UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, DC   20549

                                FORM 10-Q

(Mark One)

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

                                     1
<PAGE>





            ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES


                              INDEX

                                                                       PAGE
PART 1.   FINANCIAL INFORMATION                                        ----

  ITEM 1.   FINANCIAL STATEMENTS

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

  Financial Statements:

    Condensed Consolidated Balance Sheet                                 3

    Condensed Consolidated Statement of Operations                       4

    Condensed Consolidated Statements of
        Stockholders' Equity (Deficit)                                   5

    Condensed Consolidated Statement of Cash Flows                       6

  Notes to the Financial Statements                                      7


   ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS....................... 8

   ITEM 3.   CONTROLS AND PROCEDURES....................................12

PART II.  OTHER INFORMATION.............................................12



   ITEM 1    LEGAL PROCEEDINGS..........................................12

   ITEM 2    CHANGES IN SECURITIES AND USE OF PROCEEDS..................13

   ITEM 3    DEFAULTS ON SENIOR SECURITIES..............................13

   ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........13

   ITEM 5    OTHER INFORMATION..........................................13

   ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K...........................13

      SIGNATURES........................................................14


                                     2

<PAGE>




               PART 1 - FINANCIAL INFORMATION

         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED BALANCE SHEET

                           ASSETS

                                March 31,      September
                                                  30,
                                  2005           2004
                               (Unaudited)         *
  Current Assets
    Cash                     $  242,426    $   114,363
    Accounts receivable
                              7,730,201      8,073,391
    Prepaid expenses and
    other current assets        327,391        119,108
    Deferred tax asset -
    current                     187,000        351,000
                             ----------     ----------
  Total current assets        8,487,018      8,657,862

  Property, plant and
  equipment                   1,379,183      1,368,095
  Less:  Accumulated
  depreciation                  925,724        860,222
                             ----------     ----------
  Net property, plant and
  equipment                     453,459        507,873

  Goodwill, including
  acquisition cost, net         535,108        535,108
  Other assets                  247,374         86,224
                             ----------     ----------
  Total assets               $9,722,959     $9,787,067

           LIABILITIES AND STOCKHOLDERS' DEFICIT

  Current Liabilities
    Accounts payable         $4,772,325     $5,274,000
    Accrued expenses          1,532,004      1,178,377
    Short-term bank
    borrowings                  999,500      1,099,500
    Notes payable                25,000         25,000
                             ----------     ----------
  Total current liabilities   7,328,829      7,576,877

  Deferred tax liability -
  non current                    75,000         78,000
  Long term portion of notes
  payable                     2,361,730      2,361,730

    Stockholders' deficit
    Common stock                  3,251          3,251
    Retained earnings           (45,851)      (232,791)
                             ----------     ----------
  Total stockholders'
  deficit                      (42,600)       (229,540)

  Total liabilities and
  stockholders' deficit     $ 9,722,959      $9,787,067
                            ===========      ==========

 *  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)

<TABLE>
<S>                       <c>                      <c>
                           Three Months Ended      Six Months Ended
                               March 31,               March 31,
                            2005        2004           2005       2004
Revenues (net of
discounts)                $15,386,968  $12,095,930  $31,839,722  $25,553,550

Cost of transportation     10,520,256    8,126,150   22,241,828   17,152,451
                          -----------   ----------   ----------   ----------
Gross profit                4,866,712    3,969,780    9,597,894    8,401,099

Selling, general and
administrative expenses     4,558,275    4,043,023    9,133,884    8,089,911
                          -----------   ----------   ----------   ----------
Income/(loss) from
operations                    308,437      (73,243)     464,010      311,188

Other income (expense):
   Interest, net              (58,389)     (53,283)    (114,411)    (107,685)
   Gain/(loss) on sale of
    assets                                  (8,887)                   (3,587)
   Other income/(expense)                      327
                          -----------   ----------   ----------   ----------
Income/(loss) before
  income tax provision        250,048     (135,086)     349,599      199,916

Provision for income
  taxes                       127,659      (59,500)     162,659      121,000
                          -----------   ----------   ----------   ----------
Net income/(loss)            $122,389     $(75,586)    $186,940      $78,916

Weighted average common
shares - basic             32,509,872    32,509,872  32,509,872   32,509,872

Net income per common
share - basic                    $.00          $.00        $.00         $.00

Weighted average common
shares - diluted           32,509,872    32,509,872  32,509,872   32,509,872

Net income per common
share - diluted                  $.00          $.00        $.00         $.00

</TABLE>

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


                                      -4-
<PAGE>




         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                         (Unaudited)

<TABLE>
<S>                 <c>           <c>     <c>         <c>
                            Common Stock
                                          Retained     Total
                        Number            Earnings  Stockholders'
                          of        Par   (Deficit)    Equity
                        Shares     Value             (Deficit)
                    ___________  ______  _________   _________
Balance at           32,509,872  $ 3,251  $(232,791) $(229,540)
 September 30, 2004

 Consolidated net
 profit for the six
 months ended March                          186,940   186,940
 31, 2005
                    ___________  ______  _________   _________
 Balance at
 March 31, 2005      32,509,872  $ 3,251  $( 45,851) $( 42,600)
                    ===========  ======   =========   =========

</TABLE>

                                -5-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                         (Unaudited)

                                        Six Months Ended
                                            March 31,
                                         2005       2004
  Cash flows from operating
  activities:
  Net income                         $ 186,940    $ 78,916
  Adjustments to reconcile net
  income to net cash provided
    by operating activities:
      Depreciation                      65,502      77,977
      Amortization
      Provision for doubtful
        accounts                        67,429      73,855
      (Gain)/loss on sale of assets                  3,587
      Deferred income taxes
                                      161,000       92,000
      (Increase) decrease in assets:
          Accounts receivable         275,762     (386,412)
          Prepaid expenses and other
           assets                    (122,523)      (8,335)
       Increase (decrease) in
         liabilities:
          Accounts payable and
           accrued expenses          (148,047)     (99,248)
                                   ----------    ---------
  Net cash provided by/(used for)
  operating activities                486,063     (167,660)

  Cash flows from investing
  activities:
     Purchase of equipment            (11,089)    (257,819)
     Proceeds from sale of property
  and equipment                             0       14,050
     Loan to licensee                (250,000)
     Collection of loan principal       2,945
     Deposits                             144        3,200
                                   ----------    ---------
  Net cash used for investing
  activities                         (258,000)     (240,569)

  Cash flows from financing
  activities:
    Repayments under notes payable                  (3,836)
    Repayments under short-term
  bank borrowings                    (800,000)
     Borrowing under short-term
      bank borrowings                 700,000
                                   ----------    ---------
  Net cash used for financing
  activities                         (100,000)      (3,836)

  Net increase (decrease)
   in cash and cash
   equivalents                        128,063     (412,065)
  Cash at beginning of year           114,363      516,639
                                   ----------    ---------
  Cash and cash equivalents,
   end of period                    $ 242,426   $ 104,574
                                   ==========    =========


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

                               -6-
<PAGE>

         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       March 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, 2004 (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 March 31, 2005 and
  September 30, 2004 and the results of operations for the
  three and six months ended March 31, 2005 and 2004,
  respectively.

2.   Net income per common share appearing in the statements
  of operations for the three and six months ended March 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 95 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, 13 are licensee operations, while 8 are company
owned and staffed operations.


Results of Operations

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

                          Three Months Ended       Six Months Ended
                             March 31,                  March 31,
                          2005        2004         2005      2004
                          ----        ----         ----      ----
Revenues                 100.0%      100.0%       100.0%    100.0%
Cost of transportation    68.4        67.2         69.9      67.1
                          ----        ----         ----      ----
Gross profit              31.6        32.8         30.1      32.9

Operating expenses:
 Personnel costs          10.9        13.0         10.5      12.4
 License commissions      12.4        12.6         11.9      11.7
   and royalties
 Other selling,
  general and
  administrative
  expenses                 6.3         7.8          6.2       7.6
                          ----        ----         ----      ----
Total operating
 expenses                 29.6        33.4         28.6      31.7

Operating income           2.0        (0.6)         1.5       1.2
Interest expense, net     (0.4)       (0.4)        (0.4)     (0.4)
Other expense             (0.0)       (0.1)        (0.0)     (0.0)
Net income before
 tax provision             1.6        (1.1)         1.1       0.8
                          ----        ----         ----      ----
Tax provision             (0.8)%       0.5%        (0.5)%    (0.5)%
Net income                 0.8%       (0.6)%        0.6%      0.3%

                                8
<PAGE>

Revenues

     Revenues  of  the Company represents gross consolidated
sales  less  customer  discounts.  Total  revenues  for  the
quarter ended March 31, 2005 increased by approximately $3.3
million,  or  27.2%, to $15,387,000, over the quarter  ended
March 31, 2004, reflecting a higher volume of shipments  and
total  weight  of cargo shipped.  Sales for  the  six  month
period ended March 31, 2005 increased by approximately  $6.3
million, or 24.6%, to $31,840,000 compared to the six  month
period  ended  March 31, 2004, for the  same  reasons.   The
increase  in  revenues  during  the  three  and  six   month
comparative periods primarily reflects the growth in  volume
at our existing stations through newly acquired business, as
well  as  new volume generated by the addition of a licensee
operation in the second quarter of fiscal 2004.

     Domestic  revenues  increased  by  approximately   $1.9
million  or  19.2%,  to $11,968,000 during  the  three-month
period ended March 31, 2005 in comparison to the same period
in  the previous year, reflecting higher shipping volume for
the  reasons  mentioned above. During the six  months  ended
March 31, 2005, domestic revenues increased by approximately
$5,516,000  or 27.4%, to $25,680,000 compared  to  the  same
period  in the prior year.  International revenues increased
by  approximately  $1.4  million or  66.1%,  to  $3,419,000,
during  the  three months ended March 31, 2005 in comparison
to the prior year period.  During the six months ended March
31,  2005,  international sales increased  comparatively  by
approximately $770,000 or 14.3%.


Gross Profit

     Gross  profit  represents the  difference  between  net
revenues  and  the  cost of sales.  The  cost  of  sales  is
composed  primarily  of  amounts  paid  by  the  Company  to
carriers  and  cartage agents for the  transport  of  cargo.
Cost of sales as a percentage of revenues increased by 1.2%,
to  68.4%,  for the three months ended March 31,  2005,  and
increased  by 2.8%, to 69.9% for the six months then  ended,
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  growth  of
significant lower margin business that the Company  attained
during  fiscal 2004.  In absolute terms, the cost  of  sales
increased  by  approximately  $2.4  million  or  29.5%,   to
$10,520,000  during the three months ended  March  31,  2005
over  the previous year period.  During the six months ended
March  31,  2005,  cost of sales increased by  approximately
$5.1  million or 29.7% versus the comparative period in  the
prior  year,  reflecting the increased sales volume.   Gross
margins  decreased to 31.6% during the quarter  ended  March
31,  2005  from  32.8% in the same quarter of  the  previous
fiscal  year,  and  decreased for the six month  comparative
period  then  ended to 30.1% from 32.9% in  the  prior  year
period.  Gross profit increased by approximately $897,000 to
$4,867,000 for the three months ended March 31, 2005  versus
the  same  three months of the prior year, and increased  by
approximately  $1,197,000  for  the  six  month  comparative
period then ended.


Selling, General and Administrative Expenses

     As  a percentage of sales, operating expenses decreased
by 3.8% for the three months ended March 31, 2005, to 29.6%,
in  comparison  to the three months ended  March  31,  2004,
reflecting  the  growth rate in sales in relation  to  fixed
operating expenses, primarily those related to personnel and
company  facilities.  During the six months ended March  31,
2005, operating expenses decreased by 3.0% in comparison  to
the same period of the previous year, to 28.7% of sales, for
the  same  reason.   In absolute terms,  operating  expenses
increased  by  approximately $515,000 or  12.7%  during  the
three-month period ended March 31, 2005 as compared  to  the
same  period  in the prior fiscal year.  Operating  expenses
increased  by approximately $1,044,000, or 12.9% during  the
six  months ended March 31, 2005 over the prior year period.
The  increases in SG&A expenses for the three and six  month
comparative   periods  primarily  reflects  higher   license
commission  and  royalty expense as  well  as  higher  legal
expense.

                                -9-
<PAGE>

     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 $379,000 for the three-month period  ended
March  31,  2005  in comparison to the same  period  in  the
previous  year, and increased for the six months then  ended
over  the  previous  year period by approximately  $768,000.
The  increases  in  licensee commissions  and  royalties  is
reflected by higher gross profits at some existing  licensee
operations as well as the addition of one licensee operation
during the second quarter of fiscal 2004.

     Legal  fees  increased during the  three  months  ended
March 31, 2005 in comparison to the same period of the prior
year  by  approximately $102,000, and increased for the  six
months ended March 31, 2005 by approximately $235,000.   The
increased  expense primarily reflects Allstates defense  and
settlement  effort  related to  an  action  commenced  by  a
majority  shareholder against the Company during the  fourth
quarter of fiscal 2004.

     Personnel  expenses increased for  the  three  and  six
month  periods ended March 31, 2005 by approximately $99,000
and   $154,000,   respectively,  over  the   previous   year
comparative periods.  Corporate personnel salaries increased
primarily  due to the addition of a Director of  MIS  during
the third quarter of fiscal 2004, while operations personnel
salaries  also increased to sustain the growth  in  business
volume.

     SG&A  expenses  presented for the  three  months  ended
March  31, 2005  and 2004  are inclusive of expenditures  to
related    parties   totaling   $412,112    and    $342,598,
respectively.  SG&A expenses presented for the six months
ended March 31, 2005 and 2004 are inclusive of expenditures
to related    parties totaling $784,685 and $749,345,
respectively.

Income from Operations

     Operating  income  increased during  the  three  months
ended March 31, 2005 by approximately $382,000, to $308,000,
from  an operating loss of ($73,000) in the same three month
period  in  the  previous year, for  the  reasons  indicated
above.   During the six month period ended March  31,  2005,
operating  income  increased by approximately  $153,000,  to
$464,000 compared to the same six month period in the  prior
year.   The operating margin increased for the three  months
ended  March 31, 2005 by 2.6%, to 2.0% of sales compared  to
the   prior  fiscal  year  period.   In  comparison  to  the
respective period ended March 31, 2004, the operating margin
for  the six month period ended March 31, 2005 increased  by
0.3%, to 1.5% of sales.

Interest Expense, net

     Interest expense increased  for the three and six
months ended March 31, 2005 by approximately $5,000 and
$7,000 respectively, as compared to the same periods in the
previous year, reflecting higher interest rates on borrowed
funds.

Net Income/(Loss)

     Income before income taxes increased to $250,000 during
the  quarter  ended  March  31,  2005,   versus  a  loss  of
($135,000)  during the same period in the prior  year.   The
Company recorded a tax provision of $128,000 for the quarter
ended March 31, 2005 as compared to a tax benefit of $60,000
for  quarter ended March 31 31, 2004.  Net income after  tax
amounted  to  approximately $122,000  or  0.8%  of  revenues
during  the second quarter of Fiscal 2005 versus a net  loss
of  ($76,000) or (0.6%) of revenues in the second quarter of
Fiscal 2004.

     Income before income taxes increased to $350,000 during
the  six months ended March 31, 2005,  from $200,000  during
the  same period in the prior year.  The Company recorded  a
tax provision of $163,000 for the six months ended March 31,
2005  as  compared  to a tax provision of $121,000  for  six
months  ended March 31 2004.  Net income after tax  amounted
to  approximately  $187,000 or 0.6% of revenues  during  the
first two quarters of Fiscal 2005 versus $79,000 or 0.3%  of
revenues during the first two quarters of Fiscal 2004.

                            -10-
<PAGE>

Liquidity and Capital Resources

     Net   cash   provided  by  operating   activities   was
approximately  $486,000 for the six months ended  March  31,
2005,  compared to cash used for operations of approximately
$168,000 for the six months ended March 31, 2004.   For  the
six  months ended March 31, 2005, cash was provided  by  the
net  income  of  the company as well as a  net  decrease  in
accounts  receivable, offset by the a decrease  in  accounts
payable.  For the six months ended March 31, 2004, cash  was
used  to  finance an increase in accounts receivable  and  a
decrease in accounts payable, offset by the Company's profit
during the period.

     At March 31, 2005, the Company had cash of $242,000 and
net  working  capital of $1,158,000, compared with  cash  of
$105,000  and  net working capital of $980,000 respectively,
at  March 31, 2004.  The change in working capital at  March
31,  2005  over March 31, 2004 is primarily attributable  to
the Company's net income during the preceding twelve months,
offset by the long term portion of a loan made to a licensee
during  the  second quarter of fiscal 2005,  as  well  as  a
payment  made  in connection with a licensee agreement  that
Allstates entered in to in fiscal 2004.

       During the quarter ended December 31, 2003, Allstates
entered  into a licensee agreement with another  party  that
would  result  in  that party owning  the  rights  to  three
licensee operations commencing January 31, 2004.  As part of
the  agreement, Allstates WorldCargo paid in installments  a
sum  of  $300,000  to  the licensees as  a  start-  up  fee.
Installment payments commenced during the first  quarter  of
fiscal  2004 and continued through the second quarter,  with
the  final payment of $75,000 made during the third  quarter
of that year.  Allstates has capitalized this expenditure as
a leasehold improvement and is depreciating it over the ten-
year life of the contract.  In addition, during the month of
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.

     In  addition  to the leasehold improvement payment  and
the  aforementioned loan, the Company's investing activities
were   comprised  of  expenditures  for  capital  equipment,
primarily  representing purchases of computer  hardware  and
software.  For the six months ended March 31, 2005,  capital
expenditures   amounted  to  approximately  $11,000,   while
capital  expenditures amounted to approximately $33,000  for
the six months ended March 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  29,
2006, interest on outstanding borrowings accrues at the Wall
Street Journal's prime rate of interest (5.75% at March  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
$1,000,000  and  $1,150,000 at  March  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;
construction of the new facilities; the effect of
litigation; future costs of transportation; future operating
expenses; future margins; any seasonality of the Company's

                      -11-
<PAGE>

business; future dividend plans; future acquisitions and the
effects, benefits, results, terms or other aspects of any
acquisition; Ocean Transportation Intermediary License;
ability to continue growth and implement growth and business
strategy; the ability of expected sources of liquidity to
support working capital and capital expenditure
requirements; future expectations; and any other statements
regarding future growth, future cash needs, future
terminals, future operations, business plans, future
financial results, financial targets and goals; and any
other statements which are not historical facts are
forward-looking statements. When used in this document, the
words "anticipate," "estimate," "expect," "may," "plans,"
"project" and similar expressions are intended to be among
the statements that identify forward-looking statements.
Such statements involve risks and uncertainties, including,
but not limited to, those relating to the Company's
dependence on its ability to attract and retain skilled
managers and other personnel; the intense competition within
the freight industry; the uncertainty of the Company's
ability to manage and continue its growth and implement its
business strategy; the Company's dependence on the
availability of cargo space to serve its customers; the
effects of regulation; results of litigation; the Company's
vulnerability to general economic conditions; the control by
the Company's principal shareholder; risks of international
operations; risks relating to acquisitions; the Company's
future financial and operating results, cash needs and
demand for its services; and the Company's ability to
maintain and comply with permits and licenses, as well as
other factors detailed in this document and the Company's
other filings with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those
indicated. The Company undertakes no responsibility to
update for changes related to these or any other factors
that may occur subsequent to this filing.




ITEM 3         CONTROLS AND PROCEDURES

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

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



 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, the 56.91% majority shareholder of the
Company (the "Shareholder") (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, bearing Docket No.
OCN- C -305-04.  (Messrs. DiGiralomo, Theile, and Stratton
are also employed by the Company as its President and Chief
Executive Officer, its Executive Vice President and Chief
Operating Officer, and its Chief Financial Officer.)  The
Shareholder alleged that in accordance with state law, on
August 16, 2004, he had 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 "Written Consent"), (2) Amended and
Restated Bylaws of the Company adopted pursuant to the
Written Consent (the "A&R Bylaws"), and (3) a draft
Information Statement pursuant to Section 14(c) of the 1934
Act (the "Draft Information Statement").

                               -12-
<PAGE>

The Shareholder alleged that pursuant to the Written
Consent, he had amended the Company's bylaws to (among other
things) expand the Board of Directors from four members to
seven members, and appointed three persons (alleged to be
independent) to fill the newly created board seats.  He
alleged that the Company was required by law to comply with
his demand to notify the shareholders of his action, and
that the Company's failure to do so was a violation of the
law.  He also alleged that the three individual defendants,
both as directors and officers, owed the Company and it
shareholders certain fiduciary duties and duty of loyalty to
direct that "appropriate steps" be taken by the Company to
allegedly comply with New Jersey state law "and other
applicable law" in response to the Written Consent.

The Majority Shareholder demanded temporary, preliminary,
and injunctive relief enjoining a scheduled special Board of
Directors meeting (the "Special Board Meeting") pending
Company's performance of acts allegedly required by New
Jersey law and by the 1934 Act.  The Majority Shareholder
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 Written 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.

The Company (and the three individual defendants) opposed
the application for temporary relief upon the grounds that
subsequent to his execution of the Written Consent, the
Majority Shareholder 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.  Defendants also alleged that the Majority
Shareholder's actions were not in the best interest of the
Company, and were 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 [the Majority Shareholder] to
file the Schedule 14C presented to the Secretary of the
Corporation."

On October 28, 2004, the parties reached an agreement with
regard to some essential terms of a settlement, pursuant to
which (1) the Company's Board of Directors would not be
expanded except by unanimous consent, (2) the Majority
Shareholder 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 (the precise terms of which were
to be agreed upon) 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 the Majority Shareholder'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 the  Shareholder's counsel on December 27,
2004.

The Majority Shareholder refused to execute formal settlement
documentation, and commenced a second action, under Docket No. OCN-
C-048-05, seeking the same relief.  The Company answered, denying
the allegations, and asserting counterclaims against the Majority
Shareholder and his wife.  On April 5, 2005, a final and
settlement was placed on the record in court.  The material terms
of that settlement are (1) the Company's Board of Directors will
be expanded from four to seven members, and the Court will appoint
the three new directors, (2) the Majority Shareholder and the
individual defendants would enter into a Voting Agreement (the
precise terms of which have already been agreed upon) pursuant to
which each agrees 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 precise terms of which have already been agreed
upon), (4) the parties would exchange general releases, and (5)
the Company would, to the extent lawfully required by the Majority
Shareholder's existing employment agreement, reimburse him for the
attorneys fees he incurred in connection with the action.



 ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS

 NONE


 ITEM 3   DEFAULTS ON SENIOR SECURITIES

 NONE

                           -13-
<PAGE>


 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






 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:    May 16, 2005
 Sam DiGiralomo, President and CEO


 BY:   /s/ Craig D. Stratton          DATED:    May 16, 2005
 Craig D. Stratton, CFO, Secretary,
 Treasurer and Principal Financial Officer


                                      -14-