SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
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
----------
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
Item 2. Acquisition or Disposition of Assets.
----------------------------------------------
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 L.L.C., a Virginia
limited liability company ("Regroup"), by purchasing substantially all of
Regroup's assets.
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. 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. 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 acquisition also included the employment of Jed J. Shapiro and
Charles R. Cain, the sole members and principal managers of Regroup, as the
executive managers of SLGS.
Prior to the acquisition, Regroup operated under an agency agreement
with another logistics service business. Accordingly, its financial statements
for the periods prior to the acquisition only reflected revenue net of the cost
of purchased transportation and other agency charges. Following the acquisition,
the Company will conduct the acquired operations for its own account and not as
an agent. If Regroup had conducted its business in the manner in which it will
be conducted as a business unit of the Company, Regroup's revenues for 2002
would have been $18.5 million (instead of the $4.2 million reflected in its
financial statements), reflecting the full amounts paid by customers for
transportation services. The Company's management believes that it is important
to provide this revenue information because it reflects the manner in which the
revenues will be recognized for the acquired business as it will be conducted by
the Company. The following is a reconciliation of this revenue information to
the historical amounts reflected in Regroup's financial statements.
2
Pro forma
As reported Adjustments Pro forma
-------------------- ------------------ --------------
Total revenues $ 4,163,000 $ 14,297,000[a] $ 18,460,000
Cost of transportation -- 13,110,000[b] 13,110,000
-------------------- ------------------ --------------
Net revenues $ 4,163,000 $ 1,187,000 $ 5,350,000
==================== ================== ==============
[a] To reflect revenues and the cost of purchased transportation services on a
gross basis.
[b] To reflect cost of transportation, net of accounting and factoring fees
charged under an agency agreement with another logistics service business.
On June 23, 2003, the Company issued a Press Release announcing the
transaction. A copy of the Press Release is attached to this Form 8-K as Exhibit
99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
---------------------------------------------------------------------------
(a) Financial Statements of Acquired Business.
It is impracticable at the time of the filing of this Current
Report on Form 8-K to provide the historical financial information
for Regroup required by Regulation S-X. Accordingly, the Company
will file the required historical financial statements under cover
of an Amendment to this Current Report on Form 8-K as soon as
practicable, but in any event, not later than 60 days after the
date on which this Current Report must be filed with the
Commission.
(b) Pro Forma Financial Information.
It is impracticable at the time of the filing of this Current
Report on Form 8-K to provide the pro forma financial information
that will show the acquisition of Regroup by the Company as
required by Regulation S-X. Accordingly, the Company will file the
required pro forma financial information under cover of an
Amendment to this Current Report on Form 8-K as soon as
practicable, but in any event not later than 60 days after the
date on which this Current Report must be filed with the
Commission.
(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
99.1 Press Release dated June 23, 2003
3
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: July 3, 2003 By: Dennis L. Pelino
--------------------------------
Name: Dennis L. Pelino
Title: Chairman and
Chief Executive Officer
4
Exhibit Index
Exhibit Number Description
-------------- -----------
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
99.1 Press Release dated June 23, 2003
5