SECURITIES AND EXCHANGE COMMISSION
                               Washington, DC 20549


                                      FORM 10-Q

 (Mark One)

XX  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 August 11, 2005.

                               -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 June 30, 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.........................        13


       ITEM 1.  LEGAL PROCEEDINGS.......................         13

      ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS.........14

       ITEM 3   DEFAULTS ON SENIOR SECURITIES................    14

       ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF
                SECURITY HOLDERS....                             14

       ITEM 5   OTHER INFORMATION.......................         14

       ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K................ 14

                SIGNATURES.........................              15

                               -2-
<PAGE>



         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED BALANCE SHEET

                           ASSETS

                                June 30,       September
                                                  30,
                                  2005           2004
                               (Unaudited)         *
  Current Assets
    Cash                    $   589,618     $  114,363
    Accounts receivable
                              9,736,531      8,073,391
    Prepaid expenses and
    other current assets        209,727        119,108
    Deferred tax asset -
    current                     135,000        351,000
                            -----------    -----------
  Total current assets       10,670,876      8,657,862

  Property, plant and
   equipment                  1,469,507      1,368,095
  Less:  Accumulated
   depreciation                 960,206        860,222
                            -----------    -----------
  Net property, plant and
   equipment                    509,301        507,873

  Goodwill, including
   acquisition cost, net        535,108        535,108
  Other assets                  223,401         86,224
                            -----------    -----------
  Total assets             $ 11,938,686     $9,787,067

       LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

  Current Liabilities
    Accounts payable         $6,315,971     $5,274,000
    Accrued expenses          1,637,979      1,178,377
    Short-term bank
     borrowings               1,399,500      1,099,500
    Income taxes payable         43,343
    Notes payable                25,000         25,000
                            -----------    -----------
  Total current liabilities   9,421,793      7,576,877

  Deferred tax liability -
  non current                    58,000         78,000
  Long term portion of notes
  payable                     2,336,730      2,361,730

   Stockholders'
     equity (deficit)
    Common stock                  3,251          3,251
    Retained earnings           118,912       (232,791)
                            -----------    -----------
  Total stockholders'
   equity (deficit)              122,163       (229,540)

  Total liabilities and
  stockholders'
  equity (deficit)           $11,938,686     $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)

                           Three Months Ended    Nine Months Ended
                                June 30,              June 30,
                            2005       2004       2005       2004
Revenues (net of
 discounts)               $18,662,615  $14,565,851   $50,502,337  $40,119,401
Cost of transportation     13,332,804    9,886,379    35,574,632   27,038,830
                           ----------   ----------    ----------   ----------
Gross profit                5,329,811    4,679,472    14,927,705   13,080,571

Selling, general and
administrative expenses    4,952,378     4,287,461    14,086,262   12,377,372
                           ----------   ----------    ----------   ----------
Income from operations       377,433       392,011       841,443      703,199

Other income (expense):
   Interest, net             (55,670)      (54,636)     (170,081)    (162,321)

   Gain/(loss) on sale of
     assets                                  2,000                     (1,587)
   Other income                              9,294                      9,294
                           ----------   ----------    ----------   ----------
Income before
income tax provision          321,763      348,669       671,362      548,585

Provision for income
taxes                         157,000      184,000       319,659      305,000
                           ----------   ----------    ----------   ----------
Net income                 $  164,763   $  164,669    $  351,703    $ 243,585

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

Net income per common
share - basic                $    .01      $   .01       $   .01     $    .01

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

Net income per common
share - diluted              $    .01      $   .01       $   .01     $    .01

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 (DEFICIT)
                         (Unaudited)

                               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 nine
 months ended June                            351,703    351,703
 30, 2005

                     ___________  ______  _________   _________
 Balance at
 June 30, 2005       32,509,872  $ 3,251   $118,912    $ 122,163
                     ===========  ======   =========   =========

                               -5-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                         (Unaudited)

                                        Nine Months Ended
                                            June 30,
                                         2005         2004
  Cash flows from operating
  activities:
  Net income                          $ 351,703    $ 243,585
  Adjustments to reconcile net
  income to net cash provided
    by operating activities:
      Depreciation                       99,983      122,478
      Provision for doubtful
  accounts                              113,331     116,113
      (Gain)/loss on sale of assets        0          1,587
      Deferred income taxes             196,000     249,000
      (Increase) decrease in assets:
          Accounts receivable        (1,776,470) (1,201,483)

          Prepaid expenses and other
  assets                                  1,370        (813)
       Increase (decrease) in
  liabilities:
          Accounts payable and
  accrued expenses                    1,501,574     346,015
          Income taxes payable           43,343           0
                                      ---------   ---------
  Net cash provided by/(used for)
  operating activities                  530,834    (123,518)

  Cash flows from investing
  activities:
     Purchase of equipment            (101,412)   (382,014)
     Proceeds from sale of property
  and equipment                           0         20,150
     Loan to licensee                 (250,000)          0
     Collection of loan principal       20,689           0
     Deposits                              144       3,200
                                      ---------   ---------
  Net cash used for investing
  activities                          (330,579)   (358,664)

  Cash flows from financing
  activities:
     Repayments under notes payable    (25,000)    (28,836)
     Repayments under short-term
  bank borrowings                     (800,000)   (100,000)
     Borrowing under short-term bank
  borrowings                         1,100,000     200,000
                                      ---------   ---------
  Net cash provided by financing
  activities                          275,000     71,164

  Net increase (decrease)  in cash
  and cash equivalents                475,255     (411,018)
  Cash at beginning of year
                                      114,363      516,639
                                      ---------   ---------
  Cash and cash equivalents, end of
  period                             $589,618     $105,621
                                     ==========   =========


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

                               -6-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        June 30, 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 June 30, 2005 and
  September 30, 2004 and the results of operations for the
  three and nine months ended June 30, 2005 and 2004,
  respectively.

2.   Net income per common share appearing in the statements
  of operations for the three and nine months ended June 30,
  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 98 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       Nine Months Ended
                             June 30,                  June 30,
                          2005        2004         2005      2004
                          ----        ----         ----      ----
Revenues                 100.0%      100.0%       100.0%    100.0%
Cost of transportation    71.4        67.9         70.4      67.4
                          ----        ----         ----      ----
Gross profit              28.6        32.1         29.6      32.6

Operating expenses:
 Personnel costs           9.0        11.2          9.9      12.0
 License commissions      11.6        12.0         11.7      11.8
   and royalties
 Other selling,
  general and
  administrative
  expenses                 6.0         6.2          6.3       7.0
                          ----        ----         ----      ----
Total operating
 expenses                 26.6        29.4         27.9      30.8

Operating income           2.0         2.7          1.7       1.8
Interest expense, net     (0.3)       (0.4)        (0.4)     (0.4)
Other income (expense)    (0.0)        0.1         (0.0)     (0.0)
Net income before
 tax provision             1.7         2.4          1.3       1.4
                          ----        ----         ----      ----
Tax provision              0.8%        1.3%        (0.6)%    (0.8)%
Net income                 0.9%        1.1%         0.7%      0.6%

                                8
<PAGE>

Revenues

     Revenues  of  the Company represents gross consolidated
sales  less  customer  discounts.  Total  revenues  for  the
quarter ended June 30, 2005 increased by approximately  $4.1
million,  or  28.1%, to $18,663,000, over the quarter  ended
June  30, 2004, reflecting a higher volume of shipments  and
total  weight  of cargo shipped.  Sales for the  nine  month
period ended June 30, 2005 increased by approximately  $10.4
million, or 25.9%, to $50,502,000 compared to the nine month
period  ended  June  30, 2004, for the  same  reasons.   The
increase  in  revenues  during  the  three  and  nine  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   $2.3
million  or  19.2%,  to $14,489,000 during  the  three-month
period  ended June 30, 2005 in comparison to the same period
in  the previous year, reflecting higher shipping volume for
the  reasons  mentioned above. During the nine months  ended
June  30, 2005, domestic revenues increased by approximately
$7.9  million or 24.3%, to $40,168,000 compared to the  same
period  in the prior year.  International revenues increased
by  approximately  $1.8  million or  72.8%,  to  $4,174,000,
during the three months ended June 30, 2005 in comparison to
the  prior  year period.  During the nine months ended  June
30,  2005,  international sales increased  comparatively  by
approximately $2.5 million or 32.4%, to $10,334,000.


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 3.5%,
to  71.4%,  for  the three months ended June 30,  2005,  and
increased by 3.0%, to 70.4% for the nine 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 first attained
during  fiscal 2004.  In absolute terms, the cost  of  sales
increased  by  approximately  $3.4  million  or  34.9%,   to
$13,333,000 during the three months ended June 30, 2005 over
the previous year period.  During the nine months ended June
30,  2005,  cost  of  sales increased by approximately  $8.5
million  or  31.6%,  to $35,575,000 versus  the  comparative
period  in  the  prior year, reflecting the increased  sales
volume.  Gross margins decreased to 28.6% during the quarter
ended  June 30, 2005 from 32.1% in the same quarter  of  the
previous  fiscal  year, and decreased  for  the  nine  month
comparative  period then ended to 29.6% from  32.6%  in  the
prior  year period.  Gross profit increased by approximately
$650,000, to $5,330,000 for the three months ended June  30,
2005  versus  the same three months of the prior  year,  and
increased by approximately $1,847,000, to 14,928,000 for the
nine  month  comparative  period then  ended, reflecting the
increases in sales volume.


Selling, General and Administrative Expenses

     As  a percentage of sales, operating expenses decreased
by  2.8% for the three months ended June 30, 2005, to 26.6%,
in  comparison  to  the three months ended  June  30,  2004,
reflecting  the  growth rate in sales in relation  to  fixed
operating expenses, primarily those related to personnel and
company  facilities.  During the nine months ended June  30,
2005, operating expenses decreased by 2.9% in comparison  to
the same period of the previous year, to 27.9% of sales, for
the  same  reason.   In absolute terms,  operating  expenses
increased  by  approximately $665,000 or  15.5%  during  the
three-month  period ended June 30, 2005 as compared  to  the
same  period  in the prior fiscal year.  Operating  expenses
increased  by approximately $1,709,000, or 13.8% during  the
nine  months ended June 30, 2005 over the prior year period.
The  increases in SG&A expenses for the three and nine 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 $435,000 for the three-month period  ended
June  30,  2005  in  comparison to the same  period  in  the
previous year, and increased for the nine months then  ended
over  the  previous year period by approximately $1,203,000.
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 June
30,  2005 in comparison to the same period of the prior year
by approximately $193,000, and increased for the nine months
ended   June  30,  2005  by  approximately  $428,000.    The
increased  expense primarily reflects Allstates defense  and
settlement effort related to  an  action  commenced  by  the
majority  shareholder against the Company during the  fourth
quarter of fiscal 2004.

     Personnel  expenses increased for the  three  and  nine
month  periods ended June 30, 2005 by approximately  $44,000
and   $198,000,   respectively,  over  the   previous   year
comparative  periods.   This  increase  primarily   reflects
higher  operations personnel salaries necessary  to  sustain
the  growth in business volume, and higher corporate  salary
expense  resulting from new employment agreements that  were
ratified during the third quarter of fiscal 2005 as well  as
the  addition of a Director of MIS during the third  quarter
of fiscal 2004.

     SG&A expenses presented for the three months ended June
30,  2005 and 2004 are inclusive of expenditures to  related
parties totaling $445,779 and $392,495, respectively.   SG&A
expenses presented for the nine months ended June 30 ,  2005
and  2004  are inclusive of expenditures to related  parties
totaling $1,212,519 and $1,141,830, respectively.



Income from Operations

     Operating  income  decreased during  the  three  months
ended  June 30, 2005 by approximately $15,000, to  $377,000,
from $392,000 in the same three month period in the previous
year,  for  the  reasons indicated above.  During  the  nine
month period ended June 30, 2005, operating income increased
by  approximately $138,000, to $841,000 compared to the same
nine  month period in the prior year.  The operating  margin
decreased for the three months ended June 30, 2005 by  0.7%,
to  2.0%  of sales compared to the prior fiscal year period.
In  comparison to the respective period ended June 30, 2004,
the  operating margin for the nine month period  ended  June
30, 2005 decreased by 0.1%, to 1.7% of sales.

Interest Expense, net

     Interest expense increased  for the three and nine
months ended June 30, 2005 by approximately $1,000 and
$8,000 respectively, as compared to the same periods in the
previous year, reflecting higher interest rates on borrowed
funds.

Net Income

     Income before income taxes decreased to $322,000 during
the quarter ended June 30, 2005,  versus $349,000 during the
same  period in the prior year.  The Company recorded a  tax
provision of $157,000 for the quarter ended June 30, 2005 as
compared  to  a  tax provision of $184,000 for  the  quarter
ended  June  30,  2004.  Net income after  tax  amounted  to
approximately $165,000 or 0.9% of revenues during the  third
quarter  of Fiscal 2005 versus $165,000 or 1.1% of  revenues
in the third quarter of Fiscal 2004.

                                10
<PAGE>

     Income before income taxes increased to $671,000 during
the  nine months ended June 30, 2005,  from $549,000  during
the  same period in the prior year.  The Company recorded  a
tax provision of $320,000 for the nine months ended June 30,
2005  as  compared to a tax provision of $305,000  for  nine
months  ended June 30, 2004.  Net income after tax  amounted
to  approximately  $352,000 or 0.7% of revenues  during  the
first three quarters of Fiscal 2005 versus $244,000 or  0.6%
of revenues during the first three quarters of Fiscal 2004.



Liquidity and Capital Resources

     Net   cash   provided  by  operating   activities   was
approximately  $531,000 for the nine months ended  June  30,
2005,  compared to cash used for operations of approximately
$124,000 for the nine months ended June 30, 2004.   For  the
nine  months ended June 30, 2005, cash was provided  by  the
net income of the company as well as an increase in accounts
payable,   offset   by  a  related  increase   in   accounts
receivable.  For the nine months ended June 30,  2004,  cash
was  used  to  finance  an increase in accounts  receivable,
offset by the Company's profit during the period as well  as
an increase in accounts payable.

     At  June 30, 2005, the Company had cash of $590,000 and
net  working  capital of $1,249,000, compared with  cash  of
$106,000 and net working capital of $1,013,000 respectively,
at June 30, 2004.  The change in working capital at June 30,
2005  over  June 30, 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 nine months ended June 30, 2005,  capital
expenditures  amounted  to  approximately  $101,000,   while
capital  expenditures amounted to approximately $82,000  for
the nine months ended June 30, 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 (6.00% at June  30,
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  $1,250,000  at  June  30,  2005  and  2004,
respectively.


                                11
<PAGE>


Forward Looking Statements

The Company is making this statement in order to satisfy the
"safe harbor" provisions contained in the Private Securities
Litigation Reform Act of 1995.  The statements contained in
all parts of this document (including the portion, if any,
appended to the Form 10-K) including, but not limited to,
those relating to the availability of cargo space; the
Company's plans for, effects, results and expansion of
international operations and agreements for international
cargo; future international revenue and international market
growth; the future expansion and results of the Company's
terminal network; plans for local delivery services and
truck brokerage; future improvements in the Company's
information systems and logistic systems and services;
technological advancements; future marketing results;
construction of the new facilities; the effect of
litigation; future costs of transportation; future operating
expenses; future margins; any seasonality of the Company's
business; future dividend plans; future acquisitions and the
effects, benefits, results, terms or other aspects of any
acquisition; Ocean Transportation Intermediary License;
ability to continue growth and implement growth and business
strategy; the ability of expected sources of liquidity to
support working capital and capital expenditure
requirements; future expectations; and any other statements
regarding future growth, future cash needs, future
terminals, future operations, business plans, future
financial results, financial targets and goals; and any
other statements which are not historical facts are
forward-looking statements. When used in this document, the
words "anticipate," "estimate," "expect," "may," "plans,"
"project" and similar expressions are intended to be among
the statements that identify forward-looking statements.
Such statements involve risks and uncertainties, including,
but not limited to, those relating to the Company's
dependence on its ability to attract and retain skilled
managers and other personnel; the intense competition within
the freight industry; the uncertainty of the Company's
ability to manage and continue its growth and implement its
business strategy; the Company's dependence on the
availability of cargo space to serve its customers; the
effects of regulation; results of litigation; the Company's
vulnerability to general economic conditions; the control by
the Company's principal shareholder; risks of international
operations; risks relating to acquisitions; the Company's
future financial and operating results, cash needs and
demand for its services; and the Company's ability to
maintain and comply with permits and licenses, as well as
other factors detailed in this document and the Company's
other filings with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those
indicated. The Company undertakes no responsibility to
update for changes related to these or any other factors
that may occur subsequent to this filing.


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.


                                12
<PAGE>



 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").
(Some time after the commencement of the action, the majority
shareholder acquired beneficial ownership of additional shares,
bringing his total ownership to 58.47%)

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


                                13
<PAGE>


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 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.

On May 27, 2005, the Court entered an Order for Judgment, entering
a Final Judgment in accordance with the terms of the settlement
read into the record on April 5, 2005.  On June 6, 2005, the Court
entered an Order reconfirming the May 27, 2005 Order, and
recognizing the Employment Agreements, the Voting Agreement, and
the General Release attached thereto to be binding on the parties,
notwithstanding the lack of signatures.



 ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS

 NONE


 ITEM 3   DEFAULTS ON SENIOR SECURITIES

 NONE


 ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE


 ITEM 5   OTHER INFORMATION

 NONE


 ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits
                 None

          (b)  Reports on Form 8-K
                 None

                                14
<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:    August 12, 2005
     Sam DiGiralomo, President and CEO


 BY:  /s/ Craig D. Stratton            DATED:    August 12, 2005
    Craig D. Stratton, CFO,Secretary,
    Treasurer and Principal Financial Officer


                               15