SECURITIES AND EXCHANGE COMMISSION
                    Washington, DC 20549


                          FORM 10-Q

 (Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE  ACT OF 1934 FOR THE QUARTERLY
    PERIOD ENDED June 30, 2006

[ ] 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, 2006.


<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, 2006 and 2005

      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.........18

       ITEM 3   DEFAULTS ON SENIOR SECURITIES................    18

       ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF
                SECURITY HOLDERS....                             18

       ITEM 5   OTHER INFORMATION.......................         18

       ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K................ 18

                SIGNATURES.........................              19

                               -2-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED BALANCE SHEET

                           ASSETS

                                June 30,     September 30,
                                  2006           2005
                               (Unaudited)         *
  Current Assets
    Cash                     $  647,285         180,317
    Accounts receivable
                              9,454,190      10,681,589
    Prepaid expenses and
    other current assets        357,686         317,991
    Deferred tax asset -
    current                     161,230         184,982
                             ----------      ----------
  Total current assets       10,620,391      11,364,879

  Property, plant and
  equipment                   2,085,420       1,598,231
  Less:  Accumulated
  depreciation                1,135,934         999,189
                             ----------      ----------
  Net property, plant and
  equipment                     949,486         599,042

  Goodwill, including
  acquisition cost, net         535,108         535,108
  Other assets
                                135,810         199,773
                             ----------      ----------
  Total assets              $12,240,795     $12,698,802
                             ==========      ==========

            LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities
    Accounts payable        $ 5,163,921     $ 6,420,955
    Accrued expenses          1,793,436       1,767,391
    Short-term bank
    borrowings                2,300,000       1,599,500
    Notes/leases payable -
    current portion              92,572          49,888
    Income tax payable           25,709
                             ----------      ----------
  Total current liabilities   9,375,638       9,837,734

  Deferred tax liability -
  non current                   113,196         102,368
  Long term portion of
  notes/leases payable        2,397,601       2,385,015

    Stockholders' equity
    Common stock                  3,251           3,251
    Retained earnings           351,109         370,434
                             ----------      ----------
  Total stockholders' equity    354,360         373,685

  Total liabilities and
  stockholders' equity      $12,240,795     $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         Nine Months Ended
                                June 30,                   June 30,
                            2006       2005           2006         2005
Revenues                $16,970,407 $18,662,615   $53,364,830  $50,502,337
Cost of transportation   11,864,752  13,332,804    38,265,512   35,574,632
                         ----------  ----------    ----------   ----------

Net revenue               5,105,655   5,329,811    15,099,318   14,927,705

Selling, general and
administrative expenses   5,049,832   4,952,378    14,888,368   14,086,262
                         ----------  ----------    ----------   ----------
Income/(loss) from
operations                   55,823     377,433       210,950      841,443

Other income (expense):
   Interest, net            (87,460)    (55,670)     (231,882)    (170,081)
     assets
   Other income/                                       98,223
                         ----------  ----------    ----------   ----------
Income/(loss) before
income tax provision        (31,637)    321,763        77,291      671,362

Provision for income
taxes                        45,420     157,000        96,616      319,659
                         ----------  ----------    ----------   ----------
Net income/(loss)         $ (77,057)  $ 164,763     $ (19,325)   $ 351,703
                         ==========  ==========    ==========   ==========

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

Net income per common
share - basic              $    .00      $   .01       $   .00     $    .01

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

Net income per common
share - diluted            $    .00      $   .01       $   .00     $    .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
                         (Unaudited)


                               Common Stock

                          Number            Retained     Total
                            of        Par   Earnings  Stockholders'
                          Shares     Value               Equity
                      ___________  ______  _________   _________
Balance at             32,509,872  $ 3,251  $370,434  $373,685
 September 30, 2005

 Consolidated net
 loss for the nine
 months ended June                          (19,325)    (19,325)
 30, 2006

                     ___________  ______  _________   _________
 Balance at
 June 30, 2006       32,509,872  $ 3,251   $351,109    $ 354,360
                     ===========  ======   =========   =========

                               -5-
<PAGE>


         ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                         (Unaudited)

                                        Nine Months Ended
                                            June 30,
                                         2006         2005
  Cash flows from operating
  activities:
  Net income/(loss)                   $ (19,325)   $ 351,703
  Adjustments to reconcile net
  income to net cash used for/
  provided by operating activities:
      Depreciation                      136,744       99,983
      Provision for doubtful
       accounts                         232,429      113,331
      Deferred income taxes              34,580      196,000
      (Increase) decrease in assets:
          Accounts receivable           994,970   (1,776,470)
          Prepaid expenses and other
           assets                       (24,883)       1,370
       Increase (decrease) in
        liabilities:
          Accounts payable and
           accrued expenses          (1,230,987)   1,501,574
          Income taxes payable           25,709       43,343
                                      ---------    ---------
  Net cash provided by
  operating activities                  149,237      530,834

  Cash flows from investing
  activities:
     Purchase of equipment            (487,189)     (101,412)
     Loan to licensee                               (250,000)
     Collection of loan principal       59,535        20,689
     Deposits                          (10,385)          144
                                      ---------    ---------
  Net cash used for investing
  activities                          (438,039)     (330,579)

  Cash flows from financing
  activities:
     Repayments under capital leases   (39,797)
     Borrowing under capital leases    120,067
     Repayments under notes payable    (25,000)      (25,000)
     Repayments under short-term
      bank borrowings                 (411,360)     (800,000)
     Borrowing under short-term bank
      borrowings                     1,111,860     1,100,000
                                      ---------    ---------
  Net cash provided byr
  financing activities                 755,770       275,000

  Net increase in cash                 466,968       475,255
  Cash at beginning of year            180,317       114,363
                                      ---------    ---------
  Cash, end of period                 $647,285      $589,618



         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, 2006

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 2005 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 June 30, 2006 and
  September 30, 2005 and the results of operations for the
  nine months ended June 30, 2006 and 2005, respectively.

2.   Net income per common share appearing in the statements
  of operations for the nine months ended June 30, 2006 and
  2005, 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 22 offices
throughout the United States, including corporate
facilities, and as of June 30, 2006, employed 80 full-time
and 7 part-time 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 22 offices, 15
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       Nine Months Ended
                             June 30,                  June 30,
                          2006        2005         2006      2005
                          ----        ----         ----      ----
Revenues                 100.0%      100.0%       100.0%    100.0%
Cost of transportation    69.9        71.4         71.7      70.4
                          ----        ----         ----      ----
Gross  profit             30.1        28.6         28.3      29.6
Operating expenses:
  Personnel costs          9.2         9.0         10.0       9.9
  License commissions
   and royalties          13.7        11.6         11.5      11.7
  Other selling,
  general and
  administrative
  expenses                 6.9         6.0          6.4       6.3
                          ----        ----         ----      ----
Total operating expenses  29.8        26.6         27.9      27.9

Operating income           0.3         2.0          0.4       1.7
Interest expense, net     (0.5)       (0.3)        (0.4)     (0.4)
Other income              (0.0)       (0.0)         0.2      (0.0)
Net  income  before
 tax provision            (0.2)        1.7          0.2       1.3

Tax provision             (0.3)       (0.8)        (0.2)     (0.6)
                          ----        ----         ----      ----
Net income                (0.5)%       0.9%         0.0%      0.7%
                          ====        ====         ====      ====

                              -8-
<PAGE>
Revenues

     Revenues  of  the Company represents gross consolidated
sales  less  customer  discounts.  Total  revenues  for  the
quarter ended June 30, 2006 decreased by approximately  $1.7
million,  or  9.1%, to $16,970,000, over the  quarter  ended
June  30,  2005,  reflecting a decrease  in  the  volume  of
shipments and total weight of cargo shipped.  Sales for  the
nine  month   period  ended  June  30,  2006  increased   by
approximately   $2.9  million,  or  5.7%,   to   $53,365,000
compared  to  the  nine month period ended  June  30,  2005,
reflecting  higher shipping volume during the  period.   The
lower shipping volume during the three months ended June 30,
2006  which resulted in the decrease in revenues reflects  a
sluggish  shipping environment during the quarter,  compared
to  the  same quarter of the previous fiscal year which  had
showed robust shipping activity.  In addition, prior to  the
start  of  the three month period, Allstates had  terminated
the contractual agreement of one of our licensee operations,
which   accounted  for  approximately  $950,000  of  reduced
revenues.   The  increase in revenues for  the  nine  months
ended June 30, 2006 is significantly driven by two customers
that  accounted  for  approximately $1.2  million  and  $3.5
million in incremental sales during the three and nine month
comparative periods.

     Domestic  revenues decreased by approximately  $940,000
or  (6.5)%,  to  $13,548,000 during the  three-month  period
ended June 30, 2006 in comparison to the same period in  the
previous  year,  reflecting lower shipping  volume  for  the
reasons  mentioned above. During the nine months ended  June
30,  2006, domestic revenues increased by approximately $2.4
million or 6.1%, to $42,603,000 compared to the same  period
in  the  prior  year.  International revenues  decreased  by
approximately $752,000 or (18.0)%, to $3,422,000, during the
three  months ended June 30, 2006 in comparison to the prior
year  period.  During the nine months ended June  30,  2006,
international sales increased comparatively by approximately
$428,000 or 4.1%, to $10,762,000.


Net Revenues

     Net  revenues  represents the difference between  gross
sales   and  the  cost  of  transportation.   The  cost   of
transportation is composed primarily of amounts paid by  the
Company to carriers and cartage agents for the transport  of
cargo.   Cost of transportation as a percentage of  revenues
decreased by 1.5%, to 69.9%, for the three months ended June
30,  2006,  and  increased by 1.3%, to 71.7%  for  the  nine
months  then ended, in comparison to the same period in  the
previous   year.    This  higher  cost   of   transportation
percentage  during  the  nine month  comparative  period  is
primarily  due to the continued growth of significant  lower
margin  business  that  the Company attained  during  fiscal
2004.   The Company realized improved cost of transportation
percentages  in this significant business during  the  three
months  ended June 30, 2006, which contributed to an overall
improvement during the period.  The increases in fuel  costs
as  they  affect carrier rates and an increase  in  deferred
shipments versus priority are additional factors that affect
the cost of transportation.  In absolute terms, the cost  of
transportation  decreased by approximately $1.5  million  or
11.0%, during the three months ended June 30, 2006 over  the
previous year period.  During the nine months ended June 30,
2006, cost of transportation increased by approximately $2.7
million or 7.6%,  versus the comparative period in the prior
year,  reflecting the increased sales volume.  Gross margins
increased  to 30.1% during the quarter ended June  30,  2006
from  28.6% in the same quarter of the previous fiscal year,
and  decreased  for the nine month comparative  period  then
ended  to  28.3% from 29.6% in the prior year  period.   Net
revenue  decreased by approximately ($224,000) to $5,106,000
for  the  three months ended June 30, 2006 versus  the  same
three   months   of  the  prior  year,  and   increased   by
approximately  $171,000, to $15,099,000 for the  nine  month
comparative period then ended.


Selling, General and Administrative Expenses

     As  a percentage of sales, operating expenses increased
by  3.4% for the three months ended June 30, 2006, to 29.8%,
in  comparison  to  the three months ended  June  30,  2005,
driven  by a higher rate of licensee commissions in relation
to  sales, as well as higher personnel and facilities costs.
Operating  expenses held at 27.9% of sales during  the  nine
months  ended June 30, 2006 in comparison to the prior  year
period.  In absolute terms, operating expenses increased  by
approximately $97,000 or 2.0% during the three-month  period
ended June 30, 2006 as compared to


                              -9-
<PAGE>
the  same  period in the prior fiscal year,  led  by  higher
licensee  commissions.   Operating  expenses  increased   by
approximately $802,000, or 5.7% during the nine months ended
June 30, 2006 over the prior year period.  The increases  in
SG&A  expenses  for the nine month comparative  period  were
primarily   driven  by  higher  personnel  costs,  increased
licensee commissions, and an increase in bad debt expense.

     Personnel  expenses decreased during  the  three  month
period  ended  June 30, 2006 by approximately $114,000  over
the  previous year comparative period, primarily due to  the
reversal  of the executive bonus that had accrued  over  the
first  six  months  of the fiscal year.  Personnel  expenses
also  decreased  as  a  result  of  the  conversion  of  the
Company's  Newark, New Jersey branch location to a  licensee
operation at the beginning of the quarter.  Personnel  costs
increased  by approximately $308,000 during the nine  months
ended  June  30,  2006, primarily driven 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.

     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 $157,000 for the three-month period  ended
June  30,  2006  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  $213,000.
The  conversion of the Newark branch location to a  licensee
operation at the beginning of the quarter accounted for  the
increases in the three and nine month periods.

     Expenses  related to business travel and  entertainment
increased  by approximately $96,000 during the  nine  months
ended June 30, 2006 in comparison to the same period of  the
prior  year,  reflecting the overall  increase  in  business
volume.  Fees accrued on behalf of the Company's three newly
appointed  Directors amounted to approximately  $19,000  for
the three months ended June 30, 2006,and amounted to $75,000
for  the nine months then ended, which included compensation
for the fourth quarter of fiscal 2005.

     Bad  debt expense increased for the three months  ended
June  30,  2006 by approximately $41,000, and  increased  by
approximately $119,000 for the nine months then ended.   The
increase during the three month period reflects a negotiated
settlement  payment the Company made during the quarter  for
the  return of funds received from a customer who had  filed
for  Chapter  11 bankruptcy status in 2005.  The comparative
increase in bad debt expense during the nine month period is
due  to  a combination of higher sales in fiscal 2006 versus
fiscal 2005 and a downward adjustment made during the second
quarter of fiscal 2005.  MIS fees increased by approximately
$16,000  and  $73,000 respectively for the  three  and  nine
months  ended June 30, 2006 in comparison to the prior  year
periods,  reflecting the use of two computer systems  during
the  transition  from our older system to  the  new  system.
Such  costs include fees for training and system enhancement
on  the  new Air-Trak computer system in addition  to  costs
associated with the upkeep of our current system.

     Legal  fees,  which had increased significantly  during
the  three and nine months ended June 30, 2005, 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 and nine  months  ended
June  30, 2006 in comparison to that period by approximately
$42,000 and $219,000 respectively.

     SG&A expenses presented for the three months ended June
30,  2006 and 2005 are inclusive of expenditures to  related
parties   totaling  $394,519 and  $445,779,  respectively.
SG&A  expenses presented for the nine months ended June 30,
2006  and  2005 are  inclusive  of expenditures to related
parties totaling $1,420,724 and $1,212,519, respectively.








                            -10-
<PAGE>
Income from Operations

     Operating  income  decreased during  the  three  months
ended  June  30, 2006 by approximately $322,000,  to  56,000
compared  to  the  same three month period in  the  previous
year,  for  the  reasons indicated above.  During  the  nine
month period ended June 30, 2006, operating income decreased
by  approximately $630,000, to $211,000 compared to the same
nine  month period in the prior year.  The operating  margin
decreased  for  the  three months ended  June  30,  2006  by
(1.7%),  to 0.3% of sales compared to the prior fiscal  year
period.   In comparison to the respective period ended  June
30,  2005,  the operating margin for the nine  month  period
ended June 30, 2006 decreased by 1.3%, to 0.4% of sales.


Interest Expense, net

      Interest  expense increased  for the  three  and  nine
months  ended  June  30, 2006 by approximately  $31,000  and
$62,000 respectively, as compared to the same periods in the
previous  year, reflecting higher interest rates  on  higher
average borrowing levels.


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/(Loss)

     Income  before  income taxes decreased  to  a  loss  of
approximately  ($32,000) during the quarter ended  June  30,
2006, versus net income of approximately $322,000 during the
same  period in the prior year.  The Company recorded a  tax
provision of $45,000 for the quarter ended June 30, 2006  as
compared  to  a tax provision of $157,000 for quarter  ended
June  30,  2005.   The  net  loss  after  tax  amounted   to
approximately  ($77,000) or (0.5%) of  revenues  during  the
third  quarter of Fiscal 2006 versus net income of  $165,000
or 0.9% of revenues in the third quarter of Fiscal 2005.

     Income  before  income taxes decreased to approximately
$77,000 during the nine months ended June 30, 2006,  from  a
net  profit of approximately $671,000 during the same period
in  the prior year.  The Company recorded a tax provision of
$97,000  for the nine months ended June 30, 2006 as compared
to  a  tax provision of $320,000 for nine months ended  June
30,  2005.  The net loss after tax amounted to approximately
($19,000)  or  (0.0%)  of revenues during  the  first  three
quarters  of Fiscal 2006 versus $352,000 or 0.7% of revenues
during the first three quarters of Fiscal 2005.


Liquidity and Capital Resources

       Net   cash  provided  by  operating  activities   was
approximately  $149,000 for the nine months ended  June  30,
2006  compared  to  net  cash  provided  by  operations   of
approximately  $531,000 for the nine months ended  June  30,
2005.   For  the nine months ended June 30, 2006,  cash  was
provided  by the net income of the Company and the  $995,000
decrease  in  accounts receivable, offset  by  a  $1,231,000
decrease  in accounts payable.  Net income, net of  non-cash
charges  totaled $384,000.  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 of $1,502,000,
offset by an increase in accounts receivable of $1,776,000.





                           -11-
<PAGE>
     At  June 30, 2006, the Company had cash of $647,000 and
net  working  capital of $1,245,000, compared with  cash  of
$590,000 and net working capital of $1,249,000 respectively,
at  June 30, 2005.   Working capital at June 30, 2006 versus
June 30, 2005 was affected by the Company's net income,  net
of  non-cash  charges, during the preceding  twelve  months,
offset primarily by expenditures made toward the purchase of
a new computer system.

     The  Company's  investing activities  during  the  nine
months  ended  June  30,  2006 were primarily  comprised  of
expenditures  for capital equipment, primarily  representing
purchases of computer hardware for the new computer  system.
For   the   nine   months  ended  June  30,  2006,   capital
expenditures  amounted to approximately $487,000,  of  which
approximately $120,000 is financed by a three  year  leasing
arrangement.  Capital expenditures amounted to approximately
$101,000 for the nine months ended June 30, 2005.

      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.   Through
June   30,  2006,  Allstates  has  collected  $101,108   of
principal on the loan, including $59,535 during fiscal 2006.

      The  Company  has a commercial line of credit  with  a
bank,  pursuant  to  which  the Company  may  borrow  up  to
$3,000,000,  based on a maximum of 70% of eligible  accounts
receivable.   Per the agreement, which extends  to  February
28,  2007, interest on outstanding borrowings accrues at the
Bank's  prime  rate of interest (8.00% at  June  30,  2006).
Outstanding  borrowings on the line of credit  at  June  30,
2006 and 2005 were $2,300,000 and $1,599,500, 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
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


                             -12-
<PAGE
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

                               -13-
  <PAGE>
  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 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:

  (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.


                               -14-
  <PAGE>
  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:
  "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.

  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


                               -15-
  <PAGE>
  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).
  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.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


                               -16-
  <PAGE>
  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 Mr. Guido, the majority
  shareholder, the Court entered a second order on August 24,
  2005 (the "Second August 24 Order"), which provides that Messrs. Guido,
  DiGiralomo, Theile, and Stratton 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.

  Note:  On August 2, 2006, the Company received a Written
  Consent in Lieu of a Special Meeting of the Stockholders
  of Allstates WorldCargo, Inc. (the "August 2006 Written
  Consent"), signed by the Messrs. Guido, DiGiralomo,
  Theile, and Stratton, all of whom constitute the holders
  of a majority of the issued and outstanding shares of
  stock of the Company, and the parties to the Settlement
  Agreement.   The effect of the August 2006 Written
  Consent was to modify the Settlement Agreement by (1)
  removing Messrs. Buckelew, Starkey, and Meyer from the
  Board of Directors, (2) amending Section 3.02 of the By-
  Laws to provide that the Board of Directors shall
  consist of not less than one and not more than ten
  directors, with the precise number of directors within
  that range to be set by the Board each year before the
  annual meeting of shareholders, and with the number of
  directors immediately following the adoption of the
  amended Section 3.02 being four, and (3) amending
  Sections 3.12(b) and 3.12(c) to provide that vacancies
  in the Board shall be filled by an affirmative vote of
  the remaining Board.  The actions taken in the August
  2006 Written Consent will become effective immediately
  upon the passage of 20 days from the mailing of an
  Information Statement to all stockholders of the Company
  pursuant to Regulation 14C of the Exchange Act of 1934.
  Upon the effectiveness of the August 2006 Written
  Consent, the Board will consist of Messrs. DiGiralomo,
  Theile, Stratton, and Guido.

  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 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.  On March 6, 2006 the Court granted the parties'
  Application for Determination of Good Faith Settlement
  Pursuant California Code of Civil Procedure, which would
  bars any other joint tortfeasor or co-obligor from any
  further claims against GTD arising out of the transaction.
  The entry of that March 6 Order finalized the settlement of
  the action, and on March 8 GTD submitted the settlement
  payment, thus completing its obligations under the
  settlement.

  Jeffrey H. Mims, Chapter 7 Trustee v. Allstates WorldCargo,
  Inc.   On or about May 25, 2005, the Company was made a
  defendant in an Adversary Proceeding brought by the
  bankruptcy trustee of Mosaic Group US., Inc, to recover an
  alleged preferential transfer under 11 U.S.C. Sec. 547 in
  the sum of approximately $191,000, and a post-petition
  transwer under 11 U.S.C. Sec. 549, in the sum of
  approximately $18,000.  The parties reached a settlement in
  April 2006, pursuant to which the bankruptcy trustee agreed
  to accept the $45,000 in full settlement of all claims.  On May 18,
  2006, the Bankruptcy Court Entered an Order approving the settlement.
  The Company made the
  settlement payment, and the matter has been concluded.

  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.

  In March 2006, Weiss filed a Motion for Summary Judgment
  seeking to dismiss the action, alleging that plaintiffs
  failed to exhaust their administrative remedies with the
  United States Bureau of Customs and Border Patrol.  On or
  about May 5, 2006, the Court denied that motion.
  The action is in its initial discovery stage.

                                -17-
  <PAGE>



 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

                             -18-
<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 14, 2006
 Sam DiGiralomo, President and CEO


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




                             -19-