SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
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): August 8, 2003
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
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 979-8370
Not Applicable
--------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report
General Explanation
-------------------
This Amendment No. 1 on Form 8-K/A is being filed to amend the
Company's Current Report on Form 8-K filed on August 13, 2003 relating to the
Company's acquisition of the assets and operations of G-Link Express Pte. Ltd.
and G-Link Express (Cambodia) Pte. Ltd. The purpose of this amendment is to
restate the Pro Forma Financial Information included in Item 7(b).
RESTATED PRO FORMA FINANCIAL INFORMATION PROVIDED UNDER ITEM 7(b)
RESTATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On August 8, 2003, through two international subsidiaries, Stonepath
Group, Inc. (the "Company") acquired a seventy (70%) percent interest in the
assets and operations of the Singapore and Cambodia offices of the G-Link Group.
The G-Link Group is a non-asset based logistics business which provides a full
range of international logistics services including international air and ocean
transportation. The business services a customer base of manufacturers and
distributors through a network of affiliated offices in Southeast Asia and
agency relationships with partners located around the world.
The assets acquired from the G-Link Group consist primarily of the
goodwill and other intangible assets, such as intellectual property, employee
base, operating methods, systems and customer relationships, associated with the
ongoing operations of its Singapore and Cambodia offices. Personal property
consisting primarily of office equipment and eligible accounts receivable were
also acquired. In addition accounts payable and certain leases were assumed as
part of the acquisitions.
2
In consideration for a 70% interest in the assets and operations of the
two G-Link offices, the Company paid $3.7 million at closing through a
combination of $2.8 million in cash and $900 thousand in value of the Company's
common stock. The G-Link Group will also be entitled to an earn-out arrangement
over a period of four years of up to $2.5 million contingent upon the future
financial performance of the acquired offices. The funds required for the cash
payment at the closing were obtained by the Company from its credit facility
with LaSalle Business Credit, Inc. As additional purchase price, on a
post-closing basis the Company has also agreed to pay the G-Link Group for
excess closing date working capital estimated at $1.6 million through the
issuance of additional Company stock. The consideration for the transaction was
determined based on arms-length negotiations between the parties.
The acquisition was completed through two subsidiaries created by the
Company which acquired 100% of the assets and operations of the Singapore and
Cambodia offices of the G-Link Group. To give effect for the 70% interest
intended to be acquired, the Company has agreed to issue the G-Link Group a 30%
interest in the subsidiaries. As part of the transaction, the Company also
secured a five-year option to acquire the remaining 30% interest not acquired at
the closing.
The contingent earn-out payments will be accounted for as additional
cost of the acquired G-Link offices 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 $3.7
million paid at closing plus approximately $436,000 of direct acquisition costs.
The following unaudited pro forma condensed consolidated balance
sheet at March 31, 2003 presents the Company's acquisition of both G-Link
offices on a combined basis 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 both G-Link offices on a combined basis as if it had
occurred on January 1, 2002. The unaudited condensed consolidated pro forma
financial information also reflects the recent acquisition of certain assets and
operations of Regroup Express, LLC, which was acquired by the Company on June
20, 2003. Restated pro forma financial statements giving effect to the Regroup
acquisition were included within a Current Report of Form 8-K/A filed with the
SEC on August 28, 2003. 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 transactions 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, Regroup and the two acquired G-Link offices
and should be read in conjunction with those statements and the related notes.
3
The historical information for the Company in the following unaudited
pro forma condensed consolidated financial information has been restated from
the financial information previously included within the Company's Current
Report on 8-K/A by: (i) allocating more value to the customer relationship
intangible assets acquired in some of the Company's earlier acquisitions; and
(ii) revising the amortization method and life used for such assets; each in a
manner consistent with Note 2 to the consolidated financial statements contained
in the Company's Annual Report on Form 10-K/A, filed with the SEC on August 28,
2003. In addition, the pro forma adjustments in the Regroup and the G-Link
transactions have been restated to (i) allocate more value to the customer
relationship intangible assets related to those acquisition and (ii) revise the
amortization method used for such assets.
This pro forma presentation incorporates the Company's preliminary
allocation of purchase price of the acquired G-Link businesses which includes
$200,000 to covenants-not-to-compete (to be amortized on a straight line basis
over four years), $1,000,000 to the customer relationship intangible asset
(anticipated to be amortized under the declining balance method using a rate of
25%) and $2,800,000 to goodwill. These preliminary allocations will be refined
and finalized over the next several months as the Company completes the
appropriate valuation analysis.
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 Restated
--------------------------------- Regroup Restated
Restated Pro Forma Adjusted
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 35,956 2,310 1,187 (a) 39,417
(399) (b)
363 (c)
--------------- -------------- -------------- ---------------
Income from operations 2,354 1,853 36 4,243
Other income (expense) 128 - (148) (d) (20)
--------------- -------------- -------------- ---------------
Income before income taxes and minority interest 2,482 1,853 (112) 4,223
Income taxes 102 - 57 (e) 159
Minority interest - - - -
--------------- -------------- -------------- ---------------
Net income 2,380 1,853 (169) 4,064
Preferred stock dividends 15,020 - - 15,020
--------------- -------------- -------------- ---------------
Net income attributable to $ 17,400 $ 1,853 $ (169) $ 19,084
=============== ============== ============== ===============
common stockholders
Basic earnings per common share $ 0.79 $ 0.85
Diluted earnings per common share $ 0.08 $ 0.14
Basic weighted average common 22,154,861 22,522,508
shares outstanding
Diluted weighted average common 29,232,568 29,600,215
shares outstanding
4
Restated Restated
Combined G-Link Adjusted
Historical Pro Forma Pro Forma
G-Link Adjustments Results
-------------- -------------- ----------------
Total revenues $ 15,522 (130) (v) $ 173,501
Cost of transportation 12,139 (130) (v) 126,458
-------------- -------------- ----------------
Net revenue 3,383 - 47,043
Selling, general and administrative costs 1,630 300 (w) 41,347
-------------- -------------- ----------------
Income from operations 1,753 (300) 5,696
Other income (expense) 11 (112) (x) (121)
-------------- -------------- ----------------
Income before income taxes and minority interest 1,764 (412) 5,575
Income taxes 352 (3) (y) 508
Minority interest - 424 (z) 424
-------------- -------------- ----------------
Net income 1,412 (833) 4,643
Preferred stock dividends - - 15,020
-------------- -------------- ----------------
Net income attributable to $ 1,412 $ (833) $ 19,663
============== ============== ================
common stockholders
Basic earnings per common share $ 0.84
Diluted earnings per common share $ 0.15
Basic weighted average common 23,489,844
shares outstanding
Diluted weighted average common 30,567,551
shares outstanding
Regroup Pro Forma Adjustments
(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 under
the declining balance method using a 25% rate.
(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 income tax expense.
G-Link Pro Forma Adjustments
(v) To eliminate intercompany forwarding services.
(w) To reflect amortization of acquired identifiable intangibles under
the declining balance method using a 25% rate.
(x) To reflect incremental interest expense at 4.0% associated with
borrowings for the $2.8 million in cash paid at closing.
(y) To reflect reduction of state income tax expense for interest
expense associated with the $2.8 million in borrowings.
(z) To reflect income attributable to minority interests, calculated
based on 30% of the combined historical G-Link results of
operations.
5
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 Restated
--------------------------------- Regroup Restated
Restated Pro Forma Adjusted
Stonepath Regroup Adjustments Results
--------------- -------------- -------------- ---------------
Net revenues 12,183 397 398 12,978
Selling, general and administrative costs 11,455 285 398 (a) 12,008
(201) (b)
71 (c)
Litigation settlement 750 - - 750
--------------- -------------- -------------- ---------------
Income from operations (22) 112 130 220
Other income (expense) 30 - (37) (d) (7)
--------------- -------------- -------------- ---------------
Income before income taxes and minority interest 8 112 93 213
Income taxes 15 - 13 (e) 28
Minority interest - - - -
--------------- -------------- -------------- ---------------
Net income $ (7) $ 112 $ 80 $ 185
=============== ============== ============== ===============
Basic earnings per common share $ (0.00) $ 0.01
Diluted earnings per common share $ (0.00) $ 0.01
Basic weighted average common 24,764,810 25,132,457
shares outstanding
Diluted weighted average common 24,764,810 32,681,489
shares outstanding
6
Restated Restated
Combined G-Link Adjusted
Historical Pro Forma Pro Forma
G-Link Adjustments Results
-------------- -------------- ----------------
Net revenues 716 - 13,694
Selling, general and administrative costs 436 59 (w) 12,503
Litigation settlement - - 750
-------------- -------------- ----------------
Income from operations 280 (59) 441
Other income (expense) 1 (28) (x) (34)
-------------- -------------- ----------------
Income before income taxes and minority interest 281 (87) 407
Income taxes 53 (1) (y) 80
Minority interest - 68 (z) 68
-------------- -------------- ----------------
Net income $ 228 $ (154) $ 259
============== ============== ================
Basic earnings per common share $ 0.01
Diluted earnings per common share $ 0.01
Basic weighted average common 26,099,793
shares outstanding
Diluted weighted average common 33,648,825
shares outstanding
Regroup Pro Forma Adjustments
(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 under
the declining balance method using a 25% rate.
(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 income tax expense.
G-Link Pro Forma Adjustments
(v) To eliminate intercompany forwarding services.
(w) To reflect amortization of acquired identifiable intangibles under
the declining balance method using a 25% rate.
(x) To reflect incremental interest expense at 4.0% associated with
borrowings for the $2.8 million in cash paid at closing.
(y) To reflect reduction of state income tax expense for interest
expense associated with the $2.8 million in borrowings.
(z) To reflect income attributable to minority interests, calculated
based on 30% of the combined historical G-Link results of
operations.
7
STONEPATH GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2003
(amounts in thousands)
Historical Statements
--------------------------------- Regroup Restated
Restated Pro Forma Adjusted
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 25,060 - 4,980 (c) 30,040
Furniture and equipment, net 4,748 100 (80) (b) 4,768
Other assets 1,228 7 (7) (b) 1,228
--------------- -------------- -------------- ---------------
$ 54,404 $ 1,833 $ 3,167 $ 59,404
=============== ============== ============== ===============
Current liabilities:
Accounts payable and accrued expenses $ 12,319 $ 78 $ (78) (b) $ 12,619
300 (e)
Earn-out payable 1,061 - - 1,061
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) -
Deferred taxes - - - -
--------------- -------------- -------------- ---------------
Total liabilities 13,380 145 3,855 17,380
Minority interest - - - -
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 (160,719) - - (160,719)
Deferred compensation (93) - - (93)
--------------- -------------- -------------- ---------------
Total stockholders' equity 41,024 1,688 (688) 42,024
--------------- -------------- -------------- ---------------
$ 54,404 $ 1,833 $ 3,167 $ 59,404
=============== ============== ============== ===============
8
Restated
Combined G-Link Adjusted
Historical Pro Forma Pro Forma
G-Link Adjustments Results
-------------- -------------- ----------------
Current assets:
Cash and cash equivalents $ 1,874 (2,791) (u) $ 4,543
2,791 (x)
Accounts receivable, net 2,400 - 21,811
Other current assets 2,499 (2,174) (v) 1,613
-------------- -------------- ----------------
Total current assets 6,773 (2,174) 27,967
Goodwill and acquired intangibles, net - 4,000 (w) 34,040
Furniture and equipment, net 94 - 4,862
Other assets 19 (19) (v) 1,228
-------------- -------------- ----------------
$ 6,886 $ 1,807 $ 68,097
============== ============== ================
Current liabilities:
Accounts payable and accrued expenses 2,223 436 (y) 15,278
Earn-out payable - - 1,061
Other current liabilities 2,563 (2,563) (v) 6,491
2,791 (x)
-------------- -------------- ----------------
Total current liabilities 4,786 664 22,830
Long-term debt - - -
Deferred taxes 1 (1) (v) -
-------------- -------------- ----------------
Total liabilities 4,787 663 22,830
Minority interest - 741 (z) 741
Stockholders' equity
Common stock - 1 (u) 30
Additional paid in capital 73 (73) (v) 205,308
2,501 (u)
Members' equity - - -
Accumulated deficit 2,026 (2,026) (v) (160,719)
Deferred compensation - - (93)
-------------- -------------- ----------------
Total stockholders' equity 2,099 403 44,526
-------------- -------------- ----------------
$ 6,886 $ 1,807 $ 68,097
============== ============== ================
9
Regroup Pro Forma Adjustments
(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. Purchase price
allocated as follows:
Amount
--------------
Furniture and equipment $ 20
Covenant-not-to-compete (preliminary) 250
Customer relationship intangible (preliminary) 1,250
Goodwill (preliminary) 3,480
--------------
Net assets acquired $ 5,000
==============
(d) To reflect $3.7 million of incremental borrowings in connection
with the transaction.
(e) To reflect approximately $300 thousand of capitalized direct
acquisition costs.
G-Link Pro Forma Adjustments
(u) To reflect payment of $2.8 million in cash and $0.9 million in
Company stock paid at closing and $1.6 million in Company stock
paid on a post-closing basis
for excess working capital.
(v) To reflect the elimination of assets, liabilities and equity
balances not acquired in the asset purchase.
(w) To reflect goodwill and other acquired intangibles. Purchase price
allocated as follows:
Amount
--------------
Current assets $ 4,599
Furniture and equipment 94
Covenant-not-to-compete (preliminary) 200
Customer relationship intangible (preliminary) 1,000
Goodwill (preliminary) 2,800
--------------
Total acquired assets 8,693
Current liabilities 2,223
Minority Interest 741
--------------
Net assets acquired $ 5,729
==============
(x) To reflect $2.8 million of incremental borrowings in connection
with the transaction.
(y) To reflect approximately $436 thousand of capitalized direct
acquisition costs.
(z) To reflect 30% minority interest in $2.5 million of net acquired
assets (historical cost basis).
10
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 25, 2003 By: Dennis L. Pelino
-------------------------------------------
Name: Dennis L. Pelino
Title: Chairman and Chief Executive Officer