UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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.
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(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
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(Address of principal executive offices)
7 Doig Road, Suite 3, Wayne, New Jersey 07470
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(Former address of principal executive offices)
609-693-5950
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days)
Yes XX No
---- ----
The Company had 32,509,872 shares of common stock, par value $.0001 per
share, outstanding as of May 11, 2000.
1
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
INDEX
PAGE
PART 1. FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
Financial Statements with Supplemental Information
For the Period Ending March 31, 2000 and 1999
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
Supplemental Information: 8
Unaudited Pro Forma Combined Statements of Operations
For the Period Ended March 31, 1999 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS........................10
PART II. OTHER INFORMATION.............................................17
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...........................18
SIGNATURES........................................................19
2
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
ASSETS
March 31 September 30
2000 1999
---- ----
(Unaudited) *
Current Assets
Cash $412,179 $406,842
Accounts Receivable 3,889,984 3,920,495
Inventory 41,207 39,139
Prepaid Expenses and
Other Current Assets 201,375 100,006
Deferred Income Taxes 128,028 128,028
---------- ---------
Total Current Assets 4,672,773 4,594,510
---------- ---------
Property, Plant and Equipment 1,565,997 1,394,998
Less: Accumulated Depreciation 884,467 869,945
---------- ---------
Net Property, Plant and Equipment 681,530 525,053
Goodwill 599,514 631,347
Other Assets 131,620 318,754
---------- ---------
Total Assets $6,085,437 $6,069,664
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $2,526,044 $2,408,239
Accrued Expenses 1,041,145 755,177
Short-Term Bank Borrowings 300,000 -
Income taxes payable - 526,873
Shareholder Loan Payable - 5,000
Notes payable 139,397 116,245
--------- ---------
Total Current Liabilities 4,006,586 3,811,534
Long-Term Portion of Notes Payable 2,623,373 2,564,064
Stockholders' Equity (Deficit)
Common Stock 3,251 3,251
Foreign currency
translation adjustments (6,367) (14,323)
Retained Earnings (Deficit) (541,406) (294,862)
--------- ---------
Total Stockholders' Equity (Deficit) (544,522) (305,934)
--------- ---------
Total Liabilities and
Stockholders' Equity (Deficit) $6,085,437 $6,069,664
========== ==========
*Condensed from audited financial statements
The accompanying notes are an integral part of these consolidated
financial statements
3
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended March 31, Six Months Ended March 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenues (Net of Discounts) $7,440,571 $7,388,109 $15,100,052 $15,873,378
Cost of transportation 4,573,405 4,389,879 9,168,203 9,558,494
---------- ---------- ---------- ----------
Gross Profit 2,867,166 2,998,230 5,931,849 6,314,884
Selling, General and Administrative Expenses 2,840,082 2,979,239 6,015,887 5,733,144
---------- ---------- ---------- ----------
Income from Operations 27,084 18,991 ( 84,038) 581,740
Other Income (Expense)
Interest, net (53,079) (11,437) (98,574) (27,236)
Goodwill amortization (17,083) (34,165)
Other income and expense (13,184) 5,542 ( 9,303) 52,858
---------- ---------- ---------- ----------
Income Before Income Tax Provision ( 56,262) 13,096 (226,080) 607,362
Provision for Income Taxes 5,464 (1,595) 20,464 302,561
---------- ---------- ---------- ----------
Net Income ($ 61,726) $ 14,691 ($246,544) $304,801
========== ========== ========== ==========
Weighted average common shares - basic 32,509,872 32,509,872 32,509,872 32,509,872
Net income per common share - basic ($0.00) ($0.00) ($0.01) $0.01
Weighted average common shares - diluted 32,522,872 32,522,872 32,522,872 32,522,872
Net income per common share - diluted ($0.00) ($0.00) ($0.01) $0.01
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Stock Other Total
------------ Comprehensive Retained Stockholders'
Number of Income Earnings Equity
Shares Par Value (Loss) (Deficit) (Deficit)
--------- --------- ---------- ---------- ------------
Balance at September 30, 1999 32,509,872 $3,251 $(14,323) ($294,862) $(305,934)
Other Comprehensive Income
(Currency translation adjustment)
for the six months ended
March 31, 2000 9,756 7,956
Consolidated net loss for the six
months ended March 31, 2000 (246,544) ( 246,544)
---------- --------- ---------- ---------- ---------
Balance, March 31, 2000 32,509,872 $3,251 $ (6,637) $ (541,406) ($544,522)
========== ========= ========== ========== =========
</TABLE>
5
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended March 31,
2000 1999
---- ----
Cash flows from operating activities:
Net Income $(246,544) $304,801
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 100,216 87,356
Amortization 34,165 -
Provision for doubtful account 65,034 58,818
(Gain) Loss on sale of assets 6,343 582
Deferred income taxes - (23,715)
(Increase) decrease in assets:
Accounts receivable (34,524) 50,767
Prepaid expenses and other assets 79,815 8,862
Security deposits 1,150 28,275
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 398,774 (572,470)
Income tax payable (526,873) 273,023
--------- ---------
Net cash used for/provided by
operating activities (122,044) 216,299
Cash flows from investing activities:
Purchase of equipment (134,754) (70,025)
Proceed from sale of equipment 12,500 14,070
--------- ---------
Net cash used in investing activities (122,254) (55,955)
Cash flows from financing activities:
Repayments under notes payable (58,321) (60,663)
Repayments under short-term bank borrowings (100,000) (330,000)
Borrowing under short-term bank borrowings 400,000 100,000
Deferred financing costs - 60,000
--------- ---------
Net cash provided by financing activities 241,679 (230,663)
--------- ---------
Net increase in cash
and cash equivalents (2,619) (70,319)
Currency translation adjustments 7,956 3,702
Cash and cash equivalents, beginning of year 406,842 175,673
--------- ---------
Cash and cash equivalents, end of period $412,179 $109,056
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
6
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
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 1999 Form 10-
KSB filing dated January 12, 2000 (File No. 000-24991). In the opinion of
management, these interim financial statements contain all adjustments
necessary for a fair presentation of the Company's financial position at
March 31, 2000 and 1999 and the results of operations for the three months
and six months ended March 31, 2000 and 1999, respectively.
2. Net income per common share appearing in the statements of operations for the
three months and six months ended March 31, 2000 and 1999, 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. As a result of the reverse acquisition in which the sole
shareholder of Allstates Air Cargo, Inc. acquired a controlling interest in
Audiogenesis Systems, Inc., the shares issued during the fiscal year ended
September 30, 1999 are treated as being outstanding for each fiscal quarter
presented.
3. Selling, general and administrative expenses for the three months ended March
31,2000 were reduced by $27,095.85, reflecting the reimbursement to the
Company during the period by three officers and two related employees for
payments made to those individuals during the three months ended December 31,
1999. The payments had been made for unused accrued vacation time during
calendar year 1999. While this practice was accepted to a limited extent in
years prior to public status, it is not provided for in the Employment
Agreements of two of the Company officers. The amounts were paid back to the
Company, with interest at 8.5%, as soon as the error was discovered,
subsequent to the end of the first quarter of Fiscal 2000. SG&A expenses for
the six months ended March 31, 2000 were not effected.
4. During the quarter ended March 31, 2000, the Company invested $3,250.98 in a
start-up operation, e-tail Logistics, Inc., a New Jersey corporation. e-tail
Logistics, Inc. does not conduct any business at this time.
7
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SUPPLEMENTAL INFORMATION
ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1999
The Unaudited Pro Forma Combined Statement of Operations gives effect to the
merger of Audiogenesis Systems, Inc. and Allstates Air Cargo, Inc. as a
recapitalization of Allstates with Allstates as the acquirer (reverse
acquisition). This event has been presented as if it had occurred at the
beginning of the quarter. The Unaudited Pro Forma Combined Statement of
Operations gives effect to the merger under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16. In the opinion of
management, all significant adjustments necessary to reflect the effects of the
merger have been made.
The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
combined financial position of Audiogenesis and Allstates would have been, nor
does it purport to represent the future combined financial position of
Audiogenesis and Allstates. This Unaudited Pro Forma Combined Statement of
Operations should be read in conjunction with, and is qualified in its entirety
by, the financial statements and notes thereto referenced into the 10QSB.
8
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ALLSTATES WORLDCARGO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For Six Months Ended March 31, 1999
Allstates
Allstates Air Audiogenesis Pro Forma WorldCargo
Cargo, Inc. Systems Inc Merger Pro Forma
Historical Historical Adjustments Combined
----------- ----------- ---------- ------------
Revenues $15,873,378 $ 513,287 $(300,000)(A) $16,086,665
Cost of transportation 9,558,494 112,679 9,671,173
--------- ----------- ---------- ------------
Gross profit 6,314,884 400,608 (300,000) 6,415,492
--------- ----------- ---------- ------------
Selling, general
and administrative 5,773,144 213,766 (265,835)(A) 5,681,075
--------- ----------- ----------(B) ------------
Income from operations 581,740 186,842 ( 34,165) 734,417
Other income (expense):
Interest, net (27,236) (3,575) ( 89,600)(C) (120,411)
Other income 52,858 45,769 98,627
--------- ----------- ---------- ------------
Income before income taxes 607,362 229,036 (123,765) 712,633
Provision for income taxes 302,561 - ( 36,736)(D) 265,825
--------- ----------- ---------- ------------
Net income $304,801 $ 229,036 $( 87,029) $ 446,808
========= =========== ========== ============
Weighted average of
common shares
- basic 18,000,000 14,509,872 32,509,872
========== =========== ========== ============
Net income per common
share - basic $ 0.01 $ 0.00 $ 0.01
========== =========== ========== ============
Weighted average of
common shares
- diluted 18,000,000 14,522,872 32,522,872
========== =========== ========== ============
Net income per common
share - diluted $ 0.01 $ 0.00 $ 0.01
========== =========== ========== ============
(A) Represents an adjustment to eliminate inter-company
transaction ($300,000).
(B) Charges six months of amortization of goodwill ($34,165).
(C) Represents interest on the assumed note payable of $2,536,730 for 6
months at 7%.
(D) Represents the tax adjustment for the additional interest expense.
9
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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. The Company's
business is comprised of freight forwarding, distribution and sales of safety
equipment, and development and sales of audio-visual products. 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 1,300 customers utilizing ground
transportation, commercial air carriers, and ocean vessels. Allstates operates
22 offices throughout the United States, including Hawaii, and employs 102
people. In addition, Allstates has a European branch office located in London,
England that does business as Allstates Allcargo (UK), Ltd.
Results of Operations
The following table sets forth for the periods indicated certain financial
information derived from the Company's consolidated statement of operations
expressed as a percentage of net sales:
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of transportation 61.4 59.4 60.7 60.2
------ ------ ------ ------
Gross profit 38.5 40.6 39.3 39.8
Selling, general and
administrative expenses 38.1 40.3 39.9 36.1
------ ------ ------ ------
Operating income 0.4 0.3 (0.6) 3.7
====== ====== ====== ======
Net income (0.8)% 0.2% (1.6)% 1.9%
Revenues
Revenues of the Company represents gross consolidated sales less customer
discounts. Revenues for the quarter ended March 31, 2000 increased by $52,000,
or 0.7%, to $7,441,000, over the quarter ended March 31, 1999. Revenues for the
six months ended March 31, 2000 decreased by $773,000, or 4.9%, to $15,100,000
as compared to the six-month period ended March 31, 1999.
10
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The increase in total revenues for the three months ended March 31, 2000 is
primarily due to the higher volume of sales to international customers during
that period compared to the same period in Fiscal 1999. International sales
increased during the quarter by $565,000, or 37.0% in comparison to the same
quarter in Fiscal 1999, reflecting an increase in the total weight of
international cargo shipped. A significant portion of the increase in
international sales came from the Company's ocean freight business, which grew
by approximately $248,000 or 116% in comparison to the three months ended March
31, 1999.
The decrease in total revenues for the six months ended March 31, 2000
compared to the six months ended March 31, 1999 is primarily due to a lower
number of overall shipments and total weight of cargo shipped. The three-month
and six-month comparable periods were both effected by the loss of a significant
customer account, due to circumstances beyond the Company's control. Prior year
sales to that customer during the three and six months ended March 31, 1999
accounted for approximately 9.5% and 9.4%, respectively, of total company
revenues. The Company believes that it can replace the loss of any significant
account from its customer base but there is no guarantee of that occurring.
Sales for the three and six months ended March 31, 2000 include approximately
$93,000 and $190,000 respectively, generated by the Company's Audiogenesis
Systems division that was added as a result of the reverse acquisition of August
24, 1999. For comparative purposes, a supplemental pro forma statement of
operations is provided which gives effect to the merger as if it took place at
the beginning of the prior fiscal year six month period ended March 31,1999.
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. As a percentage of
revenues, the cost of sales increased by 2.1% and 0.5% respectively for the
three and six months ended March 31, 2000, in comparison to the same periods
in the previous year. The higher cost percentages for those periods in Fiscal
2000 is primarily reflective of the increase in international sales volume,
which generally carries a higher percentage cost of transportation. In
absolute terms, the cost of sales increased by $184,000 to $4,573,000 during
the three months ended March 31, 2000 versus the comparative period in the prior
year, primarily as a result of the higher international sales volume. Cost of
sales decreased by $390,000 to $9,168,000 for the six months ended March 31,
2000 in comparison to the previous year period due to the lower volume of sales.
Gross margins decreased for the three and six months ended March 31, 2000 to
38.5% and 39.3% respectively, from 40.6% and 39.8% during the same periods of
the previous year.
Gross profit decreased by $131,000 to $2,867,000 for the three months ended
March 31, 2000 and decreased by $383,000 to $5,932,000 for the six months
ended March 31, 2000, in comparison to their respective periods.
Gross margins have been affected to a limited extent during these periods by the
increased cost of fuel. Certain carriers have begun to add surcharges to their
freight bills to cover the higher fuel costs. During the quarter ended March
31, 2000, the Company itself imposed a surcharge on all transportation charges
to its customers to offset these increased fuel costs.
11
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Selling, General and Administrative Expenses
SG&A expenses decreased by $139,000 or 4.7% for the three months ended March 31,
2000 as compared to the same three month period in 1999, representing 37.2% of
revenues for the Fiscal 2000 quarter versus 40.3% of revenues in the same
quarter of the previous year. The comparative decrease primarily reflects
the cost incurred during Fiscal 1999 by Allstates Air Cargo, Inc. for the
development of customized audio-visual products for marketing presentation
purposes.
Operating expenses increased for the six months ended March 31, 2000 by
$283,000, or 4.9% over the six months ended March 31, 1999, primarily
reflecting isolated costs incurred by the Company in connection with the
reverse acquisition of Allstates Air Cargo, Inc by Audiogenesis Systems, Inc.
on August 24, 1999. During the first quarter of Fiscal 2000, the Company
recorded $140,500 in additional expense as reimbursement to one officer,
three employees and three consultants for income taxes due the IRS in
connection with non-cash compensation received for their participation in the
Company's restructuring (see financial statement note #11 included in Fiscal
1999 Form 10KSB). This amount was paid to those individuals in January 2000.
Also, in accordance with Employment Agreements that the Company entered into
with three stockholders on August 24, 1999, a bonus equating to 3% of the
Fiscal 1999 increase in before-tax profits over Fiscal 1998 was accrued for
approximately $82,000. This amount was paid to the three stockholders within
30 days of the issuance of the Fiscal 1999 audited financial statements, in
accordance with the employment agreements.
Operating expenses for the three and six month periods ended March 31, 2000
included approximately $49,000 and $106,000 respectively of costs incurred by
the Audiogenesis Systems division, which are fully incremental versus the
comparable periods in Fiscal 1999.
Administrative personnel expenses were higher for both the three and six-month
periods ended March 31, 2000 in comparison to the prior year periods, reflecting
the Company's efforts to build its corporate infrastructure and support its
future growth plans. Licensee commissions increased by approximately $181,000
and $400,000 for the three month and six month periods respectively, as compared
to the same periods in the prior fiscal year, primarily due to higher gross
profits generated by a significant licensee, as well as the incremental effect
of the addition of two licensee operations during the fourth quarter of Fiscal
1999. Those licensee operations replaced existing company locations in their
local markets. The Company realized an offsetting operating cost savings for the
three and six month periods ended March 31, 2000 of approximately $168,000 and
$318,000 respectively with the replacement of these company locations with
licensee operations, primarily due to the related reduction of personnel and
facilities costs.
Income/(Loss) From Operations
Income from operations increased during the quarter ended March 31, 2000 by
approximately $8,000, to $27,000, and decreased during the six months then ended
by approximately $666,000 to an operating loss of $84,000, as compared to the
same three month period in the previous year for the reasons indicated above.
Operating margins for the three month period ended March 31, 2000 increased by
0.1%, to 0.4%, in comparison to the prior year three month period, and for the
six month period ended March 31, 2000 decreased by 4.3% to (0.6%) of revenues,
primarily as a result of the higher selling, general and administrative expenses
as a percentage of revenues as described above.
12
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Interest Expense and Income
Net interest expense increased for the three month and six months ended
March 31, 2000 by approximately $46,000 and $76,000 respectively, compared to
the same periods in the previous year, primarily due to the note payable to the
Estate of A.G. Hoffman, Jr. that the Company assumed from Joseph M. Guido as
provided in the terms of the reverse acquisition. Interest expense on the note
was approximately $43,000 and $88,000 for the three and six month periods ended
March 31, 2000.
Net Loss
Income before income taxes decreased to a loss of ($56,000) during the quarter
ended March 31, 2000 from a profit of $13,000 during the same period in the
prior year. The Company recorded a provision for income taxes of $5,000 for the
quarter ended March 31, 2000 as compared to a tax benefit of $2,000 for quarter
ended March 31, 1999. The net loss amounted to ($62,000) in the second quarter
of Fiscal 2000 versus a net profit of $15,000 in the second quarter of Fiscal
1999.
For the six months ended March 31, 2000, income before income taxes decreased to
a loss of ($226,000) from a profit of $607,000 during the same period in the
prior year. The Company recorded a provision for income taxes of $20,000 for the
six month period ended March 31, 2000 as compared to a provision for income
taxes of $303,000 for six months ended March 31, 1999. The net loss amounted to
($247,000) for the six-month period versus a net profit of $305,000 in the same
period of the prior year.
Liquidity and Capital Resources
Cash used for operating activities was approximately $122,000 for the six months
ended March 31, 2000, compared to cash flow provided from operations of
approximately $216,000 for the six months ended March 31, 1999. During the six
months ended March 31, 2000, cash was used primarily to satisfy income tax
obligations from Fiscal 1999, offset by an increase in accounts payable. For the
six months ended March 31, 1999, cash flow was primarily provided by the net
income of the Company and an increase in income taxes payable, offset by a
decrease in accounts payable. Operating cash flows for the six-month periods in
both years were negatively impacted by the losses generated by the Company's UK
subsidiary, Allstates Allcargo, (UK) Ltd.
At March 31, 2000, the Company had cash and cash equivalents of $412,000 and net
working capital of $666,000, compared with cash and cash equivalents of $109,000
and net working capital of $723,000 respectively, at March 31, 1999. The
decrease in working capital at March 31, 2000 over the respective period in 1999
is primarily attributable to the loss for the six-month period then ended.
13
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The Company's investing activities were comprised of expenditures for
capital equipment, primarily representing purchases of computer hardware and
software, as well as company owned automobiles used by its sales
representatives. For the six months ended March 31, 2000, capital expenditures
amounted to approximately $276,000, of which approximately $141,000 was
acquired through notes payable. For the six months ended March 31, 1999,
capital expenditures amounted to approximately $143,000, of which approximately
$42,000 was acquired through notes payable.
Domestically, the Company has a commercial line of credit with a bank,
pursuant to which the Company may borrow up to $1,350,000, based on a maximum of
70% of eligible accounts receivable. Per the agreement, interest on outstanding
borrowings accrues at the Wall Street Journal's prime rate of interest less .25%
per annum (8.5% at March 31, 2000). The interest rate is predicated on the
Company maintaining a compensating account balance in a non-interest bearing
account equal to at least 15% of the outstanding principal balance. If such
average compensating balances are not maintained, the interest rate will
increase by 1% over the rate currently accruing. At March 31, 2000, $350,000
of the line of credit was restricted as collateral for a letter of credit
opened in support of a duty deferment guarantee and overdraft facility for the
Company's UK branch. As of March 31, 2000, there was $300,000 of outstanding
borrowings on the line of credit.
The Company's branch location in the United Kingdom relies primarily on its
ultimate parent company, Allstates WorldCargo, Inc., for its financial support.
In the past, the parent company has provided cash advances in the form of loans
to the UK branch to support its working capital needs and purchase computer
equipment. As of March 31, 2000, the UK branch had L269,000 in loans payable to
the parent (the equivalent of approximately $429,000). In April 1997, the parent
company deposited $165,000 (the US$ equivalent of L100,000) in a restricted
account in a UK bank, bearing interest at approximately 5%, as a condition of
obtaining a HM Customs and Excise bond. The bond is a requirement to guarantee
the payment of VAT and excise taxes to UK Customs on cargo imports, which the
Company collects from its customers. On September 27, 1999, the UK branch
entered in to an agreement with a new bank to provide a separate overdraft
facility and an HM Customs and Excise bond to replace the guarantee provided
by the original bank. The agreement is effective through March 31, 2000,
and allows the UK branch to draw to a maximum of L100,000 (the equivalent of
approximately $160,000 at March 31, 2000). Interest is calculated on the
cleared daily balance of the account, and is payable on the amount owing up to
the limit at 3% per annum over the bank's base rate (8.5% at March 31, 2000).
The overdraft facility and HM Customs guarantee is collateralized by a
$350,000 letter of credit opened at the Company's US bank. During the first
quarter of Fiscal 2000, the guarantee funds on deposit at the original bank
were released by HM Customs and Excise and applied against the overdraft
facility at the new bank. At March 31, 2000, the bank overdraft totaled
L103,627 (the equivalent of approximately $165,000).
14
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Forward Looking Statements
The statements contained in all parts of this document including, but not
limited to, those relating to the availability of cargo space; the Company's
overseas presence and the 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.
15
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
- ------------------
ITEM 1 LEGAL PROCEEDINGS
The Company is involved in an ongoing environmental proceeding. In December
1996, five underground storage tanks ("UST's") and two above ground storage
tanks were removed from a facility in which the Company leases office space.
Post-excavation sampling results confirmed that certain soil contamination
remained present after the removals at the location of two of the UST's. Also,
at the time of the removals, free-floating groundwater contamination was
observed in the area of these two former UST's. During 1999, the Company
engaged Carpenter Environmental Associates to prepare a Preliminary
Assessment/Site Investigation Report ("PA/SI Report"). Carpenter's PA/SI Report
stated that the chlorinated groundwater contamination is emanating from an
off-site source. The New Jersey Department of Environmental Protection
approved Carpenter's PA/SI Report and agreed that no further investigation of
the site was needed. A Remedial Action Workplan was submitted in November
1999. The Company is awaiting approval from the NJDEP. The Company has made
claims against their liability insurance carriers for coverage. Due to the
uncertain nature and extent of any additional remedial activities that may
be required regarding the existing site conditions, potential future costs
cannot be estimated by management or its counsel at this time. If an adverse
judgment is entered, the potential effect on the consolidated financial
position and consolidated results of operations, in the period in which
resolved, cannot be ascertained at this time, but may be material.
ITEM 2 CHANGES IN SECURITIES
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
16
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27FDS - Financial Data Schedule
(b) Reports on Form 8-K
None
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALLSTATES WORLDCARGO, INC.
BY: /s/ SAM DIGIRALOMO DATED: May 12, 2000
--------------------------------- ------------
Sam DiGiralomo, President and CEO
BY: /s/ Craig D. Stratton DATED: May 12, 2000
--------------------------------- ------------
Craig D. Stratton, CFO, Secretary,
Treasurer and Principal Financial Officer
18
[ARTICLE] 5
[CIK] 0001072293
[NAME] ALLSTATES WORLDCARGO, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] SEP-30-2000
[PERIOD-END] MAR-31-2000
[CASH] 412,179
[SECURITIES] 0
[RECEIVABLES] 4,193,912
[ALLOWANCES] 303,928
[INVENTORY] 41,207
[CURRENT-ASSETS] 4,672,773
[PP&E] 1,565,997
[DEPRECIATION] 884,467
[TOTAL-ASSETS] 6,085,437
[CURRENT-LIABILITIES] 4,006,586
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,251
[OTHER-SE] (547,773)
[TOTAL-LIABILITY-AND-EQUITY] 6,085,437
[SALES] 15,100,052
[TOTAL-REVENUES] 15,100,052
[CGS] 9,168,203
[TOTAL-COSTS] 6,050,052
[OTHER-EXPENSES] (2,960)
[LOSS-PROVISION] (6,343)
[INTEREST-EXPENSE] 98,574
[INCOME-PRETAX] (226,080)
[INCOME-TAX] 20,464
[INCOME-CONTINUING] (246,544)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (246,544)
[EPS-BASIC] (.01)
[EPS-DILUTED] (.01)
</TABLE>
