SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 2001
STONEPATH GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-26929 65-0867684
-------- ------- ----------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
-----------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (215) 564-9193
(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 October 5, 2001 and filed October 19, 2001 (the "Initial
Report"), relative to the acquisition by Stonepath Group, Inc. of 100 percent of
the outstanding stock of M.G.R., Inc., d/b/a "Air Plus Limited" and its
operating affiliates, a group of Minneapolis-based privately held companies that
provide a full range of logistics and transportation services(collectively, "Air
Plus"). This Report amends the Initial Report so as to provide the information
required under Item 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Condensed Consolidated Financial Information.
Basis of Presentation
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2001
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the nine months ended September 30, 2001
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2000
(c) Exhibits (referenced to Item 601 of Regulation S-K).
2.5 Stock Purchase Agreement by and among Stonepath Logistics, Inc.,
Stonepath Group, Inc. and M.G.R., Inc., Distribution Services,
Inc., Contract Air, Inc., the Shareholders of M.G.R., Inc.,
Distribution Services, Inc., Contract Air, Inc. and Gary A. Koch
(as Shareholders' Agent)*
2.6 First Amendment to Stock Purchase Agreement by and among
Stonepath Logistics, Inc., Stonepath Group, Inc. and M.G.R.,
Inc., Distribution Services, Inc., Contract Air, Inc., the
Shareholders of M.G.R., Inc., Distribution Services, Inc.,
Contract Air, Inc. and Gary A. Koch (as Shareholders' Agent)*
10.65 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and Jack E. Duffey*
10.66 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and David A. Koch*
10.67 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and Robert G. Heydt*
10.68 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and James R. Such*
10.69 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and Robert C. Carlson*
10.70 Executive Employment Agreement dated as of October 5, 2001
between M.G.R., Inc. and Gary A. Koch*
23 Consent of Independent Accountants*
99.1 Press Release dated October 8, 2001*
99.2 Press Release dated October 10, 2001*
*Filed as part of the Registrant's Current Report on Form 8-K
dated October 5, 2001, filed October 19, 2001, and incorporated herein
by reference.
PRO FORMA FINANCIAL INFORMATION PROVIDED UNDER ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On October 5, 2001, Stonepath Group, Inc. ("Stonepath") acquired 100 percent of
the outstanding stock of M.G.R., Inc., d/b/a "Air Plus Limited" and its
operating affiliates, a group of Minneapolis-based privately held companies that
provide a full range of logistics and transportation services (collectively,
"Air Plus"). The total value of the transaction was $34.5 million, consisting of
cash of $17.5 million paid at closing and a four year earn-out arrangement based
upon the future financial performance of Air Plus. The $17.0 million earn-out is
payable in annual installments of $3.0, $5.0, $5.0, and $4.0 million,
respectively, for each of the 2002, 2003, 2004, and 2005 calendar years that
Air Plus achieves pre-tax net income of at least $6.0 million (the "targeted net
income"). The earn-out payment is reduced on a dollar-for-dollar basis to the
extent Air Plus does not meet the targeted net income.
These contingent payments will be accounted for as additional cost of Air Plus
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 $17.5 million paid at closing financed through
Stonepath's existing funds.
The following unaudited pro forma condensed consolidated balance sheet at
September 30, 2001 presents Stonepath's acquisition of Air Plus as if it had
occurred on September 30, 2001. The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 2000 and the nine months
ended September 30, 2001 presents Stonepath's acquisition of Air Plus as if it
had occurred on January 1, 2000 and excludes the historical effect of
discontinued operations. 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 Stonepath and Air Plus and should be read in conjunction
with those statements and the related notes.
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2001
Historical Statements
--------------------------- Pro Forma Pro Forma
Assets Stonepath Air Plus Adjustments Results
------------- ----------- -------------- -------------
Current assets:
Cash and cash equivalents $ 31,876,170 $ 428,070 $ (18,700,000)(a) $ 13,604,240
Available-for-sale securities 57,846 301,967 -- 359,813
Accounts receivable, less allowance for doubtful
accounts of $169,601 -- 7,960,903 -- 7,960,903
Loans receivable 130,162 -- -- 130,162
Prepaid expenses and other current assets 30,375 298,209 -- 328,584
------------- ----------- ------------- -------------
Total current assets 32,094,553 8,989,149 (18,700,000) 22,383,702
Ownership interests in and advances to Affiliate Companies 1,433,783 -- -- 1,433,783
Goodwill, net -- -- 12,905,639 (b) 12,905,639
Furniture and equipment, net 75,043 1,355,215 -- 1,430,258
Other assets 382,265 240,814 1,000,000 (c) 1,623,079
------------- ----------- ------------- -------------
$ 33,985,644 $10,585,178 $ (4,794,361) $ 39,776,461
============= =========== ============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 303,808 $ 5,445,455 $ -- $ 5,749,263
Notes payable to shareholders -- 245,362 -- 245,362
Short-term borrowings -- 100,000 -- 100,000
Net liabilities of discontinued operations 695,000 -- -- 695,000
------------- ----------- ------------- -------------
Total current liabilities 998,808 5,790,817 -- 6,789,625
------------- ----------- ------------- -------------
Stockholders' equity:
Convertible preferred stock, Series C 3,868 -- -- 3,868
Common stock, Stonepath Group 20,487 -- -- 20,487
Common stock, Air Plus -- 304,270 (304,270)(d) --
Additional paid-in capital 209,567,588 -- -- 209,567,588
Retained earnings (deficit) (173,609,522) 4,705,376 (4,705,376)(d) (173,609,522)
Deferred compensation (2,808,354) -- -- (2,808,354)
Accumulated other comprehensive loss (187,231) (215,285) 215,285 (d) (187,231)
------------- ----------- ------------- -------------
Total stockholders' equity 32,986,836 4,794,361 (4,794,361) 32,986,836
------------- ----------- ------------- -------------
$ 33,985,644 $10,585,178 $ (4,794,361) $ 39,776,461
============= =========== ============= =============
Pro Forma Adjustment Legend
(a) To reflect payment of $17.5 million purchase price paid at closing plus
approximately $1.2 million of capitalized closing costs.
(b) To reflect the excess of the acquisition cost over the estimated fair value
of net assets acquired (goodwill).
(c) To reflect the value assigned to acquired intangibles
(d) To reflect the elimination of the stockholders' equity accounts of
Air Plus.
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine months ended September 30, 2001
Historical Statements
------------------------------ Pro Forma Pro Forma
Stonepath Air Plus Adjustments Results
------------- ------------- -------------- ------------
Revenues $ -- $ 40,044,898 $ -- $ 40,044,898
Operating expenses:
Purchased transportation -- (23,142,551) -- (23,142,551)
Salaries, wages and benefits (1,265,445) (6,867,679) -- (8,133,124)
Depreciation and amortization (107,165) (384,518) -- (491,683)
Rent (158,804) (2,145,589) -- (2,304,393)
Stock-based compensation (3,369,406) -- -- (3,369,406)
General and administrative (2,188,527) (5,454,637) (90,000)(a) (7,733,164)
------------ ----------- -------- ------------
Total operating expenses (7,089,347) (37,994,974) (90,000) (45,174,321)
------------ ----------- -------- ------------
Income (loss) from operations (7,089,347) 2,049,924 (90,000) (5,129,423)
Interest and dividend income 1,175,536 10,252 (841,500)(b) 344,288
Other losses (4,502,696) -- -- (4,502,696)
Equity in losses of Affiliate Companies (3,284,609) (3,819) -- (3,288,428)
------------ ----------- -------- ------------
Net income (loss) from continuing operations $(13,701,116) $ 2,056,357 $(931,500) $(12,576,259)
============ =========== ======== ============
Basic and diluted net loss per common share -
continuing operations $ (0.83)(c) $ (0.77)(c)
============ ============
Pro Forma Adjustment Legend
(a) To reflect amortization of acquired identifiable intangibles
(b) To reflect payment of $17.5 million purchase price paid at closing plus
approximately $1.2 million of capitalized closing costs and resulting
reduced average cash balance invested at a rate of 6%.
(c) Basic and diluted net loss per common share - continuing operations
calculated as follows:
Historical Pro Forma
Stonepath Results
---------------- ----------------
Net loss $ (13,701,116) $ (12,576,259)
Preferred stock dividends (3,238,502) (3,238,502)
---------------- ----------------
Net loss attributable to common stockholders $ (16,939,618) $ (15,814,761)
================ ================
Weighted average common shares outstanding 20,463,909 20,463,909
================ ================
Basic and diluted net loss per common share $ (0.83) $ (0.77)
================ ================
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2000
Historical Statements
------------------------------ Pro Forma Pro Forma
Stonepath Air Plus Adjustments Results
-------------- ------------- ------------ ------------
Revenues $ -- $56,201,458 $ -- $ 56,201,458
Operating expenses:
Purchased transportation -- (31,856,174) -- (31,856,174)
Salaries, wages and benefits (1,830,137) (11,805,734) 4,612,486 (a) (9,023,385)
Depreciation and amortization (1,620,855) (424,803) (120,000)(b) (2,145,658)
Rent (355,729) (2,097,615) -- (2,453,344)
Stock-based compensation (15,887,067) -- -- (15,887,067)
General and administrative (5,375,798) (6,216,391) -- (11,592,189)
------------ ---------- ----------- ------------
Total operating expenses (25,069,586) (52,400,717) 4,492,486 (72,977,817)
------------ ---------- ----------- ------------
Income (loss) from operations (25,069,586) 3,800,741 4,492,486 (16,776,359)
Interest and dividend income 2,080,140 55,542 (1,122,000)(c) 1,013,682
Other losses (4,981,933) (66,394) -- (5,048,327)
Equity in losses of Affiliate Companies (7,781,868) -- -- (7,781,868)
------------ ---------- ----------- ------------
Net income (loss) from continuing operations $(35,753,247) $3,789,889 $ 3,370,486 $(28,592,872)
============ ========== =========== ============
Basic and diluted net loss per common share -
continuing operations $ (4.62)(d) $ (4.21)(d)
============ ============
Pro Forma Adjustment Legend
(a) To reflect contractual reduction in officers compensation at Air Plus, a
former S-Corporation.
(b) To reflect amortization of acquired identifiable intangibles
(c) To reflect payment of $17.5 million purchase price paid at closing plus
approximately $1.2 million of capitalized closing costs and resulting
reduced average cash balance invested at a rate of 6%.
(d) Basic and diluted net loss per common share - continuing operations
calculated as follows:
Historical Pro Forma
Stonepath Results
------------------- --------------------
Net loss $ (35,753,247) $ (28,592,872)
Preferred stock dividends (45,750,830) (45,750,830)
----------------- ------------------
Net loss attributable to common stockholders $ (81,504,077) $ (74,343,702)
================= ==================
Weighted average common shares outstanding 17,657,913 17,657,913
================= ==================
Basic and diluted net loss per common share $ (4.62) $ (4.21)
================= ==================
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, thereunto duly authorized.
STONEPATH GROUP, INC.
Date: December 19, 2001 By: /s/ Dennis L. Pelino
--------------------------------------------
Name: Dennis L. Pelino
Title: Chairman and Chief Executive Officer