired
shares), which restrictive legend shall read:


                            -14-
<PAGE>

"THE  SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO  RESTRICTIONS ON TRANSFER, VOTING AND OTHER  RESTRICTIONS
PURSUANT  TO A VOTING AGREEMENT ENTERED INTO BY THE COMPANY,
THE   HOLDER   OF   THIS  CERTIFICATE  AND   CERTAIN   OTHER
STOCKHOLDERS  OF THE COMPANY, A COPY OF WHICH  IS  AVAILABLE
FOR  INSPECTION  AT  THE OFFICES OF  THE  SECRETARY  OF  THE
COMPANY."

Finally, during the term of the Voting Agreement, the Voters
agreed  not  to  enter  into any agreements  that  would  be
inconsistent with any of the provisions therein.

Also  pursuant to the terms of the settlement,  on  June  6,
2005  the Company and Allstates Air Cargo, Inc., its  wholly
owned  subsidiary,  (together, the  Employer)  entered  into
individual  employment  agreements  with  each  of   Messrs.
DiGiralomo (as President and Chief Executive Officer), Guido
(as Chairman), Theile (as Executive Vice President and Chief
Operating   Officer)  and  Stratton  (as   Chief   Financial
Officer).   Messrs. DiGiralomo, Guido, Theile  and  Stratton
are collectively referred to herein as Executives.  Each  of
the  employment agreements is effective as of April 5, 2005,
and  expires  on December 31, 2009, but may be  extended  if
agreed  to  in  writing by the parties.   Per  each  of  the
employment agreements, Mr. DiGiralomo's annual salary  shall
be  $250,000;  Mr. Guido's annual salary shall be  $370,000;
Mr.  Theile's  annual  salary shall  be  $250,000;  and  Mr.
Stratton's annual salary shall be $185,000.  Each  of  these
salaries  is subject to an annual increase at the discretion
of  the Company's Board of Directors.  Additionally, each of
Messrs. DiGiralomo, Guido and Theile shall receive an annual
bonus payment equal to 3% of the increase of the net profits
of  the Employer from the fiscal year end 2003 to the fiscal
year  end  2004.  Each of Messrs. DiGiralomo, Guido,  Theile
and   Stratton  remains  eligible  to  participate  in   the
Employer's  stock  option plan, 401(k) retirement  plan  and
insurance plans.

                            -15-
<PAGE>

Excluding  the above-described salary and bonus information,
the  material  terms  of each of the Executives'  employment
agreements  are substantially the same.  In  the  event  any
Executive  dies during the term of his respective employment
agreement, then for the longer of the remaining term of  the
employment  agreement  or three years,  the  Employer  shall
continue to pay the Executive's then current base salary  to
the  Executive's designated beneficiary or estate  and  will
also   pay  for  insurance  for  any  Executive's  surviving
immediate family.  If, within twenty-four months following a
"Change  of Control" of the Employer, as defined in each  of
the employment agreements, the Executive voluntarily resigns
or  retires,  the  Employer shall pay to the  Executive  all
compensation and benefits due to him up to the date  of  his
termination, including, but not limited to, base salary  and
any   expense  reimbursement,  and  within  one   month   of
termination,  a  lump-sum  payment  equal  to  299%  of  the
Executive's then current base salary, bonus for  the  fiscal
year end 2004, and of the amount reimbursed to the Executive
for   business-related  expenses  for  the   calendar   year
preceding the termination.  Additionally, any options and/or
restricted stock granted to the Executive shall become fully
vested  and  registered as of the date of  the  termination.
The  Executive shall have the right to exercise all  of  his
options  for  a period of five years from the  date  of  the
termination.   Additionally,  all  then-existing  life   and
health  insurance benefits shall continue for the  Executive
and his immediate family for a period of five years from the
date  of  termination.   In  the  event  of  a  "For  Cause"
termination,   as   defined  in  each  of   the   employment
agreements,  the  Employer shall pay to  the  Executive  all
compensation and benefits due to him up to the date  of  his
termination,  including but not limited to base  salary  and
expense  reimbursement.  At any time  after  180  days  have
elapsed   from   the  date  of  his  respective   employment
agreement, each Executive shall have the right to  terminate
his  employment agreement on 90 days written notice  to  the
Employer.   In the event of such termination, the  Executive
shall be entitled to such compensation that is equal to  the
"For  Cause"  termination compensation described  above.   A
termination that is neither a Change of Control termination,
a  For  Cause termination, is due to the Executive's  death,
nor  a termination by the Executive as provided above, is  a
"Without  Cause"  Termination.  In the event  of  a  Without
Cause  termination, the Executive shall be entitled to  such
compensation  that  is  equal  to  the  Change  of   Control
termination compensation described above.  Finally,  if  the
Employer  breaches  any  material term  of  each  respective
employment  agreement or reduces the Executive's  respective
title or responsibilities, the Executive may, at his option,
elect  to  leave  the Employer, in which case  he  shall  be
entitled  to  all  of  the  Change  of  Control  termination
compensation  described  above, except  that  the  lump  sum
payment to be paid to the Executive would be limited to 100%
of the Executive's base salary and bonus (if applicable).

                            -16-
<PAGE>

On July 6, 2005, to effectuate part of the settlement of the
Second  Action,  the  Court entered an Order  (the  "July  6
Order")  that  expanded the Company's  Board  of  Directors,
effective immediately, from four members to seven.  The July
6  Order  also  appointed,  effective  immediately,  Messrs.
Joseph  Buckelew, Alan E. Meyer, and Charles F. Starkey,  to
the Board.

On   August   24,  2005,  upon  the  Company's  Motion   for
Reconsideration,  the Court entered and order  amending  the
July  6  Order  (the "First August 24 Order").   Instead  of
declaring   the  Board  expanded,  and  appointing   Messrs.
Buckelew, Meyer, and Starkey to the Board, the July 6  Order
was amended to show that the parties agreed that a Unanimous
Written  Consent  of the Directors of Allstates  WorldCargo,
Inc. (attached to the First August 24 Order, and referred to
as   the  "Directors'  Consent")  was  consistent  with  the
Settlement Agreement, and shall be deemed signed by  Messrs.
DiGiralomo, Theile, Stratton, and Guido.

Pursuant  to the Directors' Consent, the Board of  Directors
amended Section 3.02 of the Bylaws to provide that the Board
of  Directors shall consist of seven members.  Prior to  the
amendment,  Section  3.02 of the Bylaws  provided  that  the
Board  of Directors shall consist of not less than  one  nor
more  than  ten Directors.  The precise number of  Directors
within  this  range was to be fixed by the Board  each  year
before  the annual meeting of shareholders.  The  number  of
Directors prior to the amendment was four.

Pursuant  to the Directors' Consent, the Board of  Directors
appointed  Joseph  Buckelew,  Alan  E.  Meyer,  C.P.A.,  and
Charles  F.  Starkey, Esq. to fill the vacancies created  by
the  expansion of the Board, to serve in accordance with the
Settlement Agreement.

Pursuant  to the Directors' Consent, the Board of  Directors
also  amended  Sections 3.12(b) and 3.12(c) of  the  Bylaws.
Prior  to  the  amendment described herein, Section  3.12(b)
provided  that vacancies in the Board may be filled  by  the
affirmative  vote  of a majority of the remaining  Directors
then  in  office,  even if their number is  insufficient  to
constitute  a  quorum.  A director so elected  was  to  hold
office  until  a successor is elected and qualified  at  the
next annual meeting of the shareholder.  As amended, Section
3.12(b)  provides that any vacancy shall be  filled  in  the
manner  provided  therein,  and  that  in  the  event  of  a
deadlock, or a three-to-three vote, with respect to  filling
any  vacancy,  an  independent arbitrator appointed  by  the
Board  shall  select the person to fill  the  vacancy.   The
amended  Bylaw also provides that any director so  appointed
pursuant  to  Section  3.12(b) shall  also  hold  office  in
accordance with the Settlement Agreement.

                            -17-
<PAGE>

Prior  to  the  amendment described herein, Section  3.12(c)
provided that if a director resigns from the Board effective
at some future date, the future vacancy may be filled by the
affirmative  vote  of a majority of the  directors  then  in
office,  including  the director who has resigned,  even  if
their  number is insufficient to constitute a  quorum.   The
term  of  the  newly elected director would begin  when  the
resignation becomes effective.  A director so elected was to
hold  office  from  the effective date of the  predecessor's
resignation  until a successor is elected and  qualified  at
the next annual or special meeting of the shareholders.   As
amended,  Section 3.12(c) provides that any  future  vacancy
shall be filled in the manner provided therein, and that  in
the  event  of  a deadlock, or a three-to-three  vote,  with
respect  to  filling any vacancy, an independent  arbitrator
appointed by the Board shall select the person to  fill  the
vacancy.  The amended By-Law also provides that any director
so  appointed  pursuant to Section 3.12(c) shall  also  hold
office in accordance with the Settlement Agreement.

In order to ensure that Messrs. Buckelew, Meyer, and Starkey
(or  their successors duly appointed pursuant to the Bylaws)
continue  to  serve pursuant to the terms of the  Settlement
Agreement,   and  not  at  the  pleasure  of  the   majority
shareholder, the Court entered a second order on August  24,
2005 (the "Second August 24 Order"), which provides that the
parties are required by the Settlement Agreement 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  November  7,  2005, the Court entered  a  Consent  Order
pursuant  to which Mr. and Mrs. Guido waived their right  to
pursue  reimbursement from the defendants  of  any  and  all
counsel fees paid or incurred in connection with the matter.

Accordingly,  there  are no issues left outstanding  in  the
matter, and it has been finally concluded.


                            -18-
<PAGE>


Liberty Mutual Insurance Company v. Lightning Freight  Inc.,
GTD Logistics, Inc., and Gilberto Cordova.

The  Company's subsidiary, GTD Logistics, Inc. ("GTD") is  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  allegedy
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 is seeking
to  recover  from GTD and also the carrier and truck  driver
the  amount  that is 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.   Liberty  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-Complains  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  have  reached  a  settlement  of  the  action,
pursuant  to  which  GTD will pay the sum  of  ten  thousand
dollars  ($10,000)  in full and complete settlement  of  all
claims.   Lightning Freight, Inc. has agreed to pay the  sum
of  ten  thousand  dollars ($10,000) in  full  and  complete
settlement  of  all  claims  against  it,  as   well.    The
settlement  is  conditioned upon the  Court's  granting  the
parties'   Application  for  Determination  of  Good   Faith
Settlement  Pursuant  California Code  of  Civil  Procedure,
which  would bar any other joint tortfeasor (wrong-doer)  or
co-obligor  from  any  further  claims  against  GTD  and/or
Lightning Freight arising out of the transaction.


Jeffrey  H. Mims, Chapter 7 Trustee v. Allstates WorldCargo,
Inc.

The Company is presently the defendant in an Adversary
Proceeding  against  Allstates  WorldCargo,  Inc.   in   the
bankruptcy  case of Mosaic Group US., Inc.  The  lawsuit  is
for  the recovery of 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.  The  matter  is  still  in  its
initial stages.

                            -19-
<PAGE>

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 paintbrushes 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
$422,281.64.   The  plaintiffs seek to recover  compensatory
and consequential damages.

The action is in its initial discovery stage.


 ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS

 NONE


 ITEM 3   DEFAULTS ON SENIOR SECURITIES

 NONE


 ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

ITEM 5    OTHER INFORMATION

 NONE


 ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits
            None

          (b)  Reports on Form 8-K
                 None

                            -20-
<PAGE>





 SIGNATURES

 Pursuant to the requirements of the Exchange Act of 1934,
the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

 ALLSTATES WORLDCARGO, INC.

 BY:  /s/ SAM DIGIRALOMO          DATED:    February 14, 2006
      Sam DiGiralomo,
      President and CEO


 BY: /s/ Craig D. Stratton        DATED:    February 14, 2006
     Craig D. Stratton, CFO,
     Secretary,
     Treasurer and
     Principal Financial Officer







                            -21-