SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 20, 2003
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Stonepath Group, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 001-16105 65-0867684
----------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1600 Market Street, Suite 1515
Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 979-8370
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report
General Explanation
-------------------
The purpose of this Report is to amend the Registrant's Current Report on Form
8-K dated June 20, 2003 (the "Initial Report") that was filed with the
Securities and Exchange Commission on July 7, 2003, which reported on the
acquisition by the Company of the operations and certain of the assets of
Regroup Express, LLC. This Report amends the Initial Report so as to provide the
information required under Item 7(a) and 7(b) of Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Acquired Business.
(i) Audited Financial Statements of Regroup Express, LLC
Independent Auditors' Report
Balance Sheets, December 31, 2002 and 2001
Statements of Operations, Years ended December 31, 2002
and 2001
Statements of Members' Equity, Years ended December 31, 2002
and 2001
Statements of Cash Flows, Years ended December 31, 2002
and 2001
Notes to Financial Statements
(ii) Unaudited Financial Statements of Regroup Express, LLC
Balance Sheet, March 31, 2003
Statements of Operations for the three months ended
March 31, 2003 and 2002
Statement of Members' Equity for the three months ended
March 31, 2003
Statements of Cash Flows for the three months ended
March 31, 2003 and 2002.
(b) Pro Forma Financial Information.
(i) Unaudited Pro Forma Condensed Consolidated Financial
Statements of Stonepath Group, Inc.
Pro Forma Balance Sheet, March 31, 2003
Pro Forma Statements of Operations, Three Months Ended
March 31, 2003 and Year Ended December 31, 2002
(c) Exhibits (referenced to Item 601 of Regulation S-K).
2.6 Asset Purchase Agreement by and among Stonepath Logistics
Government Services, Inc. (f/k/a "Transport Specialists,
Inc."), Regroup Express L.L.C. and Jed J. Shapiro and Charles
R. Cain, the sole members of Regroup Express L.L.C., dated
June 4, 2003***
23 Independent Auditors' Consent
99.1 Press Release dated June 23, 2003***
*** Exhibits previously filed with the Current Report on Form 8-K
dated June 20, 2003 and filed on July 7, 2003.
FINANCIAL STATEMENTS PROVIDED UNDER ITEM 7(a)
Independent Auditors' Report
The Members
Regroup Express, LLC:
We have audited the accompanying balance sheets of Regroup Express, LLC as of
December 31, 2002 and 2001, and the related statements of operations, members'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Regroup Express, LLC as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Philadelphia, Pennsylvania
May 9, 2003, except
as to note 9, which is
as of June 3, 2003
REGROUP EXPRESS, LLC
Balance Sheets
December 31, 2002 and 2001
Assets 2002 2001
------------------ ------------------
Cash and cash equivalents $ 429,411 $ 370,106
Due from Transgroup, less allowances of approximately
$745,000 and $44,000 in 2002 and 2001, respectively 1,318,771 336,864
Prepaid expenses 96,015 --
------------------ ------------------
Total current assets 1,844,197 706,970
Property and equipment, net 106,134 39,862
Other assets 3,650 1,150
------------------ ------------------
Total assets $ 1,953,981 $ 747,982
================== ==================
Liabilities and Members' Equity
Accounts payable and accrued expenses $ 702 $ 1,487
Accrued payroll 41,841 18,473
Current portion of long-term debt 28,126 15,238
------------------ ------------------
Total current liabilities 70,669 35,198
Long-term debt, net of current portion 45,065 15,109
------------------ ------------------
Total liabilities 115,734 50,307
Members' equity 1,838,247 697,675
------------------ ------------------
Total liabilities and members' equity $ 1,953,981 $ 747,982
================== ==================
See accompanying notes to financial statements.
REGROUP EXPRESS, LLC
Statements of Operations
Years ended December 31, 2002 and 2001
2002 2001
------------------ ------------------
Net revenues $ 4,163,293 $ 2,744,351
Selling, general, and administrative expenses 2,310,556 1,235,212
------------------ ------------------
Operating income 1,852,737 1,509,139
Other income (expense) 32 (344)
------------------ ------------------
Net income $ 1,852,769 $ 1,508,795
================== ==================
See accompanying notes to financial statements.
REGROUP EXPRESS, LLC
Statements of Members' Equity
Years ended December 31, 2002 and 2001
Members' equity, January 1, 2001 $ 92,438
Net income 1,508,795
Distributions to members (903,558)
------------------
Members' equity, December 31, 2001 697,675
Net income 1,852,769
Distributions to members (712,197)
------------------
Members' equity, December 31, 2002 $ 1,838,247
==================
See accompanying notes to financial statements.
REGROUP EXPRESS, LLC
Statements of Cash Flows
Years ended December 31, 2002 and 2001
2002 2001
------------------ ------------------
Cash flows from operating activities:
Net income $ 1,852,769 $ 1,508,795
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 27,091 9,154
Changes in assets and liabilities:
Due from Transgroup (981,907) (218,694)
Prepaid expenses (96,015) --
Other assets (2,500) --
Accounts payable and accrued expenses (785) (4,688)
Accrued payroll 23,368 8,610
------------------ ------------------
Net cash provided by operating activities 822,021 1,303,177
------------------ ------------------
Cash flows from investing activities:
Acquisition of property and equipment (34,144) --
------------------ ------------------
Net cash used in investing activities (34,144) --
------------------ ------------------
Cash flows from financing activities:
Payments on long-term debt (16,375) (14,982)
Change in bank overdraft -- (14,531)
Distributions to members (712,197) (903,558)
------------------ ------------------
Net cash used in financing activities (728,572) (933,071)
------------------ ------------------
Net increase in cash 59,305 370,106
Cash and cash equivalents, beginning of year 370,106 --
------------------ ------------------
Cash and cash equivalents, end of year $ 429,411 $ 370,106
================== ==================
Interest paid $ 205 $ 344
Long-term debt incurred for the purchase of vehicle 59,219 --
See accompanying notes to financial statements.
REGROUP EXPRESS, LLC
Notes to Financial Statements
December 31, 2002 and 2001
(1) Summary of Significant Accounting Policies
(a) Description of Business
Regroup Express, LLC (the Company) is involved in the domestic and
international freight forwarding and project management service
business. The Company entered into a Transportation Services
Agreement with Transgroup Express, Inc. (Transgroup), an unrelated
entity, in November 1995. Transgroup provides transportation
services to independent transportation companies. In conjunction
with this agreement, the Company acts as the exclusive agent for
Transgroup in the mid-Atlantic region. As an exclusive agent, the
Company prepares shipping documentation and paperwork on behalf of
Transgroup and ships freight using Transgroup's licenses. The
Company services a customer base of manufacturers, distributors,
national retail chains, and the United States government.
(b) Use of Estimates
The preparation of financial statements requires management to
make certain estimates and assumptions relating to the reported
amount of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. A
significant item subject to such estimates and assumptions
includes the allowance for doubtful accounts. Actual results could
differ from management's estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits with a
federally insured financial institution. All highly liquid
investments with a maturity of three months or less at the time of
purchase are considered to be cash equivalents. From time to time
throughout the year, balances in these accounts may exceed
federally insured amounts, but management does not consider this
to be significant concentration of credit risk.
(d) Property and Equipment
Property and equipment are stated at cost. Property and equipment
are depreciated using the straight-line method over the estimated
useful lives of the assets. The estimated useful life of furniture
and fixtures is seven years, while computer equipment and vehicles
are depreciated over five years. Leasehold improvements are
amortized on a straight-line basis over the shorter of the lease
term or estimated useful life of the asset.
(e) Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, on January 1, 2002. The adoption of SFAS No.
144 did not affect the Company's financial statements.
In accordance with SFAS No. 144, long-lived assets, such as
property and equipment, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash
(Continued)
REGROUP EXPRESS, LLC
Notes to Financial Statements
December 31, 2002 and 2001
flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, then
an impairment charge is recognized for the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
Assets to be disposed of would be separately presented in the
balance sheet and reported at the lower of the carrying amount or
fair value less costs to sell, and are no longer depreciated. The
assets and liabilities of a disposed group classified as held for
sale would be presented separately in the appropriate asset and
liability sections of the balance sheet.
Prior to the adoption of SFAS No. 144, the Company accounted for
long-lived assets in accordance with SFAS No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of.
Based upon management's current assessment, the estimated
remaining amortization period of long-lived assets is appropriate
and the remaining balance is fully recoverable.
(f) Revenue Recognition
The Company derives its revenues from arranging for freight
forwarding services for its customers through Transgroup. Revenues
are recognized when shipping documentation is complete and the
freight is delivered to the carrier.
(g) Income Taxes
The Company is a limited liability company, which is classified as
a partnership for tax purposes, and is not subject to federal and
state income taxes. The Company's taxable income is reported by
its members.
(h) Fair Value of Financial Instruments
At December 31, 2002 and 2001, the carrying values of the
Company's financial instruments (cash and cash equivalents, due
from Transgroup, and long-term debt) approximated their fair
values.
(i) Compensation of Members
The two members of the Company are also the president and the
managing director of the Company. In performing the roles of
president and managing director, the members do not receive
compensation, and as such there is no expense related to these
individuals reflected in the accompanying statements of
operations.
(3) Transactions with Transgroup Express, Inc.
Transgroup is responsible for the collection of the trade receivables
from the ultimate customers of the transportation services and the
payment of the associated transportation costs. In connection with this
process, Transgroup charges the Company an accounting and factoring fee
for each transaction based on an agreed-upon percentage depending on the
customer. On a periodic basis, Transgroup provides payment to the Company
which is net of the accounting and factoring fees.
Accounting and factoring fee expense incurred by the Company were
approximately $1,187,000 and $751,000 for the years ended December 31,
2002 and 2001, respectively. Such amounts are reflected in net revenues.
(Continued)
REGROUP EXPRESS, LLC
Notes to Financial Statements
December 31, 2002 and 2001
The Company bears the credit risk for the collection by Transgroup of the
trade receivable from the ultimate customer, up to an amount equal to the
trade receivable less the accounting and factoring fees withheld by
Transgroup related to the applicable transaction.
The allowance of $745,000 and $44,000 at December 31, 2002 and 2001,
respectively, is the Company's best estimate of the amount of probable
credit losses in the trade receivables for which Transgroup has not yet
collected from the ultimate customer.
(4) Business and Credit Concentrations
A substantial portion of the Company's net revenues are generated from
freight forwarding services that are provided to Zany Brainy and the
United States government through Transgroup. Net revenues generated from
the Zany Brainy and United States government customer relationships
totaled approximately $1,739,000 and $1,310,000, respectively, in 2002
and $999,000 and $1,266,000, respectively, in 2001.
On January 13, 2003, FAO, Inc., the parent of Zany Brainy, filed
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code
in the U.S. Bankruptcy Court for the District of Delaware (the Bankruptcy
Court). On April 4, 2003, the Bankruptcy Court held a confirmation
hearing on the Debtors' First Amended Joint Plan of Reorganization. At
the conclusion of this hearing, the Bankruptcy Court confirmed FAO,
Inc.'s Plan of Reorganization. On April 23, 2003, FAO, Inc. completed all
necessary elements to effectiveness of the Plan of Reorganization and
emerged from Chapter 11 bankruptcy protection.
Transgroup has an agreement with FAO, Inc. and certain of its
subsidiaries that would provide for the payment of approximately
$1,433,000, in thirty-six equal monthly payments, of the prepetition
trade receivables due from Zany Brainy which have not yet been collected
by Transgroup. The payments are contingent on the agreement being
approved by the Bankruptcy Court, which has not yet been completed. Based
on the agreement, the Company has established a reserve of approximately
$703,000 related to the Zany Brainy receivables held by Transgroup for
which the Company bears the credit risk.
(5) Property and Equipment
Property and equipment as of December 31, 2002 and 2001 consist of the
following:
2002 2001
---------------- ---------------
Computer equipment $ 26,451 $ 5,168
Furniture and fixtures 14,809 1,949
Leasehold improvements 4,110 4,110
Vehicles 104,548 45,329
---------------- ---------------
149,918 56,556
Less accumulated depreciation (43,784) (16,694)
---------------- ---------------
$ 106,134 $ 39,862
================ ===============
Depreciation expense was $27,091 and $9,154 for the years ended December
31, 2002 and 2001, respectively.
(Continued)
REGROUP EXPRESS, LLC
Notes to Financial Statements
December 31, 2002 and 2001
(6) Long-Term Debt
Long-term debt as of December 31, 2002 and 2001 consists of the
following:
2002 2001
--------------- ---------------
Note payable to bank due in monthly installments of $1,277,
interest at 0.9%, due November 2003, secured by vehicle $ 13,972 $ 30,347
Note payable to bank due in monthly installments of $1,377,
interest at 4.5%, due December 2006, secured by vehicle 59,219 --
--------------- ---------------
73,191 30,347
Less current portion (28,126) (15,238)
--------------- ---------------
$ 45,065 $ 15,109
=============== ===============
Scheduled maturities of long-term debt are as follows:
2003 $ 28,126
2004 14,793
2005 15,474
2006 14,798
2007 and thereafter --
--------------
$ 73,191
==============
(7) Retirement Plan
The Company has a defined contribution profit sharing and salary deferral
plan that covers all employees who meet the plan's eligibility
requirements. Employees may contribute up to the maximum allowed by law.
Matching contributions by the Company were $19,880 and $7,606 for the
years ended December 31, 2002 and 2001, respectively.
(8) Commitments and Contingencies
(a) Operating Lease
The Company leases office space under operating leases that expire
during 2004. Future minimum lease payments under noncancellable
operating leases as of December 31, 2002 are as follows:
2003 $ 23,698
2004 18,857
---------------
$ 42,555
===============
Rent expense includes annual increases in the base rent as well as
a pro rata allocation of real estate taxes and building operating
expenses that are passed through to the Company. Total rent
expense was $26,279 and $25,705 for the years ended December 31,
2002 and 2001, respectively.
(Continued)
REGROUP EXPRESS, LLC
Notes to Financial Statements
December 31, 2002 and 2001
(b) Litigation
The Company is involved in various claims and lawsuits that arise
in the normal course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position, results of
operations, or liquidity.
(9) Subsequent Events
On June 3, 2003, the Company entered into a definitive agreement for the
sale of certain assets of the Company to Transport Specialists, Inc., an
indirect wholly owned subsidiary of Stonepath Group, Inc. (STG), a
publicly traded corporation. The purchase consideration will consist of
cash of $3,700,000 and shares of STG common stock valued at $1,000,000.
In addition, STG agreed to pay up to an additional $22,500,000 over a
five-year earn-out period based upon the future financial performance of
the Company. The acquisition is subject to customary closing conditions.
REGROUP EXPRESS, LLC
Balance Sheet
March 31, 2003
Assets
Cash and cash equivalents $ 51,777
Due from Transgroup, less allowances of approximately $745,000 1,578,433
Prepaid expenses 96,015
-------------
Total current assets 1,726,225
Property and equipment, net 99,933
Other assets 6,525
-------------
Total assets $ 1,832,683
=============
Liabilities and Members' Equity
Accounts payable and accrued expenses $ 60,072
Accrued payroll 18,433
Current portion of long-term debt 30,231
-------------
Total current liabilities 108,736
Long-term debt, net of current portion 35,682
-------------
Total liabilities 144,418
Members' equity 1,688,265
-------------
Total liabilities and members' equity $ 1,832,683
=============
REGROUP EXPRESS, LLC
Statements of Operations
Three months ended March 31, 2003 and March 31, 2002
March 31, March 31,
2003 2002
------------ -------------
Net revenues $ 396,467 $ 367,945
Selling, general, and administrative expenses 284,784 312,399
------------ -------------
Operating income 111,683 55,546
Other income 663 -
------------ -------------
Net income $ 112,346 $ 55,546
============ =============
REGROUP EXPRESS, LLC
Statement of Changes in Members' Equity
Three months ended March 31, 2003
Members' equity, January 1, 2003 $ 1,838,247
Net income 112,346
Distributions to members (262,328)
-------------
Members' equity, March 31, 2003 $ 1,688,265
=============
REGROUP EXPRESS, LLC
Statements of Cash Flows
Three months ended March 31, 2003 and March 31, 2002
March 31, March 31,
2003 2002
----------- ------------
Cash flows from operating activities:
Net income $ 112,346 $ 55,546
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 6,201 2,293
Changes in assets and liabilities:
Due from Transgroup (259,662) (9,028)
Other assets (2,875) -
Accounts payable and accrued expenses 59,370 6,618
Accrued payroll (23,408) 4,937
----------- ------------
Net cash provided by (used in) operating activities (108,028) 60,366
Cash flows from financing activities:
Payments on long-term debt (7,278) (5,009)
Distributions to members (262,328) (300,000)
----------- ------------
Net cash used in financing activities (269,606) (305,009)
Net decrease in cash (377,634) (244,643)
Cash and cash equivalents, beginning of period 429,411 370,106
----------- ------------
Cash and cash equivalents, end of period $ 51,777 $ 125,463
=========== ============
PRO FORMA FINANCIAL INFORMATION PROVIDED UNDER ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On June 20, 2003, through its indirect wholly owned subsidiary, Stonepath
Logistics Government Services, Inc. ("SLGS"), Stonepath Group, Inc.(the
"Company") acquired the business of Regroup Express LLC, a Virginia limited
liability company ("Regroup").
The business acquired from Regroup provides time-definite domestic and
international transportation services including air and ground freight
forwarding, ocean freight forwarding, major project logistics as well as local
pick up and delivery services. The customers of the acquired business include
U.S. government agencies and contractors, select companies in the retail
industry and other commercial businesses.
The assets acquired from Regroup consist primarily of its goodwill and other
intangible assets, such as its intellectual property, employee base, operating
methods and systems, customer relationships and ongoing operations. Certain
leases were assumed and personal property was acquired, consisting primarily of
office equipment. Accounts receivable were not acquired and accounts payable and
other obligations were not assumed. The consideration paid by the Company at the
closing of the transaction was $4.7 million, which amount was paid through a
combination of $3.7 million in cash and $1.0 million of the Company's common
stock. Members of Regroup will be entitled to an earn-out arrangement over a
period of five years providing for a total base purchase price of up to $17.2
million, contingent upon the future financial performance of SLGS following the
acquisition. Members of Regroup may also be entitled to an additional earn-out
payment to the extent its pre-tax earnings exceed $17.5 million during the
earn-out period. The funds required for the cash payment at the closing were
obtained by the Company from its credit facility with LaSalle Business Credit,
Inc. The consideration was determined based on arms-length negotiations between
the parties.
The contingent payments will be accounted for as additional cost of Regroup when
the earnings contingency is resolved and the consideration is issued or becomes
issuable. Accordingly, the purchase price allocation presented herein is
preliminary and includes only the $4.7 million paid at closing plus
approximately $300 thousand of capitalized closing costs.
The following unaudited pro forma condensed consolidated balance sheet at March
31, 2003 presents the Company's acquisition of Regroup as if it had occurred on
March 31, 2003. The unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2002 and the three months ended March
31, 2003 presents the Company's acquisition of Regroup as if it had occurred on
January 1, 2002. The detailed assumptions used to prepare the unaudited pro
forma condensed consolidated financial information are contained in the
accompanying explanatory notes.
The unaudited pro forma condensed consolidated financial information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations which would have actually been
reported had the transaction been consummated at the dates mentioned above or
which may be reported in the future. This unaudited pro forma condensed
consolidated financial information is based upon the respective historical
financial statements of the Company and Regroup and should be read in
conjunction with those statements and the related notes.
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2002
(amounts in thousands, except share and per share information)
Historical Statements
-------------------------------
Pro Forma Pro Forma
Stonepath Regroup Adjustments Results
----------- --------------- ----------- -----------
Total revenues $ 139,649 $4,163 $14,297 (a) $ 158,109
Cost of transportation 101,339 13,110 (a) 114,449
----------- ------ ------- -----------
Net revenue 38,310 4,163 1,187 43,660
Selling, general and administrative costs 34,770 2,310 1,187 (a) 38,018
(399) (b)
150 (c)
----------- ------ ------- -----------
Income from operations 3,540 1,853 249 5,642
Other income (expense) 128 - (148) (d) (20)
----------- ------ ------- -----------
Income before income taxes 3,668 1,853 101 5,622
Income taxes 102 - 55 (e) 157
----------- ------ ------- -----------
Net income 3,566 1,853 46 5,465
Preferred stock dividends 15,020 - - 15,020
----------- ------ ------- -----------
Net income attributable to
common stockholders $ 18,586 $1,853 $ 46 $ 20,485
=========== ====== ======= ===========
Basic earnings per common share 0.84 0.91
Diluted earnings per common share 0.12 0.18
Basic weighted average common
shares outstanding 22,154,861 22,522,508
Diluted weighted average common
shares outstanding 29,232,568 29,600,215
(a) To reflect revenues, cost of purchased transportation services and
the accounting and factoring fees charged under an agency agreement
with another logistics services organization on a gross basis.
(b) To eliminate accounting and factoring fees associated with agent
operations, net of incremental compensation to former owners and
additional personnel.
(c) To reflect amortization of acquired identifiable intangibles.
(d) To reflect incremental interest expense at 4.0% associated with
borrowings for the $3.7 million in cash paid at closing.
(e) To reflect state tax expense.
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three months ended March 31, 2003
(amounts in thousands, except share and per share information)
Historical Statements
----------------------------------------
Pro Forma Pro Forma
Stonepath Regroup Adjustments Results
----------- ------------------ ----------- -----------
Total revenues $ 45,365 $397 $4,118 (a) $ 49,880
Cost of transportation 33,182 - 3,720 (a) 36,902
----------- ---- ------ -----------
Net revenues 12,183 397 398 12,978
Selling, general and administrative costs 11,173 285 398 (a) 11,693
(201) (b)
38 (c)
Litigation settlement 750 - - 750
----------- ---- ------ -----------
Income from operations 260 112 163 535
Other income (expense) 30 - (37) (d) (7)
----------- ---- ------ ------------
Income before income taxes 290 112 126 528
Income taxes 15 - 12 (e) 27
----------- ---- ------ -----------
Net income $ 275 $112 $ 114 $ 501
=========== ==== ====== ===========
Basic earnings per common share $ 0.01 $ 0.02
Diluted earnings per common share $ 0.01 $ 0.02
Basic weighted average common
shares outstanding 24,764,810 25,132,457
Diluted weighted average common
shares outstanding 32,313,842 32,681,489
(a) To reflect revenues, cost of purchased transportation services and
the accounting and factoring fees charged under an agency agreement
with another logistics services organization on a gross basis.
(b) To eliminate accounting and factoring fees associated with agent
operations, net of incremental compensation to former owners and
additional personnel.
(c) To reflect amortization of acquired identifiable intangibles.
(d) To reflect incremental interest expense at 4.0% associated with
borrowings for the $3.7 million in cash paid at closing.
(e) To reflect state tax expense.
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2003
(amounts in thousands)
Historical Statements
--------------------------------
Pro Forma Pro Forma
Stonepath Regroup Adjustments Results
--------- --------------- ------------ ---------
Current assets:
Cash and cash equivalents $ 2,669 $ 52 $(3,700) (a) $ 2,669
(52) (b)
3,700 (d)
Accounts receivable, net 19,411 1,578 (1,578) (b) 19,411
Other current assets 1,288 96 (96) (b) 1,288
--------- ------ ------- ---------
Total current assets 23,368 1,726 (1,726) 23,368
Goodwill and acquired intangibles, net 26,790 - 4,980 (c) 31,770
Furniture and equipment, net 4,748 100 (80) (b) 4,768
Other assets 1,228 7 (7) (b) 1,228
--------- ------ ------- ---------
$ 56,134 $1,833 $ 3,167 $ 61,134
========= ====== ======= =========
Current liabilities:
Accounts payable $ 8,663 $ 60 $ (60) (b) $ 8,663
Earn-out payable 1,061 - - 1,061
Accrued expenses 3,656 18 (18) (b) 3,956
300 (e)
Other current liabilities - 31 (31) (b) 3,700
3,700 (d)
--------- ------ ------- ---------
Total current liabilities 13,380 109 3,891 17,380
Long-term debt - 36 (36) (b) -
--------- ------ ------- ---------
Total liabilities 13,380 145 3,855 17,380
Stockholders' equity
Common stock 28 - 1 (a) 29
Additional paid in capital 201,808 - 999 (a) 202,807
Members' equity - 1,688 (1,688) (b) -
Accumulated deficit (158,989) - - (158,989)
Deferred compensation (93) - - (93)
--------- ------ ------- ---------
Total stockholders' equity 42,754 1,688 (688) 43,754
--------- ------ ------- ---------
$ 56,134 $1,833 $ 3,167 $ 61,134
========= ====== ======= =========
(a) To reflect payment of $3.7 million in cash and $1.0 million in Company
stock paid at closing.
(b) To reflect the elimination of assets, liabilities and equity balances
not acquired in the asset purchase.
(c) To reflect goodwill and other acquired intangibles.
(d) To reflect $3.7 million of incremental borrowings in connection with
the transaction.
(e) To reflect approximately $300 thousand of capitalized closing costs.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STONEPATH GROUP, INC.
Date: August 7, 2003 By: Dennis L. Pelino
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Name: Dennis L. Pelino
Title: Chairman and Chief Executive Officer